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 1, 1995
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, 1995: $ 292,560,564.
Number of shares of common stock outstanding as of March 1, 1995:
27,380,409 shares.
Documents incorporated by reference: Proxy Statement for Annual Meeting
to be held May 9, 1995. Part III, Items 10, 11, 12 and 13.
Index to Exhibits - pages 82-88
<PAGE>
FORM 10-K Page 2
PART I
Item 1. Business
THE COMPANY
Overview
Founded in 1891, Cone Mills Corporation (the "Company" or
"Cone") is a leading textile manufacturer with net sales in
1994 of $806.2 million. The Company conducts business in two
segments, apparel fabrics and home furnishings products,
representing 74% and 26% of 1994 net sales, respectively, and
operates 13 modern manufacturing facilities located in North
Carolina, South Carolina and Mississippi. Cone is the largest
producer of denim fabrics in the world, the largest domestic
producer of yarn-dyed and chamois flannel shirtings and the
largest domestic commission printer of home furnishings
fabrics. Sales and marketing activities are conducted through
a worldwide distribution network. With export sales of $141.7
million in 1994, the Company is the largest domestic exporter
of denim fabrics and is a major exporter of printed home
furnishings fabrics.
The Company is recognized internationally as a primary source
of high-quality fabrics for use in the production of upper-
end, branded casual apparel. The Company is a leader in denim
styling and development, with denims accounting for
approximately 70% of apparel fabrics sales. Cone believes
that it has the largest and most versatile denim manufacturing
capacity in the world and that it produces a broader range of
fashion denims than any of its competitors. In 1994, Cone
sold over 500 different styles of denim. The Company's denim
products are primarily designed for use in garments targeted
for the upper-end market, where styling and quality generally
command premium fabric prices. The Company is the largest
supplier to Levi Strauss and is the sole supplier of denim for
Levi 501R jeans. Other customers include V.F. Corporation
(Wrangler and Lee), OshKosh, H.I.S. (Chic), Calvin Klein,
Rocky Mountain Jeans, The Gap, Super Rifle, Ralph Lauren
(Polo) and Donna Karan (DKNY).
The Company has utilized its manufacturing versatility and
styling capabilities to position itself as a leader in other
selected specialty apparel fabric niches. These include yarn-
dyed and chamois flannel shirtings, specialty-dyed and printed
fabrics and high-quality, polyester/rayon sportswear fabrics.
Customers for these specialty apparel fabrics include M. Fine,
OskKosh, Woodrich and L.L. Bean.
<PAGE>
FORM 10-K Page 3
Item 1. (continued)
The Company services the home furnishings markets through
three divisions: Cone Finishing, Cone Decorative Fabrics and
Olympic Products. Cone Finishing consists of the Company's
Carlisle and Raytex plants and provides custom printing
services to leading home furnishings stylists and
distributors. Cone Decorative Fabrics is one of the country's
leading designers and marketers of printed and solid woven
fabrics for use in upholstery, draperies and bedspreads.
Olympic Products is a diversified producer of polyurethane
foam and related products used in upholstered furniture,
mattresses, quilted bedspreads, carpet padding and automotive
markets. The Company's home furnishings customers include the
Waverly Division of F. Schumacher & Co., P. Kaufmann, Collins
& Aikman, Bench Craft, Drexel Heritage and Henredon. The home
furnishings segment also includes Cornwallis Development Co.,
a wholly owned subsidiary that is systematically developing
previously acquired real estate not required for manufacturing
operations.
Cone's business strategy is to focus on products and services
that generate attractive margins and in which it believes it
is an efficient international competitor. By utilizing its
styling and development expertise and management depth and
experience, in combination with its versatile manufacturing
facilities and technical capabilities, the Company competes
effectively in worldwide markets. The Company has
deemphasized labor-intensive commodity businesses and in the
first quarter of 1994 concluded 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 seeks growth of its core businesses through
expansion into new markets and geographic areas, product
differentiation and development, and investment in value-added
technology. A primary goal of this strategy is to reduce the
cyclical fluctuations inherent in its existing businesses
through improved market and product balance. As a means of
new market penetration and geographic expansion, Cone actively
seeks acquisitions of and investments in businesses in which
it believes it can add value through its manufacturing and
marketing expertise. In 1993, the Company purchased a 20%
ownership interest in Compania Industrial de Parras S.A.
("CIPSA"), the largest denim manufacturer in Mexico, for
approximately $24 million and entered into a joint venture
with CIPSA to build and operate a modern denim manufacturing
facility in Mexico. The joint venture partners will invest
approximately $50 million of equity in the venture, with each
partner providing one-half of the investment, and expect that
the new facility will begin operation in 1995. In addition,
<PAGE>
FORM 10-K Page 4
Item 1. (continued)
the joint venture has been financed with approximately $63
million of debt financing which is not guaranteed by either
partner. While the Company's domestic denim operations focus
on high-quality fabrics for use in upper-end, branded apparel,
the joint venture will produce high quality basic denims at
costs that the Company believes will be competitive with
manufacturers anywhere in the world.
Because Cone has committed extensive denim manufacturing
expertise to its joint venture with CIPSA, its current
acquisition focus is in the home furnishings segment of its
business. To this end, on December 2, 1994, the Company
purchased substantially all of the assets of Golding
Industries, Inc., consisting primarily of its Raytex
commission printing facility located in South Carolina, for a
purchase price of $57.6 million in cash and the assumption of
$6.0 million of liabilities. Raytex primarily prints wide
fabrics used in home furnishings, including comforters and
bedspreads. The Company believes that this facility, which
prints for many of the same customers as Cone's existing
narrow fabric print operations at its Carlisle facility, will
allow it to realize increased marketing, operating and
administrative efficiencies. In early 1995, Cone also
acquired substantially all of the assets of Greeff Fabrics,
Inc., a small but well known designer and distributor of high-
end decorative fabrics to interior designers and specialty
retailers in the U.S. and the United Kingdom.
In addition to its acquisition strategy, the Company has
invested heavily in machinery and equipment to improve
productivity and product quality, expand its product lines and
increase customer satisfaction. Capital expenditures for the
last five years have totaled approximately $140 million. The
Company expects to spend approximately $62 million in 1995 for
capital projects, including approximately $15 million for a
new jacquard fabric plant which will further diversify its
core product groups in the home furnishings segment of its
business.
The Company, a North Carolina corporation, maintains its
principal executive offices at 1201 Maple Street, Greensboro,
North Carolina 27405, and its telephone number is (910) 379-
6220. Unless otherwise stated, references to "Cone" or the
"Company" include Cone Mills Corporation and its subsidiaries.
<PAGE>
FORM 10-K Page 5
Item 1.
(continued)
<TABLE>
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Business Segments
The following table sets forth certain net sales and operating income information for each of the
Company's two business segments as well as net sales of the principal product groups included
therein, for fiscal years 1990 through 1994.
Fiscal Year (1)(2)
1994 1993 1992 1991 1990
NET SALES (dollars in millions)
Apparel
Denim $423.5 52.5 % $421.8 54.9 % $402.4 57.0 % $356.6 56.3 % $317.4 53.4 %
Specialty Sportswear 177.0 22.0 154.0 20.0 117.6 16.7 101.4 16.1 104.0 17.4
Total 600.5 74.5 575.8 74.9 520.0 73.7 458.0 72.4 421.4 70.8
Home Furnishings
Fabrics 93.7 11.6 94.4 12.3 93.0 13.2 83.7 13.2 80.4 13.5
Foam Products 93.9 11.6 84.6 11.0 84.1 11.9 83.9 13.3 85.4 14.4
Real Estate and other 18.1 2.3 14.4 1.8 8.3 1.2 7.4 1.1 7.6 1.3
Total 205.7 25.5 193.4 25.1 185.4 26.3 175.0 27.6 173.4 29.2
Total net sales $806.2 100.0 % $769.2 100.0 % $705.4 100.0 % $633.0 100.0 % $594.8 100.0 %
OPERATING INCOME (3)
Apparel $47.5 7.9 % $68.8 12.0 % $67.4 13.0 % $20.4 4.5 % $25.5 6.1 %
Home Furnishings 19.0 9.2 19.5 10.1 16.3 8.8 19.2 10.9 19.1 11.0
(1) Results from continuing operations. See Note 21 of Notes to Consolidated Financial Statements.
(2) Fiscal 1992 contained 53 weeks. The remainder of the years presented contained 52 weeks.
(3) Operating income excludes restructuring, plant closing and general corporate expenses.
Percentages reflect operating income as a percentage of segment net sales.
</TABLE>
<PAGE>
FORM 10-K Page 6
Item 1. (continued)
Market Developments
Casual wear, including jeans, knit shirts, flannel shirts and
similar apparel, has been the fastest growing category within
the apparel industry in recent years. The Company believes
that this growth is the result of several factors, including
(i) the adoption of casual lifestyles by the "baby-boom"
generation, born between 1946 and 1964, and their children,
(ii) the enhanced value of casual garments to consumers
resulting from lower acquisition costs and lower life cycle
costs (elimination of alteration, dry cleaning and pressing
costs), (iii) enhanced styling of casual garments and (iv)
strong brands such as Levi, Wrangler and The Gap which
continue to create fashion interest for consumers.
The Company's domestic apparel markets have been affected by
changing demographics associated with the maturation of the
baby-boom generation. 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 jeans 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 1994 apparel export sales were $135.9
million as compared with $124.9 million in 1993 and $105.2
million in 1992. In 1993, the Company entered into agreements
with CIPSA, the largest denim manufacturer in Mexico, in order
to expand both market and manufacturing presence into Latin
America. See "Business - International Operations".
<PAGE>
FORM 10-K Page 7
Item 1. (continued)
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.
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 1994, Cone sold over 500
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".
<PAGE>
FORM 10-K Page 8
Item 1. (continued)
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, Donna Karan (DKNY), and "Pepe".
Cone's fashion-basic denims are stylish but have broader
market appeal 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 Sun Apparel, Knight
Industries and Stuffed Shirt.
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 and H.I.S. 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 25% of total denim
sales in 1994.
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, The
Gap, Ruff Hewn, Ralph Lauren (Polo), Donna Karan (DKNY) and
Miller International.
Specialty Sportswear Fabrics. The Company is the largest
domestic producer of yarn-dyed plaid flannel and solid shade
chamois flannel shirting fabrics. 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 and in lighter-weight apparel products for
women's and children's wear. Distribution channels have
expanded in recent years to include department stores and
discounters. Customers for these fabrics include M. Fine,
Woolrich, L.L. Bean and Oxford.
<PAGE>
FORM 10-K Page 9
Item 1 (continued)
Cone also serves niche markets for piece dyed fabrics based on
unique dying and finishing technologies such as the
"splashdown" look. In addition, the Company produces
polyester/rayon sportswear fabrics distributed primarily to
the women's wear market.
Cone 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, Buster Brown and Little Levi.
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
manufacturers. Carlisle is well known for its quality,
service and technical capabilities in screen printing.
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 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. Business management of apparel fabrics
is organized into three operating divisions: denim, specialty
sportswear and international. Each division contains its own
marketing group. 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 groups are headquartered
<PAGE>
FORM 10-K Page 10
Item 1. (continued)
in Greensboro in proximity to 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
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 1,000 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. In
1987, the Company instituted the Cone Mills Quality
Improvement Process, which is a process for continually
improving overall quality and operating effectiveness. The
<PAGE>
FORM 10-K Page 11
Item 1. (continued)
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 manufacturing facilities are
continually scheduled and coordinated to maximize versatility.
Approximately 60% of Cone's denim volume is shipped under its
just-in-time quality assurance and delivery 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 special
manufacturing development groups, which have specialists
located in each facility. These groups work 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. Until 1991, U.S.
cotton prices generally exceeded world price levels, which had
created a competitive disadvantage for U.S. textile
manufacturers. Because the Company's customers compete with
foreign producers, the Company could not 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 legislation, including certain price equalization
payments authorized under this Act, 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
<PAGE>
FORM 10-K Page 12
Item 1. (continued)
and continuing through 1994, cotton prices increased
throughout the world. The Company believes that cotton prices
are being affected by three major trends: (i) an increase in
worldwide demand as major consuming countries have recovered
from a cyclical recession, (ii) disappointing cotton crops in
China, India and Pakistan resulting from poor weather, disease
and insects and (iii) financial speculation in commodities
markets which tend to exacerbate price movements. 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. 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. The domestic market for
denim fabrics, on the other hand, is dominated by four
domestic producers that comprise approximately 60 percent of
the market. 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. The Uruguay Round world
trade accord under the General Agreement on Tariffs and Trade
("GATT") was approved by Congress in December 1994. This
<PAGE>
FORM 10-K Page 13
Item 1. (continued)
accord will create a new organization, the World Trade
Organization, to oversee international trade in manufactured
goods, agriculture and intellectual property and services. In
addition, quotas will be phased out and tariffs outside of the
U.S. on textile and apparel products will be substantially
reduced over a period of ten years. U.S. tariffs on these
products will be reduced slightly. Although the Company's
export business should benefit from reduced tariffs, the
significant reduction in import protection for domestic
textile manufacturers could adversely affect the Company.
The North American Free Trade Agreement ("NAFTA") between
Canada, Mexico and the U.S. became effective on January 1,
1994. NAFTA eliminates textile/apparel quotas between these
three countries for products meeting rule of origin
requirements with respect to processing in one of the three
countries. Tariffs among the three countries essentially have
been eliminated. The Company believes that the removal of
tariffs on denim and denim jeans in the participating
countries presents opportunities for growth. Its domestic
operations should benefit from improved access to Mexico's
consumer markets and export sales of its joint venture with
CIPSA should be favorably impacted. 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
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 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 and relatively
high capital investment requirements for production 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 allows the Company to respond
more quickly than foreign producers to changing fashion trends
and to its domestic customers' demands for precise production
<PAGE>
FORM 10-K Page 14
Item 1. (continued)
schedules and rapid delivery. The Company has invested in
technological and process improvements to meet demand for
quality and styling. Its emphasis on customer service is
supported by its just-in-time and quick response programs and
by electronic data interchange (EDI) with customers. These
efforts have improved communication, planning and processing
time in manufacturing.
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 fabrics are produced for these
selling seasons.
Home Furnishings Products
Textile Fabrics. The Cone Finishing Division, consisting of
the Company's Carlisle and Raytex plants, is the largest
commission printer of decorative fabrics in the U.S. As
commission printers, Carlisle and Raytex 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,
Universal and Spectrum. The home furnishings fabrics
processed at Carlisle are generally used for upper-end
upholstery and drapery prints. Customers for Raytex include
Crown Crafts, Croscill and others who provide comforters,
bedspreads and bedding products.
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 1995 expects to add the fourth of
five planned new screen printing machines. Through this
expansion Carlisle increased its home furnishings print
capacity by approximately 35%.
<PAGE>
FORM 10-K Page 15
Item 1. (continued)
The Raytex plant is a modern 260,000 square foot facility with
six printing machines. In late 1994, a state of the art
twenty-four screen printing machine was installed. Raytex is
one of the largest wide-fabric commission printers in the U.S.
Cone Finishing Division's 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 and Raytex's production and technical staff and
customers' designers and stylists. Cone Finishing also
maintains a customer service center that utilizes electronic
data interchange (EDI) with major customers.
Cone 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. The
Decorative Fabrics division's lines are printed primarily at
the Carlisle plant under the name "John Wolf Decorative
Fabrics." Recent additions of David and Dash, and Greeff have
broadened the John Wolf traditional fabric lines with
contemporary designs and high-end products.
John Wolf 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.
The Cone Finishing Division competes primarily with two large
commission printers, the Cherokee division of Spartan Mills
and Santee Print Works, as well as the Brookneal plant of the
Bibb Company. Cone Decorative Fabrics competes with a large
number of domestic and foreign suppliers of decorative
fabrics. Both divisions 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 medical applications. 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. Related products and services include nonwoven
fiber batting, specialty fabricated cushions marketed under
the Prelude brand, quilting services and distribution of
<PAGE>
FORM 10-K Page 16
Item 1. (continued)
other furniture components. Recently purchased equipment
utilizing hydrophilic foam technology is expected to expand
Olympic's specialty products line.
Olympic markets its products through its own sales force.
Customers include Bench Craft, Span America, Henredon, Collins
& Aikman, Guilford Mills, Drexel Heritage, Bassett and
Milliken.
Olympic has five manufacturing facilities, which are located
in the two largest upholstered furniture manufacturing areas
in the U.S. Four 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 approximately 1,000
acres of real estate in the Greensboro area substantially all
of which 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. Financing for these activities is undertaken through
Cornwallis. 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 17
Item 1. (continued)
International Operations
The Company began development of its international
distribution network over 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 denim 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, Replay and Joker Jeans in Europe; Itochu
and Shinpo in Japan; licensees for Guess, Calvin Klein and
Bosung in Korea; Aca Joe in Mexico; and Ellis, Calvin Klein,
Wrangler and UFO brands 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, service and fabric
development as compared with foreign manufacturers, as a
result of the economies of scale resulting from the size of
the Company's operations, manufacturing experience and the
versatility of its manufacturing facilities. 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"), the largest
Mexican denim manufacturer and a significant jeans
manufacturer. The Company initially paid approximately $24
million for this investment and, in December 1994, invested
another $6.7 million to maintain its pro rata ownership at 20%
following a new equity offering by CIPSA. The Company
accounts for this investment by the equity method. In
December 1994, the Mexican government devalued the peso and
allowed it to freely trade against the U.S. dollar resulting
in a substantial decline in value of the peso versus the U.S.
<PAGE>
FORM 10-K Page 18
Item 1. (continued)
dollar. On January 1, 1995, the peso was trading at 4.94
pesos per U.S. dollar versus an exchange rate of approximately
3.45 prior to the devaluation. If an exchange rate of 4.94
had been used in the Company's financial statements, the
currency translation adjustment would have been a $7.8 million
(net of income tax benefit) reduction of stockholders' equity
at the end of 1994. The devaluation should lower the cost of
operations and the export prices of its products in the
future. See "Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition."
The Company also entered into a 50/50 joint venture
arrangement with CIPSA to build and operate a new state of the
art denim manufacturing plant in Mexico. The joint venture
has been financed with approximately $63 million in debt, non-
recourse to the partners, and a total equity investment of $50
million split equally between the two partners.
The Company has several objectives in pursuing these
initiatives with CIPSA. The Company is seeking access to the
Mexican distribution system to sell the Company's products and
access to lower cost cut and sew facilities in order to
increase market share with private label customers. The
Company also is seeking to gain from lower labor and other
cost advantages, while benefitting from its technological
expertise contributed to the venture. The Company plans to
export basic denims made by the joint venture throughout the
world by utilizing Cone's distribution network.
Cone Decorative Fabrics exports approximately 15% of its sales
volume. Styling and service are the principal competitive
factors affecting its position in these markets. The Company
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 this division'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 trade names used in connection with its
business and products, both domestically and internationally.
The Company believes that the name recognition of Cone Mills
and its reputation for quality, service and product
development have value in both domestic and international
markets.
<PAGE>
FORM 10-K Page 19
Item 1. (continued)
Customers
The Company has one unaffiliated customer, Levi Strauss
("Levi"), which accounts for more than 10% of consolidated
sales. Sales to this customer amounted for 34%, 35%, and 38%
of sales from continuing operations in 1994, 1993, and 1992,
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
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
<PAGE>
FORM 10-K Page 20
Item 1. (continued)
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.
Other than Levi, no single customer accounted for more than
10% of the Company's net sales in 1994, 1993, and 1992.
Backlog
The Company's apparel and home furnishings order backlog was
approximately $189 million, or 60 million yards, at January 1,
1995, as compared to approximately $163 million or 53
million yards at January 2, 1994. Physical deliveries for
accepted 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 1, 1995, will be filled
within the first quarter of 1995.
<PAGE>
FORM 10-K Page 21
Item 1. (continued)
Research and Development
The research and development activities of the Company are
directed primarily toward improving the quality, styling 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 both substantial declines in demand and downward
pressures on prices and margins caused by imported garments
and to the 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 was completed in first quarter 1994. A gain of
$439,000 (net of tax) was recognized on discontinued
operations in 1994 and no gain or loss was recognized in 1993
and 1992.
<PAGE>
FORM 10-K Page 22
Item 1. (continued)
Employees
At January 31, 1995, the Company employed approximately 8,100
persons, of whom approximately 1,500 were salaried and
approximately 6,600 were hourly employees. Of such hourly
employees, approximately 2,300 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. Based upon its records relating to the
withholding of union dues from employee compensation, the
Company believes that approximately 1,100 of its employees are
dues-paying union members. The Company has not suffered any
major disruptions in its operations due to strikes or similar
events for more than a decade and considers its relationship
with its employees to be satisfactory.
The Quality Improvement Process ("QIP")
During 1987, the Company determined that in order to service
more effectively the upper-end markets of the future it needed
a new concept of overall quality management. As a result,
Cone implemented the QIP, a company-wide framework for
managing total quality.
The QIP is a building block for a comprehensive program aimed
at world class quality standards. Additionally, the Company
has fully incorporated Statistical Process Control ("SPC")
which monitors all quality standards for the manufacturing
process. As a result of its quality improvement programs, the
Company expects all denim facilities to be ISO-9002 certified
by year-end 1995.
The QIP establishes common standards of quality and
performance in terms of conformity to customer requirements
and uses these standards to set goals and measure performance.
Typically, employees are given classroom training in the QIP,
and the principles of the process are integrated into the day-
to-day management of the Company's affairs.
The Company believes that the QIP has allowed it to meet more
easily the vendor certification requirements of its major
customers. This process has eliminated routine inspection of
Company products by many major customers and has facilitated
the formation of joint quality improvement teams with major
customers in order to address complex fabric performance
issues. Management also believes that the Company has
experienced significant financial benefits from the process as
a result of substantial improvements in productivity and
yields and reductions in the production of off-quality goods.
<PAGE>
FORM 10-K Page 23
Item 2. Property
The Company operates 13 manufacturing plants - ten in North
Carolina, two in South Carolina and one in Mississippi. There
are six apparel and seven 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 "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.
Parras Cone de Mexico, the Company's joint venture with CIPSA,
owns 20 acres of land and a 550,000 square-foot building due
to be completed in 1995 to provide manufacturing space and raw
materials and finished goods warehouses.
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 certain other
defendants in which the Plaintiffs asserted a variety of
claims related to the Cone Mills Corporation 1983 ESOP (the
"1983 ESOP") and certain other employee benefit plans
maintained by the Company. In March 1992, the United States
District Court in Greenville, South Carolina entered a
judgment in the amount of $15.5 million (including an
attorneys' fee award) against the Company with respect to an
alleged promise to make additional Company contributions to
the 1983 ESOP and all claims unrelated to the alleged promise
were dismissed. The Company, certain individual defendants
and the Plaintiffs appealed.
On May 6, 1994, the United States Court of Appeals for the
Fourth Circuit, sitting en banc, affirmed the prior conclusion
<PAGE>
FORM 10-K Page 24
Item 3. (continued)
of a panel of three of its judges and unanimously reversed the
$15.5 million judgment and unanimously affirmed all of the
District Court's rulings in favor of the Company. However,
the Court of Appeals affirmed, by an equally divided court,
the District Court's holding that Plaintiffs should be allowed
to proceed on an alternative theory whether, subject to proof
of detrimental reliance, Plaintiffs could establish that a
letter to salaried employees on December 15, 1983 created an
enforceable obligation that could allow recovery on a theory
of equitable estoppel. Accordingly, the case was remanded to
the District Court for a determination of whether the
Plaintiffs can establish detrimental reliance creating
estoppel of the Company.
Additional proceedings are under way in the District Court on
the issue of detrimental reliance and other issues related to
whether the Plaintiffs can prevail on remand. For that
reason, and because of the uncertainties inherent in the
litigation process, it is not possible to predict the ultimate
outcome of this lawsuit. However, the Company intends to
continue to defend this matter vigorously, and 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 25
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 4A. Executive Officers of the Registrant.
Name Age Position with the Company
J. Patrick Danahy 51 Director, President, and
Chief Executive Officer
John L. Bakane 44 Director,
Executive Vice President
and Chief Financial
Officer
Bud W. Willis III 52 Director and
Executive Vice President
James S. Butner 49 Vice President
Neil W. Koonce 47 Vice President and
General Counsel
Lester J. Smith 65 Vice President
Eugene A. Trout 54 Vice President
David E. Bray 56 Treasurer
J. D. Holder 60 Controller
Terry L. Weatherford 52 Secretary
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 26
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. On February 17, 1995, he was
elected Executive Vice President of the Company.
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. He
was elected to the Board of Directors in May 1988. From 1992
through 1994 he served as the President of the Denim Division
of the Textile Products Division. Effective January 1, 1995,
he was named President of the Textile Products Division. He
served as corporate Vice President from 1985 until February
17, 1995, when he became Executive Vice President of the
Company.
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. He served as Group
Executive Vice President of the Textile Products Division from
1985 to 1992 and Executive Vice President of the Denim
Division from 1992 to 1995. In March 1985, he was named
Director of Marketing, Europe for the International Division
of the Company.
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 27
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., a manufacturer and retailer of mobile homes, 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 28
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.
Quarter Ended
Apr.3,1994 Jul. 3,1994 Oct.2,1994 Jan.1,1995
Common stock
prices
High 17 1/4 14 5/8 14 7/8 13 1/2
Low 13 1/2 12 12 3/8 11 1/8
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
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, 1995 was 570.
<PAGE>
FORM 10-K Page 29
Item 6. Selected Financial Data
<TABLE>
<S> <C> <C> <C> <C> <C>
(dollar amounts in millions, except per share data) 1994 1993 1992(1) 1991 1990
Summary of Operations
Net Sales $ 806.2 $ 769.2 $ 705.4 $ 633.0 $ 594.8
Cost of Sales 642.5 589.3 540.8 523.5 481.7
Depreciation 23.3 21.0 18.5 17.1 16.3
Subtotal 665.8 610.3 559.3 540.6 498.0
Gross Profit 140.4 158.9 146.1 92.4 96.8
Selling and Administrative 77.8 73.3 67.6 56.8 56.8
Restructure/Plant Closing - - - 0.8 3.9
Income from Operations 62.6 85.6 78.5 34.8 36.1
Other Expense - Net 7.1 6.1 8.3 18.4 21.1
Income from Continuing Operations Before Income Tax 55.5 79.5 70.2 16.4 15.0
Income Tax 19.7 29.9 24.8 6.3 4.1
Income from Continuing Operations 35.8 49.6 45.4 10.1 10.9
Discontinued Operations 0.4 - - (34.9) (14.1)
Income before Extraordinary Item and Cumulative
Effect of Accounting Change 36.2 49.6 45.4 (24.8) (3.2)
Extraordinary Item - - (2.0) - -
Cumulative Effect of Accounting Change (1.2) - - - -
Net Income (Loss) $ 35.0 $ 49.6 $ 43.4 $ (24.8) $ (3.2)
Per Share of Common Stock
Income from Continuing Operations $ 1.19 $ 1.68 $ 1.67 $ 0.22 $ 0.24
Net Income (Loss) 1.16 1.68 1.59 (1.58) (0.50)
Segment Information
Net Sales
Apparel $ 600.5 $ 575.8 $ 520.0 $ 458.0 $ 421.4
Home Furnishings 205.7 193.4 185.4 175.0 173.4
Total $ 806.2 $ 769.2 $ 705.4 $ 633.0 $ 594.8
Operating Income
Apparel $ 47.5 $ 68.8 $ 67.4 $ 20.4 $ 25.5
Home Furnishings 19.0 19.5 16.3 19.2 19.1
Balance Sheet Data (at year end):
Current Ratio 1.8 1.9 1.8 1.9 2.1
Total Assets $ 524.1 $ 431.6 $ 401.9 $ 432.7 $ 469.4
Long-Term Debt 126.5 77.9 77.5 188.9 200.9
Stockholders' Equity 236.9 210.0 163.4 82.9 111.0
Long-Term Debt As a Percent of Stockholders' Equity
and Long-Term Debt 35 % 27 % 32 % 69 % 64 %
Shares Outstanding (millions) Year End (2)(3) 27.4 27.7 27.7 17.9 17.1
Other Data:
Capital Expenditures-Continuing Operations $ 37.5 $ 38.7 $ 25.4 $ 21.0 $ 17.8
Return on Average Common Stockholders' Equity (4) 17.9 % 31.6 % 55.3 % 11.9 % 8.2 %
Common Stock Dividend Paid - - - - -
Number of Employees at Year End 8,100 7,800 7,600 7,600 8,400
(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
(4)Continuing Operations
</TABLE>
<PAGE>
FORM 10-K Page 30
Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The operating results and financial condition of Cone
have been influenced by a number of external factors and
Company initiatives. The principal influences have been
domestic cotton costs, the general business cycle,
international apparel and fabric trade developments, 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. 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, throughout 1994 and into
1995, primarily as a result of cotton crop declines in
Pakistan, India and China due to weather, disease and insects.
Consequently, mill delivered cotton prices per pound rose from
the lower $.60's in 1992 and 1993 to the upper $.70's in 1994
and into the mid $.80's during early 1995.
The Company has purchased cotton from suppliers at fixed
prices for delivery throughout 1995. Although these fixed
prices compare favorably with those of the present spot
market, the significant increase in the price of cotton since
late 1994 will cause a reduction in profit margins in 1995.
While the Company was unable to increase prices in its major
product lines during the first half of 1994, moderate price
increases were effected for the second half of 1994 and first
quarter 1995. Margins will be affected by the strength of
demand for the Company's products and the resulting impact on
improved pricing, cotton and other raw material costs, and
productivity improvement programs.
GENERAL BUSINESS CYCLE. The Company's operating results
are closely related to the general business cycle of the U.S.
economy. Management believes the U.S. economy is currently in
the mature phase of the economic cycle, when the demand for
home furnishings and consumer durables typically grows at a
higher rate than demand for apparel products, which is usually
strongest in the earlier phases of a recovery. When apparel
demand growth rates change during an economic cycle,
adjustments to inventories and production levels often occur.
In early 1994, despite continued strong demand at retail,
denim inventories experienced an inventory imbalance in the
<PAGE>
FORM 10-K Page 31
Item 7. (continued)
softgoods pipeline. The pipeline supply and demand imbalance
was corrected by the second half of 1994.
The external factors discussed above are reflected in the
Company's recent quarterly net sales. All quarters had 13
weeks except the fourth quarter of 1992 which had 14 weeks.
<TABLE>
<S> <C> <C> <C>
1994 1993 1992
(in millions)
Net Sales:
1st Quarter................. $195.9 $195.0 $174.2
2nd Quarter................. 201.7 202.5 182.6
3rd Quarter................. 203.5 192.7 170.5
4th Quarter................. 205.1 179.0 178.1
Total.................... $806.2 $769.2 $705.4
</TABLE>
TRADE DEVELOPMENTS. 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 December 1994, Congress approved implementing
legislation for the Uruguay Round world trade accord under the
General Agreement on Tariffs and Trade ("GATT"). As a result,
quotas will be phased out and tariffs outside of the U.S. on
textile and apparel products will be substantially reduced
over a period of 10 years. U.S. tariffs on these products will
be reduced slightly. The passage of the North American Free
Trade Agreement ("NAFTA") has essentially eliminated all
quotas and tariffs on the Company's products throughout Canada
and Mexico. 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.
STRATEGIC INITIATIVES. The Company has adopted a growth
strategy aimed at entering new markets that utilize
manufacturing technologies related to existing Cone strengths.
For example, in 1993, the Company positioned itself to supply
markets more efficiently and effectively with basic denim
products through the purchase of a 20% equity ownership
interest in CIPSA for approximately $24 million and the
formation of a joint venture with CIPSA to construct a modern
denim plant in Mexico. The joint venture partners will invest
approximately $50 million in equity in the venture, with each
partner providing one-half of the investment.
<PAGE>
FORM 10-K Page 32
Item 7. (continued)
Capital requirements for the joint venture will primarily
occur in 1995. The joint venture also obtained a $63 million
credit facility from a Mexican bank. This facility is not
guaranteed by Cone or by CIPSA.
In 1994, the Company further implemented its growth
strategy by acquiring substantially all of the assets of
Golding Industries, Inc., consisting primarily of the Raytex
division, for a purchase price of $57.6 million in cash and
the assumption of $6.0 million in liabilities. Raytex is a
leading commission printer of wide fabrics used primarily in
home furnishings products and uses technologies similar to
Cone's Carlisle facility, which also prints and finishes
decorative fabrics.
As part of its strategy, the Company has made significant
capital expenditures in recent years and plans to spend a
total of $62 million in fiscal 1995, including $15 million for
a new plant to weave jacquard pattern fabrics for home
furnishings customers. In January 1995, the Company also
purchased substantially all of the assets of Greeff Fabrics,
Inc., a small but well known designer and distributor of
high-end decorative fabrics to interior designers and
specialty retailers in the U.S. and the United Kingdom. The
new jacquard pattern fabrics plant and Greeff Fabrics, Inc.
will be part of the Cone Decorative Fabrics Division formed in
January 1995.
SEGMENT INFORMATION
Cone operates in two principal business segments, apparel
fabrics and home furnishings products. The following table
sets forth certain net sales and operating income information
regarding these segments for 1994 and 1993, both of which
contained 52 weeks, and 1992, which contained 53 weeks.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1994 1993 1992
(dollar amounts in millions)
Net Sales
Apparel $600.5 74.5% $575.8 74.9% $520.0 73.7%
Home Furnishings 205.7 25.5 193.4 25.1 185.4 26.3
Total $806.2 100.0% $769.2 100.0% $705.4 100.0%
Operating Income(1)
Apparel $ 47.5 7.9% $ 68.8 12.0% $ 67.4 13.0%
Home Furnishings 19.0 9.2 19.5 10.1 16.3 8.8
</TABLE>
(1) Operating income excludes general corporate expenses.
Percentages reflect operating income as a percentage of
segment net sales.
<PAGE>
FORM 10-K Page 33
Item 7. (continued)
RESULTS OF OPERATIONS
FIFTY-TWO WEEKS ENDED JANUARY 1, 1995 COMPARED WITH FIFTY-TWO
WEEKS ENDED JANUARY 2, 1994
Net sales for 1994 were $806.2 million, up 4.8% from 1993
net sales of $769.2 million. Income before the cumulative
effect of adoption of SFAS No. 112 was $36.2 million, or $1.20
per share after preferred dividends, as compared with $49.6
million, or $1.68 per share, for 1993. Included in the 1994
results was a net gain of $.4 million, or $.01 per share,
arising from the final disposal of assets of the Company's
discontinued operations. During the first quarter of 1994, the
Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which resulted in an after-tax,
non-cash charge of $1.2 million, or $.04 per share, and
reduced net income to $1.16 per share for the year of 1994.
Net income for 1994 was $35.0 million as compared with $49.6
million for 1993.
Gross profit (net sales less cost of sales and
depreciation) as a percentage of net sales was 17.4% in 1994
as compared with 20.7% for 1993. The decline resulted
primarily from the inability to raise denim prices to cover
higher cotton costs, higher unit production costs associated
with operating denim facilities at less than capacity during
the first six months of 1994, and a higher proportion of the
mix in lower margin specialty sportswear fabrics and
polyurethane foam products as a result of stronger sales of
those products.
APPAREL FABRICS. Apparel fabrics net sales were
$600.5 million for 1994, an increase of 4.3% from 1993. The
higher sales were due to increased sales volume. Overall,
apparel fabric segment sales benefited from increases in
specialty sportswear sales, primarily flannel shirtings, and
to a lesser extent, increases in heavyweight denim sales.
Average prices adjusted for product mix changes were
essentially unchanged. Apparel fabrics export sales for 1994
were up 8.8% to $135.9 million from $124.9 million in 1993.
Operating margins in 1994 for the apparel fabrics
segment were 7.9% of net sales compared with 12.0% for 1993.
Margins were lower in 1994 because of the decline in denim
earnings as discussed above.
<PAGE>
FORM 10-K Page 34
Item 7. (continued)
HOME FURNISHINGS. Home furnishings net sales were
$205.7 million in 1994, an increase of 6.3% from 1993.
Operating income for 1994 was $19.0 million, a decrease of
2.6% from 1993. Sales and operating income for the home
furnishings fabrics product group were down in 1994 as the
Company continued to experience weak decorative print fabric
markets. Olympic's polyurethane product sales were up in 1994
as the division experienced stronger sales in automotive
markets, but operating income was down as margins on commodity
furniture foam and carpet underlay continued to be weak and as
the division absorbed start-up costs associated with new
product ventures.
Export sales of home furnishings products were $5.8
million in 1994 as compared with $7.1 million in 1993. Export
sales were impacted by poor economic conditions in European
markets.
Total Company selling and administrative expenses were
$77.8 million, or 9.7% of net sales, for 1994 as compared with
$73.3 million, or 9.5% of net sales, for 1993. Expenses in
1994 were impacted by higher salary and benefit costs and
costs associated with expansion initiatives.
Interest expense for 1994 increased $1.0 million compared
to 1993, primarily the result of a $.4 million interest charge
on the settlement of 1990 and 1991 income taxes by the
Internal Revenue Service, higher interest rates and additional
borrowings associated with expansion initiatives.
Income taxes as a percentage of taxable income was 35.6%
in 1994 compared with 37.6% in 1993. The 1993 rate was higher
primarily as the result of the one time impact on deferred
taxes of a federal tax rate increase. Both periods reflect
tax benefits resulting from operation of the Company's foreign
sales corporation.
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 had record
sales and income from continuing operations in 1993. In the
apparel fabrics segment, sales were up substantially,
primarily as a result of growth in denims and flannel
shirtings. The Company also benefited from expanding apparel
<PAGE>
FORM 10-K Page 35
Item 7. (continued)
fabrics 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 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.
APPAREL FABRICS. Apparel fabrics net sales were
$575.8 million for 1993, an increase of 10.7% from 1992. The
improved sales resulted from increased sales volume and, to a
lesser extent, higher prices. Average prices adjusted for
product mix changes were up approximately three percent.
Apparel fabrics export sales for 1993 were up 18.8% 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.
<PAGE>
FORM 10-K Page 36
Item 7. (continued)
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, or 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.
Income taxes as a percentage of taxable income was 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.
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"), its 8 1/8% Debentures
due March 15, 2005 (the "Debentures") issued on March 15, 1995
as described below, and stockholders' equity. Primary sources
of liquidity are internally generated funds, a $80 million
Credit Agreement with a group of banks with Morgan Guaranty
Trust Company of New York ("Morgan Guaranty") as Agent Bank
(the "Revolving Credit Facility"), and a $50 million
Receivables Purchase Agreement (the "Receivables Purchase
Agreement") with Delaware Funding Corporation, an affiliate
of Morgan Guaranty. The Receivables Purchase Agreement was
<PAGE>
FORM 10-K Page 37
Item 7. (continued)
increased from $40 million in the second quarter of 1994 and
the Revolving Credit Facility from $60 million in the fourth
quarter of 1994. On January 1, 1995, the Company had funds
available of $31.0 million under its Revolving Credit
Facility.
The Term Loan is unsecured and bears interest at a fixed
annual rate of 8%, with required principal payments beginning
in August 1996 until final maturity on August 13, 2002. The
Revolving Credit Facility is unsecured and provides for a
floating rate of interest based, at the Company's election, on
the agent's base rate, the Certificate of Deposit rate or
LIBOR plus a margin determined by the Company's capital
structure, or at a rate determined through a competitive bid
process. The Revolving Credit Facility is scheduled to expire
on August 13, 1997. Under the Receivables Purchase Facility,
which is extendable to August 13, 1997, the cost of
receivables sold by Cone is the commercial paper rate plus 55
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.
On March 15, 1995, the Company completed the sale of
$100,000,000 of Debentures through an underwritten public
offering. The net proceeds from the sale of Debentures were
approximately $99.2 million. A portion of the proceeds were
used to repay all outstanding borrowings under the Revolving
Credit Facility. Amounts repaid under the Revolving Credit
Facility will remain available for future borrowings.
During 1994, the Company generated $55.3 million in funds
from operating activities, including $59.0 million from net
income adjusted for noncash depreciation and amortization
expenses, partially offset by increased working capital
requirements, primarily increases in trade receivables. Major
uses of cash during this period included $37.5 million for
capital expenditures, $57.6 million for the acquisition of the
assets of the Raytex commission print operation and $9.6
million for investment in CIPSA and the related joint venture.
Funding came primarily from operating cash flow, the Revolving
Credit Facility, and the additional sale of accounts
receivable to support working capital needs.
During 1993, Cone generated $57.2 million in funds from
operating activities, including $71.0 million from net income
adjusted for noncash depreciation and amortization 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
<PAGE>
FORM 10-K Page 38
Item 7. (continued)
million for preferred stock dividends. Cone purchased 20% of
CIPSA for approximately $24 million and began construction of
the 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.
On January 1, 1995, the Company's long-term capital
structure consisted of $126.1 million of long-term debt and
$236.9 million of stockholders' equity. For comparison, at
January 2, 1994 the Company had $77.2 million of long-term
debt and $210.0 million of stockholders' equity. Long-term
debt (including current maturities of long-term debt) as a
percentage of long-term debt and stockholders' equity was 35%
on January 1, 1995, compared with 27% at January 2, 1994. The
Company accounts for investments in unconsolidated affiliated
companies using the equity method on a one quarter delay
basis. In December 1994, the Mexican government devalued the
peso and allowed it to trade freely against the U.S. dollar
resulting in a substantial decline in value of the peso versus
the U.S. dollar. On January 1, 1995, the peso was trading at
4.94 pesos per U.S. dollar versus an exchange rate of
approximately 3.45 prior to the devaluation. If an exchange
rate of 4.94 had been used in the Company's financial
statements, the currency translation adjustment would have
been a $7.8 million (net of income tax benefit) reduction of
stockholders' equity at the end of 1994. The reduction in
stockholders' equity is a noncash adjustment.
Accounts receivable on January 1, 1995 were $56.7
million, up from $44.2 million at year-end 1993. At the end
of fiscal 1994, the Company had sold $50 million of accounts
receivable, an increase of $15 million from the amount sold at
the end of fiscal 1993. Receivables, including those sold
pursuant to the Receivables Purchase Agreement, represented 49
days of sales outstanding at year-end 1994 compared with 41
days at year-end 1993, as ewer payments were made in advance
of due date.
Inventories on January 1, 1995, were $149.4 million, down
$2.7 million from year-end 1993 levels of $152.1 million.
Capital spending in 1994 was $37.5 million and included
expansion and upgrading of yarn preparation facilities, new
weaving machines, and a new fiber production line at Olympic
Products.
Capital spending in 1995 is expected to be $62 million,
including $15 million for the new jacquard plant. Other
<PAGE>
FORM 10-K Page 39
Item 7. (continued)
projects include new weaving machines that replace 1970's
vintage weaving machines, additional dyeing capacity to
increase production flexibility, an additional screen printing
machine and approximately $6 million for computers, software
and information systems. Approximately $3.1 million of the
budgeted capital expenditures for 1995 had been committed at
year-end 1994. In addition to capital expenditures, the
Company expects to spend approximately $22 million for
completion of its investment in the Mexican joint venture
plant.
FINANCIAL OUTLOOK AND STRATEGY
Beginning in 1992, Cone 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 first half
1994 sales did not grow due to short-term denim inventory
adjustments in the softgoods pipeline, second half 1994
operations experienced accelerated growth, and the Company
believes that demographic trends and other market developments
continue to present favorable long-term opportunities for
growth. Operating income was lower in 1994 than in 1993 and
the Company does not anticipate improvement in operating
income in the first half of 1995. However, based on apparel
fabric order backlogs at the end of fiscal 1994, the Company
expects increased net sales in the first half of 1995.
In addition to the Company's plans to maintain modern
manufacturing facilities through capital reinvestment, the
Company has set priorities for the use of cash flow and debt
capacity. Cone's first priority is international denim
manufacturing and marketing opportunities. In 1993, the
Company purchased a 20% ownership in CIPSA, and signed
agreements with CIPSA providing for the formation of a joint
venture as described above. Cone's second priority for cash
flow and debt capacity is acquisitions in related home
furnishings product lines. The acquisition of Raytex and
Greeff are results of this strategy. The Company also from
time to time reviews and will continue to review acquisitions
and other investment opportunities (some of which may be
material to the Company) that permit Cone to add value through
its manufacturing and marketing expertise. However, the
Company currently has no agreement, arrangement or
understanding to make any such acquisition or investment.
Other potential uses of cash include common stock
repurchases, the reduction of outstanding preferred stock, or
<PAGE>
FORM 10-K Page 40
Item 7. (continued)
cash dividends, depending on the expected benefits to
shareholders. On February 17, 1994, the Board of Directors of
the Company authorized the repurchase, from time to time, of
up to 2.5 million shares of the Company's outstanding common
stock in market transactions. As of February 1, 1995, 385,400
shares had been repurchased in open market transactions and
future repurchase decisions will be based on the Company's
expected capital structure, alternative investment
opportunities, and the market price of the common stock.
The Company believes that the net proceeds from the sale
of the Debentures, together with its internally generated
operating funds and funds available under its existing credit
facilities, will be sufficient to meet its working capital,
capital spending, possible stock repurchases, and financing
commitment needs for the foreseeable future.
REGULATORY MATTERS
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 cause a
material change on the Company's competitive position,
operating results or planned capital expenditures. Cone has
an active environmental committee which fosters protection of
the environment and compliance with laws.
LEGAL PROCEEDINGS
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, the United States District Court in
Greenville, South Carolina entered a judgment in the amount of
$15.5 million (including an attorneys' fees award) against the
Company with respect to an alleged promise to make additional
Company contributions to the 1983 ESOP and all claims
unrelated to the alleged promise were dismissed. The Company,
certain individual defendants and the Plaintiffs appealed.
On May 6, 1994, the United States Court of Appeals for
the Fourth Circuit, sitting en banc, affirmed the prior
conclusion of a panel of three of its judges and unanimously
reversed the $15.5 million judgment and unanimously affirmed
<PAGE>
FORM 10-K Page 41
Item 7. (continued)
all of the District Court's rulings in favor of the Company.
However, the Court of Appeals affirmed, by an equally divided
court, the District Court's holding that Plaintiffs should be
allowed to proceed on an alternative theory whether, subject
to proof of detrimental reliance, Plaintiffs could establish
that a letter to salaried employees on December 15, 1983
created an enforceable obligation that could allow recovery on
a theory of equitable estoppel. Accordingly, the case was
remanded to the District Court for a determination of whether
the Plaintiffs can establish detrimental reliance creating
estoppel of the Company.
Additional proceedings are under way in the District
Court on the issue of detrimental reliance and other issues
related to whether the Plaintiffs can prevail on remand. For
that reason, and because of the uncertainties inherent in the
litigation process, it is not possible to predict the ultimate
outcome of this lawsuit. However, the Company intends to
continue to defend this matter vigorously, and 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 had 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 subsequently earned dividends of an
additional 11,474 shares valued at $1.2 million. The letter
of credit was substituted for an $8 million cash deposit made
in April 1992. To record this escrow transaction, the Company
increased outstanding Class A Preferred Stock by $8.7 million
and established an offsetting contra stockholders' equity
account.
Because the judgment of the District Court was reversed,
the escrowed stock and letter of credit were ordered released
by order of the District Court entered July 22, 1994.
Subsequent to the court's order, the stock was redeemed, the
offsetting contra account eliminated and letter of credit
terminated. None of these escrow transactions have had an
effect on net income or stockholders' equity.
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 42
Item 8. Financial Statements and Supplementary Data
McGLADREY & PULLEN, LLP
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 1, 1995 and January 2, 1994 and the related
consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended
January 1, 1995. 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 1, 1995 and January 2, 1994, and
the results of their operations and their cash flows for each
of the three years in the period ended January 1, 1995 in
conformity with generally accepted accounting principles.
As described in Note 12 to the consolidated financial
statements, on January 3, 1994 the Company changed its method
of accounting for postemployment benefits.
McGladrey & Pullen, LLP
Greensboro, North Carolina
February 10, 1995
<PAGE>
FORM 10-K Page 43
Item 8. (continued)
<TABLE>
<S> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended January 1, 1995, January 2, 1994 and January 3, 1993
(amounts in thousands, except per share data)
1994 1993 1992
Net Sales (Note 19) $ 806,167 $ 769,230 $ 705,430
Operating Costs and Expenses:
Cost of sales 642,472 589,314 540,825
Selling and administrative 77,823 73,326 67,554
Depreciation 23,269 20,991 18,553
743,564 683,631 626,932
Income from Operations 62,603 85,599 78,498
Other Income (Expense):
Interest income 614 521 2,621
Interest expense (7,924) (6,950) (10,938)
Other income 223 317 -
(7,087) (6,112) (8,317)
Income from Continuing Operations before
Income Taxes 55,516 79,487 70,181
Income Taxes (Note 13) 19,764 29,884 24,782
Income from Continuing Operations 35,752 49,603 45,399
Gain on Disposal - Discontinued Operations -
(Net of income tax of $276) (Note 21) 439 - -
Income before Extraordinary Item and Cumulative
Effect of Accounting Change 36,191 49,603 45,399
Extraordinary Item - Expenses Related to Early
Extinguishment of Debt - (Net of income tax benefit
of $1,212) - - (2,009)
Cumulative Effect of Accounting Change for
Postemployment Benefits - (Net of
income tax benefit of $772) (Note 12) (1,228) - -
Net Income $ 34,963 $ 49,603 $ 43,390
Income Available to Common Shareholders (Note 18):
Income from Continuing Operations $ 33,064 $ 46,808 $ 40,839
Income before Extraordinary Item and Cumulative
Effect of Accounting Change $ 33,503 $ 46,808 $ 40,839
Extraordinary Item - - (2,009)
Cumulative Effect of Accounting Change (1,228) - -
Net Income $ 32,275 $ 46,808 $ 38,830
Earnings Per Share - Fully Diluted (Note 18):
Income from Continuing Operations $ 1.19 $ 1.68 $ 1.67
Income before Extraordinary Item and Cumulative
Effect of Accounting Change $ 1.20 $ 1.68 $ 1.67
Extraordinary Item - - (.08)
Cumulative Effect of Accounting Change (.04) - -
Net Income $ 1.16 $ 1.68 $ 1.59
Weighted Average Common Shares and
Common Share Equivalents Outstanding -
Fully Diluted (Note 18) 27,834 27,894 24,470
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
FORM 10-K Page 44
Item 8. (continued)
<TABLE>
<S> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 1, 1995 and January 2, 1994
(amounts in thousands, except share and par value data)
ASSETS 1994 1993
Current Assets:
Cash $ 1,158 $ 503
Accounts receivable - trade, less
provision for doubtful accounts
$3,000 (Notes 2 and 19) 56,654 44,175
Inventories (Note 3):
Greige and finished goods 83,377 84,923
Work in process 15,796 15,968
Raw materials 19,973 20,612
Supplies and other 30,274 30,621
149,420 152,124
Other current assets 6,007 5,542
Total Current Assets 213,239 202,344
Investments in Unconsolidated Affiliates (Note 4) 34,294 26,420
Other Assets (Note 6) 38,803 3,171
Property, Plant and Equipment:
Land 20,662 20,758
Buildings 79,418 71,942
Machinery and equipment 284,401 239,846
Other 30,581 25,799
415,062 358,345
Less accumulated depreciation 177,321 158,669
Property, Plant and Equipment-Net 237,741 199,676
$ 524,077 $ 431,611
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
FORM 10-K Page 45
Item 8. (continued)
<TABLE>
<S> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 1, 1995 and January 2, 1994
(amounts in thousands, except share and par value data)
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
Current Liabilities:
Notes payable (Note 7) $ 10,700 $ 5,099
Current maturities of long-term debt (Note 9) 414 767
Accounts payable - trade 38,430 26,746
Sundry accounts payable and accrued expenses (Note 8) 39,881 44,231
Deferred income taxes (Note 13) 28,148 27,295
Total Current Liabilities 117,573 104,138
Long-Term Debt (Note 9) 126,108 77,172
Deferred Items:
Deferred income taxes (Note 13) 36,789 36,652
Other deferred items 6,727 3,615
43,516 40,267
Stockholders' Equity:
Class A Preferred Stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 383,948
shares; 1993, 465,077 shares - Employee Stock
Ownership Plan (Notes 15 and 20) 38,395 46,508
Class A Preferred Stock held in escrow (1993, 81,125 shares)
(Notes 15 and 20) - (8,113)
Class B Preferred Stock-no par value; authorized
5,000,000 shares (Note 15) - -
Common Stock - $.10 par value; authorized 42,700,000
shares; issued and outstanding 27,403,621shares;
1993, 27,744,783 shares (Notes 15 and 16) 2,740 2,774
Capital in excess of par 71,354 75,397
Retained earnings 125,771 93,468
Currency translation adjustment (1,380) -
Total Stockholders' Equity 236,880 210,034
$ 524,077 $ 431,611
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
FORM 10-K
Page 46
Item 8. (continued)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 1, 1995, JANUARY 2, 1994 AND JANUARY 3, 1993
(amounts in thousands, expect share data)
Class A Preferred Class A Preferred Participating
Stock Stock - Escrow Preferred Stock
Shares Amount Shares Amount Shares Amount
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 Mills
escrow account 75,330 7,533 (75,330) (7,533) - -
Participating Preferred Stock
Converted to Common Stock:
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
Mills 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) - $ -
Net income - - - - - -
Currency translation loss
(net of income tax benefit
of $1,002) - - - - - -
Class A Preferred Stock -
Employee Stock Ownership
Plan:
Cash dividends paid - - - - - -
Shares issued (7.0% dividend
on shares held in Cone
Mills escrow account) 5,679 567 (5,679) (567) - -
Shares received from
Employee Stock Ownership
Plan Trustee - Cone Mills
escrow account (86,804) (8,680) 86,804 8,680 - -
Shares redeemed (4) - - - - -
Common Stock:
Options exercised - - - - - -
Purchase of common shares - - - - - -
Balance, January 1, 1995 383,948 $ 38,395 - $ - - $ -
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> Page 46a
FORM 10-K
Item 8. (continued)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 1, 1995, JANUARY 2, 1994 AND JANUARY 3, 1993
(amounts in thousands, except share data)
Nonvoting Capital in Currency
Common Stock Common Stock Excess Retained Translation
Shares Amount Shares Amount of Par Earnings Adjustment
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 Mills
escrow account - - - - - - -
Participating Preferred Stock
Converted to Common Stock:
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
Mills 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 $ -
Net income - - - - - 34,963 -
Currency translation loss
(net of income tax benefit
of $1,002) - - - - - - (1,380)
Class A Preferred Stock -
Employee Stock Ownership
Plan:
Cash dividends paid - - - - - (2,660) -
Shares issued (7.0% dividend
on shares held in Cone
Mills escrow account) - - - - - - -
Shares received from
Employee Stock Ownership
Plan Trustee - Cone Mills
escrow account - - - - - - -
Shares redeemed - - - - - - -
Common Stock:
Options exercised - - 21,000 2 113 - -
Purchase of common shares - - (362,162) (36) (4,156) - -
Balance, January 1, 1995 - $ - 27,403,621 $ 2,740 $ 71,354 $ 125,771 $ (1,380)
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
FORM 10-K
Item 8. (continued) Page 47
<TABLE>
<S> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended January 1, 1995, January 2, 1994 and January 3, 1993
(amounts in thousands)
1994 1993 1992
Cash Flows from Operating Activities:
Net Income $ 34,963 $ 49,603 $ 43,390
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 23,269 20,991 19,952
Employee Stock Ownership Plan expense - - 1,250
Gain on sale and writedown of property, plant and equipment, net (2,519) (1,657) (1,670)
Amortization 777 444 959
Equity in earnings - unconsolidated affiliate (223) (317) -
Dividend received - unconsolidated affiliate 541 - -
Change in assets and liabilities, net of acquisition:
Decrease (increase) in trade receivables (9,577) 13,182 42,050
Decrease (increase) in inventories 5,317 (6,363) (5,013)
Decrease (increase) in other assets (2,989) (2,045) 275
Increase (decrease) in accounts payable and accrued expenses 1,644 (19,299) 14,194
Increase (decrease) in income taxes payable - (276) (1,948)
Increase (decrease) in deferred income taxes 990 3,771 4,062
Increase (decrease) in other liabilities 3,113 (835) (1,661)
Net cash provided by operating activities 55,306 57,199 115,840
Cash Flows from Investing Activities:
Investments in unconsolidated affiliates (9,572) (26,103) -
Acquisition, net of cash acquired* (57,647) - -
Proceeds from sale of property, plant and equipment 2,903 4,869 6,423
Capital expenditures (37,494) (38,712) (25,398)
Net cash used in investing activities (101,810) (59,946) (18,975)
Cash Flows from Financing Activities:
Net borrowings (payments) - short-term loans 5,601 (1,554) 353
Principal payments - long-term debt (47,606) (77,307) (316,655)
Proceeds from long-term debt borrowings 94,578 77,746 189,246
Purchase of outstanding capital stock - Class A Preferred - - (27,442)
Purchase of outstanding capital stock - Common (2,869) (358) (5,417)
Proceeds from issuance of capital stock - Common 115 535 70,886
Dividends paid - Class A Preferred (2,660) (3,097) (1,009)
Net cash provided by (used in) financing activities 47,159 (4,035) (90,038)
Net increase (decrease) in cash 655 (6,782) 6,827
Cash at Beginning of Period 503 7,285 458
Cash at End of Period $ 1,158 $ 503 $ 7,285
* Acquisition, net of cash acquired:
Working capital, other than cash $ (1,377)
Property, plant and equipment (23,795)
Cost in excess of net assets (19,686)
Other assets (14,400)
Long-term debt assumed 1,611
Net cash used to acquire business $ (57,647)
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
FORM 10-K Page 48
<TABLE>
<S> <C> <C> <C>
Item 8. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended January 1, 1995, January 2, 1994 and January 3, 1993
(amounts in thousands)
1994 1993 1992
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest, net of interest capitalized $ 7,703 $ 7,125 $ 11,100
Income taxes, net of refunds $ 17,938 $ 23,926 $ 25,011
Supplemental Schedule of Noncash Investing and Financing Activities:
Stock dividend paid - Class A Preferred Stock $ - $ - $ 5,610
Contribution to ESOP - Class A Preferred Stock - - 40
Class A Preferred Stock issued $ - $ - $ 5,650
Class A Preferred Stock issued to ESOP trustee-Cone Mills escrow account $ - $ - $ 7,533
Stock dividend paid to ESOP trustee for Cone Mills escrow account 567 580 -
Class A Preferred Stock issued $ 567 $ 580 $ 7,533
Class A Preferred Stock received from ESOP trustee and
closure of escrow account $ 8,680 $ - $ -
Purchase of outstanding capital stock - Common through
incurrence of accounts payable $ 1,323 $ - $ -
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
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
FORM 10-K Page 49
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
1, 1995, and January 2, 1994, contained 52
weeks. The year ended January 3, 1993,
contained 53 weeks.
Inventories
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
$30,000,000 higher at January 1, 1995, and
$20,000,000 higher at January 2, 1994. LIFO
inventories valued for financial statement
purposes exceed their income tax basis by
approximately $83,000,000 at January 1, 1995,
and $86,000,000 at January 2, 1994.
Investments in Unconsolidated Affiliates
Investments in unconsolidated affiliated
companies are accounted for by the equity
method. The Company's equity in earnings and
currency translation adjustments are recorded
on a one quarter delay basis.
<PAGE>
FORM 10-K Page 50
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other Assets
Other assets consist primarily of the excess
of cost over net assets acquired and trade
names, which are carried at cost less
accumulated amortization. Costs are amortized
using the straight-line method over the
estimated useful lives of the related assets,
not exceeding twenty years.
Property, Plant and Equipment
Property, plant and equipment is carried at
cost. 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.
<PAGE>
FORM 10-K Page 51
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Sale of Accounts Receivables
On August 11, 1992, the Company entered into an
agreement 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. This agreement was
amended on June 30, 1994, which made the agreement
extendable to August 1997, and allowed the sale of
up to $50 million 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 55
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 $50 million sold at January 1, 1995
and net of $35 million sold at January 2, 1994
under this agreement. Cash flows provided by
operating activities for the years 1994, 1993 and
1992 include the sale of accounts receivable of $15
million, $11 million and $24 million, respectively.
Note 3. Inventory Liquidations
During 1994, 1993 and 1992, 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 $218,000 in
1994, $303,000 in 1993 and by $1,076,000 in 1992.
<PAGE>
FORM 10-K Page 52
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. Cost of the initial investment was
approximately $24 million. During the fourth
quarter of 1994, CIPSA elected to increase capital
through the sale of additional shares of capital
stock, and the Company retained its 20% ownership
level by an additional investment of $6.7 million.
The Company accounts for this investment by the
equity method.
The summarized unaudited financial information of
CIPSA (100% basis), as adjusted for purchase
accounting, is set forth below:
Financial Information:
<TABLE>
<S> <C> <C>
Year Ended Quarter Ended
Sept.30,1994 Sept.30, 1993
(amounts in thousands)
Income statement data
Net sales $ 90,648 $ 23,128
Gross profit 17,025 5,669
Net income 1,114 1,584
Company's equity in net income 223 317
Sept.30,1994 Sept.30, 1993
(amounts in thousands)
Balance sheet data
Current assets $ 70,310 $ 70,311
Noncurrent assets 178,573 87,657
Current liabilities 109,409 13,282
Noncurrent liabilities 30,242 24,121
Net assets 109,232 120,565
Company's equity in net assets 21,847 24,113
</TABLE>
<PAGE>
FORM 10-K Page 53
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On January 1, 1995, the carrying value of this investment
exceeded by approximately $9.2 million the Company's
share in CIPSA's net assets calculated using U.S.
generally accepted accounting principles before
application of purchase accounting. Approximately $2.4
million of the excess relates to differences between
historical costs and fair market values of CIPSA's
property, plant and equipment. The remainder is the
excess of cost over net assets acquired, net of
accumulated amortization, of approximately $6.8 million
which is being amortized over a life of 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 1, 1995 the
Company had invested $5.0 million.
In December 1994, the Mexican government devalued the
peso and allowed it to freely trade against the U.S.
dollar resulting in a substantial decline in value of the
peso versus the U.S. dollar. On January 1, 1995, the
peso was trading at 4.94 pesos per U.S. dollar versus an
exchange rate of approximately 3.45 prior to the
devaluation. If an exchange rate of 4.94 had been used
in the Company's financial statements, the currency
translation adjustment would have been a $7.8 million
(net of income tax benefit) reduction of stockholders'
equity at the end of 1994.
Note 5. Acquisition
On December 2, 1994, the Company completed the closing of
the acquisition of substantially all of the assets of
M.P.M. Transportation, Inc., successor by merger with
Golding Industries, Inc. Golding was merged into M.P.M.
Transportation, Inc. as of the day immediately preceding
the closing. Golding conducted a commission printing
operation in Marion, South Carolina that was also known
<PAGE>
FORM 10-K Page 54
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
as the Raytex Division("Raytex"). Raytex prints
primarily wide fabrics used in home furnishings,
including comforters and bedspreads. The assets
purchased consist primarily of a printing plant and
related real property, equipment, inventories and
receivables.
The acquisition was accounted for using the purchase
method. The purchase price was approximately $63.6
million, consisting of cash in the amount of $57.6
million and assumption of net liabilities of $6.0
million. The excess of the purchase price over the fair
value of net assets acquired was $19.7 million. The fair
value of net assets acquired included other intangible
assets of $14.4 million.
Raytex's results of operations have been included in the
1994 consolidated financial statements from date of
acquisition. The unaudited proforma results of
operations for the fiscal years 1994 and 1993, assuming
the acquisition occurred as of the beginning of the
respective periods, follows:
<TABLE>
<S> <C> <C>
1994 1993
(amounts in thousands,
except share data)
Net sales $ 845,915 $ 818,495
Income before cumulative effect of
accounting change 37,902 50,126
Net income 36,674 50,126
Earnings per common share-fully diluted:
Income before cumulative effect of
accounting change $ 1.27 $ 1.70
Net income 1.22 1.70
</TABLE>
<PAGE>
FORM 10-K Page 55
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Other Assets
Other assets consist of the following:
<TABLE>
<S> <C> <C>
1994 1993
(amounts in thousands)
Excess of cost over net assets acquired $ 19,863 $ 177
Trade names 14,317 17
Other intangible assets 6,838 3,875
$ 41,018 $ 4,069
Less accumulated amortization ( 2,567) (1,788)
Net intangible assets $ 38,451 $ 2,281
Other assets 352 890
Total other assets $ 38,803 $ 3,171
</TABLE>
Note 7. Notes Payable
The Company's real estate subsidiary had unsecured notes
payable outstanding of $8,700,000 and $5,099,000 for 1994
and 1993, respectively. These funds are borrowed
pursuant to a $15,000,000 bank credit agreement with
interest rates, at the borrower's option, of LIBOR plus
2% or the prime rate. The availability of funds under
this credit agreement is based upon capital invested in
real estate inventory. At January 1, 1995, the Company
also had outstanding unsecured notes payable of
$2,000,000 at an interest rate of 6.65%.
Note 8. Sundry Accounts Payable and Accrued Expenses
Sundry accounts payable and accrued expenses
consist of the following:
1994 1993
(amounts in thousands)
Accrued salaries, wages
and commissions $ 14,414 $ 15,062
Checks issued in excess
of deposits 10,811 12,185
Other 14,656 16,984
$ 39,881 $ 44,231
<PAGE>
FORM 10-K Page 56
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Long-Term Debt
Long-term debt consists of the following:
January 1, 1995
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 75,000 $ - $ 75,000
Revolving Credit Agreement 49,000 - 49,000
Capital Lease Obligation 1,610 155 1,455
Industrial Revenue Bonds 757 224 533
Other 155 35 120
$ 126,522 $ 414 $ 126,108
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
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. On
November 18, 1994, the Revolving Credit Agreement was
amended to $80 million and extended to August 13, 1997.
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 or through a
competitive bid. On January 1, 1995, the Company had
borrowings under the Revolving Credit Agreement at
interest rates ranging from 6.19% to 6.63%.
The financing agreements contain certain covenants
regarding the operations and financial condition of the
Company. The Company was in compliance with all loan
covenants on January 1, 1995. The total amount of unused
capacity under the Revolving Credit Agreement at January
1, 1995, was $31 million.
<PAGE>
FORM 10-K Page 57
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In December of 1994, the Company assumed a capital lease
obligation of $1.6 million in connection with the
acquisition of substantially all of the assets of Golding
Industries, Inc. Golding entered into this lease in June
of 1994 with a lease term of five years and an effective
interest rate of 10.27%. Equipment with a net book value
of $3.6 million secures the lease and is included in
property, plant and equipment. Aggregate future minimum
lease payments of $2.0 million consist of the present
value of mininum payments of $1.6 million and interest
expense of $.4 million. Future minimum capital lease
payments are: 1995, $237,000; 1996, $472,000; 1997,
$472,000; 1998, $472,000; and 1999, $355,000.
The Company's industrial revenue bond obligations are at
interest rates ranging from 70% to 84% of prime rate and
have maturities through 1999.
The Company also has a long-term obligation of $155,000
at 7% per annum with maturities through 1998.
Annual maturities of long-term debt, excluding the
capital lease obligation, for each of the next five
fiscal years are:
1995 $ 259,000
1996 10,901,000
1997 59,878,000
1998 10,881,000
1999 10,850,000
<PAGE>
FORM 10-K Page 58
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10. 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.
Pension expense related to these plans was $4,100,000 in
1994, $2,445,000 in 1993 and $1,807,000 in 1992. 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 1994, 1993, and 1992
included the following components:
1994 1993 1992
(amounts in thousands)
Service cost, benefits
earned during period $ 2,144 $ 1,284 $ 1,194
Interest cost on projected
benefit obligation 1,752 1,180 686
Actual loss (return) on assets 93 (571) (262)
Net amortization and deferral 111 552 189
$ 4,100 $ 2,445 $ 1,807
Assumptions used in determining the periodic
pension cost of the pension plans are as follows:
1994 1993 1992
Discount rate 7.5% 8.5% 8.5%
Average rate of increase
in compensation levels 4.0 4.0 4.5
Expected long-term rate of
return on assets 8.5 9.0 8.0
<PAGE>
FORM 10-K Page 59
Item 8. (continued)
<TABLE>
<S> <C> <C> <C> <C>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the pension plans' funded status and amounts
recognized in the Company's consolidated balance sheets at January 1,
1995 and January 2, 1994:
1994 1993
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 $ 9,449 $ 4,511 $ 5,415 $ 2,472
Actuarial present value of accumulated benefit
obligation - nonvested portion 1,261 174 649 20
Accumulated benefit obligation - total 10,710 4,685 6,064 2,492
Additional amounts related to projected
compensation levels 12,202 1,068 8,377 133
Total actuarial projected benefit obligation
for service rendered to date 22,912 5,753 14,441 2,625
Less: Plan assets at fair value 11,624 1,749 8,168 159
Projected benefit obligation in excess of
plan assets (11,288) (4,004) (6,273) (2,466)
Unrecognized net actuarial loss,
difference in assumptions and actual
experience 15,067 1,111 7,879 176
Unrecognized prior service cost (income) (1,164) 651 (543) (28)
Initial unrecognized net liability
at date of adoption, being recognized
over 14-16 years 364 752 512 756
Adjustment to recognize minimum liability
through recording an intangible asset - (1,446) - (734)
Pension related assets (liabilities) included
in the consolidated balance sheets $ 2,979 $ (2,936) $ 1,575 $ (2,296)
Assumptions used in determining the funded status of the pension plans (shown above) are as follows:
1994 1993
Discount rate 8.0 % 7.5 %
Average rate of increase in
compensation levels 5.0 4.0
</TABLE>
<PAGE>
FORM 10-K Page 60
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Listed below are the Company's five defined contribution
plans which cover substantially all employees.
1. The 1983 Employee Stock Ownership Plan ("ESOP")
2. The Supplemental Retirement Plan ("SRP")
3. The Supplemental Retirement Plan - Hourly ("SRP Hourly")
4. The Employee Equity Plan ("EEP")
5. The Employee Equity Plan - Hourly ("EEP Hourly")
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 a portion of participants'
ESOP accounts.
The 401(k) Program consists of the EEP, EEP Hourly, SRP
and the SRP Hourly plans. Participants of the Program
may contribute from 2% to 15% of their annual
compensation to their respective SRP or to their
respective EEP, or their contributions may be divided
between the two plans. The Company makes matching cash
contributions of 25% to both SRP plans, and 50% to both
EEP plans. The Company does not match employee
contributions in excess of 6% of the employee's annual
compensation.
Expenses for the defined contribution plans are shown
below:
1994 1993 1992
(amounts in thousands)
ESOP $ - $ - $ 1,250
EEP (combined) 1,090 544 1,174
SRP (combined) 630 631 1,149
The 1992 EEP and SRP expenses include a special
discretionary contribution made by the Company.
<PAGE>
FORM 10-K Page 61
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Postretirement Benefits Other Than Pensions
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 $4,598,000 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
$405,000.
The periodic expense for postretirement benefits included
the following components:
1994 1993
(amounts in thousands)
Service cost for benefits earned
during the year $ 113 $ 188
Interest cost on accumulated
benefit obligation 197 379
Amortization of the unrecognized net gain (130) -
Amortization of transition obligation 230 230
Total expense $ 410 $ 797
Postretirement benefit cost recognized in 1992 under the
Company's prior accounting policy was $277,000.
<PAGE>
FORM 10-K Page 62
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The actuarial and recorded liabilities for postretirement
benefits, none of which have been funded, are as follows:
1994 1993
(amounts in thousands)
Accumulated postretirement benefit obligation:
Retirees $ 571 $ 743
Fully eligible active plan participants 703 967
Other active plan participants 1,466 2,242
Total $ 2,740 $ 3,952
Plus unrecognized gain 2,149 1,080
Less unrecognized transition obligation 4,138 4,368
Accrued postretirement benefit cost $ 751 $ 664
For measurement purposes, a 13% annual rate of increase
in per capita health care costs of covered benefits was
assumed for 1995, with such rate of increase gradually
declining to 5.5% in 2003. Increasing the assumed health
care cost trend rate by 1 percentage point would increase
the accumulated postretirement benefit obligation at
January 1, 1995 by $297,000 and increase net periodic
postretirement benefit expense by approximately $42,000
in 1994. The accumulated postretirement benefit
obligation was computed using an assumed discount rate of
8% for 1994 and 7% for 1993.
Note 12. 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.
The Company adopted SFAS No. 112, "Employers' Accounting
for Postemployment Benefits", as of the beginning of the
1994 fiscal year. This statement requires an accrual
method of recognizing postemployment benefits rather than
recording an expense when paid. The cumulative effect of
this accounting change, included in first quarter 1994
earnings, resulted in a one-time charge to income of
$2,000,000 and a reduction in net income of $1,228,000.
Additional annual expenses resulting from the
implementation of this accounting statement were
insignificant.
<PAGE>
FORM 10-K Page 63
Item 8. (continued)
<TABLE>
<S> <C> <C> <C>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13. Income Taxes
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)
1994 1993 1992
Continuing operations $ 19,764 $ 29,884 $ 24,782
Discontinued operations 276 - -
Extraordinary item - - (1,212)
Cumulative effect of accounting change (772) - -
Stockholders' equity, currency translation adjustment (1,002) - -
Total provision $ 18,266 $ 29,884 $ 23,570
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Components of Income Tax Expense from Continuing Operations (in thousands)
1994 1993 1992
Current Deferred Total Current Deferred Total Current Deferred Total
Federal $ 15,928 $ 1,145 $ 17,073 $ 22,303 $ 3,470 $ 25,773 $ 17,447 $ 3,511 $ 20,958
State and local 2,350 341 2,691 3,810 301 4,111 3,273 551 3,824
Total provision $ 18,278 $ 1,486 $ 19,764 $ 26,113 $ 3,771 $ 29,884 $ 20,720 $ 4,062 $ 24,782
</TABLE>
<TABLE>
<S> <C> <C> <C>
Reconciliation to Effective Tax Rate from Continuing Operations 1994 1993 1992
Statutory U. S. tax rate 35.0 % 35.0 % 34.0 %
State income taxes, net of federal benefit 3.2 3.4 3.6
Tax benefit from foreign sales corporation (2.3) (1.9) (1.4)
Impact on deferred taxes from federal tax rate increase - 2.1 -
Other (0.3) (1.0) (0.9)
Total effective tax rate 35.6 % 37.6 % 35.3 %
Components of Net Deferred Income Tax Liability (in thousands) 1994 1993 1992
Deferred income tax liabilities $ 75,391 $ 75,160 $ 73,731
Deferred income tax assets (10,454) (11,213) (13,555)
Net deferred income tax liability $ 64,937 $ 63,947 $ 60,176
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>
Items Comprising Net Deferred Income Tax Liability (in thousands) 1994 1993 1992
Property, plant & equipment - principally depreciation $ 38,804 $ 37,538 $ 37,239
Inventories 32,313 32,853 31,557
Other - net (6,180) (6,444) (8,620)
Net deferred income tax liability $ 64,937 $ 63,947 $ 60,176
</TABLE>
<PAGE>
FORM 10-K Page 64
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. 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 15. Capital Stock
All Class A Preferred Stock is held by the Cone Mills
Corporation 1983 ESOP except shares which were 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 1995, 7.0% for 1994 and 8.0% for 1993.
<PAGE>
FORM 10-K Page 65
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 $99.78 per share
at January 1, 1995.
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 66
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 67
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 16. 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 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. On November 9, 1994, nonqualified stock
option grants to purchase 410,000 shares of common stock
at $12.00 per share were made. The 1993 and 1994 option
grants 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;
however, the 1994 options provide that no more than fifty
percent (50%) of the shares granted can be exercised in
any one calendar year. The 1994 nonqualified option
grants have the income tax benefit reimbursement feature.
On May 10, 1994, the shareholders approved the Company's
1994 Stock Option Plan for non-employee directors which
allows the grant of options to purchase an aggregate of
100,000 shares of common stock. A grant of one thousand
(1,000) shares is issued on the fifth business day after
each annual meeting to each of the non-employee
directors. The option price is the last reported sale
price on the New York Stock Exchange composite tape on
the date of grant. Options granted under the Plan are
nonqualified stock option grants with a term of seven
years. Grants of 6,000 shares were made on May 17, 1994,
at $12.875 per share.
<PAGE>
FORM 10-K Page 68
Item 8. (continued)
<TABLE>
<S> <C> <C> <C> <C> <C>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of activity under the plans follows:
1984 Stock Option Plan:
Option price per share $ 5.25 $ 6.50
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
Exercised (17,000) (4,000)
Outstanding at 1/1/95 78,200 99,800
1992 Stock Option Plan:
Option price per share $15.625 $12.00
Granted 2/18/93 500,000
Outstanding 1/2/94 500,000
Granted 11/9/94 410,000
Canceled (8,000) -
Outstanding at 1/1/95 492,000 410,000
1994 Stock Option Plan:
Option price per share $12.875
Granted 5/17/94 6,000
Outstanding at 1/1/95 6,000
Options exercisable
at 1/1/95 78,200 45,900 196,800 - 6,000
</TABLE>
Note 17. Leases, Commitments and Repairs and Maintenance
The Company has various leases accounted for as operating
leases. Rent expense was $ 5,132,000, $5,053,000 and
$4,465,000 for 1994, 1993, and 1992, respectively.
Future minimum rental payments required under lease
agreements are $4,289,000 for 1995, $3,755,000 for 1996,
$2,268,000 for 1997, $1,911,000 for 1998, $1,550,000 for
1999 and thereafter $1,431,000. Aggregate future minimum
rental payments total $15,204,000. Commitments for
improvements of and additions to property, plant and
equipment were approximately $3,100,000 at January 1,
1995. Operating costs and expenses include repairs and
maintenance costs of $34,622,000, $34,680,000 and
$32,239,000 for 1994, 1993 and 1992, respectively.
<PAGE>
FORM 10-K Page 69
Item 8. (continued)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18. Earnings Per Share
1994 1993 1992
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
(amounts in thousands, except per share data)
Income from continuing operations $ 35,752 $ 35,752 $ 49,603 $ 49,603 $ 45,399 $ 45,399
Less: Class A Preferred dividends (2,688) (2,688) (2,795) (2,795) (4,560) (4,560)
Adjusted income from continuing operations 33,064 33,064 46,808 46,808 40,839 40,839
Gain on disposal - discontinued operations 439 439 - - - -
Adjusted income before extraordinary item and
cumulative effect of accounting change 33,503 33,503 46,808 46,808 40,839 40,839
Extraordinary Item - - - - (2,009) (2,009)
Cumulative effect of accounting change (1,228) (1,228) - - - -
Adjusted net income $ 32,275 $ 32,275 $ 46,808 $ 46,808 $ 38,830 $ 38,830
Weighted average common shares outstanding 27,728 27,728 27,694 27,694 19,421 19,421
Common share equivalents from assumed
exercise of outstanding options, less
shares assumed repurchased 106 106 192 200 4,864 5,049
Weighted average common shares and
common share equivalents outstanding 27,834 27,834 27,886 27,894 24,285 24,470
Earnings per common share and
common share equivalent:
Income from continuing operations $ 1.19 $ 1.19 $ 1.68 $ 1.68 $ 1.68 $ 1.67
Income before extraordinary item and
cumulative effect of accounting change $ 1.20 $ 1.20 $ 1.68 $ 1.68 $ 1.68 $ 1.67
Extraordinary item - - - - (.08) (.08)
Cumulative effect of accounting change (.04) (.04) - - - -
Net income $ 1.16 $ 1.16 $ 1.68 $ 1.68 $ 1.60 $ 1.59
Primary and fully diluted earnings per share have been computed by dividing the net earnings
available to common stockholders by the sum of the weighted average common shares and
common share equivalents outstanding.
Common shares issued June 18, 1992 have been included from date of issue.
</TABLE>
<PAGE>
FORM 10-K Page 70
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19. 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 17.6% of sales from continuing operations in 1994,
17.2% in 1993 and 16.1% in 1992. 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 33.9% in 1994, 35.3% in 1993
and 37.9% in 1992. At January 1, 1995, this customer had
an outstanding accounts receivable balance with the
Company of approximately $17.9 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, gains from
discontinued operations, extraordinary items and
cumulative effect of accounting changes 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 71
Item 8. (continued)
<TABLE>
<S> <C> <C> <C>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment Information
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:
1994 1993 1992
(amounts in thousands)
Sales
Apparel $ 600,477 $ 575,800 $ 520,019
Home Furnishings 205,690 193,430 185,411
Total $ 806,167 $ 769,230 $ 705,430
Operating income
Apparel $ 47,498 $ 68,828 $ 67,382
Home Furnishings 18,970 19,470 16,317
66,468 88,298 83,699
General corporate expenses 3,865 2,699 5,201
Interest expense - net 7,310 6,429 8,317
Other income (223) (317) -
10,952 8,811 13,518
Income from continuing operations
before income taxes $ 55,516 $ 79,487 $ 70,181
Operating Margin
Apparel 7.9 % 12.0 % 13.0 %
Home Furnishings 9.2 10.1 8.8
Total 8.2 % 11.5 % 11.9 %
Identifiable Assets
Apparel $ 324,223 $ 295,832 $ 268,872
Home Furnishings 182,510 113,780 104,039
Corporate 17,344 16,227 20,888
Discontinued Operations - 5,772 8,149
Total $ 524,077 $ 431,611 $ 401,948
Depreciation
Apparel $ 17,913 $ 16,518 $ 14,634
Home Furnishings 4,122 3,376 2,893
Corporate 1,234 1,097 1,026
Total $ 23,269 $ 20,991 $ 18,553
Capital Expenditures
Apparel $ 25,234 $ 28,083 $ 17,590
Home Furnishings 9,077 8,927 5,993
Corporate 3,183 1,702 1,815
Total $ 37,494 $ 38,712 $ 25,398
</TABLE>
<PAGE>
FORM 10-K Page 72
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 20. 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.
On March 20, 1992, the United States District Court in
Greenville, South Carolina, 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 certain of its executive
officers 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 was 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.
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 had 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 subsequently earned
dividends of an additional 11,474 shares valued at $1.2
million. To record these escrow transactions, the
<PAGE>
FORM 10-K Page 73
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company increased outstanding Class A Preferred Stock by
$8.7 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 May 6, 1994, the Court of Appeals, sitting en banc,
affirmed the prior conclusion of a panel of three of its
judges, and unanimously reversed the $15.5 million
judgment and unanimously affirmed all of the District
Court's rulings in favor of the Company. However, the
Court of Appeals affirmed, by an equally divided court,
the District Court's holding that Plaintiffs should be
allowed to proceed on an alternative theory whether,
subject to proof of detrimental reliance, Plaintiffs
could establish that a letter to salaried employees on
December 15, 1983 created an enforceable obligation that
could allow recovery on a theory of equitable estoppel.
Accordingly, the case was remanded to the District Court
for a determination of whether the Plaintiffs can
establish detrimental reliance creating estoppel of the
Company.
Additional proceedings are under way in the District
Court on the issue of detrimental reliance and other
issues related to whether the Plaintiffs can prevail on
remand. For that reason, and because of the
uncertainties inherent in the litigation process, it is
not possible to predict the ultimate outcome of this
lawsuit. However, the Company intends to continue to
defend this matter vigorously, and 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.
Because judgment of the District Court was reversed, the
escrowed stock and letter of credit were ordered released
by order of the District Court entered July 22, 1994.
Subsequent to the court's order, the stock was redeemed,
the offsetting contra account eliminated and letter of
credit terminated. None of these escrow transactions had
an effect on net income or stockholders' equity.
<PAGE>
FORM 10-K Page 74
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 21. Discontinued Operations
The Company adopted a plan to discontinue and liquidate
its corduroy and other bottomweight continuous piece-dyed
fabrics product line in December 1991. During 1992 and
1993 the Company continued to accommodate customers,
liquidate inventory, and collect receivables. Revenues
for 1993 and 1992 were $4,814,000 and $62,036,000,
respectively. Actual losses for 1993 and 1992 were
consistent with the estimates provided for these years,
and no gain nor additional loss was recognized for these
periods. On January 4, 1994, the Company completed the
sale of all remaining assets identified with discontinued
operations. Proceeds from this sale of inventories were
$3,500,000 and resulted in net income of $439,000. This
transaction concluded the Company's 1991 Plan for
Discontinued Operations.
Note 22. Fair Value of Financial Instruments and Derivatives
The Company has estimated the fair value amounts of
financial instruments as required by SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments",
using market information and appropriate valuation
methodologies. The valuation of long-term debt is based
on current rates for similar debt maturities that the
Company expects it could obtain in present financial
markets. It is estimated that the carrying value of all
of the Company's financial instruments, including long-
term debt, approximated fair value at January 1, 1995 and
January 2, 1994.
The Company purchases cotton futures for the purpose of
managing its raw material costs. On January 1, 1995, no
cotton futures were held by the Company, and for each of
the fiscal years presented gains or losses charged to
cost of sales have been less than $200,000. In addition
to cotton, from time to time the Company hedges foreign
currency transactions and interest rates.
<PAGE>
FORM 10-K Page 75
<TABLE>
<S> <C> <C> <C> <C>
Item 8. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23. Quarterly Financial Data (unaudited)
Summarized quarterly financial data for years 1994 and 1993:
Quarters Ended
Apr. 3, Jul. 3, Oct. 2, Jan. 1,
1994 1994 1994 1995
(in thousands, except per share)
Net sales $ 195,919 $ 201,662 $ 203,475 $ 205,111
Gross profit (1) 36,536 36,232 33,722 33,936
Income from operations 17,583 16,905 14,790 13,325
Income from continuing operations 10,025 9,847 8,559 7,321
Gain on discontinued operations 439 - - -
Income before cumulative effect of accounting change 10,464 9,847 8,559 7,321
Cumulative effect of accounting change (1,228) - - -
Net income $ 9,236 $ 9,847 $ 8,559 $ 7,321
Per share data (fully diluted):
Income from continuing operations $ .34 $ .33 $ .28 $ .24
Income before cumulative effect of accounting change $ .35 $ .33 $ .28 $ .24
Net income $ .31 $ .33 $ .28 $ .24
Weighted average shares outstanding 27,866 27,858 27,853 27,760
Common stock prices*
High 17 1/4 14 5/8 14 7/8 13 1/2
Low 13 1/2 12 12 3/8 11 1/8
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
The number of holders of record of the Company's Common Stock as of February 23, 1995 was 572.
*New York Stock Exchange Composite Tape.
(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 76
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
<PAGE>
FORM 10-K Page 77
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 6, 1995, prepared for
the Annual Meeting of Shareholders to be held on May 9, 1995,
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 6, 1995, prepared for
the Annual Meeting of Shareholders to be held on May 9, 1995,
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 6, 1995,
prepared for the Annual Meeting of Shareholders to be held on
May 9, 1995, 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 "Certain Relationships and Related
Transactions" in the Company's definitive Proxy Statement
dated April 6, 1995, prepared for the Annual Meeting of
Shareholders to be held on May 9, 1995, and is hereby
incorporated by reference.
<PAGE>
FORM 10-K PART IV Page 78
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 42 through 75 hereof.
Report of Independent Auditor
Consolidated Statements of Operations for the Years
Ended January 1, 1995, January 2, 1994, and January 3,
1993
Consolidated Balance Sheets as of January 1, 1995 and
January 2, 1994
Consolidated Statements of Stockholders' Equity for
the Years Ended January 1, 1995, January 2, 1994, and
January 3, 1993
Consolidated Statements of Cash Flows for the Years
Ended January 1, 1995, January 2, 1994, and January 3,
1993
Notes to Consolidated Financial Statements
(a)(2) The following Financial Statement Schedules are
presented on pages 80 through 81 hereto.
Report of Independent Auditor relating to Schedule II
Schedule II - Valuation and Qualifying Accounts
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.
(a)(3) Exhibits. Exhibits to this report are listed on the
accompanying Index to Exhibits.
(b) Reports on Form 8-K
(1) On December 19, 1994, the Registrant filed a
Current Report on Form 8-K, dated December 2,
1994, with respect to the acquisition of
substantially all of the assets of M.P.M.
Transportation, Inc., a wholly owned
subsidiary of Lancer Industries, Inc . and
successor by merger with Golding Industries,
Inc. ("Golding").
<PAGE>
FORM 10-K Page 79
(2) On February 13, 1995, the Registrant filed a
Current Report on Form 8-K/A, Amendment No. 1 to
Current Report of Form 8-K, dated December 2, 1994.
The Form 8-K/A included: (i) Golding's unaudited
consolidated financial statements as of September
30, 1994 and for the nine months ended September
30, 1994 and September 30, 1993, (ii) Golding's
audited consolidated financial statements as of
December 31, 1993 and for the year ended December
31, 1993 and (iii) pro forma consolidated financial
information as of October 2, 1994, for the thirty-
nine weeks ended October 2, 1994 and for the year
ended January 2, 1994.
(3) On March 1, 1995, the Registrant filed a Current
Report on Form 8-K dated March 1, 1995, in
connection with its underwritten public offering of
8-1/8% Debentures due March 15, 2005 ("Debentures")
to provide the information included in Items 7 and
8 of this Form 10-K as well as certain exhibits.
(4) On March 8, 1995, the Registrant filed a Current
Report on Form 8-K, dated March 8, 1995, to provide
certain exhibits in connection with its
underwritten public offering of Debentures.
<PAGE>
FORM 10-K Page 80
McGLADREY & PULLEN, LLP
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
Cone Mills Corporation
Greensboro, North Carolina
Our audits were made for the purpose of forming an
opinion on the basic consolidated financial statements taken
as a whole. The consolidated supplemental schedule II is
presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a part of the basic
consolidated financial statements. This schedule has been
subject to the auditing procedures applied in our audits of
the basic consolidated financial statements and, in our
opinion, is fairly stated in all material respects in relation
to the basic consolidated financial statements taken as a
whole.
McGladrey & Pullen, LLP
Greensboro, North Carolina
February 10, 1995
<PAGE>
FORM 10-K Page 81
<TABLE>
<S> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended January 1, 1995, January 2, 1994 and January 3, 1993
(amounts in thousands)
Column A Column B Column C Column D Column E
Additions
Balance (1) (2)
at Charged to Charged to Balance
beginning costs and other at end
Description of period expenses accounts Deductions of period
January 1, 1995
Valuation accounts deducted
from the assets to which
they apply:
Provision for doubtful
accounts $ 3,000 $ 232 $ - $ 232 (a) $ 3,000
Inventory reserves 393 (b) - - 348 (b)(c 45
Reserve for future losses (b) 1,227 - - 1,227 (c) -
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
(a) Represents bad debts charged off.
(b) Represents reserves for discontinued operations (Note 21).
(c) Represents reserves charged to costs and expenses.
</TABLE>
FORM 10-K INDEX TO EXHIBITS Page 82
Exhibit Sequential
No. Description Page No.
* 2.1 Receivables Purchase Agreement dated
as of August 11, 1992, between the
Registrant and Delaware Funding
Corporation filed as Exhibit 2.01 to
the Registrant's report on Form 8-K
dated August 13, 1992.
* 2.1(a) Amendment to Receivables Purchase
Agreement dated April 4, 1994, between
the Registrant and Delaware Funding
Corporation filed as Exhibit 2.1 to
the Registrant's report on Form 8-K
dated March 1, 1995.
* 2.1(b) Amendment to Receivables Purchase
Agreement dated June 7, 1994, between
the Registrant and Delaware Funding
Corporation filed as Exhibit 2.2 to
the Registrant's report on Form 8-K
dated March 1, 1995.
* 2.1(c) Amendment to Receivables Purchase
Agreement dated as of June 30, 1994,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.1 to the Registrant's report on
Form 10-Q for the quarter ended
July 3, 1994.
* 2.1(d) Amendment to Receivables Purchase
Agreement dated as of November 15, 1994,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.4 to the Registrant's report on
Form 8-K dated March 1, 1995.
* 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:
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 83
Exhibit Sequential
No. Description Page No.
* 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.
* 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.
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 84
Exhibit Sequential
No. Description Page No.
* 2.3 Asset Purchase Agreement dated as
of December 2, 1994 between the
Registrant, Lancer Industries, Inc.
and M.P.M. Transportation, Inc.,
filed as Exhibit 2 to the Registrant's
Current Report on Form 8-K dated
December 2, 1994.
* 4.1 Restated Articles of Incorporation of
the Registrant effective August 25, 1993,
filed as Exhibit 4.1 to Registrant's
report on Form 10-Q for the quarter ended
October 3, 1993.
* 4.2 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.
* 4.3(a) Letter Agreement dated September 11, 1992,
amending the Note Agreement dated August 13,
1992, between the Registrant and The
Prudential Insurance Company of America
filed as Exhibit 4.2 to the Registrant's
report on Form 8-K dated March 1, 1995.
* 4.3(b) Letter Agreement dated July 19, 1993,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.3 to the
Registrant's report on Form 8-K dated
March 1, 1995.
* 4.3(c) Letter Agreement dated June 30, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.4 to the
Registrant's report on Form 8-K dated
March 1, 1995.
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 85
Exhibit Sequential
No. Description Page No.
* 4.3(d) Letter Agreement dated November 14, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.5 to the
Registrant's report on Form 8-K dated
March 1, 1995.
* 4.4 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.
* 4.4(a) Amended and Restated Credit Agreement
dated November 18, 1994, among the
Registrant, various banks and Morgan
Guaranty Trust Company of New York,
as Agent, filed as Exhibit 4.1
to the Registrant's report on Form 8-K
dated March 1, 1995.
* 4.5 Specimen Class A Preferred Stock
Certificate, filed as Exhibit 4.5
to the Registrant's Registration
Statement on Form S-1(File No. 33-46907).
* 4.6 Specimen Common Stock Certificate,
effective June 18, 1992, filed as
Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-46907).
* 4.7 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 of Cone Mills
Corporation, amended and restated
effective December 1, 1994. 89
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 86
Exhibit Sequential
No. Description Page No.
4.9 Cone Mills Corporation 1983 ESOP as
amended and restated effective
December 1, 1994. 201
* 4.10 Indenture dated as of February 14,
1995, between Cone Mills Corporation
and Wachovia Bank of North Carolina,
N.A. as Trustee, filed as Exhibit 4.1
to Registrant's Registration Statement
on Form S-3 (File No. 33-57713)
4.11 Form of 8 1/8% Debenture in aggregate
principal amount of $100,000,000 due
March 15, 2005. 288
Management contract or compensatory plan or arrangement
(Exhibits 10.1 - 10.13)
10.1 Employees' Retirement Plan of Cone Mills
Corporation as amended and restated
effective December 1, 1994. 293
*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).
*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).
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 87
Exhibit Sequential
No. Description Page No.
*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-
Employee Directors of Registrant filed
as Exhibit 10.9 to Registrant's report
on Form 10-K for the year ended
January 2, 1994.
*10.10 Form of Non-Qualified Stock Option
Agreement under 1994 Stock Option
Plan for Non-Employee Directors of
Registrant filed as Exhibit 10.10 to
Registrant's report on Form 10-K for
the year ended January 2, 1994.
*10.11 Management Incentive Plan of the
Registrant filed as Exhibit 10.11(b) to
Registrant's report on Form 10-K for the
year ended January 3, 1993.
10.12 Consulting Agreement between Dewey L.
Trogdon and the Registrant dated
November 10, 1994. 393
*10.13 Form of Agreement between the Registrant
and Levi Strauss dated as of March 30,
1992, filed as Exhibit 10.14 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-46907).
*10.14 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).
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 88
Exhibit Sequential
No. Description Page No.
10.15 Underwriting Agreement dated March 8,
1995 between the Registrant and J. P.
Morgan Securities, Inc., NationsBanc
Capital Markets, Inc. and Prudential
Securities Incorporated. 396
21 Subsidiaries of the Registrant. 424
23.l Consent of McGladrey & Pullen,
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; 33-67800 and 33-53705)
of their reports on the consolidated
financial statements and schedules
included in this Annual Report on
Form 10-K. 425
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 (Nos. 33-31979 and 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).
27 Financial Data Schedule 426
99 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.
FORM 10-K Page 89
Exhibit 4.8
THE 401(K) PROGRAM
OF
CONE MILLS CORPORATION
EMPLOYEE EQUITY PLAN
EMPLOYEE EQUITY PLAN - HOURLY
SUPPLEMENTAL RETIREMENT PLAN
SUPPLEMENTAL RETIREMENT PLAN - HOURLY
As Amended and Restated December 1, 1994
<PAGE>
FORM 10-K Page 90
Exhibit 4.8
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . .95-98
ARTICLE I DEFINITIONS
Section
1.01. Account . . . . . . . . . . . . . . . . . . . . . . . 99
1.02. Actual Deferral Percentage. . . . . . . . . . . . . . 99
1.03. Advisory Committee. . . . . . . . . . . . . . . . . . 99
1.04. Affiliate . . . . . . . . . . . . . . . . . . . . . . 99
1.05. Alternate Payee . . . . . . . . . . . . . . . . . . . 99
1.06. Annual Additions. . . . . . . . . . . . . . . . . . . 99
1.07. Approved Leave. . . . . . . . . . . . . . . . . . 99-100
1.08. Beneficiary or Beneficiaries. . . . . . . . . . . 100
1.09. Board of Directors . . . . . . . . . . . . .100
1.10. Break in Service. . . . . . . . . . . . . . . . 100-101
1.11. CODA Account. . . . . . . . . . . . . . . . . . . . .101
1.12. CODA Contributions. . . . . . . . . . . . . . . . . .101
1.13. Code. . . . . . . . . . . . . . . . . . . . . . . . .101
1.14. Compensation. . . . . . . . . . . . . . . . . . .101-102
1.15. Computation Period. . . . . . . . . . . . . . . . . .102
1.16. Cone. . . . . . . . . . . . . . . . . . . . . . . . .102
1.17. Cone Contributions. . . . . . . . . . . . . . . . . .102
1.18. Cone Contributions Account. . . . . . . . . . . . . .102
1.19. Continuous Service. . . . . . . . . . . . . . . .102-103
1.20. EEP . . . . . . . . . . . . . . . . . . . . . . . . .103
1.21. EEP CODA Contributions. . . . . . . . . . . . . . . .103
1.22. EEP CODA Contributions Account. . . . . . . . . . . .103
1.23. EEP Cone Contributions. . . . . . . . . . . . . . . .103
1.24. EEP Cone Contributions Account. . . . . . . . . . . .104
1.25. EEP Voluntary Contributions Account . . . . . . . . .104
1.26. Effective Date. . . . . . . . . . . . . . . . . . . .104
1.27. Eligible Employee . . . . . . . . . . . . . . . . . .104
1.28. Employee. . . . . . . . . . . . . . . . . . . . .104-105
1.29. Employer . . . . . . . . . . . . . . . . . . . . 105
1.30. Employment Commencement Date. . . . . . . . . . . . .105
1.31. ERISA . . . . . . . . . . . . . . . . . . . . . . . .105
1.32. Forfeiture. . . . . . . . . . . . . . . . . . . . . .105
1.33. Hour of Service . . . . . . . . . . . . . . . . .105-108
1.34. Investment Committee. . . . . . . . . . . . . . . . .108
1.35. Investment Earnings . . . . . . . . . . . . . . . . .108
<PAGE>
FORM 10-K Page 91
Exhibit 4.8
1.36. Investment Fund . . . . . . . . . . . . . . . . . . .108
1.37. Investment Manager. . . . . . . . . . . . . . . . . .108
1.38. Member. . . . . . . . . . . . . . . . . . . . . . . .108
1.39. Period of Severance . . . . . . . . . . . . . . . . .109
1.40. Plan. . . . . . . . . . . . . . . . . . . . . . . . .109
1.41. Plan Year . . . . . . . . . . . . . . . . . . . . . .109
1.42. Prior Plan. . . . . . . . . . . . . . . . . . . . . .109
1.43. Rule of Parity Years. . . . . . . . . . . . . . . . .109
1.44. Salary. . . . . . . . . . . . . . . . . . . . . . . .109
1.45. Salary-Reduction Election . . . . . . . . . . . . . .110
1.46. Severance from Service Date . . . . . . . . . . . . .110
1.47. Spouse. . . . . . . . . . . . . . . . . . . . . . . .110
1.48. SRP . . . . . . . . . . . . . . . . . . . . . . . . .111
1.49. SRP CODA Contributions. . . . . . . . . . . . . . . .111
1.50. SRP CODA Contributions Account. . . . . . . . . . . .111
1.51. SRP Cone Contributions. . . . . . . . . . . . . . . .111
1.52. SRP Cone Contributions Account. . . . . . . . . . . .111
1.53. SRP Voluntary Contributions Account . . . . . . . . .111
1.54. Trust and Trust Fund. . . . . . . . . . . . . . . . .111
1.55. Trust Agreement . . . . . . . . . . . . . . . . . . .111
1.56. Trustee . . . . . . . . . . . . . . . . . . . . .111-112
1.57. Valuation Date 112
1.58. Voluntary Contribution. . . . . . . . . . . . . . . .112
1.59. Year of Service . . . . . . . . . . . . . . . . .112-114
ARTICLE II PARTICIPATION
Section
2.01. Member. . . . . . . . . . . . . . . . . . . . . . . .115
2.02. Conditions of Participation . . . . . . . . . . .115-116
2.03. Employment and Eligibility Status Changes . . . .116-117
2.04. Participation Upon Reemployment . . . . . . . . . . .117
ARTICLE III CONTRIBUTIONS
Section
3.01. CODA Contributions. . . . . . . . . . . . . . . .118-120
3.02. Cone Contributions. . . . . . . . . . . . . . . .120-122
3.03. Cash and Noncash Contributions. . . . . . . . . . . .122
3.04. Deferral Percentage Test-CODA Contributions . . .122-127
3.05. Contributions Percentage Test-Employee After-Tax
Contributions and Cone Contributions. . . . . .127-130
3.06. Distribution Restrictions . . . . . . . . . . . . . .130
<PAGE>
FORM 10-K Page 92
Exhibit 4.8
ARTICLE IV ACCOUNTS AND ALLOCATIONS
Section Page
4.01. Individual Accounts . . . . . . . . . . . . . . . . .131
4.02. CODA Contributions Account. . . . . . . . . . . . . .131
4.03. Cone Contributions Account. . . . . . . . . . . .131-134
4.04. Voluntary Contributions Account . . . . . . . . . . .134
4.05. Allocation of Investment Earnings . . . . . . . .134-136
4.06. Maximum Annual Additions. . . . . . . . . . . . .136-144
4.07. Adjustments for Excessive Annual Additions. . . .144-145
4.08. Determination of Top Heavy Status . . . . . . . .145-152
4.09. Top Heavy Requirements. . . . . . . . . . . . . .152-154
ARTICLE V VESTING
Section
5.01. Vested Accounts . . . . . . . . . . . . . . . . . . .155
5.02. Forfeitures . . . . . . . . . . . . . . . . . . .155-156
ARTICLE VI DISTRIBUTION OF BENEFITS
Section
6.01. Claim Procedure . . . . . . . . . . . . . . . . . . .157
6.02. Review of Claims. . . . . . . . . . . . . . . . .157-158
6.03. Distribution Definitions. . . . . . . . . . . . . . .158
6.04. Methods of Payment. . . . . . . . . . . . . . . .158-162
6.05. Commencement of Benefits. . . . . . . . . . . . .162-163
6.06. Special Distribution Provisions . . . . . . . . .164-166
6.07. Death Benefits. . . . . . . . . . . . . . . . . .166-168
6.08. Qualified Domestic Relations Order. . . . . . . .169-170
6.09. Withholding of Benefits . . . . . . . . . . . . . . .170
6.10. Hardship Withdrawal . . . . . . . . . . . . . . .170-172
6.11. Valuation of Account Balances . . . . . . . . . . . .172
6.12. Withholding of Taxes. . . . . . . . . . . . . . .172-173
6.13. Eligible Rollover Distributions . . . . . . . . .173-174
ARTICLE VII INVESTMENT OF ACCOUNTS
Section
7.01. Investment Funds 175-176
7.02. Directing Investment of Individual Accounts . . .176-179
7.03. Segregated Account. . . . . . . . . . . . . . . . . .179
<PAGE>
FORM 10-K Page 93
Exhibit 4.8
ARTICLE VIII TRUST FUND AND ADMINISTRATION OF THE PLAN
Section
8.01. Named Fiduciaries, Allocation of Responsibility . . . .
180-181
8.02. Duties and Responsibilities . . . . . . . . . . . . .181
8.03. Trust Fund. . . . . . . . . . . . . . . . . . . . . .182
8.04. Enforceable Rights. . . . . . . . . . . . . . . . . .182
8.05. Impossibility of Diversion. . . . . . . . . . . . . .182
8.06. Advisory Committee and Other Committees . . . . .182-183
8.07. Officers, Quorums, Expenses . . . . . . . . . . . . .183
8.08. Duties of Investment Manger . . . . . . . . . . .183-184
8.09. Information to Investment Manager . . . . . . . . . .184
8.10. Notice to Trustee . . . . . . . . . . . . . . . .184-185
8.11. Duties of the Advisory Committee. . . . . . . . . . .185
8.12. Notice of Payments Due. . . . . . . . . . . . . . . .185
8.13. Records and Reports . . . . . . . . . . . . . . .185-186
8.14. Exoneration of Advisory Committee . . . . . . . . . .186
8.15. Errors and Omissions. . . . . . . . . . . . . . . . .187
8.16. Fees and Expenses . . . . . . . . . . . . . . . . . .187
8.17. Voting and Tendering of Shares. . . . . . . . . .187-188
8.18. Certification of Directions from Members. . . . . . .188
ARTICLE IX AMENDMENT, TERMINATION AND MERGER
Section
9.01. Amendment . . . . . . . . . . . . . . . . . . . .189-190
9.02. Termination . . . . . . . . . . . . . . . . . . .190-191
9.03. Discontinuance of Contributions . . . . . . . . . . .192
9.04. Plan Merger or Asset Transfer . . . . . . . . . . . .192
9.05. Continuation of the Plan. . . . . . . . . . . . . . .193
ARTICLE X MULTIPLE COMPANIES INCLUDED
Section
10.01. Plan Sponsor and Other Employers. . . . . . . . . . .194
10.02. Method of Participation . . . . . . . . . . . . . . .194
10.03. Withdrawal by Employer. . . . . . . . . . . . . .194-195
10.04. Tax Year. . . . . . . . . . . . . . . . . . . . . . .195
<PAGE>
FORM 10-K Page 94
Exhibit 4.8
ARTICLE XI GENERAL
Section Page
11.01. Plan Creates No Separate Rights . . . . . . . . . . .196
11.02. Delegation of Authority . . . . . . . . . . . . . . .196
11.03. Limitation of Liability . . . . . . . . . . . . .196-198
11.04. Legal Action. . . . . . . . . . . . . . . . . . . . .198
11.05. Benefits Supported Only by Trust. . . . . . . . . . .198
11.06. Discrimination. . . . . . . . . . . . . . . . . . . .198
11.07. Model Amendment IV. . . . . . . . . . . . . . . . . .199
11.08. Entire Plan . . . . . . . . . . . . . . . . . . . . .199
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . .200
<PAGE>
FORM 10-K Page 95
Exhibit 4.8
INTRODUCTION
Cone Mills Corporation ("Cone") initially adopted the
Supplemental Retirement Plan of Cone Mills Corporation (the
"Supplemental Plan") effective January 1, 1947. Its purposes
were to supplement pension benefits for salaried employees of
Cone and its affiliates and to promote strong employee
interest in successful business operations.
The Supplemental Plan was amended a number of times since
inception; several of the more significant changes are
described below. Amendments effective January 1, 1983,
provided for salary-reduction contributions pursuant to a
qualified cash or deferred arrangement under Section 401 (k)
of the Internal Revenue Code, of 2% to 6% of members'
salaries. Limited in-service withdrawal rights and investment
choices and a shortened vesting period of five years instead .
of 15 years were also instituted. Amendments effective
January 1, 1984, to permit after-tax voluntary contributions
of 2% to 6% of salary and to grant authority to the Advisory
Committee to reduce or suspend salary-reduction elections were
adopted.
On November 11, 1986, the Board of Directors of Cone
authorized amendments which increased member cash or deferred
elections to 2% to 10% of salary and discontinued after-tax
contributions effective January 1, 1987. Other changes became
effective as a result of the Retirement Equity Act of 1984 and
the Tax Reform Act of 1986. On December 8, 1987, the Board
of Directors of Cone again approved amendments to the Plan
which established matching Cone contributions equal to 25% of
member salary-reduction contributions not in excess of 6% of
salaries, permitted additional matching Cone contributions at
the discretion of the Board of Directors and added semi-annual
member investment and contributions elections.
Effective May 1, 1989, the Supplemental Retirement Plan
of Cone Mills Corporation was amended, restated, and renamed,
and operated as and became known as the Supplemental
Retirement Program of Cone Mills Corporation. As amended and
restated, the Program consisted thereafter through December
31, 1993, of two separate plans: the Cone Mills Corporation
Supplemental Retirement Plan (SRP), which was a continuation
of the prior plan, and the Cone Mills Corporation Employee
Equity Plan (EEP), which was a new stock bonus plan that
<PAGE>
FORM 10-K Page 96
Exhibit 4.8
invests primarily in Common Stock of Cone Mills Corporation.
Members were afforded the opportunity of transferring from the
SRP to the EEP all or any portion of their SRP account
balances as of June 30, 1989. Effective July 1, 1989 members
could make salary-reduction contributions of 2% to 10% of
salary and direct that the contribution be made to the SRP or
EEP or divided between the two plans. Cone's matching
contributions remained at 25% of salary reduction
contributions not in excess of 6% of salary to the SRP and
were set at 50% of such members' contributions to the EEP. If
a member contributes more than 6% to both Plans, the 6%
limitation is divided between the SRP and EEP in the same
proportion as the member elects to divide his salary reduction
contribution.
Effective January 1, 1993 hourly employees were added to
the class of employees eligible to participate in the Plan.
In addition, amendments to the Plan required quarterly
valuation and reporting of member account balances, gave
members the right to change their contribution percentages and
SRP investment fund selection quarterly, added a third
investment choice in the SRP and subject to certain
restrictions, provided limited rights to transfer funds from
the EEP to the SRP.
The Plan document was amended and restated to incorporate
all amendments that became effective on or before
September 1, 1993. The effective date of the amended and
restated Plan document was September 1, 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 therein.
Effective January 1, 1994, the Supplemental Retirement
Program of Cone Mills Corporation was amended, restated and
renamed The 401(K) Program of Cone Mills Corporation. An
amendment to the Program increased the amount members could
contribute from 10% to 15% of compensation on the same terms
and conditions as previously provided. As amended and
restated, the Program consists of four separate plans: the
Supplemental Retirement Plan, a newly adopted Supplemental
Retirement Plan - Hourly ("SRP - Hourly"), the Employee Equity
Plan, and a newly adopted Employee Equity Plan - Hourly ("EEP
- Hourly"). Accounts as of December 31, 1993, in the SRP and
<PAGE>
FORM 10-K Page 97
Exhibit 4.8
EEP of Members who were compensated on an hourly wage basis
were transferred to the respective SRP - Hourly and EEP -
Hourly. Members who were compensated on an hourly wage basis
as of December 31, 1993, became Members of such hourly plans
and employees who were compensated on a salary basis remained
as members of the Supplemental Retirement Plan and Employee
Equity Plan. The account of a Member whose classification of
pay status changes during a calendar quarter shall be
allocated to the respective plans in accordance with his or
her classification at the end of the calendar quarter.
Cone intends to continue the SRP as a profit-sharing plan
(assigned plan number 003) and to maintain the SRP-Hourly as
a profit-sharing plan (assigned plan number 17) by
incorporating all amendments described above and any other
changes required by applicable law or regulation effective or
to become effective at the time of adoption of this amended
and restated 401(k) Program. Cone intends to maintain the EEP
as a stock bonus plan (assigned plan number 016) and the EEP-
Hourly as a stock bonus plan (assigned plan number 18) by
incorporating all provisions required by applicable law
effective or to become effective at the time of adoption of
this amended and restated 401(k) Program.
The Supplemental Retirement Plan and the SRP - Hourly are
funded through the Master Trust Agreement for the Supplemental
Retirement Plan and the Supplemental Retirement Plan - Hourly
of Cone Mills Corporation. The Employee Equity Plan and the
Employee Equity Plan - Hourly are funded through the Master
Trust Agreement for the Employee Equity Plan and Employee
Equity Plan of Cone Mills Corporation.
The Plan was amended on November 10, 1994, in order to
add a provision on the eligibility of employees of a Company
of which certain assets were acquired and was amended and
restated on December 1, 1994, to incorporate the prior
amendment and to make additional amendments for purpose of
complying with certain requirements of the Internal Revenue
Code of 1986 and of clarifying certain plan provisions.
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 Internal Revenue
Code or the Employee Retirement Income Security Act, both laws
<PAGE>
FORM 10-K Page 98
Exhibit 4.8
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 99
Exhibit 4.8
ARTICLE I
DEFINITIONS
1.01. Account means a Member's interest under the Plan
according to Plan provisions. A Member may have
several named accounts in this Plan. When Account
is used without modification, it means the sum of
all the Member's Accounts in this Plan. See also:
CODA Account, Cone Contributions Account and
Voluntary Account. Accounts as of December 31,
1993, in the SRP and EEP of Members who were
compensated on an hourly wage basis were
transferred as of January 1, 1994, to the
respective SRP - Hourly and EEP - Hourly. Accounts
of Members who were compensated on a salary basis
remained in the Supplemental Retirement Plan and
the Employee Equity Plan. An account of a member
whose pay classification changes during a calendar
quarter shall be credited to the hourly or salary
plans according to his or her status as of the end
of the calendar quarter.
1.02. Actual Deferral Percentage or ADP is defined in
Plan Section 3.04(b).
1.03. Advisory Committee means the committee appointed by
Cone Mills Corporation which is responsible for
general administration of the Plan.
1.04. Affiliate means a member of the same controlled
group of corporations as defined in Code Section
1563(a) as Cone Mills Corporation.
1.05. 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.
1.06. Annual Additions is defined in Plan Section 4.06.
1.07. Approved Leave means an individual's nonworking
period granted by an Employer for reasons relating
to:
(a) accident, sickness or disability:
<PAGE>
FORM 10-K Page 100
Exhibit 4.8
(b) job-connected education or training;
(c) government service, including jury duty,
whether elective or by appointment; or
(d) terminal leave, with or without pay.
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
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 Services and such period
thereafter as his job rights are protected by law.
1.08. Beneficiary or Beneficiaries means one or more
individuals or other entities so designated by a
Member according to Plan Section 6.07, 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.
1.09. Board of Directors means the Board of Directors of
Cone Mills Corporation.
1.10. 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.
<PAGE>
FORM 10-K Page 101
Exhibit 4.8
(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 Internal Revenue Code Sections
410(a)(3)(E) and 411(a)(6)(E) regarding
maternity and paternity absences.
1.11. CODA Account means the sum of a Member's EEP CODA
Account and his SRP CODA Account.
1.12. CODA Contributions means the Employers'
contributions described in Plan Section 3.01 caused
by Salary-Reduction Elections and includes both EEP
CODA Contributions and SRP CODA Contributions.
1.13. Code means the Internal Revenue Code as amended by
the Tax Reform Act of 1986, as amended from time to
time.
1.14. 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, effective for
Plan Years beginning January 1, 1994) as adjusted
for increases in cost-of-living in accordance with
<PAGE>
FORM 10-K Page 102
Exhibit 4.8
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, effective for Plan Years beginning
January 1, 1994) limitation is exceeded, the
limitation shall be prorated among the affected
individuals in proportion to each such individual's
Compensation determined under this Section 1.14
prior to application of the limitation. The
Compensation of an Employee described in the last
sentence of Section 1.28 of the Plan shall be
determined in accordance with the special rules set
forth in Code Section 406(b)(2).
1.15. 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.
1.16. Cone means Cone Mills Corporation, a North Carolina
corporation, the Plan sponsor.
1.17. Cone Contributions means the Employer Contributions
described in Plan Section 3.02 and includes both
EEP Cone Contributions and SRP Cone Contributions.
1.18. Cone Contributions Account means the sum of a
Member's EEP Cone Contributions Account and his SRP
Cone Contributions Account.
1.19. 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
<PAGE>
FORM 10-K Page 103
Exhibit 4.8
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,
the Continuous Service of an Employee who quits,
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 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 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.
1.20. EEP and defined terms incorporating EEP means the
Cone Mills Corporation Employee Equity Plan when
used with respect to an employee compensated on a
salaried basis and the Cone Mills Corporation
Employee Equity Plan - Hourly ("EEP - Hourly") when
used with respect to an employee compensated on an
hourly wage basis.
1.21. EEP CODA Contributions means CODA Contributions
made to the EEP pursuant to Salary-Reduction
Elections.
1.22. EEP CODA Contributions Account means a Member's
Account to which his EEP CODA Contributions are
allocated.
1.23. EEP Cone Contributions means Cone Contributions
made to the EEP pursuant to Plan Section 3.02.
<PAGE>
FORM 10-K Page 104
Exhibit 4.8
1.24. EEP Cone Contributions Account means a Member's
Account to which EEP Cone Contributions are
allocated.
1.25. EEP Voluntary Contributions Account means a
Member's Account to which amounts transferred from
the Member's Supplemental Retirement Plan Voluntary
Contributions Account pursuant to Member elections
in accordance with the Plan provisions in effect on
May 1, 1989 are allocated.
1.26. Effective Date means with respect to this amended
and restated Plan, January 1, 1994, except with
respect to those provisions that have an earlier
effective date pursuant to the Tax Reform Act of
1986, or as otherwise provided. The trust for each
plan has an effective date contained in the first
trust agreement executed for that plan.
1.27. Eligible Employee is defined in Plan Section 2.02.
1.28. Employee is 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 included Leased
Employees within the meaning of Code Sections
404(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
<PAGE>
FORM 10-K Page 105
Exhibit 4.8
which Cone 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 Cone if Cone has
entered into an agreement under Code Section
3121(l) with respect to such foreign entity and if
no contributions under a funded plan of deferred
compensation are provided by any person other than
Cone with respect to the remuneration paid to such
individual by the foreign entity.
1.29. Employer means an entity described in Plan Section
10.01.
1.30. 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.
1.31. ERISA means the Employee Retirement Income Security
Act of 1974, as amended from time to time.
1.32. Forfeiture refers to any part of a Member's Account
under this Plan to which he is not entitled to
receive by reason of the vesting rules of Plan
Article V.
1.33. 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)
<PAGE>
FORM 10-K Page 106
Exhibit 4.8
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 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
<PAGE>
FORM 10-K Page 107
Exhibit 4.8
(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 the
subsection. For example, not 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 the 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.
(f) The determination of Hours of Service must be
made from records of hours worked and hours
for which payment is made or due.
<PAGE>
FORM 10-K Page 108
Exhibit 4.8
(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.
1.34. 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 then in effect in accordance
with and subject to Plan Section 8.08 (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.
1.35. Investment Earnings means the net gain or loss of
an Investment 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 chargeable to
the Investment Fund for a Plan Year or such interim
period within a Plan Year for which the assets of
the Investment Fund are being valued. Investment
Earnings shall be determined on the basis of
generally accepted accounting principles and assets
of an Investment Fund as of any Valuation Date
shall be valued on the basis of their current fair
market value.
1.36. Investment Fund means a fund established for the
investment of Trust Fund assets pursuant to Article
VII.
1.37. Investment Manager means an individual, firm or
other entity appointed by the Board of Directors
and assigned duties as described in Plan Section
8.08.
1.38. Member is defined in Plan Section 2.01.
<PAGE>
FORM 10-K Page 109
Exhibit 4.8
1.39. 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.
1.40. Plan means the 401(K) Program of Cone Mills
Corporation as described in this document. The
Program consists of the Employee Equity Plan, a
stock bonus plan (plan number 016), the Employee
Equity Plan - Hourly, a stock bonus plan (plan
number 18) the Supplemental Retirement Plan, a
profit sharing plan (plan number 003), and the
Supplemental Retirement Plan - Hourly, a profit
sharing plan (plan number 17).
1.41. 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.
1.42. Prior Plan means the Supplemental Retirement
Program of Cone Mills Corporation as in effect on
September 1, 1993.
1.43. 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 not
joined either the EEP or the SRP, (2) who has at
least five consecutive one-year Breaks in Service,
and (3) whose total consecutive one-year Breaks in
Service exceed prior Years of Service.
1.44. Salary means compensation which is fixed in amount
and stipulated to be regularly paid by one or more
Employers for a definite period, which shall be a
week or more in duration as differentiated from
wages, commissions, bonuses or the guaranty of
earnings for wage earners over any stated period.
<PAGE>
FORM 10-K Page 110
Exhibit 4.8
1.45. Salary-Reduction Election means the election
described in Plan Section 3.01, regardless of
whether the election is made with respect to base
Salary, wages, or other Compensation.
1.46. 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
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 day 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. For purposes of this Plan, an Employee
has a Severance from Service on his Severance from
Service Date.
1.47. Spouse means the individual legally married to a
Member. Surviving Spouse means the individual
legally married to a Member on the date of such
Member's death. An individual is not a Spouse or a
Surviving Spouse after the marriage to the Member
is legally ended for reasons other than death of
the Member.
<PAGE>
FORM 10-K Page 111
Exhibit 4.8
1.48. SRP and define terms incorporating SRP means the
Cone Mills Corporation Supplemental Retirement Plan
when used with respect to an employee compensated
on a salaried basis and the Cone Mills Corporation
Supplemental Retirement Plan - Hourly ("SRP -
Hourly") when used with respect to an employee
compensated on an hourly wage basis.
1.49. SRP CODA Contributions means CODA Contributions
made to the SRP pursuant to Salary-Reduction
Elections.
1.50. SRP CODA Contributions Account means a Member's
Account to which his SRP CODA Contributions
(including all CODA Contributions made prior to
May 1, 1989) are allocated.
1.51. SRP Cone Contributions means Cone Contributions
made to the SRP pursuant to Plan Section 3.02.
1.52. SRP Cone Contributions Account means a Member's
Account to which his SRP Cone Contributions
(including all Cone Contributions made prior to
May 1, 1989) are allocated.
1.53. SRP Voluntary Contributions Account means a
Member's Account to which his Voluntary
Contributions are allocated.
1.54. Trust and Trust Fund refers to a Trust Fund
established for this Plan and the Trust
Agreement(s) executed under this Plan.
1.55. Trust Agreement means any agreement including
amendments executed by a Trustee or Co-Trustee with
Cone to be used in connection with this Plan.
1.56. Trustee of SRP means Trustee designated in Master
Trust Agreement of Supplemental Retirement Plan and
Supplemental Retirement Plan - Hourly dated as of
January 1, 1994 and any amendatory agreements
thereto. Trustee of EEP means Trustee designated
in Master Trust Agreement of Employee Equity Plan
and Employee Equity Plan - Hourly dated as of
<PAGE>
FORM 10-K Page 112
Exhibit 4.8
January 1, 1994 and any amendatory agreements
thereto. 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.
1.57. 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.
1.58. Voluntary Contribution means any nondeductible
Member contribution that is not made pursuant to a
Salary Reduction Election.
1.59. Year of Service is defined in (a) for a Part-Time
Employee and in (b) for a Full-Time Employee, but a
Year of Service does 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 of employment.
(b) for a Full-Time Employee, twelve months of
Continuous Service (whether or not
consecutive). Months of Continuous Service
are aggregated 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
<PAGE>
FORM 10-K Page 113
Exhibit 4.8
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 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 1000 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.
<PAGE>
FORM 10-K Page 114
Exhibit 4.8
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.
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-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 115
Exhibit 4.8
ARTICLE II
PARTICIPATION
2.01. MEMBER
A Member is an Employee or former Employee who has
begun participation in this Plan or the Prior Plan
according to this Article II. A Member of the
Supplemental Retirement Plan or the Employee Equity
Plan who was compensated as of December 31, 1993 on
an hourly wage basis became as of January 1, 1994
members of the Supplemental Retirement Plan -
Hourly or the Employee Equity Plan - Hourly. A
Member whose classification of pay status changes
during a calendar quarter shall be deemed to be a
Member of the hourly or salaried plan for that
quarter based upon his or her pay classification as
of the end of the calendar quarter.
An individual whose Account Balance is greater than
zero continues to be a Member for purposes of
provisions relating to allocation of earnings and
losses to his Account and to distributions from his
Account, but is a Member for purposes of
allocations of Cone Contributions only if he was an
Eligible Employee at any time during the Plan Year
and CODA Contributions pursuant to Salary-Reduction
Elections in effect during such Plan Year were made
on his behalf and not withdrawn.
2.02. CONDITIONS OF PARTICIPATION
(a) An Employee shall become an Eligible Employee
on the January 1 or July 1 coinciding with or
next following his attainment of age twenty-
one (21) and completion of one (1) Year of
Service. Solely for the purpose of
determining eligibility to participate in this
Plan, any former employee of Golding
Industries, Inc. who became an Employee
pursuant to the Asset Purchase Agreement
referred to in the Letter of Intent dated
October 14, 1994, between Golding Industries,
<PAGE>
FORM 10-K Page 116
Exhibit 4.8
Inc. and Cone Mills Corporation shall receive
credit for all service with which he or she
was credited for eligibility purposes under
the Golding Industries, Inc. Savings and
Investment Plan immediately prior to his or
her becoming an Employee; and
(b) An Eligible Employee who is compensated on an
hourly wage basis shall only be eligible to
participate in and shall become a Member of
the SRP - Hourly by electing an SRP CODA
Contribution and shall become a Member of the
EEP - Hourly by electing an EEP CODA
Contribution. An Eligible Employee who is
compensated on a salary basis shall only be
eligible to participate in and shall become a
Member of the SRP by electing an SRP CODA
Contribution and shall become a Member of the
EEP by electing an EEP CODA Contribution. An
Eligible Employee's compensation
classification as of the participation date
set forth in sub-paragraph (a) above shall
determine to which plan he can enroll but the
Member's pay classification at the end of each
calendar quarter shall be determinative of
which plan his Accounts will be maintained.
(c) Employees who are Leased Employees within the
meaning of Code Sections 414(n)(2) and
414(o)(2) cannot be Eligible Employees.
(d) Employees who contribute to the Defined
Contribution Pension Plan of the Machine
Printers' and Engravers' Association of the
United States cannot be Eligible Employees.
2.03. EMPLOYMENT AND ELIGIBILITY STATUS CHANGES
(a) If a Member does not have a Severance from
Service Date but becomes an Employee of an
Affiliate that does not participate in the
Plan, or ceases to make CODA Contributions, he
shall become a suspended Member at the end of
the pay period the change in status occurs.
<PAGE>
FORM 10-K Page 117
Exhibit 4.8
(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
transfer from an Affiliate not participating
in the Plan to an Employer, he may participate
in the Plan on the January 1 or July 1
coinciding with or next 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 has a
Severance from Service Date and is reemployed,
such Member shall 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 has a
Severance from Service Date and whose prior
Years of Service are all disregarded as Rule
of Parity Years is 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 an Eligible Employee or
Member when he has a Severance from Service
Date shall be treated as a new Employee upon
reemployment and shall participate according
to Plan Section 2.02.
<PAGE>
FORM 10-K Page 118
Exhibit 4.8
ARTICLE III
CONTRIBUTIONS
3.01. CODA CONTRIBUTIONS
(a) The Employer's CODA Contribution for a Plan
Year is the total of all reductions in
Members' Compensation for the Plan Year by way
of Salary-Reduction Elections. Each Eligible
Employee may elect to have his Employer make
CODA Contributions on his behalf for a Plan
Year in an amount, expressed as a whole
percentage, of not less than 2% or more than
15% of his Compensation, provided, however,
that no Member shall be permitted to have
"Excess Elective Deferrals", which shall mean
CODA Contributions made under this Plan, or
any other qualified plan maintained by an
Employer, during any taxable year, in excess
of the dollar limitation contained in Section
402(g) of the Code in effect at the beginning
of such taxable year. All CODA Contributions
shall be credited to the Member's EEP CODA
Contributions Account or to his SRP CODA
Contributions Account, as directed by the
Member. A Member may divide his CODA
Contributions between the SRP and the EEP
provided that at least 2% of his Compensation
is contributed to each plan.
(b) CODA Contributions elections shall be made on
a form provided by the Advisory Committee.
Such forms shall authorize the Employer to
remit the aggregate amount of CODA
Contributions designated to be made from
Compensation payable to the Employee by the
Employer to the EEP or to the SRP or to divide
such CODA Contributions between the EEP and
SRP. The Employer shall remit CODA
Contributions as soon as practicable, but in
no event later than ninety (90) days following
the end of the pay period for which such
contributions were made.
<PAGE>
FORM 10-K Page 119
Exhibit 4.8
(c) Members and Eligible Employees will be allowed
to make or change CODA Contributions as of
January 1, April 1, July 1 and October 1 of
each Plan Year. Employees who are or become
Eligible Employees during the Plan Year may
become Members of the Plan by executing the
appropriate Salary-Reduction Election forms
authorizing CODA Contributions to become
effective on the January 1 or July 1 next
following the date the election forms are
delivered to the Advisory Committee.
(d) Any Member may elect to cease CODA
Contributions to the Plan by delivering
written notice to the Advisory Committee, such
election to be effective as soon as possible
after receipt. Should such Member desire to
rejoin the Plan, he may do so by submitting a
new Salary-Reduction Election to the Advisory
Committee provided, however, that such
reinstatement will not become effective until
the July 1 or January 1 next following the
effective date on which his earlier CODA
Contributions terminated.
(e) As provided in Section 3.04, the Advisory
Committee may suspend or revoke any Salary-
Reduction Election of any member or cause
refunds of CODA Contributions previously made
in the Plan Year by a Member if it is
determined that such suspension, revocation or
refund is necessary to comply with the
limitations and discrimination tests contained
in Section 401(k) of the Internal Revenue
Code.
(f) A Member may assign to this Plan any Excess
Elective Deferrals made during a taxable year
of the Member by notifying the Advisory
Committee on or before March 15 of the
following year of the amount of the excess
CODA Contributions to be assigned to the Plan.
A Member is deemed to notify the Advisory
Committee of any Excess Elective Deferrals
<PAGE>
FORM 10-K Page 120
Exhibit 4.8
that result solely from CODA Contributions
made to this Plan and any other plans of an
Employer. Notwithstanding any other
provisions of the Plan, excess CODA
Contributions, plus any income and minus any
loss allocable thereto, shall be distributed
no later than April 15 to any Member to whose
Account excess CODA Contributions were
assigned for the preceding year and who claims
excess CODA Contributions for such taxable
year.
3.02. CONE CONTRIBUTIONS
(a) The Employer shall contribute respectively to
the EEP and the EEP - Hourly for each Plan
Year an amount equal to 50% of the EEP CODA
Contributions made on behalf of Members of
each plan for such Plan Year. The Employer
shall contribute respectively to the SRP and
SRP - Hourly for each Plan Year an amount
equal to 25% of the SRP CODA Contributions
made on behalf of Members of each Plan for
such Plan Year; however, CODA Contributions
made on behalf of any Member in excess of 6%
of his Compensation shall not be taken into
account in determining the Cone Contribution.
If the total CODA Contributions made on behalf
of any Member exceed 6% of his Compensation,
then the 6% of Compensation limitation will be
divided between the EEP and SRP in the same
proportion as the Member elects to divide the
CODA Contributions made on his behalf.
(b) Additional Cone Contributions may be made to
the EEP, the SRP or both, with respect to a
Plan Year or with respect to any three-month
period ending March 31, June 30, September 30
or December 31, in such amount as the Board of
Directors in its sole discretion may
determine.
<PAGE>
FORM 10-K Page 121
Exhibit 4.8
(c) Current or accumulated earnings and profits of
the Employer are not required in order for
Cone Contributions to be made. In no event,
however, shall Cone Contributions for any Plan
Year exceed the amount allowed as a deduction
for its fiscal year ended with or nearest the
Plan Year end for which such Cone
Contributions are made under applicable
provisions of the Code.
(d) All Cone Contributions shall be paid not later
than the time prescribed in the Code for
filing the federal income tax return of the
Employer including extensions which have been
granted for the filing of such return. The
Trustee is not required to collect Cone
Contributions or payments required by an
Employer and is responsible only for assets
received as Trustee.
(e) All contributions to the Trust Fund are
conditioned on their being deductible under
applicable provisions of the Code. If any
deduction for any contribution is not allowed
in whole or in part, then that disallowed
portion must be returned to the contributor,
but repayment must be made no later than one
year after the disallowance. To the extent
such disallowance represents CODA
Contributions made pursuant to Salary-
Reduction Elections of Members, such
contribution shall be returned to the
appropriate Members. For purposes of this
Section 3.02, the disallowance may be made by
the opinion of any court whose decision has
become final or by any disallowance asserted
by the Internal Revenue Service to which Cone
agrees.
(f) 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. To the extent such
mistake-of-fact contribution represents CODA
<PAGE>
FORM 10-K Page 122
Exhibit 4.8
Contributions made pursuant to Salary-
Reduction Elections of Members, such
contributions shall be returned to the
appropriate Members. Earnings of the Trust
Fund attributable to the excess contribution
may not be returned but any losses
attributable thereto must reduce the amount
returned.
3.03. CASH AND NONCASH CONTRIBUTIONS
(a) Cone Contributions and CODA Contributions to
the SRP Trust Fund shall be in cash.
(b) CODA Contributions to the EEP Trust Fund shall
be in cash.
(c) Cone Contributions to the EEP Trust Fund may
be in the form of either cash or Qualifying
Employer Securities as defined in Section
407(d)(5) of ERISA. 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.
3.04. DEFERRAL PERCENTAGE TEST - CODA CONTRIBUTIONS
(a) CODA Contributions under this Plan are
intended to qualify as cash or deferred
arrangements according to Section 401(k) of
the Code. For purposes of measuring
compliance with Section 401(k), the
Supplemental Retirement Plan and the Employee
Equity Plan shall be treated as an aggregated
group and CODA contributions to those plans
shall be aggregated and the Supplemental
Retirement Plan - Hourly and the Employee
Equity Plan - Hourly shall be treated as an
aggregated group and CODA contributions to
those plans shall be aggregated. The deferral
percentage tests as described in this Section
3.04 shall be made for each Plan Year and
shall be applied separately to each aggregated
group. Compliance with such tests will be
<PAGE>
FORM 10-K Page 123
Exhibit 4.8
secured as provided in this Section 3.04 and
in accordance with Code Section 401(k)(3),
Treasury Regulation 1.401(k)-1(b), and, if
applicable, Code Section 401(m)(9) and
Treasury Regulation 1.401(m)-2, each of which
is incorporated herein by reference.
(b) Definitions for purposes of deferral
percentage tests are:
(1) Actual Deferral Percentage (ADP) means
the percentage determined by dividing the
sum of CODA Contributions made on behalf
of a Member which are allocated to his
Account for the Plan Year or portion
thereof by his Compensation for the Plan
Year or portion thereof. The ADP of an
Eligible Employee who does not elect to
have CODA Contributions made on his
behalf is zero.
(2) Average ADP means the arithmetic average
of the ADP of all Members and Eligible
Employees as a group.
(3) For any Plan Year, compensation may be
given any meaning which satisfies Code
Section 414(s).
(4) Highly Compensated Employee includes
highly compensated active Employees and
highly compensated former Employees.
A highly compensated active Employee
includes any Employee who performs
services for the Employer during the
determination year and who, during the
look-back year: (i) received compensation
from the Employer in excess of $75,000
(as adjusted pursuant to Section 415(d)
of the Code); (ii) received compensation
from the Employer in excess of $50,000
(as adjusted pursuant in Section 415(d)
of the Code) and was a member of the top-
paid group for such year; or (iii) was an
<PAGE>
FORM 10-K Page 124
Exhibit 4.8
officer of the Employer and received
Compensation during such year that is
greater than 150 percent of the dollar
limitation in effect under Section
415(b)(1)(A) of the Code. The term
highly compensated active Employee also
includes: (i) any Employee who is both
described in the preceding sentence if
the term "determination year" is
substituted for the term "look-back year"
and is one of the 100 Employees who
received the most Compensation from the
Employer during the determination year;
and (ii) Employees who are 5 percent
owners at any time during the look-back
year or determination year.
If no officer has satisfied the
Compensation requirement of (iii) above
during either a determination year or
look-back year, the highest paid officer
for such year shall be treated as a
Highly Compensated Employee.
For this purpose, the determination year
shall be the Plan Year. The look-back
year shall be the twelve-month period
immediately preceding the determination
year.
A highly compensated former Employee
includes any Employee who has a Severance
from Service (or was deemed to have a
Severance from Service) prior to the
determination year, performs no services
for the Employer during the determination
year, and was a highly compensated active
Employee for either his severance year or
any determination year ending on or after
the Employee's 55th birthday.
If an Employee is, during a determination
year or look-back year, a family member
of either a 5 percent owner who is an
<PAGE>
FORM 10-K Page 125
Exhibit 4.8
active or former Employee or of a Highly
Compensated Employee who is one of the 10
most Highly Compensated Employees ranked
on the basis of compensation paid by the
Employer during such year, then the
combined ADP for the family group of
which such Employee is a member (which is
treated as one Highly Compensated
Employee) must be determined by combining
the compensation and CODA Contributions
of all the eligible family members, and
the combined ACP for the family group
must be determined by combining the
compensation and Cone Contributions of
all the eligible family members. For
purposes of the Section, family member
includes the Spouse, lineal ascendants
and descendants of the Employee or former
Employee and the Spouses of such lineal
ascendants and descendants.
The determination of who is a Highly
Compensated Employee, including the
determinations of the number and identity
of Employees in the top-paid group, the
top 100 Employees, the number of
Employees treated as officers and the
compensation that is considered, will be
made in accordance with Code Section
414(q) and the regulations thereunder.
(5) Non-Highly Compensated Employee means an
Employee who is neither a Highly
Compensated Employee nor a family member
of a Highly Compensated Employee as
defined in Plan Section 3.04(b)(4).
<PAGE>
FORM 10-K Page 126
Exhibit 4.8
(c) The average ADP for any Plan Year cannot
exceed the allowance set forth in the
following table:
(A) (B)
If Average Actual Deferral The Average Actual Deferral
Percentage for Eligible Non- Percentage for Eligible Highly
Highly Compensated Employees is: Compensated Employees can be:
2% or less.........................2 times Column A
2% to 8%...........................Column A plus 2
percentage points
Over 8%............................1.25 times Column A
(d) Notwithstanding the foregoing table, to avoid
duplicate use of the limit for any Highly
Compensated Employee in violation of Code
Section 401(m)(9), the actual contribution
ratio for Highly Compensated Employees shall be
reduced pursuant to Treasury Regulation
1.401(m)-2 and Plan Section 3.05(f).
(e) In the case of a Highly Compensated Employee
who is a Member or Eligible Employee and who is
eligible to have CODA Contributions made on his
behalf to individual accounts under two or more
Employer plans described in Section 401(a) or
401(k) of the Code, all such contributions
shall be treated as if made to a single plan
for purposes of determining the ADP for any
Plan Year.
(f) CODA Contributions made on behalf of any Member
who is a Highly Compensated Employee, that in
the aggregate for any Plan Year, exceed the
maximum amount that can be allocated based on
the application of the deferral percentage test
for such Plan Year, shall be distributed, to
the extent practicable within two and one half
months, but in no event later than the last day
of the Plan Year next following the year in
which such excess CODA Contributions were made.
Such distributions shall include any income or
be reduced by any loss applicable to the excess
CODA Contributions and shall be made in cash to
the Members on whose behalf excess CODA
Contributions were made.
<PAGE>
FORM 10-K Page 127
Exhibit 4.8
If it appears during a Plan Year that excess
CODA Contributions will be made on behalf of
Highly Compensated Employees, the Advisory
Committee, upon appropriate notice, may
reduce, or suspend entirely current Salary
Reduction Elections in effect for Highly
Compensated Employees or refund a portion of
CODA Contributions previously made in the Plan
Year to the extent necessary to comply with
the deferral percentage tests. The amount of
excess CODA Contributions for a Member who is
a Highly Compensated Employee shall be
determined in accordance with Treasury
Regulation 1.401(k)-1(f)(2). No "gap period"
income or loss will be distributed.
3.05. CONTRIBUTIONS PERCENTAGE TEST - EMPLOYEE AFTER-TAX
CONTRIBUTIONS AND CONE CONTRIBUTIONS
(a) Contributions by Members on an after-tax basis
are not permitted by this Plan. If such
Member contributions are allowed in the
future, they shall be taken into account for
purposes of applying the tests described in
this Section 3.05. For purposes of measuring
compliance with Section 401(m) the
Supplemental Retirement Plan and the Employee
Equity Plan shall be treated as an aggregated
group and Cone Contributions to those plans
shall be aggregated and the Supplemental
Retirement Plan - Hourly and the Employee
Equity Plan - Hourly shall be treated as an
aggregated group and Cone Contributions to
those plans shall be aggregated. The
contribution percentages tests as described in
this Section 3.05 shall be made for each Plan
Year and shall be applied separately to each
aggregated group. Compliance with such tests
will be secured as provided in this Section
3.05 and in accordance with Code Section
401(m)(2), Treasury Regulation 1.401(m)(1)-b,
and, if applicable, Code Section 401(m)(9) and
Treasury Regulation 1.401((m)-2, each of which
is incorporated herein by reference.
<PAGE>
FORM 10-K Page 128
Exhibit 4.8
(b) Definitions for purposes of contributions
percentage tests are:
(1) Actual Contributions Percentage (ACP)
means the percentage determined by
dividing the sum of Cone Contributions
and Member contributions, if any,
allocated to his Account for the Plan
Year or portion thereof by his
Compensation for the Plan Year or portion
thereof. The ACP of an Eligible Employee
who does not receive Cone Contributions
or make Member contributions is zero.
(2) Average ACP means the arithmetic average
of the ACP for all Members and Eligible
Employees as a group.
(3) Compensation has the meaning given such
term by Plan Section 3.04(b)(3).
(4) Highly Compensated Employee means an
Employee described in Plan Section
3.04(b)(4).
(5) Non-Highly Compensated Employee means an
Employee who is neither a Highly
Compensated Employee nor a family member
of a Highly Compensated Employee as
defined in Plan Section 3.05(b)(5).
(c) The average ACP for any Plan Year cannot
exceed the allowance set forth in the
following table:
(A) (B)
If Average Actual Contributions The Average Actual Contributions
Percentage for Eligible Non- Percentage for Eligible Highly
Highly Compensated Employees is: Compensated Employees can be:
2% or less.........................2 times Column A
2% to 8%...........................Column A plus 2
percentage points
Over 8%............................1.25 times Column A
<PAGE>
FORM 10-K Page 129
Exhibit 4.8
(d) Notwithstanding the foregoing table, to avoid
duplicate use of the limit for any Highly
Compensated Employee in violation of Code
Section 401(m)(9), the actual contribution
ratio for Highly Compensated Employees shall
be reduced pursuant to Treasury Regulation
1.401(m)-2 and Plan Section 3.05(f).
(e) In the case of a Highly Compensated Employee
who is a Member or Eligible Employee and who
is eligible to receive matching Employer
Contributions and to make Member contributions
to individual accounts under two or more
Employer plans described in Section 401(a) or
401(m) of the Code, all such contributions
shall be treated as if made to a single plan
for purposes of determining the ACP for any
Plan Year.
(f) Cone Contributions made on behalf of any
Member who is a Highly Compensated Employee
and Member contributions that in the aggregate
for any Plan Year exceed the maximum amount
that can be allocated based on the application
of the contributions percentage test for such
Plan Year, shall be distributed, to the extent
practicable within two and one-half months,
but in no event later than the last day of the
Plan Year next following the year in which
such excess Cone Contributions and Member
contributions were made. Such distributions
shall include any income or be reduced by any
loss applicable to the excess Cone
Contributions and Member Contributions and
shall be made in cash to the Members on whose
behalf excess Cone Contributions and Member
contributions were made. If it appears during
a Plan Year that excess Cone Contributions and
member contributions will be made on behalf of
Highly Compensated Employees, the Advisory
Committee, upon appropriate notice, may reduce
or suspend entirely current Member
contribution elections in effect for Highly
Compensated Employees or refund a portion of
such contributions previously made in the Plan
<PAGE>
FORM 10-K Page 130
Exhibit 4.8
Year to the extent necessary to comply with
the contributions percentage tests. The
amount of excess CODA Contributions for a
Member who is a Highly Compensated Employee
shall be determined in accordance with
Treasury Regulation 1.401(m)-1(e)(2) and
1.401(m)-2. No "gap period" income or loss
will be distributed.
3.06. DISTRIBUTION RESTRICTIONS
Except as permitted by Plan Section 3.04(f) or
3.05(f), no distribution from the Plan shall be
made to a Member or his or her Beneficiary or
Beneficiaries, in accordance with such Member's or
Beneficiary or Beneficiaries election, earlier than
upon Severance from Service, death, disability or
the hardship of the Member as described in Plan
Section 6.10.
<PAGE>
FORM 10-K Page 131
Exhibit 4.8
ARTICLE IV
ACCOUNTS AND ALLOCATIONS
4.01. INDIVIDUAL ACCOUNTS.
The Advisory Committee shall maintain individual
accounts 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. Individual accounts shall contain the
following components or subaccount as applicable:
CODA Contributions Account consisting of the
Member's EEP CODA Contributions Account and his SRP
CODA Contributions Account; Cone Contributions
Account consisting of the Member's EEP Cone
Contributions Account and his SRP Cone
Contributions Account; and Voluntary Contributions
Account consisting of the Member's EEP Voluntary
Contribution Account and his SRP Voluntary
Contribution Account. Each Member's individual
account shall reflect the Investment Funds in which
his account balances are invested pursuant to Plan
Article VII.
4.02. CODA CONTRIBUTIONS ACCOUNT.
As of each Valuation Date, the Advisory Committee
shall credit the total value of the contributions
made during the period ending on such Valuation
Date by each Member pursuant to his Salary-
Reduction Election to his CODA Contributions
Account.
4.03. CONE CONTRIBUTIONS ACCOUNT.
(a) As of each Valuation Date, the Advisory
Committee shall compute each Member's share of
Cone Contributions determined for the period
ending on such Valuation Date under Plan
Section 3.02 and allocate such amount to his
Cone Contributions Account as provided herein.
Cone Contributions shall be allocated and
credited to the Cone Contributions Accounts of
Members employed on each Valuation Date and
Members who retired, terminated employment,
<PAGE>
FORM 10-K Page 132
Exhibit 4.8
suspended CODA Contributions or died during
the period ending on such Valuation Date and
who had made CODA Contributions pursuant to
Salary-Reduction Elections in effect during
such period.
(b) Each Member described in paragraph (a) above
shall receive an allocation of Cone
Contributions made pursuant to Plan Section
3.02(a) as follows:
(1) With respect to Cone Contributions made
to the SRP pursuant to Section 3.02(a),
each Member shall be credited with 25% of
the aggregate SRP CODA Contributions made
on his behalf for the applicable Plan
Year and not withdrawn, provided,
however, that CODA Contributions in
excess of 6% of his Compensation shall
not be taken into account.
(2) With respect to Cone Contributions made
to the EEP pursuant to Section 3.02(a),
each Member shall be credited with 50% of
the aggregate EEP CODA Contributions made
on his behalf for the applicable Plan
Year and not withdrawn, provided,
however, that CODA Contributions in
excess of 6% of his Compensation shall
not be taken into account.
If the total CODA Contributions made on
behalf of any Member exceed 6% of his
Compensation then the 6% of Compensation
limitation will be divided between the
SRP and the EEP in the same proportion as
the Member elects to have divided the
CODA Contributions made on his behalf.
(c) Each Member described in paragraph (a) above
shall receive an allocation of Cone
Contributions made pursuant to Plan Section
3.02(b) as follows:
<PAGE>
FORM 10-K Page 133
Exhibit 4.8
(1) With respect to Cone Contributions made
to the SRP pursuant to Section 3.02(b),
each Member shall be credited with the
same proportion of the additional Cone
Contributions as the SRP CODA
Contributions made on his behalf for the
applicable Plan Year or other period and
not withdrawn bears to the total CODA
Contributions made on behalf of all
Members for such Plan Year or period and
not withdrawn; provided, however, that in
its resolutions authorizing any
additional Cone Contributions to the SRP
pursuant to Section 3.02(b), the Board of
Directors may direct that SRP CODA
Contributions in excess of a specified
percentage of Compensation shall be
disregarded, in which case each Member
shall be credited with the same
proportion of the additional Cone
Contributions as the SRP CODA
Contributions made on his behalf not in
excess of the specified percentage of
Compensation bears to the total CODA
Contributions made on behalf of all
members, not in excess of the specified
percentage of each individual's
Compensation.
(2) With respect to Cone Contributions made
to the EEP pursuant to Section 3.02(b),
each Member shall be credited with the
same proportion of the additional Cone
Contributions as the EEP CODA
Contributions made on his behalf for the
applicable Plan Year or other period and
not withdrawn bears to the total CODA
Contributions made on behalf of all
Members for such Plan Year or period and
not withdrawn; provided, however, that in
its resolutions authorizing any
additional Cone Contributions to the EEP
pursuant to Section 3.02(b), the Board of
Directors may direct that EEP CODA
<PAGE>
FORM 10-K Page 134
Exhibit 4.8
Contributions in excess of a specified
percentage of Compensation shall be
disregarded, in which case each Member
shall be credited with the same
proportion of the additional Cone
Contributions as the EEP CODA
Contributions made on his behalf not in
excess of the specified percentage of
Compensation bears to the total CODA
Contributions made on behalf of all
members, not in excess of the specified
percentage of each individual's
Compensation.
If the total CODA Contributions made on
behalf of any Member for any applicable
Plan Year or other period exceed the
percentage limitation specified by the
Board of Directors in its resolution
authorizing additional Cone Contributions
pursuant to Section 3.02(a), then the
percentage of Compensation Limitation
will be divided between the SRP and the
EEP in the same proportion as the Member
elects to have divided the CODA
Contributions made on his behalf.
4.04. VOLUNTARY CONTRIBUTIONS ACCOUNT.
Members who made Voluntary Contributions as
previously permitted under the Plan shall have a
Voluntary Contributions Account, which shall have
as its opening balance, the amount carried forward
from the previous Plan. Voluntary Member
Contributions are not permitted by this Plan; such
Accounts will only share in Investment Earnings as
hereafter provided.
4.05. ALLOCATION OF INVESTMENT EARNINGS.
Investment Earnings as of each Valuation Date shall
be allocated to the individual Accounts of Members
as provided below:
<PAGE>
FORM 10-K Page 135
Exhibit 4.8
(a) The Trustee shall determine the net Investment
Earnings as of each Valuation Date separately
for each Investment Fund in accordance with
generally accepted accounting principles. The
determination by the Trustee may be accepted
as conclusive by the Advisory Committee.
(b) Investment Earnings for each Investment Fund
shall be allocated as of each Valuation Date
to the individual Accounts of Members in the
same proportion that the dollar value
investment of each Member's individual Account
in such Investment Fund bears to the total
dollar value investment of all Member's
individual Accounts in such Investment Fund.
The dollar value investment eligible to share
in the allocation of net Investment Earnings
shall be determined by deducting from the
value of each individual Account 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 such individual Account;
provided however, that the total amount of all
installment payments shall be deducted if the
total amount in an individual Account as of
the preceding Valuation Date is to be paid out
prior to the next succeeding Valuation Date.
The amount eligible to share in the allocation
of net Investment Earnings shall be increased
by adding to the value of each Member's
individual accounts as of the preceding
Valuation Date, one-half of the amount of CODA
Contributions made to such accounts with
respect to each Member, but not withdrawn
during the period after the preceding
Valuation Date.
(c) Notwithstanding the foregoing provisions of
this Section 4.05, unrealized gains and losses
with respect to Qualifying Employer Securities
held in the Company Stock Fund shall not be
allocated, but the value of Qualifying
Employer Securities allocated to a Member's
<PAGE>
FORM 10-K Page 136
Exhibit 4.8
EEP Accounts shall be determined as of each
Valuation Date and reported to the Member.
Qualifying Employer Securities traded on the
New York Stock Exchange with be valued at
their closing price on the Exchange on the
Valuation Date or, if that date is not a
business day, on the immediately preceding
business day.
4.06. MAXIMUM ANNUAL ADDITIONS.
(a) Notwithstanding any other provision of this
Plan, the maximum "Annual Additions" credited
to a Member's 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."
(b) For purposes of applying the limitations of
Code Section 415, "Annual Additions" means the
sum credited to a Member's individual Accounts
in the SRP and the EEP, taken together, for
any "limitation year" of: (1) Cone
Contributions, (2) CODA Contributions, (3)
Voluntary Contributions, (4) Forfeitures, (5)
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
(6) 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
<PAGE>
FORM 10-K Page 137
Exhibit 4.8
(within the meaning of Code Section
419A(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 CODA Contributions or Voluntary
Contributions for the purposes of Plan
Sections 4.06(b)(2) and (3): (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
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 service 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".
<PAGE>
FORM 10-K Page 138
Exhibit 4.8
"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 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
<PAGE>
FORM 10-K Page 139
Exhibit 4.8
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, effective for
Plan Year beginning January 1, 1994) (unless
adjusted in the same manner as permitted under
Code Section 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 as single Employer.
<PAGE>
FORM 10-K Page 140
Exhibit 4.8
(i) For the purpose of this Section, if this Plan
is a Code Section 413(c) plan, all Employers
of 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
<PAGE>
FORM 10-K Page 141
Exhibit 4.8
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 4.06(p)
below, if an Employee is (or has been) a
Member 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 limitation
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.:
<PAGE>
FORM 10-K Page 142
Exhibit 4.8
(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 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
<PAGE>
FORM 10-K Page 143
Exhibit 4.8
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
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 1(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 then adjust the
numerator of the defined benefit plant
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 plant shall not
increase, (B) no "Annual Additions" may be
<PAGE>
FORM 10-K Page 144
Exhibit 4.8
credited to a Member's account 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.
4.07. ADJUSTMENTS FOR EXCESSIVE ANNUAL ADDITIONS.
(a) If, as a result of 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 CODA 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 CODA
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 CODA 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 Cone or CODA Contributions
which would constitute "Annual Additions" are
made to the Plan for such "limitation year",
(4) reduce Cone Contributions to the Plan for
such "limitation year" by the amount of the
"Section 415 suspense account" allocated and
reallocated during such "limitation year."
<PAGE>
FORM 10-K Page 145
Exhibit 4.8
(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 4.06.
(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
account" shall not share in any earnings or
losses of the Trust Fund.
(d) The Plan may not distribute "excess amounts,"
other than CODA Contributions as provided by
the Code and regulations thereunder, to
Members or former Members.
4.08 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, 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.
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, exceed ninety percent (90%)
of the Present Value of Accrued Benefits and the
Aggregate Accounts of all Key and Non-Key Employees
<PAGE>
FORM 10-K Page 146
Exhibit 4.8
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 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 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
Heavy Plan:
(a) Aggregate Account: A Member's Aggregate
Account as of the Determination Date is the
sum of:
(1) the Member's Account balance as of the
most recent Valuation Date 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
most recent 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;
<PAGE>
FORM 10-K Page 147
Exhibit 4.8
(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 most recent
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.
(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.
<PAGE>
FORM 10-K Page 148
Exhibit 4.8
(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
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.
<PAGE>
FORM 10-K Page 149
Exhibit 4.8
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.
<PAGE>
FORM 10-K Page 150
Exhibit 4.8
(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 150 percent (150%) 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 (0.5%) 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), (c), (m) and (o) shall
be treated as separate employers.
<PAGE>
FORM 10-K Page 151
Exhibit 4.8
(iv) a "one percent owner" of the Employer
having 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 4.06(d), except
that the determination of "415
Compensation" shall be made without
regard to Code Sections 125, 402(e)(3),
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
<PAGE>
FORM 10-K Page 152
Exhibit 4.8
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 the group, exceeds sixty
percent (60%) of a similar sum determined
for all Members.
4.09. 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
<PAGE>
FORM 10-K Page 153
Exhibit 4.8
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
effective for Plan Years beginning
January 1, 1994) unless adjusted in such
manner as permitted under Code Section
415(d).)
For purposes of the minimum allocations set
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
the Top-Heavy Group, the required minimum
contribution for each Top-Heavy Plan Year
shall be satisfied by the minimum benefit
under the defined benefit plan. For Employees
who do not participate in this Plan but who
participate in another plan of the Top-Heavy
Group, the top-heavy minimum accrued benefit
or contribution shall be satisfied by
providing the minimum accrued benefit or
contribution under that plan. If the Employer
maintains another qualified plan that provides
a minimum benefit or contribution, then in no
event shall the minimum benefit or
contribution provided under this Plan, when
combined with the benefit or contribution
provided by the other plan, exceed the amount
required by Code Section 416(c). For purposes
of determining minimum allocations, the CODA
Contributions and Cone Contributions for Key
Employees shall be taken into account but the
CODA Contributions for Non-Key Employees shall
not be taken into account.
<PAGE>
FORM 10-K Page 154
Exhibit 4.8
(b) Minimum Vesting: In accordance with Plan
Section 5.01, a Member is 100% vested in his
Account at all times.
(c) Impact on Maximum Benefits: For any Plan Year
in which the Plan is a Top-Heavy Plan, Plan
Section 4.06 shall be applied by substituting
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 155
Exhibit 4.8
ARTICLE V
VESTING
5.01. VESTED ACCOUNTS.
(a) Each Member's CODA Contributions Account and
Voluntary Contributions Account, if
applicable, are nonforfeitable (100% vested).
(b) (1) If, before January 1, 1989, a Member had
a voluntary Severance from Service Date
(other than by retirement or death) and
had incurred a one-year Break in Service,
his Cone Contributions Accounts are
vested (nonforfeitable) according to the
following schedule:
Vested Percentage
Years of Service Cone Contributions
After age 18 Account
Less than 4, 0%
4 but less than 5 50%
5 or more 100%
Before January 1, 1989, a Member's Cone
Contributions Accounts were 100% vested
on the earlier of his 65th birthday
(normal retirement date) or his death, or
at his involuntary Severance from Service
Date.
(2) Each Member of the Plan who is employed
by an Employer on or after January 1,
1989, and each Member of the Plan on
January 1, 1989, who was not then
employed by an Employer but who had
not yet incurred a one-year Break in
Service is 100% vested in his Cone
Contributions Accounts.
5.02. FORFEITURES.
For Plan Years beginning on and after January 1,
1989, each Member's Accounts in the SRP and EEP are
<PAGE>
FORM 10-K Page 156
Exhibit 4.8
nonforfeitable (100% vested); therefore, no
Forfeitures shall occur or shall be subject to
allocation in such Plan Years.
<PAGE>
FORM 10-K Page 157
Exhibit 4.8
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
benefits are 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 notice will
state: (1) the specific reason or reasons for
denial; (2) 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
member or Beneficiary 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 or 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
<PAGE>
FORM 10-K Page 158
Exhibit 4.8
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.
6.03. DISTRIBUTION DEFINITIONS.
(a) Spousal Consent means with respect to a
Member's election to designate a Beneficiary
other than his Spouse, the Spouse's written
consent 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).
(b) Spouse or Surviving Spouse is defined in Plan
Section 1.47.
6.04. METHODS OF PAYMENT.
(a) After a Member has a Severance from Service
Date and submits the appropriate claim forms,
election forms and income tax withholding
forms, and subject to the rights of any
Alternate Payee under a Qualified Domestic
Relations Order, the Advisory Committee shall
direct the Trustee to distribute the vested
portion of the Member's Accounts by one of the
following methods as elected by such Member:
(1) In a single, lump sum distribution.
(2) In monthly installments of a specified
amount over a fixed period not to exceed
the life expectancy of the Member or the
joint life expectancies of the Member and
his designated Beneficiary.
(3) By a combination of the methods set forth
in (1) and (2) above.
<PAGE>
FORM 10-K Page 159
Exhibit 4.8
The Advisory Committee may adjust installment
elections so as not to be administratively
burdensome.
Not earlier than 90 days, but (except as
hereinafter provided) not later than 30 days,
before a distribution is made or begun, the
Advisory Committee must provide a benefit
notice to a Member who is eligible to make an
election under this Section 6.04. The benefit
notice must explain the optional forms of
benefit and the Member's right to defer
distribution until he attains age 65. If a
distribution is one to which Code Sections
401(a)(11) and 417 do not apply, such
distribution may commence less than 30 days
after the notice required under Section
1.411(a)-11(c) of the Income Tax Regulations
is given, provided that (i) the Advisory
Committee clearly informs the Member that the
Member has a right to a period of at least 30
days after receiving the notice to consider
the decision of whether or not to elect a
distribution or a particular distribution
option and (ii) the Member, after receiving
the notice, affirmatively elects a
distribution.
(b) If a Member has a Severance from Service and
the vested portion of his Cone Contributions
Account is $3,500 or less, distribution will
only be made in a single lump sum amount or
direct trustee-to-trustee transfer; in such
event, the Member shall not be entitled to
elect any other method of payment pursuant to
paragraph (a) above. If the vested portion of
such Member's Account is over $3,500,
distribution before the Member's sixty-fifth
birthday shall be made only with the consent
of the Member.
(c) A monthly installment distribution method may
be elected only in accordance with the special
distribution provisions set forth in Plan
Section 6.06.
<PAGE>
FORM 10-K Page 160
Exhibit 4.8
(d) Distributions from the Plan must be in cash,
except that the receiving Member may elect to
receive his distribution from the EEP in the
form of 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
stock distribution has assets other than
Qualifying Employer Securities forming part of
the vested portion of his EEP Accounts, and if
he exercises his right to elect to receive
such Qualifying Employer Securities, those
other assets must be converted at fair market
value (in accordance with Plan Section 6.11)
into any Qualifying Employer Securities to
which he may be entitled by Code Section
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 of the EEP 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 EEP 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.
(e) In the case of a distribution of Qualifying
Employer Securities which are not readily
tradable on an established securities market,
the EEP shall provide the Member with a put
option that complies with the requirements of
Section 409(h) of the Code. Such put option
shall provide that if a Member exercises the
put option, the Employer, or the EEP if the
EEP elects to assume the Employer's
obligation, shall repurchase the Qualifying
Employer Securities as follows:
<PAGE>
FORM 10-K Page 161
Exhibit 4.8
(1) If the distribution constitutes a total
distribution of the vested portion of a
Member's EEP Accounts, 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 EEP 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.
(f) Shares of Qualifying Employer Securities
distributed by the Plan shall be subject to
the "right of first refusal" described in this
Section 6.04(f) 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 of the EEP 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 of the EEP 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 of the EEP 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-
<PAGE>
FORM 10-K Page 162
Exhibit 4.8
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 of the EEP, Cone, or
both, then the 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(f).
6.05. COMMENCEMENT OF BENEFITS.
(a) Subject to Plan Section 6.11, the valuation of
a Member's Accounts for purposes of
determining the amount of benefit payment(s)
is made as of the Valuation Date immediately
following the date on which he becomes
eligible for such payment(s) pursuant to this
Section 6.05.
(b) Unless a Member elects otherwise, 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;
(2) the 10th anniversary of the date he
became a Member of the Plan; or
(3) his Severance from Service.
(c) A Member who has an involuntary Severance from
Service and who receives Approved Leave with
or without pay shall be eligible to receive a
distribution of the balance in his Accounts in
accordance with Plan Section 6.04 within 75
days of the Valuation Date immediately
following his last day of active employment,
<PAGE>
FORM 10-K Page 163
Exhibit 4.8
provided that the Member terminates his
election to have CODA Contributions made on
his behalf to the Plan so that no further CODA
Contributions will be made after such
Valuation Date.
(d) 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
not 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).
(e) Distributions pursuant to this Section 6.05(e)
may be requested by a Member who has a
Severance from Service date prior to January
1, 1993, and by the Beneficiary of a Member
who dies before January 1, 1993. A
distribution pursuant to this Section 6.05(e)
shall begin or be made, subject to Section
6.05(d), within 90 days of the Valuation Date
immediately following such Severance from
Service Date or Death. At the election of the
Member or Beneficiary, up to 90% of the value
of the Member's Accounts as of the Valuation
Date immediately preceding the Severance from
Service Date or death will be distributed
within 15 days after the Valuation Date
immediately following such Severance from
Service Date or death, with the balance
distributed by April 1 or October 1 following
the applicable Valuation Date.
(f) Distributions pursuant to this Section 6.05(f)
may be requested by a Member who has a
Severance from Service Date after December 31,
1992, and by the Beneficiary of a Member who
dies after December 31, 1992. A distribution
pursuant to this Section 6.05(f) shall begin
or be made, subject to Section 6.05(d), within
75 days of the Valuation Date immediately
following such Severance from Service Date or
death.
<PAGE>
FORM 10-K Page 164
Exhibit 4.8
6.06. SPECIAL DISTRIBUTION PROVISIONS.
(a) Notwithstanding any provision in the Plan to
the contrary, the distribution of a
Participant's benefits shall be made in
accordance with the following requirements and
shall otherwise comply with Code Section
401(a)(9) and the Regulations thereunder
(including Regulation 1.401(a)(9)-2), the
provisions of which are incorporated herein by
reference:
(1) Except as otherwise permitted by Code
Section 401(a)(9), a Participant's
benefits shall be distributed to him not
later than April 1st of the calendar year
in which the Participant attains age 70-
1/2 whether or not he has a Severance
from Service. Alternatively,
distributions must begin no later than
April 1st of the calendar year in which
the Participant attains age 70-1/2 and
must be made over a period certain
measured by or not extending beyond the
life expectancy of the Participant (or
the life expectancies of the Participant
and his designated Beneficiary) in
accordance with Treasury Regulations.
(2) Distributions to a Participant and his
Beneficiaries shall only be made in
accordance with the incidental death
benefit requirements of Code Section
401(a)(9)(G) and the Regulations
thereunder.
(b) Notwithstanding any provision in the Plan to
the contrary, distributions upon the death of
a Participant shall be made in accordance with
the following requirements and shall otherwise
comply with Code Section 401(a)(9) and the
Regulations thereunder. If it is determined
pursuant to Regulations that the distribution
of a participant's interest has begun and the
<PAGE>
FORM 10-K Page 165
Exhibit 4.8
Participant dies before his entire interest
has been distributed to him, the remaining
portion of such interest shall be distributed
at least as rapidly as under the method of
distribution selected pursuant to Plan Section
6.04 as of his date of death. If a
Participant dies before he has begun to
receive any distributions of his interest
under the Plan or before distributions are
deemed to have begun pursuant to Treasury
Regulations, then his death benefit shall be
distributed to his Beneficiaries by December
31st of the calendar year in which the fifth
anniversary of his date of death occurs,
except as hereinafter provided.
The five-year distribution requirement of the
preceding paragraph shall not apply to any
portion of the deceased Participant's interest
which is payable to or for the benefit of a
designated Beneficiary. In such event, such
portion may, at the election of the
Participant (or the Participant's designated
Beneficiary), be distributed over a period not
extending beyond the life expectancy of such
designated Beneficiary provided such
distribution begins not later than December
31st of the calendar year immediately
following the calendar year in which the
Participant died. However, in the event the
Participant's Surviving Spouse (determined as
of the date of the Participant's death) is his
Beneficiary, the requirement that
distributions commence within one year of a
Participant's death shall not apply. In lieu
thereof, the distributions must commence on or
before the later of: (1) December 31st of the
calendar year immediately following the
calendar year in which the Participant dies;
(2) December 31st of the calendar year in
which the Participant would have attained age
70-1/2. If the Surviving Spouse dies before
distributions to such spouse begin, then the
five-year distribution requirement of this
Section shall apply as if the Surviving Spouse
was the Participant.
<PAGE>
FORM 10-K Page 166
Exhibit 4.8
(c) For purposes of Section 6.06(b), the election
by a designated Beneficiary to be excepted
from the five-year distribution requirement
must be made no later than December 31st of
the calendar year following the calendar year
of the Participant's death, except that with
respect to a designated Beneficiary who is the
Participant's Surviving Spouse, the election
must be made by the earlier of: (1) December
31st of the calendar year immediately
following the calendar year in which the
Participant died or, if later, the calendar
year in which the Participant would have
attained age 70-1/2; or (2) December 31st of
the calendar year which contains the fifth
anniversary of the date of the Participant's
death. An election by a designated
Beneficiary must be in writing and shall be
irrevocable as of the last day of the election
period stated herein. In the absence of an
election by the participant or, a designated
Beneficiary, the five-year distribution
requirement shall apply.
(d) For purposes of this Section 6.06, the life
expectancy of a Participant and a
Participant's Surviving Spouse or designated
Beneficiary may, at the election of the
Participant or the Participant's spouse, be
redetermined in accordance with Regulations.
The election, once made, shall be irrevocable.
If no election is made by the time
distributions must commence, then the life
expectancy of the Participant and the
Participant's Surviving Spouse or designated
Beneficiary shall not be subject to
recalculation. Life expectancy and joint and
last survivor expectancy shall be computed
using the return multiples in Tables V and VI
of Regulations 1.72-9.
6.07. DEATH BENEFITS.
(a) Subject to the rights of any Alternate Payee
under a Qualified Domestic Relations Order, if
<PAGE>
FORM 10-K Page 167
Exhibit 4.8
a Member having a vested interest in the Plan
dies before receiving a distribution of his
Account balance with a Surviving Spouse, his
vested Account balance, valued in accordance
with Plan Section 6.11, shall be distributed
to the Surviving Spouse in accordance with
subsection (b), unless the Member had made an
effective election pursuant to subsection (c).
(b) Unless the Surviving Spouse elects a later
date, distribution of the Member's vested
Account balance 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 6.05(d). Payment
shall be made under one of the methods
provided in Plan Section 6.04.
Notwithstanding the foregoing, if the
aggregate amount of the Member's vested
Account balance is $3,500 or less, such amount
shall be distributed to the Surviving Spouse
in a single lump-sum payment. No 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 designate a Beneficiary or
Beneficiaries (other than his Spouse) in
accordance with subsection (d) to receive
death benefits under this Plan; provided,
however, that no Beneficiary designation in
accordance with subsection (d) shall be
effective unless accompanied by a Spousal
Consent. A Member may revoke any Beneficiary
designation and, subject to any required
Spousal Consent, may designate another
Beneficiary or Beneficiaries.
(d) 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
<PAGE>
FORM 10-K Page 168
Exhibit 4.8
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 (d), 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 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 6.05(d), and Plan Section 6.06,
and shall be made by one of the methods
described in Plan Section 6.04, as elected by
the Beneficiary or Beneficiaries. If a
Member had elected installment payments
pursuant to Plan Section 6.04 and had
designated a Beneficiary or Beneficiaries in
accordance with this subsection (d), 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.
<PAGE>
FORM 10-K Page 169
Exhibit 4.8
6.08. 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 of 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 his Plan and specifies the following:
(1) the name and last know 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).
<PAGE>
FORM 10-K Page 170
Exhibit 4.8
The Advisory Committee shall establish reasonable
procedures to determine the qualified status of
domestic relations orders and to administer
distributions under such Orders.
6.09. WITHHOLDING OF BENEFITS.
If a Member has a Severance from Service and
returns to regular employment of the 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. HARDSHIP WITHDRAWAL.
(a) Upon written application on forms provided by
the Advisory Committee and subject to the
provisions of this Section 6.10, a Member
shall be permitted to withdraw a specified
whole dollar amount from the vested balance in
his individual Accounts to the extent such
withdrawal is necessary to meet the following
documented immediate and heavy financial need
of the Member:
(1) medical expenses described in Code
Section 213(d) of the Member, his Spouse
or dependents;
(2) purchase (excluding mortgage payments) of
a principal residence of the Member;
(3) tuition and related education fees (but
not room and board) for the next twelve
(12) months of post-secondary education
for the Member, his Spouse, or
dependents;
(4) the need to prevent eviction of the
Member from his principal residence or
foreclosure on the mortgage of his
principal residence; plus, any amounts
necessary to pay any federal state or
local income taxes or penalties
reasonably anticipated to result from the
distribution.
<PAGE>
FORM 10-K Page 171
Exhibit 4.8
No such withdrawal shall be permitted to the
extent that the immediate and heavy financial
need proposed to be met thereby may be met
from other resources that are reasonably
available to the Member and, for this purpose,
the Member's resources shall be deemed to
include those assets of his Spouse and minor
children that are reasonably available to the
Member. Accordingly, no withdrawal from a
Member's Accounts shall be permitted unless
the Member has represented to the Advisory
Committee in writing that his immediate and
heavy financial need cannot be relieved: (1)
through reimbursement or compensation by
insurance or otherwise; (2) by reasonable
liquidation of the Employee's assets, to the
extent such liquidation would not itself cause
an immediate and heavy financial need; (3) by
cessation of elective contributions or
Employee contributions under the Plan; (4) by
other distributions or nontaxable loans from
plans maintained by Cone or by any other
Employer of the Member; or (5) by borrowing
from commercial sources on reasonable
commercial terms. Amounts withdrawn shall be
in the following order: (1) a portion or all
of the SRP Voluntary Contributions Account;
(2) a portion or all of the EEP Voluntary
Contributions Account; (3) a portion or all of
the SRP Cone Contributions Account; (4) a
portion or all of the SRP CODA Contributions
Account; (5) a portion or all SRP Investment
Earnings attributable to Plan Years ending
before January 1, 1989; (6) a portion or all
of the EEP Cone Contributions Account; (7) a
portion or all of the EEP CODA Contributions
Account. Subject to paragraph (b), the
maximum amount subject to withdrawal is the
vested balance in the Member's Accounts as of
the end of the Plan Year immediately preceding
the date of application, but in no event shall
a withdrawal be in excess of the amount
necessary to meet the immediate and heavy
financial need of the Member, and a withdrawal
of less than $300 shall not be permitted.
<PAGE>
FORM 10-K Page 172
Exhibit 4.8
b) Beginning January 1, 1989, the amount of any
hardship withdrawal cannot exceed the sum of
the Member's Accounts, including Investment
Earnings thereon attributable to Plan Years
ending before January 1, 1989, (but excluding
Investment Earnings thereon attributable to
Plan Years ending after December 31, 1988, and
all Investment Earnings attributable to the
EEP Company Stock Fund). The order of
withdrawal rules in paragraph (a) will apply.
(c) The determination required to be made under
this Section 6.10 by the Advisory Committee
shall be made in a uniform and non-
discriminatory manner on the basis of all
relevant facts and circumstances. Hardship
withdrawals are not subject to the Advisory
Committee's discretion, except to the extent
reasonably necessary to determine whether the
conditions set forth in paragraph (a) have
been met, and the Claim Procedure set forth in
Section 6.01 shall apply. The Advisory
Committee shall be entitled to rely on
information and documentation supplied by a
Member in connection with his written
application for a hardship withdrawal,
pursuant to this Plan Section 6.10.
6.11. VALUATION OF ACCOUNT BALANCES.
For purposes of determining the amount of any
distribution, a Member's Accounts will be
determined as of the Valuation Date immediately
preceding the date of the distribution, except that
cash distributions from the EEP after December 31,
1992, that are attributable to common stock of Cone
will be based on the closing price of the common
stock on the sixtieth day following such Valuation
Date or, if the sixtieth day is not a business day,
the immediately preceding business day.
6.12. WITHHOLDING OF TAXES.
Notwithstanding any other term or provision of this
Article VI, the Advisory Committee will direct the
<PAGE>
FORM 10-K Page 173
Exhibit 4.8
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.
6.13. ELIGIBLE ROLLOVER DISTRIBUTIONS.
(a) This Section 6.13 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 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).
<PAGE>
FORM 10-K Page 174
Exhibit 4.8
(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 distributed 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.
<PAGE>
FORM 10-K Page 175
Exhibit 4.8
ARTICLE VII
INVESTMENT OF ACCOUNTS
7.01. INVESTMENT FUNDS.
(a) The Trustee of the SRP shall establish and
maintain three Investment Funds. The first
fund, known as the Fixed Income Fund, shall be
invested in interest bearing accounts,
certificates of deposit, money market
securities and other interest bearing
investments which involve a minimum or no risk
to principal. The second fund, known as the
Balanced Fund, shall be invested primarily in
common and preferred stocks, corporate and
government bonds, debentures and other
evidences of indebtedness. The third fund,
known as the Diversified Common Stock Fund,
shall be invested primarily in common stocks.
The Trustee of the SRP shall establish and
maintain other Investment Funds if directed to
do so by the Board of Directors. The
Investment Funds maintained by the Trustee of
the SRP shall be utilized in investing the
individual SRP Accounts of Members and
Beneficiaries.
(b) Plan assets held in the SRP Trust Fund and
attributable to Members' SRP CODA
Contributions and SRP Voluntary Contributions,
that is, any funds allocated or allocable to
SRP CODA Contributions Accounts or SRP
Voluntary Contributions Accounts shall not be
invested in any securities or other properties
whatsoever of Cone or Affiliates.
(c) The Trustee of the EEP shall establish and
maintain two Investment Funds. The first
fund, known as the Company Stock Fund, shall
be invested solely in Qualifying Employer
Securities (as defined in Section 407(d)(5) of
ERISA). The second fund, known as the Other
Investments Fund shall be invested in interest
<PAGE>
FORM 10-K Page 176
Exhibit 4.8
bearing accounts, certificates of deposit,
money market securities and other interest
bearing investments which involve a minimum or
no risk to principal. The Investment Funds
maintained by the Trustee of the EEP shall be
utilized in investing the individual EEP
Accounts of Members and Beneficiaries.
7.02. DIRECTING INVESTMENT OF INDIVIDUAL ACCOUNTS.
(a) At least 30 days prior to each January 1,
April 1, July 1 and October 1 each Member
shall have the right to direct the Advisory
Committee as to the investment of all funds in
his individual SRP Accounts during the next
three months. Such election shall be in
writing on a form provided by the Advisory
Committee and shall indicate which amounts, in
25% increments, are to be invested in each of
the SRP Investment Funds. In the event no
election is made on a timely basis, the
Member's individual Accounts shall remain
invested in the same manner as during the
prior period in accordance with his last
election.
(b) Members shall not have the right to direct the
investment of EEP Accounts. EEP Accounts
shall be invested by the Trustee of the EEP
primarily in the Company Stock Fund, and the
Other Investments Fund will be used primarily
as a temporary fund whose assets will be used
to purchase Qualifying Employer Securities or
to make distributions in accordance with
Article VI.
(c) Notwithstanding any other provisions of this
Section 7.02, effective January 1, 1991, a
Member who has attained age 60 and who has an
EEP Account balance may elect on forms
provided by the Advisory Committee, to
transfer such balance to the SRP Investment
Funds. Transfers as permitted by this Section
7.02(c) shall be effective on January 1 of
each Plan Year, with respect to Members who
<PAGE>
FORM 10-K Page 177
Exhibit 4.8
are age 60 or older on or before the December
31 Valuation Date immediately preceding such
January 1. The initial transfer by any Member
shall be 50% of the value of his EEP Account
balance as of the December 31 Valuation Date
immediately preceding the January 1 effective
date. A Member shall be allowed a second
transfer effective no sooner than one year
after such initial transfer; the second
transfer shall be the Member's remaining EEP
Account balance. A Member shall not be
allowed more than two transfers pursuant to
this Section 7.02(c). The Advisory Committee
shall restrict rights to transfer by Highly
Compensated Employees which may otherwise be
permitted by this Section 7.02(c) to the
extent necessary to cause compliance with
Treasury Regulation 1.401(a)(4)-4. If
restricting transfer rights by Highly
Compensated Employees becomes necessary, then
to the extent required to comply with Treasury
Regulation 1.401(a)(4)-4, the Advisory
Committee shall not allow transfer rights to
be elected by Highly Compensated Employees as
of any applicable December 31 Valuation Date
in the following order:
First - by those Highly Compensated
Employees who have attained age 60.
Second - by those Highly Compensated
Employees who have attained age 61.
Third - by those Highly Compensated
Employees who have attained age 62.
Fourth - by those Highly Compensated
Employees who have attained age 63.
Fifth - by those Highly Compensated
Employees who have attained age 64
or any older age.
<PAGE>
FORM 10-K Page 178
Exhibit 4.8
(d) Effective January 1, 1993, in accordance with
uniform and nondiscriminatory procedures
adopted from time to time by the Advisory
Committee, a Member who has an EEP Account
balance may elect to transfer such balance to
the SRP Investment Funds over a period of four
Plan Years as follows:
(1) For the first Plan Year in which a
transfer is elected, 25% of the Member's
total EEP Account balance as of the
Valuation Date immediately preceding the
date on which the transfer is made;
(2) For the second Plan Year in which a
transfer is elected, 33-1/3% of the
Member's total EEP Account balance as of
the Valuation Date immediately preceding
the date on which the transfer is made;
(3) For the third Plan Year in which a
transfer is elected, 50% of the Member's
total EEP Account balance as of the
Valuation Date immediately preceding the
date on which the transfer is made; and
(4) For the fourth Plan Year in which a
transfer is elected, 100% of the Member's
total EEP Account balance as of the
Valuation Date immediately preceding the
date on which the transfer is made.
Notwithstanding the foregoing, if the total
value of a Member's EEP Account balance does
not exceed $5,000 as of any Valuation Date, he
may elect to have such balance transferred to
the SRP Investment Funds, provided that only
one transfer shall be permitted of an EEP
Account balance that does not exceed $5,000.
The Advisory Committee shall restrict rights
to transfer by Highly Compensated Employees
which may otherwise be permitted by this
Section 7.02(d) to the extent necessary to
cause compliance with Treasury Regulation
1.401(a)(4)-4. If restricting transfer rights
<PAGE>
FORM 10-K Page 179
Exhibit 4.8
by Highly Compensated Employees becomes
necessary, then to the extent required to
comply with the Treasury Regulation
1.401(a)(4)-4, the Advisory Committee shall
not allow transfer rights to be elected by
Highly Compensated Employees as of any
applicable Valuation Date in the following
order:
(i) By those Highly Compensated
Employees described in Code Section
414(q)(1)(A)or (B).
(ii) By those Highly Compensated
Employees described in Code Section
414(q)(1)(C) and not included in
category (i) above.
(iii) By those Highly Compensated
Employees described in Code Section
414(q)(1)(D) and not included in
category (i) or (ii) above.
7.03. SEGREGATED ACCOUNT.
If a terminated Member's or Beneficiary's
distribution is payable in installments which
extend more than 6 months after the normal payment
date for a lump sum distribution, then, as of the
January 1 coinciding with or next following the
date on which the election to receive installment
payments is made, the individual SRP Accounts shall
be invested in the Fixed Income Fund and, subject
to Plan Section 6.04(d), the individual EEP
Accounts shall be invested in the Other Investments
Fund.
<PAGE>
FORM 10-K Page 180
Exhibit 4.8
ARTICLE VIII
TRUST FUND AND ADMINISTRATION OF THE PLAN
8.01. 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) Each Trustee has custody and sole
responsibility for administration of the Trust
Fund of which it is the Trustee, but a
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 such Trustee.
If an Investment Manger 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 8.06 shall have such authority and
responsibilities as may be delegated by the
Board of Directors.
<PAGE>
FORM 10-K Page 181
Exhibit 4.8
(e) 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 he has knowledge of
a breach of Fiduciary responsibility by
another Fiduciary and fails to make reasonable
effort to remedy the breach.
8.02. 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 of Qualifying Employer Securities as
defined in ERISA Section 407(d) by the EEP.
<PAGE>
FORM 10-K Page 182
Exhibit 4.8
8.03. 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. Any
such Trust Agreement 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. Benefits provided by the Plan shall be
payable from the Trust Fund. 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.
8.04. 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.
8.05. IMPOSSIBILITY OF DIVERSION.
Except as provide in Section 3.02, 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.
8.06. ADVISORY COMMITTEE AND OTHER COMMITTEES.
The Board of Directors shall appoint an Advisory
Committee and may appoint other Committees from
<PAGE>
FORM 10-K Page 183
Exhibit 4.8
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 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.
8.07. 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 agents shall be paid by
Cone.
8.08. DUTIES OF INVESTMENT MANAGER.
Cone shall have authority to appoint in writing and
obtain the services of one or more Investment
Mangers (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
<PAGE>
F0RM 10-K Page 184
Exhibit 4.8
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 Manger shall become effective as
of the date it 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
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
Manger for services rendered shall be paid out of
the Trust Fund, unless paid by Cone in its
discretion.
8.09. INFORMATION TO INVESTMENT MANAGER.
Cone shall advise each Investment Manager of the
amount of that portion of any Trust Fund which it
is to manage, the amount of Cone and CODA
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.
8.10. 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
<PAGE>
FORM 10-K Page 185
Exhibit 4.8
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.
8.11. 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
other Fiduciary appointed by the Board of
Directors. The Advisory Committee's rules,
interpretations, computations and actions with be
conclusive and binding on all persons. Individual
members of the Advisory Committee may exercise
jurisdiction and take actions with respect to
administration of the Plan provided such actions
are consistent with the proposes of and authorized
by the Plan.
8.12. NOTICE OF PAYMENTS DUE.
The Advisory Committee shall notify the Trustees in
writing of the amounts payable under the Plan and
the date of such payments.
8.13. RECORDS AND REPORTS.
The Advisory Committee shall maintain or shall
direct the Trustees to maintain accounts showing
the fiscal transactions of the Plan and shall keep
or direct the Trustees to 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
<PAGE>
FORM 10-K Page 186
Exhibit 4.8
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 Trustees.
Such report shall be submitted to the Board of
Directors.
8.14. 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
any Trustee or by any accountant retained by the
Committee or the Board of Directors, and upon all
opinions given by any legal counsel selected or
retained 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 his
from performing any duties which the Plan or the
Trust Agreements authorize or require 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.
<PAGE>
FORM 10-K Page 187
Exhibit 4.8
8.15. 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 11.06 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
11.06, 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.
8.16. FEES AND EXPENSES.
Any fees or expenses incurred in connection with
the operation of the Plan shall be paid out of the
SRP or EEP Trust Fund, unless paid by Cone in its
discretion.
8.17. VOTING AND TENDERING OF SHARES.
(a) Qualifying Employer Securities held in the
Trust Fund established under the EEP shall be
voted by the Trustee according to the written
instructions of the Member whose Accounts hold
the shares. Without limiting the generality
of the foregoing and notwithstanding any other
provision of this Plan or the Trust Agreement
<PAGE>
FORM 10-K Page 188
Exhibit 4.8
established under the EEP, 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 Qualifying
Employer Securities allocated to his Accounts.
Shares unallocated as of any voting record
date or shares as to which the Trustee
receives no written instructions shall be
voted by the Trustee.
(b) Options and other rights (for example, tender
rights) inuring to the benefit of Qualifying
Employer Securities allocated to a Member's
Account may be exercised by the Trustee only
according to the written instruction of the
Member whose Account holds the shares.
Options and similar rights (for example,
tender rights) inuring to the benefit of
unallocated shares must be exercised by the
Trustee according to the same principles set
forth in this Section with regard to voting
rights. Members directions pursuant to this
Section may be itemized or a general (blanket)
authorization.
(c) The Advisory Committee shall take such action
as may be necessary to ensure that Members of
the EEP receive the same notices, financial
statements, proxies, proxy solicitation
materials and other information as Cone sends
to its shareholders generally.
8.18 CERTIFICATION OF DIRECTIONS FROM MEMBERS.
Any Member's rights contained in this Plan or in
the Trust Agreements 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 Member's directions
communicated by the Advisory Committee are deemed
to be true and accurate, and each recipient of
directions shall be entitled to rely conclusively
upon the directions.
<PAGE>
FORM 10-K Page 189
Exhibit 4.8
ARTICLE IX
AMENDMENT, TERMINATION AND MERGER
9.01. AMENDMENT.
(a) The Board of Directors retains the right at
any time;
(1) to amend this Plan (or any component
hereof) 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 (or any component
hereof) and any Trust Agreement in any
other manner; and
(3) to amend this Plan (or any component
hereof) and liquidate any Trust Fund 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 any Trust Fund shall permit any part
of the Trust Fund to be used for or diverted
to purposes other that 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 regulation, no Plan
amendment or transaction having the effect of
a Plan amendment (such as a merger, plan
transfer or similar transaction) shall be
<PAGE>
FORM 10-K Page 190
Exhibit 4.8
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
to the SRP or the EEP, 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 labilities 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.
9.02. TERMINATION.
(a) The Board of Directors has the right at any
time to terminate this Plan (or any Component
hereof) 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.
<PAGE>
FORM 10-K Page 191
Exhibit 4.8
(b) If the Plan (or any component hereof)
terminates, all Accounts are then
nonforfeitable (100% vested). If the Plan (or
any component hereof) 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.
(c) On the Plan's (or any component hereof)
termination, the Advisory Committee must
direct the Trustee to allocate the assets of
the affected Trust Fund among the Members and
Beneficiaries according to the rules contained
in Article IV. Members have no recourse
toward satisfaction of their SRP Accounts
other than from the SRP Trust Fund and no
recourse toward satisfaction of their EEP
Accounts other than from the EEP Trust Fund.
(d) After providing for payment of any expenses
properly chargeable against the affected 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 9.02.
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
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 not 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.
<PAGE>
FORM 10-K Page 192
Exhibit 4.8
9.03. DISCONTINUANCE OF CONTRIBUTIONS.
(a) Each Employer has the right at any time to
reduce or discontinue its contributions to
this Plan (or any component hereof). If there
is a complete discontinuance of contributions
from all Employers, all Accounts become fully
non-forfeitable.
(b) A discontinuance of Employer contributions is
not a termination of the Plan unless Cone
gives the notice described in Plan Section
9.02(a).
9.04. PLAN MERGER OR ASSET TRANSFER.
(a) The merger or consolidation of this Plan with,
or the transfer of assets or liabilities of
this Plan (or any component hereof) 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 subsection (a), on written
direction from Cone, the Advisory 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 193
Exhibit 4.8
9.05. 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 (or any component hereof) as to
that Employer's Members but shall not be required
to do so.
<PAGE>
FORM 10-K Page 194
Exhibit 4.8
ARTICLE X
MULTIPLE COMPANIES INCLUDED
10.01. 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 the
effective Date of this amendment and
restatement and Affiliates that are permitted
to adopt this Plan in accordance with Section
10.02.
10.02. 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 (or any component hereof) as an
Employer. To become an Employer, a business must
adopt this Plan (or any component hereof) 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 (or any component hereof) 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.
10.03 WITHDRAWAL BY EMPLOYER.
(a) An employer may withdraw from the Plan (or any
component hereof) 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.
<PAGE>
FORM 10-K Page 195
Exhibit 4.8
(b) Upon receipt of an Employer's notice of
withdrawal, the Advisory Committee must
certify to the appropriate Trustees 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
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 Advisory Committee. If
the Plan (or any component hereof) 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
IX. If the Plan (or any component hereof) 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.
10.04. 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 196
Exhibit 4.8
ARTICLE XI
GENERAL
11.01. 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) an Employer;
(b) any officer, director, Employee or other agent
of an Employer;
(c) any Trustee or any Co-Trustee;
(d) the Advisory Committee or any member of the
Advisory 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.
11.02. 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 an
person with authorization from that Employer's
board.
11.03. 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 11.03.
<PAGE>
FORM 10-K Page 197
Exhibit 4.8
(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
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.
<PAGE>
FORM 10-K Page 198
Exhibit 4.8
(f) Each Employee releases all members of the
Investment Committee and 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.
11.04. 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 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 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.
11.05. 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.
11.06. 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.
<PAGE>
FORM 10-K Page 199
Exhibit 4.8
11.07. MODEL AMENDMENT IV.
The following sections of Model Amendment IV (IRS
Notice 87-2) are hereby incorporated in the
Supplemental 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, IX, X, XI AND XII.
11.08. ENTIRE PLAN.
This document incorporates in their entirety the
Plan, the SRP and the EEP 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, the SRP or the EEP, 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 200
Exhibit 4.8
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 effective this 21st day of
December, 1994.
Cone Mills Corporation
By: /s/ Terry L. Weatherford
Title: Secretary
FORM 10-K Page 201
EXHIBIT 4.9
CONE MILLS CORPORATION 1983 ESOP
AS AMENDED AND RESTATED
DECEMBER 1, 1994
<PAGE>
FORM 10-K Page 202
EXHIBIT 4.9
TABLE OF CONTENTS Page
INTRODUCTION .........................................206-207
ARTICLE I - DEFINITIONS
Section
1.01 Account............................................208
1.02 Advisory Committee.................................208
1.03 Affiliate..........................................208
1.04 Alternate Payee....................................208
1.05 Annual Additions...................................208
1.06 Approved Leave.................................208-209
1.07 Beneficiary or Beneficiaries.......................209
1.08 Board of Directors.................................209
1.09 Break in Service...................................209
1.10 Code...............................................209
1.11 Company or Cone....................................209
1.12 Company Contributions..............................210
1.13 Compensation.......................................210
1.14 Computation Period.................................210
1.15 Continuous Service.................................211
1.16 Eligible Employee..................................211
1.17 Employee.......................................211-212
1.18 Employer...........................................212
1.19 Employment Commencement Date.......................212
1.20 ERISA..............................................212
1.20A ESOP A Account.....................................212
1.20B ESOP B Account.................................212-213
1.21 Forfeiture.........................................213
1.22 Hour of Service................................213-215
1.23 Investment Committee...............................215
1.24 Investment Earnings................................215
1.25 Investment Manager.................................215
1.26 Member.............................................215
1.27 Money-Purchase Pension Account.....................215
1.28 Money-Purchase Pension Contribution................215
1.29 Period of Severance................................216
1.30 Plan...............................................216
1.31 Plan Year..........................................216
1.32 Rule of Parity Years...............................216
1.33 Severance from Service Date....................216-217
1.34 Spouse or Surviving Spouse.........................217
1.35 SRA................................................217
1.36 Special Retirement Account.........................217
1.37 Stock-Bonus Account................................217
1.38 Stock-Bonus Contributions..........................217
1.39 Trust and Trust Fund...............................218
<PAGE>
FORM 10-K Page 203
EXHIBIT 4.9
TABLE OF CONTENTS Page
1.40 Trust Agreement....................................218
1.41 Trustee............................................218
1.42 Valuation Date.....................................218
1.43 Year of Service................................218-220
ARTICLE II - PARTICIPATION
Section
2.01 Member.............................................221
2.02 Conditions of Participation....................221-222
2.03 Employment and Eligibility Status Changes..........222
2.04 Participation Upon Reemployment................222-223
ARTICLE III - CONTRIBUTIONS
Section
3.01 Stock-Bonus Contributions......................... 224
3.02 Money-Purchase-Pension Contributions.......... 224-225
3.03 Time of Payment of Company Contributions...........225
3.04 Return of Contributions if Deduction Disallowed....225
3.05 Mistake-of-Fact Contributions......................226
3.06 Cash and Noncash Contributions.....................226
ARTICLE IV - ACCOUNTS AND ALLOCATIONS
Section
4.01 Individual Accounts................................227
4.02 Stock Bonus Contribution and Forfeiture Allocation..
. . . .. . . . . . . . . . . . . . . . . . .227-228
4.03 Money-Purchase-Pension Contribution Allocation.228-229
4.04 Allocation of Investment Earnings..................229
4.05 Maximum Annual Additions.......................229-236
4.06 Adjustments for Excessive Annual Additions.....236-237
4.07 Determination of Top Heavy Status..............237-243
4.08 Top Heavy Requirements.........................243-245
ARTICLE V - VESTING
Section
5.01 Vested Accounts................................246-247
5.02 Determination of Years of Service..................247
5.03 Forfeitures........................................247
<PAGE>
FORM 10-K Page 204
EXHIBIT 4.9
TABLE OF CONTENTS Page
ARTICLE VI - DISTRIBUTION OF BENEFITS
Section
6.01 Claim Procedure....................................248
6.02 Review of Claims...............................248-249
6.03 Distribution Definitions.......................249-251
6.04 Lifetime Distributions.........................251-253
6.04-A Transfers to Defined Benefit Plans............... 253
6.04-B Normal Form of Benefit........................254-255
6.04-C Other Forms of Benefit........................255-258
6.05 Death Benefits.................................258-261
6.06 Commencement of Benefits.......................261-262
6.07 Special Distribution Provisions................262-266
6.08 Limitation on Assignment; Qualified Domestic
Relations Order.............................266-267
6.09 Withholding of Benefits............................267
6.10 Withholding of Taxes...............................267
6.11 Eligible Rollover Distributions................267-268
6.12 Legal Disability of Member or Beneficiary......268-269
ARTICLE VII - TRUST FUND AND ADMINISTRATION OF THE PLAN
Section
7.01 Named Fiduciaries and Allocation of Responsibility..
................................................270-271
7.02 Duties and Responsibilities.........................271
7.03 Trust Fund......................................271-272
7.04 Enforceable Rights..................................272
7.05 Impossibility of Diversion..........................272
7.06 Advisory Committee and Other Committees.............272
7.07 Officers, Quorums, Expenses.........................273
7.08 Duties of Investment Manager....................273-274
7.09 Information to Investment Manager...................274
7.10 Notice to Trustee...................................274
7.11 Duties of Advisory Committee........................274
7.12 Notice of Payments Due..............................274
7.13 Records and Reports.................................275
7.14 Exoneration of Advisory Committee...................275
7.15 Errors and Omissions............................275-276
7.16 Fees and Expenses...................................276
7.17 Voting of Shares....................................276
7.18 Certification of Directions from Members........276-277
<PAGE>
FORM 10-K Page 205
EXHIBIT 4.9
TABLE OF CONTENTS Page
ARTICLE VIII - AMENDMENT, TERMINATION AND MERGER
Section
8.01 Amendment.......................................278-279
8.02 Termination.....................................279-280
8.03 Discontinuance of Contributions.....................280
8.04 Plan Merger or Asset Transfer...................280-281
8.05 Continuation of the Plan............................281
ARTICLE IX - MULTIPLE COMPANIES INCLUDED
Section
9.01 Plan Sponsor and Other Employers....................282
9.02 Method of Participation.............................282
9.03 Withdrawal by Employer..........................282-283
9.04 Tax Year............................................283
ARTICLE X - GENERAL
Section
10.01 Plan Creates No Separate Rights.................... 284
10.02 Delegation of Authority.............................284
10.03 Limitation of Liability.........................284-285
10.04 Legal Action....................................285-286
10.05 Benefits Supported Only By Trust....................286
10.06 Discrimination......................................286
10.07 Model Amendment III.................................286
10.08 Entire Plan.........................................286
SIGNATURE PAGE.............................................287
<PAGE>
FORM 10-K Page 206
EXHIBIT 4.9
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 plans.
Benefits of participants in each of the merged plans and their
rights and responsibilities were not affected by the merger.
<PAGE>
FORM 10-K Page 207
EXHIBIT 4.9
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.
Effective December 1, 1994, the Plan was amended to
incorporate certain technical changes required by the Code and
regulations thereunder and to clarify certain provisions of
the Plan.
This Plan has been amended and restated to incorporate all
amendments that became effective on or before December 1,
1994. 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
December 1, 1994, 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 208
EXHIBIT 4.9
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.
<PAGE>
FORM 10-K Page 209
EXHIBIT 4.9
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 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.
<PAGE>
FORM 10-K Page 210
EXHIBIT 4.9
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.
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.
<PAGE>
FORM 10-K Page 211
EXHIBIT 4.9
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, 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 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 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
<PAGE>
FORM 10-K Page 212
EXHIBIT 4.9
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.
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
<PAGE>
FORM 10-K Page 213
EXHIBIT 4.9
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.
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.
<PAGE>
FORM 10-K Page 214
EXHIBIT 4.9
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 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 215
EXHIBIT 4.9
(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 216
EXHIBIT 4.9
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
<PAGE>
FORM 10-K Page 217
EXHIBIT 4.9
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; 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.
<PAGE>
FORM 10-K Page 218
EXHIBIT 4.9
1.39 Trust and Trust Fund refers to the Trust Fund
established for this Plan and the Trust Agreement
executed under this Plan.
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.
<PAGE>
FORM 10-K Page 219
EXHIBIT 4.9
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 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 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 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,
<PAGE>
FORM 10-K Page 220
EXHIBIT 4.9
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 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 221
EXHIBIT 4.9
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.
<PAGE>
FORM 10-K Page 222
EXHIBIT 4.9
(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 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.
<PAGE>
FORM 10-K Page 223
EXHIBIT 4.9
(b) A Member or Eligible Employee who terminates
employment and whose prior Years of Service are all
disregarded as Rule of Parity Years is 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 224
EXHIBIT 4.9
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.
<PAGE>
FORM 10-K Page 225
EXHIBIT 4.9
(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 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.
<PAGE>
FORM 10-K Page 226
EXHIBIT 4.9
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.
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 227
EXHIBIT 4.9
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 after
January 1, 1990, as determined pursuant to
<PAGE>
FORM 10-K Page 228
EXHIBIT 4.9
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), will be reduced
by the amount of any Employer contribution on his
behalf for such Plan Year to any qualified plan
<PAGE>
FORM 10-K Page 229
EXHIBIT 4.9
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."
(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
<PAGE>
FORM 10-K Page 230
EXHIBIT 4.9
"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 Section
419A(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 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
<PAGE>
FORM 10-K Page 231
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 232
EXHIBIT 4.9
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 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."
<PAGE>
FORM 10-K Page 234
EXHIBIT 4.9
(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 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
<PAGE>
FORM 10-K Page 234
EXHIBIT 4.9
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 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.
<PAGE>
FORM 10-K Page 235
EXHIBIT 4.9
(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 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
<PAGE>
FORM 10-K Page 236
EXHIBIT 4.9
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.
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
<PAGE>
10-K Page 237
EXHIBIT 4.9
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 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 FORM
<PAGE>
FORM 10-K Page 238
EXHIBIT 4.9
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 Determina-
tion 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 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
<PAGE>
FORM 10-K Page 239
EXHIBIT 4.9
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.
Notwith-standing 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.
(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.
<PAGE>
FORM 10-K Page 240
EXHIBIT 4.9
(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 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.
<PAGE>
FORM 10-K Page 241
EXHIBIT 4.9
(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 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
<PAGE>
FORM 10-K Page 242
EXHIBIT 4.9
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.
(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,
<PAGE>
FORM 10-K Page 243
EXHIBIT 4.9
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 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 contribu-
tions 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
<PAGE>
FORM 10-K Page 244
EXHIBIT 4.9
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 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. 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 the Top
Heavy Group, the required minimum contribution for
each Top-Heavy Plan Year shall be satisfied by the
minimum benefit under the defined benefit plan. For
Employees who do not participate in this Plan but
who participate in another plan of the Top-Heavy
Group, the top-heavy minimum accrued benefit or
contribution shall be satisfied by providing the
minimum accrued benefit or contribution under that
plan. If the Employer maintains another qualified
plan that provides a minimum benefit or
contribution, then in no event shall the minimum
benefit or contribution provided under this Plan,
when combined with the benefit or contribution
provided by the other plan, exceed the amount
required by Code Section 416(c).
(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:
Vested Forfeited
Years of Service Percentage Percentage
Less than 3 0% 100%
3 or more 100% 0%
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 determin-
ing 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
<PAGE>
FORM 10-K Page 245
EXHIBIT 4.9
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 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 246
EXHIBIT 4.9
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 other Member with an Account balance
greater than zero on December 31, 1992, become fully
<PAGE>
FORM 10-K Page 247
EXHIBIT 4.9
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 Stock Bonus
Accounts and Forfeitures from Money-Purchase-Pension
Accounts shall be reallocated only to
Money-Purchase-Pension Accounts.
<PAGE>
FORM 10-K Page 248
EXHIBIT 4.9
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
<PAGE>
FORM 10-K Page 249
EXHIBIT 4.9
be furnished to the claimant within the appropriate time
described in this Section 6.02.
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 the cost of
purchasing from Prudential Insurance Company of
America (or another legal reserve life insurance
company selected by the Advisory Committee for this
purpose) an annuity that is payable under the method
of payment elected by the Member under the defined
benefit plan, commencing at the time elected by the
Member or as otherwise determined in accordance with
the defined benefit plan. The cost of purchasing an
annuity shall be determined on a unisex basis and
shall include all fees and expenses that would be
charged by the insurance company in connection with
<PAGE>
FORM 10-K Page 250
EXHIBIT 4.9
the issuance of the annuity. 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 251
EXHIBIT 4.9
(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 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
<PAGE>
FORM 10-K Page 252
EXHIBIT 4.9
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
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
<PAGE>
FORM 10-K Page 253
EXHIBIT 4.9
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.
(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.
<PAGE>
FORM 10-K Page 254
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 255
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 256
EXHIBIT 4.9
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.
A monthly installment distribution method may be
elected only in accordance with the special
distribution provisions set forth in Plan Section
6.07.
(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
incorpora-
tion. 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
<PAGE>
FORM 10-K Page 257
EXHIBIT 4.9
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
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.
<PAGE>
FORM 10-K Page 258
EXHIBIT 4.9
(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
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).
<PAGE>
FORM 10-K Page 259
EXHIBIT 4.9
(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 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 Preretire-
ment 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
<PAGE>
FORM 10-K Page 260
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 261
EXHIBIT 4.9
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 Bene-ficiaries to submit claim,
election and tax with-holding 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 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 Plan Section 6.07, and 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
<PAGE>
FORM 10-K Page 262
EXHIBIT 4.9
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;
(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) Notwithstanding any provision in the Plan to the
contrary, the distribution of a Participant's
benefits shall be made in accordance with the
following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations
thereunder (including Regulation 1.401(a)(9)-2), the
provisions of which are incorporated herein by
reference:
(1) Except as otherwise permitted by Code Section
401(a)(9), a Participant's benefits shall be
<PAGE>
FORM 10-K Page 263
EXHIBIT 4.9
distributed to him not later than April 1st of
the calendar year in which the Participant
attains age 70-1/2 whether or not he has a
Severance from Service. Alternatively,
distributions to a Participant must begin no
later than April 1st of the calendar year in
which the Participant attains age 70-1/2 and
must be made in accordance with Treasury
Regulations over the life of the Participant or
over the lives of the Participant and a
designated Beneficiary (or over a period
certain not extending beyond the life
expectancy of the Participant or the life
expectancies of the Participant and a
designated Beneficiary).
(2) Distributions to a Participant and his
Beneficiaries shall only be made in accordance
with the incidental death benefit requirements
of Code Section 401(a)(9)(G) and the
Regulations thereunder.
(b) Notwithstanding any provision in the Plan to the
contrary, distributions upon the death of a
Participant shall be made in accordance with the
following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations
thereunder. If it is determined pursuant to
Regulations that the distribution of a Participant's
interest has begun and the Participant dies before
his entire interest has been distributed to him, the
remaining portion of such interest shall be
distributed at least as rapidly as under the method
of distribution selected pursuant to Plan Section
6.04 as of his date of death. If a Participant dies
before he has begun to receive any distributions of
his interest under the Plan or before distributions
are deemed to have begun pursuant to Treasury
Regulations, then his death benefit shall be
distributed to his Beneficiaries by December 31st of
the calendar year in which the fifth anniversary of
his date of death occurs, except as hereinafter
provided.
The 5-year distribution requirement of the preceding
paragraph shall not apply to any portion of the
deceased Participant's interest which is payable to
or for the benefit of a designated Beneficiary. In
such event, such portion may, at the election of the
<PAGE>
FORM 10-K Page 264
EXHIBIT 4.9
Participant (or the Participant's designated
Beneficiary), be distributed over a period not
extending beyond the life expectancy of such
designated Beneficiary provided such distribution
begins not later than December 31st of the calendar
year immediately following the calendar year in
which the Participant died. However, in the event
the Participant's Surviving Spouse (determined as of
the date of the Participant's death) is his
Beneficiary, the requirement that distributions
commence within one year of a Participant's death
shall not apply. In lieu thereof, the distributions
must commence on or before the later of: (1)
December 31st of the calendar year immediately
following the calendar year in which the Participant
dies; or (2) December 31st of the calendar year in
which the Participant would have attained age
70-1/2. If the Surviving Spouse dies before
distributions to such spouse begin, then the 5-year
distribution requirement of this Section shall apply
as if the Surviving Spouse was the Participant.
(c) For purposes of Section 6.07(b), the election by a
designated Beneficiary to be excepted from the
5-year distribution requirement must be made no
later than December 31st of the calendar year
following the calendar year of the Participant's
death, except that with respect to a designated
Beneficiary who is the Participant's Surviving
Spouse, the election must be made by the earlier of:
(1) December 31st of the calendar year immediately
following the calendar year in which the Participant
died or, if later, the calendar year in which the
Participant would have attained age 70-1/2; or (2)
December 31st of the calendar year which contains
the fifth anniversary of the date of the
Participant's death. An election by a designated
Beneficiary must be in writing and shall be
irrevocable as of the last day of the election
period stated herein. In the absence of an election
by the Participant or a designated Beneficiary, the
5-year distribution requirement shall apply.
(d) For purposes of this Section 6.07, the life
expectancy of a Participant and a Participant's
Surviving Spouse or designated Beneficiary may, at
the election of the Participant or the Participant's
spouse, be redetermined in accordance with
<PAGE>
FORM 10-K Page 265
EXHIBIT 4.9
Regulations. The election, once made, shall be
irrevocable. If no election is made by the time
distributions must commence, then the life
expectancy of the Participant and the Participant's
Surviving Spouse or designated Beneficiary shall not
be subject to recalculation. Life expectancy and
joint and last survivor expectancy shall be computed
using the return multiples in Tables V and VI of
Regulations 1.72-9.
(e) Notwithstanding any other provision of the 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).
<PAGE>
FORM 10-K Page 266
EXHIBIT 4.9
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
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
<PAGE>
FORM 10-K Page 267
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 268
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 269
EXHIBIT 4.9
any payment otherwise payable to be paid (i) to the
guardian of the person or property of such Member or
Beneficiary, (ii) to any 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 270
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 271
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 272
EXHIBIT 4.9
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 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.
<PAGE>
FORM 10-K Page 273
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 274
EXHIBIT 4.9
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 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.
<PAGE>
FORM 10-K Page 275
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 276
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 277
EXHIBIT 4.9
Committee are deemed to be true and accurate, and each
recipient of directions is entitled to rely conclusively
upon the directions.
<PAGE>
FORM 10-K Page 278
EXHIBIT 4.9
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 amendment. "Section 411(d)(6)
protected benefits" are benefits described in Code
Section 411(d)(6)(A), early retirement benefits and
<PAGE>
FORM 10-K Page 279
EXHIBIT 4.9
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.
(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
<PAGE>
FORM 10-K Page 280
EXHIBIT 4.9
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
nonforfeit-
able.
(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 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
<PAGE>
FORM 10-K Page 281
EXHIBIT 4.9
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 282
EXHIBIT 4.9
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
<PAGE>
FORM 10-K Page 283
EXHIBIT 4.9
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 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 284
EXHIBIT 4.9
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 Trustee
and Co-Trustee, or any person employed by an
<PAGE>
FORM 10-K Page 285
EXHIBIT 4.9
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 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
<PAGE>
FORM 10-K Page 286
EXHIBIT 4.9
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 287
EXHIBIT 4.9
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 29, 1994.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Secretary
FORM 10-K Page 288
Exhibit 4.11
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Company or its agent for registration
of transfer, exchange, or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.
Unless and until it is exchanged in whole or in part for Debentures
in definitive registered form, this Debenture may not be
transferred except as a whole by the Depositary to the nominee of
the Depositary or by a nominee of the Depositary to the
Depositary or another Depositary or by the Depositary or any such
nominee to a successor Depositary or a nominee of such successor
Depositary.
No. 1 $100,000,000
CUSIP: 206814 AA3
CONE MILLS CORPORATION
8-1/8% Debentures Due March 15, 2005
Cone Mills Corporation, a corporation duly
organized and existing under the laws of North Carolina (herein
called the "Company", which term includes any successor Person
under the Indenture hereinafter referred to), for value received,
hereby promises to pay to Cede & Co. or registered assigns, the
principal sum of ONE HUNDRED MILLION DOLLARS on March 15, 2005, and
to pay interest thereon semiannually on March 15 and September 15
of each year (each, an "Interest Payment Date"), commencing
September 15, 1995, at the rate per annum specified in the title
of this Debenture, from March 15, 1995 or the most recent Interest
Payment Date to which interest has been paid or duly provided for,
or if no interest has been paid or duly provided for on this
Debenture, from March 15, 1995, until payment of said principal sum
has been made or duly provided for. The interest so payable on any
Interest Payment Date will, subject to certain exceptions provided
in the Indenture referred to on the reverse hereof, be paid to the
Person in whose name this Debenture is registered at the close of
business on the March 1 or September 1, as the case may be, next
preceding such Interest Payment Date.
<PAGE>
FORM 10-K Page 289
Exhibit 4.11
Payment of the principal of and interest on this
Debenture will be made at the office or agency of the
Company maintained for that purpose in the Borough of
Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time
of payment is legal tender for payment of public and
private debts; provided, however, that at the option of
the Company payment of interest may be made by check
mailed to the address of the Person entitled thereto as
such address shall appear in the Security register.
Reference is hereby made to the further provisions
of this Debenture set forth on the reverse hereof. Such
further provisions shall for all purposes have the same
effect as if fully set forth at this place.
Unless the certificate of authentication hereon has
been executed by the Trustee referred to on the reverse
hereof by manual signature, this Debenture shall not be
entitled to any benefit under the Indenture or be valid
or become obligatory for any purpose.
IN WITNESS WHEREOF, Cone Mills Corporation has
caused this instrument to be duly executed under its
corporate seal.
Dated: March 15, 1995
CONE MILLS CORPORATION
By: /S/ John L. Bakane
Attest:
/S/ Terry L. Weatherford
TRUSTEE'S CERTIFICATION OF AUTHENTICATION
This is one of the Securities of the series
designated herein and referred to in the
within-mentioned Indenture.
WACHOVIA BANK OF NORTH
CAROLINA, N.A. as Trustee
By: /S/ Robert W. Seifert
Authorized Signatory
<PAGE>
FORM 10-K Page 290
Exhibit 4.11
CONE MILLS CORPORATION
8-1/8% Debentures Due March 15, 2005
This Debenture is one of a duly authorized issue of debentures,
notes, and/or other unsecured evidences ofindebtedness of the
Company (herein called the "Securities") of the series
hereinafter defined, issued or to be issued in one or more series
under an Indenture, dated as of February 14, 1995 (herein called
the "Indenture"), between the Company and Wachovia Bank of North
Carolina, N.A., as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference
is hereby made for a description of the respective rights,
limitations of rights, obligations, duties and immunities
thereunder of the Company, the Trustee and the Holders of the
Securities. The Securities may be issued in one or more series,
which different series may be issued in various aggregate
principal amounts, may mature at different times, may bear
interest (if any) at different rates, may be subject to different
redemption provisions (if any), may be subject to different
sinking, purchase or analogous funds (if any) and may otherwise
vary as in the Indenture provided. This Debenture is one of a
series designated as the 8-1/8% Debentures Due March 15, 2005 of
the Company limited in aggregate principal amount to $100,000,000
(the "Debentures").
If an Event of Default with respect to the Debentures shall
occur and be continuing, the principal of the Debentures may be
declared due and payable, in the manner and with the effect and
subject to the conditions provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of the entire indebtedness of this Debenture or certain
restrictive covenants with respect to this Debenture, in each
case upon compliance by the Company with certain conditions set
forth therein.
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the Holders of not less than a
majority in aggregate principal amount of the Securities at the
time Outstanding (as defined in the Indenture) of all series to
be affected (voting as one class), evidenced as in the Indenture
provided, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or
modifying in any manner the right of the Holders of the
Securities of each such series; provided, that no such
supplemental indenture shall (i) extend the final maturity of any
Security, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of any interest thereon, or
reduce any amount payable on redemption thereof or make the
<PAGE>
FORM 10-K Page 291
Exhibit 4.11
principal thereof (including any amount in respect of original issue
discount) or interest thereon payable in any coin or currency other
than that provided in the Securities or in accordance with the terms
thereof, or reduce the amount of the principal of an Original Issue
Discount Security that would be due and payable upon an acceleration
of the maturity thereof, or impair or affect the right of any Holder
to institute suit for the payment thereof, any right of repayment at
the option of the Holder, in each case without the consent of the
Holder of each Security so affected, or (ii) reduce the aforesaid
percentage of Securities of any series, the consent of the Holders of
which is required for any such supplemental indenture, without the
consent of the Holder of each Security so affected. It is also
provided in the Indenture that, with respect to certain defaults or
Events of Default regarding the Securities of any series, prior to any
declaration of the acceleration of the maturity of such Securities,
the Holders of a majority in aggregate principal amount of the
Securities of such series Outstanding (or, in the case of certain
defaults or Events of Default, all or certain series of the
Securities) may on behalf of the Holders of all the Securities of such
series (or all or certain series of the Securities, as the case may
be) waive any such past default or Event of Default and its
consequences. The preceding sentence shall not, however, apply to a
default in the payment of the principal of or interest on any of the
Securities. Any such consent or waiver by the Holder of this
Debenture (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such Holder and upon all future Holders
and owners of this Debenture and any Debentures which may be issued in
exchange or substitution herefor, irrespective of whether or not any
notation thereof is made upon this Debenture or such other Debentures.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the
principal of and interest on this Debenture in the manner, at the
respective times, place and rate, and in the coin or currency, herein
prescribed.
The Debentures may not be redeemed prior to maturity. As
provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Debenture is registrable in the
Security register upon surrender of this Debenture for registration of
transfer at the office or agency of the Company in any place where the
principal of and interest on this Debenture are payable, duly endorsed
by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Debentures of this series and of like tenor,
of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
<PAGE>
FORM 10-K Page 292
Exhibit 4.11
The Debentures are issuable in registered form without coupons in
denominations of $1,000 and any integral multiple thereof at the
office or agency of the Company in the Borough of Manhattan, The City
of New York, and in the manner and subject to the limitations provided
in the Indenture.
No service charge shall be made for any such registration of
transfer of exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Trustee and any authorized agent of the Company
or the Trustee may deem and treat the Person in whose name this
Debenture is registered as the owner hereof for all purposes, whether
or not this Security be overdue and notwithstanding any notation of
ownership or other writing hereon, for the purpose of receiving
payment of, or on account of, the principal hereof and, subject to the
provisions on the face hereof, interest hereon, and for all other
purposes, and neither the Company, the Trustee nor any such agent
shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement
of the Company in the Indenture or any indenture supplemental thereto
or in any Debenture, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, or any
past, present or future shareholder, officer or director, as such, of
the Company or of any successor corporation, either directly or
through the Company or any successor corporation, under any rule of
law, statute or constitutional provision or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise, all
such liability being expressly waived and released by the acceptance
hereof and as part of the consideration for the issue hereof.
All terms used in this Debenture which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
FORM 10-K Page 293
Exhibit 10.1
EMPLOYEES' RETIREMENT PLAN
OF
CONE MILLS CORPORATION
As Amended and Restated December 1, 1994
<PAGE>
FORM 10-K Page 294
Exhibit 10.1
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . 299-301
ARTICLE I. DEFINITIONS
1.01 Accredited Service. . . . . . . . . . . . . . . 302
1.02 Accrued Benefit . . . . . . . . . . . . . . 302-303
1.03 Actuarial Equivalent. . . . . . . . . . . . 304-305
1.04 Actuary . . . . . . . . . . . . . . . . . . . . 305
1.05 Affiliate . . . . . . . . . . . . . . . . . . . 305
1.06 Annuity Starting Date . . . . . . . . . . . . . 305
1.07 Approved Leave. . . . . . . . . . . . . . . 305-306
1.08 Average Monthly Compensation. . . . . . . . 306-308
1.09 Average Monthly Covered Compensation. . . . 308-309
1.10 Beneficiary . . . . . . . . . . . . . . . . . . 309
1.11 Board of Directors. . . . . . . . . . . . . . . 309
1.12 Code. . . . . . . . . . . . . . . . . . . . . . 309
1.13 Companies or Cone. . . . . . . . . . . . . . . 309
1.14 Computation Period. . . . . . . . . . . . . . . 309
1.15 Continuous Service. . . . . . . . . . . . . . . 310
1.16 Disability Leave. . . . . . . . . . . . . . . . 310
1.17 Effective Date. . . . . . . . . . . . . . . . . 310
1.18 Eligible Employee . . . . . . . . . . . . . 311-312
1.19 Employee. . . . . . . . . . . . . . . . . . . . 312
1.20 Employer. . . . . . . . . . . . . . . . . . . . 312
1.21 Employment Commencement Date. . . . . . . . . . 313
1.22 ERISA . . . . . . . . . . . . . . . . . . . . . 313
1.23 Hour(s) of Service. . . . . . . . . . . . . 313-315
1.24 Investment Manager. . . . . . . . . . . . . . . 315
1.25 Member. . . . . . . . . . . . . . . . . . . . . 315
1.26 Normal Retirement Date. . . . . . . . . . . . . 315
1.27 Offset Value. . . . . . . . . . . . . . . . 315-316
1.28 One-Year Break in Service . . . . . . . . . . . 316
1.29 Participation Date. . . . . . . . . . . . . 316-317
1.30 Part-Time Employee. . . . . . . . . . . . . . . 317
1.31 Pension Committee . . . . . . . . . . . . . . . 317
1.32 Period of Service . . . . . . . . . . . . . . . 317
1.33 Period of Severance . . . . . . . . . . . . . . 317
1.34 Plan. . . . . . . . . . . . . . . . . . . . . . 317
1.35 Plan Year . . . . . . . . . . . . . . . . . . . 317
1.36 Retirement, Retired . . . . . . . . . . . . . . 317
1.37 Rule of Parity Years. . . . . . . . . . . . . . 318
1.38 Severance from Service Date . . . . . . . . . . 318
1.39 Spouse or Surviving Spouse. . . . . . . . . . . 319
<PAGE>
FORM 10-K Page 295
Exhibit 10.1
Page
1.40 Suspended Member. . . . . . . . . . . . . . . . 319
1.41 Termination of Employment . . . . . . . . . . . 319
1.42 Total Years of Service. . . . . . . . . . . 319-320
1.43 Transfer Contribution . . . . . . . . . . . . . 320
1.44 Trust and Trust Fund. . . . . . . . . . . . . . 320
1.45 Trust Agreement . . . . . . . . . . . . . . . . 320
1.46 Trustee . . . . . . . . . . . . . . . . . . . . 320
1.47 Year of Service . . . . . . . . . . . . . . 320-322
ARTICLE II. MEMBERSHIP IN PLAN
2.01 Automatic Membership. . . . . . . . . . . . . . 323
2.02 Irrevocable Membership. . . . . . . . . . . . . 323
2.03 Suspended Membership. . . . . . . . . . . . . . 323
2.04 Termination of Membership . . . . . . . . . . . 323
ARTICLE III. FUNDING POLICY AND CONTRIBUTIONS
3.01 Members . . . . . . . . . . . . . . . . . . . . 324
3.02 Company Contributions . . . . . . . . . . . . . 324
3.03 Contribution Conditioned on Deductibility . . . 324
3.04 Transfer Contributions. . . . . . . . . . . 324-325
ARTICLE IV. RETIREMENT
4.01 Normal Retirement . . . . . . . . . . . . . . . 326
4.02 Early Retirement. . . . . . . . . . . . . . . . 326
4.03 Notice to Pension Committee . . . . . . . . . . 326
4.04 Postponed Retirement. . . . . . . . . . . . . . 326
4.05 Date of First Payment . . . . . . . . . . . . . 326
4.06 Date of Last Payment. . . . . . . . . . . . . . 326
4.07 Re-employment of Retired Member . . . . . . 327-328
ARTICLE V. METHODS OF PAYMENT
5.01 Method 1. Life Income with 120 Months Certain. 329
5.02 Method 2. Life Income with no Death Benefit. . 329
5.03 Method 3. Qualified Joint and Survivor Annuity . .
. . . . . . . . . . . . . . . . . . . . . 329-330
5.04 Group Annuity Contract. . . . . . . . . . . . . 330
5.05 Special Distribution Provisions . . . . . . 330-331
5.06 Normal Form of Benefit. . . . . . . . . . . 332-333
5.07 Eligible Rollover Distributions . . . . . . 333-335
5.08 Commencement of Benefits. . . . . . . . . . . . 335
5.09 Qualified Domestic Relations Order. . . . . 335-336
<PAGE>
FORM 10-K Page 296
Exhibit 10.1
ARTICLE VI. COMPUTATION OF PENSION Page
6.01 Retirement Benefits . . . . . . . . . . . . . 337-339
6.02 Early Retirement. . . . . . . . . . . . . . . 339-340
6.03 Disability Retirement . . . . . . . . . . . . . . 340
6.04 Maximum Pension . . . . . . . . . . . . . . . 340-345
6.05 Determination of Top-Heavy Status . . . . . . 345-346
6.06 Top-Heavy Definitions . . . . . . . . . . . . 346-352
6.07 Top-Heavy Requirements. . . . . . . . . . . . 352-355
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 . . . . . . . . . 356
7.02 Termination of Employment with at Least Five
Years of Service. . . . . . . . . . . . . . . 356-357
7.03 Accrued Benefit of Reemployed Members . . . . . . 357
7.04 Involuntary Termination of Employment . . . . 357-358
ARTICLE VIII. BENEFITS PAYABLE BY REASON OF DEATH
8.01 Death of a Member without a Surviving Spouse. 359-360
8.02 Death of a Member with a Surviving Spouse . . 360-361
8.03 Qualified Preretirement Survivor Annuity. . . 361-363
8.04 Designation of Beneficiaries. . . . . . . . . 363-364
8.05 Legal Disability of Beneficiary . . . . . . . . . 364
ARTICLE IX. TRUST FUND AND ADMINISTRATION OF THE PLAN
9.01 Named Fiduciaries & Allocation of
Responsibility. . . . . . . . . . . . . . . . 365-366
9.02 Duties and Responsibilities . . . . . . . . . . . 366
9.03 Trust Fund. . . . . . . . . . . . . . . . . . 366-367
9.04 Enforceable Rights. . . . . . . . . . . . . . . . 367
9.05 Impossibility of Diversion. . . . . . . . . . . . 367
9.06 Pension Committee . . . . . . . . . . . . . . . . 367
9.07 Officers, Quorums, Expenses . . . . . . . . . 367-368
9.08 Investment Power. . . . . . . . . . . . . . . . . 368
9.09 Duties of Investment Manager. . . . . . . . . . . 368
9.10 Information to Investment Manager . . . . . . . . 369
9.11 Notice to Trustee . . . . . . . . . . . . . . . . 369
9.12 Duties of the Pension Committee . . . . . . . . . 369
9.13 Notice of Payments Due. . . . . . . . . . . . . . 369
9.14 Records and Reports . . . . . . . . . . . . . 369-370
9.15 Exoneration of Pension Committee. . . . . . . . . 370
<PAGE>
FORM 10-K Page 297
Exhibit 10.1 Page
9.16 Errors and Omissions. . . . . . . . . . . . . 370-371
9.17 Fees and Expenses . . . . . . . . . . . . . . . . 371
9.18 Voting and Tendering of Shares. . . . . . . . . . 371
9.19 Claim Procedure . . . . . . . . . . . . . . . . . 371
ARTICLE X. AMENDMENT, TERMINATION AND MERGER
10.01 Amendment . . . . . . . . . . . . . . . . . 372-373
10.02 Termination . . . . . . . . . . . . . . . . . 373-374
10.03 Limitation of Benefits on Plan Termination. . 374-375
10.04 Discontinuance of Contributions . . . . . . . . . 375
10.05 Plan Merger or Asset Transfer . . . . . . . . 375-376
10.06 Continuation of the Plan. . . . . . . . . . . . . 376
ARTICLE XI. MULTIPLE COMPANIES INCLUDED
11.01 Plan Sponsor and Other Employers. . . . . . . . . 377
11.02 Method of Participation . . . . . . . . . . . . . 377
11.03 Withdrawal by Employer. . . . . . . . . . . . 377-378
11.04 Tax Year. . . . . . . . . . . . . . . . . . . . . 378
ARTICLE XII. GENERAL
12.01 Plan Creates No Separate Rights . . . . . . . . . 379
12.02 Delegation of Authority . . . . . . . . . . . . . 379
12.03 Limitation of Liability . . . . . . . . . . . 379-380
12.04 Legal Action. . . . . . . . . . . . . . . . . . . 381
12.05 Benefits Supported Only by Trust. . . . . . . . . 381
12.06 Discrimination. . . . . . . . . . . . . . . . . . 381
12.07 Model Amendment IV. . . . . . . . . . . . . . . . 381
12.08 Entire Plan . . . . . . . . . . . . . . . . . . . 381
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . 382
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . 383-385
Table I Early Retirement Factors Plan Percentages For
Early Payment of Method I: Life with 120 Months
Certain
Table II Method 2: Life Income Only
Table III Joint and 50PC Survivor Option Factors
Table IV Actuarial Equivalent Factors to convert a monthly
Life Annuity with 120 payments certain Payable
at age 65
Table V Factors to Convert a 10 Year Certain and Life
Annuity to a Straight Life Annuity at Ages Shown
<PAGE>
FORM 10-K Page 298
Exhibit 10.1
Table VI 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
<PAGE>
FORM 10-K Page 299
Exhibit 10.1
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 300
Exhibit 10.1
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 301
Exhibit 10.1
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. The Spin-Off Plan was
amended and restated to incorporate all amendments that became
effective through September 1, 1993.
This Spin-Off Plan was amended November 10, 1994, to add
a provision on the eligibility of employees of a Company of
which certain assets were acquired. Effective December 1,
1994, the Spin-Off Plan was amended to incorporate certain
technical changes required by the Code and regulations
thereunder and to clarify certain provisions of the Plan and
was restated to incorporate all amendments that became
effective through December 1, 1994. 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 302
Exhibit 10.1
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 first
became 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)
<PAGE>
FORM 10-K Page 303
Exhibit 10.1
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 amount computed for such
Member under The numerator of such fraction shall
be the total number of months of his active
participation in the Plan 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. 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.
<PAGE>
FORM 10-K Page 304
Exhibit 10.1
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) 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, that could then be
purchased from Prudential Insurance Company of
America (or another legal reserve life
insurance company selected by the Pension
Committee for this purpose) 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, 1993, his total Account balance in the
Cone Mills Corporation 1983 ESOP) were used to
purchase such an annuity (at unisex rates) and
to pay all fees and expenses that would be
charged by the insurance company in connection
with the issuance thereof.
(b) 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
Prudential Insurance Company of America (or
another legal reserve life insurance company
selected by the Pension Committee for this
purpose) if the amount of the Transfer
Contribution were used to purchase such an
annuity (at unisex rates) and to pay all fees
and expenses that would be charged by the
insurance company in connection with the
issuance thereof.
(c) The present value of an Accrued Benefit shall
be calculated by using the UP-1984 Mortality
Table and:
<PAGE>
FORM 10-K Page 305
Exhibit 10.1
(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 (ii) be less then
$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.
1.07 Approved Leave means an individual's nonworking
period granted by an Employer for reasons related
to:
<PAGE>
FORM 10-K Page 306
Exhibit 10.1
(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
<PAGE>
FORM 10-K Page 307
Exhibit 10.1
annual compensation of each Member taken into
account under the Plan for any Plan Year shall
not exceed $200,000 ($150,000, effective for
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;
<PAGE>
FORM 10-K Page 308
Exhibit 10.1
(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,
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
<PAGE>
FORM 10-K Page 309
Exhibit 10.1
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
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.
<PAGE>
FORM 10-K Page 310
Exhibit 10.1
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,
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.
<PAGE>
FORM 10-K Page 311
Exhibit 10.1
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
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 1.18 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.
(f) Solely for the purpose of determining
eligibility to participate in this Plan, any
former employee of Golding Industries, Inc.
who became an Employee pursuant to the Asset
Purchase Agreement referred to in this Letter
<PAGE>
FORM 10-K Page 312
Exhibit 10.1
of Intent dated October 14, 1994, between
Golding Industries, Inc. and Cone Mills
Corporation shall receive credit for all
service with which he was credited for
eligibility purposes under the Golding
Industries, Inc. Salaried Retirement Plan
immediately prior to his becoming an
Employee.In no event shall any service with
Golding Industries, Inc. constitute Accredited
Service or be included in determining an
Employee's Years of Service for purposes of
vesting.
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
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.
<PAGE>
FORM 10-K Page 313
Exhibit 10.1
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
<PAGE>
FORM 10-K Page 314
Exhibit 10.1
related expenses incurred.
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.
<PAGE>
FORM 10-K Page 315
Exhibit 10.1
(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.
(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.
<PAGE>
FORM 10-K Page 316
Exhibit 10.1
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 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
<PAGE>
FORM 10-K Page 317
Exhibit 10.1
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.
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.
<PAGE>
FORM 10-K Page 318
Exhibit 10.1
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.
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.
<PAGE>
FORM 10-K Page 319
Exhibit 10.1
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
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.
<PAGE>
FORM 10-K Page 320
Exhibit 10.1
(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.
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
<PAGE>
FORM 10-K Page 321
Exhibit 10.1
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
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
<PAGE>
FORM 10-K Page 322
Exhibit 10.1
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-
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 323
Exhibit 10.1
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 324
Exhibit 10.1
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
<PAGE>
FORM 10-K Page 325
Exhibit 10.1
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 326
Exhibit 10.1
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.
<PAGE>
FORM 10-K Page 327
Exhibit 10.1
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
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
<PAGE>
FORM 10-K Page 328
Exhibit 10.1
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 329
Exhibit 10.1
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
<PAGE>
FORM 10-K Page 330
Exhibit 10.1
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
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) Notwithstanding any provision in the Plan to
the contrary, the distribution of a
Participant's benefits shall be made in
accordance with the following requirements and
shall otherwise comply with Code Section
401(a)(9) and the Regulations thereunder
(including Regulation 1.401(a)(9)-2), the
provisions of which are incorporated herein by
reference:
(1) Except as otherwise permitted by Code
Section 401(q)(9), a Participant's
benefits shall be distributed to him not
later than April 1st of the calendar year
in which the Participant attains age 70-
1/2 whether or not he has a Severance
form Service. Alternatively,
distributions to a Participant must begin
no later than April 1st of the calendar
year in which the Participant attains age
70-1/2 and must be made in accordance
with Treasury Regulations over the life
of the Participant or over the lives of
the Participant and a designated
Beneficiary (or over a period certain not
extending beyond the life expectancy of
the Participant or life expectancies of
the Participant and a designated
Beneficiary).
<PAGE>
FORM 10-K Page 331
Exhibit 10.1
(2) Distributions to a Participant and his
Beneficiaries shall only be made in
accordance with the incidental death
benefit requirements of Code Section
401(a)(9)(G) and the Regulations
thereunder.
(b) Notwithstanding any provision in the Plan to
the contrary, any distributions upon the death
of a Participant shall be made in accordance
with the following requirements and shall
otherwise comply with Code Section 401(a)(9)
and the Regulations thereunder. If it is
determined pursuant to Regulations that the
distribution of a Participant's interest has
begun and the Participant dies before his
entire interest has been distributed to him,
the remaining portion of such interest shall
be distributed at least as rapidly as under
the method of distribution selected pursuant
to Article V as of his date of death. If a
Participant dies before he has begun to
receive any distributions of his interest
under the Plan or before distributions are
deemed to have begun pursuant to Treasury
Regulations, then any death benefit payable to
a designated Beneficiary must be distributed
over a period not extending beyond the life
expectancy of such designated Beneficiary
provided such distribution begins not later
than December 31st of the calendar year
immediately following the calendar year in
which the Participant died. If the death
benefit is payable in the form of a Qualified
Preretirement Survivor Annuity, then
distributions thereunder must commence on or
before the later of: (1) December 31st of the
calendar year immediately following the
calendar year in which the Participant dies;
or (2) December 31st of the calendar year in
which the Participant would have attained age
70-1/2.
(c) For purposes of this Section 5.05, the life
expectancy of a Participant and a
Participant's Surviving Spouse or designated
Beneficiary shall be computed using the
return multiples in Tables V and VI of
Regulations 1.72-9.
<PAGE>
FORM 10-K Page 332
Exhibit 10.1
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)
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.
<PAGE>
FORM 10-K Page 333
Exhibit 10.1
(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 334
Exhibit 10.1
(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
<PAGE>
FORM 10-K Page 335
Exhibit 10.1
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.
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 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).
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
<PAGE>
FORM 10-K Page 336
Exhibit 10.1
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
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 337
Exhibit 10.1
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:
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%
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
<PAGE>
FORM 10-K Page 338
Exhibit 10.1
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.
(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
<PAGE>
FORM 10-K Page 339
Exhibit 10.1
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.
(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
<PAGE>
FORM 10-K Page 340
Exhibit 10.1
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
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
<PAGE>
FORM 10-K Page 341
Exhibit 10.1
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
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.
<PAGE>
FORM 10-K Page 342
Exhibit 10.1
(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
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.
<PAGE>
FORM 10-K Page 343
Exhibit 10.1
(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.
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
<PAGE>
FORM 10-K Page 344
Exhibit 10.1
(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."
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
<PAGE>
FORM 10-K Page 345
Exhibit 10.1
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.
(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.
<PAGE>
FORM 10-K Page 346
Exhibit 10.1
(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 Member
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 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;
<PAGE>
FORM 10-K Page 347
Exhibit 10.1
(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
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
<PAGE>
FORM 10-K Page 348
Exhibit 10.1
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
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
<PAGE>
FORM 10-K Page 349
Exhibit 10.1
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.
<PAGE>
FORM 10-K Page 350
Exhibit 10.1
(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:
(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.
<PAGE>
FORM 10-K Page 351
Exhibit 10.1
(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
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
<PAGE>
FORM 10-K Page 352
Exhibit 10.1
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 the
group, exceeds sixty percent (60%) of a
similar sum determined for all Members.
6.07 Top Heavy Requirements.
(a) Minimum Benefits for Top-Heavy Plans. If the
Plan is or becomes a Top-Heavy Plan, then,
notwithstanding the provisions of Section
6.01, the minimum accrued benefit expressed as
a single life annuity beginning at Normal
Retirement Age for each Non-Key Employee who
is a Participant shall be the lesser of:
(1) two percent of his Top-Heavy Average
Compensation times Top-Heavy Years of
Service, or
(2) 20% of his Top-Heavy Average
Compensation.
If the form of benefit is other than a
single life annuity, the minimum benefit must
be an amount that is the Actuarial Equivalent
of the above minimum benefit. If the benefit
commences at a date other than at Normal
Retirement Age, the Participant will receive
an amount that is at least the Actuarial
Equivalent of the single life annuity benefit
commencing at Normal Retirement Age. Each
Non-Key Employee who is a Participant shall
receive this minimum benefit regardless of the
Non-Key Employee's level of Compensation and
regardless of whether the Non-Key Employee is
employed on a specified date.
<PAGE>
FORM 10-K Page 353
Exhibit 10.1
In the case of a Top-Heavy Group
consisting of both defined benefit and defined
contribution plans, the required minimum
accrued benefit or Employer contribution for
each Top-Heavy Year of Service for Employees
participating in each type of Plan shall be
satisfied by the minimum accrued benefit under
this Plan. The required minimum accrued
benefit or Employer contribution for each Top-
Heavy Year of Service for Employees who do not
participate in this Plan, but who do
participate in another plan of the Top-Heavy
Group shall be satisfied by providing the
minimum accrued benefit or contribution under
that plan. If the Employer maintains another
qualified plan which provides a minimum
benefit or contribution, then in no event
shall the minimum benefit or contribution
provided under this Plan, when combined with
the benefit or contribution provided by the
other plan, exceed the amount required by
Section 415(c) of the Code.
For purposes of this Section 6.07,
Compensation shall mean compensation as
defined in Section 414 (q)(7) the average
Compensation paid during the consecutive Top-
Heavy Years of Service, not to exceed five
years, which produces the highest average
Compensation. In determining the Top-Heavy
Average Compensation, years during which the
Employee did not earn a Year of Service shall
be disregarded. Top-Heavy Years of Service
shall mean all Years of Service, excluding any
Year of Service after which the Plan was not a
Top-Heavy Plan for the Plan Year ending during
such Year of Service and further excluding any
Year of Service completed in a Plan Year
beginning before January 1, 1984.
(b) Minimum Vesting Requirements. If the Plan is
or becomes a Top-Heavy Plan, as defined in
Section 6.05, then, notwithstanding the
provisions of Section 7.01, a Participant
shall be vested in the applicable percentage
of his Accrued Benefit under the Plan as
follows:
<PAGE>
FORM 10-K Page 354
Exhibit 10.1
Number of Years of Service Percentage
Less than 3 0%
3 or more 100%
Years of Service for the purposes of
vesting in a Top-Heavy Plan shall include all
Years of Service, including years prior to
January 1, 1984, and years during which the
Plan is not considered to be a Top-Heavy Plan.
Vesting pursuant to this Section 6.07(b) shall
apply to each Participant's entire Accrued
Benefit. However, when the Plan becomes a
Top-Heavy Plan, the Accrued Benefit of any
Employee who does not complete at least one
Hour of Service after the Plan becomes Top-
Heavy is not required to be subject to the
minimum vesting schedule for Top-Heavy Plans.
When the Plan ceases to be a Top-Heavy
Plan, the vesting schedule shall revert to the
schedule set forth in Section 7.01 with
respect to future benefit accruals. However,
each Participant with at least three Years of
Service shall have his nonforfeitable
percentage computed under the Plan according
to the Top-Heavy vesting schedule.
For purposes of the above paragraph, a
Participant shall be considered to have
completed three Years of Service if he has
completed 1,000 Hours of Service in each of
three Plan Years, whether or not consecutive,
ending with or prior to the last day of the
election period described below.
(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.
<PAGE>
FORM 10-K Page 355
Exhibit 10.1
(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 356
Exhibit 10.1
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 Accrued 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
<PAGE>
FORM 10-K Page 357
Exhibit 10.1
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
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
<PAGE>
FORM 10-K Page 358
Exhibit 10.1
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
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 359
Exhibit 10.1
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
<PAGE>
FORM 10-K Page 360
Exhibit 10.1
Order, any pension benefit payable under the
Plan will be paid in accordance with the
method of payment elected under Article V.
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.
<PAGE>
FORM 10-K Page 361
Exhibit 10.1
The Pension Committee must provide each
Member eligible to make an election under this
Section 8.02(c) with a general written
explanation of (i) the terms and conditions of
the Qualified Preretirement Survivor Annuity
payable under Plan Section 8.03; (ii) the
Member's right to make, and the effect of, an
election not to receive survivor benefits in
that form; (iii) any required spousal consent;
and (iv) the right to make, and the effect of,
a revocation of an election under this Section
8.02(c). The explanation must be provided to
the Member within a reasonable period after he
becomes eligible to make an election under
this Section 8.02(c). A Member's election not
to take the Qualified Preretirement Survivor
Annuity provided in Section 8.03 is not
effective 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.
(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.
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:
<PAGE>
FORM 10-K Page 362
Exhibit 10.1
(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 363
Exhibit 10.1
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 364
Exhibit 10.1
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 365
Exhibit 10.1
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
<PAGE>
FORM 10-K Page 366
Exhibit 10.1
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
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
<PAGE>
FORM 10-K Page 367
Exhibit 10.1
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.
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
<PAGE>
FORM 10-K Page 368
Exhibit 10.1
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
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.
<PAGE>
FORM 10-K Page 369
Exhibit 10.1
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
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
<PAGE>
FORM 10-K Page 370
Exhibit 10.1
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 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 adminis-
tration, and if the Pension Committee determines
<PAGE>
FORM 10-K Page 371
Exhibit 10.1
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
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 372
Exhibit 10.1
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
<PAGE>
FORM 10-K Page 373
Exhibit 10.1
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 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
<PAGE>
FORM 10-K Page 374
Exhibit 10.1
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
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:
<PAGE>
FORM 10-K Page 375
Exhibit 10.1
(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
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
<PAGE>
FORM 10-K Page 376
Exhibit 10.1
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.
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 377
Exhibit 10.1
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
<PAGE>
FORM 10-K Page 378
Exhibit 10.1
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
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 379
Exhibit 10.1
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.
<PAGE>
FORM 10-K Page 380
Exhibit 10.1
(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.
(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.
<PAGE>
FORM 10-K Page 381
Exhibit 10.1
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.
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 382
Exhibit 10.1
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 this 21st day of December,
1994.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Secretary
<PAGE>
FORM 10-K Page 383
Exhibit 10.1
APPENDIX A
<PAGE>
FORM 10-K Page 384
Exhibit 10.1
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.
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 o the new Annuity
Starting Date.
v. Interest: 5% per annum
<PAGE>
FORM 10-K Page 385
Exhibit 10.1
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: 9.5% per annum
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 386
Exhibit 10.1 Table I
<TABLE>
<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 Benefit Attained Age Plus Additional Months As Indicated
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 387
Exhibit 10.1
Table II
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARLY RETIREMENT FACTORS
PLAN PERCENTAGES FOR EARLY PAYMENT OF METHOD 2:
LIFE INCOME ONLY
Attained Benefit Attained Age Plus Additional Months As Indicated
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 388
Exhibit 10.1 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 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>
<PAGE>
FORM 10-K Page 389
Exhibit 10.1 Table III
(Continued)
<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 390
Exhibit 10.1 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 Benefit Attained Age Plus Additional Months As Indicated
Age % 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 391
Exhibit 10.1 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 Benefit Attained Age Plus Additional Months As Indicated
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 392
Exhibit 10.1 Table VI
<TABLE>
<S> <C> <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>
FORM 10-K Page 393
Exhibit 10.12
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated November 10, 1994, 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 and 1994
pursuant to Consulting Agreements dated November 19, 1992, and
December 3, 1993, respectively. The Company and Trogdon have
agreed to continue the consulting arrangement during the
period beginning January 1, 1995, and ending December 31, 1995
(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
<PAGE>
FORM 10-K Page 394
Exhibit 10.12
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, 1995, June 30, 1995, September
30, 1995, and December 31, 1995) 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.
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
<PAGE>
FORM 10-K Page 395
Exhibit 10.12
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 as of 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
FORM 10-K Page 396
Exhibit 10.15
CONE MILLS CORPORATION
Debt Securities
Underwriting Agreement
March 8, 1995
To the Representatives named
in Schedule I hereto of the
Underwriters named in
Schedule II hereto
Dear Sirs:
Cone Mills Corporation, a North Carolina corporation
(the "Company"), proposes to issue and sell to the underwriters
named in Schedule II hereto (the "Underwriters"), for whom you
are acting as representatives (the "Representatives"), the
principal amount of its debt securities identified in Schedule I
hereto (the "Securities"), to be issued under the indenture
specified in Schedule I hereto (the "Indenture") between the
Company and the Trustee identified in such Schedule (the
"Trustee"). If the firm or firms listed in Schedule II hereto
include only the firm or firms listed in Schedule I hereto, then
the terms "Underwriters" and "Representatives", as used herein,
shall each be deemed to refer to such firm or firms.
The Company has prepared and filed with the Securities
and Exchange Commission (the "Commission") in accordance with the
provisions of the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder (collectively,
the "Securities Act"), a registration statement (the file number
of which is set forth in Schedule I hereto) on Form S-3, relating
to certain debt securities (the "Shelf Securities") to be issued
from time to time by the Company. The Company also has filed
with, or proposes to file with, the Commission pursuant to Rule
424 under the Securities Act a prospectus supplement specifically
relating to the Securities. The registration statement as
amended to the date of this Agreement is hereinafter referred to
as the "Registration Statement" and the related prospectus
covering the Shelf Securities in the form first used to confirm
sales of the Securities is hereinafter referred to as the "Basic
<PAGE>
Page 397
Prospectus". The Basic Prospectus as supplemented by the
prospectus supplement specifically relating to the Securities in
the form first used to confirm sales of the Securities is
hereinafter referred to as the "Prospectus". Any reference in
this Agreement to the Registration Statement, the Basic
Prospectus, any preliminary form of Prospectus (a "preliminary
prospectus") previously filed with the Commission pursuant to
Rule 424 or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the Securities Act which were filed
under the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder (collectively,
the "Exchange Act") on or before the date of this Agreement or
the date of the Basic Prospectus, any preliminary prospectus or
the Prospectus, as the case may be; and any reference to "amend",
"amendment" or "supplement" with respect to the Registration
Statement, the Basic Prospectus, any preliminary prospectus or
the Prospectus shall be deemed to refer to and include any
documents filed under the Exchange Act after the date of this
Agreement, or the date of the Basic Prospectus, any preliminary
prospectus or the Prospectus, as the case may be, which are
deemed to be incorporated by reference therein.
For purposes of this Agreement, the joint venture known
as Parras Cone de Mexico, S.A. de C.V. (the "Joint Venture")
between Cone Mills (Mexico), S.A. de C.V. ("Cone Mexico"), a
subsidiary of the Company, and Compania Industrial de Parras,
S.A. de C.V. will be deemed a "subsidiary" of the Company.
The Company hereby agrees with the Underwriters as
follows:
1. The Company agrees to issue and sell the Securities
to the several Underwriters as hereinafter provided, and each
Underwriter, on the basis of the representations and warranties
herein contained, but subject to the conditions hereinafter
stated, agrees to purchase, severally and not jointly, from the
Company the respective principal amount of Securities set forth
opposite such Underwriter's name in Schedule II hereto at the
purchase price set forth in Schedule I hereto plus accrued
interest, if any, from the date specified in Schedule I hereto to
the date of payment and delivery.
2. The Company understands that the several
Underwriters intend (i) to make a public offering of their
respective portions of the Securities and (ii) initially to offer
the Securities upon the terms set forth in the Prospectus.
3. Payment for the Securities shall be made to the
Company or to its order by immediately available funds on the
date and at the time and place set forth in Schedule I hereto (or
at such other time and place on the same or such other date, not
later than the fifth Business Day thereafter, as you and the
Company may agree in writing). Such payment will be made upon
delivery to, or to you for the respective accounts of, such
Underwriters
<PAGE>
Page 398
of the Securities registered in such names and in such
denominations as you shall request not less than two full
Business Days prior to the date of delivery. As used herein, the
term "Business Day" means any day other than a day on which banks
are permitted or required to be closed in New York City. The
time and date of such payment and delivery with respect to the
Securities are referred to herein as the Closing Date. The
certificates for the Securities will be made available for
inspection and packaging by you by 1:00 P.M. on the Business Day
prior to the Closing Date at such place in New York City as you
and the Company shall agree.
4. The Company represents and warrants to each
Underwriter that:
(a) the Registration Statement has been
declared effective by the Commission under the
Securities Act; no stop order suspending the
effectiveness of the Registration Statement has
been issued and no proceeding for that purpose has
been instituted or, to the knowledge of the
Company, threatened by the Commission; and the
Registration Statement and Prospectus (as amended
or supplemented if the Company shall have furnished
any amendments or supplements thereto) comply, or
will comply, as the case may be, in all material
respects with the Securities Act and the Trust
Indenture Act of 1939, as amended, and the rules
and regulations of the Commission thereunder
(collectively, the "Trust Indenture Act"), and do
not and will not, as of the applicable effective
date as to the Registration Statement and any
amendment thereto and as of the date of the
Prospectus and any amendment or supplement thereto,
contain any untrue statement of a material fact or
omit to state any material fact required to be
stated therein or necessary to make the
statements therein, in the light of the circumstances
under which they were made, not misleading, and the
Prospectus, as amended or supplemented at the Closing
Date, if applicable, will not contain any untrue
statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the
light of the circumstances under which they were made,
not misleading; except that the foregoing
representations and warranties shall not apply to
(i) that part of the Registration Statement which
constitutes the Statement of Eligibility and
<PAGE>
Page 399
Qualification (Form T-l) of the Trustee under the Trust
Indenture Act, and (ii) statements or omissions in the
Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto made
in reliance upon and in conformity with information
relating to any Underwriter furnished to the
Company in writing by such Underwriter through the
Representatives expressly for use therein;
(b) the documents incorporated by reference in the
Prospectus, when they were filed with the Commission,
conformed in all material respects to the requirements
of
the Exchange Act, and none of such documents
contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances
under which they were made, not misleading; and any
further documents so filed and incorporated by reference
in the Prospectus, when such documents are filed with
the Commission will conform in all material respects to
the requirements of the Exchange Act, as applicable, and
will not contain an untrue statement of a material fact
or omit to state a material fact necessary to
make the statements therein, in the light of the
circumstances under which they were made, not
misleading;
(c) the consolidated financial statements, together
with the related notes thereto, included or incorporated
by reference in the Registration Statement and the
Prospectus present fairly the consolidated financial
position of the Company and its consolidated
subsidiaries as of the dates indicated and the results
of their operations and the changes in their
consolidated results of operations and changes in
financial condition as of the dates and for the periods
specified; said financial statements have been prepared
in conformity with generally accepted accounting
principles applied on a consistent basis (except as
otherwise noted therein), and the supporting schedules
included or incorporated by reference in the
Registration Statement present fairly the information
required to be stated therein; and the pro forma
financial information, together with the related notes
thereto, included or incorporated by reference
in the Registration Statement and the Prospectus has
been prepared in accordance with the applicable
requirements of the Securities Act and the Exchange Act,
as applicable;
(d) since the respective dates as of which
information is given in the Registration Statement and
the Prospectus, there has not been any material adverse
change, or any development involving a prospective
<PAGE>
Page 400
material adverse change, in the general affairs,
business, management, financial position, stockholders'
equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set
forth or contemplated in the Prospectus; and
except as set forth or contemplated in the Prospectus
neither the Company nor any of its subsidiaries has
entered into any transaction or agreement (whether or
not in the ordinary course of business) material to the
Company and its subsidiaries taken as a whole;
(e) the Company has been duly incorporated and is
validly existing as a corporation in good standing under
the laws of the state of its incorporation, with power
and authority (corporate and other) to own or lease its
properties and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction
in which it owns or leases properties or conducts any
business so as to require such qualification, other than
where the failure to be so qualified or in good standing
would not have a material adverse effect on the Company
and its subsidiaries taken as a whole;
(f) each of the Company's subsidiaries (other than
the Joint Venture and Cone Mexico) has been duly
incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of
incorporation, with power and authority (corporate and
other) to own or lease its properties and conduct its
business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the
transaction of business and is in good standing under
the laws of each jurisdiction in which it owns
or leases properties or conducts any business so as to
require such qualification, other than where the failure
to be so qualified or in good standing would not have a
material adverse effect on the Company and its
subsidiaries taken as a whole; each of the Joint Venture
and Cone Mexico has been duly organized and is validly
existing as a sociedad anonima de capital variable under
the laws of Mexico; and, with respect to each subsidiary
of the Company other than the Joint Venture and
Cliffside Railroad Company, all the outstanding shares
of capital stock of each such subsidiary
and, with respect to the Joint Venture and Cliffside
Railroad Company, the outstanding shares of capital
stock of the Joint Venture and Cliffside Railroad
Company beneficially owned by the Company, have been
duly authorized and validly issued, are fully paid and
non-assessable, and (other than as set forth or
contemplated in the Prospectus and in the case of
foreign subsidiaries, for directors' qualifying shares
or other shares required under applicable law to be
owned by parties other than the Company) are owned by
the Company, directly or indirectly, free and clear of
<PAGE>
Page 401
all liens, encumbrances, security interests and claims;
(g) this Agreement has been duly authorized,
executed and delivered by the Company and constitutes
the valid and binding agreement of the Company, except
as rights to indemnity and contribution hereunder may be
limited by applicable law or public policy;
(h) the Securities have been duly authorized, and,
when issued and delivered pursuant to this Agreement,
will have been duly executed, authenticated, issued and
delivered and will constitute valid and binding
obligations of the Company entitled to the benefits
provided by the Indenture; the Indenture has been duly
authorized and upon effectiveness of the Registration
Statement will have been duly qualified under the Trust
Indenture Act and, when executed and delivered by the Company
and the Trustee,the Indenture will constitute a valid and
binding instrument of the Company; and the Securities and the
Indenture will conform to the descriptions thereof in
the Prospectus;
(i) neither the Company nor any of its subsidiaries
is, or with the giving of notice or lapse of time or
both would be, in violation of or in default under, its
Articles of Incorporation or Bylaws or other
organizational documents or any indenture, mortgage,
deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them or
any of their respective properties is bound, except for
violations and defaults which individually and in the
aggregate are not material to the Company and its
subsidiaries taken as a whole or to the holders of the
Securities; the issue and sale of the Securities and the
performance by the Company of all of the provisions of
its obligations under the Securities, the Indenture and
this Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with
or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other
material agreement or instrument to which
the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or
to which any of the property or assets of the Company or
any of its subsidiaries is subject, nor will any such
action result in any violation of the provisions of the
Articles of Incorporation or the Bylaws or other
organizational documents of the Company or any of its
subsidiaries or any applicable law or statute or any
order, rule or regulation of any court
or governmental agency or body having jurisdiction over
the Company, its subsidiaries or any of their respective
<PAGE>
Page 402
properties; and no consent, approval, authorization,
order, registration or qualification of or with any such
court or governmental agency or body is required for the
issue and sale of the Securities or the consummation by
the Company of the related transactions contemplated by
this Agreement or the Indenture, except such consents,
approvals, authorizations, registrations or
qualifications as have been obtained under the
Securities Act, the Trust Indenture Act
and as may be required under state securities or Blue
Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters;
(j) other than as set forth or contemplated in the
Prospectus, there are no legal or governmental
proceedings pending or, to the best knowledge of the
Company, threatened to which the Company or any of its
subsidiaries is or may be a party or to which any
property of the Company or any of its
subsidiaries is or may be the subject which, if
determined adversely to the Company, could individually
or in the aggregate reasonably be expected to have a
material adverse effect on the general affairs,
business, prospects, management, financial position,
stockholders' equity or results of operations of the
Company and its subsidiaries taken as a whole and, to
the best of the Company's knowledge, no such proceedings
are threatened or contemplated by governmental
authorities or threatened by others; and there
are no contracts or other documents of a character
required to be filed as an exhibit to the Registration
Statement or required to be described in the
Registration Statement or the Prospectus which are not
filed or described as required;
(k) the conditions for use of a Registration
Statement on Form S-3 set forth in the General
Instructions to Form S-3 have been satisfied with
respect to the Company and the transactions contemplated
by this Agreement, the Indenture and the Registration
Statement; and
(l) the Joint Venture Agreement (the "Joint Venture
Agreement") between Compania Industrial de Parras, S.A.
de C.V. and Cone Mexico, dated as of June 25, 1993 has
been duly authorized, executed and delivered by Cone
Mexico and constitutes the valid and binding agreement
of Cone Mexico.
5. The Company covenants and agrees with the several
Underwriters as follows:
(a) to file the Prospectus in a form approved by
you pursuant to Rule 424 under the Securities Act in the
<PAGE>
Page 403
manner and within the time period required by such Rule;
(b) to deliver to each Representative and counsel
for the Underwriters, at the expense of the Company, a
signed copy of the Registration Statement (as originally
filed) and each amendment thereto, in each case
including exhibits and documents incorporated by
reference therein and, during the period mentioned in
paragraph (e) below, to each of the Underwriters as many
copies of the Prospectus (including all amendments and
supplements thereto) and documents incorporated by
reference therein as you may reasonably request;
(c) from the date hereof and prior to the Closing
Date, to furnish to you a copy of any proposed amendment
or supplement to the Registration Statement or the
Prospectus, for your review, and not to file any such
proposed amendment or supplement to which you reasonably
object;
(d) to file promptly all reports and any definitive
proxy or information statements required to be filed by
the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act for so
long as the delivery of a prospectus is required under
the Securities Act or state securities or Blue sky laws in
connection with the offering or sale of the Securities, and
during such same period, to advise you promptly, and to confirm
such advice in writing, (i) when any amendment to the
Registration Statement shall have become effective, (ii)
of any request by the Commission for any amendment to
the Registration Statement or any amendment or
supplement to the Prospectus or for any additional
information, (iii) of the issuance by the Commission of
any stop order suspending the effectiveness of
the Registration Statement or the initiation or
threatening of any proceeding for that purpose, and (iv)
of the receipt by the Company of any notification with
respect to any suspension of the qualification of the
Securities for offer and sale in any jurisdiction or the
initiation or threatening of any proceeding for such
purpose; and to use its best efforts to prevent the
issuance of any such stop order or notification and, if
issued, to obtain as soon as possible the withdrawal
thereof;
(e) if, during such period after the first date of
the public offering of the Securities as in the opinion
of counsel for the Underwriters a prospectus relating to
the Securities is required under the Securities Act to
be delivered in connection with sales by an Underwriter
or dealer, any event shall occur as a result of which it
is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of
<PAGE>
Page 404
the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with the
Securities Act and the Exchange Act, as the case may be,
forthwith to prepare and furnish, at the expense of the
Company, to the Underwriters and to the dealers (whose
names and addresses you will furnish to the Company) to
which Securities may have been sold by you on behalf of
the Underwriters and to any other dealers upon request,
such amendments or supplements to the Prospectus as may
be necessary so that the statements in the Prospectus as
so amended or supplemented will not, in the
light of the circumstances when the Prospectus is
delivered to a purchaser, be misleading or so that the
Prospectus will comply with the Securities Act and the
Exchange Act, as the case may be;
(f) to endeavor to qualify the Securities for offer
and sale under the securities or Blue Sky laws of such
jurisdictions as you shall reasonably request and to
continue such qualification in effect so long as
reasonably required for distribution of the Securities
and to pay all reasonable fees and expenses (including
fees and disbursements of counsel to the Underwriters)
reasonably incurred in connection with such
qualification and in connection with the
determination of the eligibility of the Securities for
investment under the laws of such jurisdictions as you may
designate; provided that the Company shall not be required to
qualify as a foreign corporation or file a general consent to
service of process or become subject to taxation in any
jurisdiction;
(g) to make generally available to its security
holders and to you as soon as practicable an earnings
statement covering a period of at least twelve months
beginning with the first fiscal quarter of the Company
occurring after the effective date of the Registration
Statement, which shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 of the
Commission promulgated thereunder;
(h) so long as the Securities are outstanding, to
furnish to you copies of all reports or other
communications (financial or other) furnished to holders
of Securities generally, and copies of any reports and
financial statements filed by the Company with the
Commission or any national securities exchange;
(i) during the period beginning on the date hereof
and continuing to and including the Business Day
following the Closing Date, not to offer, sell, contract
to sell or otherwise dispose of any debt securities of
<PAGE>
Page 405
or guaranteed by the Company that are substantially
similar to the Securities without your prior written
consent; and
(j) to pay all costs and expenses incident to the
performance of its obligations hereunder, including
without limiting the generality of the foregoing, all
costs and expenses (i) incident to the preparation,
issuance, execution, authentication and delivery of the
Securities, including any expenses of the Trustee, (ii)
incident to the preparation, printing and filing under
the Securities Act of the Registration Statement, the
Prospectus and any preliminary prospectus (including in
each case all exhibits, amendments and supplements
thereto), (iii) incurred in connection with the
registration or qualification and determination of
eligibility for investment of the Securities under the
laws of such jurisdictions as the Underwriters may
designate (including reasonable fees of counsel for the
Underwriters and their disbursements), (iv) in
connection with the listing of the Securities on any
stock exchange, (v) related to any filing with National
Association of Securities Dealers, Inc. (for purposes of
this clause (v), such costs and expenses shall include
only any required filing fee), (vi) in connection with
the printing (including duplication costs) and delivery
of this Agreement, the Indenture, the
Preliminary and Supplemental Blue Sky Memoranda and any
Legal Investment Survey and the furnishing to
Underwriters and dealers of copies of the Registration
Statement and the Prospectus, including mailing and shipping,
as herein provided and (vii) payable to rating agencies in
connection with the rating of the Securities.
6. The several obligations of the Underwriters
hereunder shall be subject to the following conditions:
(a) the representations and warranties of the
Company contained herein are true and correct on and as
of the Closing Date as if made on and as of the Closing
Date and the Company shall have complied with all
agreements and all conditions on its part to be
performed or satisfied hereunder at or prior to the
Closing Date;
(b) the Prospectus shall have been filed with the
Commission pursuant to Rule 424 within the applicable
time period prescribed for such filing by the rules and
regulations under the Securities Act; no stop order
suspending the effectiveness of the Registration
Statement shall be in effect, and no proceedings for
such purpose shall be pending before or, to the
knowledge of the Company or you, threatened by the
<PAGE>
Page 406
Commission; and all requests for additional
information on the part of the Commission shall have
been complied with to your reasonable satisfaction;
(c) subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, there shall not
have occurred any downgrading, nor shall any notice have
been given to the Company or you of (i) any intended or
potential downgrading or (ii) any review or possible
change in the rating (other than a review or change with
no implication of a possible downgrading of such rating)
accorded any securities of or guaranteed by the Company
by any "nationally recognized statistical rating
organization", as such term is defined for purposes of
Rule 436(g)(2) under the Securities Act;
(d) since the respective dates as of which
information is given in the Prospectus there shall not
have been any material adverse change or any development
involving a prospective material adverse change, in the
general affairs, business, management, financial
position, stockholders' equity or results of operations
of the Company and its subsidiaries, taken as a whole,
otherwise than as set forth or contemplated in the
Prospectus, the effect of which in the judgment of the
Representatives makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the
Securities on the terms and in the manner contemplated
in the Prospectus;
(e) the Representatives shall have received on and
as of the Closing Date a certificate of an executive
officer of the Company satisfactory to you to the effect
set forth in subsections (a) through (c) of this Section
and to the further effect that there has not occurred
any material adverse change, or any development involving a
prospective material adverse change, in the general
affairs, business, management, financial position,
stockholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole, from
that set forth or contemplated in the Prospectus.
(f) Neil W. Koonce, General Counsel of the Company,
shall have furnished to you his written opinion, dated
the Closing Date, in form and substance reasonably
satisfactory to you, to the effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation, with
the corporate power and authority to own or lease its
properties and conduct its business as described in the
Prospectus as then amended or supplemented;
<PAGE>
Page 407
(ii) the Company has been duly qualified as a
foreign corporation for the transaction of business and
is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such
qualification, other than where the failure to be so
qualified or in good standing would not have a material
adverse effect on the Company and its subsidiaries taken
as a whole;
(iii) each of the Company's subsidiaries (other than
the Joint Venture and Cone Mexico) has been duly
incorporated and is validly existing as a corporation
under the laws of its jurisdiction of incorporation with
the corporate power and authority to own and lease its
properties and conduct its business as described in the
Prospectus, as then amended and supplemented, and has
been duly qualified as a foreign corporation for the
transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to
require such qualification, other than where the failure
to be so qualified and in good standing would not have
a material adverse effect on the Company and its
subsidiaries taken as a whole; and all of the issued
shares of capital stock of each subsidiary (other than
the Joint Venture, Cone Mexico and Cliffside Railroad
Company) and, with respect to Cliffside Railroad
Company, all of the issued shares of capital stock
beneficially owned by the Company, have been duly
authorized and validly issued, are fully paid and
non-assessable, and (other than as set forth or
contemplated in the Prospectus and except in the case of
foreign subsidiaries, for directors' qualifying shares)
are owned directly or indirectly by the Company, free and
clear of any perfected security interests or, to the best
knowledge of such counsel, any other security interests,
liens, encumbrances, equities or claims;
(iv) other than as set forth or contemplated in the
Prospectus, there are no legal or governmental
proceedings pending or, to the best of such counsel's
knowledge, threatened to which the Company or any of its
subsidiaries is or may be a party, or to which any
property of the Company or its subsidiaries is or may be
the subject, that are required to be described in the
Registration Statement or the Prospectus; to the best of
such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities
or threatened by others; and such counsel does not know
of any contracts or other documents of a character
required to be filed as an exhibit to the Registration
<PAGE>
Page 408
Statement or required to be described in the
Registration Statement or the Prospectus which are not
filed or described as required;
(v) this Agreement has been duly authorized,
executed and delivered by the Company and is a valid and
binding agreement of the Company, (A) subject to
applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and similar laws
affecting creditors' rights and remedies generally,
(B) subject to general principles of equity, including
principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is
sought in a proceeding at law or in equity) and
(C) except as rights to indemnity and contribution
hereunder may be limited by applicable law or public
policy;
(vi) the Securities have been duly authorized,
executed and delivered by the Company and, when duly
authenticated in accordance with the terms of the
Indenture and delivered to and paid for by the
Underwriters in accordance with the terms of this
Agreement, will constitute valid and binding obligations
of the Company entitled to the benefits provided by the
Indenture, (A) subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance,
moratorium and similar laws affecting creditors' rights
and remedies generally and (B) subject to general
principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law
or in equity);
(vii) the Indenture has been duly authorized,
executed and delivered by the Company and constitutes a
valid and binding instrument of the Company, (A) subject
to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and similar laws
affecting creditors' rights and remedies generally and
(B) subject to general principles of equity, including
principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is
sought in a proceeding at law or in equity); and the
Indenture has been duly qualified under the Trust
Indenture Act;
(viii) neither the Company nor any of its
subsidiaries is, or with the giving of notice or lapse
of time or both would be, in violation of or in default
under, its Articles of Incorporation or Bylaws or other
organizational documents or any indenture, mortgage,
deed of trust, loan agreement or other agreement or
instrument known to such counsel to which the Company or
<PAGE>
Page 409
any of its subsidiaries is a party or by which it or any
of them or any of their respective properties is bound,
except for violations and defaults which individually
and in the aggregate are not material to the Company and
its subsidiaries taken as a whole or to the holders of
the Securities; the issue and sale of the Securities and
the performance by the Company of its obligations under
the Securities, the Indenture and this Agreement and the
consummation of the transactions herein and therein
contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other material
agreement or instrument known to such counsel to which
the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or
to which any of the property or assets of the Company or
any of its subsidiaries is subject, nor will any such
action result in any violation of the provisions of the
Articles of Incorporation or Bylaws or other
organizational documents of the Company or any of its
subsidiaries or any applicable law, statute, rule or
regulation or any order, judgment or decree known to him
of any court or governmental agency or body having
jurisdiction over the Company, its subsidiaries or any
of their respective properties;
(ix) no consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body is required for the issue
and sale of the Securities or the consummation of the
related transactions contemplated by this Agreement or
the Indenture, except such consents, approvals,
authorizations, registrations or qualifications as have
been obtained under the Securities Act and the Trust
Indenture Act and as may be required under state
securities or Blue sky laws in connection with the
purchase and distribution of the Securities by the
Underwriters;
(x) the statements in the Prospectus under "Legal
Proceedings" and "Description of Debt Securities" in the
Prospectus or incorporated by reference from Item 3 of
Part 1 of the Company's Annual Report on Form 10-K for
the year ended January 2, 1994 and in the Registration
Statement in Item 15, insofar as such statements
constitute a summary of the legal matters, documents or
proceedings referred to therein, fairly present the
information required by the Securities Act or Exchange
Act, as the case may be, with respect to such legal
matters, documents or proceedings as of the respective
dates of such statements; and
(xi) the Joint Venture Agreement has been duly
<PAGE>
Page 410
authorized, executed and delivered by Cone Mexico and is
a valid and binding agreement of Cone Mexico, (A)
subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and
similar laws affecting creditors' rights and remedies
generally, and (B) subject to general principles of
equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law
or in equity).
Such counsel shall state that he has no reason to
believe that (a) any part of the registration statement
(including the documents incorporated by reference
therein) (except for the financial statements included
therein as to which such counsel need express no belief)
filed with the Commission pursuant to the Securities Act
relating to the Securities, when such part was filed or
became effective, contained any untrue statement of a
material fact or omitted to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading, (b) the Registration
Statement and any amendment thereto (except for the
financial statements included therein as to which such
counsel need express no belief), on the date of this
Agreement, contained any untrue statement of a material
fact or omitted to state any material fact required to
be stated therein or necessary to make the statements
therein not misleading, or (c) the Prospectus, as
amended or supplemented, if applicable (except for the
financial statements included therein as to which such
counsel need express no belief), as of its date, on the
date of this Agreement and the date of such opinion,
included or includes any untrue statement of a material
fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in
the light of the circumstances under which they were
made, not misleading.
In rendering such opinions, such counsel may rely
(A) as to matters involving the application of laws
other than the laws of the United States and the State
of North Carolina, to the extent such counsel deems
proper and to the extent specified in such opinion, if
at all, upon an opinion or opinions (in form and
substance reasonably satisfactory to Underwriters'
counsel) of other counsel reasonably acceptable to the
Underwriters' counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent such
counsel deems proper, on certificates of responsible
officers of the Company and certificates or other
written statements of officials of jurisdictions having
custody of documents respecting the corporate existence
or good standing of the Company. The opinion of such
<PAGE>
Page 411
counsel for the Company shall state that the opinion of
any such other counsel is in form satisfactory to such
counsel and, in such counsel's opinion, the Underwriters
and they are justified in relying thereon. With respect
to the matters to be covered in the immediately
preceding paragraph counsel may state his opinion and
belief is based upon his participation in the
preparation of the Registration Statement and the
Prospectus and any amendment or supplement thereto and
review and discussion of the contents thereof but is
without independent check or verification except as
specified.
(g) Schell Bray Aycock Abel & Livingston, L.L.P.,
counsel for the Company, shall have furnished to you
their written opinion, dated the Closing Date, in form
and substance reasonably satisfactory to you, to the
effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation, with the
corporate power and authority to own or lease its
properties and conduct its business as described in the
Prospectus as then amended or supplemented;
(ii) each of the Company's subsidiaries (other than
the Joint Venture and Cone Mexico) has been duly
incorporated and is validly existing as a corporation
under the laws of its jurisdiction of incorporation with
the corporate power and authority to own or lease its
properties and conduct its business as described in the
Prospectus, as then amended or suplemented; and all of
the issued shares of capital stock of each subsidiary
(other than the Joint Venture, Cone Mexico and Cliffside
Railroad Company) and, with respect to Cliffside
Railroad Company, all of the issued shares of stock
beneficially owned by the Company, have been duly
authorized and validly issued, are fully paid and
non-assessable, and (other than as set forth or
contemplated in the Prospectus and except in the case of
foreign subsidiaries, for directors' qualifying shares)
are owned directly or indirectly by the Company, free
and clear of any perfected security interests or, to the
best knowledge of such counsel, any other security interests,
liens, encumbrances, equities or claims;
(iii) other than as set forth or contemplated in the
Prospectus, there are no legal or governmental
proceedings pending or, to the best of such counsel's
knowledge, threatened to which the Company or any of the
its subsidiaries is or may be a party, or to which any
property of the Company or its subsidiaries is or may be
the subject, that are required to be described in the
<PAGE>
Page 412
Registration Statement or the Prospectus; to the best of
such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities
or threatened by others; and such counsel does not know
of any contracts or other documents of a character
required to be filed as an exhibit to the Registration
Statement or required to be described in the
Registration Statement or the Prospectus which are not
filed or described as required;
(iv) this Agreement has been duly authorized,
executed and delivered by the Company and is a valid and
binding agreement of the Company, (A) subject to
applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and similar laws
affecting creditors' rights and remedies generally,
(B) subject to general principles of equity, including
principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is
sought in a proceeding at law or in equity) and
(C) except as rights to indemnity and contribution
hereunder may be limited by applicable law;
(v) the Securities have been duly authorized,
executed and delivered by the Company and, when duly
authenticated in accordance with the terms of the
Indenture and delivered to and paid for by the
Underwriters in accordance with the terms of this
Agreement, will constitute valid and binding obligations
of the Company entitled to the benefits provided by the
Indenture, (A) subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance,
moratorium and similar laws affecting creditors' rights
and remedies generally and (B) subject to general
principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law
or in equity);
(vi) the Indenture has been duly authorized,
executed and delivered by the Company and constitutes a
valid and binding instrument of the Company, (A) subject
to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and similar laws affecting
creditors' rights and remedies generally and (B) subject to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law
or in equity); and the Indenture has been duly qualified
under the Trust Indenture Act;
(vii) the issue and sale of the Securities and the
performance by the Company of its obligations under the
Securities, the Indenture and this Agreement and the
<PAGE>
Page 413
consummation of the transactions herein and therein
contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other material
agreement or instrument which is required to be filed
as an exhibit to the Registration Statement or any
document incorporated by reference therein and which is
known to such counsel (such counsel acknowledges that,
for purposes of this opinion, all documents so filed are
known to such counsel) to which the Company
or any of it subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of
its subsidiaries is subject, nor will any such action
result in any violation of the provisions of the
Articles of Incorporation or Bylaws or other
organizational documents of the Company or any of its
subsidiaries or any applicable law, statute, rule or
regulation or any order, judgment or decree known to
such counsel of any court or governmental agency or body
having jurisdiction over the Company, its subsidiaries
or any of their respective properties;
(viii) no consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body is required for the issue
and sale of the Securities or the consummation of the
related transactions contemplated by this Agreement or
the Indenture, except such consents, approvals,
authorizations, registrations or qualifications as have
been obtained under the Securities Act and the Trust
Indenture Act and as may be required under state
securities or Blue sky laws in connection with the
purchase and distribution of the Securities by the
Underwriters;
(ix) the statements in the Prospectus under "Legal
Proceedings" and "Description of Debt Securities" in the
Prospectus or incorporated by reference from Item 3 of
Part 1 of the Company's Annual Report on Form 10-K for
the year ended January 2, 1994 and in the Registration
Statement in Item 15, insofar as such statements
constitute a summary of the legal matters, documents or
proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents or
proceedings as of the respective dates of such statements;
(x) the conditions for use of a Registration
Statement on Form S-3 set forth in the General
Instructions to Form S-3 have been satisfied with
respect to the Company and the transactions contemplated
by this Agreement and the Registration Statement;
<PAGE>
Page 414
(xi) to the best knowledge of such counsel, no stop
order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that
purpose has been instituted or threatened by the
Commission; and
(xii) each document incorporated by reference in the
Registration Statement and the Prospectus (except for
the financial statements included therein as to which
such counsel need express no opinion) complied as to
form when filed with Commission in all material respects
with the Exchange Act, and the Registration Statement
and the Prospectus and any amendments and supplements
thereto (except for the financial statements included
therein as to which such counsel need express no
opinion) comply as to form in all material respects with
the requirements of the Securities Act and the Trust
Indenture Act.
Such counsel shall state that they have no reason to believe
that (a) any part of the registration statement (including the
documents incorporated by reference therein) (except for the
financial statements included therein as to which such counsel
need express no belief) filed with the Commission pursuant to the
Securities Act relating to the Securities, when such part was
filed or became effective, contained any untrue statement of a
material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, (b) the Registration Statement and any amendment
thereto (except for the financial statements included therein as
to which such counsel need express no belief), on the date of
this Agreement, contained any untrue statement of a material fact
or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, or (c) the Prospectus, as amended or supplemented, if
applicable (except for the financial statements included therein
as to which such counsel need express no belief), as of its date,
on the date of this Agreement and the date of such opinion,
included or includes any untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading.
In rendering such opinions, such counsel may rely (A) as to
matters involving the application of laws other than the laws of
the United States and the State of North Carolina, to the extent
such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and
substance reasonably satisfactory to Underwriters' counsel) of
other counsel reasonably acceptable to the Underwriters' counsel,
familiar with the applicable laws; (B) as to matters of fact, to
the extent such counsel deems proper, on certificates of
responsible officers of the Company and certificates or other
<PAGE>
Page 415
written statements of officials of jurisdictions having custody
of documents respecting the corporate existence or good standing
of the Company. The opinion of such counsel for the Company
shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and, in such counsel's opinion, the
Underwriters and they are justified in relying thereon. With
respect to the matters to be covered in the preceding paragraph
counsel may state their opinion and belief is based upon their
participation in the preparation of the Registration Statement
and the Prospectus and any amendment or supplement thereto and
review and discussion of the contents thereof but is without
independent check or verification except as specified.
(h) on the Closing Date, McGladrey & Pullen, LLP shall
have furnished to you letters, dated such date, in form and
substance satisfactory to you, containing statements and
information of the type customarily included in accountants
"comfort letters" to underwriters with respect to the
financial statements and certain financial information
contained in the Registration Statement and the Prospectus;
(i) you shall have received on and as of the Closing
Date an opinion of King & Spalding, counsel to the
Underwriters, with respect to the validity of the Indenture
and the Securities, the Registration Statement, the
Prospectus and other related matters as the Representatives
may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to
enable them to pass upon such matters;
(j) on or prior to the Closing Date, the Company shall
have furnished to the Representatives such further
certificates and documents as the Representatives shall
reasonably request.
7. The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including without
limitation the legal fees and other expenses reasonably incurred
in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration
Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Underwriter furnished
to the Company in writing by such Underwriter through the
<PAGE>
Page 416
Representatives expressly for use therein; provided, that the
foregoing indemnity with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling such Underwriter) from whom the
person asserting any such losses, claims, damages or liabilities
purchased Securities if such untrue statement or omission or
alleged untrue statement or omission made in such preliminary
prospectus is eliminated or remedied in the Prospectus (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) and, if required by law, a
copy of the Prospectus (as so amended or supplemented) shall not
have been furnished to such person at or prior to the written
confirmation of the sale of such Securities to such person.
Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its
officers who sign the Registration Statement and each person who
controls the Company within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to each
Underwriter, but only with reference to information relating to
such Underwriter furnished to the Company in writing by such
Underwriter through the Representatives expressly for use in the
Registration Statement, the Prospectus, any amendment or
supplement thereto, or any preliminary prospectus.
If any suit, action, proceeding (including any governmental
or regulatory investigation), claim or demand shall be brought or
asserted against any person in respect of which indemnity may be
sought pursuant to either of the two preceding paragraphs, such
person (the "Indemnified Person") shall promptly notify the
person against whom such indemnity may be sought (the
"Indemnifying Person") in writing, and the Indemnifying Person,
upon request of the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent
the Indemnified Person and any others the Indemnifying Person may
designate in such proceeding and shall pay the fees and expenses
of such counsel related to such proceeding. In any such
proceeding, any Indemnified Person shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has
failed within a reasonable time to retain counsel reasonably
satisfactory to the Indemnified Person or (iii) the named parties
in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and
<PAGE>
Page 417
expenses shall be reimbursed as they are incurred. Any such
separate firm for the Underwriters and such control persons of
Underwriters shall be designated in writing by the first of the
named Representatives on Schedule I hereto and any such separate
firm for the Company, its directors, its officers who sign the
Registration Statement and such control persons of the Company or
authorized representatives shall be designated in writing by the
Company. The Indemnifying Person shall not be liable for any
settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an
Indemnified Person shall have requested an Indemnifying Person to
reimburse the Indemnified Person for fees and expenses of counsel
as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than
30 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not
have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement. No Indemnifying
Person shall, without the prior written consent of the
Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person
is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional release of such Indemnified
Person from all liability on claims that are the subject matter
of such proceeding.
If the indemnification provided for in the first and second
paragraphs of this Section 7 is unavailable to an Indemnified
Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such
paragraph, in lieu of indemnifying such Indemnified Person there-
under, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and
the Underwriters on the other hand from the offering of the
Securities or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to
in clause (i) above but also the relative fault of the Company on
the one hand and the Underwriters on the other in connection with
the statements or omissions that resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on
the one hand and the Underwriters on the other shall be deemed to
be in the same respective proportions as the net proceeds from
the offering of such Securities (before deducting expenses)
<PAGE>
Page 418
The indemnity and contribution agreements contained in this
received by the Company and the total underwriting discounts and
the commissions received by the Underwriters bear to the
aggregate public offering price of the Securities. The relative
fault of the Company on the one hand and the Underwriters on the
other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Person as
a result of the losses, claims, damages and liabilities referred
to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any
reasonable legal or other expenses incurred by such Indemnified
Person in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section
7, in no event shall an Underwriter be required to contribute any
amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section 7 are several in
proportion to the respective principal amount of the Securities
set forth opposite their names in Schedule I hereto, and not
joint.
The indemnity and contribution agreements contained in this
Section 7 are in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to
above.
Section 7 and the representations and warranties of the Company
set forth in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter or by or on
behalf of the Company, its officers or directors or any other
person controlling the Company and (iii) acceptance of and
payment for any of the Securities.
<PAGE>
Page 419
8. Notwithstanding anything herein contained, this Agreement
may be terminated in the absolute discretion of the
Representatives, by notice given to the Company, if after the
execution and delivery of this Agreement and prior to the Closing
Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, the New York
Stock Exchange, (ii) trading of any securities of or guaranteed
by the Company shall have been suspended on the New York Stock
Exchange, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal
or New York State authorities, or (iv) there shall have occurred
any outbreak or escalation of hostilities between the United
States and a foreign power or any change in financial markets or
any calamity or crisis that, in the judgment of the
Representatives, is material and adverse and which, in the
judgment of the Representatives, makes it impracticable to market
the Securities on the terms and in the manner contemplated in the
Prospectus.
9. If, on the Closing Date, any one or more of the
Underwriters shall fail or refuse to purchase Securities which it
or they have agreed to purchase under this Agreement, and the
aggregate principal amount of Securities which such defaulting
Underwriter or Underwriters agreed but failed or refused to
purchase is not more than one-tenth of the aggregate principal
amount of the Securities, the other Underwriters shall be
obligated severally in the proportions that the principal amount
of Securities set forth opposite their respective names in
Schedule I hereto bears to the aggregate principal amount of
Securities set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as the
Representatives may specify, to purchase the Securities which
such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall
the principal amount of Securities that any Underwriter has
agreed to purchase pursuant to Section 1 be increased pursuant to
this Section 9 by an amount in excess of one-ninth of such
principal amount of Securities without the written consent of
such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Securities and the
aggregate principal amount of Securities with respect to which
such default occurs is more than one-tenth of the aggregate
principal amount of Securities to be purchased, and arrangements
satisfactory to you and the Company for the purchase of such
Securities are not made within 36 hours after such default, this
Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case
either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven business
days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. Any action taken
under this paragraph shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter
under this Agreement.
<PAGE>
Page 420
10. If this Agreement shall be terminated by the
Underwriters (other than termination pursuant to Section 8(i),
8(iii) or 8(iv)), or any of them, because of any failure or
refusal on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations
under this Agreement or any condition of the Underwriters'
obligations cannot be fulfilled, the Company agrees to reimburse
the Underwriters or such Underwriters as have so terminated this
Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the reasonable fees and
expenses of their counsel) reasonably incurred by such
Underwriters in connection with this Agreement or the offering of
Securities.
11. This Agreement shall inure to the benefit of and be
binding upon the Company, the Underwriters, any controlling
persons referred to herein and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person, firm or
corporation any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein
contained. No purchaser of Securities from any Underwriter shall
be deemed to be a successor by reason merely of such purchase.
12. Any action by the Underwriters hereunder may be taken by
you jointly or by the first of the named Representatives set
forth in Schedule I hereto alone on behalf of the Underwriters,
and any such action taken by you jointly or by the first of the
named Representatives set forth in Schedule I hereto alone shall
be binding upon the Underwriters. All notices and other
communications hereunder shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be
given at the address set forth in Schedule II hereto. Notices to
the Company shall be given to it at 1201 Maple Street,
Greensboro, North Carolina 27405; Attention: Chief Financial
Officer.
13. This Agreement may be signed in counterparts, each of
which shall be an original and all of which together shall
constitute one and the same instrument. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York, without giving effect to the conflicts of laws
provisions thereof.
Very truly yours,
CONE MILLS CORPORATION
<PAGE>
Page 421
By: /S/ John L. Bakane
Name: John L. Bakane
Title: Chief Financial Officer
Accepted: March 8, 1995
J.P. Morgan Securities Inc.
NationsBanc Capital Markets, Inc.
Prudential Securities Incorporated
Acting severally on behalf of
themselves and the several
Underwriters listed in Schedule II
hereto.
By: J.P. Morgan Securities Inc.
By: /S/ Thomas F. Hagerstrom
Name: Thomas F. Hagerstrom
Title: Vice President
<PAGE>
Page 422
SCHEDULE I
Representatives: J.P. Morgan Securities Inc.
NationsBanc Capital Markets, Inc.
Prudential Securities Incorporated
Underwriting Agreement
dated: March 8, 1995
Registration Statement
No.: 33-57713
Title of Securities: 8 1/8% Debentures Due March 15, 2005
Aggregate principal
amount: $100,000,000
Price to Public: 99.831% of the principal amount of the
Securities, plus accrued interest, if
any, from March 15, 1995 to the Closing
Date.
Purchase Price by
Underwriters: 99.181%
Indenture: Indenture dated as of February 14, 1995
between the Company and Wachovia Bank of North
Carolina, N.A., as Trustee.
Maturity: March 15, 2005
Interest Rate: 8 1/8%
Interest Payment
Dates: March 15 and September 15
Optional Redemption
Provisions: N/A
Sinking Fund Provisions: N/A
Other Provisions: N/A
Closing Date and
Time of Delivery: March 15, 1995
Closing location: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Address for Notices
to Underwriters: c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, NY 10260
<PAGE>
Page 423
SCHEDULE II
Principal Amount
of Securities
To Be Purchased
Underwriter
J.P. Morgan Securities Inc .......... $34,000,000
NationsBanc Capital Markets, Inc...... $33,000,000
Prudential Securities Incorporated.... $33,000,000
Total....................... $100,000,000
FORM 10-K Page 424
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.
FORM 10-K Page 425
Exhibit 23.1
McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF McGLADREY & PULLEN, LLP, 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; 33-53705 and
33-67800) of our reports, dated February 10, 1995, with
respect to the consolidated financial statements and
schedule included in the Annual Report on Form 10-K of Cone
Mills Corporation for the fiscal year ended January 1, 1995.
McGLADREY & PULLEN, LLP
Greensboro, North Carolina
March 29, 1995
FORM 10-K Page 426
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 31, 1995 By: J. PATRICK DANAHY
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 31, 1995
(Dewey L. Trogdon) Board
/S/ J. PATRICK DANAHY Director, President March 31, 1995
(J. Patrick Danahy) and Chief Executive
Officer (Principal
Executive Officer)
/S/ JOHN L. BAKANE Director, Executive March 31, 1995
(John L. Bakane) Vice President and
Chief Financial
Officer (Principal
Financial Officer)
/s/ DORIS R. BRAY Director March 31, 1995
(Doris R. Bray)
/s/LESLIE W. GAULDEN Director March 31, 1995
(Leslie W. Gaulden)
<PAGE>
FORM 10-K Page 427
Signature Title Date
/s/ JEANETTE C. KIMMEL Director March 31, 1995
(Jeanette C. Kimmel)
/s/ CHARLES M. REID Director March 31, 1995
(Charles M. Reid)
/s/ JOHN W. ROSENBLUM Director March 31, 1995
(John W. Rosenblum)
/s/ RICHARD S. VETACK Director March 31, 1995
(Richard S. Vetack)
/s/ BUD W. WILLIS III Director March 31, 1995
(Bud W. Willis III)
/s/ J. D. HOLDER Controller March 31, 1995
(J. D. Holder) (Principal Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cone Mills
Corporation Consolidated Financial Statements dated January 1, 1995, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-END> JAN-01-1995
<CASH> 1,158
<SECURITIES> 0
<RECEIVABLES> 59,654
<ALLOWANCES> 3,000
<INVENTORY> 149,420
<CURRENT-ASSETS> 213,239
<PP&E> 415,062
<DEPRECIATION> 177,321
<TOTAL-ASSETS> 524,077
<CURRENT-LIABILITIES> 117,573
<BONDS> 126,108
<COMMON> 2,740
0
38,395
<OTHER-SE> 195,745
<TOTAL-LIABILITY-AND-EQUITY> 524,077
<SALES> 806,167
<TOTAL-REVENUES> 806,167
<CGS> 665,741
<TOTAL-COSTS> 743,564
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,310
<INCOME-PRETAX> 55,516
<INCOME-TAX> 19,764
<INCOME-CONTINUING> 35,752
<DISCONTINUED> 439<F1>
<EXTRAORDINARY> 0
<CHANGES> 1,228
<NET-INCOME> 34,963
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
<FN>
<F1>Discontinued operations - Gain
</FN>
</TABLE>
