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 December 31, 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.)
3101 North Elm Street, Greensboro, N. C. 27408
(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. [ ]
Aggregate market value of voting stock held by nonaffiliates of the
registrant as of February 29, 1996: $ 294,420,046.
Number of shares of common stock outstanding as of February 29, 1996:
27,381,933 shares.
Documents incorporated by reference: Portions of 1995 Annual Report to
Shareholders, Part II, Items 6, 7 & 8; Proxy Statement for Annual Meeting
to be held May 14, 1996, Part III, Items 10, 11, 12 and 13 of this report.
Index to Exhibits - pages 33-44
<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
1995 of $910.2 million. The Company conducts business in two
segments, apparel fabrics and home furnishings products,
representing 77% and 23% of 1995 net sales respectively, and
currently operates nine modern manufacturing facilities
located in North Carolina and South Carolina. 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 $180.3 million in 1995, the Company is the
largest domestic exporter of denim fabrics and 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 79% 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 1995, Cone
sold over 300 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 the sole supplier of denim for
Levi 501R jeans. Other customers include V.F. Corporation
(Wrangler), H.I.S. (Chic), Calvin Klein, The Gap, Aalfs
(Arizona) and P.L. Industries (Hilfiger).
The Company has used 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,
OshKosh, Woolrich, L.L. Bean and J.C. Penney.
<PAGE>
FORM 10-K Page 3
Item 1. (continued)
The Company services the home furnishings markets through two
divisions: Cone Finishing and Cone Decorative Fabrics. 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. The Company's home furnishings
customers include the Waverly Division of F. Schumacher & Co.,
P. Kaufmann, Covington, Richloom, Crown Crafts and Croscill.
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.
In January 1996, the Company sold its Olympic Products
Division. Olympic produced polyurethane foam and related
products used in upholstered furniture, mattresses, quilted
bedspreads, carpet padding and automotive markets.
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 using 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 commodity 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 an
ownership interest in Compania Industrial de Parras S.A.
("CIPSA"), the largest denim manufacturer in Mexico, and
entered into a joint venture with CIPSA to build and operate
a modern denim manufacturing facility in Mexico. The purpose
<PAGE>
FORM 10-K Page 4
Item 1. (continued)
of the investment in CIPSA was to capture the financial
benefits of Cone's transfer of quality, productivity and
styling technology as a result of the joint venture with
CIPSA. CIPSA has the highest denim market share in Mexico.
The joint venture partners invested $60 million of equity in
the venture, with each partner providing one-half of the
investment, and the new facility began operation in the fourth
quarter of 1995. In addition, the joint venture is being
financed with approximately $74 million of debt financing
which is not guaranteed by either partner. While the domestic
denim operations of Cone Mills focus on high-quality fabrics
for use in upper-end, branded apparel, the joint venture will
produce high quality basic denims at costs that Cone believes
will be competitive with manufacturers anywhere in the world.
On December 2, 1994, Cone Mills 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 the fourth quarter of 1995, the Company began
production in its new jacquard weaving facility which has
further diversified its core product groups in the home
furnishings segment of its business.
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 $185 million. The
Company expects to spend approximately $52 million in 1996 for
capital projects.
The Company, a North Carolina corporation, maintains its
principal executive offices at 3101 North Elm Street,
Greensboro, North Carolina 27415-6540, 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)
Business Segments
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The following table sets forth certain net sales and operating income (loss) 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 1991 through 1995.
Fiscal Year (1)(2)
1995 1994 1993 1992 1991
NET SALES (dollars in millions)
Apparel
Denim $552.0 60.6 % $423.5 52.5 % $421.8 54.9 % $402.4 57.0 % $356.6 56.3 %
Specialty Sportswear 148.1 16.3 177.0 22.0 154.0 20.0 117.6 16.7 101.4 16.1
Total 700.1 76.9 600.5 74.5 575.8 74.9 520.0 73.7 458.0 72.4
Home Furnishings
Fabrics 98.4 10.8 93.7 11.6 94.4 12.3 93.0 13.2 83.7 13.2
Foam Products (3) 94.7 10.4 93.9 11.6 84.6 11.0 84.1 11.9 83.9 13.3
Real Estate and other 17.0 1.9 18.1 2.3 14.4 1.8 8.3 1.2 7.4 1.1
Total 210.1 23.1 205.7 25.5 193.4 25.1 185.4 26.3 175.0 27.6
Total net sales $910.2 100.0 % $806.2 100.0 % $769.2 100.0 % $705.4 100.0 % $633.0 100.0 %
OPERATING INCOME (LOSS) (4)
Apparel $39.9 5.7 % $47.5 7.9 % $68.8 12.0 % $67.4 13.0 % $20.4 4.5 %
Home Furnishings (0.6) (0.3) 19.0 9.2 19.5 10.1 16.3 8.8 19.2 10.9
</TABLE>
(1) Results from continuing operations.
(2) Fiscal 1992 contained 53 weeks. The remainder of the years presented
contained 52 weeks.
(3) Foam Products represents the Olympic Products Division which was sold
in January 1996.
(4) Operating income (loss) excludes restructuring and general corporate
expenses.
Percentages reflect operating income (loss) as a percentage of segment
net sales.
<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 fabrics 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
along with greater acceptance of casual wear in the workplace
and (iv) strong brands such as Levi, Wrangler and The Gap
which continue to create fashion interest for consumers.
The Company's domestic apparel fabrics 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, began to expand in the
mid-1990s when the children of baby boomers began 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 fabrics exports have increased
sharply in recent years with 1995 apparel fabrics export sales
at $175.7 million as compared with $135.9 million in 1994 and
$124.9 million in 1993. In 1993, the Company entered into
agreements with CIPSA, the largest denim manufacturer in
Mexico, in order to expand both market and manufacturing
<PAGE>
FORM 10-K Page 7
Item 1. (continued)
presence into Latin America. See "Business - International
Operations".
The Company believes that the demographic trends applicable to
the U.S. markets for its home furnishings fabrics indicate
continued increases in demand as the baby boomers reach ages
traditionally associated with high levels of spending on home
furnishings. The Company also believes that the outlook for
printed home furnishings fabrics is favorable because these
products provide high fashion appearance at affordable prices.
Additionally, there has been an increased international demand
for U.S. styled home furnishings products. Accordingly, the
Company's strategy is to continue to expand its home
furnishings businesses.
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 1995, Cone sold over 300
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 "value added" and "basic." Value
<PAGE>
FORM 10-K Page 8
Item 1. (continued)
added denims are distinquished by styling and customer
service. Basic denims are less differentiated by styling and
customer service with competition being primarily in the form
of price.
Cone's value added denims are stylish and have broad market
appeal. 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 V.F.
Corporation (Wrangler), Calvin Klein and The Gap.
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 20% of total denim
sales in 1995.
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 because of their use in
higher fashion garments. Cone's customers in this group
include OshKosh, The Gap, Ruff Hewn, 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, J.C. Penney, Eddie Bauer and Levi
Strauss.
Cone also serves niche markets for piece dyed fabrics based on
unique dying, finishing, and yarn formation technologies and
provides fabrics such as splashdown dyed fabrics and its new
wrinkle resistant fabric ProSpin. In addition, the Company
produces polyester/rayon sportswear fabrics distributed
primarily to the women's wear market.
<PAGE>
FORM 10-K Page 9
Item 1 (continued)
Cone styles and distributes a line of specialty print fabrics
for a wide range of branded apparel customers. These fabrics
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,
L.L. Bean, Healthtex, Buster Brown, Woolrich and J.C. Penney.
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, use 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 fabrics marketing and sales
staff of more than 175 persons. Business management of
apparel fabrics is organized into three operating divisions:
Cone Denim North America, Cone Sportswear and Cone
International Marketing. 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
in Greensboro in proximity to apparel manufacturing facilities
so that customer requirements can be translated more
effectively into finished products. To provide a more direct
<PAGE>
FORM 10-K Page 10
Item 1. (continued)
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
marketing support offices in Brussels, Belgium, and Singapore.
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 900 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 seven 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 with its denim
plants being certified under the ISO 9002 process.
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.
<PAGE>
FORM 10-K Page 11
Item 1. (continued)
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 increased
cotton costs on 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. Congress is presently
considering new farm legislation which is aimed at reducing
farm subsidies and allowing farmers more versatility in
planting decisions. The long-term impact of this legislation
on cotton supplies and pricing is presently unclear. However,
management believes that U.S. companies will be able to
acquire cotton at prices competitive with offshore
manufacturers but there can be no assurance that these results
will always occur.
Since cotton is an agricultural product, its supply and
quality are subject to the forces of nature. Although the
Company has always been able to acquire sufficient supplies of
cotton for its operations in the past, any shortage in the
cotton supply by reason of weather, disease or other factors
could adversely affect the Company's operations. In late 1993
and continuing through 1995, cotton prices increased
throughout the world. The Company believes that cotton prices
<PAGE>
FORM 10-K Page 12
Item 1. (continued)
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 in 1993 and 1994 and in the U.S. in
1995 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."
The Company has an established cotton purchasing program,
administered in conformance with policies approved by the
board of directors, to ensure an uninterrupted supply of
appropriate quality and quantities of cotton, to hedge
committed and anticipated fabric sales and to manage margin
risks associated with price fluctuations on anticipated cotton
purchases. The Company primarily uses forward purchase
contracts and, to a lesser extent, futures and options
contracts. Management believes that its cotton purchasing
program has resulted in lower overall cotton prices than if
cotton were purchased solely on a spot market basis or by
solely matching cotton purchases with product sales. Since
prices for forward purchase contracts are sometimes fixed in
advance of shipment, the Company may benefit from its fixed
price purchases in cotton if prices thereafter rise, or fail
to benefit if prices subsequently fall.
Cone also purchases "greige goods" (fabrics that have not been
dyed or finished), yarn, synthetic fibers, and dyes and
chemicals. These raw materials have normally been available
in adequate supplies through a number of suppliers.
Competition. The textile apparel fabrics 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
<PAGE>
FORM 10-K Page 13
Item 1. (continued)
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
accord created a new organization, the World Trade
Organization, to oversee international trade in manufactured
goods, agriculture and intellectual property and services. In
addition, quotas are being phased out and tariffs outside of
the U.S. on textile and apparel products are being
substantially reduced over a period of ten years. U.S.
tariffs on these products also are being 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 among 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. Cone's domestic
operations may benefit from the improved access to Mexico's
consumer markets and export sales of its joint venture plant
have been favorably impacted.
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.
<PAGE>
FORM 10-K Page 14
Item 1. (continued)
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
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., Western Textiles, 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, Sunbeam, Perfect Fit,
Barkley and Whiting.
<PAGE>
FORM 10-K Page 15
Item 1. (continued)
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 completed its planned screen printing
expansion in 1995.
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 which allows
for the printing of a wider range of patterns. 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 directly 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.
<PAGE>
FORM 10-K Page 16
Item 1. (continued)
The Cone Finishing division also competes indirectly with
other suppliers of products used in the home furnishing
industry including jacquard woven fabrics, velvets and plain
shade fabrics. From time to time consumer fashion preference
changes based upon coloration and texture. Presently,
consumer preference has shifted away from printed fabrics. In
order to smooth the effects of these shifts in consumer
preference, the Company has entered the jacquard weaving
business with the start up in 1995 of a new weaving facility.
Foam Products. In first quarter of 1996, the Company
completed the sale of its Olympic Products Division to British
Vita PLC. Proceeds will be realized in excess of $50 million
associated with the sale of fixed assets, inventories and the
liquidation of receivables. Olympic Products supplied
polyurethane foam and related products, primarily to the home
furnishings industry for use in upholstered furniture,
mattresses, carpet padding and specialty medical applications.
Olympic also supplied foam to the automotive market, for use
in interior headliners and side panels. Related products and
services included nonwoven fiber batting, specialty fabricated
cushions, quilting services and distribution of other
furniture components. Olympic has five manufacturing
facilities.
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. The Company sold Olympic because
management did not believe it was appropriate to invest
substantial amounts of capital in order to grow the business
to the size required to be an effective competitor in the
business. Taking this action allows the Company to focus on
its core strengths for the long-term.
Real Estate Activities. The Company owns approximately 900
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 Co. Cornwallis'
activities include residential and commercial lot development
<PAGE>
FORM 10-K Page 17
Item 1. (continued)
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.
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.
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. 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, 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 the upper-end segment of the
market 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.
The Company's competitiveness in other international market
segments is influenced by tariffs and shipping costs. The
Company is assessing the feasibility of manufacturing within
certain trade blocs in order to more efficiently compete in
these markets.
In 1993, the Company purchased a 20% ownership in Compania
Industrial de Parras S.A., ("CIPSA"), the largest Mexican
denim manufacturer and a significant jeans manufacturer. The
<PAGE>
FORM 10-K Page 18
Item 1. (continued)
Company's initial investment was approximately $24 million.
In October 1995 and Decemer 1994, CIPSA elected to increase
capital through the sale of additional shares of capital
stock, and the Company retained its 20% ownership level by
additional investments of $5.7 million and $6.7 million,
respectively. Through 1995 the Company accounted 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 the value of the peso versus the U.S. dollar. On
December 31, 1995, the peso was trading at 7.69 pesos per U.S.
dollar versus an exchange rate of approximately 3.45 prior to
the devaluation in December 1994. Pursuant to a December 1995
agreement, the Company reduced the carrying value of its
investment in CIPSA to expected net realizable value and in
January 1996 the Company sold 1.5 million shares of CIPSA,
approximately 10% of its holdings, for $.8 million. Based
upon the reduction in its ownership to 18% and certain other
factors, the Company will account for its investment in CIPSA
by the cost method in future periods. See "Item 7.
Management's Discussion of 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 world class
denim manufacturing plant in Mexico. The joint venture is
being financed with approximately $74 million in debt, non-
recourse to the partners, and a total equity investment of $60
million split equally between the two partners. Construction
of the joint venture facility was completed in 1995 and it
began production in fourth quarter 1995.
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 benefiting from its technological
expertise contributed to the venture. The Company plans to
export basic denims made by the joint venture throughout the
world by taking advantage of Cone's distribution network.
Cone Decorative Fabrics exports approximately 13% of its sales
volume. Styling and service are the principal competitive
factors affecting its position in these markets. The Company
<PAGE>
FORM 10-K Page 19
Item 1. (continued)
believes that there is a growing international preference for
U.S. styling and design. This styling, and the Company's
technical printing expertise, are not easily duplicated by
foreign competitors and have given 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. 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.
Customers
The Company has one unaffiliated customer, Levi Strauss
("Levi"), which accounts for more than 10% of consolidated
sales. Sales to this customer accounted for 39%, 34%, and 35%
of sales from continuing operations in 1995, 1994, and 1993,
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 relation-
<PAGE>
FORM 10-K Page 20
Item 1. (continued)
ship between Levi and the Company. The Supply Agreement
provides that, upon a change in control of the Company and at
Levi's election, Cone will enter into a three-year supply
arrangement with Levi pursuant to which Cone will make
available to Levi up to 30 million yards per fiscal quarter of
its proprietary denim fabrics used in Levi's 501 family of
jeans, and, so long as Levi purchases at least 10 million
yards per fiscal quarter, Cone will sell these fabrics
exclusively to Levi. If the change in control provision
becomes operative, the price for the fabric will be derived
from a formula based upon prevailing denim market prices,
adjusted to reflect the average differential between the price
for the Company's proprietary denim and the market price of
certain other denims in the market over the preceding 16
fiscal quarters, plus an additional 1.5% of the total price
paid during any quarter for which purchases by Levi are less
than 15 million yards. Although the Company believes that the
formula price will not materially vary from the price at which
the Company could have otherwise sold its proprietary denims,
there is no assurance that the formula price will reflect
then-current market prices for such denims.
For purposes of the Supply Agreement, a "change in control" is
deemed to occur upon a change in a majority of the directors
of the Company excluding persons nominated by the current
Board of Directors, or a merger, consolidation or other
transaction pursuant to which a third party obtains 50% or
more of the Company's outstanding voting shares. In the event
of a change in control followed by the Company's failure to
supply fabric to Levi in accordance with the three-year supply
arrangement, Levi will have the option to lease from Cone its
White Oak denim manufacturing plant, which is the Company's
largest denim facility, for a period not to exceed four years
from the time Levi receives notice that a change of control
occurred. The annual rents under such lease would be an
amount equal to 115% of Cone's average operating profit on the
plant for the immediately preceding three fiscal years.
The Supply Agreement expires on March 30, 1998 and is
automatically extended on each March 30, for an additional
year unless either party gives notice otherwise. Following a
change in control, the Supply Agreement would terminate at the
end of the three-year supply arrangement or of the lease term,
as the case may be. Additionally, Levi may terminate the
Supply Agreement upon 30 days' written notice and either party
may terminate the Supply Agreement in the event of the other
party's insolvency, bankruptcy or occurrence of a similar
event.
<PAGE>
FORM 10-K Page 21
Item 1. (continued)
Other than Levi, no single customer accounted for more than
10% of the Company's net sales in 1995, 1994, and 1993.
Backlog
The Company's apparel and home furnishings order backlog was
approximately $186 million, or 54 million yards, at December
31, 1995, as compared to approximately $189 million or 60
million yards at January 1, 1995. 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.
In addition, the Company has an ongoing proprietary program
for which orders are issued only for nearby delivery.
Therefore, orders on hand are not necessarily indicative of
total future revenues. It is expected that substantially all
of the orders outstanding at December 31, 1995, will be filled
within the first quarter of 1996.
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 workplace safety organization.
<PAGE>
FORM 10-K Page 22
Item 1. (continued)
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 as
a result of substantial declines in demand, downward pressures
on prices and margins caused by imported garments, and 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 the first quarter of 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.
Employees
At January 31, 1996, the Company employed approximately 7,050
persons, of whom approximately 1,350 were salaried and
approximately 5,700 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 from strikes or similar
events for more than a decade and considers its relationship
with its employees to be satisfactory.
Item 2. Property
After the sale of the Olympic Products division, the Company
operates 9 manufacturing plants - seven in North Carolina and
two in South Carolina. There are six apparel and three 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
<PAGE>
FORM 10-K Page 23
Item 1. (continued)
Company's manufacturing facilities total approximately 4.3
million square feet of floor space, with buildings generally
constructed of brick, steel, concrete or concrete block. All
such facilities are maintained in good condition and are
suitable for their respective purposes. Although such
facilities are substantially fully utilized, the Company
believes that it is in a position to respond to opportunities
to produce additional higher margin fabrics through changes in
product mix and through acquisition of greige goods from
outside sources for further processing and finishing by the
Company. The Company also has an ongoing capital expenditure
program that will increase its production capacity. See "Item
7. Management's Discussion and Analysis of Results of
Operations and Financial Condition". The Company leases
office buildings 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 575,000 square-foot building
completed in 1995, which provides 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
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,
<PAGE>
FORM 10-K Page 24
Item 3. (continued)
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 could establish detrimental reliance creating
estoppel of the Company.
On April 19, 1995, the District Court granted a motion by the
Company for summary judgment on the issues of equitable
estoppel and third-party beneficiary of contract which had
been remanded to it by the Court of Appeals. The court ruled
that the Plaintiffs could not forecast necessary proof of
detrimental reliance. The District Court, however, granted
Plaintiffs motion to amend the complaint insofar as they
sought to pursue a "new" claim for unjust enrichment, but
denied their motion to amend so far as they sought to add
claims for promissory estoppel and unilateral contract. The
court further denied the Company's motion to decertify the
class.
The District Court held a hearing on July 24, 1995 to decide
on the merits Plaintiffs' lone remaining claim of unjust
enrichment, and in an order entered September 25, 1995, the
District Court dismissed that claim with prejudice. On
October 20, 1995, the Plaintiffs appealed to the Court of
Appeals from the April 19, 1995 and September 25, 1995 orders
of the District Court. Due to the uncertainties inherent in
the litigation process, it is not possible to predict the
ultimate outcome of this lawsuit. However, the Company has
defended this matter vigorously, and it is the opinion of the
Company's management that the probability is remote that this
lawsuit, when finally concluded, will have a material adverse
affect on the Company's financial condition or results of
operations.
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 or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
<PAGE>
FORM 10-K Page 25
Item 4A. Executive Officers of the Registrant.
Name Age Position with the Company
J. Patrick Danahy 52 Director, President, and
Chief Executive Officer
John L. Bakane 45 Director,
Executive Vice President
and Chief Financial
Officer
Bud W. Willis III 53 Director and
Executive Vice President
James S. Butner 50 Vice President
Neil W. Koonce 48 Vice President and
General Counsel
Terry L. Weatherford 53 Vice President and
Secretary
David E. Bray 57 Treasurer
J. D. Holder 61 Controller
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.
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.
<PAGE>
FORM 10-K Page 26
Item 4A. (continued)
Bud W. Willis III was employed by the Company in August
1970 and has served in various management positions in the
Apparel Products Division (previously called 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 Apparel 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.
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. In May 1995 he was elected Vice
President and Secretary.
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.
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.
<PAGE>
FORM 10-K Page 27
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.2,1995 Jul. 2,1995 Oct.1,1995 Dec.31,1995
Common stock
prices
High 12 1/4 13 1/2 14 3/8 13 1/4
Low 10 5/8 11 12 1/2 10 3/4
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
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, 1996 was 511.
<PAGE>
FORM 10-K Page 28
Item 6. Selected Financial Data
The information appearing under the heading "Historical
Financial Data" on page 38 of the Registrant's 1995 Annual
Report to Shareholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
The information appearing under the heading "Management's
Discussion and Analysis of Results of Operations and Financial
Condition" on pages 12 thru 16 of the Registrant's 1995 Annual
Report to Shareholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes thereto,
appearing on pages 18 through 37 of the Registrant's 1995
Annual Report to Shareholders, are incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
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 prepared for the Annual
Meeting of Shareholders to be held on May 14, 1996, 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 prepared for the Annual
Meeting of Shareholders to be held on May 14, 1996, and is
hereby incorporated by reference.
<PAGE>
FORM 10-K Page 29
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 prepared for the Annual
Meeting of Shareholders to be held on May 14, 1996, 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
prepared for the Annual Meeting of Shareholders to be held on
May 14, 1996, and is hereby incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a)(1) The following financial statements of the Registrant
are incorporated by reference in Item 8 hereof:
Report of Independent Auditor
Consolidated Statements of Operations for the Years
Ended December 31, 1995, January 1, 1995, and January
2, 1994
Consolidated Balance Sheets as of December 31, 1995
and January 1, 1995
Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1995, January 1, 1995 and
January 2, 1994
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995, January 1, 1995 and January
2, 1994
Notes to Consolidated Financial Statements
<PAGE>
FORM 10-K Page 30
Item 14. (continued)
(a)(2) The following Financial Statement Schedules are
presented on pages 31 through 32 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
No report on 8-K was filed during fourth quarter 1995.
<PAGE>
FORM 10-K Page 31
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
McGladrey & Pullen, LLP
Greensboro, North Carolina
February 14, 1996
<PAGE>
FORM 10-K Page 32
<TABLE>
<S> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1995, January 1, 1995 and January 2, 1994
(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
December 31, 1995
Valuation accounts deducted
from the assets to which
they apply:
Provision for doubtful
accounts $ 3,000 $ 411 $ - $ 211 (a) $ 3,200
Inventory reserves 45 - - 45 (c) -
Reserve for future losses - 2,644 - - 2,644
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
</TABLE>
(a) Represents bad debts charged off.
(b) Represents reserves for discontinued operations (Note 19).
(c) Represents reserves charged to costs and expenses.
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 33
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.
* 2.1(e) Amendment to Receivables Purchase
Agreement dated as of June 30, 1995,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.1(e) to the Registrant's report on
Form 10-Q for the quarter ended
July 2, 1995.
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 34
Exhibit Sequential
No. Description Page No.
2.1(f) Amendment to Receivables Purchase
Agreement dated as of December 31,
1995, between the Registrant and
Delaware Funding Corporation. 45
* 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, filed as Exhibit 2.2(a)
to Registrant's report on Form 10-Q for
the quarter ended July 4, 1993, with
exhibits herein numbered 2.2(b),(c),
(d), (f), (g), and (j) attached.
* 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) First Amendment to Joint Venture
Agreement dated as of June 14, 1995,
between Compania Industrial de Parras,
S.A. de C.V., and Cone Mills (Mexico),
S.A. de C.V., filed as Exhibit 2.2(e)
to the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 35
Exhibit Sequential
No. Description Page No.
* 2.2(f) Joint Venture Registration Rights
Agreement dated as of June 25, 1993,
among Parras Cone de Mexico, S.A.,
Compania Industrial de Parras, S.A. de
C.V. and Cone Mills (Mexico),
S.A. de C.V. filed as Exhibit 2.2(e)
to Registrant's report on Form 10-Q
for the quarter ended July 4, 1993.
* 2.2(g) Parras Registration Rights Agreement
dated as of June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V. and
Cone Mills Corporation filed as Exhibit
2.2(f) to the Registrant's report on Form
10-Q for the quarter ended July 4, 1993.
* 2.2(h) Guaranty Agreement dated as of June 14,
1995, between Compania Industrial de
Parras, S.A. de C.V. and Cone Mills
Corporation filed as Exhibit 2.2(h) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 2.2(i) Guaranty Agreement dated as of June 15,
1995, between Cone Mills Corporation
and Morgan Guaranty Trust Company of
New York filed as Exhibit 2.2(I) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 2.2(j) 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.
* 2.2(k) Call Option dated September 25, 1995,
between Registrant and SMM Trust, 1995
- M, a Delaware business trust, filed
as Exhibit 2.2(k) to the Registrant's
report on Form 10-Q for the quarter
ended October 1, 1995.
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 36
Exhibit Sequential
No. Description Page No.
* 2.2(l) Put Option dated September 25, 1995,
between Registrant and SMM Trust, 1995
- M, a Delaware business trust, filed
as Exhibit 2.2(l) to the Registrant's
report on Form 10-Q for the quarter
ended October 1, 1995.
2.2(m) Letter Agreement dated January 11, 1996
among Registrant, Rodolfo Garcia Muriel,
and Compania Industrial de Parras,
S.A. de C.V. 48
* 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.
2.4 Olympic Division Acquisition Agreement
by and among Vitafoam Incorporated,
British Vita PLC, and Registrant
dated January 19, 1996 with related
Lease Agreement, Lease Agreement and
Option to Purchase, Sublease Agreement,
Services Agreement, License Agreement
And Hold Back Escrow Agreement, each
dated January 22, 1996. The following
exhibits and schedules to the
Acquisition Agreement have been
omitted. The Registrant hereby
undertakes to furnish supplementally
a copy of such omitted exhibit or
schedule to the Commission upon
request.
Exhibits
Exhibit A1 Form of Buyer Lease
Exhibit A2 Form of Buyer Lease
Exhibit B Form of Holdback Escrow
Agreement
Exhibit C1 Facility 1
Exhibit C2 Facility 2
Exhibit C3 Facility 3
Exhibit C4 Facility 4
Exhibit C5 Facility 5
Exhibit C6 Facility 6
Exhibit D Form of Sublease Agreement
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 37
Exhibit Sequential
No. Description Page No.
Exhibit E Form of Opinion of Buyer's
Counsel
Exhibit F Form of Opinion of Seller's
Counsel
Exhibit G Form of Assumption Agreement
Exhibit H Form of Services Agreement
Exhibit I Inventory Valuation Principles
Exhibit J Form of License Agreement
Schedules
Schedule 1.1(a) Excluded Assets
Schedule 1.1(b) Tangible Fixed Assets
Schedule 2.8 Assigned Contracts
Schedule 2.10 Allocation of Purchase
Price
Schedule 4.3 Consents and
Authorizations
Schedule 4.7 Contracts by Category
Schedule 4.9 Litigation
Schedule 4.11 Tax Matters
Schedule 4.12 Licenses and Permits
Schedule 4.14 Tangible Personal
Property
Schedule 4.15 Employees and Wage Rates
Schedule 4.16 Insurance Policies
Schedule 4.17 Intellectual Property
Schedule 4.18 Licenses to Intellectual
Property; Third-party
Patents
Schedule 4.19 Purchases from One Party
Schedule 4.22 Real Property
Schedule 4.23 Business Names
Schedule 4.24 Environmental Matters
Schedule 9.4 Facility 5 Remediation Plan 49
* 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).
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 38
Exhibit Sequential
No. Description Page No.
* 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.
* 4.3(d) Letter Agreement dated November 14, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.5 to the
Registrant's report on Form 8-K dated
March 1, 1995.
* 4.3(e) Letter Agreement dated as of June 30,
1995, amending the Note Agreement dated
August 13, 1992, between the Registrant
and the Prudential Insurance Company
of America filed as Exhibit 4.3(e) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 39
Exhibit Sequential
No. Description Page No.
4.3(f) Letter Agreement dated as of June 30,
1995, between the Registrant and
The Prudential Insurance Company
of America superseding Letter Agreement
filed as Exhibit 4.3(e) to the
Registrant's report on Form 10-Q
for the quarter ended July 2, 1995. 193
* 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.
* 4.4(b) Amendment to Credit Agreement dated as of
June 30, 1995, amending the 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 4.4(b) to the Registrant's
report on Form 10-Q for the quarter
ended July 2, 1995.
4.4(c) Amendment No. 2 to Credit Agreement
dated as of December 31, 1995, amending
the Amended and Restated Credit
Agreement dated November 18, 1994,
among the Registrant, various banks
and Morgan Guaranty Trust Company
of New York, as Agent. 195
* 4.5 Specimen Class A Preferred Stock
Certificate, filed as Exhibit 4.5
to the Registrant's Registration
Statement on Form S-1(File No. 33-46907).
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 40
Exhibit Sequential
No. Description Page No.
* 4.6 Specimen Common Stock Certificate,
effective June 18, 1992, filed as
Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-46907).
* 4.7 Registration rights agreement dated
as of March 30, 1992, among the
Registrant and the shareholders listed
therein, filed as Exhibit 4.8 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-46907).
* 4.8 The 401(k) Program of Cone Mills
Corporation, amended and restated
effective December 1, 1994, filed as
Exhibit 4.8 to the Registrant's
report on Form 10-K for year ended
January 1, 1995.
4.8(a) First Amendment to the 401(k)
Program of Cone Mills Corporation
dated May 9, 1995. 197
4.8(b) Second Amendment to the 401(k)
Program of Cone Mills Corporation
dated December 5, 1995. 199
* 4.9 Cone Mills Corporation 1983 ESOP as
amended and restated effective
December 1, 1994, filed as Exhibit
4.9 to the Registrant's report on
Form 10-K for year ended January 1,
1995.
4.9(a) First Amendment to the Cone Mills
Corporation 1983 ESOP dated
May 9, 1995. 204
4.9(b) Second Amendment to the Cone Mills
Corporation 1983 ESOP dated
December 5, 1995. 207
* 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).
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 41
Exhibit Sequential
No. Description Page No.
* 4.11 Form of 8 1/8% Debenture in aggregate
principal amount of $100,000,000 due
March 15, 2005, filed as Exhibit 4.11
to the Registrant's report on Form 10-K
for the year ended January 1, 1995.
Management contract or compensatory plan or arrangement
(Exhibits 10.1 - 10.12)
*10.1 Employees' Retirement Plan of Cone
Mills Corporation as amended and
restated effective December 1, 1994,
filed as Exhibit 10.1 to the Registrant's
report on Form 10-K for the year ended
January 1, 1995.
10.1(a) First Amendment to the Employees'
Retirement Plan of Cone Mills
Corporation dated May 9,1995. 209
10.1(b) Second Amendment to the Employees'
Retirement Plan of Cone Mills
Corporation dated December 5, 1995. 211
10.2 Cone Mills Corporation SERP as amended
and restated as of December 5, 1995. 221
10.3 Excess Benefit Plan of Cone Mills
Corporation as amended and restated
as of December 5, 1995. 228
*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 42
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
December 5, 1995. 235
*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 43
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 filed as Exhibit
10.15 to Registrant's report on Form 10-K
for the year ended January 1, 1995.
13 Portions of the Registrant's 1995 Annual
Report to Shareholders that are incor-
porated by reference into this Annual
Report on Form 10-K. 237
21 Subsidiaries of the Registrant. 263
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; 33-53705; and
33-67800) of their reports on the
consolidated financial statements and
schedules included in this Annual
Report on Form 10-K. 264
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; 33-51951;
and 33-51953) of their report on the
financial statements included in the
Form 11-K Annual Report of Cone Mills
Corporation Employee Equity Plan
(to be filed by amendment).
23.3 Consent of Auditors of Compania
Industrial de Parras S.A. de C.V.
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; 33-53705; and 33-67800)
of their report on the consolidated
financial statements to be included
in this Annual Report on Form 10-K
(to be filed by amendment).
<PAGE>
FORM 10-K INDEX TO EXHIBITS Page 44
Exhibit Sequential
No. Description Page No.
27 Financial Data Schedule 265
99.1 Form 11-K Annual Report of Cone Mills
Corporation Employee Equity Plan
(to be filed by amendment).
99.2 Consolidated Financial Statements of
Compania Industrial de Parras S.A.
de C.V. (to be filed by amendment).
* Incorporated by reference to the statement or report indicated.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cone Mills
Corporation consolidated financial statements dated December 31, 1995, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 336
<SECURITIES> 0
<RECEIVABLES> 60,955
<ALLOWANCES> 3,200
<INVENTORY> 162,374
<CURRENT-ASSETS> 233,892
<PP&E> 465,396
<DEPRECIATION> 198,188
<TOTAL-ASSETS> 584,320
<CURRENT-LIABILITIES> 150,872
<BONDS> 161,782
0
38,395
<COMMON> 2,738
<OTHER-SE> 180,992
<TOTAL-LIABILITY-AND-EQUITY> 584,320
<SALES> 910,217
<TOTAL-REVENUES> 910,217
<CGS> 785,232
<TOTAL-COSTS> 874,793
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14,518)
<INCOME-PRETAX> 1,058
<INCOME-TAX> 4,314
<INCOME-CONTINUING> (3,256)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,256)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
FORM 10-K Page 45
Exhibit 2.1(f)
AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
AMENDMENT dated as of December 31, 1995 (this
"Amendment") of a Receivables Purchase Agreement dated as of
August 11, 1992, previously amended (as previously amended,
the "Receivables Purchase Agreement") between CONE MILLS
CORPORATION (the "Seller")and DELAWARE FUNDING CORPORATION
(the "Buyer"). Terms defined in the Receivables Purchase
Agreement and not otherwise defined herein have the same
meaning when used herein.
WITNESSETH:
WHEREAS, the Seller and the Buyer are parties to the
Receivables Purchase Agreement; and
WHEREAS, the Seller and the Buyer desire to amend certain
covenants of the Seller in the Receivables Purchase Agreement.
NOW, THEREFORE, the parties hereto, in consideration of
their mutual covenants hereinafter set forth and intending to
be legally bound hereby, agree as follows:
ARTICLE I. Amendment to the Receivable Purchase
Agreement.
The Receivables Purchase Agreement shall be amended as
follows:
a. The definition "Consolidated Net Income" is hereby
added to Section 1.01 of the Receivables Purchase
Agreement and reads as follows:
"Consolidated Net Income" shall mean, for any
period, the net income of the Seller and its
Consolidated Subsidiaries for such period,
excluding non-cash equity earnings or losses from
unconsolidated foreign affiliates.
b. The definition of "EBIT" in Section 6.02(j)(i) of
the Receivables Purchase Agreement is hereby
amended to read as follows:
"EBIT" shall mean, for any period, the sum for the
Seller and its Consolidated Subsidiaries
(determined on a consolidated basis without
<PAGE>
FORM 10-K Page 46
Exhibit 2.1(f) (continued)
duplication in accordance with GAAP) of (a)
Consolidated Net Income for such period plus (b)
the aggregate amount deducted in determining
Consolidated Net Income in respect of Consolidated
Interest Expense and income taxes for such period.
c. Section 6.02(j)(ii) of the Receivables Purchase
Agreement is hereby amended as follows:
(i) The date "January 1, 1996" in the definition
of "Debt Ratio" is deleted and such date is
replaced with the date "January 1, 1997."
(ii) The definition of "Adjusted Cash Flow" is
amended to read as follows:
"Adjusted Cash Flow" shall mean, for any
period, the sum for the Seller and its
Consolidated Subsidiaries (determined on a
consolidated basis without duplication in
accordance with GAAP) of (a) Consolidated Net
Income for such period determined before
giving effect to any net gain or loss with
respect to discontinued operations during such
period, plus (b) the aggregate amount deducted
in determining the amount determined pursuant
to clause (a) for such period in respect of
(1) depreciation and amortization and (2) any
increase (or minus the aggregate amount added
in respect of any decrease) in deferred tax
liabilities.
ARTICLE II. Governing Law.
This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
ARTICLE III. Counterparts.
This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this
Amendment by signing such counterpart.
IN WITNESS WHEREOF, each of the parties hereto have
caused a counterpart of this Amendment to be duly executed as
of the date first above written.
<PAGE>
FORM 10-K Page 47
Exhibit 2.1(f) (continued)
DELAWARE FUNDING CORPORATION
By: J. P. Morgan Delaware,
as attorney-in-fact
for Delaware Funding Corporation
By: /s/ Richard A. Burke
Authorized signatory
Associate
Title
CONE MILLS CORPORATION
By: /s/ David E. Bray
Authorized signatory
Treasurer
Title
<PAGE>
FORM 10-K Page 48
Exhibit 2.2(m)
CONE MILLS CORPORATION
3101 NORTH ELM STREET
GREENSBORO, NC 27415-6540
January 11, 1996
Rodolfo Garcia Muriel
Compania Industrial de Parras, S.A. de C.V.
Dear Rodolfo:
This will memorialize our December 22, 1995 sale to you and
your family under the Support Agreement of 1.5 million shares
of CIPSA stock in exchange for N$6,000,000.
The 1.5 million shares are from the total of 4,001,317 shares
purchased by Cone on June 25, 1993, the certificates for which
are presently in the custody of CIPSA for reissuance to
reflect CIPSA's recent recapitalization. This is also
authority to CIPSA to issue said 1.5 million shares to you
upon receipt of wire transfer.
This confirms a wire transfer for dollars in the amount of
N$6,000,000 at the Janaury 12, 1996 exchange rate.
By signing below, you confirm this transaction and that
Section 9 of the Support Agreement has been complied with.
With best regards,
Sincerely,
CONE MILLS CORPORATION
/s/ J. Patrick Danahy
President and Chief Executive Officer
Accepted and agreed to this
11th Day of January, 1996.
/s/ Rodolfo Garcia Muriel
Director General
<PAGE>
FORM 10-K Page 49
Exhibit 2.4
OLYMPIC DIVISION ACQUISITION AGREEMENT
by and among
VITAFOAM INCORPORATED,
BRITISH VITA PLC,
and
CONE MILLS CORPORATION
January 19, 1996
<PAGE>
FORM 10-K Page 50
Exhibit 2.4 (continued)
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . .
1.2. References to Exhibits, Schedules, and
Sections. . . . . . . . . . . . . . . . . . . . . . . . . . .
1.3. Accounting Terms. . . . . . . . . . . . . . . . . . . . . . .
1.4. Seller's Knowledge. . . . . . . . . . . . . . . . . . . . . .
ARTICLE II
SALE, LEASE AND LICENSE OF ASSETS; TERMS OF PAYMENT; AND
NONCOMPETE
2.1. The Sale. . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2. Consideration . . . . . . . . . . . . . . . . . . . . . . . .
2.3. Final Fixed Assets Payment. . . . . . . . . . . . . . . . . .
2.4. Inventory Payment . . . . . . . . . . . . . . . . . . . . . .
2.5. Offer of Receivables. . . . . . . . . . . . . . . . . . . . .
2.6. License of Hydrophilic Foam Technology. . . . . . . . . . . .
2.7. Real Property and Other Expenses; Proration . . . . . . . . .
2.8. Assumption of Obligations and Liabilities . . . . . . . . . .
2.9. Seller's Assignments of Warranty Claims . . . . . . . . . . .
2.10. Allocation of Purchase Price. . . . . . . . . . . . . . . . .
2.11. Leaseback Realty. . . . . . . . . . . . . . . . . . . . . . .
2.12. Leased Realty . . . . . . . . . . . . . . . . . . . . . . . .
2.13. Noncompete. . . . . . . . . . . . . . . . . . . . . . . . . .
2.14. Services Agreement. . . . . . . . . . . . . . . . . . . . . .
2.15. Credit to Buyer . . . . . . . . . . . . . . . . . . . . . . .
2.16. No Amendment to Carpenter Agreement; Polymer
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE III
THE CLOSING
3.1. Time and Place of Closing . . . . . . . . . . . . . . . . . .
3.2. Deliveries by Seller. . . . . . . . . . . . . . . . . . . . .
3.3. Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1. Organization; Qualification . . . . . . . . . . . . . . . . .
4.2. Authority Relative to this Agreement. . . . . . . . . . . . .
4.3. Consent and Approvals; No Violation . . . . . . . . . . . . .
<PAGE>
FORM 10-K Page 51
Exhibit 2.4 (continued)
4.4. Purchased Assets Conveyed . . . . . . . . . . . . . . . . . .
4.5. Business and Trading Relations. . . . . . . . . . . . . . . .
4.6. Joint Ventures and Partnerships . . . . . . . . . . . . . . .
4.7. Certain Contracts and Arrangements. . . . . . . . . . . . . .
4.8. Assigned Contracts. . . . . . . . . . . . . . . . . . . . . .
4.9. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . .
4.10. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . .
4.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.12. Licenses and Authorizations . . . . . . . . . . . . . . . . .
4.13. Title to Real Property. . . . . . . . . . . . . . . . . . . .
4.14. Title to Personal Property. . . . . . . . . . . . . . . . . .
4.15. Corporate and Personnel Data; Labor
Relations . . . . . . . . . . . . . . . . . . . . . . . .
4.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .
4.17. Intellectual Property Rights. . . . . . . . . . . . . . . . .
4.18. Infringements . . . . . . . . . . . . . . . . . . . . . . . .
4.19. Purchases and Sales from or to One Party. . . . . . . . . . .
4.20. Financial Statements. . . . . . . . . . . . . . . . . . . . .
4.21. Books and Records . . . . . . . . . . . . . . . . . . . . . .
4.22. Condition of Real Property. . . . . . . . . . . . . . . . . .
4.23. Business Names. . . . . . . . . . . . . . . . . . . . . . . .
4.24. Environmental Matters . . . . . . . . . . . . . . . . . . . .
4.25. Compliance With Laws. . . . . . . . . . . . . . . . . . . . .
4.26. Minimum Purchases . . . . . . . . . . . . . . . . . . . . . .
4.27. Periphlex Agreement . . . . . . . . . . . . . . . . . . . . .
4.28. Accuracy of Information . . . . . . . . . . . . . . . . . . .
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1. Organization. . . . . . . . . . . . . . . . . . . . . . . . .
5.2. Authority Relative to this Agreement. . . . . . . . . . . . .
5.3. Consents and Approvals; No Violation. . . . . . . . . . . . .
5.4. Qualification . . . . . . . . . . . . . . . . . . . . . . . .
5.5. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BRITISH VITA
6.1. Organization and Authority. . . . . . . . . . . . . . . . . .
6.2. Consents and Approvals; No Violation. . . . . . . . . . . . .
6.3. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
FORM 10-K Page 52
Exhibit 2.4 (continued)
ARTICLE VII
COVENANTS OF SELLER AND BUYER
7.1. Conduct of Business . . . . . . . . . . . . . . . . . . . . .
7.2. Access to Information . . . . . . . . . . . . . . . . . . . .
7.3. Employees and Employee Benefits . . . . . . . . . . . . . . .
7.4. Consummation of Agreement . . . . . . . . . . . . . . . . . .
7.5. Filings . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.6. Further Assurances. . . . . . . . . . . . . . . . . . . . . .
7.7. Actions by British Vita . . . . . . . . . . . . . . . . . . .
7.8. Assistance in Pending Litigation. . . . . . . . . . . . . . .
7.9. Other Covenants . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII
CLOSING CONDITIONS
8.1. Conditions to Each Party's Obligations to
Effect the Transactions Contemplated Hereby . . . . . . . . .
8.2. Conditions to the Obligations of Seller to
Effect the Transactions Contemplated Hereby . . . . . . . . .
8.3. Conditions to the Obligations of Buyer to
Effect the Transactions Contemplated Hereby . . . . . . . . .
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
9.1. Survival of Representations . . . . . . . . . . . . . . . . .
9.2. Seller's Agreement to Indemnify . . . . . . . . . . . . . . .
9.3. Limitation of Seller's Indemnification
Obligations . . . . . . . . . . . . . . . . . . . . . . . . .
9.4. Third Party Actions or Claims; Remediation
Procedures. . . . . . . . . . . . . . . . . . . . . . . . . .
9.5. Seller's Payment of Its Indemnification
Obligations . . . . . . . . . . . . . . . . . . . . . . . . .
9.6. Conflict with the Escrow Agreement. . . . . . . . . . . . . .
9.7. Indemnification by Buyer. . . . . . . . . . . . . . . . . . .
ARTICLE X
TERMINATION
10.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . .
10.2. Procedure and Effect of Termination or
Failure to Close. . . . . . . . . . . . . . . . . . . . .
<PAGE>
FORM 10-K Page 53
Exhibit 2.4 (continued)
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Commissions . . . . . . . . . . . . . . . . . . . . . . . . .
11.2. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .
11.3. Further Assurances. . . . . . . . . . . . . . . . . . . . . .
11.4. Amendment and Modification. . . . . . . . . . . . . . . . . .
11.5. Waiver of Compliance; Consents. . . . . . . . . . . . . . . .
11.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.7. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . .
11.8. Governing Law; Jurisdiction . . . . . . . . . . . . . . . . .
11.9. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . .
11.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .
11.11. Interpretation. . . . . . . . . . . . . . . . . . . . . . . .
11.12. Public Announcements. . . . . . . . . . . . . . . . . . . . .
11.13. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . .
11.14. Bulk Sales. . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBITS
Exhibit A1 Form of Buyer Lease
Exhibit A2 Form of Buyer Lease
Exhibit B Form of Holdback Escrow Agreement
Exhibit C1 Facility 1
Exhibit C2 Facility 2
Exhibit C3 Facility 3
Exhibit C4 Facility 4
Exhibit C5 Facility 5
Exhibit C6 Facility 6
Exhibit D Form of Sublease Agreement
Exhibit E Form of Opinion of Buyer's Counsel
Exhibit F Form of Opinion of Seller's Counsel
Exhibit G Form of Assumption Agreement
Exhibit H Form of Services Agreement
Exhibit I Inventory Valuation Principles
Exhibit J Form of License Agreement
SCHEDULES
Schedule 1.1(a) Excluded Assets
Schedule 1.1(b) Tangible Fixed Assets
Schedule 2.8 Assigned Contracts
Schedule 2.10 Allocation of Purchase Price
Schedule 4.3 Consents and Authorizations
Schedule 4.7 Contracts by Category
Schedule 4.9 Litigation
Schedule 4.11 Tax Matters
Schedule 4.12 Licenses and Permits
Schedule 4.14 Tangible Personal Property
<PAGE>
FORM 10-K Page 54
Exhibit 2.4 (continued)
Schedule 4.15 Employees and Wage Rates
Schedule 4.16 Insurance Policies
Schedule 4.17 Intellectual Property
Schedule 4.18 Licenses to Intellectual Property;
Third-party Patents
Schedule 4.19 Purchases from One Party
Schedule 4.22 Real Property
Schedule 4.23 Business Names
Schedule 4.24 Environmental Matters
Schedule 9.4 Facility 5 Remediation Plan
<PAGE>
FORM 10-K Page 55
Exhibit 2.4 (continued)
OLYMPIC DIVISION ACQUISITION AGREEMENT
THIS AGREEMENT is made and entered as of the 19th day of
January, 1996, and is by and among CONE MILLS CORPORATION, a
North Carolina corporation ("Seller"), BRITISH VITA PLC, a
United Kingdom company ("British Vita"), and VITAFOAM
INCORPORATED, a North Carolina corporation and an indirect
wholly owned subsidiary of British Vita ("Buyer").
Background Statement
Seller is engaged in the business of manufacturing,
converting and selling polyurethane foam, polyester fiber and
related products at six facilities located in Tupelo,
Mississippi (one facility), Greensboro, North Carolina (two
facilities), Trinity, North Carolina (one facility) and High
Point, North Carolina (one facility), Thomasville, North
Carolina (one facility), all of which together are organized
as and constitute the "Olympic Products Company" or "Olympic
Division" of Seller (the "Business"). Buyer desires to buy,
and Seller desires to sell, certain of the assets, as
described herein, that are used in, or in connection with, the
Business, on the terms and conditions set forth herein.
Statement of Agreement
In consideration of the premises and the mutual covenants
herein contained, the adequacy and sufficiency of which are
hereby acknowledged, the parties hereto, for themselves, their
successors and assigns, agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. The following terms shall have the
following meanings:
"Arbitration Rules" shall have the meaning given to it in
Section 11.9.
"Assigned Contracts" shall have the meaning given to it
in Section 4.8.
"Assumption Agreement" shall mean an assignment and
assumption agreement of the form attached hereto as Exhibit G
pursuant to which Seller shall assign to Buyer and Buyer shall
<PAGE>
FORM 10-K Page 56
Exhibit 2.4 (continued)
assume certain of Seller's contracts and liabilities and
obligations to the extent, but only to the extent, provided in
Section 2.8.
"British Vita" shall mean British Vita PLC, a United
Kingdom company.
"Business" shall have the meaning given to it in the
Background Statement.
"Business Day" shall mean any day other than a Saturday
or Sunday, a United States of America or North Carolina legal
holiday, or a day on which commercial banks in Greensboro,
North Carolina are required by law to be closed.
"Business Employees" shall have the meaning given to it
in Section 7.3(a).
"Buyer" shall mean Vitafoam Incorporated, a North
Carolina corporation.
"Buyer Entity" shall have the meaning given to it in
Section 9.2.
"Buyer Leases" shall mean the lease agreements, to be
executed at closing in substantially the forms attached hereto
as Exhibits A-1 and A-2, between Buyer, as tenant, and Seller,
as landlord, pursuant to which Seller will lease the Leaseback
Realty to Buyer.
"Buyer's Accountants" shall have the meaning given to it
in Section 2.3.
"Buyer's Damages" shall have the meaning given to it in
Section 9.2.
"Carpenter Agreement" shall have the meaning given to it
in Section 4.26.
"Cash" shall mean cash, any cash equivalent, or any other
kind of same-day available funds.
"Closing" shall have the meaning given to it in Section
3.1.
"Closing Date" shall mean the date referred to in Section
3.1.
<PAGE>
FORM 10-K Page 57
Exhibit 2.4 (continued)
"Decision" shall have the meaning given to it in Section
9.4(b).
"Disputes" shall have the meaning given to it in Section
11.9.
"Environmental Law" shall mean any presently existing
federal, state or local law (including common law), statute,
ordinance, rule, regulation, permit, directive, license,
approval, guidance, interpretation, order, or other legal
requirement relating to the protection of human health or the
environment, including, but not limited to, any requirement
pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation
of materials that are or may constitute a threat to human
health or the environment. Without limiting the foregoing,
each of the following is an Environmental Law: the
Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"), the
Hazardous Material Transportation Act (49 U.S.C. Section 1801
et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.) ("RCRA"), the Federal Water
Pollution Control Act (33 U.S.C. Section 1251 et seq.), the
Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.), the
Safe Drinking Water Act (42 U.S.C. Section 300 et seq.) and
the Occupational Safety and Health Act (29 U.S.C. Section 651
et seq.) ("OSHA"), as such laws and regulations have been
amended or supplemented, and each similar federal, state or
local statute, and each rule and regulation promulgated under
such federal, state and local laws.
"Escrow Agent" shall mean the Person named as escrow
agent under the Escrow Agreement.
"Escrow Agreement" shall mean the Holdback Escrow
Agreement of the form attached hereto as Exhibit B to be
entered into on the Closing Date by Buyer, Seller and the
Escrow Agent to be named therein.
"Estimated Fixed Assets Payment" shall have the meaning
given to it in Section 2.2(a).
<PAGE>
FORM 10-K Page 58
Exhibit 2.4 (continued)
"Excluded Assets" shall mean the Leaseback Realty; the
Licensed Technology; any insurance policies and claims
receivable thereunder, or bonds, letters of credit or similar
items or any cash surrender value in regard thereto; any of
Seller's cash or cash equivalents; the books, records and
documents relating to the Business (except that Seller shall
provide Buyer, on the Closing Date and from time to time
thereafter, with access to and/or copies of such books,
records and documents, provided that Buyer will reimburse
Seller for the reasonable cost of such copies); any claims or
rights against third parties (other than express or implied
warranties or other similar claims that Seller may have with
respect to the Purchased Assets) that Seller may have or
hereafter acquire arising out of any matters occurring prior
to the close of business on the Closing Date, including
without limitation claims for refunds of federal, state or
local franchise, income or other taxes; Receivables, provided
that Seller shall offer to sell Receivables to Buyer at the
times and in the manner set forth in Section 2.5; and the
properties and rights listed on Schedule 1.1(a).
"Existing Lease" shall mean the Lease Agreement dated
July 18, 1977, between High Point Industrial Leasing, a North
Carolina limited partnership, as landlord, and Seller, as
tenant, pursuant to which Seller leases Facility 3 (High
Point).
"Facility" or "Facilities" shall mean one or more of the
following six (6) manufacturing facilities owned or leased by
Seller in connection with its operation of the Business:
(1) "Facility 1" is located on a 81.73 acre tract of
land located on Pleasant Garden Road in Fentress
Township, Guilford County, North Carolina, which
is described more specifically in Exhibit C-1.
(2) "Facility 2" is located on a 15.14 acre tract of
land located at 2005 Yanceyville Street in the
City of Greensboro, Guilford County, North
Carolina, which is described more specifically in
Exhibit C-2.
(3) "Facility 3" is located on a 6.32 acre tract of
land located on Shore Drive in the City of High
Point, Guilford County, North Carolina, which is
described more specifically in Exhibit C-3.
<PAGE>
FORM 10-K Page 59
Exhibit 2.4 (continued)
(4) "Facility 4" is located on a 21.79 acre tract of
land located on Trinity Street Extension in
Thomasville Township, Davidson County, North
Carolina, which is described more specifically in
Exhibit C-4.
(5) "Facility 5" is located on a 54.8 acre tract of
land located on State Road 1571 at State Road
1532 in New Market Township, Randolph County,
North Carolina, which is described more
specifically in Exhibit C-5.
(6) "Facility 6" is located on a 23.76 acre tract of
land located on South Veterans Boulevard in the
City of Tupelo, Lee County, Mississippi, which is
described more specifically in Exhibit C-6.
"Final Fixed Assets Value" shall have the meaning given
to it in Section 2.3(a).
"Financial Statements" shall have the meaning given to it
in Section 4.20.
"Fixed Assets Report" shall have the meaning given to it
in Section 2.3(a).
"GAAP" shall mean generally accepted accounting
principles, as recognized by the American Institute of
Certified Public Accountants and Financial Accounting
Standards Board, consistently applied.
"Governmental Authority" shall mean any nation, province,
state or other political subdivision thereof, and any agency,
natural person or other entity exercising executive,
legislative, regulatory or administrative functions of or
pertaining to government.
"Hazardous Material" shall mean any substance or material
meeting any one or more of the following criteria: (i) it is
or contains a substance designated as a hazardous waste,
hazardous substance, hazardous material, pollutant,
contaminant or toxic substance under any Environmental Law;
(ii) it is toxic, explosive, corrosive, reactive, ignitable,
infectious, radioactive, mutagenic, dangerous or otherwise
hazardous; (iii) its presence at some quantity requires
investigation, notification or remediation under any
Environmental Law or common law; (iv) it constitutes a
<PAGE>
FORM 10-K Page 60
Exhibit 2.4 (continued)
nuisance or a health or safety hazard to persons or property;
or (v) it is or contains, without limiting the foregoing,
asbestos, polychlorinated biphenyls, petroleum hydrocarbons,
petroleum derived substances or waste, crude oil or any
fraction thereof, nuclear fuel, natural gas or synthetic gas.
"HSR Act" shall have the meaning set forth in
Section 7.5.
"Hydrophilic Foam Business" shall mean that portion of
the Business comprising the manufacture and sale of
reticulated absorbent foam products based on the proprietary
technology currently employed at Facility 1.
"Information" shall have the meaning given to it in
Section 7.2(b).
"Inspection Date" shall have the meaning given to in
Section 4.13(c).
"Intangibles Payment" shall have the meaning given to it
in Section 2.2(a).
"Intellectual Property Rights" shall mean all copyrights,
patents, trademarks, trade names, processes, computer programs
and program rights, trade secrets, customer lists, goodwill
and other similar intangible rights and interests owned or
used by Seller in connection with the Business, including
licenses thereof, except as set forth on Schedule 1.1(a).
"Inventory" shall mean the raw materials, work-in-
process, finished goods inventories and other inventories, and
supplies and spare parts, owned or used by Seller to be used
in, or in connection with, or relating to, the Business, which
are to be transferred to Buyer from Seller pursuant to this
Agreement.
"Inventory Payment" shall have the meaning given to it in
Section 2.2(a).
"Inventory Report" shall have the meaning given to it in
Section 2.3(a).
"Inventory Value" shall have the meaning given to it in
Section 2.3(a).
<PAGE>
FORM 10-K Page 61
Exhibit 2.4 (continued)
"Leaseback Realty" shall mean the real property on which
Facility 2 (Greensboro-Rebond) and Facility 5 (Trinity-Comfort
Sleep) are located, and all improvements located thereon and
all easements appurtenant thereto, all of which will be leased
by Seller to Buyer pursuant to the Buyer Leases.
"Leased Realty" shall mean the real property on which
Facility 3 (High Point) is located, and all improvements
located thereon and all easements appurtenant thereto, all of
which is leased by Seller pursuant to the Existing Lease.
"Leased Vehicles" shall mean the vehicles used by Seller
primarily in the Business that are leased from Third Parties
and are more particularly described in Schedule 1 to the
Services Agreement.
"License Agreement" shall mean a license agreement of the
form attached hereto as Exhibit J pursuant to which Seller
shall license to Buyer the Licensed Technology and Seller
shall grant to Buyer an option to purchase the Licensed
Technology.
"Licensed Technology" shall mean any and all copyrights,
patents, patent applications, processes, computer programs and
program rights, know-how, trade secrets, goodwill and other
similar intangible rights and interests owned or used by
Licensor in connection with the Hydrophilic Foam Business,
including licenses and all written specifications, manuals,
drawings, diagrams, flow charts and other documents which
relate to the Licensed Technology and which are necessary or
helpful with respect to the operations of the Hydrophilic Foam
Business and Seller's rights and interests under the
Settlement Agreement dated July 11, 1995 among Seller, Time
Release Sciences, Inc. and the shareholders of Time Release
Sciences, Inc.
"Material Adverse Effect on the Business" shall mean any
effect that could be materially adverse to the Business, its
assets, financial condition, results of operations or
prospects in an amount in excess of $75,000.
"Periphlex" shall have the meaning given to it in Section
4.27.
"Periphlex Contract" shall have the meaning given to it
in Section 4.27.
<PAGE>
FORM 10-K Page 62
Exhibit 2.4 (continued)
"Permitted Encumbrances" shall have the meaning given to
it in Section 4.13(a).
"Person" shall mean a corporation, an association, a
joint venture, an organization, a business, an individual, a
trust or a government or political subdivision thereof, a
government agency, or any other legal entity.
"Purchased Assets" shall mean the collective assets and
properties of Seller, whether real, personal, tangible or
intangible, that are used in connection with the Business
(specifically excepting the Excluded Assets), including all
additions thereto prior to the Closing Date, but less all
dispositions of finished goods inventory and scrap inventory
in the ordinary course of business and other assets consumed
or disposed of in the ordinary course of business prior to the
Closing Date, including the following items used in connection
with the Business: the Purchased Realty and Seller's rights
with respect to the Leased Realty, to the extent transferred
in the Sublease Agreement; the Inventory; Seller's other
tangible personal property including all machinery, equipment,
vehicles, rolling stock, furniture and furnishings, and
fixtures, including without limitation the tangible personal
property listed in Schedule 4.14; a. all of Seller's right,
title and interest in and to, or under, all contracts,
agreements, options, leases and other similar arrangements
related to the Business, including without limitation the
Assigned Contracts, as listed in Schedule 4.8; b. the
Intellectual Property Rights as listed in Schedule 4.17; all
licenses, permits (including environmental permits) and
authorizations issued by or obtained from any Governmental
Authority or other Person required for the conduct of the
Business as presently conducted to the extent the transfer of
which is permitted by law; and any and all express or implied
warranties or other similar claims that Seller may have with
respect to any of the Purchased Assets.
"Purchase Price" shall mean the aggregate of all amounts
paid or to be paid to Seller by Buyer pursuant to Article II
hereof.
"Purchased Realty" shall mean the real property on which
Facility 1 (Greensboro-Pleasant Garden), Facility 4
(Thomasville) and Facility 6 (Tupelo) are located, and all
improvements located thereon and all easements appurtenant
thereto, all of which will be conveyed in fee simple by
Seller to Buyer.
<PAGE>
FORM 10-K Page 63
Exhibit 2.4 (continued)
"Realty" shall mean, collectively, the Leaseback Realty,
the Leased Realty, and the Purchased Realty.
"Referee Accountant" shall have the meaning given to it
in Section 2.3(b).
"Receivables" shall mean all "accounts," within the
meaning of the Uniform Commercial Code, of Seller arising out
of the operation of the Business.
"Seller" shall mean Cone Mills Corporation, a North
Carolina corporation.
"Seller's Accountants" shall mean McGladrey & Pullen,
LLP, Seller's independent accountants.
"Services Agreement" shall have the meaning given to it
in Section 2.14.
"Sublease Agreement" shall mean the Sublease Agreement,
to be executed at Closing in substantially the form attached
hereto as Exhibit D, pursuant to which Seller will sublease to
Buyer Facility 3 after Closing for a period of approximately
two years.
"Tangible Fixed Assets" shall mean the fixed assets, as
defined in accordance with GAAP, of Seller used in the
Business, to be transferred to Buyer from Seller pursuant to
this Agreement all of which are listed in Schedule 1.1(b).
"Taxes" shall mean all taxes, charges, fees, levies or
other assessments (whether federal, state, local or foreign),
including, without limitation, income, gross receipts, excise,
property, estate, sales, use, transfer, license, payroll,
franchise, ad valorem, withholding, Social Security and
unemployment taxes; and such term shall include any interest,
penalties and additions to such taxes, charges, fees, levies
or other assessments.
"Tax Returns" shall mean any report, return, or statement
required to be supplied to a taxing authority in connection
with Taxes.
"Third Party" shall mean any Person other than Buyer or
Seller.
"Third-Party Claim" shall have the meaning given to it in
Section 9.4.
<PAGE>
FORM 10-K Page 64
Exhibit 2.4 (continued)
1.2. References to Exhibits, Schedules, and Sections.
References to "Exhibits" and "Schedules" herein shall refer to
those certain Exhibits and Schedules, respectively, attached
hereto. References to "Sections" herein shall refer to the
various sections of this Agreement.
1.3. Accounting Terms. Any accounting terms used in
this Agreement that are not specifically defined herein shall
have the meanings customarily given to them in accordance with
GAAP; provided, however, that in the event that changes in
GAAP shall be mandated by the Financial Accounting Standards
Board, or any similar accounting body of comparable standing,
to the extent that such changes would modify or could modify
such accounting terms or the interpretation or computation
thereof, such changes shall not be followed until and unless
the parties hereto have agreed to amend this Agreement to
reflect any such change.
1.4. Seller's Knowledge. As used herein, the phrase
"to the best of Seller's knowledge" and phrases of similar
construction shall be deemed to mean the actual knowledge of
the officers of Seller and Seller's Corporate Environmental
Manager (Arthur J. Toompas) upon each such Person's due
inquiry of the management of the Business (including the
President of the Olympic Division and the plant manager of
each of the six facilities operated by the Business) as a
prudent seller of a business would make in similar
circumstances.
ARTICLE II
SALE, LEASE AND LICENSE OF ASSETS; TERMS OF PAYMENT; AND
NONCOMPETE
2.1. The Sale. Upon the terms and subject to the
conditions of this Agreement, on the Closing Date, Seller will
sell and deliver to Buyer, and Buyer will purchase and accept
from Seller, the Purchased Assets.
2.2. Consideration. a. Upon the terms and subject to
the conditions contained in this Agreement, and in
consideration of the sale of the Purchased Assets, at the
following times, Buyer will pay to Seller the following
amounts in the following manner:
<PAGE>
FORM 10-K Page 65
Exhibit 2.4 (continued)
(i) On the Closing Date, the sum of Nineteen Million
Six Hundred Fifty Thousand Dollars ($19,650,000) and, on
January 26, 1996, the sum of Four Hundred Seventy-two Thousand
One Hundred Sixty-two Dollars ($472,162) (such aggregate sum,
the "Estimated Fixed Assets Payment") in Cash, subject,
however, to the adjustment set forth in Section 2.3;
(ii) On the Closing Date, the sum of Ten Million
Dollars ($10,000,000) in Cash (the "Intangibles Payment"); and
(iii)As provided in Section 2.4, the payment in cash for
all of the Inventory (the "Inventory Payment").
(b) Notwithstanding any other provision set forth
herein, Four Million Dollars ($4,000,000) of the Inventory
Payment otherwise payable to Seller shall be paid into escrow
pursuant to the Escrow Agreement at the time the Inventory
Payment is to be paid to Seller as provided in Section 2.4.
2.3. Final Fixed Assets Payment. (a) Within thirty
(30) days after the Closing Date, Seller shall prepare and
deliver to Buyer a schedule (the "Fixed Assets Report"),
setting forth all of the Tangible Fixed Assets and their
respective depreciated book values as of the Closing Date
determined in accordance with GAAP, and such work papers and
other supporting detail as Buyer and its independent public
accounts ("Buyer's Accountants") shall reasonably request.
Depreciation shall be calculated consistent with Seller's past
practice and shall be based on the actual number of days
elapsed for any portion of a year. Seller shall deliver to
Buyer, simultaneously with delivery of the Fixed Assets
Report, a certificate of Seller's chief financial officer that
the valuation set forth on the Fixed Assets Report sets forth
the book value of the Tangible Fixed Assets in accordance with
this Agreement. The sum of the values of all Tangible Fixed
Assets reflected in the Fixed Assets Report, less $1,500,000
and adjusted as provided in paragraph (b) below, shall
constitute the final Fixed Assets Value (the "Final Fixed
Assets Value").
(b) Following delivery of the Fixed Assets Report,
Buyer and Buyer's Accountants shall have twenty (20) days in
which to review and examine the Fixed Assets Report. If
following such review, Buyer disputes the accuracy of the
Fixed Assets Report or the determination of the Final Fixed
Assets Value, Buyer and Seller, or each of their accountants,
shall meet to reconcile any such dispute. If such dispute has
<PAGE>
FORM 10-K Page 66
Exhibit 2.4 (continued)
not been reconciled within ten (10) days of Buyer's
notification to Seller of the existence of such dispute, or
such longer period upon which Buyer and Seller shall agree,
they shall refer such dispute to an accountant or accounting
firm on whom Buyer's and Seller's Accountants shall mutually
agree to resolve the dispute ("Referee Accountant"). Seller
and Buyer shall furnish to the Referee Accountant copies of
the Fixed Assets Report and all such working papers and
supporting detail as the Referee Accountant shall reasonably
request. The decision of the Referee Accountant shall be
final and binding upon all parties, absent manifest error.
Seller and Buyer each shall pay one-half of the fees and
expenses of the Referee Accountant.
(c) Following determination of the Final Fixed Assets
Value as set forth in subparagraphs (a) and (b), Seller and
Buyer shall adjust the Estimated Fixed Assets Payment in
accordance with this subparagraph (c). If the Final Fixed
Assets Value exceeds the Estimated Fixed Assets Payment, Buyer
shall promptly pay in Cash to Seller the amount of such
difference. If the Final Fixed Assets Value is less than the
Estimated Fixed Assets Payment, Seller shall promptly pay to
Buyer in Cash, the amount of such difference.
2.4. Inventory Payment. (a) On the Closing Date (or
such earlier date as agreed by Seller and Buyer), Seller shall
conduct a physical count of the Inventory, which count shall
be observed by Buyer and Buyer's Accountants, and shall as
promptly as practicable thereafter, and in no event more than
thirty (30) days thereafter, prepare and deliver to Buyer a
schedule (the "Inventory Report") setting forth the quantity
and value of each particular type of Inventory as of the
Closing Date. The valuation of the Inventory shall be
determined in accordance with the principles set forth in
Exhibit I. Seller shall deliver to Buyer, simultaneously with
delivery of the Inventory Report, a certificate of Seller's
chief financial officer that the valuation set forth on the
Inventory Report has been prepared in accordance with this
Agreement and such work papers and other supporting detail as
Buyer and Buyer's Accountants shall reasonably request. The
sum of the values of all Inventory reflected in the Inventory
Report, adjusted as provided in paragraph (b) below, shall
constitute the inventory value (the "Inventory Value").
(b) Following delivery of the Inventory Report, Buyer
and Buyer's Accountants shall have twenty (20) days in which
to review and examine the Inventory Report. If Buyer does not
<PAGE>
FORM 10-K Page 67
Exhibit 2.4 (continued)
give Seller notice of any dispute with respect to the accuracy
of the Inventory Report or the determination of the Inventory
Value within such period, the Inventory Value shall be the
amount set forth in such Inventory Report. If, following such
review, Buyer disputes the accuracy of the Inventory Report or
the determination of the Inventory Value, Buyer and Seller or
each of their accountants, shall meet to reconcile any such
dispute. If such dispute has not been reconciled within
twenty (20) days following delivery of the Inventory Report,
Seller and Buyer shall refer such dispute to the Referee
Accountant for resolution. Seller and Buyer shall furnish to
the Referee Accountant copies of the Inventory Report and all
such working papers and supporting detail as the Referee
Accountant shall reasonably request. Seller and Buyer each
shall use reasonable efforts to obtain a decision from the
Referee Accountant, and such decision of the Referee
Accountant shall be final and binding upon all parties, absent
manifest error. Seller and Buyer each shall pay one-half of
the fees and expenses of the Referee Accountant.
(c) Immediately following the determination of the
Inventory Value, Buyer shall make the Inventory Payment in
Cash in an amount equal to the Inventory Value to Seller in
the manner provided in Section 2.2. In the event of any
dispute in the amount of the Inventory Value, Buyer shall
promptly pay to Seller in the manner provided in Section 2.2
an amount equal to the portion of the Inventory Value not in
dispute (the first $4,000,000 of which shall be paid into
escrow as provided in Section 2.2(b)) and shall pay an amount
equal to the remainder of the Inventory Value immediately upon
the determination thereof in the manner set forth in
Section 2.4(b).
2.5. Offer of Receivables. Seller agrees that prior
to commencing any legal proceedings for the collection of any
Receivable, Seller shall notify Buyer in writing of its intent
to do so and shall enter into good faith negotiations to sell
such Receivable to Buyer. In the event that Buyer and Seller
have not agreed to the terms of sale of such Receivable within
ten (10) Business Days following Buyer's receipt of such
notice, Seller may commence such legal proceedings. Upon
Seller's request, Buyer shall provide to Seller reasonable
assistance (including access to applicable records transferred
to Buyer) in connection with the collection of such
Receivables.
<PAGE>
FORM 10-K Page 68
Exhibit 2.4 (continued)
2.6. License of Hydrophilic Foam Technology. At the
Closing, Buyer and Seller shall enter into the License
Agreement in substantially the form of the License Agreement
attached hereto as Exhibit J.
2.7. Real Property and Other Expenses; Proration. (a)
Seller shall pay all applicable real property transfer taxes
on the deeds conveying the Purchased Realty. Buyer shall pay
any recording fees for recording all deeds, the assignment of
the Existing Lease and memoranda of the Buyer Leases, any
sales or use taxes, and the cost of any title insurance and
surveys obtained by Buyer.
(b) All ad valorem taxes on real and personal property
for the year in which the Closing occurs shall be prorated per
diem on a calendar-year basis up to the Closing Date. If any
such taxes are not due until after the Closing Date, Buyer
shall assume the responsibility of paying the taxes when the
tax bill is submitted, and at such time upon Buyer's request,
Seller will remit its pro rata share of such taxes to Buyer.
(c) All other expenses of the Business shall be
prorated on a daily basis between Seller and Buyer as of the
Closing Date. Seller agrees to pay in full its pro rata share
of all expenses of the Business as of the Closing Date.
Seller agrees that all expenses, charges, bills, or trade
accounts maintained or incurred by Seller or its agents in
connection with the management or operation of the Business or
otherwise accrued for the period prior to the Closing Date
will be paid in full on or before the date past due; provided,
however, that all such expenses, charges, bills, or trade
accounts that have accrued but have not been billed as of the
Closing Date will be paid in full by Seller after the time
Seller receives the bills and before the date such bills
become past due. Without limiting the generality of the
foregoing, the following items will be adjusted as of the
Closing Date:
(i) rent and other charges payable under the
Existing Lease for the calendar month in which the Closing
Date occurs;
(ii) water and utility charges and sanitary sewer
taxes, if any;
(iii) charges under service, management or other
agreements, if any, that remain in effect after the Closing
Date; and
<PAGE>
FORM 10-K Page 69
Exhibit 2.4 (continued)
(iv) other operating expenses not covered by any
of the above subparagraphs.
2.8. Assumption of Obligations and Liabilities. In
addition to Buyer's obligations to make payments pursuant to
Section 2.2, Buyer shall: (i) assume and pay, discharge and
perform the obligations and liabilities of Seller under the
contracts, leases and other agreements listed in Schedule 2.8;
and (ii) enter into the Sublease Agreement. Except as
specifically set forth in the immediately preceding clauses
(i) and (ii), Buyer shall assume no other obligations or
liabilities of Seller in connection with the Business or the
Purchased Assets, including without limitation products
liability claims for goods sold by Seller, liabilities under
any employee benefit plans adopted by Seller, and liabilities
under any contracts or agreements regarding the Business not
specifically set forth in Schedule 2.8.
2.9. Seller's Assignments of Warranty Claims. Upon
Buyer's request, Seller shall assign and confirm in writing
such assignment to Buyer of any warranty or any warranty
claim, express or implied, that Seller has or may have against
another Person with respect to any of the Purchased Assets.
2.10. Allocation of Purchase Price. The Purchase Price
shall be allocated between the different types of Purchased
Assets as set forth in Schedule 2.10. The parties hereto
shall report on applicable tax returns the allocation of
Purchase Price among the Purchased Assets to which they have
mutually agreed.
2.11 Leaseback Realty. On the Closing Date, Buyer
and Seller shall enter into the Buyer Leases pursuant to which
Buyer will lease the Leaseback Realty from Seller in
accordance with the terms and conditions thereof, in addition
to the memoranda of the Buyer Leases in recordable form.
2.12. Leased Realty. On the Closing Date, Buyer and
Seller shall enter into the Sublease Agreement.
2.13. Noncompete. For a period of three (3) years from
the Closing Date, Seller will not directly or indirectly,
either as principal, agent, manager, member, partner,
shareholder, consultant or otherwise:
<PAGE>
FORM 10-K Page 70
Exhibit 2.4 (continued)
(a) Conduct, become associated with, or otherwise
interested in any business operation, whether financially or
in any other capacity, if such business competes in any way
whatsoever with the Business in the sale of polyurethane foam
products within the following geographical areas: (i) North
Carolina; (ii) the Southeastern states; (iii) all states east
of the Mississippi; (iv) each state in which customers of the
Business are located as of the Closing Date; (v) each state in
which customers of the Business are located at any time after
the Closing Date; (vi) each state in which potential customers
of the Business are located as of the Closing Date; (vii) each
state in which potential customers of the Business are located
after the Closing Date; and (viii) the United States of
America;
(b) In any way solicit or attempt to solicit for the
sale of polyurethane foam products any customer to which the
Business has provided goods or services during the three (3)-
year period immediately preceding the Closing Date; or
(c) In any way, induce or attempt to induce any
employee of the Business as of the Closing Date or as of any
future date to leave his or her position with Buyer to become
associated in any way with a competing business.
Seller and Buyer agree that the geographical areas in
subparagraph (a) and the other restrictions set forth in this
Section 2.13 are completely severable and independent, and any
invalidity or unenforceability of this Agreement with respect
to any one area or any one restriction in this Section 2.13
shall not render this Agreement unenforceable as applied to
any one or more of the other areas or other restrictions
herein.
Seller acknowledges both (i) that Buyer will need
injunctive relief in order to adequately enforce its rights
under this Section 2.13, and (ii) that Buyer's recovery of any
monetary damages for Seller's breach of this Section 2.13 will
not by itself be an adequate means with which to redress such
breach. Accordingly, Seller agrees that Buyer will be
entitled to enforce this Agreement by obtaining a preliminary
and permanent injunction and any other appropriate equitable
relief in any court of competent jurisdiction. Nothing in
this Section 2.13 shall be construed to prohibit Buyer from
pursuing any and all of its legal remedies for a breach of
this Section 2.13, including the recovery of monetary damages.
This Section 2.13 is expressly excepted from the arbitration
provision set forth in Section 11.9.
<PAGE>
FORM 10-K Page 71
Exhibit 2.4 (continued)
2.14. Services Agreement. On the Closing Date, Buyer
and Seller shall enter into a Services Agreement in
substantially the form of the Services Agreement attached
hereto as Exhibit H (the "Services Agreement").
2.15. Credit to Buyer. Seller hereby grants to Buyer,
effective upon the Closing, a $300,000 credit against amounts
payable by Buyer to Seller under the Lease Agreements, the
Sublease Agreement, the License Agreement and the Services
Agreement and, other than payments due under Sections 3.3(a)
and (b), amounts due under this Agreement or any other
agreement between Buyer and Seller. In the event that the
amount of such credit has not been fully applied upon the last
to expire of the Lease Agreements, the Sublease Agreement and
the Services Agreement, Seller shall promptly pay the
remaining portion of such credit to Buyer in cash.
2.16. No Amendment to Carpenter Agreement; Polymer
Inventory. Seller shall not amend the Carpenter Agreement
without Buyer's prior written consent, which consent shall not
be unreasonably withheld. Buyer shall not amend the Carpenter
Agreement to affect the minimum purchase requirements of
Polymer A thereunder without the prior written consent of
Seller, which consent shall not be unreasonably withheld. By
no later than November 15 of each of 1996 and 1997, Buyer
shall provide written notice to Seller of its purchases of
Polymer A under the Carpenter Agreement (as well as purchases
of Polymer A by Time Release Sciences, Inc., to the extent
known by Buyer and to the extent such purchases apply to the
minimum purchase requirement) to date for such year and its
good faith estimate of anticipated purchases of Polymer A
under the Carpenter Agreement for the remaining portion of the
year (the sum of such actual and estimated purchases is
referred to as the "Purchase Amount"), along with its good
faith estimate of the supply of Polymer A then held in
inventory. On each of December 31, 1996 and December 31,
1997, Buyer shall maintain levels of inventory of Polymer A
(as defined in the Carpenter Agreement) reasonable for its use
of such Polymer A in the ordinary course of business. From
the Closing Date until December 31, 1997, Buyer shall purchase
all Polymer A needed by it in the operation of the Hydrophilic
Foam Business from Carpenter Co. and its affiliates.
<PAGE>
FORM 10-K Page 72
Exhibit 2.4 (continued)
ARTICLE III
THE CLOSING
3.1. Time and Place of Closing. The closing (the
"Closing") of the transactions contemplated hereby shall take
place as of the commencement of business on January 22, 1996,
at the offices of Robinson, Bradshaw & Hinson, P.A. in
Charlotte, North Carolina, or at such other time or place as
shall be mutually satisfactory to the parties hereto (the
"Closing Date").
3.2. Deliveries by Seller. At the Closing, Seller will
deliver to Buyer the following:
(a) General warranty deeds to the Purchased Realty;
(b) The Buyer Leases and memoranda thereof (in
recordable form);
(c) The Escrow Agreement;
(d) The Sublease Agreement;
(e) The Assumption Agreement;
(f) The Services Agreement;
(g) The License Agreement;
(h) All bills of sale, certificates of title,
assignments of leases and agreements, and other instruments of
transfer necessary to transfer title to the Purchased Assets,
as may be reasonably required by Buyer;
(i) The opinions, certificates, consents and other
documents contemplated by Section 8.3; and
(j) All other documents, certificates, instruments and
writings required hereunder to be delivered by Seller, or as
may reasonably be requested by Buyer at or prior to the
Closing Date pursuant to this Agreement.
3.3. Deliveries by Buyer. At the Closing, Buyer will
deliver to Seller the following:
(a) A wire transfer of Cash equal to $29,650,000 (the
first installment of the Estimated Fixed Assets Payment and
the Intangibles Payment);
<PAGE>
FORM 10-K Page 73
Exhibit 2.4 (continued)
(b) A wire transfer of any other amounts required to
be paid at the Closing by Buyer pursuant to this Agreement;
(c) The Buyer Leases and memoranda thereof (in
recordable form);
(d) The Escrow Agreement;
(e) The Sublease Agreement;
(f) The Services Agreement;
(g) The License Agreement;
(h) The opinions, certificates and other documents
contemplated by Section 8.2 hereof;
(i) The Assumption Agreement; and
(j) All other documents, certificates, instruments and
writings required hereunder to be delivered by Buyer, or as
may reasonably be requested by Seller at or prior to Closing
pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise set forth in any Schedules hereto
specifically referencing applicable Sections of this
Agreement, Seller represents and warrants to Buyer and British
Vita as follows:
4.1. Organization; Qualification. Seller is a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation
and is duly qualified and in good standing to do business as
a foreign corporation in each jurisdiction in which the
operation of the Business makes such qualification necessary,
except in those jurisdictions where the failure to be so
qualified and in good standing would not have a material
adverse effect on the Business. Seller has the full power and
authority to own, lease and operate the Purchased Assets and
carry on the Business as such operations are now being
conducted.
<PAGE>
FORM 10-K Page 74
Exhibit 2.4 (continued)
4.2. Authority Relative to this Agreement. Seller has
the full corporate power, authority and legal right to execute
and deliver this Agreement and to carry out its transactions
and perform its obligations contemplated hereby. The
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, and this
Agreement has been duly and validly executed and delivered by
Seller, and constitutes a legal, valid and binding obligation
of Seller enforceable against Seller in accordance with its
terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the rights of creditors generally or the fact
that specific performance is a remedy within the discretion of
any court.
4.3. Consent and Approvals; No Violation. Except as
set forth in Schedule 4.3, there is no requirement applicable
to Seller to make any filing with, or to obtain any permit,
authorization, consent or approval of, any Governmental
Authority as a condition to the lawful consummation by Seller
of the transactions contemplated hereby, other than the
filings, if any, required under the HSR Act and the expiration
of the waiting period thereunder. Except as set forth in
Schedule 4.3, the execution and delivery of this Agreement by
Seller and the performance of this Agreement by Seller will
not (a) conflict with any provision of the articles of
incorporation or bylaws of Seller, (b) result in a default (or
give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, agreement, lease or
other instrument or obligation relating to the Business and to
which Seller is a party or to which any of the Purchased
Assets may be subject, except for defaults that individually
or in the aggregate would not have a Material Adverse Effect
on the Business and except for such defaults (or rights of
termination, cancellation or acceleration) as to which
requisite waivers or consents have been or will be obtained
prior to the Closing Date, or (c) violate any law, statute,
rule, regulation, order, writ, injunction or decree of any
Governmental Authority that is applicable to Seller or any of
the Purchased Assets.
4.4. Purchased Assets Conveyed. (a) The Purchased
Assets, the Licensed Technology, the Leased Vehicles, the
Leased Realty and the Leaseback Realty comprise all of the
<PAGE>
FORM 10-K Page 75
Exhibit 2.4 (continued)
assets (including all governmental authorizations and permits,
the transfer of which is permitted by law) currently used in
the Business.
(b) The Inventory as of the Closing Date is consistent
with operation of the Business in the ordinary course and past
practice.
4.5. Business and Trading Relations. To the best of
Seller's knowledge, (i) no material supplier will cease
supplying goods or services to the Business or substantially
reduce its supplies to the Business as a result of the
acquisition of the Business by Buyer, and (ii) no material
customer of the Business will, as a result of the acquisition
of the Business by Buyer, terminate or materially reduce its
relationship with the Business.
4.6. Joint Ventures and Partnerships. Seller has not
conducted any part of the Business through a joint venture
with any Person through a branch, agency or permanent
establishment outside the United States.
4.7. Certain Contracts and Arrangements. Schedule 4.7
lists all contracts, agreements and other legally binding
commitments of Seller in existence on the date hereof
affecting the Business, separated into the following
categories:
(a) union contracts;
(b) employment contracts and other employee benefit
and/or employee remuneration plans, arrangements, contracts or
agreements, including pension and stock option plans;
(c) contracts relating to Intellectual Property
Rights;
(d) sales agency, sales representation and
distributorship contracts; and
(e) all other contracts not of the types covered by
(a) through (d) inclusive except contracts involving payment
by or to Seller of less than $25,000 during any twelve-month
period and purchase orders received or issued in the ordinary
course of business and not requiring performance over a period
in excess of ninety (90) days. Except as set forth in
Schedule 4.7, there is not, under any of the agreements
designated in Schedule 4.7, any existing default, event of
<PAGE>
FORM 10-K Page 76
Exhibit 2.4 (continued)
default or other event, that with or without due notice or
lapse of time or both, would constitute a default or event of
default on the part of Seller.
4.8. Assigned Contracts. (a) Schedule 2.8 lists the
contracts, agreements, options, leases and similar
arrangements that are related to the Business to be assigned
by Seller to Buyer pursuant to this Agreement (the "Assigned
Contracts").
(b) To the best of Seller's knowledge, the execution
and delivery of this Agreement by Seller and the performance
of this Agreement by Seller will not relieve any other party
to any Assigned Contract from its obligations or enable it to
terminate any of them.
(c) Seller is not and will not, as a result of the
sale of the Business contemplated hereby, be in default under
any of the Assigned Contracts that are material to the
operation of the Business.
(d) Except as set forth in Schedule 2.8, no threat or
claim of default under any of the Assigned Contracts has been
made and Seller has no knowledge of anything that could
reasonably be expected to result in a claim of default.
(e) To the best of Seller's knowledge, no other party
to any of the Assigned Contracts is in breach, violation or
default thereof, and each Assigned Contract is in full force
and effect.
4.9. Litigation. Except as set forth in Schedule
4.9, there are no legal, administrative, arbitration or other
proceedings pending or, to the best of Seller's knowledge,
threatened against Seller or any governmental investigation
pending, in connection with the operation of the Business
that, if decided adversely to Seller, would have a Material
Adverse Effect on the Business or seeking to enjoin the
transactions contemplated herein or recover damages in
connection therewith.
4.10. Labor Matters. Seller has not recognized, nor has
Seller received, a demand for recognition of, any collective
bargaining representative in connection with the Business.
There are no strikes, labor disputes or work stoppages in
effect or threatened against Seller that may have a material
adverse effect on the Business.
<PAGE>
FORM 10-K Page 77
Exhibit 2.4 (continued)
4.11. Taxes. Seller has filed, or caused to be filed,
all federal, state and local Tax Returns required to be filed
by Seller. Except as set forth in Schedule 4.11, Seller has
paid, or made provisions for the payment of, its respective
allocable share of (i) all Taxes due for the periods covered
by such Tax Returns, except such accrued and unpaid Taxes for
which appropriate accruals have been made in accordance with
GAAP, and (ii) all deficiencies assessed as a result of any
examination of such Tax Returns.
4.12. Licenses and Authorizations. All licenses,
permits (including environmental permits) and authorizations
issued by or obtained from any Governmental Authority or any
other Person that are held by Seller as of the date hereof and
required for the conduct of the Business as presently
conducted: (a) are in full force and effect, with no
violations of any of them having occurred or, to the best of
Seller's knowledge, alleged to have occurred; (b) have no
proceedings pending or, to the best of Seller's knowledge,
threatened against them that would have the effect of revoking
or materially limiting or affecting the transfer or renewal of
any such licenses, permits or authorizations; (c) to the
extent permitted by law, shall be transferred to Buyer; and
(d) other than as required by law, shall not be lost or
materially modified as a result of the transactions
contemplated hereby. All such licenses, permits, and
authorizations are listed on Schedule 4.12, which also lists
those licenses, permits and authorizations the transfer of
which is not permitted by law or which shall be lost or
materially modified as a result of the transactions
contemplated hereby. Except as set forth in Schedule 4.12 or
as otherwise disclosed in this Agreement or in any document
delivered pursuant to this Agreement: (x) such scheduled
items are not subject to any restrictions or conditions that
could or would limit operation of the Business as presently
conducted; and (y) there are no applications by Seller in
connection with the Business or complaints by others pending
or, to the best of Seller's knowledge, threatened as of the
date hereof before any Governmental Authority relating to the
Business.
4.13. Title to Real Property. (a) The Realty comprises
all real property currently owned or leased by Seller and used
in, or in connection with, the operation of the Business.
Except with respect to the Leased Realty, Seller has good and
marketable fee simple title to all of the Realty, free and
clear of all material liens, mortgages, pledges and
<PAGE>
FORM 10-K Page 78
Exhibit 2.4 (continued)
encumbrances whatsoever other than the following permitted
encumbrances (collectively, the "Permitted Encumbrances"):
(i) real estate taxes not yet due and payable; and
(ii) easements, rights of way, mineral rights or other similar
reservations and restrictions that are set forth in the deeds
to such real property and that in the aggregate do not
materially and adversely affect or interfere with the use of
such property in the Business.
(b) With respect to the Leased Realty: (i) the
Existing Lease is in full force and effect; (ii) Seller has
the right to sublease the Leased Realty on the terms set forth
in the Sublease Agreement; and (iii) neither Seller nor, to
the best of Seller's knowledge, the landlord thereunder is in
default under the terms of the Existing Lease, nor has an
event occurred that, but for the giving of notice or the
passage of time, would constitute such a default by Seller or,
to the best of Seller's knowledge, such landlord.
(c) On or before January 22, 1996 (the "Inspection
Date"), Buyer shall deliver to Seller a statement of any
objections to Seller's title, excluding the Permitted
Encumbrances, and shall notify Seller in writing of the nature
of such objections. If objections to title are made as
provided above, Seller shall use reasonable efforts to cure
the objections prior to the Closing Date, but shall not be
required to expend in excess of $10,000. If Seller fails to
cure the objections within such period, Buyer may, by delivery
of written notice to Seller, either (i) terminate this
Agreement; (ii) elect to consummate the purchase of the
Business in the same manner as if there had been no title
objections (in which event Buyer shall be deemed to have
waived such objections); or (iii) cure the title objections at
Seller's reasonable expense, not to exceed $25,000, and treat
that expense as a credit against the Purchase Price. On or
before the Inspection Date, Buyer shall cause to be prepared,
at its expense, a survey of each parcel of Realty certified by
a registered land surveyor, showing the boundaries and the
acreage of each parcel of Realty, and the location of all
easements, buildings, improvements and encroachments, if any,
located thereon. Buyer's objections to title may be based
solely on such surveys.
4.14. Title to Personal Property. Schedule 4.14 lists,
as of a recent date, all material tangible personal property
(exclusive of Inventory) owned or leased by Seller and used in
connection with the Business. Except with respect to any
<PAGE>
FORM 10-K Page 79
Exhibit 2.4 (continued)
leased property or as set forth in Schedule 4.14, Seller owns
and has good and valid title to all tangible personal property
that is included in the Purchased Assets, free and clear of
all material liens and encumbrances, except for liens for
taxes not yet due and payable. Seller has delivered or made
available to Buyer true and complete copies of all leases and
other agreements affecting the properties listed in
Schedule 4.14, all of which leases are, to the best of
Seller's knowledge, valid and binding on the lessor
thereunder, and with respect to which Seller is not in
material default.
4.15. Corporate and Personnel Data; Labor Relations.
Schedule 4.15 lists the names and current salary or hourly
rates of all the employees of Seller who are employed in
connection with the Business. Except as set forth in Schedule
4.15, the operation of the Business has complied in all
material respects with all applicable laws and regulations
relating to the employment of labor, including those related
to wages, hours, collective bargaining, the payment of Social
Security or similar taxes, and discrimination laws. There are
no unfair labor practice claims or charges pending involving
Seller relating to the Business.
4.16. Insurance. Schedule 4.16 lists all of Seller's
outstanding insurance policies relating to the Purchased
Assets or the Business, and indicates the insurer's name,
policy number, expiration date and amount and type of
coverage. Seller maintains product liability insurance with
respect to the Business in the amounts and coverages set forth
on Schedule 4.16.
4.17. Intellectual Property Rights. Schedule 4.17
lists the Intellectual Property Rights, together with any
applicable registrations. Except as shown in Schedule 4.17,
all trademarks, trade names, copyrights and patents, and any
applicable registrations, are owned by Seller and are not the
subject of any proceeding challenging their use, or seeking to
deny, modify or revoke any registration or application
therefor or renewal thereof. Except as shown in Schedule
4.17, Seller is entitled to use all of its respective
Intellectual Property Rights, and Seller has not granted any
right, title or interest in or to any such Intellectual
Property Rights to any other Person.
<PAGE>
FORM 10-K Page 80
Exhibit 2.4 (continued)
4.18. Infringements. Seller has not received any
written notice of any claim of infringement with respect to
the Business, and the Business does not infringe any patent,
registered design, trademark, copyright or other intellectual
property right of any other person. Except as listed on
Schedule 4.18, Seller does not require nor has it been granted
any license (other than a shrink-wrap license for computer
software) relating to any intellectual property right of any
kind whatsoever.
4.19. Purchases and Sales from or to One Party. Except
as set forth in Schedule 4.19, neither more than ten percent
(10%) of the aggregate amount of all the purchases nor more
than ten percent (10%) of the aggregate amount of all the
sales of the Business are obtained or made from or to a single
supplier or customer (including any Person associated or
affiliated with a supplier or customer), and Seller has not
received any written notification nor any oral notification
from any such source of supply or outlet for sales that such
Person intends to terminate its relationship with the
Business.
4.20. Financial Statements. Seller has delivered to
Buyer statements of assets and operations of the Business for
the fiscal year ended January 1, 1995 and the 39-week period
ended October 31, 1995 and Cost Department Reports for the
Business for the fiscal years ended January 3, 1993, January
2, 1994 and January 1, 1995, and the 39-week period ended
October 31, 1995 (the "Financial Statements"). The Financial
Statements fairly present in all material respects the assets
and results of operations of the Business as of the respective
dates and for the respective periods indicated, including
normal accruals and intercompany eliminations.
4.21. Books and Records. All the books and records of
Seller related to the Business and the Purchased Assets,
copies of which are to be delivered at Buyer's expense to
Buyer as it may request, have been maintained in the ordinary
course of business consistent with the past practices of
Seller and do not contain any material inaccuracies or
discrepancies.
4.22. Condition of Real Property. Except as set forth
in Schedule 4.22:
(a) Seller has not received any notice of
administrative agency action, litigation, condemnation
<PAGE>
FORM 10-K Page 81
Exhibit 2.4 (continued)
proceeding, or proceeding of any kind pending against Seller
that relates to or affects any portion of the Realty,
including any requests for public dedication, nor does Seller
know of any basis for any such action;
(b) To the best of Seller's knowledge, all buildings
and improvements located on the Realty fully conform with all
applicable zoning regulations and building codes and
restrictions and are located entirely within the boundary
lines of the Realty. To the best of Seller's knowledge,
(i) none of the buildings or improvements located on the
Realty are prior, nonconforming structures under either the
applicable zoning regulations or the applicable building
codes, and (ii) all of the buildings are structurally sound in
all material respects consistent with their current use;
(c) To the best of Seller's knowledge, each parcel of
Realty may be used for the operation of the Business without
violating any federal, state, local, or any other governmental
building, zoning, health, safety, platting, subdivision or
other statute, ordinance or regulation, or any applicable
private restriction; such use is not a pre-existing,
nonconforming use; and no notice of the violation of any of
the same has been received by Seller; and
(d) To the best of Seller's knowledge, each parcel of
Realty is currently served by the following public utility
services sufficient for the operation of such Realty:
electricity, gas, water, sanitary sewer and telephone. Seller
will reasonably cooperate with Buyer to assure that those
utility services will continue after the Closing.
4.23. Business Names. Schedule 4.23 lists all names
under which the Business, or any portion thereof, has been
operated during the past five years.
4.24. Environmental Matters. Except as set forth in
Schedule 4.24:
(a) The Realty and any other real property owned,
leased or operated by Seller in connection with the Business
currently or in the past (all of which Realty and other real
property is listed in Schedule 4.24), including without
limitation the improvements thereon and the soil and
groundwater thereunder, (i) does not contain and is not
contaminated by any Hazardous Material, other than Hazardous
<PAGE>
FORM 10-K Page 82
Exhibit 2.4 (continued)
Materials at naturally occurring background levels and
Hazardous Materials properly stored and used in the ordinary
course of business as listed on current MSDS reports for each
facility operated by the Business; (ii) does not contain
underground storage tanks (other than one petroleum
underground storage tank located on the Leased Realty); (iii)
has never been used for the generation, treatment, storage or
disposal of any Hazardous Material (other than in the ordinary
course of business in compliance with applicable Environmental
Laws), or for mining, land filling, dumping, gasoline station,
dry cleaning or commercial petroleum product storage purposes;
(iv) has not been the subject of any activities representing
a violation or alleged violation of any Environmental Law or
any action by a governmental authority pursuant to any
Environmental Law within the past five years, and is in
compliance in all material respects with all Environmental
Laws; (v) does not otherwise contain a condition that is a
threat to the safety or health of the public or environment;
(vi) has not had any release of any Hazardous Material from,
on, in or upon it (other than in the ordinary course of
business in compliance with applicable Environmental Laws) and
does not face any current risk, to Seller's knowledge, of
contamination by any Hazardous Material from any nearby
property; and (vii) to Seller's knowledge, has never been the
subject of an environmental audit or assessment, or remedial
action for an environmental problem performed by a Person
other than Seller or an agent of Buyer in connection with this
Agreement. With respect to any real property owned, leased or
operated by Seller in the past in connection with the
Business, but not currently owned, leased or operated by
Seller, the representations set forth above in this Section
4.24 shall be deemed to apply as of the last date that Seller
owned, leased or operated the property in question.
(b) Except as set forth in Schedule 4.24, in
connection with the Business, Seller: (i) has never sent a
Hazardous Material to a site that, pursuant to any
Environmental Law, (1) has been placed on the "National
Priorities List", the "CERCLIS" list, or any similar state or
federal list, or (2) is subject to or the source of a claim,
an administrative order or other request to take "removal",
"remedial", "corrective" or any other "response" action, as
defined in any Environmental Law, or to pay for the costs of
any such action at the site; (ii) is in material compliance
with all Environmental Laws in all of its activities and
operations; (iii) is not involved in any suit or proceeding
<PAGE>
FORM 10-K Page 83
Exhibit 2.4 (continued)
and has not received any notice or request for information
from any governmental authority or other third party with
respect to a release or threatened release of any Hazardous
Material or a violation or alleged violation of any
Environmental Law, and has not received notice of any claims
from any person or entity relating to property damage or to
personal injuries from exposure to any Hazardous Material; and
(iv) has timely filed every report required to be filed,
acquired all necessary material certificates, approvals and
permits (all of which shall be transferred to Buyer to the
extent permitted by law, none of which shall be lost or
materially modified as a result of this transaction other than
as required by law and all of which are listed on Schedule
4.12, which also specifically identifies any such material
certificates, approval or permit that are not permitted by law
to be transferred or may be lost or materially modified as a
result of this transaction as required by law), and generated
and maintained all required data, documentation and records
under all Environmental Laws.
(c) To the best knowledge of Seller, no material
expense or change in the Business will be required to comply
with any prospective requirement adopted or promulgated prior
to the date hereof under any Environmental Law and to be
applicable to the Business in the future, other than permits
required under Title V of the Clean Air Act for Facility 6.
4.25. Compliance With Laws. In connection with the
Business, Seller has duly complied in all material respects
with the provisions of all federal, state and local law, rules
and regulations (other than Environmental Laws, compliance
with which by Seller is described in Section 4.24) applicable
to the Purchased Assets or the Business.
4.26. Minimum Purchases. Pursuant to the Agreement
dated March 30, 1994 between Seller and Cook Composites and
Polymers (including all amendments and supplements thereto,
the "Carpenter Agreement"), Seller has purchased an aggregate
amount of Polymer A (as defined in the Carpenter Agreement) in
1995 equal to or exceeding the minimum purchase requirement
for such period necessary to maintain Seller's exclusive
"Field of Uses" (as defined in the Carpenter Agreement).
Cone's minimum purchase requirements of Polymer A under the
Carpenter Agreement for 1996, 1997, 1998 and 1999 are 400,000
pounds, 600,000 pounds, 1,000,000 pounds and 1,000,000 pounds,
respectively, of Polymer A, provided that any purchases in any
<PAGE>
FORM 10-K Page 84
Exhibit 2.4 (continued)
year in excess of such amount shall be carried forward and
applied to the threshold in subsequent periods. Seller has
delivered to Buyer a true and correct copy of the Carpenter
Agreement and such document states the entire agreement
between Carpenter Co. and Seller purported to be addressed
thereby. Seller's inventory of such Polymer A was
approximately 300,000 pounds at December 31, 1995. There are
no outstanding purchase orders for Polymer A. Polymer A has
a shelf-life (for the purposes of the proposed use of Polymer
A in the Hydrophilic Foam Business) of at least two years.
4.27. Periphlex Agreement. Seller is a party to a
Contract dated as of June 30, 1994 with Periphlex U.S.A. Ltd.
("Periphlex"), as amended by an Addendum to Contract dated
April 24, 1995 (the "Periphlex Contract"), pursuant to which,
to Seller's knowledge, Periphlex has completed the Project (as
defined in the Periphlex Contract and which includes the
fabrication, construction and assembly of a machine and
related equipment to manufacture hydrophilic foam, which will
incorporate Seller's proprietary processes and technology
necessary to produce such foam). Seller has performed all of
its obligations under the Periphlex Contract. Seller has
delivered to Buyer a true and correct copy of the Periphlex
Contract and such document states the entire agreement between
Periphlex and Seller purported to be addressed thereby.
Seller has not requested that Periphlex perform any services
with respect to the Business other than the services required
under the Periphlex Contract.
4.28. Accuracy of Information. All written information
given to Buyer by Seller relating to the Business or Purchased
Assets, taken as a whole, does not contain any material
inaccuracies. Seller makes no representations or warranties
regarding the Business or Purchased Assets other than as set
forth in this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1. Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the
laws of the State of North Carolina and has the requisite
power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
<PAGE>
FORM 10-K Page 85
Exhibit 2.4 (continued)
5.2. Authority Relative to this Agreement. Buyer has
the power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and
validly authorized by Buyer and no other proceedings on the
part of Buyer are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by
Buyer and constitutes the legal, valid and binding agreement
of Buyer.
5.3. Consents and Approvals; No Violation. To the best
knowledge of Buyer, there is no requirement applicable to
Buyer to make any filing with, or to obtain any permit,
authorization, consent or approval of, any Governmental
Authority as a condition to the lawful consummation by Buyer
of the transactions contemplated hereby, other than the
filings, if any, required under the HSR Act and the expiration
of the waiting period thereunder. Neither the execution,
delivery and performance of this Agreement by Buyer nor the
operation of the Business by Buyer will: (a) conflict with or
result in any breach of any provision of the articles of
incorporation or bylaws of Buyer; (b) result in a default (or
give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, agreement, lease or
other instrument or obligation to which Buyer is a party or by
which any of its assets may be bound, except for such defaults
(or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained or will
be obtained prior to the Closing Date; or (c) violate any law,
statute, rule, regulation, order, writ, injunction or decree
of any federal, state or local governmental authority or
agency that is applicable to Buyer.
5.4. Qualification. Buyer knows of no facts that
would, under present law, disqualify Buyer as a transferee of
any of the licenses, permits and authorizations described in
Section 4.12 that are transferrable or as owner and operator
of the Business. In the event Buyer becomes aware of any such
facts, it will promptly notify Seller in writing thereof and
use its best efforts to prevent any such disqualification.
5.5. Litigation. There are no legal, administrative,
arbitration or other proceedings or governmental
investigations pending or, to the knowledge of Buyer,
<PAGE>
FORM 10-K Page 86
Exhibit 2.4 (continued)
threatened against Buyer seeking to enjoin the transactions
contemplated hereby or recover damages in connection
therewith.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BRITISH VITA
British Vita represents and warrants to Seller as
follows:
6.1. Organization and Authority. British Vita is a
company duly organized, validly existing and in good standing
under the laws of the United Kingdom with the requisite power
and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and
validly authorized by British Vita and no other proceedings on
the part of British Vita are necessary to authorize this
Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by British Vita and constitutes the legal, valid and
binding agreement of British Vita.
6.2. Consents and Approvals; No Violation. To the best
knowledge of British Vita, there is no requirement applicable
to British Vita to make any filing with, or to obtain any
permit, authorization, consent or approval of, any
Governmental Authority as a condition to the lawful
consummation by British Vita of the transactions contemplated
hereby, other than the filings, if any, required under the HSR
Act and the expiration of the waiting period thereunder. The
execution, delivery and performance of this Agreement by
British Vita will not: (a) conflict with or result in any
breach of any provision of the organizational documents of
British Vita; (b) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond,
mortgage, indenture, agreement, lease or other instrument or
obligation to which British Vita is a party or by which any of
its assets may be bound, except for such defaults (or rights
of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained or will be
obtained prior to the Closing Date; or (c) violate any law,
statute, rule, regulation, order, writ, injunction or decree
of any federal, state or local governmental authority or
agency and that is applicable to British Vita.
<PAGE>
FORM 10-K Page 87
Exhibit 2.4 (continued)
6.3. Litigation. There are no legal, administrative,
arbitration or other proceedings or governmental
investigations pending or, to the knowledge of British Vita,
threatened against British Vita seeking to enjoin the
transactions contemplated herein or recover damages in
connection therewith.
ARTICLE VII
COVENANTS OF SELLER AND BUYER
7.1. Conduct of Business. Except as otherwise
expressly provided in or contemplated by this Agreement, prior
to the Closing Date, without the prior written consent of
Buyer, Seller will not, except in the ordinary course of
business:
(a) enter into any contract or commitment material to
the Business;
(b) create or assume any mortgage, pledge, lien, or
other encumbrance with respect to the Purchased Assets,
whether now owned or hereafter acquired;
(c) sell, assign, lease, transfer or otherwise dispose
of any of the Purchased Assets; or
(d) increase the rate of compensation payable to any
of the Business Employees, other than increases in the
ordinary course of business consistent with past practices.
7.2. Access to Information. (a) Between the date of
this Agreement and the Closing Date, Seller shall: (i) give
Buyer and its authorized representatives reasonable access
during normal business hours to the Purchased Assets and to
all books, records, offices and other facilities and
properties relating to the Business; (ii) permit Buyer to make
such inspections thereof and perform such soil and groundwater
tests, surveys, environmental assessments and audits, and
other inspections, tests and inquiries as Buyer may desire;
and (iii) cause its officers or other appropriate officials to
furnish Buyer with such financial and operating data and other
information with respect to the Business as Buyer may from
time to time reasonably request; provided, however, that any
such investigation by Buyer shall be conducted in such a
manner as not to interfere unreasonably with the operation of
the Business, and Buyer shall promptly repair and indemnify
Seller against any damages, costs or claims caused by it or
<PAGE>
FORM 10-K Page 88
Exhibit 2.4 (continued)
such representatives in connection with such inspections,
tests and inquiries (other than damages, costs or claims
caused by Seller or arising with respect to the condition of
any of the facilities or Business prior to such inspection,
test or inquiry).
(b) From the date of this Agreement until the Closing
Date (or at any time after the date hereof if this Agreement
is terminated pursuant to Article X, Buyer and British Vita:
(i) will hold, and will use its best efforts to cause its
officers, directors, employees, lenders, accountants,
representatives, agents, consultants and advisors to hold, in
strict confidence all information (other than such information
as may be publicly available) furnished to Buyer in connection
with the transactions contemplated by this Agreement
(collectively, the "Information"); and (ii) will not, without
the prior written consent of Seller, release or disclose any
Information to any other person, except to Buyer's officers,
directors, employees, lenders, attorneys, accountants,
representatives, agents, consultants and advisors who need to
know the Information in connection with the consummation of
the transactions contemplated by this Agreement, who are
informed by Buyer of the confidential nature of the
Information, and who agree to be bound by the terms and
conditions of this Section 7.2(b) and will use the Information
solely for the purposes of evaluating the transactions
contemplated hereby. In the event Buyer or any Person to whom
Buyer transmits the Information pursuant to this Agreement
becomes legally compelled to disclose any of the Information,
Buyer will provide Seller with prompt notice so that Seller
may seek a protective order or other appropriate remedy or
waive compliance with the provisions of this Section 7.2(b),
or both. If the transactions contemplated by this Agreement
are not consummated, the Information will be returned to
Seller immediately upon Seller's request therefor.
7.3. Employees and Employee Benefits. (a) Buyer and
Seller agree that on the Closing Date the employees of Seller
employed solely in the Business (the "Business Employees")
shall cease to be employees of Seller and shall be employed by
Buyer on an employment-at-will basis (except to the extent
otherwise agreed in writing by Buyer or to the extent
employment agreements are assumed by Buyer pursuant to Section
2.8). Seller shall be responsible for payment of any vested
vacation or holidays or similar benefits earned prior to the
Closing Date, even if such vacation or holidays are taken
after the Closing Date. Seller represents that pursuant to
<PAGE>
FORM 10-K Page 89
Exhibit 2.4 (continued)
its vacation policies the full amount of vacation to which an
employee of the Business is entitled in any fiscal year vests
on the first day of such fiscal year.
(b) Concurrently with the Closing, Seller shall notify
the employees of the Business of such employees' rights to
receive the full amount of vested vacation pay in connection
with the termination of such employees' employment with Seller
and shall permit such employees to waive the right to receive
such payment at such time and in lieu thereof to receive such
payments from Buyer. Within 30 days following the Closing
Date, Seller shall provide to Buyer a list of all employees
electing to so defer the payment of such vacation pay, each
such employee's salary or wage rate and the aggregate amount
of such vacation pay for 1996 based upon such salary and wage
rates, and Seller shall pay to Buyer such aggregate amount at
such time. Buyer shall permit employees of the Business to
take vacation time during 1996 consistent with Seller's
vacation policies (with such employees' service with Seller to
constitute service with Buyer for such purpose) and shall pay
such employees set forth in the list described in the
foregoing sentence (at the salary rate set forth in such list)
such vacation pay upon two-weeks' written notice therefor in
accordance with Seller's current vacation pay policy. All
amounts received by Buyer pursuant to this Section 7.3(b)
shall be maintained by Buyer in a segregated account until
applied from time to time to fund the payment to employees of
vacation pay as contemplated hereby and, prior to such time
such funds are so applied, such funds shall not be commingled
with other funds of Buyer.
(c) Seller shall, if requested by Buyer, assign to
Buyer the unemployment insurance and worker's compensation
experience ratings applicable to the Business and take such
steps as Buyer shall reasonably request to effect such
assignment, if such assignment is permitted by law and is not
prejudicial to Seller. Buyer shall pay to Seller any cost,
expense or penalty of Seller relating to such assignment.
7.4. Consummation of Agreement. Buyer and Seller will
use each of their reasonable efforts to perform or fulfill all
conditions and obligations to be performed or fulfilled by
each of them under this Agreement so that the transactions
contemplated hereby shall be consummated. Except for events
that are the subject of specific provisions of this Agreement,
<PAGE>
FORM 10-K Page 90
Exhibit 2.4 (continued)
if any event should occur, either within or outside the
control of Buyer or Seller, that could materially delay or
prevent fulfillment of the conditions upon the obligations of
any party hereto to consummate the transactions contemplated
by this Agreement, Buyer and Seller will notify the others of
any such event and each of them will use their reasonable,
diligent and good faith efforts to cure or minimize the same
as expeditiously as possible.
7.5. Filings. Buyer and Seller have filed Notification
and Report Forms under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and regulations
thereunder (the "HSR Act") with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division") and shall respond as
promptly as practicable to all inquiries received from the FTC
or the Antitrust Division for additional information or
documentation.
7.6. Further Assurances. Subject to the terms and
conditions of this Agreement, each of the parties hereto will
use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to
consummate the transactions contemplated hereby.
7.7. Actions by British Vita. British Vita shall cause
Buyer to perform its obligations hereunder, and in the event
of any failure by Buyer to perform such obligations, British
Vita shall perform such obligations, without any requirement
that Seller first exhaust any legal remedies it may have
against Buyer.
7.8. Assistance in Pending Litigation. After the
Closing Date, Buyer shall upon Seller's reasonable request, in
connection with any litigation described in Schedule 4.9 or
any other litigation arising after the date hereof involving
the Business, provide reasonable assistance to Seller in
connection with such litigation or investigation by providing
Seller reasonable access to applicable records transferred to
Buyer hereunder, permitting its employees to be available to
provide applicable information or testify in such litigation
(including depositions) and to otherwise reasonably cooperate
with Seller in connection with such litigation. Seller shall
reimburse Buyer for its reasonable expenses incurred in
providing such assistance.
<PAGE>
FORM 10-K Page 91
Exhibit 2.4 (continued)
7.9. Other Covenants. Buyer and Seller will take all
action, do, or cause to be done all other covenants and
agreements contained in this Agreement other than in this
Article VII. Buyer and Seller will not take any action and
will not cause any action to be taken prohibited from being
taken by any covenants and agreements contained in this
Agreement other than in this Article VII.
ARTICLE VIII
CLOSING CONDITIONS
8.1. Conditions to Each Party's Obligations to Effect
the Transactions Contemplated Hereby. The respective
obligations of each party to effect the transactions
contemplated hereby shall be subject to the fulfillment at or
prior to the Closing Date (subject to Article X hereof) of the
following conditions:
(a) Neither Seller nor Buyer shall be subject on the
Closing Date to any order, decree or injunction of a court of
competent jurisdiction that enjoins or prohibits the
consummation of this Agreement or the transactions
contemplated hereby, nor shall there be pending a suit or
proceeding by any Governmental Authority that seeks injunctive
or other relief in connection with this Agreement or the
transactions contemplated hereby.
(b) Seller and Buyer shall have received the approval
or consent of all Governmental Authorities required to approve
or consent to the transactions contemplated hereby, including
without limitation the filings contemplated by Section 7.5.
8.2. Conditions to the Obligations of Seller to Effect
the Transactions Contemplated Hereby. The obligations of
Seller to effect the transactions contemplated hereby shall be
further subject to the fulfillment at or prior to the Closing
Date (subject to Article X hereof) of the following
conditions, any one or more of which may be waived by Seller:
(a) Buyer shall have executed and delivered to Seller
the Assumption Agreement, the Buyer Leases and memorandum
thereof (in recordable form), the Escrow Agreement, and the
Sublease Agreement.
<PAGE>
FORM 10-K Page 92
Exhibit 2.4 (continued)
(b) All representations and warranties of Buyer
contained in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made as of
such date (except as otherwise contemplated by this
Agreement). Buyer shall have performed and complied in all
material respects with all covenants and agreements contained
in this Agreement required to be performed and complied with
by them at or prior to the Closing Date. Seller shall have
received a certificate to the matters set forth in this
subparagraph (a) signed on behalf of Buyer by its President;
(c) All documents required to have been delivered by
Buyer to Seller, and all actions required to have been taken
by Buyer, at or prior to the Closing Date, shall have been
delivered or taken;
(d) Seller shall have received an opinion from
Robinson, Bradshaw & Hinson, P. A., dated as of the Closing
Date in substantially the form attached hereto as Exhibit E;
(e) Seller shall have received from Buyer copies,
certified by its Secretary or an Assistant Secretary, of
resolutions of Buyer's board of directors authorizing the
execution, delivery and performance of this Agreement and all
instruments and documents to be delivered in connection
herewith and the transactions contemplated hereby;
(f) As of the Closing Date, Seller shall have received
from Buyer the following documents:
(i) A long-form certificate of good standing of
Buyer's corporate status from the State of North Carolina;
(ii) A true and complete copy of Buyer's articles
of incorporation and all amendments thereto, certified by the
Secretary of State of the State of North Carolina;
(iii) A true and complete copy of Buyer's bylaws,
certified by its Secretary;
(iv) A certificate of Buyer's Secretary that
Buyer's articles of incorporation have not been amended since
the date of the certificate described in subsection (ii) above
and that nothing has occurred since the date of issuance of
the good standing certificate specified in subsection (i)
above that would adversely affect Buyer's corporate good
standing; and
<PAGE>
FORM 10-K Page 93
Exhibit 2.4 (continued)
(v) A certificate from Buyer's Secretary
attesting to the incumbency and signatures of any of Buyer's
officers who will execute documents at the closing or who have
executed the Agreement.
8.3. Conditions to the Obligations of Buyer to Effect
the Transactions Contemplated Hereby. The obligations of
Buyer to effect any transaction contemplated hereby shall be
further subject to the fulfillment at or prior to the Closing
Date (subject to Article X hereof) of the following
conditions, any one or more of which may be waived by Buyer:
(a) Seller shall have delivered and executed: (i) the
general warranty deeds to the Purchased Realty; (ii) the Buyer
Leases and memorandum thereof (in recordable form); (iii) the
Escrow Agreement; (iv) the Sublease Agreement; (v) the
Assumption Agreement; and (vi) all bills of sale, certificates
of title, odometer affidavits, assignments of leases and
agreements and other instruments necessary to transfer title
to the Purchased Assets to Buyer in accordance with this
Agreement.
(b) All representations and warranties of Seller
contained in this Agreement shall be true and correct as of
the Closing Date as though made as of such date. Seller shall
have performed and complied with all covenants and agreements
contained in this Agreement required to be performed and
complied with by them at or prior to the Closing Date. Buyer
shall have received a certificate to the matters set forth in
this subparagraph (a) signed on behalf of Seller by its
President or a Vice President.
(c) Consents from third parties and Governmental
Authorities as shall be required and that are listed in
Schedule 4.3 shall have been obtained.
(d) All documents required to have been delivered by
Seller to Buyer, and all actions required to have been taken
by Seller, at or prior to the Closing Date, shall have been
delivered or taken.
(e) Buyer shall have received an opinion from Neil W.
Koonce, dated as of the Closing Date in substantially the form
attached hereto as Exhibit F.
<PAGE>
FORM 10-K Page 94
Exhibit 2.4 (continued)
(f) Buyer shall have received from Seller copies,
certified by its respective Secretary or an Assistant
Secretary, of resolutions adopted on behalf of Seller
authorizing the execution, delivery and performance of this
Agreement and all instruments and documents to be delivered in
connection herewith and the transactions contemplated hereby.
(g) As of the Closing Date, Buyer shall have received
from Seller the following documents:
(i) A long-form certificate of good standing of
Seller's corporate status from its jurisdiction of
incorporation, and certificates of qualification to do
business as a foreign corporation for Seller from such
jurisdictions where Seller's activities in the Business would
require it to be so qualified;
(ii) A true and complete copy of Seller's
articles of incorporation and all amendments thereto certified
by the jurisdiction of incorporation;
(iii) A true and complete copy of Seller's bylaws
certified by its respective Secretary;
(iv) A certificate from Seller's Secretary that
its respective articles of incorporation have not been amended
since the date of the certificate described in subsection (ii)
above and that nothing has occurred since the date of issuance
of the good standing certificate specified in subsection (i)
above that would adversely affect Seller's corporate good
standing; and
(v) A certificate from Seller's Secretary
attesting to the incumbency and signatures of any of Seller's
officers who will execute documents at the Closing or who have
executed the Agreement.
(h) Buyer shall have completed a review of the
Business and shall not have given notice to Seller that Buyer
has determined not to proceed with the consummation of the
transactions contemplated hereby because a representation or
warranty of Seller set forth herein (without regard to any
qualification set forth therein with respect to Seller's
knowledge) is not true, accurate or complete.
(i) To the extent deemed necessary by Buyer, Buyer
shall have received environmental assessment and audit
<PAGE>
FORM 10-K Page 95
Exhibit 2.4 (continued)
reports, prepared at the expense of Buyer, for each site
listed on Schedule 4.13, by a qualified independent
environmental consultant acceptable to Buyer, and such other
analyses, reports and examinations as Buyer shall request, at
its expense, and Buyer shall be satisfied on the basis of such
studies, in its sole, absolute and unqualified discretion,
that no material environmental problems exist with respect to
the Business or any of the Purchased Assets. Buyer shall
deliver copies of such reports to Seller.
(j) Buyer shall have received at its own expense
policies of title insurance with respect to the Realty
(excluding any Leased Real Property), along with as-built
surveys of such Realty, such insurance policies insuring that
title to all such properties is in accordance with this
Agreement.
(k) Pursuant to the Lease Agreement dated as of
December 1, 1984 between Seller and City of Tupelo,
Mississippi, Seller shall have repurchased the "Project" (as
defined in such Lease Agreement), and shall hold such Project
free and clear of all liens and encumbrances.
(l) Buyer shall have received such other documents,
opinions and certificates that it has reasonably requested in
connection with the conveyance of the Purchased Assets and the
consummation of the other transactions contemplated hereby.
(m) No events or conditions shall have occurred with
respect to the Purchased Assets or the Business or any of
Seller's relationships with customers or suppliers of the
Business that have or would be likely to have a Material
Adverse Effect on the Business.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
9.1. Survival of Representations. All representations,
warranties and agreements made by the parties to this
Agreement or pursuant hereto shall survive the Closing,
subject to the limitations set forth in this Article IX. All
claims of any kind against Seller (except as provided in
Sections 9.2(b)(iii) and 11.13 and except for claims of actual
<PAGE>
FORM 10-K Page 96
Exhibit 2.4 (continued)
intentional fraud) that relate in any way to the repre-
sentations, warranties, this Agreement or any document
delivered hereunder shall be made under, and subject to the
limitations set forth in, this Article IX.
9.2. Seller's Agreement to Indemnify. Subject to the
limitations, conditions and provisions set forth herein,
Seller agrees to indemnify, defend and hold harmless Buyer,
its affiliates, their respective officers, directors,
employees, agents, representatives, successors and assigns
(each, a "Buyer Entity") from and against all demands, claims,
actions, losses, damages, liabilities, fines, penalties,
governmental requirements, administrative proceedings,
personal injury claims, property damage claims, liens, costs
and expenses, including, without limitation, attorney's fees
and consultant and expert witness fees, asserted against or
incurred by a Buyer Entity: (i) resulting from a breach of any
covenant, agreement, representation or warranty of Seller,
individually or in the aggregate, contained in this Agreement
or any document delivered hereunder; (ii) resulting from,
arising out of, or in connection with any violation or alleged
violation of any Environmental Law with respect to the
Business that occurs or commences prior to the Closing Date
(but not to the extent such violation or alleged violation is
continued by Buyer by an act or omission after a reasonable
period after the management of Buyer become aware of such
violation (other than violations currently known by employees
of the Business)), any violation or alleged violation of any
Environmental Law that results from any act or omission of
Seller or any of tenants of Seller (other than Buyer), any
presence, generation, treatment, storage, disposal, transport,
release, threatened release or suspected release of any
Hazardous Material in connection with the Business, or on, in,
to or from the Purchased Assets or Realty (or any part thereof
including without limitation the soil and groundwater
thereunder), that occurs or results from activities occurring
prior to the Closing Date, and/or any presence, generation,
treatment, storage, disposal, transport, release, threatened
release or suspected release of any Hazardous Material by
Seller or through any act or omission of Seller or any tenant
of Seller (other than Buyer); (iii) resulting from, arising
out of, or in connection with any loss or modification of use
of any of the Facilities or any portion of any Facility as a
result of any order, decree, decision or other action by any
judicial authority or Governmental Authority under any
Environmental Law or in connection with the release or
<PAGE>
FORM 10-K Page 97
Exhibit 2.4 (continued)
discharge of any Hazardous Material requiring the cessation or
material modification of business operations at such Facility
or portion thereof to the extent that such releases,
discharges and operations are in all applicable regards
consistent with those releases, discharges and operations
historically made or conducted at such Facility by the Seller;
(iv) resulting from any claim made by Andrew W. Gordon with
respect to any matter existing or commencing on or prior to
the Closing Date; and (v) resulting from, arising out of, or
in connection with any liability of Seller not specifically
assumed by Buyer pursuant to this Agreement (the immediately
preceding clauses (i), (ii), (iii) and (iv), collectively,
"Buyer's Damages").
9.3. Limitation of Seller's Indemnification
Obligations. Seller's obligation to indemnify Buyer against
any Buyer's Damages is subject to all of the following
limitations:
(a) Notwithstanding anything to the contrary contained
in this Agreement, Seller will have indemnity obligations
hereunder only with respect to Buyer's Damages (other than
Buyer's Damages listed in clause (ii), (iii) or (iv) of
Section 9.2) that in the aggregate exceed $50,000, as measured
beginning on the Closing Date.
(b) Except as set forth in subparagraph (c) below, a
claim, or notice of a claim or a potential claim for Buyer's
Damages must be in writing and (other than Buyer's Damages
listed in clauses (ii) or (iv) of Section 9.2) must be
delivered to Seller within two (2) years after the Closing
Date; provided, however, that a claim, or notice of a claim or
a potential claim, for Buyer's Damages with respect to any
liability of Seller not expressly and voluntarily assumed by
Buyer pursuant to this Agreement must be delivered in writing
to Seller within three (3) years after the Closing Date.
Notwithstanding anything to the contrary contained in this
Agreement, a Buyer Entity is not required to institute
proceedings of any kind whatsoever within such three-year or
two-year period, as the case may be.
(c) Notwithstanding anything to the contrary contained
in this Agreement, any claim for Buyer's Damages that any
Buyer Entity may have against Seller (i) arising in connection
with tax liabilities of any kind whatsoever, (ii) arising in
connection with Seller's breach of any of its representations
and warranties contained in Section 4.13 or (iii) as described
<PAGE>
FORM 10-K Page 98
Exhibit 2.4 (continued)
in clauses (ii) or (iv) of Section 9.2 may be made by such
Buyer Entity Buyer at any time without regard to the time
limitations imposed by the immediately preceding subparagraph
(b), but shall in all other respects remain subject to the
provisions of this Article IX, including without limitation,
to the extent applicable, the provisions of subparagraph
9.3(a).
(d) Notwithstanding anything to the contrary contained
in this Agreement, with respect to Seller's indemnification
obligations of Buyer hereunder, Buyer first shall have
recourse against the balance of all monies held in escrow
pursuant to the Escrow Agreement (which is provided for in
Section 2.2(b)) and then against Seller.
(e) Seller's obligation to indemnify Buyer Entities
hereunder (other than its obligation with respect to Buyer's
Damages listed in clause (ii) of Section 9.2, which obligation
shall not be subject to any dollar limitation) shall terminate
upon payment in the aggregate by Seller to Buyer Entities of
Buyer's Damages (other than Buyer's Damages listed in clause
(ii) of Section 9.2) equal to the Purchase Price; provided
that Seller's obligation to indemnify Buyer's Entities
hereunder as a result of Seller's breach of the warranty set
forth in Section 4.18 (but only to extent that such breach of
warranty arises with respect to any claim of infringement of
United States Patent Number 5,460,655) shall terminate upon
payment in the aggregate by Seller to Buyer's Entities of
Buyer's Damages in connection with any such claim of
infringement of such patent equal to $2,500,000.
(f) Any claim for Buyer's Damages hereunder shall be
reduced by the amount of any insurance (including title
insurance) proceeds actually received by Buyer in respect of
the same matter underlying such claim for Buyer's Damages.
(g) Buyer's exclusive remedies following the Closing
Date for any breach by Seller of a representation, warranty,
covenant, agreement or provision set forth in this Agreement
shall be the indemnification set forth herein and exercise of
its rights under the Escrow Agreement; provided, however, that
Buyer may set-off against any Buyer's Damages, any amounts
payable to Seller pursuant to this Agreement or any agreement
delivered upon consummation of the transactions contemplated
hereby.
<PAGE>
FORM 10-K Page 99
Exhibit 2.4 (continued)
9.4. Third Party Actions or Claims; Remediation
Procedures. (a) Defenses. If any action or claim shall be
brought or asserted against any Buyer Entity by a Third Party
(a "Third-Party Claim") in respect of which indemnity may be
sought from Seller, such Buyer Entity shall promptly notify
Seller in writing of such claim, and Seller shall assume the
defense thereof, including the employment of counsel and the
payment of all expenses. Such Buyer Entity shall have the
absolute right to employ separate counsel in any such action
and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Buyer
Entity unless: (i) the employment thereof has been
specifically authorized by Seller in writing; (ii) Seller
shall have failed to assume the defense and to employ counsel
satisfactory to such Buyer Entity in such Buyer Entity's good
faith discretion; or (iii) the named parties to any such
action (including any impleaded parties) include both such
Buyer Entity and Seller, and such Buyer Entity shall have been
advised by such counsel that there may be one or more legal
defenses available to it that are different from or in
addition to those available to Seller, in which case, if such
Buyer Entity notifies Seller in writing that it elects to
employ separate counsel at the expense of Seller, Seller shall
not have the right to assume the defense of such action on
behalf of such Buyer Entity, it being understood, however,
that Seller shall not, in connection with any one such action
or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys
at any time for all Buyer Entities.
(b) Resolution of Third-Party Claims. Upon a
judgment, order, decree or decision being rendered by any
court of law or equity or any proper arbitral tribunal or
Governmental Authority (a "Decision"), Seller agrees to, and
shall, indemnify and hold harmless each Buyer Entity against
the amount of the Decision (plus any other losses or
liabilities relating to such Decision). If any Third-Party
Claim is settled with the written consent of Seller, Seller
agrees to, and shall, indemnify and hold harmless each Buyer
Entity against the amount of such settlement (plus any other
liabilities relating to such settlement).
(c) Remediation Procedures. (i) Prior to the
implementation of any plan to remediate any violation or
alleged violation of any Environmental Law or any Hazardous
<PAGE>
FORM 10-K Page 100
Exhibit 2.4 (continued)
Material or other environmental condition with respect to
which it has rights of indemnification hereunder, Buyer shall
provide reasonable written notice thereof to Seller setting
forth such remediation plan and the estimated costs thereof.
Seller shall have the right to approve Buyer's remediation
plan, which approval shall not be unreasonably withheld and
shall be deemed given if within ten (10) days after Seller's
receipt of such remediation plan Seller fails to provide Buyer
with written notice of its objection to such plan, identifying
specific reasonable objections. Buyer shall revise the
remediation plan to address any reasonable objections of
Seller. Buyer's failure to provide such notice or plan of
remediation or Buyer's implementation of a plan of remediation
as to which Seller has objected shall not limit in any way
Buyer's right to indemnification as set forth herein, but may
give rise to a separate action by Seller against Buyer for any
actual loss caused by a breach of this Section 9.4(c)(i),
which action is subject to arbitration pursuant to Section
11.9. Notwithstanding the foregoing provisions of this
Section 9.4(c)(i), in the event that Buyer reasonably and in
good faith determines that it must act with immediacy to
remediate any violation or alleged violation of any
Environmental Law or any Hazardous Material or other
environmental condition, it shall not be required to provide
the notice or a plan of remediation to Seller as set forth in
the first sentence of this Section 9.4(c)(i), but shall
provide a copy of its remediation plan to Seller as promptly
as is reasonably possible. In the event Buyer conducts
remediation work for which it has rights of indemnification
hereunder pursuant to a plan approved by Seller, Seller shall
reimburse Buyer for the cost of such work. In the event Buyer
conducts remediation work for which it has rights of
indemnification hereunder that is not pursuant to a plan
approved by Seller, Seller shall reimburse Buyer for the
reasonable cost of such work. Subject to the foregoing, all
such reimbursement payments shall be made by Seller to Buyer
within ten (10) days after Seller's receipt of Buyer's written
request therefor.
(ii) Notwithstanding the foregoing provisions of
this Section 9.4(c)(i), Buyer may at its option require that
Seller remediate any violation or alleged violation of any
Environmental Law or any Hazardous Material or other
environmental condition with respect to which Buyer has rights
of indemnification hereunder, in which case Buyer shall
provide reasonable written notice thereof to Seller and Seller
shall within a reasonable period provide to Buyer Seller's
<PAGE>
FORM 10-K Page 101
Exhibit 2.4 (continued)
plan of remediation. Buyer shall have the right to approve
Seller's remediation plan, which approval shall not be
unreasonably withheld and shall be deemed given if within ten
(10) days after Buyer's receipt of such remediation plan Buyer
fails to provide Seller with written notice of its objection
to such plan, identifying specific reasonable objections.
Seller shall revise the remediation plan to address any
reasonable objections by Buyer, and upon approval or deemed
approval of the plan, Seller shall at its sole cost and
expense complete the required remediation work. Without
limiting the foregoing, Seller shall complete all remediation
work currently underway by Seller at any Facility (including
without limitation remediation work underway at Facility 1 and
Facility 5, remediation work reasonably contemplated at
Facility 5 as described in Schedule 9.4 and remediation work
reasonably contemplated by the Comprehensive Site Assessment
Plan submitted to the North Carolina Department of
Environment, Health and Natural Resources on or about December
31, 1995 with respect to Facility 1; provided that all such
remediation work shall be performed pursuant to a plan
approved by the Buyer and otherwise in accordance with this
Section 9.4(c)(ii)). Seller shall perform all remediation
work required by Buyer under this Section 9.4(c)(ii) at
Seller's risk and expense in accordance with applicable
Environmental Laws and the requirements of Governmental
Authorities as promptly as is reasonably possible, minimizing
interference with Buyer's operations and property. Seller
shall maintain in good and safe condition all wells, borings,
equipment and other property relating to remediation work by
Seller, and Buyer shall have no responsibility of any kind in
connection therewith. Seller shall make such reports to
Governmental Authorities as are required, and simultaneously
send copies of such reports to Buyer. Seller shall conduct
remediation work only through qualified professional
environmental contracting firms approved in advance by Buyer,
which approval shall not to be unreasonably withheld (Law
Engineering and Environmental Services ("Law Engineering") is
hereby approved by Buyer with respect to continuing ongoing
remediation work at Facility 1). The scheduling of all
remediation work and the location of all wells, borings,
equipment and operations by Seller and its contractors must be
approved in advance by Buyer, which approval shall not be
unreasonably withheld. Buyer shall provide Seller and its
contractors reasonable access to Buyer's facilities necessary
for Seller and its contractors to perform such remediation
work. Seller or its contractors shall remain the owner of all
such wells and equipment installed at a Facility by Seller or
its contractors, as well as all Hazardous Materials, samples
<PAGE>
FORM 10-K Page 102
Exhibit 2.4 (continued)
and contaminated media removed by them, all of which promptly
shall be properly disposed of by Seller at an off-site
location. At the conclusion of remediation work at any
Facility, Seller and its contractors shall close all wells and
borings in accordance with legal requirements and remove all
of their equipment. Upon the completion of each phase of
remediation work, Seller and its contractors shall restore the
Facility in question to its condition prior to the
commencement of the remediation work, reasonable wear and tear
excepted. Seller shall provide evidence of, and shall cause
to be maintained throughout the period of remediation work,
comprehensive general public liability insurance coverage for
Seller and its contractors in amounts reasonably satisfactory
to Buyer covering all actions of Seller and its contractors at
any Facility. Seller agrees, upon Buyer's request, promptly
to supply to Buyer copies of all written information in its
possession relating to remediation work by Seller, and to
notify Buyer at least two (2) business days in advance of any
remediation work to be performed by Seller. Buyer shall have
the right to observe and verify all such work. Seller shall
also provide Buyer with copies of all notices, orders, claims,
lawsuits, actions, complaints, requests for information and
other correspondence with any Governmental Authority, or any
private third party, relating to any alleged violation of any
Environmental Law or Hazardous Material with respect to any
Facility. Seller agrees to indemnify, defend and hold
harmless each Buyer Entity from and against all demands,
claims, actions, losses, damages, liabilities, fines,
penalties, governmental requirements, administrative
proceedings, personal injury claims, property damage claims,
liens, costs and expenses, including without limitation
attorneys' fees and consultant and expert witness fees,
arising in any manner, directly or indirectly, out of or by
reason of any remediation work by Seller or its contractors or
agents.
(iii) For the purposes of this Section 9.4, the
terms "remediation" or "remediate" shall include
investigative, response, removal, remedial, treatment,
cleanup, disposal and other corrective actions.
9.5. Seller's Payment of Its Indemnification
Obligations. Within a reasonable time after delivery by a
Buyer Entity to Seller of a claim for Buyer's Damages, Seller
shall pay such Buyer Entity in Cash, subject to prior
arbitration as may be required in accordance with Section 11.9
and subject to the other provisions of this Article IX, the
amount set forth in such claim for Buyer's Damages.
<PAGE>
FORM 10-K Page 103
Exhibit 2.4 (continued)
9.6. Conflict with the Escrow Agreement. In the event
there is any inconsistency or conflict, regarding the payment
and disbursement of the portion of the Purchase Price held
back from Seller and placed in escrow pursuant to the Escrow
Agreement (which is provided for in Section 2.2(b)), between
this Article IX and the Escrow Agreement, for so long as the
Escrow Agreement is effective and is applicable, the Escrow
Agreement shall control over the provisions of this Article
IX.
9.7. Indemnification by Buyer. Buyer agrees to
indemnify, defend and hold harmless Seller from and against
all demands, claims, actions, losses, damages, liabilities,
fines, penalties, governmental requirements, administrative
proceedings, personal injury claims (including claims for
death), property damage claims, liens, costs and expenses,
including, without limitation, attorney's fees and consultant
and expert witness fees, asserted against or incurred by
Seller resulting from Buyer's use of any vehicle to be
transferred by Seller to Buyer pursuant to this Agreement or
the Services Agreement prior to Buyer's completion of the
retitling and licensing of such vehicle as contemplated hereby
and thereby.
ARTICLE X
TERMINATION
10.1. Termination. This Agreement may be terminated:
(a) At any time by mutual consent of Seller and Buyer;
(b) By either party, if Closing hereunder has not
taken place on or before January 31, 1996 (subject, however,
to the provisions of Section 7.4);
(c) By Seller if all the conditions in Sections 8.1
and 8.2 have not been satisfied or waived by the Closing Date;
(d) By Buyer if all the conditions set forth in
Sections 8.1 and 8.3 have not been satisfied or waived by the
Closing Date;
10.2. Procedure and Effect of Termination or Failure to
Close. In the event of termination of this Agreement and
abandonment of the transactions contemplated hereby by any or
<PAGE>
FORM 10-K Page 104
Exhibit 2.4 (continued)
all of the parties pursuant to Section 10.1, prompt written
notice thereof shall be given to the other party, and this
Agreement shall terminate and the transactions contemplated
hereby shall be abandoned, without further action by any of
the parties hereto. If this Agreement is terminated as
provided herein:
(a) None of the parties hereto nor any of their
partners, directors, officers, shareholders, employees,
agents, or affiliates shall have any liability or further
obligation to the other party or any of its partners,
directors, officers, shareholders, employees, agents, or
affiliates pursuant to this Agreement with respect to which
termination has occurred, except as stated in Article IX or in
Section 10.2(b) and in Sections 7.2(b), 11.1 and 11.2 hereof;
and
(b) All filings, applications and other submissions
relating to the transfer of the Purchased Assets shall, to the
extent practicable, be withdrawn from the agency or other
Person to which made.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Commissions. Seller and Buyer represent and
warrant to each other that no broker, finder or other Person
is entitled to any brokerage fees, commissions or finder's
fees in connection with the transactions contemplated hereby
by reason of any action taken by the party making such
representation. Seller and Buyer will pay or otherwise
discharge, and will indemnify and hold each other harmless
from and against, any and all claims or liabilities for all
brokerage fees, commissions and finder's fees incurred by
reason of any action taken by such party.
11.2. Expenses. Whether or not the transactions
contemplated hereby are consummated, except as otherwise
provided herein, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby
will be paid by the party incurring such costs and expenses.
11.3. Further Assurances. Subject to the terms and
conditions of this Agreement, each of the parties hereto will
use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary,
<PAGE>
FORM 10-K Page 105
Exhibit 2.4 (continued)
proper or advisable under applicable laws and regulations to
consummate and make effective the sale of the Purchased Assets
pursuant to this Agreement. From time to time after the
Closing Date, without further consideration, Seller will, at
its expense, execute and deliver, or cause to be executed and
delivered, such documents to Buyer as Buyer may reasonably
request in order to more effectively vest in Buyer good title
to the Purchased Assets. From time to time after the Closing
Date, without further consideration, Buyer will, at Buyer's
expense, execute and deliver such documents to Seller as
Seller may reasonably request in order to consummate the sale
of the Purchased Assets pursuant to this Agreement.
11.4. Amendment and Modification. This Agreement may
not be amended, modified or supplemented except by written
agreement executed by Seller and Buyer.
11.5. Waiver of Compliance; Consents. Except as
otherwise provided in this Agreement, any failure of any of
the parties to comply with any obligation, representation,
warranty, covenant, agreement or condition herein may be
waived by the party entitled to the benefits thereof only by
a written instrument signed by the party granting such waiver,
but such waiver or failure to insist upon strict compliance
with such obligation, representation, warranty, covenant,
agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in
writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 11.5.
11.6. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given when
delivered by hand or by facsimile transmission or mailed by
registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses
(or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address
shall be effective only upon receipt thereof):
(a) If to Seller, to:
Cone Mills Corporation
1201 Maple Street
Greensboro, North Carolina 27405
Attention: Mr. Neil W. Koonce, Vice President
and General Counsel
Telecopy: (910) 379-6972
<PAGE>
FORM 10-K Page 106
Exhibit 2.4 (continued)
(b) If to Buyer or British Vita, to:
British Vita PLC
Middleton, Manchester M24 2DB
United Kingdom
Attention: Mr. Mark Stirzaker, Company Solicitor
Telecopy: 011 44 161-655-3957
with copies to:
Vitafoam Incorporated
2222 Surrett Drive
High Point, North Carolina 27263
Attention: Stephen M. Lynch,
Corporate Secretary
Telecopy: (910) 431-7747
and
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street
Suite 1900
Charlotte, North Carolina 28246
Attention: Mr. Stephen M. Lynch
Telecopy: (704) 378-4000
11.7. Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors
and permitted assigns, but neither this Agreement nor any of
the rights, interests or obligations hereunder, other than
Buyer's collateral assignment thereof to any lenders, shall be
assigned by any party hereto without the prior written consent
of the other party, which shall not be unreasonably withheld,
nor is this Agreement intended to confer upon any other Person
except the parties hereto any rights or remedies hereunder.
11.8. Governing Law; Jurisdiction. The execution,
interpretation and performance of this Agreement shall be
governed by the internal laws and judicial decisions of the
State of North Carolina, without regard to its conflicts-of-
laws principles. Buyer, British Vita and Seller hereby
irrevocably consent, to the maximum extent permitted by law,
that any legal action or proceeding against them under,
arising out of or in any manner relating to, this Agreement
may be brought in any court of general jurisdiction of
Guilford County, North Carolina, or in the United States
<PAGE>
FORM 10-K Page 107
Exhibit 2.4 (continued)
District Court for the Middle District of North Carolina,
Greensboro Division. By its execution and delivery of this
Agreement, each such party expressly and irrevocably assents
and submits to the personal jurisdiction of either of such
courts in any such action or proceeding. Each such party
further irrevocably consents to the service of any complaint,
summons, notice or other process relating to any such action
or proceeding by delivery thereof to it by hand or by mail in
the manner provided for in Section 11.6, and expressly and
irrevocably waives its respective claims and defenses in any
such action or proceeding in either such court based on any
alleged lack of personal jurisdiction, improper venue or forum
non conveniens, or any similar basis to the maximum extent
permitted by law.
11.9. Arbitration. Except as otherwise provided herein
or in any other agreement contemplated hereby between Seller
and Buyer (including without limitation the exceptions set
forth in Section 2.13 hereof) and notwithstanding Section
11.8, upon demand of any party hereto, whether made before or
after institution of any judicial proceeding, any dispute,
claim or controversy arising out of, connected with or
relating to this Agreement, or any other agreement entered
into pursuant to this Agreement (including without limitation
the Escrow Agreement) (collectively, "Disputes"), between
Seller and Buyer shall be resolved by binding arbitration as
provided in this Section 11.9. Institution of a judicial
proceeding by a party does not waive the right of that party
to demand arbitration. Disputes may include, without
limitation, tort claims, counterclaims, claims arising from
modifications, amendments or supplements to this Agreement or
any other agreement provided for herein executed in the
future, or claims concerning any aspect of the past, present
or future relationships arising out of or connected with this
Agreement.
Arbitration shall be conducted under and governed by the
Commercial Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association and Title 9 of the U.S. Code.
All arbitration hearings shall be conducted either in Guilford
County or Mecklenburg County, North Carolina. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration
Rules shall be applicable to claims of less than $500,000.
All applicable statutes of limitation shall apply to any
Dispute. A judgment upon the award may be entered in any
court of competent jurisdiction. The arbitrators shall be
appointed as provided in the Arbitration Rules.
<PAGE>
FORM 10-K Page 108
Exhibit 2.4 (continued)
Notwithstanding anything to the contrary contained in
this Section 11.9, Seller and Buyer preserve, without
diminution, certain remedies that either of them may employ or
exercise freely, either alone, in conjunction with, or during
a Dispute. Seller and Buyer both have the right to proceed in
any court of proper jurisdiction or by self help to exercise
or prosecute the following remedies, as applicable: (i) all
rights of self help including peaceful occupation of real
property and collection of rents, set off and peaceful
possession of personal property; (ii) obtaining provisional or
ancillary remedies including injunctive relief, requestration,
garnishment, attachment, appointment of a receiver and filing
an involuntary bankruptcy proceeding; and (iii) when
applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an
arbitrator to grant similar remedies that may be requested by
a party in a Dispute.
11.10. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
11.11. Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and
shall not in any way affect the meaning or interpretation of
this Agreement.
11.12. Public Announcements. Prior to the Closing Date,
any public announcement or press release by either party
describing the transactions provided for herein must be
approved in advance by the other party, subject, however, to
any securities law disclosure requirements.
11.13. Entire Agreement. This Agreement, including the
Exhibits and Schedules hereto and the documents delivered
pursuant to this Agreement, embody the entire agreement and
understanding of the parties hereto in respect of the subject
matter hereof. The Exhibits and Schedules hereto are an
integral part of this Agreement and are incorporated by
reference herein. Each party hereto acknowledges to the other
that it has not made any, and makes no, promises,
representations, warranties, covenants or undertakings, other
than those expressly set forth herein. Except as otherwise
provided herein, this Agreement supersedes all prior
agreements and understandings between the parties with respect
<PAGE>
FORM 10-K Page 109
Exhibit 2.4 (continued)
to the transactions contemplated by this Agreement, including
the letter of intent signed by British Vita on September 18,
1995 and accepted by Seller on September 19, 1995, and the
amendment thereto signed by British Vita on November 27, 1995
and accepted by Seller on November 27, 1995.
11.14. Bulk Sales. Buyer waives compliance by Seller
with respect to any bulk sales or other transfer laws
applicable to the transactions contemplated hereunder. Seller
hereby agrees to indemnify and hold Buyer harmless from and
against any and all losses, claims, costs, charges, and
expenses arising out of or resulting from noncompliance by
Seller or Buyer with respect to any bulk sales laws or
transfer laws applicable to the transactions contemplated
hereunder.
[Signatures begin on next page]
<PAGE>
FORM 10-K Page 110
Exhibit 2.4 (continued)
IN WITNESS WHEREOF, Seller and Buyer have caused this
Agreement to be signed by their respective duly authorized
officers as of the date first above written.
CONE MILLS CORPORATION
By: /s/ Neil W. Koonce
Title: Vice President and
General Counsel
VITAFOAM INCORPORATED
By: /s/ Stephen M. Lynch
Title:Corporate Secretary
BRITISH VITA PLC
By: /s/ Mark R. Stirzaker
Title:Company Solicitor
<PAGE>
FORM 10-K Page 111
Exhibit 2.4 (continued)
STATE OF NORTH CAROLINA
LEASE AGREEMENT
COUNTY OF GUILFORD
THIS LEASE AGREEMENT is made and entered into as of the
22nd day of January, 1996, by and between CONE MILLS
CORPORATION, a North Carolina corporation with offices in
Greensboro, North Carolina ("Landlord") and VITAFOAM
INCORPORATED, a North Carolina corporation with offices in
High Point, North Carolina ("Tenant").
PRELIMINARY STATEMENT
A. Landlord is the owner of that certain parcel of land
(the "Land") containing approximately 15.14 acres, located on
the northwest side of Yanceyville Street, in the City of
Greensboro, Guilford County, North Carolina, identified as
Guilford County Tax Parcel No. 251-061-01 and outlined in blue
on Exhibit A attached hereto.
B. Landlord or its predecessor in title has previously
constructed on the Land a manufacturing/warehouse building
(the "Building") containing approximately 144,000 square feet
of floor area, and outlined in red on Exhibit A attached
hereto, and certain improvements appurtenant to the Building,
such as roadways, rail spurs, loading docks, parking areas,
and utility facilities (collectively, with the Building, the
"Improvements"). The Building, the Improvements, and the
portion of the Land on which the Building and the Improvements
are located, are referred to collectively in this Lease as the
"Premises."
C. Under the terms of an Acquisition Agreement dated
January 19, 1996 between Landlord and Tenant (the "Acquisition
Agreement"), Landlord has agreed to convey certain assets to
Tenant, and also has agreed to lease the Premises to Tenant
for a period of approximately six (6) months. Tenant intends
to occupy the Building and use the other Improvements for the
manufacture of rebonded polyurethane foam, carpet underlay and
related products. In order to evidence their agreement
regarding Tenant's lease of the Premises, the parties are
entering into this Lease Agreement (this "Lease").
<PAGE>
FORM 10-K Page 112
Exhibit 2.4 (continued)
LEASE
NOW, THEREFORE, in consideration of the mutual covenants
and conditions contained in this Lease, including the covenant
to pay rent, and other good and valuable consideration,
Landlord and Tenant hereby agree, for themselves, their
successors and assigns, as follows:
1. Premises. Landlord leases to Tenant, and Tenant
accepts and rents from Landlord, the Premises, for the term
and on the terms and conditions set forth in this Lease. In
additon to the Premises, Tenant shall have the non-exclusive
right to use all other improvements located on the Land that
are necessary to its use and enjoyment of the Premises.
2. Term. The term of this Lease shall begin on the
date that the Premises are delivered to Tenant, as provided in
Section 3, and shall end at midnight on the last day of the
sixth (6th) complete calendar month following the commencement
date; provided, however, that Tenant in its sole discretion
may extend the term of this Lease for an additional period of
six (6) months by delivery of written notice to Landlord at
least thirty (30) days prior to the expiration of the initial
term of this Lease.
3. Delivery of Premises. Landlord shall remove from
the Premises all chemicals and other "Hazardous Material" (as
defined in the Acquisition Agreement) that have no further use
in operations at the Premises, all drums containing
unidentified substances, all spilled chemicals and other
Hazardous Material, and all unidentified substances on floors
or in spill containment areas. Landlord shall complete this
work and deliver the Premises on or before January 22, 1996.
Tenant acknowledges that it has inspected the Improvements,
that Landlord makes no representations or warranties as to the
condition of the Improvements or their suitability for any
particular purpose, except as may be expressly set forth in
the Acquisition Agreement, and that Landlord shall have no
responsibility to make any repairs or alterations to the
Improvements prior to their delivery to Tenant, except as
provided above.
4. Rent. Tenant shall pay to Landlord as monthly rent
the sum of $8,164.97 per month, payable in advance on the
first day of each calendar month, commencing on the
commencement date of the term of this Lease and continuing
<PAGE>
FORM 10-K Page 113
Exhibit 2.4 (continued)
throughout the term of this Lease. If the commencement date
falls on a day other than the first day of a calendar month,
the installment of rent payable for the initial partial
calendar month shall be payable on the first day of the
following calendar month. All rent shall be paid to Landlord
at the address to which notices to Landlord are given as set
forth in Section 22 below, and shall be paid without demand,
setoff or deduction. Rent for any partial month shall be
prorated on a daily basis.
5. Additional Rent. If Tenant does not pay such
expenses directly as provided in this Lease, Tenant shall pay
to Landlord, as additional rent, the following operating
expenses incurred by Landlord with respect to the Premises
during the term of this Lease:
(a) All real estate taxes and assessments
levied or assessed against the Premises;
(b) The cost of all utility services provided
to the Premises, including but not limited to
electricity, natural gas, water and sewer services
and trash removal; and
(c) All other costs incurred by Landlord in
performing any items of maintenance that are the
obligation of Tenant under Section 6 below,
including but not limited to the cost of janitorial
services, security services, maintenance of
landscaped and paved areas, maintenance of utility
systems and other similar expenditures.
Tenant shall reimburse Landlord for each of the foregoing
expenses within ten (10) days after receipt of a written
statement from Landlord, detailing the expense incurred by
Landlord.
6. Repair and Maintenance. Landlord shall maintain the
entire Premises in the condition existing as of the date of
this Lease (ordinary wear and tear excepted), including
without limitation the Building and other Improvements on the
Premises, and all roofs and exterior walls, driveways and
parking areas, and shall make all necessary repairs to the
building structure and concealed systems (including without
limitation plumbing, electrical, heating and air conditioning)
within or servicing the Premises; provided, however, that
<PAGE>
FORM 10-K Page 114
Exhibit 2.4 (continued)
Landlord shall not be required to effect any repair the
reasonable cost of which would exceed $50,000, in which case
Tenant may immediately terminate this Lease or may effect such
repair and offset against payments due to Landlord hereunder
or under any other agreement its reasonable cost of effecting
such repair. Landlord shall also make any modifications to
the Premises required to comply with applicable legal
requirements, including without limitation the Americans with
Disabilities Act. If any repairs required to be made by
Landlord to the Premises are not completed within ten (10)
days after written notice of the need for the repairs has been
given by Tenant to Landlord (or, in the event of an emergency,
if not made as soon as reasonably practical), then Tenant may
make the needed repairs on behalf of and at the expense of
Landlord. Landlord shall reimburse Tenant for the reasonable
cost of the repairs within ten (10) days after written demand,
accompanied by supporting invoices. If any repairs required
to be made by Landlord are commenced when necessary, but
cannot be completed within ten (10) days, then Landlord shall
have an additional reasonable period of time to complete the
repairs, so long as it continues to prosecute the completion
of the repairs with due diligence, and provided it keeps
Tenant fully informed as to the progress of the repairs.
Tenant shall keep the Premises in a safe, neat and clean
condition at all times, and shall be responsible the routine
maintenance and upkeep of the Improvements (including minor
non-structural repairs to the interior of the Building, and
the general policing of paved and landscaped areas). Tenant
also shall be responsible for any repairs to Tenant's personal
property and equipment placed on the Premises.
7. Alterations and Personal Property. Subject to the
proviso of the first sentence of Section 6, Tenant shall have
no right to make any structural alterations to the Building
without the prior written consent of Landlord, which may be
withheld in Landlord's sole discretion. If Landlord approves
any such alterations, Tenant must obtain from Landlord
approval in writing in advance of plans and specifications for
the work, and shall keep the Premises free and clear of any
lien or claim of lien arising out of any such work occurring,
or allegedly occurring, by, through or under Tenant. Tenant
shall immediately pay and discharge any such lien or claim of
lien that is filed.
<PAGE>
FORM 10-K Page 115
Exhibit 2.4 (continued)
All inventory, equipment, fixtures and furnishings
installed in or attached to the Premises by and at the expense
of Tenant may be removed by Tenant at any time during the
Lease term provided Tenant is not in default hereunder, and
provided that such removal will not damage the Premises or
that any damage caused by such removal will be promptly
repaired by Tenant at its expense. Any such property not so
removed before the expiration of the term of this Lease or the
earlier termination of this Lease shall, as Landlord's option,
become the property of Landlord, or shall be removed by
Tenant. Tenant shall repair any damage caused by removal, and
these obligations shall survive termination of this Lease or
expiration of the Lease term. All personal property owned by
Tenant shall be brought onto the Premises at Tenant's sole
risk, and Tenant hereby releases Landlord from any liability
for damage to such property, no matter how caused.
8. Taxes. Landlord shall pay, prior to delinquency,
all real estate taxes and assessments that are levied or
assessed against the Land during the term of this Lease.
Tenant shall pay, prior to delinquency, all taxes,
assessments, license fees and other charges of any nature
whatsoever that are levied or assessed against any personal
property or equipment of Tenant or are otherwise based on
Tenant's operations within the Premises during the term of
this Lease. On demand by Landlord, Tenant shall furnish
Landlord with satisfactory evidence of the payments.
9. Utilities and Services. Tenant shall make all
arrangements for and pay for all utilities and services
furnished to the Premises, including, without limitation, gas,
electricity, water, sewer and telephone service, and for all
charges for initiation of service therefor. Notwithstanding
the foregoing, Landlord agrees to continue to supply steam to
the Premises, in the manner, quantity and price ($4.80 per
1,000 pounds) that it currently is being supplied from
Landlord's adjacent manufacturing facility.
10. Damage by Casualty or Fire. If the Building or
other Improvements are totally or partially damaged or
destroyed by casualty, explosion or fire, however caused, or
by the elements, and Landlord's architect reasonably estimates
that the damage will take longer than thirty (30) days to
repair, then either party shall have the right to terminate
this Lease by delivery of written notice of such termination
<PAGE>
FORM 10-K Page 116
Exhibit 2.4 (continued)
to the other party within thirty (30) days after such damage
or destruction. Upon any such termination, Landlord shall be
entitled to receive all insurance proceeds payable with
respect to such damage or destruction, excluding the proceeds
of any separate policy of insurance maintained by Tenant on
its personal property, equipment or trade fixtures. If this
Lease is not terminated as provided above, then Landlord shall
repair and restore the Building and the other Improvements to
substantially the same condition as existed prior to the
casualty, and Tenant shall be entitled to an abatement of rent
in proportion to the degree in which Tenant's use and
enjoyment of the Premises is interfered with during the period
of damage, repair or restoration.
11. Insurance. Landlord shall maintain, at its expense,
throughout the term of this Lease, a policy of standard fire
and extended coverage insurance on the Improvements in an
amount equal to the full replacement cost of the Improvements.
Tenant shall maintain, at its expense, throughout the term of
this Lease, a policy of commercial general liability insurance
with a single limit of liability of not less than $5,000,000
per occurrence, and shall maintain on all its personal
property, inventory, fixtures and equipment a policy of
standard fire and extended coverage insurance, in an amount
sufficient to meet the co-insurance requirements of such
policy. Prior to the commencement of the term of this Lease,
and thereafter from time to time upon request, each party
shall provide the other party with certificates (or upon
request, copies) of the insurance policies required to be
maintained under this Section 11.
12. Taking for Public Use. If the entire Premises are
taken for any public or any quasi-public use under any statute
or by right of eminent domain, or by private purchase in lieu
thereof, then this Lease shall automatically terminate as of
the date that title is vested in the condemning authority. If
any part of the Premises is so taken as to render the
remainder thereof unusable for the purposes for which the
Premises are leased, then either party shall have the right to
terminate this Lease by delivery of written notice to the
other party within thirty (30) days after the date of such
taking, time being of the essence.
If any part of the Premises is so taken and this Lease is
not terminated under the provisions of the preceding paragraph
of this Section 12, then the rent shall be apportioned
according to the space so taken, and Landlord shall, to the
<PAGE>
FORM 10-K Page 117
Exhibit 2.4 (continued)
extent possible with any award of damages from such taking,
restore the remaining portion of the Premises to the extent
necessary to render it reasonably suitable for the purposes
for which it is leased, and shall make all repairs to any
Building damaged by such taking to the extent necessary to
constitute the Building a complete architectural unit.
All compensation awarded or paid upon such a total or
partial taking of the Premises shall belong to and be the
property of Landlord without any participation by Tenant;
provided, however, that nothing contained herein shall be
construed to preclude Tenant from prosecuting any claim
directly against the condemning authority in such condemnation
proceedings for loss of business, or for depreciation to,
damage to, the cost of removal of, or the value of stock,
trade fixtures, furniture, and other personal property
belonging to Tenant; provided, further, that no such claim
shall diminish or otherwise adversely affect Landlord's award.
13. Indemnity and Waiver. Tenant shall protect,
indemnify, defend and save Landlord harmless from and against
any and all claims, demands, causes of action and other
expenses of any nature whatsoever (including attorneys' fees),
for injury to or death of persons, or loss of or damage to
property, occurring on or about the Premises, and resulting
from the use and occupancy of the Premises by Tenant, its
agents or employees. The foregoing indemnity shall not extend
to any matters resulting, directly or indirectly, from the
negligence or intentional misconduct of Landlord, or to any
claims relating to any "Hazardous Material" or "Environmental
Law," as those terms are defined in Section 19.
Landlord shall not be responsible or liable for any
event, act or omission to the extent covered by insurance
maintained by Tenant, or required by this Lease to be
maintained by Tenant, and Tenant shall require its insurers to
include in Tenant's insurance policies effective waivers of
subrogation rights for the benefit of Landlord, its agents and
employees.
Landlord hereby releases and waives all claims against
Tenant, its agents and employees, for injury or damage to the
Improvements, to the extent covered by insurance maintained by
Landlord, or required by this Lease to be maintained by
Landlord, and Landlord shall use its best efforts (but shall
not be required to pay any additional or special charges for
endorsements) to cause its insurers to include in Landlord's
<PAGE>
FORM 10-K Page 118
Exhibit 2.4 (continued)
insurance policies effective waivers of subrogation rights for
the benefit of Tenant, its agents and employees.
14. Default. The occurrence of any one of the following
shall constitute a default by Tenant:
(a) Failure to pay rent or any other amount
payable under this Lease within ten (10) days after
written notice that such amount is past due; or
(b) Failure to perform any other provision of
this Lease if the failure to perform is not cured
within thirty (30) days after notice thereof has
been given to Tenant; provided, however, that if
the default is not reasonably capable of being
cured in thirty (30) days, Tenant shall not be in
default if it commences the cure within that thirty
(30) day period and diligently prosecutes the cure
to completion.
15. Landlord's Remedies. Landlord shall have the
following remedies if Tenant defaults. These remedies are not
exclusive; they are cumulative in addition to any remedies now
or later allowed by law.
(a) Landlord shall have the right to
terminate Tenant's right of possession of the
Premises without terminating this Lease, and as
long as Landlord does not terminate this Lease,
collect rent when due. Tenant shall surrender
possession of the Premises to Landlord and Landlord
shall have the right to enter the Premises without
notice to vacate (any right to which is hereby
waived by Tenant) and relet them, without prior
notice or demand, using such reasonable force as
may be necessary, changing any or all locks on the
Premises all without being liable for forcible
entry, trespass, or other tort. Tenant shall be
liable immediately to Landlord for all costs
Landlord shall incur in reletting the Premises
including, without limitation, broker's
commissions, expenses for remodeling required by
the reletting, and like costs. Reletting can be
for a period shorter or longer than the remaining
term of the Lease. Tenant shall pay to Landlord
the rent due under this Lease on the date that the
rent is due, less the rent Landlord receives from
<PAGE>
FORM 10-K Page 119
Exhibit 2.4 (continued)
any reletting. No act by Landlord allowed by this
Section 15(a) or surrender of possession of the Premises
pursuant to this Section 15(a) shall terminate this Lease
unless Landlord notifies Tenant that Landlord elects to
terminate this Lease.
(b) Landlord shall have the right to
terminate this Lease without notice to vacate (any
right to which is hereby waived by Tenant) and
Tenant's rights to possession of the Premises at
any time, and reenter the Premises as described in
Section 15(a). No act by Landlord other than the
giving notice of termination to Tenant shall
terminate this Lease. Upon termination, Landlord
shall have the right to pursue its remedies at law
or in equity to recover of Tenant all amounts of
rent then due or thereafter accruing and such other
damages as are caused by Tenant's default.
Without limiting the foregoing, Tenant shall pay, upon
demand, all cost and expenses, including reasonable attorneys'
fees, incurred by Landlord in enforcing Tenant's obligations
under this Lease.
16. Assignment and Subleasing. Tenant shall not sell,
assign, pledge or hypothecate this Lease or sublease the
Premises or any part thereof without the prior written consent
of Landlord, which may be withheld by Landlord in its sole
discretion. Consent by Landlord to one assignment or
subleasing shall not destroy or operate as a waiver of the
prohibitions contained in this Section 16 as to future
assignments or subleases, and all such later assignments or
subleases shall be made only with Landlord's prior written
consent. In the event any assignment of this Lease or
sublease of the Premises or any part thereof is made by
Tenant, whether or not the same is consented to by Landlord,
Tenant shall remain liable to Landlord for payment of all rent
and other charges provided in this Lease, and for the faithful
performance of all of the covenants and conditions of this
Lease by any assignee or subtenant to the same extent as if
the Lease had not been assigned or the Premises had not been
subleased.
17. Quiet Enjoyment. Provided Tenant performs all its
covenants, agreements and obligations hereunder, Landlord will
warrant and defend Tenant in the peaceful and quiet enjoyment
of the Premises, subject to enforceable easements, restrictive
covenants and rights of way, if any, against the lawful claims
of all persons claiming under Landlord.
<PAGE>
FORM 10-K Page 120
Exhibit 2.4 (continued)
18. Use Clause/Compliance with Legal Requirements.
Tenant shall use the Premises only for general manufacturing
and related office purposes. Tenant shall obey and comply
with all laws, rules, regulations, ordinances and other legal
requirements of all legally constituted authorities existing
at any time during the Lease term that are applicable to
Tenant's operations at the Premises. Tenant shall not cause
or permit a nuisance to exist on or about the Premises, and
shall at all times maintain the Premises in a clean and
attractive condition; provided, however, that the foregoing
provision shall not be deemed to impose upon Tenant any
obligation to remedy any situation or condition in existence
as of the date of this Lease.
19. Hazardous Materials. The environmental provisions
set forth in this Section 19 are in addition to and supplement
the environmental provisions of the Acquisition Agreement,
which shall remain in full force and effect with respect to
the Premises notwithstanding this Lease. For the purposes of
this Lease, the terms "Hazardous Material" and "Environmental
Law" shall have the meanings given those terms in the
Acquisition Agreement.
Landlord and Tenant shall promptly, after either of them
learns of the occurrence thereof, give written notice to the
other of receipt of any notice of violation or claim, or a
request for information, relating in any manner to any
Hazardous Material or Environmental Law in connection with the
Premises. Landlord and Tenant shall, upon receipt by either
of them of any environmental sampling or testing results
relating in any manner to the Premises, provide the other with
copies of documents relating to such environmental
investigations.
Tenant agrees that it shall not generate, use, store,
release or dispose of any Hazardous Material on the Premises
except in material compliance with applicable Environmental
Laws. Tenant shall, at its sole cost and expense, cure within
thirty (30) days after written notice from Landlord any breach
of this Section 19 by Tenant by taking all necessary response
and corrective actions in accordance with all applicable
Environmental Laws. If Tenant is responsible by virtue of
this Section 19 for the removal or remediation of any
Hazardous Material, Tenant shall carry out and complete, at
<PAGE>
FORM 10-K Page 121
Exhibit 2.4 (continued)
its sole cost and expense, such response actions, including
without limitation, any investigation, reporting, removal,
remediation, repair, closure, detoxification, decontamination,
restoration and other clean-up of the Premises required under
applicable Environmental Laws, as promptly as reasonably
possible. All response actions shall be undertaken with
disclosure to Landlord of and approval by Landlord of response
plans.
Landlord shall, at its sole cost and expense, cure within
thirty (30) days after written notice from Tenant any breach
by Landlord of this Section 19 by taking all necessary
response and corrective actions in accordance with all
applicable Environmental Laws. If Landlord is responsible for
the removal or remediation of any Hazardous Material by virtue
of this Section 19, Landlord shall carry out and complete, at
its sole cost and expense, such response actions, including
without limitation, any investigation, reporting, removal,
remediation, repair, closure, detoxification, decontamination,
restoration and other clean-up of the Premises required under
applicable Environmental Laws, as promptly as reasonably
possible. All response actions shall be undertaken so as to
minimize interruption of Tenant's business and with disclosure
to Tenant of and approval by Tenant of response plans. IT IS
UNDERSTOOD AND AGREED THAT TENANT HAS NO RESPONSIBILITY FOR OR
AUTHORITY OVER ANY HAZARDOUS MATERIALS LOCATED IN, ON OR ABOUT
THE PREMISES, EXCEPT TO THE EXTENT, IF ANY, BROUGHT THEREON BY
OR AT THE DIRECTION OF TENANT AND THOSE HAZARDOUS MATERIALS
PROPERLY STORED AND LISTED ON AN MSDS REPORT MAINTAINED BY
LANDLORD WITH RESPECT TO THE PREMISES ON THE DATE OF THIS
LEASE AND ACQUIRED BY TENANT PURSUANT TO THE ACQUISITION
AGREEMENT. LANDLORD RETAINS COMPLETE RESPONSIBILITY FOR AND
AUTHORITY OVER ANY AND ALL HAZARDOUS MATERIALS IN, ON OR ABOUT
THE PREMISES EXCEPT FOR THOSE BROUGHT THEREON BY TENANT AND SO
ACQUIRED.
Tenant agrees to indemnify, defend and hold harmless
Landlord, its officers, directors, shareholders, employees,
agents, successors and assigns, from and against all claims,
damages, actions, proceedings, costs, liens, requirements,
judgments, losses, penalties, fines, settlements and
liabilities of any kind (including without limitation
attorneys' fees and court costs, and consultant and expert
witness fees arising in any manner, directly or indirectly,
out of or by reason of (1) any breach of any of the
warranties, representations, covenants or agreements in this
Section 19 by Tenant, (2) any violation or alleged violation
<PAGE>
FORM 10-K Page 122
Exhibit 2.4 (continued)
of any Environmental Law by Tenant with respect to the
Premises (provided such violation or alleged violation does
not represent the substantial continuation of a violation or
alleged violation that commenced prior to the Term when
Landlord operated the Premises, except for a violation that
continues beyond a reasonable period after the management of
Tenant become aware of such violation (other than violations
currently known by employees of Landlord who have been or may
become employees of Tenant as contemplated by the Acquisition
Agreement)), and/or (3) any presence, generation, treatment,
storage, disposal, transport, release, threatened release or
suspected release of any Hazardous Material brought on, in, to
or from the Premises by Tenant. Tenant agrees to employ
security measures, consistent with the security measures
historically employed by Landlord at the Premises, to prevent
unauthorized dumping of Hazardous Materials on the Premises by
third parties.
Landlord agrees to indemnify, defend and hold harmless
Tenant, its officers, directors, shareholders, employees,
agents, successors and assigns, from and against all claims,
damages, actions, proceedings, costs, liens, requirements,
judgments, losses, penalties, fines, settlements and
liabilities of any kind (including without limitation
attorneys' fees and court costs, and consultant and expert
witness fees arising in any manner, directly or indirectly,
out of or by reason of (1) any breach by Landlord of this
Section 19, (2) any violation or alleged violation of any
Environmental Law by Landlord, and/or (3) any presence,
generation, treatment, storage, disposal, transport, release,
threatened release or suspected release of any Hazardous
Material on, in, to or from the Premises that does not result
solely and directly from Tenant's activities in the Premises.
In the event of a breach by Landlord of this Section 19,
Tenant may at any time thereafter terminate this Lease by
written notice to Landlord. The provisions of this Section 19
shall survive the expiration or earlier termination of the
term of this Lease.
20. [INTENTIONALLY DELETED]
21. Waiver. The waiver by either Landlord or Tenant of
any breach of any covenant or agreement of this Lease shall
not be deemed a waiver of any other default concerning the
same or any other covenant or agreement of this Lease. The
receipt and acceptance by Landlord of delinquent or partial
rent shall not constitute a waiver of that or any other
default.
<PAGE>
FORM 10-K Page 123
Exhibit 2.4 (continued)
22. Notice. Any notice that either party desires or is
required to give the other party shall be in writing and shall
be deemed to have been sufficiently given if either delivered
by hand delivery or sent by prepaid, registered or certified
mail, addressed to the other party at the address set forth
below:
Landlord: Cone Mills Corporation
1201 Maple Street
Greensboro, North Carolina 27405
Attention: Mr. Neil W. Koonce, Vice
President and General Counsel
Telecopy: (910) 329-6972
Tenant: Vitafoam Incorporated
2222 Surrett Drive
High Point, North Carolina 27263
Attention: Corporate Secretary
Telecopy: (910) 431-7747
With a copy to:
British Vita PLC
Middleton, Manchester M24 2DB
United Kingdom
Attention: Mr. Mark Stirzaker
Telecopy: 011 44 161-655-3957
Either party may change its address by notifying the
other party of the change of address in the foregoing manner.
23. Surrender and Holding Over. Upon the expiration or
earlier termination of the Lease term, Tenant shall surrender
possession of the Premises in as good a condition as delivered
to it, reasonable wear and tear and damage by fire and other
casualty excepted. Upon the expiration or earlier termination
of this Lease, Tenant shall remove from the Premises all
chemicals and other Hazardous Material that have been placed
on the Premises by or at the direction of Tenant and have no
further use in operations at the Premises, all drums
containing unidentified substances that have been placed on
the Premises by or at the direction of Tenant, all chemicals
or other Hazardous Materials spilled at the Premises by
Tenant, and all unidentified substances on floors or in spill
<PAGE>
FORM 10-K Page 124
Exhibit 2.4 (continued)
containment areas placed there by or at the direction of
Tenant. If Tenant remains in possession of the Premises
following the expiration or earlier termination of this Lease
term with the consent of Landlord but without any written
agreement between the parties, Tenant shall be only a tenant
at will, and there shall be no renewal of this Lease or
exercise of any option by operation of law.
24. Applicable Law. This Lease has been entered into
under, and shall be governed by, the laws of the State of
North Carolina.
25. Nature and Extent of Agreement. This instrument and
the Acquisition Agreement contain the complete agreement of
the parties regarding the terms and conditions of the lease of
the Premises, and there are no oral or written conditions,
terms, understandings or other agreements pertaining thereto
which have not been incorporated in this Lease or in the
Acquisition Agreement. This instrument creates only the
relationship of landlord and tenant between the parties as to
the Premises. This Lease may be amended only by a written
instrument executed by Landlord and Tenant.
[signatures on following page]
<PAGE>
FORM 10-K Page 125
Exhibit 2.4 (continued)
IN WITNESS WHEREOF, the parties have executed this Lease
under seal as of the day and year first above written.
CONE MILLS CORPORATION
[CORPORATE SEAL] By: /s/ Neil W. Koonce
Title: Vice President
Attest:
__________________________
Secretary
VITAFOAM INCORPORATED
[CORPORATE SEAL] By: /s/ M. R. Stirzaker
Title: Vice President
Attest:
__________________________
Secretary
<PAGE>
FORM 10-K Page 126
Exhibit 2.4 (continued)
STATE OF NORTH CAROLINA
LEASE AGREEMENT
COUNTY OF RANDOLPH AND OPTION TO PURCHASE
THIS LEASE AGREEMENT AND OPTION TO PURCHASE is made and
entered into as of the 22nd day of January, 1996, by and
between CONE MILLS CORPORATION, a North Carolina corporation
with offices in Greensboro, North Carolina ("Landlord") and
VITAFOAM INCORPORATED, a North Carolina corporation with
offices in High Point, North Carolina ("Tenant").
PRELIMINARY STATEMENT
A. Landlord is the owner of that certain parcel of land
(the "Land") containing approximately 54.8 acres, located at
the southwest corner of State Route 1532 and State Route 1571
(Glenola Road), in New Market Township, Randolph County, North
Carolina. The Land is more particularly described on Exhibit
A attached hereto.
B. Landlord or its predecessor in title has previously
constructed on the Land a manufacturing building (the
"Building") containing approximately 97,000 square feet of
floor area, together with associated improvements such as
parking areas and utility facilities (collectively, with the
Building, the "Improvements") on the Land. The Land, the
Building and the other Improvements are referred to
collectively in this Lease as the "Premises."
C. Under the terms of an Olympic Division Acquisition
Agreement dated January 19, 1996 between Landlord and Tenant
(the "Acquisition Agreement"), Landlord has agreed to convey
certain assets to Tenant, and also has agreed to lease the
Premises to Tenant for a period of approximately six (6)
months, with an option to extend the term for an additional
six (6) months, and to grant to Tenant an option to purchase
the Premises for its book value as of the date of the exercise
of the option. Tenant intends to occupy the Building and use
the other Improvements for the manufacture of beds,
mattresses, bedding and related products. In order to
evidence their agreement regarding Tenant's lease and purchase
option of the Premises, the parties are entering into this
Lease Agreement and Option to Purchase (this "Lease").
<PAGE>
FORM 10-K Page 127
Exhibit 2.4 (continued)
LEASE
NOW, THEREFORE, in consideration of the mutual covenants
and conditions contained in this Lease, including the covenant
to pay rent, and other good and valuable consideration,
Landlord and Tenant hereby agree, for themselves, their
successors and assigns, as follows:
1. Premises. Landlord leases to Tenant, and Tenant
accepts and rents from Landlord, the Premises, for the term
and on the terms and conditions set forth in this Lease.
2. Term. The term of this Lease shall begin on the date
that the Premises are delivered to Tenant, as provided in
Section 3, and shall end at midnight on the last day of the
sixth (6th) complete calendar month following the commencement
date.
At the expiration of the initial term of this Lease,
provided Tenant is not in material default under this Lease
beyond the expiration of any applicable cure period, Tenant
shall have one option to extend the term for an additional
period of six (6) months (the "Renewal Period"), upon the same
terms and conditions set forth in this Lease. The "Option"
(as defined in Section 26) shall remain in effect during the
Renewal Period. Tenant shall exercise its renewal option by
delivery of written notice to Landlord on or before the
expiration of the initial term. All references to the "Lease
term" or the "term of this Lease" shall, unless the context
clearly indicates a different meaning, be deemed to include
the Renewal Period, if properly exercised.
3. Delivery of Premises. Landlord shall remove from the
Premises all chemicals and other "Hazardous Material" (as
defined in the Acquisition Agreement) that have no further use
in operations at the Premises, all drums containing
unidentified substances, all spilled chemicals and other
Hazardous Material, and all unidentified substances on floors
or in spill containment areas. Landlord shall complete this
work and deliver the Premises to Tenant on or before January
22, 1996. Tenant acknowledges that it has inspected the
Improvements, that Landlord makes no representations or
warranties as to the condition of the Improvements or their
suitability for any particular purpose, except as may be
expressly set forth in the Acquisition Agreement, and that
Landlord shall have no responsibility to make any repairs or
alterations to the Improvements prior to their delivery to
Tenant, except as provided above.
<PAGE>
FORM 10-K Page 128
Exhibit 2.4 (continued)
4. Rent. Tenant shall pay to Landlord as monthly rent
the sum of $10,015.26 per month, payable in advance on the
first day of each calendar month, commencing on the
commencement date of the term of this Lease and continuing
throughout the term of this Lease. If the commencement date
falls on a day other than the first day of a calendar month,
the installment of rent payable for the initial partial
calendar month shall be payable on the first day of the
following calendar month. All rent shall be paid to Landlord
at the address to which notices to Landlord are given as set
forth in Section 22 below, and shall be paid without demand,
setoff or deduction. Rent for any partial month shall be
prorated on a daily basis.
5. Additional Rent. If Tenant does not pay such
expenses directly as provided in this Lease, Tenant shall pay
to Landlord, as additional rent, the following operating
expenses incurred by Landlord with respect to the Premises
during the term of this Lease:
(a) All real estate taxes and assessments
levied or assessed against the Premises;
(b) The cost of all utility services provided
to the Premises, including but not limited to
electricity, natural gas and water services and
trash removal; and
(c) All other costs incurred by Landlord in
performing any items of maintenance that are the
obligation of Tenant under Section 6 below,
including but not limited to the cost of janitorial
services, security services, maintenance of
landscaped and paved areas, maintenance of utility
systems and other similar expenditures.
Tenant shall reimburse Landlord for each of the foregoing
expenses within ten (10) days after receipt of a written
statement from Landlord, detailing the expense incurred by
Landlord.
6. Repair and Maintenance. Landlord shall maintain the
entire Premises in the condition existing as of the date of
this Lease (ordinary wear and tear excepted), including
without limitation the Building and other Improvements on the
Premises, and all roofs and exterior walls, driveways and
<PAGE>
FORM 10-K Page 129
Exhibit 2.4 (continued)
parking areas, and shall make all necessary repairs to the
building structure and concealed systems (including without
limitation plumbing, electrical, heating and air conditioning)
within or servicing the Premises; provided, however, that
Landlord shall not be required to effect any repair the
reasonable cost of which would exceed $50,000, in which case
Tenant may immediately terminate this Lease or may effect such
repair and offset against payments due to Landlord hereunder
or under any other agreement its reasonable cost of effecting
such repair. Landlord shall also make any modifications to
the Premises required to comply with applicable legal
requirements, including without limitation the Americans with
Disabilities Act. If any repairs required to be made by
Landlord to the Premises are not completed within ten (10)
days after written notice of the need for the repairs has been
given by Tenant to Landlord (or, in the event of an emergency,
if not made as soon as reasonably practical), then Tenant may
make the needed repairs on behalf of and at the expense of
Landlord. Landlord shall reimburse Tenant for the reasonable
cost of the repairs within ten (10) days after written demand,
accompanied by supporting invoices. If any repairs required
to be made by Landlord are commenced when necessary, but
cannot be completed within ten (10) days, then Landlord shall
have an additional reasonable period of time to complete the
repairs, so long as it continues to prosecute the completion
of the repairs with due diligence, and provided it keeps
Tenant fully informed as to the progress of the repairs.
Tenant shall keep the Premises in a safe, neat and clean
condition at all times, and shall be responsible the routine
maintenance and upkeep of the Improvements (including minor
non-structural repairs to the interior of the Building, and
the general policing of paved and landscaped areas). Tenant
also shall be responsible for any repairs to Tenant's personal
property and equipment placed on the Premises.
7. Alterations and Personal Property. Subject to the
proviso of the first sentence of Section 6, Tenant shall have
no right to make any structural alterations to the Building
without the prior written consent of Landlord, which may be
withheld in Landlord's sole discretion. If Landlord approves
any such alterations, Tenant must obtain from Landlord
approval in writing in advance of plans and specifications for
the work, and shall keep the Premises free and clear of any
lien or claim of lien arising out of any such work occurring,
or allegedly occurring, by, through or under Tenant. Tenant
shall immediately pay and discharge any such lien or claim of
lien that is filed.
<PAGE>
FORM 10-K Page 130
Exhibit 2.4 (continued)
All inventory, equipment, fixtures and furnishings
installed in or attached to the Premises by and at the expense
of Tenant may be removed by Tenant at any time during the
Lease term provided Tenant is not in default hereunder, and
provided that such removal will not damage the Premises or
that any damage caused by such removal will be promptly
repaired by Tenant at its expense. Any such property not so
removed before the expiration of the term of this Lease or the
earlier termination of this Lease shall, as Landlord's option,
become the property of Landlord, or shall be removed by
Tenant. Tenant shall repair any damage caused by removal, and
these obligations shall survive termination of this Lease or
expiration of the Lease term. All personal property owned by
Tenant shall be brought onto the Premises at Tenant's sole
risk, and Tenant hereby releases Landlord from any liability
for damage to such property, no matter how caused.
8. Taxes. Landlord shall pay, prior to delinquency, all
real estate taxes and assessments that are levied or assessed
against the Premises during the term of this Lease. Tenant
also shall pay, prior to delinquency, all taxes, assessments,
license fees and other charges of any nature whatsoever that
are levied or assessed against any personal property or
equipment of Tenant or are otherwise based on Tenant's
operations within the Premises during the term of this Lease.
On demand by Landlord, Tenant shall furnish Landlord with
satisfactory evidence of the payments.
9. Utilities and Services. Tenant shall make all
arrangements for and pay for all utilities and services
furnished to the Premises, including, without limitation, gas,
electricity, water and telephone service, and for all charges
for initiation of service therefor.
10. Damage by Casualty or Fire. If the Building or other
Improvements are totally or partially damaged or destroyed by
casualty, explosion or fire, however caused, or by the
elements, and Landlord's architect reasonably estimates that
the damage will take longer than thirty (30) days to repair,
then either party shall have the right to terminate this Lease
by delivery of written notice of such termination to the other
party within thirty (30) days after such damage or
destruction. Upon any such termination, Landlord shall be
entitled to receive all insurance proceeds payable with
respect to such damage or destruction, excluding the proceeds
of any separate policy of insurance maintained by Tenant on
its personal property, equipment or trade fixtures. If this
<PAGE>
FORM 10-K Page 131
Exhibit 2.4 (continued)
Lease is not terminated as provided above, then Landlord shall
repair and restore the Building and the other Improvements to
substantially the same condition as existed prior to the
casualty, and Tenant shall be entitled to an abatement of rent
in proportion to the degree in which Tenant's use and
enjoyment of the Premises is interfered with during the period
of damage, repair or restoration. Notwithstanding the
foregoing, if Landlord notifies Tenant of its election to
terminate this Lease and Tenant exercises its Option to
purchase the Premises (pursuant to Section 26) within thirty
(30) days after the date of Landlord's notice, then this Lease
shall not terminate, nor shall Landlord be required to repair
or restore the Building, but the proceeds of insurance shall
be applied in the manner provided in Section 26(g).
11. Insurance. Landlord shall maintain, at its expense,
throughout the term of this Lease, a policy of standard fire
and extended coverage insurance on the Improvements in an
amount equal to the full replacement cost of the Improvements.
Tenant shall maintain, at its expense, throughout the term of
this Lease, a policy of commercial general liability insurance
with a single limit of liability of not less than $5,000,000
per occurrence, and shall maintain on all its personal
property, inventory, fixtures and equipment a policy of
standard fire and extended coverage insurance, in an amount
sufficient to meet the co-insurance requirements of such
policy. Prior to the commencement of the term of this Lease,
and thereafter from time to time upon request, each party
shall provide the other party with certificates (or upon
request, copies) of the insurance policies required to be
maintained under this Section 11.
12. Taking for Public Use. If the entire Premises are
taken for any public or any quasi-public use under any statute
or by right of eminent domain, or by private purchase in lieu
thereof, then this Lease shall automatically terminate as of
the date that title is vested in the condemning authority. If
any part of the Premises is so taken as to render the
remainder thereof unusable for the purposes for which the
Premises are leased, then either party shall have the right to
terminate this Lease by delivery of written notice to the
other party within thirty (30) days after the date of such
taking, time being of the essence.
If any part of the Premises is so taken and this Lease is
not terminated under the provisions of the preceding paragraph
of this Section 12, then the rent shall be apportioned
according to the space so taken, and Landlord shall, to the
<PAGE>
FORM 10-K Page 132
Exhibit 2.4 (continued)
extent possible with any award of damages from such taking,
restore the remaining portion of the Premises to the extent
necessary to render it reasonably suitable for the purposes
for which it is leased, and shall make all repairs to any
Building damaged by such taking to the extent necessary to
constitute the Building a complete architectural unit.
All compensation awarded or paid upon such a total or
partial taking of the Premises shall belong to and be the
property of Landlord without any participation by Tenant;
provided, however, that nothing contained herein shall be
construed to preclude Tenant from prosecuting any claim
directly against the condemning authority in such condemnation
proceedings for loss of business, or for depreciation to,
damage to, the cost of removal of, or the value of stock,
trade fixtures, furniture, and other personal property
belonging to Tenant; provided, further, that no such claim
shall diminish or otherwise adversely affect Landlord's award.
13. Indemnity and Waiver. Tenant shall protect,
indemnify, defend and save Landlord harmless from and against
any and all claims, demands, causes of action and other
expenses of any nature whatsoever (including attorneys' fees),
for injury to or death of persons, or loss of or damage to
property, occurring on or about the Premises, and resulting
from the use and occupancy of the Premises by Tenant, its
agents or employees. The foregoing indemnity shall not extend
to any matters resulting, directly or indirectly, from the
negligence or intentional misconduct of Landlord, or to any
claims relating to any "Hazardous Material" or "Environmental
Law," as those terms are defined in Section 19.
Landlord shall not be responsible or liable for any
event, act or omission to the extent covered by insurance
maintained by Tenant, or required by this Lease to be
maintained by Tenant, and Tenant shall require its insurers to
include in Tenant's insurance policies effective waivers of
subrogation rights for the benefit of Landlord, its agents and
employees.
Landlord hereby releases and waives all claims against
Tenant, its agents and employees, for injury or damage to the
Improvements, to the extent covered by insurance maintained by
Landlord, or required by this Lease to be maintained by
Landlord, and Landlord shall use its best efforts (but shall
not be required to pay any additional or special charges for
endorsements) to cause its insurers to include in Landlord's
<PAGE>
FORM 10-K Page 133
Exhibit 2.4 (continued)
insurance policies effective waivers of subrogation rights for
the benefit of Tenant, its agents and employees.
14. Default. The occurrence of any one of the following
shall constitute a default by Tenant:
(a) Failure to pay rent or any other amount
payable under this Lease within ten (10) days after
written notice that such amount is past due; or
(b) Failure to perform any other provision of
this Lease if the failure to perform is not cured
within thirty (30) days after notice thereof has
been given to Tenant; provided, however, that if the
default is not reasonably capable of being cured in
thirty (30) days, Tenant shall not be in default if
it commences the cure within that thirty (30) day
period and diligently prosecutes the cure to
completion.
15. Landlord's Remedies. Landlord shall have the
following remedies if Tenant defaults. These remedies are not
exclusive; they are cumulative in addition to any remedies now
or later allowed by law.
(a) Landlord shall have the right to terminate
Tenant's right of possession of the Premises without
terminating this Lease, and as long as Landlord does
not terminate this Lease, collect rent when due.
Tenant shall surrender possession of the Premises to
Landlord and Landlord shall have the right to enter
the Premises without notice to vacate (any right to
which is hereby waived by Tenant) and relet them,
without prior notice or demand, using such
reasonable force as may be necessary, changing any
or all locks on the Premises all without being
liable for forcible entry, trespass, or other tort.
Tenant shall be liable immediately to Landlord for
all costs Landlord shall incur in reletting the
Premises including, without limitation, broker's
commissions, expenses for remodeling required by the
reletting, and like costs. Reletting can be for a
period shorter or longer than the remaining term of
the Lease. Tenant shall pay to Landlord the rent
due under this Lease on the date that the rent is
due, less the rent Landlord receives from any
reletting. No act by Landlord allowed by this
<PAGE>
FORM 10-K Page 134
Exhibit 2.4 (continued)
Section 15(a) or surrender of possession of the Premises
pursuant to this Section 15(a) shall terminate this Lease
unless Landlord notifies Tenant that Landlord elects to
terminate this Lease.
(b) Landlord shall have the right to terminate
this Lease without notice to vacate (any right to
which is hereby waived by Tenant) and Tenant's
rights to possession of the Premises at any time,
and reenter the Premises as described in Section
15(a). No act by Landlord other than the giving
notice of termination to Tenant shall terminate this
Lease. Upon termination, Landlord shall have the
right to pursue its remedies at law or in equity to
recover of Tenant all amounts of rent then due or
thereafter accruing and such other damages as are
caused by Tenant's default.
Without limiting the foregoing, Tenant shall pay, upon
demand, all cost and expenses, including reasonable attorneys'
fees, incurred by Landlord in enforcing Tenant's obligations
under this Lease.
16. Assignment and Subleasing. Tenant shall not sell,
assign, pledge or hypothecate this Lease or sublease the
Premises or any part thereof without the prior written consent
of Landlord, which may be withheld by Landlord in its sole
discretion. Consent by Landlord to one assignment or
subleasing shall not destroy or operate as a waiver of the
prohibitions contained in this Section 16 as to future
assignments or subleases, and all such later assignments or
subleases shall be made only with Landlord's prior written
consent. In the event any assignment of this Lease or
sublease of the Premises or any part thereof is made by
Tenant, whether or not the same is consented to by Landlord,
Tenant shall remain liable to Landlord for payment of all rent
and other charges provided in this Lease, and for the faithful
performance of all of the covenants and conditions of this
Lease by any assignee or subtenant to the same extent as if
the Lease had not been assigned or the Premises had not been
subleased.
17. Quiet Enjoyment. Provided Tenant performs all its
covenants, agreements and obligations hereunder, Landlord will
warrant and defend Tenant in the peaceful and quiet enjoyment
of the Premises, subject to enforceable easements, restrictive
covenants and rights of way, if any, against the lawful claims
of all persons claiming under Landlord.
<PAGE>
FORM 10-K Page 135
Exhibit 2.4 (continued)
18. Use Clause/Compliance with Legal Requirements.
Tenant shall use the Premises only for general manufacturing
and related office purposes. Tenant shall obey and comply
with all laws, rules, regulations, ordinances and other legal
requirements of all legally constituted authorities existing
at any time during the Lease term that are applicable to
Tenant's operations at the Premises. Tenant shall not cause
or permit a nuisance to exist on or about the Premises, and
shall at all times maintain the Premises in a clean and
attractive condition; provided, however, that the foregoing
provision shall not be deemed to impose upon Tenant any
obligation to remedy any situation or condition in existence
as of the date of this Lease.
19. Hazardous Materials. The environmental provisions
set forth in this Section 19 are in addition to and supplement
the environmental provisions of the Acquisition Agreement,
which shall remain in full force and effect with respect to
the Premises notwithstanding this Lease. For the purposes of
this Lease, the terms "Hazardous Material" and "Environmental
Law" shall have the meanings given those terms in the
Acquisition Agreement.
Landlord and Tenant shall promptly, after either of them
learns of the occurrence thereof, give written notice to the
other of receipt of any notice of violation or claim, or a
request for information, relating in any manner to any
Hazardous Material or Environmental Law in connection with the
Premises. Landlord and Tenant shall, upon receipt by either
of them of any environmental sampling or testing results
relating in any manner to the Premises, provide the other with
copies of documents relating to such environmental
investigations.
Tenant agrees that it shall not generate, use, store,
release or dispose of any Hazardous Material on the Premises
except in material compliance with applicable Environmental
Laws. Tenant shall, at its sole cost and expense, cure within
thirty (30) days after written notice from Landlord any breach
of this Section 19 by Tenant by taking all necessary response
and corrective actions in accordance with all applicable
Environmental Laws. If Tenant is responsible by virtue of
this Section 19 for the removal or remediation of any
Hazardous Material, Tenant shall carry out and complete, at
its sole cost and expense, such response actions, including
without limitation, any investigation, reporting, removal,
<PAGE>
FORM 10-K Page 136
Exhibit 2.4 (continued)
remediation, repair, closure, detoxification, decontamination,
restoration and other clean-up of the Premises required under
applicable Environmental Laws, as promptly as reasonably
possible. All response actions shall be undertaken with
disclosure to Landlord of and approval by Landlord of response
plans.
Landlord shall, at its sole cost and expense, cure within
thirty (30) days after written notice from Tenant any breach
by Landlord of this Section 19 by taking all necessary
response and corrective actions in accordance with all
applicable Environmental Laws. If Landlord is responsible for
the removal or remediation of any Hazardous Material by virtue
of this Section 19, Landlord shall carry out and complete, at
its sole cost and expense, such response actions, including
without limitation, any investigation, reporting, removal,
remediation, repair, closure, detoxification, decontamination,
restoration and other clean-up of the Premises required under
applicable Environmental Laws, as promptly as reasonably
possible. All response actions shall be undertaken so as to
minimize interruption of Tenant's business and with disclosure
to Tenant of and approval by Tenant of response plans. IT IS
UNDERSTOOD AND AGREED THAT TENANT HAS NO RESPONSIBILITY FOR OR
AUTHORITY OVER ANY HAZARDOUS MATERIALS LOCATED IN, ON OR ABOUT
THE PREMISES, EXCEPT TO THE EXTENT, IF ANY, BROUGHT THEREON BY
OR AT THE DIRECTION OF TENANT AND THOSE HAZARDOUS MATERIALS
PROPERLY STORED AND LISTED ON AN MSDS REPORT MAINTAINED BY
LANDLORD WITH RESPECT TO THE PREMISES ON THE DATE OF THIS
LEASE AND ACQUIRED BY TENANT PURSUANT TO THE ACQUISITION
AGREEMENT. LANDLORD RETAINS COMPLETE RESPONSIBILITY FOR AND
AUTHORITY OVER ANY AND ALL HAZARDOUS MATERIALS IN, ON OR ABOUT
THE PREMISES EXCEPT FOR THOSE BROUGHT THEREON BY TENANT AND SO
ACQUIRED.
Tenant agrees to indemnify, defend and hold harmless
Landlord, its officers, directors, shareholders, employees,
agents, successors and assigns, from and against all claims,
damages, actions, proceedings, costs, liens, requirements,
judgments, losses, penalties, fines, settlements and
liabilities of any kind (including without limitation
attorneys' fees and court costs, and consultant and expert
witness fees arising in any manner, directly or indirectly,
out of or by reason of (1) any breach of any of the
warranties, representations, covenants or agreements in this
Section 19 by Tenant, (2) any violation or alleged violation
of any Environmental Law by Tenant with respect to the
Premises (provided such violation or alleged violation does
<PAGE>
FORM 10-K Page 137
Exhibit 2.4 (continued)
not represent the substantial continuation of a violation or
alleged violation that commenced prior to the Term when
Landlord operated the Premises, except for a violation that
continues beyond a reasonable period after the management of
Tenant become aware of such violation (other than violations
currently known by employees of Landlord who have been or may
become employees of Tenant as contemplated by the Acquisition
Agreement)), and/or (3) any presence, generation, treatment,
storage, disposal, transport, release, threatened release or
suspected release of any Hazardous Material brought on, in, to
or from the Premises by Tenant. Tenant agrees to employ
security measures, consistent with the security measures
historically employed by Landlord at the Premises, to prevent
unauthorized dumping of Hazardous Materials on the Premises by
third parties.
Landlord agrees to indemnify, defend and hold harmless
Tenant, its officers, directors, shareholders, employees,
agents, successors and assigns, from and against all claims,
damages, actions, proceedings, costs, liens, requirements,
judgments, losses, penalties, fines, settlements and
liabilities of any kind (including without limitation
attorneys' fees and court costs, and consultant and expert
witness fees arising in any manner, directly or indirectly,
out of or by reason of (1) any breach by Landlord of this
Section 19, (2) any violation or alleged violation of any
Environmental Law by Landlord, and/or (3) any presence,
generation, treatment, storage, disposal, transport, release,
threatened release or suspected release of any Hazardous
Material on, in, to or from the Premises that does not result
solely and directly from Tenant's activities in the Premises.
In the event of a breach by Landlord of this Section 19,
Tenant may at any time thereafter terminate this Lease by
written notice to Landlord. The provisions of this Section 19
shall survive the expiration or earlier termination of the
term of this Lease.
20. [INTENTIONALLY DELETED]
21. Waiver. The waiver by either Landlord or Tenant of
any breach of any covenant or agreement of this Lease shall
not be deemed a waiver of any other default concerning the
same or any other covenant or agreement of this Lease. The
receipt and acceptance by Landlord of delinquent or partial
rent shall not constitute a waiver of that or any other
default.
<PAGE>
FORM 10-K Page 138
Exhibit 2.4 (continued)
22. Notice. Any notice that either party desires or is
required to give the other party shall be in writing and shall
be deemed to have been sufficiently given if either delivered
by hand delivery or sent by prepaid, registered or certified
mail, addressed to the other party at the address set forth
below:
Landlord: Cone Mills Corporation
1201 Maple Street
Greensboro, North Carolina 27405
Attention: Mr. Neil W. Koonce, Vice President
and General Counsel
Telecopy: (910) 329-6972
Tenant: Vitafoam Incorporated
2222 Surrett Drive
High Point, North Carolina 27263
Attention: Corporate Secretary
Telecopy: (910) 431-7747
With a copy to:
British Vita PLC
Middleton, Manchester M24 2DB
United Kingdom
Attention: Mr. Mark Stirzaker
Telecopy: 011 44 161-655-3957
Either party may change its address by notifying the
other party of the change of address in the foregoing manner.
23. Surrender and Holding Over. Upon the expiration or
earlier termination of the Lease term, Tenant shall surrender
possession of the Premises in as good a condition as delivered
to it, reasonable wear and tear and damage by fire and other
casualty excepted. Upon the expiration or earlier termination
of this Lease, Tenant shall remove from the Premises all
chemicals and other Hazardous Material that have been placed
on the Premises by or at the direction of Tenant and have no
further use in operations at the Premises, all drums
containing unidentified substances that have been placed on
the Premises by or at the direction of Tenant, all chemicals
or other Hazardous Materials spilled at the Premises by
Tenant, and all unidentified substances on floors or in spill
<PAGE>
FORM 10-K Page 139
Exhibit 2.4 (continued)
containment areas placed there by or at the direction of
Tenant. If Tenant remains in possession of the Premises
following the expiration or earlier termination of this Lease
term with the consent of Landlord but without any written
agreement between the parties, Tenant shall be only a tenant
at will, and there shall be no renewal of this Lease or
exercise of any option by operation of law.
24. Applicable Law. This Lease has been entered into
under, and shall be governed by, the laws of the State of
North Carolina.
25. Nature and Extent of Agreement. This instrument and
the Acquisition Agreement contain the complete agreement of
the parties regarding the terms and conditions of the lease of
the Premises, and there are no oral or written conditions,
terms, understandings or other agreements pertaining thereto
which have not been incorporated in this Lease or in the
Acquisition Agreement. This instrument creates only the
relationship of landlord and tenant between the parties as to
the Premises. This Lease may be amended only by a written
instrument executed by Landlord and Tenant.
26. Option to Purchase. Landlord hereby grants unto
Tenant the right, privilege and option ("Option") to purchase
the Premises upon the following terms and conditions:
(a) The purchase price for the Premises shall
be the book value of the Premises, as reflected on
Landlord's financial statements maintained in
accordance with generally accepted accounting
principles consistently applied, as of the date of
exercise of the Option. The purchase price shall
be payable in cash or certified Greensboro, North
Carolina funds at closing.
(b) Tenant must exercise this Option on or
before the date of expiration or earlier
termination of the Lease term pursuant to the terms
hereof, as the term may be extended under Section
2, by delivery of written notice to Landlord,
accompanied by an earnest money deposit in the
amount of Ten Thousand and No/100 Dollars
($10,000.00). The Option shall lapse if not
properly exercised within the time period set forth
above, and Tenant may not exercise the Option if it
is in default, beyond the expiration of any
<PAGE>
FORM 10-K Page 140
Exhibit 2.4 (continued)
applicable cure period, in any material respect under
this Lease. Upon proper exercise of this Option, the
provisions of this Section 26 shall constitute a contract
of sale and shall be binding upon Landlord and Tenant.
(c) If Tenant exercises this Option, the
closing of the purchase and sale of the Premises
shall occur on or before the date thirty (30) days
after the date of Tenant's notice exercising the
Option, on a date acceptable to Landlord and
Tenant, at the offices of Tenant's attorney in
Charlotte, North Carolina. Time shall be of the
essence. If the date of closing falls after the
expiration of the Lease term, this Lease shall
continue in full force and effect through that
date; otherwise, this Lease shall terminate upon
closing.
(d) At the closing, Landlord shall execute
and deliver to Tenant the following items:
(i) A good and sufficient general
warranty deed conveying valid,
insurable, marketable and
indefeasible fee simple title to the
Premises free and clear of all liens
and encumbrances of any nature,
except for liens and encumbrances
created by Tenant and restrictions
and rights of way of record in
existence as of the date hereof; ad
valorem real property taxes for the
calendar year of sale (which shall be
prorated on a calendar year basis
through the date of closing); and
such other matters as are expressly
approved by Tenant in writing.
(ii) An Owner's Affidavit in a form
reasonably acceptable to Tenant and
its title insurer, affirming that
there has been no skill, labor or
material furnished to the Premises by
Landlord for which mechanics' or
materialmen's liens could be filed;
<PAGE>
FORM 10-K Page 141
Exhibit 2.4 (continued)
(iii) An affidavit stating that Landlord is
not a "foreign person" within the
meaning of Section 1445(f)(3) of the
Internal Revenue Code of 1986, as
amended; and
(iv) All other documents affecting title
to the Premise and necessary to
transfer title to Tenant, free and
clear of all liens and encumbrances
(except as set forth in subparagraph
(i) above).
(e) Landlord shall be responsible for the
cost of preparation of its deed and the payment
of revenue stamps thereon. Tenant shall be
responsible for the cost of recording the deed.
Landlord and Tenant will each be responsible for
the remainder of their respective closing costs,
including attorneys' fees.
(f) On or before the tenth day after the
delivery to Landlord of the notice exercising the
Option (the "Inspection Date"), Tenant shall
deliver to Landlord a statement of objections to
Landlord's title and shall notify Landlord in
writing of the nature of such objections. If
objections to title are made as provided in the
foregoing sentence, Landlord shall use reasonable
efforts to cure the objections within ten (10)
days after receipt of Tenant's statement, but
shall not be required to expend in excess of
$10,000. If Landlord fails to cure the
objections within that ten (10)-day period,
Tenant may, by delivery of written notice to
Landlord, either (i) terminate its obligation to
purchase the Premises and receive a return of all
earnest money paid to Landlord in connection with
the exercise of the Option; (ii) proceed to close
the purchase of the Premises, in which case the
purchase price for the Premises shall not be
adjusted and such objectives shall be deemed to
have been waived; or (iii) cure the objections at
Landlord's reasonable expense, not to exceed
$25,000, and treat that expense as a credit
against the purchase price for the Premises. On
<PAGE>
FORM 10-K Page 142
Exhibit 2.4 (continued)
or before the Inspection Date, Tenant may cause to be
prepared, at its expense, a survey of the Premises
certified by a registered land surveyor, showing the
boundaries and the acreage of the Premises, and the
location of all easements, buildings, improvements and
encroachments, if any, located thereon. Tenant's
objections to title may be based solely on such surveys.
(g) If, after the date of exercise of this
Option, but prior to closing, any eminent domain
proceedings are commenced against the Premises,
or the Premises is damaged by fire or other
casualty, and the reasonable cost of repairing
the damage exceeds Twenty-Five Thousand and
No/100 Dollars ($25,000.00), then Tenant may, at
its election, either terminate its obligation to
purchase the Premises and receive a return of all
earnest money paid to Landlord in connection with
the exercise of the Option, or proceed to close
the purchase of the Premises, in which case the
purchase price for the Premises shall not be
adjusted, but Landlord shall assign to Tenant all
of its right, title and interest in any
condemnation or insurance proceeds.
(h) If Landlord defaults in the performance
of its obligations under this Section 26, Tenant
shall be entitled to a return of any earnest
money it has paid to Landlord in connection with
the exercise of this Option, or to obtain the
remedy of specific performance, but no other
remedy. If Tenant defaults in the performance of
any of its obligations under this Section 26,
Landlord shall be entitled to retain all earnest
money paid by Tenant to Landlord in connection
with the exercise of this Option as liquidated
damages for that default, and Tenant shall have
no further liability for that default.
[signatures on following page]
<PAGE>
FORM 10-K Page 143
Exhibit 2.4 (continued)
IN WITNESS WHEREOF, the parties have executed this Lease
under seal as of the day and year first above written.
CONE MILLS CORPORATION
[CORPORATE SEAL] By: /s/ Keil W. Koonce
Title: Vice President
Attest:
___________________________
Secretary
VITAFOAM INCORPORATED
[CORPORATE SEAL] By: /s/ M. R. Stirzaker
Title: Vice President
By: /s/ Stephen M. Lynch
Title: Secretary
Attest:
___________________________
Secretary
<PAGE>
FORM 10-K Page 144
Exhibit 2.4 (continued)
STATE OF NORTH CAROLINA
SUBLEASE AGREEMENT
COUNTY OF GUILFORD
THIS SUBLEASE AGREEMENT is entered of the 22nd day of
January, 1996, by and between CONE MILLS CORPORATION, a North
Carolina corporation with offices in Greensboro, North
Carolina ("Landlord"), and VITAFOAM INCORPORATED, a North
Carolina corporation with offices in High Point, North
Carolina ("Tenant").
RECITALS
A. High Point Industrial Leasing, a Limited
Partnership, a North Carolina limited partnership with offices
in High Point, North Carolina ("Prime Landlord") and Landlord
previously have entered into a Lease Agreement dated July 18,
1977 (the "Prime Lease"), pursuant to which Prime Landlord
leases to Landlord three contiguous tracts of land in the City
of High Point, Guilford County, North Carolina, containing an
aggregate of approximately 6.32 acres, and the improvements
located thereon (collectively, the "Premises"), on the terms
and conditions set forth in the Prime Lease. The Premises
include a manufacturing building containing approximately
_________ square feet of floor area (the "Building") and other
related improvements including areas, roadways and utility
facilities (collectively, with the Building the
"Improvements"). A map showing the location of the Premises
is attached hereto as Exhibit A. A memorandum of the Prime
Lease is recorded in Deed Book 2892 at Page 120 in the
Guilford County Public Registry.
B. Under the terms of an Acquisition Agreement dated
January 19, 1996 between Landlord and Tenant (the "Acquisition
Agreement"), Landlord has agreed to convey certain assets to
Tenant, and also has agreed to sublease the Premises to Tenant
for a period of approximately two (2) years. Tenant intends
to occupy the Building and use the other Improvements for the
manufacture of beds, mattresses, bedding and related products.
In order to evidence their agreement regarding Tenant's
sublease of the Premises, the parties are entering into this
Sublease Agreement (this "Lease"). Landlord and Tenant have
requested Prime Landlord to join in the execution of this
Lease, in order to consent to its terms as required by
Paragraph 11 of the Prime Lease.
<PAGE>
FORM 10-K Page 145
Exhibit 2.4 (continued)
LEASE
NOW, THEREFORE, in consideration of the mutual covenants
and conditions contained in this Lease, including the covenant
to pay rent, and other good and valuable consideration,
Landlord and Tenant hereby agree, for themselves, their
successors and assigns, as follows:
1. Premises. Landlord subleases to Tenant, and Tenant
accepts and rents from Landlord, the Premises, for the term
and on the terms and conditions set forth in this Lease, and
in the Prime Lease, a copy of which has been delivered by
Landlord to Tenant.
2. Term. The term of this Lease shall begin on the
date that the Premises are delivered to Tenant, as provided in
Section 3, and shall end at midnight on December 30, 1997.
3. Delivery of Premises. Landlord shall remove from
the Premises all chemicals and other "Hazardous Material" (as
defined in the Acquisition Agreement) that have no further use
in operations at the Premises, all drums containing
unidentified substances, all spilled chemicals and other
Hazardous Material, and all unidentified substances on floors
or in spill containment areas. Landlord shall complete this
work and deliver the Premises to Tenant on or before January
22, 1996. Tenant acknowledges that it has inspected the
Improvements, that Landlord makes no representations or
warranties as to the condition of the Improvements or their
suitability for any particular purpose, except as may be
expressly set forth in the Acquisition Agreement, and that
Landlord shall have no responsibility to make any repairs or
alterations to the Improvements prior to their delivery to
Tenant, except as provided above.
4. Rent. Tenant shall pay to Landlord as monthly rent
the sum of $9,200.00 per month, payable in advance on the
first day of each calendar month, commencing on the
commencement date of the term of this Lease and continuing
throughout the term of this Lease. If the commencement date
falls on a day other than the first day of a calendar month,
the installment of rent payable for the initial partial
calendar month shall be payable on the first day of the
following calendar month. All rent shall be paid to Landlord
at the address to which notices to Landlord are given as set
forth in Section 22 below, and shall be paid without demand,
setoff or deduction. Rent for any partial month shall be
prorated on a daily basis.
<PAGE>
FORM 10-K Page 146
Exhibit 2.4 (continued)
5. Additional Rent. If Tenant does not pay such
expenses directly as provided in this Lease, Tenant shall pay
to Landlord, as additional rent, the following operating
expenses incurred by Landlord with respect to the Premises
during the term of this Lease:
(a) All real estate taxes and assessments
levied or assessed against the Premises;
(b) The cost of all utility services provided
to the Premises, including but not limited to
electricity, natural gas, water and sewer services
and trash removal; and
(c) All other costs incurred by Landlord in
performing any items of maintenance that are the
obligation of Tenant under Section 6 below,
including but not limited to the cost of janitorial
services, security services, maintenance of
landscaped and paved areas, maintenance of utility
systems and other similar expenditures.
Tenant shall reimburse Landlord for each of the foregoing
expenses within ten (10) days after receipt of a written
statement from Landlord, detailing the expense incurred by
Landlord.
6. Repair and Maintenance. Landlord shall maintain, or
cause Prime Landlord to maintain, the entire Premises in the
condition existing as of the date of this Lease (ordinary wear
and tear excepted), including without limitation the Building
and other Improvements on the Premises, and all roofs and
exterior walls, driveways and parking areas, and shall make
all necessary repairs to the building structure and concealed
systems (including without limitation plumbing, electrical,
heating and air conditioning) within or servicing the
Premises; provided, however, that Landlord shall not be
required to effect any repair the reasonable cost of which
would exceed $50,000, in which case Tenant may immediately
terminate this Lease or may effect such repair and offset
against payments due to Landlord hereunder or under any other
agreement its reasonable cost of effecting such repair.
Landlord shall also make any modifications to the Premises
required to comply with applicable legal requirements,
including without limitation the Americans with Disabilities
Act. If any repairs required to be made by Landlord to the
Premises are not completed within ten (10) days after written
<PAGE>
FORM 10-K Page 147
Exhibit 2.4 (continued)
notice of the need for the repairs has been given by Tenant to
Landlord (or, in the event of an emergency, if not made as
soon as reasonably practical), then Tenant may make the needed
repairs on behalf of and at the expense of Landlord. Landlord
shall reimburse Tenant for the reasonable cost of the repairs
within ten (10) days after written demand, accompanied by
supporting invoices. If any repairs required to be made by
Landlord are commenced when necessary, but cannot be completed
within ten (10) days, then Landlord shall have an additional
reasonable period of time to complete the repairs, so long as
it continues to prosecute the completion of the repairs with
due diligence, and provided it keeps Tenant fully informed as
to the progress of the repairs.
Tenant shall keep the Premises in a safe, neat and clean
condition at all times, and shall be responsible the routine
maintenance and upkeep of the Improvements (including minor
non-structural repairs to the interior of the Building, and
the general policing of paved and landscaped areas). Tenant
also shall be responsible for any repairs to Tenant's personal
property and equipment placed on the Premises.
Notwithstanding the foregoing, Tenant shall have no
responsibility whatsoever for any underground storage tanks
located on the Premises as of the date of this Lease.
7. Alterations and Personal Property. Subject to the
proviso of the first sentence of Section 6, Tenant shall have
no right to make any structural alterations to the Building
without the prior written consent of Landlord and Prime
Landlord, which may be withheld in their sole discretion. If
Landlord and Prime Landlord approve any such alterations,
Tenant must obtain from Landlord and Prime Landlord approval
in writing in advance of plans and specifications for the
work, and shall keep the Premises free and clear of any lien
or claim of lien arising out of any such work occurring, or
allegedly occurring, by, through or under Tenant. Tenant shall
immediately pay and discharge any such lien or claim of lien
that is filed.
All inventory, equipment, fixtures and furnishings
installed in or attached to the Premises by and at the expense
of Tenant may be removed by Tenant at any time during the
Lease term provided Tenant is not in default hereunder, and
provided that such removal will not damage the Premises or
that any damage caused by such removal will be promptly
repaired by Tenant at its expense. Any such property not so
removed before the expiration of the term of this Lease or the
<PAGE>
FORM 10-K Page 148
Exhibit 2.4 (continued)
earlier termination of this Lease shall, as Landlord's option,
become the property of Landlord, or shall be removed by
Tenant. Tenant shall repair any damage caused by removal, and
these obligations shall survive termination of this Lease or
expiration of the Lease term. All personal property owned by
Tenant shall be brought onto the Premises at Tenant's sole
risk, and Tenant hereby releases Landlord from any liability
for damage to such property, no matter how caused.
8. Taxes. Tenant shall pay, prior to delinquency, all
real estate taxes and assessments that are levied or assessed
against the Premises during the term of this Lease. Tenant
also shall pay, prior to delinquency, all taxes, assessments,
license fees and other charges of any nature whatsoever that
are levied or assessed against any personal property or
equipment of Tenant or are otherwise based on Tenant's
operations within the Premises during the term of this Lease.
On demand by Landlord, Tenant shall furnish Landlord with
satisfactory evidence of the payments.
9. Utilities and Services. Tenant shall make all
arrangements for and pay for all utilities and services
furnished to the Premises, including, without limitation, gas,
electricity, water, sewer and telephone service, and for all
charges for initiation of service therefor.
10. Damage by Casualty or Fire. If the Building or
other Improvements are totally or partially damaged or
destroyed by casualty, explosion or fire, however caused, or
by the elements, and Landlord's architect reasonably estimates
that the damage will take longer than thirty (30) days to
repair, then either party shall have the right to terminate
this Lease by delivery of written notice of such termination
to the other party within thirty (30) days after such damage
or destruction. Upon any such termination, Landlord (subject
to the rights of Prime Landlord under the Prime Lease) shall
be entitled to receive all insurance proceeds payable with
respect to such damage or destruction, excluding the proceeds
of any separate policy of insurance maintained by Tenant on
its personal property, equipment or trade fixtures. If this
Lease is not terminated as provided above, then Landlord shall
repair and restore, or cause Prime Landlord to repair and
restore, the Building and the other Improvements to
substantially the same condition as existed prior to the
casualty, and Tenant shall be entitled to an abatement of rent
in proportion to the degree in which Tenant's use and
enjoyment of the Premises is interfered with during the period
of damage, repair or restoration.
<PAGE>
FORM 10-K Page 149
Exhibit 2.4 (continued)
11. Insurance. Landlord shall maintain, at its expense,
throughout the term of this Lease, a policy of standard fire
and extended coverage insurance on the Improvements in an
amount sufficient to comply with the requirements of the Prime
Lease. Tenant shall maintain, at its expense, throughout the
term of this Lease, a policy of commercial general liability
insurance with a single limit of liability of not less than
$5,000,000 per occurrence, and shall maintain on all its
personal property, inventory, fixtures and equipment a policy
of standard fire and extended coverage insurance, in an amount
sufficient to meet the co-insurance requirements of such
policy. Prior to the commencement of the term of this Lease,
and thereafter from time to time upon request, each party
shall provide the other party with certificates (or upon
request, copies) of the insurance policies required to be
maintained under this Section 11.
12. Taking for Public Use. If the entire Premises are
taken for any public or any quasi-public use under any statute
or by right of eminent domain, or by private purchase in lieu
thereof, then this Lease shall automatically terminate as of
the date that title is vested in the condemning authority. If
any part of the Premises is so taken as to render the
remainder thereof unusable for the purposes for which the
Premises are leased, then either party shall have the right to
terminate this Lease by delivery of written notice to the
other party within thirty (30) days after the date of such
taking, time being of the essence.
If any part of the Premises is so taken and this Lease is
not terminated under the provisions of the preceding paragraph
of this Section 12, then the rent shall be apportioned
according to the space so taken, and Landlord or Prime
Landlord shall, to the extent possible with any award of
damages from such taking, restore the remaining portion of the
Premises to the extent necessary to render it reasonably
suitable for the purposes for which it is leased, and shall
make all repairs to any Building damaged by such taking to the
extent necessary to constitute the Building a complete
architectural unit.
Subject to the rights of Prime Landlord under the Prime
Lease, all compensation awarded or paid upon such a total or
partial taking of the Premises shall belong to and be the
property of Landlord without any participation by Tenant;
provided, however, that nothing contained herein shall be
construed to preclude Tenant from prosecuting any claim
<PAGE>
FORM 10-K Page 150
Exhibit 2.4 (continued)
directly against the condemning authority in such condemnation
proceedings for loss of business, or for depreciation to,
damage to, the cost of removal of, or the value of stock,
trade fixtures, furniture, and other personal property
belonging to Tenant; provided, further, that no such claim
shall diminish or otherwise adversely affect Landlord's award.
13. Indemnity and Waiver. Tenant shall protect,
indemnify, defend and save Landlord harmless from and against
any and all claims, demands, causes of action and other
expenses of any nature whatsoever (including attorneys' fees),
for injury to or death of persons, or loss of or damage to
property, occurring on or about the Premises, and resulting
from the use and occupancy of the Premises by Tenant, its
agents or employees. The foregoing indemnity shall not extend
to any matters resulting, directly or indirectly, from the
negligence or intentional misconduct of Landlord, or to any
claims relating to any "Hazardous Material" or "Environmental
Law," as those terms are defined in Section 19.
Landlord shall not be responsible or liable for any
event, act or omission to the extent covered by insurance
maintained by Tenant, or required by this Lease to be
maintained by Tenant, and Tenant shall require its insurers to
include in Tenant's insurance policies effective waivers of
subrogation rights for the benefit of Landlord, its agents and
employees.
Landlord hereby releases and waives all claims against
Tenant, its agents and employees, for injury or damage to the
Improvements, to the extent covered by insurance maintained by
Landlord, or required by this Lease to be maintained by
Landlord, and Landlord shall use its best efforts (but shall
be required to pay additional or special charges for
endorsements) to cause its insurers to include in Landlord's
insurance policies effective waivers of subrogation rights for
the benefit of Tenant, its agents and employees.
14. Default. The occurrence of any one of the following
shall constitute a default by Tenant:
(a) Failure to pay rent or any other amount
payable under this Lease within ten (10) days after
written notice that such amount is past due; or
<PAGE>
FORM 10-K Page 151
Exhibit 2.4 (continued)
(b) Failure to perform any other provision of
this Lease if the failure to perform is not cured
within thirty (30) days after notice thereof has
been given to Tenant; provided, however, that if
the default is not reasonably capable of being
cured in thirty (30) days, Tenant shall not be in
default if it commences the cure within that thirty
(30) day period and diligently prosecutes the cure
to completion.
15. Landlord's Remedies. Landlord shall have the
following remedies if Tenant defaults. These remedies are not
exclusive; they are cumulative in addition to any remedies now
or later allowed by law.
(a) Landlord shall have the right to
terminate Tenant's right of possession of the
Premises without terminating this Lease, and as
long as Landlord does not terminate this Lease,
collect rent when due. Tenant shall surrender
possession of the Premises to Landlord and Landlord
shall have the right to enter the Premises without
notice to vacate (any right to which is hereby
waived by Tenant) and relet them, without prior
notice or demand, using such reasonable force as
may be necessary, changing any or all locks on the
Premises all without being liable for forcible
entry, trespass, or other tort. Tenant shall be
liable immediately to Landlord for all costs
Landlord shall incur in reletting the Premises
including, without limitation, broker's
commissions, expenses for remodeling required by
the reletting, and like costs. Reletting can be
for a period shorter or longer than the remaining
term of the Lease. Tenant shall pay to Landlord
the rent due under this Lease on the date that the
rent is due, less the rent Landlord receives from
any reletting. No act by Landlord allowed by this
Section 15(a) or surrender of possession of the
Premises pursuant to this Section 15(a) shall
terminate this Lease unless Landlord notifies
Tenant that Landlord elects to terminate this
Lease.
(b) Landlord shall have the right to
terminate this Lease without notice to vacate (any
right to which is hereby waived by Tenant) and
<PAGE>
FORM 10-K Page 152
Exhibit 2.4 (continued)
Tenant's rights to possession of the Premises at any
time, and reenter the Premises as described in Section
15(a). No act by Landlord other than the giving notice
of termination to Tenant shall terminate this Lease.
Upon termination, Landlord shall have the right to pursue
its remedies at law or in equity to recover of Tenant all
amounts of rent then due or thereafter accruing and such
other damages as are caused by Tenant's default.
Without limiting the foregoing, Tenant shall pay, upon
demand, all cost and expenses, including reasonable attorneys'
fees, incurred by Landlord in enforcing Tenant's obligations
under this Lease.
16. Assignment and Subleasing. Tenant shall not sell,
assign, pledge or hypothecate this Lease or further sublease
the Premises or any part thereof without the prior written
consent of Landlord, which may be withheld by Landlord in its
sole discretion. Consent by Landlord to one assignment or
subleasing shall not destroy or operate as a waiver of the
prohibitions contained in this Section 16 as to future
assignments or subleases, and all such later assignments or
subleases shall be made only with Landlord's prior written
consent. In the event any assignment of this Lease or
sublease of the Premises or any part thereof is made by
Tenant, whether or not the same is consented to by Landlord,
Tenant shall remain liable to Landlord for payment of all rent
and other charges provided in this Lease, and for the faithful
performance of all of the covenants and conditions of this
Lease by any assignee or subtenant to the same extent as if
the Lease had not been assigned or the Premises had not been
subleased.
17. Quiet Enjoyment. Provided Tenant performs all its
covenants, agreements and obligations hereunder, Landlord will
warrant and defend Tenant in the peaceful and quiet enjoyment
of the Premises, subject to enforceable easements, restrictive
covenants and rights of way, if any, against the lawful claims
of all persons claiming under Landlord.
18. Use Clause/Compliance with Legal Requirements.
Tenant shall use the Premises only for general manufacturing
and related office purposes. Tenant shall obey and comply
with all laws, rules, regulations, ordinances and other legal
requirements of all legally constituted authorities existing
at any time during the Lease term that are applicable to
Tenant's operations at the Premises. Tenant shall not cause
<PAGE>
FORM 10-K Page 153
Exhibit 2.4 (continued)
or permit a nuisance to exist on or about the Premises, and
shall at all times maintain the Premises in a clean and
attractive condition; provided, however, that the foregoing
provision shall not be deemed to impose upon Tenant any
obligation to remedy any situation or condition in existence
as of the date of this Lease.
19. Hazardous Materials. The environmental provisions
set forth in this Section 19 are in addition to and supplement
the environmental provisions of the Acquisition Agreement,
which shall remain in full force and effect with respect to
the Premises notwithstanding this Lease. For the purposes of
this Lease, the terms "Hazardous Material" and "Environmental
Law" shall have the meanings given those terms in the
Acquisition Agreement.
Landlord and Tenant shall promptly, after either of them
learns of the occurrence thereof, give written notice to the
other of receipt of any notice of violation or claim, or a
request for information, relating in any manner to any
Hazardous Material or Environmental Law in connection with the
Premises. Landlord and Tenant shall, upon receipt by either
of them of any environmental sampling or testing results
relating in any manner to the Premises, provide the other with
copies of documents relating to such environmental
investigations.
Tenant agrees that it shall not generate, use, store,
release or dispose of any Hazardous Material on the Premises
except in material compliance with applicable Environmental
Laws. Tenant shall, at its sole cost and expense, cure within
thirty (30) days after written notice from Landlord any breach
of this Section 19 by Tenant by taking all necessary response
and corrective actions in accordance with all applicable
Environmental Laws. If Tenant is responsible by virtue of
this Section 19 for the removal or remediation of any
Hazardous Material, Tenant shall carry out and complete, at
its sole cost and expense, such response actions, including
without limitation, any investigation, reporting, removal,
remediation, repair, closure, detoxification, decontamination,
restoration and other clean-up of the Premises required under
applicable Environmental Laws, as promptly as reasonably
possible. All response actions shall be undertaken with
disclosure to Landlord of and approval by Landlord of response
plans.
<PAGE>
FORM 10-K Page 154
Exhibit 2.4 (continued)
Landlord shall, at its sole cost and expense, cure within
thirty (30) days after written notice from Tenant any breach
by Landlord of this Section 19 by taking all necessary
response and corrective actions in accordance with all
applicable Environmental Laws. If Landlord is responsible for
the removal or remediation of any Hazardous Material by virtue
of this Section 19, Landlord shall carry out and complete, at
its sole cost and expense, such response actions, including
without limitation, any investigation, reporting, removal,
remediation, repair, closure, detoxification, decontamination,
restoration and other clean-up of the Premises required under
applicable Environmental Laws, as promptly as reasonably
possible. All response actions shall be undertaken so as to
minimize interruption of Tenant's business and with disclosure
to Tenant of and approval by Tenant of response plans. IT IS
UNDERSTOOD AND AGREED THAT TENANT HAS NO RESPONSIBILITY FOR OR
AUTHORITY OVER ANY HAZARDOUS MATERIALS LOCATED IN, ON OR ABOUT
THE PREMISES, EXCEPT TO THE EXTENT, IF ANY, BROUGHT THEREON BY
OR AT THE DIRECTION OF TENANT AND THOSE HAZARDOUS MATERIALS
PROPERLY STORED AND LISTED ON AN MSDS REPORT MAINTAINED BY
LANDLORD WITH RESPECT TO THE PREMISES ON THE DATE OF THIS
LEASE AND ACQUIRED BY TENANT PURSUANT TO THE ACQUISITION
AGREEMENT. LANDLORD RETAINS COMPLETE RESPONSIBILITY FOR AND
AUTHORITY OVER ANY AND ALL HAZARDOUS MATERIALS IN, ON OR ABOUT
THE PREMISES EXCEPT FOR THOSE BROUGHT THEREON BY TENANT AND SO
ACQUIRED.
Tenant agrees to indemnify, defend and hold harmless
Landlord, its officers, directors, shareholders, employees,
agents, successors and assigns, from and against all claims,
damages, actions, proceedings, costs, liens, requirements,
judgments, losses, penalties, fines, settlements and
liabilities of any kind (including without limitation
attorneys' fees and court costs, and consultant and expert
witness fees arising in any manner, directly or indirectly,
out of or by reason of (1) any breach of any of the
warranties, representations, covenants or agreements in this
Section 19 by Tenant, (2) any violation or alleged violation
of any Environmental Law by Tenant with respect to the
Premises (provided such violation or alleged violation does
not represent the substantial continuation of a violation or
alleged violation that commenced prior to the Term when
Landlord operated the Premises, except for a violation that
continues beyond a reasonable period after the management of
Tenant become aware of such violation (other than violations
currently known by employees of Landlord who have been or may
become employees of Tenant as contemplates by the Acquisition
<PAGE>
FORM 10-K Page 155
Exhibit 2.4 (continued)
Agreement), and/or (3) any presence, generation, treatment,
storage, disposal, transport, release, threatened release or
suspected release of any Hazardous Material brought on, in, to
or from the Premises by Tenant. Tenant agrees to employ
security measures, consistent with the security measures
historically employed by Landlord at the Premises, to prevent
unauthorized dumping of Hazardous Materials on the Premises by
third parties.
Landlord agrees to indemnify, defend and hold harmless
Tenant, its officers, directors, shareholders, employees,
agents, successors and assigns, from and against all claims,
damages, actions, proceedings, costs, liens, requirements,
judgments, losses, penalties, fines, settlements and
liabilities of any kind (including without limitation
attorneys' fees and court costs, and consultant and expert
witness fees arising in any manner, directly or indirectly,
out of or by reason of (1) any breach by Landlord of this
Section 19, (2) any violation or alleged violation of any
Environmental Law by Landlord, (3) any presence, generation,
treatment, storage, disposal, transport, release, threatened
release or suspected release of any Hazardous Material on, in,
to or from the Premises that does not result solely and
directly from Tenant's activities in the Premises, and/or (4)
the underground storage tanks located on the premises as of
the date of this Lease.
In the event of a breach by Landlord of this Section 19,
Tenant may at any time thereafter terminate this Lease by
written notice to Landlord. The provisions of this Section 19
shall survive the expiration or earlier termination of the
term of this Lease.
20. [INTENTIONALLY DELETED]
21. Waiver. The waiver by either Landlord or Tenant of
any breach of any covenant or agreement of this Lease shall
not be deemed a waiver of any other default concerning the
same or any other covenant or agreement of this Lease. The
receipt and acceptance by Landlord of delinquent or partial
rent shall not constitute a waiver of that or any other
default.
22. Notice. Any notice that either party desires or is
required to give the other party shall be in writing and shall
be deemed to have been sufficiently given if either delivered
by hand delivery or sent by prepaid, registered or certified
<PAGE>
FORM 10-K Page 156
Exhibit 2.4 (continued)
mail, addressed to the other party at the address set forth
below:
Landlord: Cone Mills Corporation
1201 Maple Street
Greensboro, North Carolina 27405
Attention: Mr. Neil W. Koonce, Vice President
and General Counsel
Telecopy: (910) 329-6972
Tenant: Vitafoam Incorporated
2222 Surrett Drive
High Point, North Carolina 27263
Attention: Corporate Secretary
Telecopy: (910) 431-7747
With a copy to:
British Vita PLC
Middleton, Manchester M24 2DB
United Kingdom
Attention: Mr. Mark Stirzaker
Telecopy: 011 44 161-655-3957
Either party may change its address by notifying the
other party of the change of address in the foregoing manner.
23. Surrender and Holding Over. Upon the expiration or
earlier termination of the Lease term, Tenant shall surrender
possession of the Premises in as good a condition as delivered
to it, reasonable wear and tear and damage by fire and other
casualty excepted. Upon the expiration or earlier termination
of this Lease, Tenant shall remove from the Premises all
chemicals and other Hazardous Material that have been placed
on the Premises by or at the direction of Tenant and have no
further use in operations at the Premises, all drums
containing unidentified substances that have been placed on
the Premises by or at the direction of Tenant, all chemicals
or other Hazardous Materials spilled at the Premises by
Tenant, and all unidentified substances on floors or in spill
containment areas placed there by or at the direction of
Tenant. If Tenant remains in possession of the Premises
following the expiration or earlier termination of this Lease
term with the consent of Landlord but without any written
agreement between the parties, Tenant shall be only a tenant
at will, and there shall be no renewal of this Lease or
exercise of any option by operation of law.
<PAGE>
FORM 10-K Page 157
Exhibit 2.4 (continued)
24. Applicable Law. This Lease has been entered into
under, and shall be governed by, the laws of the State of
North Carolina.
25. Nature and Extent of Agreement. This instrument and
the Acquisition Agreement contain the complete agreement of
the parties regarding the terms and conditions of the lease of
the Premises, and there are no oral or written conditions,
terms, understandings or other agreements pertaining thereto
which have not been incorporated in this Lease or in the
Acquisition Agreement. This instrument creates only the
relationship of landlord and tenant between the parties as to
the Premises. This Lease may be amended only by a written
instrument executed by Landlord and Tenant.
26. Consent to Sublease. Tenant represents and warrants
to Landlord that Prime Landlord has consented to the sublease
of the Premises by Landlord to Tenant under this Lease, as
required by the terms of the Prime Lease.
[signatures on following page]
<PAGE>
FORM 10-K Page 158
Exhibit 2.4 (continued)
IN WITNESS WHEREOF, the parties have executed this Lease
under seal as of the day and year first above written.
LANDLORD:
CONE MILLS CORPORATION
By: /s/ Neil W. Koonce
Title: Vice President
TENANT:
VITAFOAM INCORPORATED
By: /s/ M. R. Stirzaker
Title: Vice President
<PAGE>
FORM 10-K Page 159
Exhibit 2.4 (continued)
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (the "Agreement") is made as of
January 22, 1996 by and between CONE MILLS CORPORATION, a
North Carolina corporation ("Cone"), and VITAFOAM
INCORPORATED, a North Carolina corporation ("Vita").
RECITALS
Cone and Vita have entered into an Olympic Division
Acquisition Agreement, dated January 19, 1996, pursuant to
which Cone has agreed to sell, and Vita has agreed to
purchase, certain real and personal properties and other
assets (the "Assets") used in manufacturing, converting and
selling polyurethane foam, polyester fiber and related
products manufactured at six facilities located in North
Carolina and Mississippi (the "Business").
Cone provides certain bookkeeping, transportation and
other support services and systems in connection with the
operation of the Business, and it is willing to provide for a
fee those of such services and systems specifically designated
herein to Vita upon Vita's purchase of the Assets and
Business. Vita desires to obtain those services and the use
of those systems as provided herein in connection with its
ownership of the Assets and operation of the Business.
NOW, THEREFORE, in consideration of the premises and
other good and valuable consideration, receipt of which is
hereby acknowledged, Cone and Vita agree as follows:
1. Services and Systems. (a) Cone shall provide to
Vita services and systems described below (the "Services and
Systems"):
(i) maintenance of accounts receivable, billing
and sales reporting; and
(ii) mainframe operational support of business unit
operating systems related to delivery tickets,
order processing and billing; and
(iii) preparation of invoices; and
(iv) at the request of Vita, provision of
transportation services; and
<PAGE>
FORM 10-K Page 160
Exhibit 2.4 (continued)
(v) at the request of Vita, office space and
office services to the extent currently made
available to management of the Business at
Cone's North Pointe Facility located at 3101
North Elm Street, Greensboro, North Carolina;
and
(vi) such other services as may be agreed upon by
Cone and Vita from time to time.
The Services and Systems shall be substantially equivalent to
the services and systems provided to the Business by Cone
during the ninety (90) days prior to the execution of this
Agreement. The Services and Systems shall be provided by Cone
hereunder for a period of six months commencing on the date
hereof, unless any Service or System is earlier terminated by
notice from Vita to Cone; provided that Cone shall provide the
Services and Systems described in clauses (i), (ii) and (iii)
above through March 31, 1997. On January 26, 1996, Vita shall
purchase, and Cone shall cause to be sold to Vita, the
vehicles listed on Schedule 1 attached hereto, which vehicles
are presently leased by Cone from Third Parties and are used
primarily in the Business at the prices set forth therein
which prices are equal, on an item-by-item basis, to the
termination costs changed by the lessors of such vehicles;
provided, however, that if the aggregate amount of such
termination costs includes breakage fees, penalties or other
contractual charges or fees for the early termination of the
lease applicable to such vehicles ("Early Termination Fees")
in the aggregate in excess of $10,000, then, at Cone's option,
either (i) the purchase price to be paid by Vita for such
vehicles shall be reduced by such excess amount or (ii) Buyer
shall purchase only the number of such vehicles such that the
aggregate Early Termination Fees associated therewith do not
exceed $10,000. Vita shall notify Cone by 5:00 p.m. on
January 25, 1996 if it believes the Early Termination Fees
with respect to such vehicles exceeds $10,000, and in the
event Vita fails to so notify Cone by such time the Early
Termination Fees shall be conclusively presumed to be no more
than $10,000. Cone shall permit Vita to use such vehicles
from the date hereof until January 26, 1996 (and with respect
to vehicles to be purchased hereunder for such additional
reasonable period, not to exceed 5 days, until the retitling
and transfer of registration of such vehicles is completed).
(b) In addition, Cone shall provide the following
transitional services (the "Assistance") to Vita for a
reasonable period of time after the date hereof:
<PAGE>
FORM 10-K Page 161
Exhibit 2.4 (continued)
(i) assistance in establishing ADP as an outside
payroll administrator for all hourly and
salaried employees of the Business, including
providing necessary employee data with
respect to such employees not currently
enrolled by ADP;
(ii) assistance in establishing cash management
policies and procedures, including
establishing lock-box accounts;
(iii) provision of hard-copy records of accounts
payable of the Business as of the date hereof
(Cone shall nonetheless remain liable for the
payment of such accounts payable); and
(iv) assistance in continuing the third-party
credit union currently located in the
Business's facilities.
2. Personnel. Cone shall also make available to Vita
the expertise and manpower reasonably required in Cone's
principal office in Greensboro, North Carolina (the "Office")
to provide the Services and to process that part of its work
necessary to be performed under the Systems at the Office.
Vita shall permit only William Kenyon (and such other persons
approved by Cone) to access Cone's computer network in
performing the Services and Systems.
3. Fees, Payment of Fees.
(a) Vita shall pay Cone a monthly fee for Cone's
undertakings pursuant to this Agreement equal
to Cone's actual cost (the "Cost of Services")
of providing the Services and Systems (other
than the Services and Systems described in
clauses (i), (ii) and (iii) of Section 1(a))
in such calendar month determined in a manner
consistent with Cone's historical internal
cost-allocation accounting practices and a
monthly Fee of $9,583 for the Services and
Systems described in clauses (i), (ii) and
(iii) of Section 1(a) for such Services and
Systems until September 30, 1996 (subject to
adjustment upon agreement of the parties to
reflect any change in the scope of such
Services and Systems); (from October 1, 1996
<PAGE>
FORM 10-K Page 162
Exhibit 2.4 (continued)
through March 31, 1997, Cone shall provide the
Services and Systems described in clauses (i),
(ii) and (iii) of Section 1(a) free of charge)
(the "Computer Fee").
(b) On the first day of each month during the term
of the Agreement (beginning February 1, 1996),
Vita shall pay Cone for the Services and the
Systems to be provided by Cone during that
month based Cone's good faith estimate of the
Cost of Services for such month (the "Base
Fee") and the Computer Fee. Within fifteen
(15) days after the last day of each month (a
"Period") during the term of this Agreement
(e.g. the first Period will begin on the date
hereof and will end on January 31, 1996), Cone
shall calculate the actual amount of the Cost
of Services for such Period (the "Final Fee").
In the event that the Final Fee for such
Period exceeds the Base Fee paid for such
Period, Vita shall promptly pay such excess to
Cone. In the event that the Final Fee for a
Period is less than the Base Fee paid for such
Period, such difference shall be applied to
reduce additional fee payments by Vita
hereunder, and to the extent such difference
is not fully set off against fees due
hereunder the remainder shall be promptly
reimbursed by Cone to Vita.
4. Modification of Services and Systems. Cone's
obligation to provide the Services and Systems under this
Agreement is limited to those Services and Systems that have
been provided to the Business by Cone during the ninety (90)
days preceding the execution of this Agreement. Cone shall
not be required to increase or modify those Services or
Systems except upon its express written agreement entered into
in its sole discretion, at Vita's request.
5. Expense Reimbursement. In addition to all fees and
payments described elsewhere in this Agreement, Vita shall
reimburse Cone on a monthly basis for all direct out-of-pocket
costs and expenses incurred by Cone in providing the Services
and Systems hereunder, including, but not limited to, the
following:
<PAGE>
FORM 10-K Page 163
Exhibit 2.4 (continued)
(a) Travel and subsistence expenses of Cone
personnel when away from their principal place
of employment and incurred in connection with
the Services and Systems and Assistance
provided by Cone to Vita under this Agreement;
and
(b) The cost of any materials, supplies and
equipment, including postage, overnight
delivery charges and similar expenses,
purchased for, or utilized in the provision of
the Services and Systems or the Assistance to
Vita under this Agreement; and
(c) Telephone and other communication expenses
applicable to the Services and Systems or the
Assistance.
6. Term and Termination.
(a) The term of this Agreement shall commence on
January 22, 1996 and terminate on January 22,
1997.
(b) This Agreement may be terminated prior to
January 22, 1997 (i) as provided in Section 9,
and (ii) by Vita upon thirty (30) days prior
written notice given as provided in Section
11.
7. Custody of Books and Records, Confidentiality.
(a) Cone may from time to time have custody of
"hard copy" books and records of, or
pertaining to, Vita. Vita shall have
reasonable access to such materials for all
purposes, including for the making of copies
thereof. Upon the termination of this
Agreement, Cone shall deliver custody of such
materials (or duplicates of any such materials
consolidated into Cone's files or records) to
Vita upon Vita's request. Vita acknowledges
and agrees that the Systems utilize data which
is contained in "soft" computer tapes, disks
and data bases, which data is intermingled or
otherwise incorporated into data which is
essential, proprietary and confidential to
<PAGE>
FORM 10-K Page 164
Exhibit 2.4 (continued)
Cone. Vita agrees that such data will not be
turned over or made available to Vita during
the term, or upon termination, of this
Agreement and that Cone shall have no
obligation to eradicate, erase or destroy such
data.
(b) Cone shall make all reasonable efforts to hold
in confidence and not to disclose to any third
party (other than Vita or its agents or
accountants and other than pursuant to an
order or subpoena of a court or governmental
agency) any confidential information or data
received from Vita pursuant to this Agreement.
8. Relationship of Cone and Vita. Cone shall provide
the Services, the Systems and the Assistance pursuant to this
Agreement solely as an independent contractor. The parties
hereto acknowledge and agree that this Agreement is not
intended, nor should it be construed, to create a relationship
of employer and employee, principal and agent, master and
servant, partners, joint venturers, or any other relationship
other than independent contractor and contractee. The parties
also acknowledge and agree that Cone is not, and should not be
deemed to be, acting as an auditor or an accountant on behalf
of Vita and shall not be expected to undertake the
responsibilities, or to satisfy the standards of care, of an
accountant. In connection with its providing the Services and
Systems and the Assistance hereunder, Cone shall not be liable
for any consequential damages or loss of profits of Vita.
9. Bankruptcy and Change in Ownership. In the event
that either party hereto (i) becomes insolvent, (ii) commits
an act of bankruptcy, (iii) takes advantage of any law for the
benefit of debtors or such party's creditors, (iv) suffers a
receiver to be appointed for it or any of its property, (v)
has a change in control of the majority of its stock ownership
other than to an assignee permitted under Section 13, or (vi)
commits a default of any other agreement between the parties,
the other party may, then or thereafter, upon giving written
notice, terminate this Agreement and exercise such other and
further rights and remedies as it may have pursuant to law.
10. Impossibility of Performance. If Cone is rendered
unable, wholly or in part, by "force majeure" to carry out its
obligations under this Agreement, the obligations of Cone, as
<PAGE>
FORM 10-K Page 165
Exhibit 2.4 (continued)
far as they are affected by the "force majeure," shall be
suspended during, but no longer than, the continuance of the
"force majeure." To the extent possible, Cone shall remove the
"force majeure" with all reasonable dispatch, but shall not be
required in this connection to settle strikes, lockouts or
other labor difficulties contrary to its wishes. The term
"force majeure" as used herein shall mean an act of God,
strike, lockout, act of the public enemy, war blockade, public
riot, lightning, fire, storm, hurricane, flood, explosion,
governmental restraint unavailability of equipment, equipment
breakdown or any other cause, whether of the kind specifically
mentioned above or otherwise, which is not reasonably within
the control of Cone.
11. Notices. Any notice, request, demand, report or
other instrument which may be required or permitted to be
given to or furnished to or served upon either party hereto
shall be in writing and shall be deemed sufficiently given or
furnished or serviced at the time of delivery if delivered to
such party or to an officer of such party, or three (3) days
after deposit in the United States mail, first class and
prepaid, if mailed, addressed to such party at its address set
forth below, or at such other address as the party to be
addressed shall designate by written notice to the party
giving such notice or furnishing such report or making such
request or demand. The address of the parties hereto for the
foregoing purposes are as follows:
Vitafoam Incorporated
2222 Surrett Drive
High Point, North Carolina 27263
Attention: Corporate Secretary
Telecopy: (910) 431-7747
with a copy to:
British Vita PLC
Middleton, Manchester M24 2DB
United Kingdom
Attention: Mark R. Stirzaker, Company Solicitor
Telecopy: 011 44 161-655-3957
Cone Mills Corporation
1201 Maple Street
Greensboro, North Carolina 27405
Attention: Neil W. Koonce, Vice President and
General Counsel
Telecopy: (910) 379-6972
<PAGE>
FORM 10-K Page 166
Exhibit 2.4 (continued)
12. Controlling Law. This Agreement shall be deemed to
be a contract made under the laws of the State of North
Carolina and shall be interpreted in accordance with, and
construed under, such laws.
13. Assignment. This Agreement shall not be assignable
in whole or in part by either party hereto.
14. Section Headings. The section headings throughout
this Agreement are for convenience and reference only, and the
words contained therein shall not in any way be held to
explain, modify, amplify, or aid in the interpretation,
construction, or meaning of the provisions of this Agreement.
15. Complete Agreement. This Agreement contains the
entire agreement between the parties with respect to the
transactions herein contemplated. This Agreement cannot be
modified or amended orally but can only be modified or amended
by written instrument executed by both parties.
16. Severability. In the event any provisions hereof
shall be modified or held ineffective by any court in any
respect, such adjudication shall not invalidate or render
ineffective the balance of the provisions of this Agreement.
17. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
[Signatures to Follow]
<PAGE>
FORM 10-K Page 167
Exhibit 2.4 (continued)
IN WITNESS WHEREOF, Cone and Vita have signed this
Agreement as of the day and year first above written.
CONE MILLS CORPORATION
By: /s/ Neil W. Koonce
Title: Vice President
VITAFOAM INCORPORATED
By: /s/ M. R. Stirzaker
Title: Vice President
<PAGE>
FORM 10-K Page 168
Exhibit 2.4 (continued)
Schedule 1 to Services Agreement
January 22, 1996
______________________________
Schedule 1
Leased Vehicles
A. Lessor: Citicorp
Vehicle Description Serial No. Price
'95 Chevy Caprice Classic 1G1BL52W4SR118719 $15,941.64
'95 Chevy Caprice Classic 1G1BL52P7SR108730 $13,571.52
'95 Ford Crown Victoria 2FALP74W9SX126058 $15,545.06
'95 Plymouth Voyager SF 2P4GH45R9SR191654 $15,312.50
'95 Chevy G20 Sport Van 1GNEG25K6SF103437 $14,970.01
'95 Ford Taurus GL 1FALP5749SA118775 $13,820.67
'95 Ford Taurus GL 1FALP57U6SA103506 $13,415.22
'95 GMC Model C7HO42 1GDM7H1J4SJ505339 $36,013.36
'95 GMC Model C7HO42 1GDM7H1J9SJ505353 $36,013.36
'95 GMC Model C7HO42 1GDM7H1J7SJ505433 $36,013.36
'95 GMC Model C7HO42 S/A 1GDM7H1J7SJ505996 $36,786.95
'95 GMC Model C7HO42 S/A 1GDM7H1J4SJ500786 $37,068.24
'95 GMC Model C7HO42 S/A 1GDM7H1J2SJ506117 $37,068.24
'94 GMC Model C7HO42 S/A 1GBM7H1J9RJ101276 $34,816.93
'95 Buick LeSabre 1G4HP52L2SH421804 $16,904.79
B. Lessor: GE Capital
Vehicle Description Serial No. Price
53' Squeeze Trailer 1S12E9536LD329536 $36,246
C. Lessor: Southern National
Vehicle Description Serial No. Price
35' Furn. Van 1GDM7H1J9PJ503285 $24,439
GMC Topkick 1GDP7H1JXMJ509167 $20,817
Chevy Kodiak Tractor 1GBP7H1J2PJ101503 $24,159
Inthr. 8100 Tractor 1HSHBAZN5PH494019 $30,543
<PAGE>
FORM 10-K Page 169
Exhibit 2.4 (continued)
D. Lessor: Fifth Third
Vehicle Description Serial No. Price
'94 Plymouth Grand Voyager SE 2P4GH4537RR589385 $10,116
'94 Chevy Caprice 1G1BL52W4RR105348 $ 9,511
'94 Chevy Caprice 1G1BL52W6RR116108 $ 9,066
'94 Chevy Caprice 1G1BL52W1RR111401 $ 9,066
'94 Chevy Caprice Classic 1G1BL52W2RR103698 $ 9,066
'94 Chevy Caprice Classic 1G1BL52W5RR106105 $ 9,820
'94 Chevy Caprice Classic 1G1BL52W1RR107249 $ 9,754
'94 Chevy Caprice Classic 1G1BL52W4RR122845 $ 9,099
'94 Chevy Caprice Classic 1G1BL52W0RR122843 $ 9,099
'94 Chevy Pickup 1GCFC24H4RE113043 $ 8,664
'94 Chevy Pickup 1GCFC24K7RE156453 $ 9,182
'94 Ford Taurus SW 1FALP5742RA102735 $10,116
GMC Truck C7H042 1GDM7H1J4RJ507246 $32,064
GMC Truck C7H042 1GDM7H1J7RJ507323 $32,064
GMC Truck C7H042 1GDM7H1J2RJ507164 $32,064
'94 Inthr 8100 1HSHBAZN2RH591150 $37,632
<PAGE>
FORM 10-K Page 170
Exhibit 2.4 (continued)
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "License Agreement"), dated
as of January 22, 1996, is made by and between CONE MILLS
CORPORATION, a North Carolina corporation ("Licensor"), and
VITAFOAM INCORPORATED, a North Carolina corporation
("Licensee").
STATEMENT OF PURPOSE
Pursuant to an Olympic Division Acquisition Agreement
dated January 19, 1996 between Licensee and Licensor (the
"Acquisition Agreement"), Licensor has agreed to grant to
Licensee an exclusive (subject to an existing license granted
by Licensor, the rights and benefits to which are being
concurrently transferred to Licensee), irrevocable,
transferable, worldwide license to certain proprietary
technology owned by Licensor and used in its Hydrophilic Foam
Business (as defined below) for a period of five years and to
grant to Licensee an option to purchase such technology at the
expiration of such period.
STATEMENT OF AGREEMENT
For good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
I. Definitions. In addition to the terms defined
elsewhere herein, the following terms shall have the following
meanings (capitalized terms used herein and not defined herein
shall have the meanings given to them in the Acquisition
Agreement):
"Documentation" means all written specifications,
manuals, drawings, diagrams, flow charts and other documents
which relate to the Licensed Technology and which are
necessary or helpful with respect to the operations of the
Hydrophilic Foam Business.
"Excess Accumulated Sales" shall mean the gross sales, if
any, of the Hydrophilic Foam Business for any two-calendar
quarter period reduced by the amount of TRS Royalties included
in such amount, all as determined in accordance with GAAP, to
<PAGE>
FORM 10-K Page 171
Exhibit 2.4 (continued)
the extent that the cumulative amount of such sales less TRS
Royalties from the date hereof through the end of such period
exceeds Fifty Million Dollars ($US 50,000,000).
"GAAP" shall mean generally accepted accounting
principles, as recognized by the American Institute of
Certified Public Accountants and Financial Accounting
Standards Board, consistently applied.
"Hydrophilic Foam Business" shall mean that portion of
the Business comprising the manufacture and sale of
reticulated absorbent foam products based on the proprietary
technology currently employed by Licensor at its facility
located on Pleasant Garden Road in Fentress Township, Guilford
County, North Carolina.
"Licensed Technology" shall mean any and all copyrights,
patents, patent applications, processes, computer programs and
program rights, know-how, Trade Secrets, goodwill and other
similar intangible rights and interests owned or used by
Licensor in connection with the Hydrophilic Foam Business,
including licenses and Documentation thereof including but not
limited to the rights and interests of Licensor under the
Settlement Agreement dated July 11, 1995 among Licensor, Time
Release Sciences, Inc. and the shareholders of Time Release
Sciences, Inc.
"Licensee" shall mean Vitafoam Incorporated, a North
Carolina corporation, and its successors and assigns.
"License Termination Date" shall mean the fifth
anniversary of the date hereof.
"Licensor" shall mean Cone Mills Corporation, a North
Carolina corporation, and its successors and assigns.
"Licensor's Accountants" shall mean McGladrey & Pullen,
LLP, or such other accounting firm that serves as Licensor's
independent accountants.
"Limited Accumulated Sales" shall mean the gross sales,
if any, of the Hydrophilic Foam Business for any two-calendar
quarter period reduced by the amount of TRS Royalties included
in such amount, all as determined in accordance with GAAP, to
the extent that the cumulative amount of such sales less TRS
Royalties from the date hereof through the end of such period
does not exceed Fifty Million Dollars ($US 50,000,000).
<PAGE>
FORM 10-K Page 172
Exhibit 2.4 (continued)
"Person" shall mean a corporation, an association, a
joint venture, an organization, a business, an individual, a
trust or a government or political subdivision thereof, a
government agency, or any other legal entity.
"Trade Secrets" means business or technical information
of Licensor including, but not limited to, methods, programs,
Documentation, formulae, devices, compilations of information,
techniques and processes, which information is not generally
known to other Persons and which derives actual or potential
commercial value from not being generally known or readily
ascertainable to other Persons, all with respect to the
Hydrophilic Foam Business.
"TRS Royalties" shall mean all royalties payable by Time
Release Sciences, Inc., its successors and assigns, pursuant
to the Modification of License Agreement dated as of July 1,
1995 between Licensor and Time Release Sciences, Inc., as
amended or modified.
II. Grant of License. Subject to the terms and
conditions of this Agreement, Licensor hereby grants to
Licensee, and Licensee hereby receives and accepts from
Licensor, a perpetual, irrevocable, transferable, worldwide
license to use, sublicense and in any other manner exploit the
Licensed Technology or any portion thereof, whether in its
operation of the Hydrophilic Foam Business or otherwise. Such
license shall be exclusive, except to the extent that Licensor
has granted a license to Time Release Sciences, Inc., its
successors and assigns, pursuant to the Modification of
License Agreement dated as of July 1, 1995 between Licensor
and Time Release Sciences, Inc., as amended or modified.
Licensor has assigned to Licensee all of Licensor's rights,
benefits and obligations under such agreement with Time
Release Sciences, Inc.
III. Royalties. Licensee shall pay to Licensor the
following royalties at the following times:
A. Within forty-five (45) days after the end of
each of the second and fourth calendar quarters through the
License Termination Date, an amount equal to five percent (5%)
of the Limited Accumulated Sales, if any, for such preceding
two-calendar-quarter period; and
<PAGE>
FORM 10-K Page 173
Exhibit 2.4 (continued)
B. Within forty-five (45) days after the end of
each of the second and fourth calendar quarters through the
License Termination Date, an amount equal to seven percent
(7%) of Excess Accumulated Sales, if any, for such preceding
two-calendar-quarter period; provided, however, that in the
event that Licensee ceases to be entitled, under the Carpenter
Agreement (as defined in the Acquisition Agreement), to the
benefit of the exclusive "Field of Uses" (as defined in the
Carpenter Agreement) as a result of the minimum purchase
requirements for Polymer A (as defined in the Carpenter
Agreement) in 1996 and 1997 not being satisfied, Licensee's
obligation to make any payment of royalties pursuant to this
Section 3 of this License Agreement with respect to any sales
occurring after such date shall automatically and immediately
terminate. The failure of Licensee to pay any royalties to
Licensor pursuant to this License Agreement shall not entitle
Licensor to terminate this License Agreement.
IV. Royalty Report. In connection with making payments
pursuant to Section 3, Licensee shall deliver to Licensor a
report setting forth in reasonable detail the gross sales, as
determined in accordance with GAAP, of the Hydrophilic Foam
Business, if any, for the period in respect of which such
payment is made and the cumulative gross sales, as determined
in accordance with GAAP, of the Hydrophilic Foam Business from
the date hereof through the end of such period. Upon the
reasonable request of Licensor, Licensee shall permit Licensor
and Licensor's Accountants to examine and audit the books and
records of Licensee solely for the purpose of determining the
accuracy of such report.
V. Sale of Hydrophilic Foam Business; TRS Royalties.
A. Licensee agrees that it shall not sell the
assets comprising the Hydrophilic Foam Business or sublicense
its the rights to the Licensed Technology to any Person at any
time prior to the License Termination Date unless: (i) such
Person assumes Licensee's obligation to make payments to
Licensor under this License Agreement with respect to the
period remaining through the License Termination Date (which
unless otherwise agreed by Licensee and Licensor will not
terminate Licensee's obligation under Section 3); or (ii)
Licensee agrees to continue to make payments to Licensor
pursuant to Section 3 for the period remaining through the
License Termination Date based upon sales of the Hydrophilic
Foam Business, or any successor business using such Licensed
Technology, as operated by such Person for such periods; or
(iii) Licensor consents to such sale or sublicense in writing.
<PAGE>
FORM 10-K Page 174
Exhibit 2.4 (continued)
B. Promptly upon receipt by Licensee of any TRS
Royalties, to the extent such TRS Royalties are paid in
respect of the period commencing on the date hereof and
terminating on the License Termination Date, Licensee shall
remit to Licensor such TRS Royalties.
VI. No Sale or Pledge of Licensed Technology. Except as
otherwise expressly provided in or contemplated by this
License Agreement, prior to the date next following the
License Termination Date, without the prior written consent of
Licensee, Licensor will not:
A. create or assume any mortgage, pledge, lien, or
other encumbrance with respect to the Licensed Technology; or
B. sell, assign, license, transfer or otherwise
dispose of any of the Licensed Technology.
VII. Obligations of Licensor. Upon execution of this
Agreement, Licensor shall deliver to Licensee all of the
Information.
VIII. Ownership. During the term of this License
Agreement, Licensor shall own all right, title and interest in
and to the Licensed Technology. Licensee shall own all right,
title and interest in and to any developments to, or
modifications and enhancements of, the Licensed Technology.
IX. Option to Purchase Licensed Technology. Licensor
hereby grants to Licensee an irrevocable option to purchase
the Licensed Technology on the License Termination Date for
$1.00 on the License Termination Date. Such option shall be
deemed automatically exercised by Licensee unless 60 days
prior to the License Termination Date Licensee provides
Licensor written notice of its intention not to exercise such
option. Upon the exercise of such option, on the License
Termination Date, Licensor shall deliver to Licensee such
bills of sale, patent assignments (in recordable form) and
other documents necessary to transfer to Licensee all of
Licensor's rights in the Licensed Technology.
X. Term. The license granted under this License
Agreement shall be effective as of the date hereof and shall
remain in effect until the License Termination Date.
<PAGE>
FORM 10-K Page 175
Exhibit 2.4 (continued)
XI. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given when
delivered by hand or by facsimile transmission or mailed by
registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses
(or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address
shall be effective only upon receipt thereof):
(a) If to Licensor, to:
Cone Mills Corporation
1201 Maple Street
Greensboro, North Carolina 27405
Attention: Mr. Neil W. Koonce, Vice President
and General Counsel
Telecopy: (910) 379-6972
(b) If to Licensee, to:
Vitafoam Incorporated
2222 Surrett Drive
High Point, North Carolina 27263
Attention: Corporate Secretary
Telecopy: (910) 431-7747
with a copies to:
British Vita PLC
Middleton, Manchester M24 2DB
United Kingdom
Attention: Mr. Mark Stirzaker, Company Solicitor
Telecopy: 011 44 161-655-3957
and
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street
Suite 1900
Charlotte, North Carolina 28246
Attention: Mr. Stephen M. Lynch
Telecopy: (704) 378-4000
<PAGE>
FORM 10-K Page 176
Exhibit 2.4 (continued)
XII. Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors
and assigns.
XIII. Governing Law; Jurisdiction. The execution,
interpretation and performance of this License Agreement shall
be governed by the internal laws and judicial decisions of the
State of North Carolina, without regard to its conflicts-of-
laws principles. Licensee and Licensor hereby irrevocably
consent, to the maximum extent permitted by law, that any
legal action or proceeding against them under, arising out of
or in any manner relating to, this License may be brought in
any court of general jurisdiction of Guilford County, North
Carolina, or in the United States District Court for the
Middle District of North Carolina, Greensboro Division. By
its execution and delivery of this License Agreement, each
such party expressly and irrevocably assents and submits to
the personal jurisdiction of either of such courts in any such
action or proceeding. Each such party further irrevocably
consents to the service of any complaint, summons, notice or
other process relating to any such action or proceeding by
delivery thereof to it by hand or by mail in the manner
provided for in Section 12, and expressly and irrevocably
waives its respective claims and defenses in any such action
or proceeding in either such court based on any alleged lack
of personal jurisdiction, improper venue or forum non
conveniens, or any similar basis to the maximum extent
permitted by law.
XIV. Arbitration. Notwithstanding Section 13, upon
demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this
License Agreement, or any other agreement entered into
pursuant to this License Agreement (collectively, "Disputes"),
between Licensor and Licensee shall be resolved by binding
arbitration as provided in this Section 14. Institution of a
judicial proceeding by a party does not waive the right of
that party to demand arbitration. Disputes may include,
without limitation, tort claims, counterclaims, claims arising
from modifications, amendments or supplements to this License
Agreement or any other agreement provided for herein executed
in the future, or claims concerning any aspect of the past,
present or future relationships arising out of or connected
with this License Agreement.
<PAGE>
FORM 10-K Page 177
Exhibit 2.4 (continued)
Arbitration shall be conducted under and governed by the
Commercial Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association and Title 9 of the U.S. Code.
All arbitration hearings shall be conducted either in Guilford
County or Mecklenburg County, North Carolina. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration
Rules shall be applicable to claims of less than $500,000.
All applicable statutes of limitation shall apply to any
Dispute. A judgment upon the award may be entered in any
court of competent jurisdiction. The arbitrators shall be
appointed as provided in the Arbitration Rules.
Notwithstanding anything to the contrary contained in
this Section 14, Licensor and Licensee preserve, without
diminution, certain remedies that either of them may employ or
exercise freely, either alone, in conjunction with, or during
a Dispute. Licensor and Licensee both have the right to
proceed in any court of proper jurisdiction or by self help to
exercise or prosecute the following remedies, as applicable:
(i) obtaining provisional or ancillary remedies including
injunctive relief, requestration, garnishment, attachment,
appointment of a receiver and filing an involuntary bankruptcy
proceeding; and (ii) when applicable, a judgment by confession
of judgment. Preservation of these remedies does not limit
the power of an arbitrator to grant similar remedies that may
be requested by a party in a Dispute.
XV. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
XVI. Interpretation. The section headings contained in
this License Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and
shall not in any way affect the meaning or interpretation of
this License.
XVII. Entire Agreement. This License Agreement and the
documents delivered pursuant to this License Agreement, embody
the entire agreement and understanding of the parties hereto
in respect of the subject matter hereof.
[Signatures to Follow]
<PAGE>
FORM 10-K Page 178
Exhibit 2.4 (continued)
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
CONE MILLS CORPORATION
By: /s/ Neil W. Koonce
Title: Vice President
VITAFOAM INCORPORATED
By: /s/ Mark R. Stirzaker
Title: Vice President
<PAGE>
FORM 10-K Page 179
Exhibit 2.4 (continued)
HOLD BACK ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into this 22nd
day of January, 1996, and is by and between VITAFOAM
INCORPORATED, a North Carolina corporation ("Buyer"), FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association ("Escrow Agent"), and CONE MILLS CORPORATION, a
North Carolina corporation ("Seller").
BACKGROUND STATEMENT
Buyer, Seller and British Vita PLC have entered into an
acquisition agreement ("Acquisition Agreement") for the
purchase of the "Olympic Division" of Seller, also known as
the "Olympic Products Company," dated as of January 19, 1996.
The Acquisition Agreement sets forth certain indemnification
obligations of Seller. As required by the Acquisition
Agreement on the Inventory Payment Date ( as defined herein),
Buyer will deposit with Escrow Agent a portion of the Purchase
Price of Seller's Business. Escrow Agent will hold such
deposit in escrow in accordance with the terms and conditions
hereof for the purpose of securing, to the extent of the
escrowed funds, such indemnification obligations of Seller.
Unless otherwise defined herein, the capitalized terms used
herein shall have the meanings given to them in the
Acquisition Agreement.
STATEMENT OF AGREEMENT
In consideration of the premises and mutual covenants
contained herein, the adequacy and sufficiency of which are
hereby acknowledged, the parties hereto, for themselves, their
successors and assigns, agree as follows:
ARTICLE I
DEFINITIONS AND REFERENCES
1.1. Defined Terms. The following terms shall have the
following meanings:
"Acquisition Agreement" shall have the meaning given to
it in the Background Statement hereof.
"Buyer" shall have the meaning given to it in the
introduction hereof.
<PAGE>
FORM 10-K Page 180
Exhibit 2.4 (continued)
"Buyer's Costs and Expenses" shall mean, with respect to
a Claim not involving a Third Party, all costs and expenses,
including attorney's fees, incurred by Buyer associated with
or relating to such Claim.
"Cash Deposit" shall have the meaning given to it in
Section 2.2.
"Claim" shall mean a claim for indemnification under the
Acquisition Agreement by Buyer; provided, however, that a
Claim shall not include Buyer's Costs and Expenses.
"Closing Date" shall mean January 22, 1996.
"Escrowed Funds" shall mean the Cash Deposit plus the
investment proceeds of the Cash Deposit as invested in
accordance with Section 3.1.
"Escrow Maturity Date" shall have the meaning given to it
Section 2.3.
"Final Decision" shall have the meaning given to it
Section 4.3.
"Inventory Payment Date" shall mean the first date upon
which Seller is required to make an Inventory Payment pursuant
to Article II of the Acquisition Agreement (as such term is
defined in the Acquisition Agreement).
"Negotiation Period" shall have the meaning given to it
in Section 4.3(a).
"Objection" shall mean a written objection by Seller to
a Claim stating in reasonable detail the basis for such
objection.
"Proper Settlement" shall have the meaning given to it in
Section 4.3(b).
"Purchase Price" shall have the meaning given to it in
the Acquisition Agreement.
"Release" shall mean a written declaration, executed by
Seller and Buyer, specifying the resolution of an Objection
and the disposition to be made of the Escrowed Funds or any
portion thereof that was the subject of such Objection.
<PAGE>
FORM 10-K Page 181
Exhibit 2.4 (continued)
"Reserved Funds" shall have the meaning given to it
Section 4.2.
"Seller" shall have the meaning given to it in the
introduction hereof.
"Third Party" shall mean a corporation, an association,
a joint venture, an organization, a business, an individual,
a trust or a government or political subdivision thereof, a
government agency, or any other legal entity other than Buyer
and Seller.
"Uncontested Claim" shall have the meaning given to it in
Section 4.3.
"Unresolved Claim" shall have the meaning given to it in
Section 4.3.
"Withdrawal of Claim" shall mean a written declaration
executed by Buyer withdrawing a Claim.
"Withdrawal of Objection" shall mean a written
declaration executed by Seller withdrawing an Objection.
1.2. References to Exhibits and Sections. Unless
otherwise indicated, references to "Exhibits" and "Sections"
herein shall refer to those certain Exhibits attached hereto
and Sections herein, respectively.
ARTICLE II
THE ESCROW
2.1. Appointment of Escrow Agent. Buyer and Seller
hereby designate and appoint Escrow Agent to serve as escrow
agent, and Escrow Agent hereby confirms its agreement to act
as escrow agent upon the terms, conditions and provisions of
this Escrow Agreement.
2.2. Creation of the Escrow Fund. On the Inventory
Payment Date, Buyer shall hold back from the portion of the
Purchase Price payable by it to Seller on the Inventory
Payment Date and deposit with Escrow Agent to be held,
invested, administered and distributed in accordance with the
terms and conditions hereof (by wire transfer of immediately
available funds) the amount of $ 4,000,000 (the "Cash
Deposit"), as required by the Acquisition Agreement.
<PAGE>
FORM 10-K Page 182
Exhibit 2.4 (continued)
2.3. Termination of Escrow Agreement. This Escrow
Agreement will terminate on the later of (a) the first
anniversary of the Closing Date (the "Escrow Maturity Date"),
or (b) the date on which the final Unresolved Claim with
respect to the Escrowed Funds is resolved in accordance with
Section 4.3.
2.4. Administration of the Escrowed Funds. The Escrowed
Funds, including the proceeds from investment thereof as
provided in Section 3.1, shall be held, invested, administered
and distributed by Escrow Agent pursuant to this Escrow
Agreement. Seller and Buyer agree that the escrow of the Cash
Deposit pursuant to this Escrow Agreement is irrevocable.
Neither this Escrow Agreement nor any provision hereof may be
amended, modified, waived, discharged, or terminated except in
a writing executed by all parties hereto. Escrow Agent
acknowledges receipt of the Cash Deposit and agrees not to
permit any withdrawal or distribution thereof, or any of the
investment proceeds thereof (as invested in accordance with
Section 3.1), except pursuant to the terms and conditions of
this Escrow Agreement.
ARTICLE III
INVESTMENT OF THE ESCROWED FUNDS
3.1. Investment. With respect to the Escrowed Funds,
Escrow Agent shall, upon the written direction of Seller (with
a copy to Buyer), from time to time during the term of this
Escrow Agreement invest the Escrowed Funds in short-term money
market funds maintained by an incorporated bank organized and
doing business under the laws of the United States of America,
or of any state thereof, provided that the total amount of the
combined capital and surplus of such bank is at least
$50,000,000.
3.2. Income and Expenses. All income received from the
deposit or investment of the Escrowed Funds shall become part
of the Escrowed Funds and shall be disbursed and disposed of
in the same manner as the Cash Deposit; provided, however, all
income earned on Reserved Funds deposited into an interest-
bearing savings account pursuant to Section 4.2 shall become
additional Reserved Funds to be disbursed and disposed of in
the same manner as Reserved Funds. Expenses incurred by
Escrow Agent in the investment of the Escrowed Funds shall be
reimbursed to Escrow Agent from the Escrowed Funds.
<PAGE>
FORM 10-K Page 183
Exhibit 2.4 (continued)
3.3. Reserved Funds. Notwithstanding the foregoing,
Escrow Agent shall not invest any Reserved Funds, as defined
in Section 4.2, except as expressly provided in that Section.
ARTICLE IV
DISTRIBUTION OF THE ESCROWED FUNDS
4.1. Notice of Claims. At any time prior to the close
of business on the Escrow Maturity Date, Buyer may deliver
notice of a Claim to Escrow Agent (with a copy being
contemporaneously delivered to Seller) ("Notice of Claim").
Any such Notice of Claim by Buyer is conclusive and is given
in its sole discretion, limited only by Buyer's obligation to
act in good faith.
4.2. Reservation of Funds. Upon receipt of a Claim,
Escrow Agent shall withdraw from the Escrowed Funds an amount
equal to the amount stated in the Claim, plus Buyer's good
faith estimate of Buyer's Costs and Expenses with respect to
such Claim (collectively, the "Reserved Funds"). Escrow Agent
shall place such Reserved Funds in an interest-bearing savings
account in an institution of the type described in Section
3.1.
4.3. Objections and Resolution of Claims. (a) If the
Claim specified in Buyer's Notice of Claim does not involve a
Third Party, Seller shall have fifteen (15) days to deliver to
Escrow Agent (with a copy being contemporaneously delivered to
Buyer) an Objection. If no Objection is timely delivered,
such Claim becomes an "Uncontested Claim." If an Objection is
timely filed and Escrow Agent shall not have received a
Release, Withdrawal of Claim or Withdrawal of Objection within
thirty (30) days (the "Negotiation Period") from the date the
Objection was delivered to Escrow Agent, such claim shall
become an "Unresolved Claim," and either Buyer or Seller may
submit it to arbitration in accordance with Section 10.9 of
the Acquisition Agreement. Upon the rendering of the
arbitration decision and after any and all appeals of such
Final Decision have been exhausted or become untimely
(resulting in a "Final Decision"), Buyer shall submit to
Escrow Agent a copy of such decision, and Escrow Agent shall
make a disbursement of the Escrowed Funds in accordance with
Section 5.1 hereof.
(b) If the Claim specified in Buyer's Notice of Claim
does involve a Third Party, the defense of such Claim shall be
<PAGE>
FORM 10-K Page 184
Exhibit 2.4 (continued)
conducted by Seller in accordance with Article IX of the
Acquisition Agreement; provided, however, in the event that
Seller does not, in accordance with Article IX of the
Acquisition Agreement, assume the defense of such Claim and
employ counsel satisfactory to Buyer in Buyer's good faith
discretion, such Claim shall become, without further action by
anyone, an "Uncontested Claim," and Escrow Agent shall make a
disbursement of the Escrowed Funds in accordance with Section
5.1 hereof. Otherwise, if an Objection is timely filed and
Escrow Agent shall not have received a Release, Withdrawal of
Claim or Withdrawal of Objection within thirty (30) days (the
"Negotiation Period") from the date the Objection was
delivered to Escrow Agent, such claim shall become an
"Unresolved Claim," subject to resolution by a court of
competent jurisdiction or a proper arbitral tribunal. Upon
the rendering of a judgment or decision by such a court of
competent jurisdiction or proper arbitral tribunal and after
any and all appeals of such judgment or decision have been
exhausted or become untimely, or a settlement agreement has
been executed to which Seller has given its written consent,
Buyer shall submit such judgment or decision (a "Final
Decision") or settlement agreement (a "Proper Settlement") to
Escrow Agent, and Escrow Agent shall make a disbursement of
the Escrowed Funds in accordance with Section 5.1 hereof.
4.4. Unresolved Claims at Maturity Date. All Reserved
Funds relating to any Unresolved Claims at the Escrow Maturity
Date shall be held by Escrow Agent until Escrow Agent's
receipt of a Release, a Withdrawal of Claim, a Withdrawal of
Objection, a Final Decision, or a Proper Settlement resolving
all disputes with respect to such Unresolved Claims, upon
which Escrow Agent shall pay and disburse such Reserved Funds
in accordance with Section 5.1.
ARTICLE V
DISPOSITION OF THE ESCROWED FUNDS
5.1. Payment of Claims and Balance of the Escrowed
Funds. Escrow Agent shall pay and disburse the Escrowed
Funds, which include the Reserved Funds, as follows:
(a) On the date six (6) months after the Closing
Date, Escrow Agent shall pay and disburse to Seller (in the
manner set forth in a written notice delivered by Seller to
Escrow Agent) an amount equal to the aggregate of (i) the
balance of the Escrowed Funds, less (ii) $2,000,000, less
(iii) any Reserved Funds;
<PAGE>
FORM 10-K Page 185
Exhibit 2.4 (continued)
(b) As specified in any Claim with respect to which
Seller shall have delivered a Withdrawal of Objection;
(c) As specified in any Release received by Escrow
Agent;
(d) As specified in any Uncontested Claim, Final
Decision, or Proper Settlement;
(e) Buyer's Cost and Expenses with respect to a
Claim that has been resolved favorably to Buyer pursuant to a
Final Decision; and
(f) Upon the Escrow Maturity Date, Escrow Agent
shall pay and disburse to Seller (in the manner set forth in
a written notice delivered by Seller to Escrow Agent) an
amount equal to the balance of the Escrowed Funds, less any
Reserved Funds.
5.2. Timing of Distributions; Cooperation with Escrow
Agent. All disbursements hereunder shall be made by Escrow
Agent by wire transfer of immediately available funds to such
account(s) as may be designated in writing by the receiving
party in advance of the disbursement within five (5) business
days following the events or dates described in Section 5.1.
Each of the parties shall cooperate with and deliver to Escrow
Agent such additional information and documents as Escrow
Agent shall reasonably request in the performance of its
obligations under this Escrow Agreement.
ARTICLE VI
ESCROW AGENT'S DUTIES
6.1. General. Escrow Agent shall be obligated to
perform only such duties as are expressly set forth in this
Escrow Agreement, and shall not be required, in carrying out
its duties under this Escrow Agreement to refer to the
Acquisition Agreement, except as expressly set forth herein.
Escrow Agent may rely on, and shall be protected in acting or
refraining from acting upon, any written notice, instruction
or request furnished to it under this Escrow Agreement and
believed in good faith by it to be genuine and to have been
signed or presented by the proper party or parties, provided
that, as set forth in Section 7.7, any modification of this
Escrow Agreement shall be required to be signed by the parties
hereto. Escrow Agent acts under this Escrow Agreement as a
<PAGE>
FORM 10-K Page 186
Exhibit 2.4 (continued)
depositary only and is not a party to or bound by any
agreement or undertaking that may be evidenced by or arise out
of any items deposited with or delivered to it pursuant to
this Escrow Agreement. Escrow Agreement is not responsible or
liable in any manner for the sufficiency, correctness,
genuineness or validity of any such items, and it undertakes
no responsibility or liability for the form or execution of
such items presented to it or the identity, authority, title
or rights of any person executing or depositing same. Escrow
Agent shall not be liable to any of the parties to this Escrow
Agreement or their respective heirs, successors and assigns
for any action taken or omitted to be taken in good faith;
provided, however, that Escrow Agent shall be and remain
liable beyond: (a) its resignation or termination as Escrow
Agent; (b) the Escrow Maturity Date; and (c) its fulfillment
of all of its obligations, responsibilities and duties
hereunder for any damages arising from its willful misconduct
or gross negligence in connection with the carrying out of its
obligations as Escrow Agent hereunder.
6.2. Indemnification of Escrow Agent. Buyer and Seller,
jointly and severally, shall indemnify Escrow Agent for and
hold Escrow Agent harmless against, any loss, damage,
liability or expense incurred by Escrow Agent not caused by
gross negligence or willful misconduct on its part, arising
out of, or in connection with, its entering into this Escrow
Agreement and the carrying out of its duties under this Escrow
Agreement, including the costs and expenses of defending
itself against any claim of liability in connection with
carrying out its duties or participating in any legal
proceedings in connection with this Escrow Agreement
(including reasonable attorneys' fees). Escrow Agent may
consult with appropriately qualified counsel of its choice,
and shall have full and complete authorization and protection
for any action taken or suffered by it under this Escrow
Agreement in good faith and in accordance with the opinion of
such counsel.
6.3. Resignation or Termination of Escrow Agent. Escrow
Agent may, upon reasonable advance written notice, resign and
be discharged from its duties or obligations under this Escrow
Agreement by giving notice of such resignation to Buyer and
Seller specifying the date upon which such resignation shall
take effect. Buyer and Seller shall have the right to
terminate by mutual agreement the appointment of Escrow Agent
under this Escrow Agreement by giving to it notice of such
termination, specifying the date upon which such termination
<PAGE>
FORM 10-K Page 187
Exhibit 2.4 (continued)
shall take effect. In either such event, the resigning or
terminated Escrow Agent shall remain liable for any actions
taken or omitted in the carrying out of its duties under this
Escrow Agreement as Escrow Agent. In either such event, Buyer
and Seller shall designate a successor Escrow Agent, who shall
become bound by the terms of this Escrow Agreement; provided,
however, that the designation of a successor Escrow Agent
shall not affect the validity of any action taken or any
document executed by the predecessor Escrow Agent. Upon
demand of any such successor Escrow Agent, all of the Escrowed
Funds shall be turned over and delivered to such successor
Escrow Agent, which shall, thereupon, be bound by all of the
provisions of this Escrow Agreement. Escrow Agent's
agreements and obligations under this Escrow Agreement shall
terminate and Escrow Agent shall be discharged from further
duties and obligations under this Escrow Agreement upon the
final payment of all of the Escrowed Funds in accordance with
the terms of Section 5.1.
ARTICLE VII
ESCROW AGENT'S FEES AND EXPENSES; MISCELLANEOUS
7.1. Fee Schedule. Escrow Agent's charges for its
services and expenses incurred hereunder shall be as set forth
in Exhibit A hereto.
7.2. Compensation of Escrow Agent. Except as otherwise
provided herein, all compensation of Escrow Agent, routine
expenses, disbursements and advances (including reasonable
attorneys' fees) incurred in the administration of any Claim
or pursuant to a dispute among any of the parties hereto shall
be paid by Buyer and Seller in equal shares and shall be
payable within a reasonable time after their receipt of
written notice from Escrow Agent or by set-off against amounts
otherwise payable to Buyer or Seller hereunder.
7.3. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be
deemed given and received (a) on the date of delivery when
delivered by hand or when transmitted by confirmed
simultaneous telecopy, (b) on the following business day when
sent by receipted overnight courier, or (c) three (3) business
days after deposit in the United States Mail when mailed by
registered or certified mail, return receipt requested, first
class postage prepaid, as follows:
<PAGE>
FORM 10-K Page 188
Exhibit 2.4 (continued)
If to Cone Mills:
Cone Mills Corporation
1201 Maple Street
Greensboro, North Carolina 27405
Attention: Mr. Neil W. Koonce, Vice
President and General Counsel
Telecopy: (910) 379-6972
If to Buyer:
Vitafoam Incorporated
2222 Surrett Drive
High Point, North Carolina 27263
Attention: Corporate Secretary
Telecopy: (910) 431-7747
With a copy to:
British Vita PLC
Middleton, Manchester M24 2DB
United Kingdom
Attention: Mr. Mark R. Stirzaker
Telecopy: 011 44 161-655-3957
If to Escrow Agent to:
First Union National Bank of North Carolina
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Bond Administration
Telecopy: (704) 383-7316
or such other address as shall be furnished in writing in
accordance with the provisions of this Section 7.3 by any
party to the other parties.
7.4. Headings. The Section headings in this Escrow
Agreement are inserted solely as a matter of convenience for
reference and shall not in any way affect the meaning or
interpretation of any of the provisions of this Escrow
Agreement.
7.5. Counterparts. This Escrow Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
<PAGE>
FORM 10-K Page 189
Exhibit 2.4 (continued)
7.6. Prior Agreements. This Escrow Agreement supersedes
all prior agreements, oral and written, among the parties
hereto with respect to the subject matter hereunder, except
for the Acquisition Agreement.
7.7 Amendment; Waiver. This Escrow Agreement may not be
amended except by an instrument in writing signed by the
parties hereto. No term or condition of this Escrow Agreement
shall be deemed to have been waived, nor shall there be any
estoppel against the enforcement of any provision of this
Escrow Agreement, except by written instrument signed by the
party charged with such waiver or estoppel. No such written
waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to
the specific term or condition waived and shall not constitute
a waiver of such term or condition for the future or as to any
act other than that specifically waived.
7.8. Severability. Should any provision of this Escrow
Agreement, or the application thereof, be held invalid or
unenforceable by a court of competent jurisdiction, the
remainder of this Escrow Agreement, or alternative
applications thereof, other than the provision(s) that shall
have been held invalid or unenforceable, shall not be affected
thereby and shall continue to be valid and enforceable to the
fullest extent permitted by law or equity.
7.9. Assignment. This Escrow Agreement shall not be
assignable by Buyer, except as a collateral assignment to any
lender(s), without the written consent of the other parties to
this Escrow Agreement. Any attempt to do so shall be null and
void and of no legal effect whatsoever. Nothing contained in
this Escrow Agreement, express or implied, is intended to
confer upon any person or entity, other than the parties
hereto and their permitted successors, assigns and transferees
any rights or remedies under or by reason of this Escrow
Agreement.
7.10. Binding Effect. This Escrow Agreement shall be
binding upon, and shall inure to the benefit of, the parties
hereto and their respective permitted successors, assigns and
transferees.
7.11. Governing Law. This Escrow Agreement shall be
construed and enforced in accordance with the laws of the
State of North Carolina, without regards to its conflicts-of-
laws principles.
<PAGE>
FORM 10-K Page 190
Exhibit 2.4 (continued)
7.12. Arbitration. All disputes under this Escrow
Agreement between or among the parties hereto, including the
resolution of any Unresolved Claims in accordance with Section
4.3, shall be submitted to arbitration in accordance with the
procedures set forth in Section 10.9 of the Acquisition
Agreement.
[Signatures to Follow]
<PAGE>
FORM 10-K Page 191
Exhibit 2.4 (continued)
IN WITNESS WHEREOF, Seller, Buyer and Escrow Agent have
caused this Escrow Agreement to be signed by their respective
duly authorized officers as of the date first above written.
CONE MILLS CORPORATION
By: /s/ Neil W. Koonce
Title: Vice President
VITAFOAM INCORPORATED
By: /s/ Mark R. Stirzaker
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Escrow Agent
By: /s/ Shannon Stahel
Title: Trust Officer
<PAGE>
FORM 10-K Page 192
Exhibit 2.4 (continued)
Exhibit A to Escrow Agreement
Acquisition of the Olympic Division
of Cone Mills Corporation
January 22, 1996
______________________________
EXHIBIT A
FEES PAYABLE TO ESCROW AGENT
Escrow Agent annual fees: $1,500.00 in advance
Activity charges: $25.00 per wire transfer
$10.00 per check
Out-of-pocket expenses: Billed at cost
(shipping, postage,
telephone, legal
publication, etc.)
[The foregoing fees are subject to First Union's review and
acceptance of the final documents that sets forth its duties and
responsibilities.]
FORM 10-K Page 193
Exhibit 4.3(f)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
c/o Prudential Capital Group
Four Gateway Center
Newark, New Jersey 07102
As of June 30, 1995
CONE MILLS CORPORATION
1201 Maple Street
Greensboro, North Carolina 27405
Attention: David Bray, Treasurer
Ladies and Gentlemen:
This letter is to amend the Note Agreement dated as of
August 13, 1992, as amended previously (the "Note Agreement")
between Cone Mills Corporation (the "Company") and The
Prudential Insurance Company of American ("Prudential").
Capitalized words in this letter shall have the same meaning
as in the Note Agreement except as otherwise defined herein.
Prudential and the Company agree that the Note Agreement shall
be amended as follows:
1. Paragraph 6A is hereby amended and restated in its
entirety as follows:
6A. Funds from Operations to Debt Ratio. The
Company covenants that it will not permit its Funds
from Operations to Debt Ratio to be less than 20%
at the end of any fiscal quarter during 1995 and
26% at the end of any fiscal quarter thereafter.
2. Except as amended herein, all of the terms,
conditions and obligations of the Note Agreement
shall remain in full force and effect.
3. This letter supercedes our letter to you dated as
of June 30, 1995, a copy of which is attached
hereto.
<PAGE>
FORM 10-K Page 194
Exhibit 4.3(f) (continued)
Cone Mills Corporation
As of June 30, 1995
Page 2
If you agree to these changes, please sign each copy of this
letter enclosed and return two of them to Prudential, at which
time this letter shall become a binding agreement as of the
date first above written.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Robert Derrick
Vice President
Agreed to and accepted
as of June 30, 1995
CONE MILLS CORPORATION
By: /s/ David E. Bray
Treasurer
FORM 10-K Page 195
Exhibit 4.4(c)
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT dated as December 31, 1995 to the Amended and
Restated Credit Agreement dated as of November 18, 1994 (as
heretofore amended, the "Agreement") among Cone Mills
Corporation, the banks listed on the signature pages thereof
(the "Banks") and Morgan Guaranty Trust Company of New York,
as Agent (the "Agent").
The parties hereto agree as follows with respect to the
Agreement:
SECTION 1. Definitions: References. Unless otherwise
specifically defined herein, each term used herein which is
defined in the Agreement shall have the meaning assigned to
such term in the Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each
other similar reference contained in the Agreement shall from
and after the date hereof refer to the Agreement as amended
hereby.
SECTION 2. Amendment of Definition of Consolidated Net
Income. The definition of Consolidated Net Income in Section
1.01 of the Agreement is hereby amended to read in full as
follows:
"Consolidated Net Income" means, for any period, the
net income of the Borrower and its Consolidated
Subsidiaries for such period, excluding non-cash equity
earnings or losses from unconsolidated foreign
affiliates.
SECTION 3. Amendment of Section 5.10 of the Agreement.
Section 5.10 of the Agreement is amended to read in full as
follows:
SECTION 5.10. Debt Ratio. As of the last day of each
fiscal quarter ended after January 1, 1997, the
percentage of Adjusted Cash Flow for the period of four
consecutive fiscal quarters then ended to Total
Consolidated Debt as of such day will not be less than
26%.
<PAGE>
FORM 10-K Page 196
Exhibit 4.4(c) (continued)
SECTION 4. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the
State of New York.
SECTION 5. Counterparts: Effectiveness. This Amendment
may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the
Signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective as of December 31, 1995
when the Agent shall have received duly executed counterparts
hereof signed by the Borrower and the Required Banks.
IN WITNESS WHEREOF, the parties hereto have caused this
amendment to be duly executed as of the date first above
written.
CONE MILLS CORPORATION
By: /s/ David E. Bray
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Jeffrey Hwang
Title: Vice President
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ K. Patrick McCormick
Title: Vice President
NATIONSBANK OF NORTH
CAROLINA, N.A.
By: /s/ Alison H. Mewborne
Title: Senior Vice President
WACHOVIA BANK OF NORTH
CAROLINA, N.A.
By: /s/ W. Stanton Laight
Title: Senior Vice President
FORM 10-K Page 197
Exhibit 4.8(a)
FIRST AMENDMENT TO THE 401(K) PROGRAM
OF
CONE MILLS CORPORATION
(As Amended and Restated December 1, 1994)
FIRST AMENDMENT, dated May 9, 1995, to The 401(k)
Program of Cone Mills Corporation, As Amended and Restated
December 1, 1994 (the "Plan").
RECITALS
A. The Plan presently provides that a distribution
pursuant to a Qualified Domestic Relations Order entered
with respect to a Member's Account may not be made prior to
the Member's "earliest retirement age," as defined in
Section 414(p) of the Internal Revenue Code of 1986, as
amended (the "Code"). Under Section 414(p) of the Code, an
earlier distribution date is permitted if provided for in
the Plan and authorized by the Qualified Domestic Relations
Order. To facilitate plan administration, the Advisory
Committee has recommended that the Plan be amended so that a
distribution pursuant to a Qualified Domestic Relations
Order may be made prior to a Member's "earliest retirement
date."
B. Subject to certain limitations, the Plan authorizes
hardship withdrawals for tuition and related education fees
(but not room and board expenses) for the next twelve months
of post-secondary education for a Member, his Spouse or
dependents. Under amended regulations recently issued by
the Internal Revenue Service and now in effect, the Plan may
authorize hardship withdrawals for educational room and
board expenses, and the Advisory Committee has recommended
that such withdrawals be authorized.
NOW, THEREFORE, the Plan be and hereby is amended,
effective May 9, 1995, as follows:
(1) By deleting the last paragraph of Plan Section
6.08 in its entirety and inserting in lieu thereof the
following:
<PAGE>
FORM 10-K Page 198
Exhibit 4.8(a) (continued)
"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, even if the
affected Member has not separated from service and
has not reached the "earliest retirement age", as
defined in Code Section 414(p); provided, however,
that a Qualified Domestic Relations Order may not
require the Plan to provide any type or form of
benefit or any option not otherwise provided and
may not require the Plan to provide increased
benefits. The Advisory Committee shall establish
reasonable procedures to determine the qualified
status of domestic relations orders and to
administer distributions under orders that are
determined to be Qualified Domestic Relations
Orders."
(2) By deleting Plan Section 6.10(a)(3) and inserting
in lieu thereof the following:
"(3) tuition, related educational fees, and room and
board expenses for the next twelve (12) months of
post-secondary education for the Member, his
Spouse, or dependents;"
IN WITNESS WHEREOF, this First Amendment, having been
approved by the Board of Directors of Cone Mills Corporation
at a meeting duly held on May 9, 1995, is signed by the
Secretary of the Corporation on the 19th day of May, 1995.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Vice President and Secretary
FORM 10-K Page 199
Exhibit 4.8(b)
SECOND AMENDMENT TO THE 401(K) PROGRAM
OF
CONE MILLS CORPORATION
(As Amended and Restated December 1, 1994)
SECOND AMENDMENT, dated December 5, 1995, to The 401(k)
Program of Cone Mills Corporation, As Amended and Restated
December 1, 1994 (the "Plan").
RECITALS
A. The Plan presently provides that any act required or
permitted to be taken by Cone shall be taken by the Board of
Directors. For clarification and to facilitate plan
administration, the Board of Directors desires to amend the
Plan to provide that, in general, any action required or
permitted to be taken by Cone under the Plan shall be taken by
the Board of Directors, the Executive Committee of the Board
of Directors or a committee appointed by the Board of
Directors pursuant to Plan Section 8.06 to which the authority
to take such action has been granted.
B. The Internal Revenue Code of 1986, as amended, and
the Regulations thereunder impose certain limitations on when
distributions may be made from the Plan. The Board of
Directors desires to amend the Plan to ensure compliance with
such limitations and to clarify the circumstances under which
a distribution from the Plan is permitted.
C. The Board of Directors also desires to clarify
certain other provisions of the Plan and thereby to facilitate
plan administration.
NOW, THEREFORE, the Plan be and hereby is amended,
effective January 1, 1995, as follows:
(1) By adding the following sentence to Plan Section
1.10(b): "Any period of unpaid leave under The Family and
Medical Leave Act of 1993 shall not be treated as or counted
toward a Break in Service for purposes of vesting and
eligibility to participate in the Plan."
(2) By deleting Plan Section 1.16 in its entirety and
inserting in lieu thereof the following:
<PAGE>
FORM 10-K Page 200
Exhibit 4.8(b) (continued)
"Cone means Cone Mills Corporation, a
North Carolina corporation, the Plan
sponsor. Any action required or
permitted to be taken by Cone under or
pursuant to the Plan shall be taken by
the Board of Directors, the Executive
Committee of the Board of Directors or a
committee appointed by the Board of
Directors pursuant to Plan Section 8.06
to which the authority to take such
action has been granted; provided,
however, that only the Board of Directors
may amend or terminate the Plan."
(3) By deleting the first sentence of Plan Section 1.28
and inserting in lieu thereof the following: "Employee is an
individual who renders personal services for an Employer or an
Affiliate and who is classified as an employee by the Employer
or Affiliate."
(4) By adding a new sentence as the next-to-last
sentence of Plan Section 1.46, so that the last three
sentences thereof read as follows:
"An Employee's Severance from Service
Date may be postponed by the Advisory
Committee under established policy
uniformly applied in similar situations.
Without limiting the circumstances under
which the Advisory Committee may postpone
an Employee's Severance from Service
Date, the Advisory Committee may postpone
an Employee's Severance from Service Date
to ensure that there has been a
"separation from service" within the
meaning of Code Section
401(k)(2)(B)(i)(I). For purposes of this
Plan, an Employee has a Severance from
Service on his Severance from Service
Date."
(5) By deleting Plan Section 3.02(a) in its entirety and
inserting in lieu thereof the following:
(a) The Employer shall contribute
respectively to the EEP and the
EEP-Hourly as of the end of
each calendar quarter an amount
<PAGE>
FORM 10-K Page 201
Exhibit 4.8(b) (continued)
equal to 50% of the EEP CODA Contributions
made on behalf of Members of each Plan for
such calendar quarter. The Employer shall
contribute respectively to the SRP and
SRP-Hourly for each calendar quarter an amount
equal to 25% of the SRP CODA Contributions
made on behalf of Members of each Plan for
such calendar quarter; however, CODA
Contributions made on behalf of any Member in
excess of 6% of his Compensation for the
calendar quarter shall not be taken into
account in determining the Cone Contribution.
If the total CODA Contributions made on behalf
of any Member exceeds 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."
(6) By deleting Plan Section 3.04(b)(1) in its entirety
and inserting in lieu thereof the following:
"(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 by his
Compensation for the Plan Year (or for the portion
thereof during which he was eligible to participate in
the Plan). The ADP of an Eligible Employee who does not
elect to have CODA Contributions made on his behalf is
0."
(7) By deleting Plan Section 3.05(b)(1) in its entirety
and inserting in lieu thereof the following:
"(1) Actual Contributions Percentage (ACP) means the
percentage determined by dividing the sum of Cone
Contributions made on behalf of a Member which are
allocated to his Account for the Plan Year by his
Compensation for the Plan Year (or for the portion
thereof during which he was eligible to participate in
the Plan). The ACP of an Eligible Employee who does not
elect to have Cone Contributions made on his behalf is
0."
(8) By adding a new Plan Section 6.05(g) to read as
follows:
<PAGE>
FORM 10-K Page 202
Exhibit 4.8(b) (continued)
"(g) Distributions pursuant to this Section 6.05
are permitted only upon death, disability or
a Severance from Service that constitutes a
"separation from service" within the meaning
of Code Section 401(k)(2)(B)(i)(I), except
that distributions pursuant to this Section
6.05 may also be made upon the occurrence of
any of the following events:
(i) Termination of the Plan by Cone
without establishment or
maintenance of another defined
contribution plan (other than an
employee stock ownership plan as
defined in Code Section
4975(e)(7));
(ii) The disposition by Cone of
substantially all of the assets
(within the meaning of Code Section
409(d)(2)) used by Cone in a trade
or business, but only with respect
to an employee who continues
employment with the corporation
acquiring such assets; and
(iii) The disposition by Cone of its
interest in a subsidiary (within
the meaning of Code Section
409(d)(3)), but only with respect
to an employee who continues
employment with such subsidiary;
provided that any such distribution
constitutes a "lump sum distribution" within
the meaning of Code Section 402(d)(4)
(without regard to clauses (i), (ii), (iii),
and (iv) of subparagraph (A), subparagraph
(B), or subparagraph (F) thereof) and, in
the case of the events described in clauses
(ii) and (iii) above, provided that Cone
continues to maintain the Plan after the
disposition."
(9) By deleting Plan Section 8.01(a) in its entirety and
inserting in lieu thereof the following:
<PAGE>
FORM 10-K Page 203
Exhibit 4.8(b) (continued)
"(a) Plan Fiduciaries are Cone, 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. Cone shall
appoint the Advisory Committee and any Trustee or
successor Trustees or co-Trustees and any other
Fiduciaries."
IN WITNESS WHEREOF, this Second Amendment, having been
approved by the Board of Directors of Cone Mills Corporation
at a meeting duly held on December 5, 1995, is signed by the
Vice President and Secretary of the Corporation on the 5th day
of December, 1995.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Vice President and Secretary
FORM 10-K Page 204
Exhibit 4.9(a)
FIRST AMENDMENT TO
CONE MILLS CORPORATION 1983 ESOP
(As Amended and Restated December 1, 1994)
FIRST AMENDMENT, dated May 9, 1995, to the Cone Mills
Corporation 1983 ESOP, As Amended and Restated December 1,
1994 (the "1983 ESOP").
RECITALS
A. Effective December 31, 1989, the Money-Purchase
Pension Plan component of the 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 1983 ESOP. The Stock Bonus Plan component
was appropriately amended and, from and after January 1, 1990,
has constituted the continuing 1983 ESOP.
Effective March 31, 1993, the 1983 ESOP 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.
On November 29, 1994, the Internal Revenue Service issued
Revenue Ruling 94-76, which requires that the 1983 ESOP be
amended to provide that accrued benefits attributable to the
Money-Purchase Pension Plan component of the 1983 ESOP will be
distributable only after a Member's retirement, death,
disability or severance of employment or after termination of
the 1983 ESOP.
B. The Advisory Committee has recommended that the 1983
ESOP be amended to provide for distributions to an Alternate
Payee pursuant to a Qualified Domestic Relations Order prior
to the affected Member's "earliest retirement age", as defined
in Section 414(p) of the Internal Revenue Code of 1986, as
amended.
NOW, THEREFORE, the 1983 ESOP be and hereby is amended as
follows:
(1) By adding the following sentence to Plan Section
6.04(c):
"Notwithstanding the foregoing, no
distribution shall be made pursuant to this
<PAGE>
FORM 10-K Page 205
Exhibit 4.9(a) (continued)
Section 6.04(c) after March 12, 1995, except as
expressly permitted under the provisions of Plan
Section 6.07(f)."
(2) By adding a new Plan Section 6.07(f) to read as
follows:
"(f) Notwithstanding any other term or provision of the
Plan or the Trust Agreement, this Section 6.07(f)
will apply to all distributions from the Plan
after March 12, 1995. The accrued benefits of a
Member that are attributable to the Money-Purchase
Pension Plan component of the Plan (i.e., the
Member's Money-Purchase Pension Account as of
December 31, 1989 and post-merger earnings
thereon) will be distributable only after the
Member's retirement, death, disability, or
severance of employment or after termination of
the Plan. Accordingly, no distribution from the
Plan will be made to a Member prior to the
Member's retirement, death, disability or
severance of employment or prior to termination of
the Plan, unless there is an "acceptable separate
accounting" between those accrued benefits of the
Member that are attributable to the Money-Purchase
Pension Plan component and those accrued benefits
that are attributable to the Supplemental
Retirement Plan and Stock Bonus Plan components
and unless the distribution is solely attributable
to (and accounted for as a distribution of)
accrued benefits under the Special Retirement Plan
and Stock Bonus Plan components. The acceptable
separate accounting shall include, without
limitation, allocation of post-merger gains,
losses, withdrawals, contributions, forfeitures
and other credits or charges on a reasonable and
consistent basis between accrued benefits
attributable to the Money-Purchase Pension Plan
component and the other components of the Plan.
This Section 6.07(f) is intended to comply with
the provisions of Revenue Ruling 94-76 and shall
be construed and applied as provided therein."
(3) By deleting the last three sentences of Plan Section
6.08 and inserting in lieu thereof the following (effective
May 9, 1995):
<PAGE>
FORM 10-K Page 206
Exhibit 4.9(a) (continued)
"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, even if the affected Member has not
separated from service and has not reached the
"earliest retirement age", as defined in Code
Section 414(p); provided, however, that a Qualified
Domestic Relations Order may not require the Plan to
provide any type or form of benefit or any option
not otherwise provided and may not require the Plan
to provide increased benefits. The Advisory
Committee shall establish reasonable procedures to
determine the qualified status of domestic relations
orders and to administer distributions under orders
that are determined to be Qualified Domestic
Relations Orders."
IN WITNESS WHEREOF, this First Amendment, having been
approved by the Board of Directors of Cone Mills Corporation
at a meeting duly held on May 9, 1995, is signed by the
Secretary of the Corporation on the 19th day of May, 1995.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Vice President and Secretary
FORM 10-K Page 207
Exhibit 4.9(b)
SECOND AMENDMENT TO THE
CONE MILLS CORPORATION 1983 ESOP
(As Amended and Restated December 1, 1994)
SECOND AMENDMENT, dated December 5, 1995, to the Cone
Mills Corporation 1983 ESOP, As Amended and Restated December
1, 1994 (the "Plan").
The Plan presently provides that any act required or
permitted to be taken by Cone shall be taken by the Board of
Directors. For clarification and to facilitate plan
administration, the Board of Directors desires to amend the
Plan to provide that, in general, any action required or
permitted to be taken by Cone under the Plan shall be taken by
the Board of Directors, the Executive Committee of the Board
of Directors or a committee appointed by the Board of
Directors pursuant to Plan Section 7.06 to which the authority
to take such action has been granted.
NOW, THEREFORE, the Plan be and hereby is amended,
effective January 1, 1995, as follows:
(1) By deleting Plan Section 1.11 in its entirety and
inserting in lieu thereof the following:
"Company or Cone means Cone Mills Corporation, a
North Carolina corporation, the Plan sponsor. Any
action required or permitted to be taken by Cone
under or pursuant to the Plan shall be taken by
the Board of Directors, the Executive Committee of
the Board of Directors or a committee appointed by
the Board of Directors pursuant to Plan Section
7.06 to which the authority to take such action
has been granted; provided, however, that only the
Board of Directors may amend or terminate the
Plan."
(2) By deleting Plan Section 7.01(a) in its entirety
and inserting in lieu thereof the following:
"(a) Plan Fiduciaries are Cone, each Trustee or
co-Trustee, the Advisory Committee and any
other Committee appointed pursuant to Plan
Section 7.06. Each Fiduciary shall have
only those powers, duties, responsibilities
<PAGE>
FORM 10-K Page 208
Exhibit 4.9(b) (continued)
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. Cone shall appoint the Advisory
Committee and any Trustee or successor Trustees or
co-Trustees and any other Fiduciaries."
IN WITNESS WHEREOF, this Second Amendment, having been
approved by the Board of Directors of Cone Mills Corporation
at a meeting duly held on December 5, 1995, is signed by the
Vice President and Secretary of the Corporation on the 5th day
of December, 1995.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Vice President and Secretary
FORM 10-K Page 209
Exhibit 10.1(a)
FIRST AMENDMENT TO THE
EMPLOYEES' RETIREMENT PLAN
OF
CONE MILLS CORPORATION
(As Amended and Restated December 1, 1994)
FIRST AMENDMENT, dated May 9, 1995, to the Employees'
Retirement Plan of Cone Mills Corporation, As Amended and
Restated December 1, 1994 (the "Plan").
RECITAL
The Plan presently provides that a distribution pursuant
to a Qualified Domestic Relations Order entered with respect
to a Member's Account may not be made prior to the Member's
"earliest retirement age," as defined in Section 414(p) of the
Internal Revenue Code of 1986, as amended (the "Code"). Under
Section 414(p) of the Code, an earlier distribution date is
permitted if provided for in the Plan and authorized by the
Qualified Domestic Relations Order. To facilitate plan
administration, the Pension Committee has recommended that the
Plan be amended so that a distribution pursuant to a Qualified
Domestic Relations Order may be made prior to a Member's
"earliest retirement date."
NOW, THEREFORE, the Plan be and hereby is amended,
effective May 9, 1995, by deleting the last three sentences of
Section 5.09 and inserting in lieu thereof the following:
"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, even if the affected Member has not
separated from service and has not reached the
"earliest retirement age", as defined in Code
Section 414(p); provided, however, that a Qualified
Domestic Relations Order may not require the Plan
to provide any type or form of benefit or any
option not otherwise provided and may not require
the Plan to provide increased benefits. The
Pension Committee shall establish reasonable
procedures to determine the qualified status of
domestic relations orders and to administer
distributions under orders that are determined to
be Qualified Domestic Relations Orders."
<PAGE>
FORM 10-K Page 210
Exhibit 10.1(a) (continued)
IN WITNESS WHEREOF, this First Amendment, having been
approved by the Board of Directors of Cone Mills Corporation
at a meeting duly held on May 9, 1995, is signed by the
Secretary of the Corporation on the 19 day of May, 1995.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Vice President and Secretary
FORM 10-K Page 211
Exhibit 10.1(b)
SECOND AMENDMENT TO THE
EMPLOYEES' RETIREMENT PLAN
OF
CONE MILLS CORPORATION
(As Amended and Restated December 1, 1994)
SECOND AMENDMENT, dated as of December 5, 1995, to the
Employees' Retirement Plan of Cone Mills Corporation, As
Amended and Restated December 1, 1994 (the "Plan").
RECITALS
A. The Board of Directors desires to amend the Plan
effective January 1, 1996, to implement the
provisions of the Retirement Protection Act of 1994
with respect to the determination of the present
value of a Member's Accrued Benefit and to provide
a death benefit to an active or Suspended Member
who dies with ten or more Years of Service, but
before reaching age 55 and without a Surviving
Spouse.
B. The Plan presently provides that any act required
or permitted to be taken by Cone shall be taken by
the Board of Directors. For clarification and to
facilitate plan administration, the Board of
Directors desires to amend the Plan to provide
that, in general, any action required or permitted
to be taken by Cone under the Plan shall be taken
by the Board of Directors, the Executive Committee
of the Board of Directors or a committee appointed
by the Board of Directors pursuant to Plan Section
9.06 to which the authority to take such action has
been granted.
C. The Board of Directors also desires to update and
clarify certain other provisions of the Plan and
correct certain drafting errors and thereby to
facilitate plan administration.
NOW, THEREFORE, the Plan be and hereby is amended as
follows, effective January 1, 1996:
<PAGE>
FORM 10-K Page 212
Exhibit 10.1(b) (continued)
(1) By deleting Plan Section 1.01 in its entirety and
inserting in lieu thereof the following:
"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 Sections
1.42(b), (c) or (d);
(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; and
(f) any period of service prior to
January 1, 1976 that did not
constitute accredited service
under the Plan as then in
effect."
Accredited Service shall include service
with a previous employer to the extent
determined under Section 1.18(b)."
(2) By deleting the last paragraph of Plan Section 1.02
and inserting in lieu thereof the following:
"This paragraph applies only to those Members
as of December 31, 1993, whose retirement
benefit under Article VI is affected by the
$150,000 compensation limit set forth in Code
Section 401(a)(17) and incorporated in Plan
Section 1.08(a). The frozen Accrued Benefit
for each such Member as of December 31, 1993,
shall be the pension computed as of that date
<PAGE>
FORM 10-K Page 213
Exhibit 10.1(b) (continued)
under Method 1 for purposes of Article VI or
Article VII of the Plan, and such frozen 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, the Accrued Benefit as of any date
after December 31, 1993, for any Member to whom
this paragraph applies 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."
(3) By deleting Plan Sections 1.03(c) and 1.03(d) in
their entirety and inserting in lieu thereof the
following:
"(c) The present value of an Accrued Benefit
shall be determined by using the
assumptions set forth in paragraph 1 of
Appendix A.
(d) If this Section 1.03 is amended,
then, to the extent required by Code
Section 411(d)(6), 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."
<PAGE>
FORM 10-K Page 214
Exhibit 10.1(b) (continued)
(4) By deleting Plan Section 1.13 in its entirety and
inserting in lieu thereof the following:
"Companies or Cone means Cone Mills
Corporation, a North Carolina corporation, the
Plan sponsor and its Affiliates. Any action
required or permitted to be taken by Cone
under or pursuant to the Plan shall be taken
by the Board of Directors, the Executive
Committee of the Board of Directors or a
committee appointed by the Board of Directors
pursuant to Plan Section 9.06 to which the
authority to take such action has been
granted; provided, however, that only the
Board of Directors may amend or terminate the
Plan."
(5) By deleting the first sentence of Plan Section 1.19
and inserting in lieu thereof the following:
"Employee is an individual who renders personal
services for an Employer or an Affiliate and who is
classified as an employee by the Employer or
Affiliate."
(6) By adding the following sentence to Plan Section
1.28(b): "Any period of unpaid leave under The
Family and Medical Leave Act of 1993 shall not be
treated as or counted toward a Break in Service for
purposes of vesting and eligibility to participate
in the Plan."
(7) By deleting Plan Section 4.04 in its entirety and
inserting in lieu thereof the following:
"4.04 Postponed Retirement. If a
Member continues his employment
by the Companies after age
sixty-five (65), payment of his
normal retirement benefit shall
be suspended and he shall be
given notice of the suspension
in accordance with ERISA
Section 203(a)(3)(B) and
regulations thereunder, but
such Member shall receive
credit for service because of
employment after age sixty-five
(65) and the percentages and
<PAGE>
FORM 10-K Page 215
Exhibit 10.1(b) (continued)
other factors used in determining his
benefits under 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 benefit shall be
subject to the provisions of Sections
4.06 and 5.05."
(8) By deleting Plan Sections 5.06(b) and 5.06(c) in
their entirety and inserting in lieu thereof the
following:
"(b) A Member may elect to waive the normal
form of benefit described in paragraph (a)
during the 90-day period ending on his Annuity
Starting Date; 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 earlier than 90 days and,
except as otherwise permitted by the Code
or Regulations, not later than 30 days
before his Annuity Starting Date."
<PAGE>
FORM 10-K Page 216
Exhibit 10.1(b) (continued)
(9) By rewriting Plan Section 6.01(e) to read as
follows:
"(e) If a Member who has become entitled to
Retirement benefits 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
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."
(10) By deleting Plan Section 8.01 in its entirety and
inserting in lieu thereof the following:
"8.01 Death of a Member without a Surviving Spouse.
(a) Death of Active or Suspended Member
Before Early Retirement Age:
(1) If an active or Suspended Member
with fewer than ten Years of Service
dies before reaching age 55 and does
not have a Surviving Spouse, no
benefit shall be payable under the
Plan on his behalf.
(2) If an active or Suspended Member
with ten or more Years of Service
dies before reaching age 55 and does
not have a Surviving Spouse, then
his Beneficiary shall be entitled to
120 monthly installments equal to
50% of the monthly pension to which
such Member would have been entitled
<PAGE>
FORM 10-K Page 217
Exhibit 10.1(b) (continued)
had he Separated from Service as of
the date of his death, survived to
age 55, and then elected to receive
payment of his Accrued Benefit under
Method 1 beginning as of the first
day of the next month. Payment of
the installments provided for in
this subparagraph (a)(2) shall begin
as of the first day of the month
following the month in which the
deceased Member would have attained
age 55.
(b) Death of Active or Suspended Member After
Early Retirement Age But Before Annuity
Starting Date:
If an active or Suspended Member who 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
monthly installments equal to 50% of the
monthly pension to which such Member
would have been entitled 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.
(c) Death after Termination of Employment:
(1) Except as provided in subparagraph
(c)(2) below, if a Member's
employment terminates before he has
met the age and service requirements
for Early Retirement under Section
4.02 and the Member dies before his
Annuity Starting Date without a
Surviving Spouse, no benefits shall
be payable under the Plan on his
behalf.
(2) If a Member's employment is
involuntarily terminated and he is
entitled to benefits under Section
7.04, and if such Member survives
<PAGE>
FORM 10-K Page 218
Exhibit 10.1(b) (continued)
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 monthly 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 the present value of any benefit
payable under Section 8.01(a)(2), Section
8.01(b) or Section 8.01(c)(2) does not
exceed $3,500, the Pension Committee
shall direct the immediate distribution
of such amount to the Beneficiary.
(e) 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."
(11) By deleting the last two paragraphs of Plan Section
8.03(b) and inserting in lieu thereof the
following:
"Unless the Spouse elects a later
starting date, the preretirement spousal
death benefit under this Section 8.03(b)
shall commence as of the first day of the
first month in which 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.
Notwithstanding the foregoing, if the
present value of the preretirement
spousal death benefit provided for in
this Section 8.03(b) does not exceed
<PAGE>
FORM 10-K Page 219
Exhibit 10.1(b) (continued)
$3,500, the Pension Committee shall direct the
immediate distribution of such amount to the
Spouse."
(12) By deleting Plan Section 9.01(a) in its entirety
and inserting in lieu thereof the following:
"(a) Plan Fiduciaries are Cone, each Trustee
or co-Trustee, the Pension Committee and
any other Committee appointed pursuant to
Plan Section 9.06. 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. Cone shall appoint the Pension
Committee and any Trustee or successor
Trustees or co-Trustees and any other
Fiduciaries."
(13) By deleting the heading and the first sentence of
Plan Section 9.06 and inserting in lieu thereof the
following:
"9.06" Pension Committee and Other
Committees. The Board of
Directors shall appoint a
Pension 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."
(14) By deleting paragraph 1 of Appendix A and inserting
in lieu thereof the following:
"1. Lump Sums - for purposes of
determining single lump sums
pursuant to Sections 7.02 and
8.03 of the Plan:
(a) Mortality: The "applicable
mortality table", which shall
mean the table prescribed under
<PAGE>
FORM 10-K Page 220
Exhibit 10.1(b) (continued)
Code Section 417(e)(3) as in effect on
the first day of the Plan Year of
distribution.
(b) Interest: The "applicable interest
rate", which shall mean the annual
rate of interest on 30-year Treasury
securities for the month of November
of the calendar year preceding
distribution.
Factors for computations under this
paragraph shall be redetermined
annually and set forth in tables
provided by the Actuary."
IN WITNESS WHEREOF, this Second Amendment, having been
authorized by the Board of Directors of Cone Mills Corporation
at a meeting duly held on December 5, 1995, is signed by the
Vice President and Secretary of the Corporation on the 19 day
of January, 1996.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Vice President and Secretary
FORM 10-K Page 221
Exhibit 10.2
CONE MILLS CORPORATION SERP
(As Amended and Restated December 5, 1995)
RECITALS
WHEREAS, Cone Mills Corporation (the "Corporation") has
heretofore adopted the Employees' Retirement Plan of Cone
Mills Corporation (the "Basic Plan"); and
WHEREAS, effective from and after January 1, 1989,
Section 401(a)(17) of the Internal Revenue Code of 1986, as
amended (the "Code"), limits the annual compensation that may
be taken into account under the Basic Plan for each employee
(such limitation, as in effect from and after January 1, 1989,
to the date hereof and as hereafter modified or amended from
time to time, is hereinafter referred to as the "Compensation
Limitation"); and
WHEREAS, by plan document dated as of February 23, 1989,
the Corporation adopted the Cone Mills Corporation SERP (the
"Plan") so that certain executives of Cone Mills Corporation
retiring under the Basic Plan (and their beneficiaries) would
receive retirement benefits under the Plan that, when
aggregated with the retirement benefits payable under the
Basic Plan, would equal those benefits that would have been
payable under the Basic Plan if the Compensation Limitation
did not apply to the Basic Plan; and
WHEREAS, on December 5, 1995, the Board of Directors of
the Corporation approved an amendment to the Plan pursuant to
which executives who terminate employment on or after January
1, 1996, with ten or more Years of Service under the Basic
Plan but who do not qualify for Retirement under Section 4
thereof will be eligible to participate in the Plan; and
WHEREAS, the Corporation desires to amend and restate the
Plan as of December 5, 1995;
NOW, THEREFORE, the Corporation hereby adopts this
Amended and Restated SERP, the terms and conditions of which
are as follows:
1. Name of Plan. As amended and restated herein, the
Plan shall continue to be known as the Cone Mills Corporation
SERP.
<PAGE>
FORM 10-K Page 222
Exhibit 10.2 (continued)
2. Purpose of Plan. The purpose of this Plan is to
provide the participants herein with retirement benefits that,
when aggregated with the retirement benefits payable under the
Basic Plan, will provide total benefits equal to those that
would be payable under the Basic Plan if the Compensation
Limitation did not apply to the Basic Plan. The Plan is
intended to be a plan which is unfunded and maintained
primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated
employees and, as such, exempt from the participation and
vesting, funding, and fiduciary responsibility provisions of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), by reason of Sections 201(2), 301(a)(3),
and 401(a)(1) thereof.
3. Definitions. All capitalized terms used herein that
are defined in the Basic Plan and not otherwise defined herein
shall have the meaning specified in the Basic Plan, except
that, for purposes of this Plan, Offset Value (as defined in
the Basic Plan) shall be disregarded in determining a Member's
Accrued Benefit under the Basic Plan, and Beneficiary shall
include a Member's Spouse if the Spouse is entitled to receive
benefits pursuant to Section 8 of the Basic Plan after the
Member's death.
4. Participation. Subject to paragraph 7 below, if any
Member of the Basic Plan has retired or shall retire from any
of the Companies in accordance with Section 4 of the Basic
Plan or shall die while an active Member in the Basic Plan or
shall otherwise terminate employment after completing 10 or
more Years of Service but without qualifying for Retirement
under Section 4 of the Basic Plan, and if the Compensation
Limitation reduces the benefits otherwise payable under the
Basic Plan to such Member and/or his Beneficiary (determined
without regard to any limitations imposed by Section 415 of
the Code), such Member and/or his Beneficiary shall be
entitled to participate in this Plan. No Member or his
Beneficiary shall be entitled to benefits hereunder unless
such Member (a) has retired and qualified for Normal
Retirement, Early Retirement, or Postponed Retirement under
Section 4 of the Basic Plan or (b) has died while an active
Member in the Basic Plan and qualified for death benefits
under Section 8 thereof or (c) has otherwise terminated
employment on or after January 1, 1996, with 10 or more Years
of Service but without qualifying for Retirement under Section
4 of the Basic Plan.
<PAGE>
FORM 10-K Page 223
Exhibit 10.2 (continued)
5. SERP Benefit. Any Member who is entitled to
participate in this Plan in accordance with paragraph 4 above,
and the Beneficiary of any such Member, shall be entitled to
a monthly benefit, payable by the Corporation, at the same
time and in the same manner as the monthly benefit payable to
such Member or his Beneficiary under the Basic Plan, in an
amount equal to the excess of:
(a) The amount of the monthly benefit (determined
without regard to any limitations imposed by Section 415 of
the Code) that would be payable to such Member or his
Beneficiary under the Basic Plan if the Compensation
Limitation did not apply to the Basic Plan (except that
Section 7.04 of the Basic Plan shall be disregarded in
determining the amount of the monthly benefit that would be
payable to the Member or his Beneficiary); over
(b) The amount of the monthly benefit that would be
payable to such Member or his Beneficiary under the Basic
Plan after applying the Compensation Limitation and after
giving effect to Section 7.04 of the Basic Plan (but without
regard to any limitations imposed by Section 415 of the
Code).
In the case of a death benefit under the Basic Plan that is
converted to a lump sum payment, the excess benefit payable to
the Beneficiary under this Plan shall be a lump sum payment
determined by applying the Basic Plan rules and calculating a
lump sum death benefit under the Basic Plan as if the
Compensation Limitation did not apply (and without regard to
any limitations imposed by Section 415 of the Code) and
subtracting therefrom the amount of the lump sum death benefit
that would be payable under the Basic Plan after applying the
Compensation Limitation (but without regard to any limitations
imposed by Section 415 of the Code).
6. Determinations by Corporation. Any determination in
good faith by the Corporation, including any determination by
the Pension Committee under the Basic Plan, as to the amount
of benefits payable hereunder to any Member or Beneficiary
shall be final and binding for purposes of this Plan.
7. Forfeiture of Benefits.
(a) If a Member's employment with any of the Companies
is terminated for cause or if he is retired for cause, then
neither the Member nor his Beneficiary shall be entitled to
<PAGE>
FORM 10-K Page 224
Exhibit 10.2 (continued)
receive benefits under this Plan. For purposes of this
paragraph 7(a), termination for cause shall mean (i)
termination due to the Member's committing fraud,
misappropriation or embezzlement in the performance of his
duties as an employee or (ii) termination due to the Member's
committing any felony for which he is convicted and which, as
determined in good faith by the Board of Directors of the
Corporation, constitutes a crime involving moral turpitude and
results in material harm to the Corporation.
(b) If at any time while benefits are payable under
this Plan, a Member entitled to such benefits shall, directly
or indirectly, own any interest in, manage, operate, control,
be employed by, render advisory services to, represent, or
participate in or be connected with the management or control
of, any business which is then in competition with the
Corporation or any of its subsidiaries, the Corporation shall
have the right to terminate payment of any benefits that would
otherwise be payable hereunder to such Member or his
Beneficiary from and after the date of such Member's violation
of the conditions of this paragraph 7(b); provided, however,
that any Member may own, directly or indirectly, solely as an
investment, securities of any corporation traded on a national
securities exchange if such Member is not a controlling person
of, or a member of a group which controls, such corporation,
does not, directly or indirectly, own more than one percent of
any class of securities of such corporation and does not
otherwise violate the conditions of this paragraph 7(b). The
Board of Directors may waive in writing the Corporation's
right to terminate payment of benefits under this Plan in the
event of a violation of this paragraph 7(b).
8. Termination.
(a) The Corporation reserves the right to terminate
this Plan at any time; provided, however, that in the event of
termination, each Member who had theretofore retired under
Section 4 of the Basic Plan or who had died while an active
Member in the Plan or who had otherwise terminated employment
with 10 or more Years of Service, and the Beneficiary of each
such Member, shall receive the benefits provided hereunder and
provided further that each Member who is then eligible for
Early Retirement, Normal Retirement or Postponed Retirement
under Section 4 of the Basic Plan or who has then completed 10
or more Years of Service shall have an accrued benefit under
this Plan equal to the excess of:
<PAGE>
FORM 10-K Page 225
Exhibit 10.2 (continued)
(i) The amount that his Accrued Benefit under the
Basic Plan (determined without regard to any limitations
imposed by Section 415 of the Code) would have been if he
had actually retired or, if not eligible for Retirement,
voluntarily terminated employment on the date of termination
of this Plan and if the Compensation Limitation did not
apply to the Basic Plan; over
(ii) The amount that his Accrued Benefit under the
Basic Plan would have been, after applying the Compensation
Limitation (but without regard to any limitations imposed by
Section 415 of the Code), if he had actually retired or, if
not eligible for Retirement, voluntarily terminated
employment on the date of termination of this Plan.
The accrued benefit of each such Member under this Plan (or
the Actuarial Equivalent thereof) shall be payable by the
Corporation to the Member and/or his Beneficiary at the same
time, in the same manner, and at the same rate or percentage
as the retirement benefit payable to such Member or his
Beneficiary under the Basic Plan. The accrued benefit of a
Member under this Plan upon its termination shall be
determined by independent actuaries retained by the
Corporation.
(b) This Plan shall automatically terminate upon any
termination of the Basic Plan and the provisions of paragraph
8(a) above shall apply; provided, however, that if amounts
paid to any Member or his Beneficiary under the Basic Plan and
the Corporation's 1983 ESOP are less than the Accrued Benefit
(or Actuarial Equivalent thereof) of the Member under the
Basic Plan, then any amounts otherwise payable in accordance
with paragraph 8(a) above to any Member and/or his Beneficiary
under this Plan shall be paid in the same proportion as the
benefits payable under the Basic Plan and the Corporation's
1983 ESOP to such Member or Beneficiary bear to the Accrued
Benefit (or Actuarial Equivalent thereof) of the Member or
Beneficiary under the Basic Plan.
(c) Members of the Basic Plan on the date of
termination of this Plan or the Basic Plan who are not then
eligible for Early Retirement, Normal Retirement or Postponed
Retirement under Section 4 of the Basic Plan or who have not
then completed 10 or more Years of Service shall have no
accrued benefit under this Plan, and the Corporation shall
have no obligation hereunder to such Members or their
Beneficiaries.
<PAGE>
FORM 10-K Page 226
Exhibit 10.2 (continued)
9. No Funding of Plan. This Plan shall be "unfunded"
within the meaning of ERISA. All benefits payable hereunder
shall be paid by the Corporation out of its general assets.
To the extent that any Member or Beneficiary acquires the
right to receive payments from the Corporation hereunder, such
right shall be no greater than the right of any unsecured
general creditor of the Corporation. The Corporation shall
have no obligation to establish any fund or to purchase any
annuity or other contract to provide the amounts payable
hereunder, and, except as otherwise expressly provided by
written instrument, if any such fund is established or any
such contract purchased, it shall be the sole property of the
Corporation and no Member or Beneficiary shall have any rights
therein.
10. No Assignment. No right or benefit under this Plan
shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance, or charge by any Member or
his Beneficiary, and any attempt to anticipate, alienate,
sell, assign, pledge, encumber, or charge any right or benefit
under this Plan shall be void.
11. Binding Effect. This Plan shall constitute a binding
obligation of the Corporation and its successors and assigns
to each Member and Beneficiary entitled to benefits in
accordance with the terms and conditions hereof. As used
herein, the term "successor" shall include any person, firm,
corporation or other business entity that, whether by merger,
purchase or otherwise, acquires all or substantially all of
the assets or business of the Corporation. This Plan has been
adopted by the Corporation in consideration of past and
anticipated future services of its employees.
12. Construction. This Plan shall be governed by and
construed in accordance with the laws and judicial decisions
of the State of North Carolina. As used herein, the masculine
gender shall include the feminine, as appropriate.
13. Coordination. This Plan shall be coordinated with the
Excess Benefit Plan of Cone Mills Corporation so that the
total retirement benefits payable to a participant in the
Basic Plan, the Excess Benefit Plan and this Plan equal the
benefits that would have been payable to such participant
under the Basic Plan if neither the Compensation Limitation
nor any limitations imposed by Section 415 of the Code applied
to the Basic Plan and if Section 7.04 of the Basic Plan were
disregarded.
<PAGE>
FORM 10-K Page 227
Exhibit 10.2 (continued)
IN WITNESS WHEREOF, the Corporation has caused this Plan to
be executed as of December 5, 1995.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Vice President and Secretary
FORM 10-K Page 228
Exhibit 10.3
EXCESS BENEFIT PLAN
OF
CONE MILLS CORPORATION
(As Amended and Restated as of December 5, 1995)
RECITALS
WHEREAS, Cone Mills Corporation (the "Corporation") has
heretofore adopted the Employees' Retirement Plan of Cone
Mills Corporation (the "Basic Plan"); and
WHEREAS, Section 415 of the Internal Revenue Code of
1986, as amended (the "Code"), imposes certain limitations
(such limitations, as now existing and as hereafter modified
or amended from time to time, are hereinafter referred to as
the "Section 415 Limitations") on benefits payable under the
Basic Plan and under the other retirement plans of the
Corporation that are qualified under Section 401(a) of the
Code (the "Other Qualified Plans"); and
WHEREAS, the Other Qualified Plans provide that, in the
case of an employee of the Corporation who is a participant in
both the Basic Plan and the Other Qualified Plans, the Section
415 Limitations shall be applied first to the Basic Plan so
that any required reduction in benefit accruals will occur in
the Basic Plan and not in the Other Qualified Plans; and
WHEREAS, by plan document dated as of August 2, 1983, the
Corporation established the Supplemental Executive Retirement
Plan of Cone Mills Corporation (hereinafter the "Supplemental
Executive Plan") so that certain executives of Cone Mills
Corporation retiring under the Basic Plan (and their
beneficiaries) would receive retirement benefits under the
Supplemental Executive Plan that, when aggregated with the
retirement benefits payable under the Basic Plan, would equal
those benefits that would have been payable under the Basic
Plan if the Section 415 Limitations did not apply to the Basic
Plan and the Other Qualified Plans; and
<PAGE>
FORM 10-K Page 229
Exhibit 10.3 (continued)
WHEREAS, by plan document dated as of February 23, 1989,
the Supplemental Executive Plan was amended and restated as
provided therein and was renamed the Excess Benefit Plan of
Cone Mills Corporation (the "Excess Benefit Plan"); and
WHEREAS, on December 5, 1995, the Board of Directors of
the Corporation approved an amendment to the Excess Benefit
Plan pursuant to which executives who terminate employment on
or after January 1, 1996, with 10 or more Years of Service
under the Basic Plan but who do not qualify for Retirement
under Section 4 thereof will be eligible to participate in the
Excess Benefit Plan; and
WHEREAS, the Corporation desires to amend and restate the
Excess Benefit Plan as of December 5, 1995.
NOW, THEREFORE, the Corporation hereby adopts this
Amended and Restated Excess Benefit Plan, the terms and
conditions of which are as follows:
1. Name of Plan. As amended and restated herein, the
Plan shall continue to be known as the Excess Benefit Plan of
Cone Mills Corporation.
2. Purpose of Plan. The purpose of this Excess Benefit
Plan is to provide the participants herein with retirement
benefits that, when aggregated with the retirement benefits
payable under the Basic Plan, will provide total benefits
equal to those that would be payable under the Basic Plan if
the Section 415 Limitations did not apply to the Basic Plan
and the Other Qualified Plans. The Plan is intended to be an
"excess benefit plan" within the meaning of Section 3(36) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and, as such, exempt from the provisions of
ERISA by reason of Section 4(b)(5) thereof.
3. Definitions. All capitalized terms used herein that
are defined in the Basic Plan and not otherwise defined herein
shall have the meaning specified in the Basic Plan, except
that, for purposes of this Plan, Offset Value (as defined in
the Basic Plan) shall be disregarded in determining a Member's
Accrued Benefit under the Basic Plan, and Beneficiary shall
include a Member's Spouse if the Spouse is entitled to receive
benefits pursuant to Section 8 of the Basic Plan after the
Member's death.
<PAGE>
FORM 10-K Page 230
Exhibit 10.3 (continued)
4. Participation. Subject to paragraph 7 below, if any
Member of the Basic Plan has retired or shall retire from any
of the Companies in accordance with Section 4 of the Basic
Plan or shall die while an active Member in the Basic Plan or
shall otherwise terminate employment after completing 10 or
more Years of Service but without qualifying for Retirement
under Section 4 of the Basic Plan, and if the Section 415
Limitations applicable to the Basic Plan and the Other
Qualified Plans reduce the benefits otherwise payable under
the Basic Plan to such Member and/or his Beneficiary, such
Member and/or his Beneficiary shall be entitled to participate
in this Excess Benefit Plan. No Member or his Beneficiary
shall be entitled to benefits hereunder unless such Member (a)
has retired and qualified for Normal Retirement, Early
Retirement, or Postponed Retirement under Section 4 of the
Basic Plan or (b) has died while an active Member in the Basic
Plan and qualified for death benefits under Section 8 thereof
or (c) has otherwise terminated employment on or after January
1, 1996, with 10 or more Years of Service but without
qualifying for Retirement under Section 4 of the Basic Plan.
5. Excess Benefit. Any Member who is entitled to
participate in this Excess Benefit Plan in accordance with
paragraph 4 above, and the Beneficiary of any such Member,
shall be entitled to a monthly benefit, payable by the
Corporation, at the same time and in the same manner as the
monthly benefit payable to such Member or his Beneficiary
under the Basic Plan, in an amount equal to the excess of:
(a) The amount of the monthly benefit that
would be payable to such Member or his Beneficiary
under the Basic Plan if the Section 415 Limitations
did not apply to the Basic Plan and the Other
Qualified Plans (except that Section 7.04 of the
Basic Plan shall be disregarded in determining the
amount of the monthly benefit that would be payable
to the Member or his Beneficiary); over
(b) The amount of the monthly benefit actually
payable to such Member or his Beneficiary under the
Basic Plan after applying the Section 415
Limitations in accordance with the terms and
provisions of the Basic Plan and the Other Qualified
Plans (and after giving effect to Section 7.04 of
the Basic Plan).
<PAGE>
FORM 10-K Page 231
Exhibit 10.3 (continued)
In the case of a death benefit under the Basic Plan that is
converted to a lump sum payment, the excess benefit payable to
the Beneficiary under this Plan shall be a lump sum payment
determined by applying the Basic Plan rules and calculating a
lump sum death benefit under the Basic Plan as if the Section
415 Limitations did not apply and subtracting therefrom the
amount of the lump sum death benefit payable under the Basic
Plan after applying the Section 415 Limitations.
6. Determinations by Corporation. Any determination in
good faith by the Corporation, including any determination by
the Pension Committee under the Basic Plan, as to the amount
of benefits payable hereunder to any Member or Beneficiary
shall be final and binding for purposes of this Plan.
7. Forfeiture of Benefits.
(a) If a Member's employment with any of the Companies
is terminated for cause or if he is retired for cause, then
neither the Member nor his Beneficiary shall be entitled to
receive benefits under this Excess Benefit Plan. For purposes
of this paragraph 7(a), termination for cause shall mean (i)
termination due to the Member's committing fraud,
misappropriation or embezzlement in the performance of his
duties as an employee or (ii) termination due to the Member's
committing any felony for which he is convicted and which, as
determined in good faith by the Board of Directors of the
Corporation, constitutes a crime involving moral turpitude and
results in material harm to the Corporation.
(b) If at any time while benefits are payable under
this Excess Benefit Plan, a Member entitled to such benefits
shall, directly or indirectly, own any interest in, manage,
operate, control, be employed by, render advisory services to,
represent, or participate in or be connected with the
management or control of, any business which is then in
competition with the Corporation or any of its subsidiaries,
the Corporation shall have the right to terminate payment of
any benefits that would otherwise be payable hereunder to such
Member or his Beneficiary from and after the date of such
Member's violation of the conditions of this paragraph 7(b);
provided, however, that any Member may own, directly or
indirectly, solely as an investment, securities of any
corporation traded on a national securities exchange if such
<PAGE>
FORM 10-K Page 232
Exhibit 10.3 (continued)
Member is not a controlling person of, or a member of a group
which controls, such corporation, does not, directly or
indirectly, own more than one percent of any class of
securities of such corporation and does not otherwise violate
the conditions of this paragraph 7(b). The Board of Directors
may waive in writing the Corporation's right to terminate
payment of benefits under this Plan in the event of a
violation of this paragraph 7(b).
8. Termination.
(a) The Corporation reserves the right to terminate
this Excess Benefit Plan at any time; provided, however, that
in the event of termination, each Member who had theretofore
retired under Section 4 of the Basic Plan or who had died
while an active Member in the Plan or who had otherwise
terminated employment with 10 or more Years of Service, and
the Beneficiary of each such Member, shall receive the
benefits provided hereunder and provided further that each
Member who is then eligible for Early Retirement, Normal
Retirement or Postponed Retirement under Section 4 of the
Basic Plan or who has then completed 10 or more Years of
Service shall have an accrued benefit under this Plan equal to
the excess of:
(i) The amount that his Accrued Benefit under
the Basic Plan would have been if he had actually
retired or, if not eligible for Retirement,
voluntarily terminated employment on the date of
termination of this Plan and if the Section 415
Limitations did not apply to the Basic Plan and the
Other Qualified Plans; over
(ii) The amount that his Accrued Benefit under
the Basic Plan would have been, after applying the
Section 415 Limitations in accordance with the
terms and provisions of the Basic Plan and the
Other Qualified Plans, if he had actually retired
or, if not eligible for Retirement, voluntarily
terminated employment on the date of termination of
this Plan.
The accrued benefit of each such Member under this Plan (or
the Actuarial Equivalent thereof) shall be payable by the
Corporation to the Member and/or his Beneficiary at the same
time, in the same manner, and at the same rate or percentage,
as the retirement benefit payable to such Member
<PAGE>
FORM 10-K Page 233
Exhibit 10.3 (continued)
or his Beneficiary under the Basic Plan. The accrued benefit
of a Member under this Plan upon its termination shall be
determined by independent actuaries retained by the
Corporation.
(b) This Excess Benefit Plan shall automatically
terminate upon any termination of the Basic Plan and the
provisions of paragraph 8(a) above shall apply; provided,
however, that if amounts paid to any Member or his Beneficiary
under the Basic Plan and the Corporation's 1983 ESOP are less
than the Accrued Benefit (or Actuarial Equivalent thereof) of
the Member under the Basic Plan, then any amounts otherwise
payable in accordance with paragraph 8(a) above to any Member
and/or his
Beneficiary under this Plan shall be paid in the same
proportion as the benefits payable under the Basic Plan and
the Corporation's 1983 ESOP to such Member and/or his
Beneficiary bear to the Accrued Benefit (or Actuarial
Equivalent thereof) of the Member or Beneficiary under the
Basic Plan.
(c) Members of the Basic Plan on the date of
termination of this Plan or the Basic Plan who are not then
eligible for Early Retirement, Normal Retirement or Postponed
Retirement under Section 4 of the Basic Plan or who have not
then completed 10 or more Years of Service shall have no
accrued benefit under this Excess Benefit Plan, and the
Corporation shall have no obligation hereunder to such Members
or their Beneficiaries.
9. No Funding of Plan. This Excess Benefit Plan shall be
"unfunded" within the meaning of Section 4(b)(5) of ERISA.
All benefits payable hereunder shall be paid by the
Corporation out of its general assets. To the extent that any
Member or Beneficiary acquires the right to receive payments
from the Corporation hereunder, such right shall be no greater
than the right of any unsecured general creditor of the
Corporation. The Corporation shall have no obligation to
establish any fund or to purchase any annuity or other
contract to provide the amounts payable hereunder, and, except
as otherwise expressly provided by written instrument, if any
such fund is established or any such contract purchased, it
shall be the sole property of the Corporation and no Member or
Beneficiary shall have any rights therein.
<PAGE>
FORM 10-K Page 234
Exhibit 10.3 (continued)
10. No Assignment. No right or benefit under this Excess
Benefit Plan shall be subject to anticipation, alienation,
sale, assignment, pledge, encumbrance, or charge by any Member
or his Beneficiary, and any attempt to anticipate, alienate,
sell, assign, pledge, encumber, or charge any right or benefit
under this Plan shall be void.
11. Binding Effect. This Excess Benefit Plan shall
constitute a binding obligation of the Corporation and its
successors and assigns to each Member and Beneficiary entitled
to benefits in accordance with the terms and conditions
hereof. As used herein, the term "successor" shall include
any person, firm, corporation or other business entity that,
whether by merger, purchase or otherwise, acquires all or
substantially all of the assets or business of the
Corporation. This Plan has been adopted by the Corporation in
consideration of past and anticipated future services of its
employees.
12. Construction. This Plan shall be governed by and
construed in accordance with the laws and judicial decisions
of the State of North Carolina. As used herein, the masculine
gender shall include the feminine, as appropriate.
13. Coordination. This Excess Benefit Plan shall be
coordinated with the Cone Mills Corporation SERP so that the
total retirement benefits payable to a participant in the
Basic Plan, the SERP and this Plan equal the benefits that
would have been payable to such participant under the Basic
Plan if the Section 415 Limitations did not apply to the Basic
Plan and the Other Qualified Plans, if there were no
limitation on the amount of annual compensation taken into
account under the Basic Plan and if Section 7.04 of the Basic
Plan were disregarded.
IN WITNESS WHEREOF, the Corporation has caused this Excess
Benefit Plan to be executed as of December 5, 1995.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Vice President and Secretary
FORM 10-K Page 235
Exhibit 10.12
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated December 5, 1995, 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, 1994, and
1995 pursuant to Consulting Agreements dated November 19, 1992,
December 3, 1993, and November 10, 1994, respectively. The
Company and Trogdon have agreed to continue the consulting
arrangement during the period beginning January 1, 1996, and
ending December 31, 1996 (the "Consulting Period").
NOW, THEREFORE, Trogdon and the Company agree as follows:
1. Consulting Services. Subject to the terms and
provisions of this Agreement, the Company hereby
engages Trogdon to perform consulting services during
the Consulting Period. Trogdon hereby accepts such
engagement and agrees to render such consulting
services pertaining to the business of the Company as
the Chief Executive Officer of Cone shall request
from time to time during the Consulting Period.
2. Fees. During the Consulting Period, the Company
shall pay to Trogdon a consulting fee of $15,000 per
calendar quarter (payable on March 31, 1996, June 30,
1996, September 30, 1996, and December 31, 1996) and,
in addition, shall reimburse Trogdon for any travel
and entertainment expenses reasonably incurred by him
in connection with rendering consulting services
hereunder upon submission of appropriate
documentation therefor.
<PAGE>
FORM 10-K Page 236
Exhibit 10.12 (continued)
3. Independent Contractor. During the Consulting
Period, Trogdon shall be an independent contractor
and not an employee of the Company. Accordingly,
Trogdon shall determine when, where and how the
consulting services required of him under this
Agreement will be performed, shall be responsible for
the payment of all employment, income and other taxes
payable by reason of his receipt of consulting fees
under this Agreement, and shall not be eligible to
participate in any pension, profit sharing, health,
disability, life, or other employee benefit plan or
program maintained by the Company.
4. Termination by Death. If Trogdon dies during the
Consulting Period, this Agreement shall thereupon
terminate, but the Company shall pay to Trogdon's
estate all consulting fees and unremibursed expenses
to which he would otherwise have been entitled under
this Agreement through the end of the Consulting
Period.
5. Entire Contract. This Agreement constitutes the
entire contract and agreement of the parties and
supersedes and replaces all other prior agreements
and understandings, both written and oral, with
respect to the performance of personal services by
Trogdon for the Company during the Consulting Period.
6. Miscellaneous. This Agreement may not be amended or
modified except by an instrument in writing signed by
the party against whom any such modification or
amendment is sought to be enforced. No wavier 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.
By: /s/Dewey L. Trogdon
Title: Chairman of the Board
CONE MILLS CORPORATION
By: /s/ J. Patrick Danahy
Title: President & CEO
FORM 10-K Page 237
Exhibit 13
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 the general business cycle, domestic cotton costs, changes in consumer
fashion preferences for printed fabrics and strategic changes in the Company's
business and capital structure.
In 1993 through mid-1995, Cone benefited from favorable general economic
conditions. Apparel fabric markets were 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 and first half 1995 apparel fabric operations experienced growth. Following
several years of strong demand, consumer preferences for home furnishing fabrics
began to shift from prints during 1994. In mid-1995, U.S. retail apparel and
home furnishings markets became very weak which caused a sharp decline in orders
for Cone's specialty sportswear and decorative print fabrics as retailers
adjusted their inventories. These weak markets are continuing into 1996 and
there is some current softening in denim demand as excess inventories of
garments in the mass market channels of distribution are liquidated.
Management believes that the most significant factor affecting operating
margins during the 1993 thru 1995 period was the increasing price of cotton, the
Company's principal raw material. World cotton prices began to rise in late 1993
and throughout 1994 and 1995, primarily as a result of cotton crop declines in
Pakistan, India and China in 1993 and 1994, and the United States in 1995.
Weather, disease and insects accounted for the declines.
(Mill Delivered Prices of Cotton - Memphis Territory Chart appears here)
<TABLE>
<CAPTION>
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jan 77.87 68.84 65.78 62.95 67.71 62.75 68.74 79.39 58.58 63.63 72.68 92.37
Feb 78.15 67.05 67.36 90.13 65.06 61.75 71.48 86.78 55.51 64.21 79.78 96.67
Mar 82.08 68.67 69.63 60.61 66.49 65.01 74.61 88.06 56.98 65.51 79.57 108.41
Apr 82.65 70.58 70.28 64.25 67.61 66.69 77.53 89.97 60.84 64.64 81.51 110.50
May 86.81 67.76 71.40 72.50 69.85 70.27 81.74 95.87 60.63 64.64 85.42 112.84
Jun 84.17 65.73 71.92 72.38 72.17 71.34 86.77 90.74 62.39 62.68 82.48 118.24
Jul 75.08 65.30 73.74 79.66 66.26 75.36 86.62 81.25 67.38 62.73 74.94 101.93
Aug 69.70 63.52 34.29 82.94 60.70 77.97 84.12 75.52 64.31 59.91 74.10 89.74
Sep 67.47 62.43 42.48 78.52 55.00 75.31 77.51 71.63 60.68 57.78 74.48 96.00
Oct 67.39 63.03 49.83 70.98 57.87 76.64 76.35 65.75 57.06 58.81 71.81 89.11
Nov 67.80 64.00 52.47 70.18 59.26 75.40 76.62 61.47 60.22 59.42 75.44 88.23
Dec 68.50 63.83 59.23 69.27 61.81 71.06 77.96 60.93 61.41 60.88 85.54 86.99
AVG 75.64 65.90 60.70 73.36 64.15 70.80 78.34 78.95 60.50 62.07 78.15 99.25
Y/Y% -12.9% -7.9% 20.9% -12.6% 10.4% 10.7% 0.8% -23.4% 2.6% 25.9% 27.0%
</TABLE>
Consequently, mill-delivered cotton prices per pound for the industry
rose from the lower $.60s in 1993 to the upper $.70s in 1994 and into the $.90s
during 1995.
The Company has purchased cotton from suppliers at fixed prices for
delivery throughout 1996 and expects 1996 average cotton costs to be
approximately at 1995 levels. Although these fixed prices compare favorably with
those of the present spot market, the significant increase in the price of
cotton will continue to unfavorably impact profit margins in 1996 as compared
with 1993 and 1994 results. While the Company was unable to increase prices
in its major product lines during 1994 and early 1995, price increases in the
range of 6%-8% were effected during the second half of 1995.
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 North American markets
more efficiently and effectively through the purchase of a 20% equity ownership
interest in Compania Industrial de Parras, S.A. ("CIPSA") and the formation of a
joint venture with CIPSA to construct and operate a world-class denim plant in
Mexico. The joint venture partners have invested approximately $60 million in
equity in the venture, with each partner providing one-half of the investment.
The joint venture also obtained a Mexican bank credit facility not guaranteed by
Cone or by CIPSA. The joint venture plant began production in the fourth quarter
of 1995.
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.
12
<PAGE>
Exhibit 13 (continued) Page 238
Operations and Financial Condition
In 1995, the Company 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. A new jacquard fabric plant was constructed in 1995 and
began operation late in the year. Both the jacquard plant and Greeff are part of
the Cone Decorative Fabrics Division.
Pursuant to a December 1995 agreement, in January 1996 the Company sold
1.5 million shares of CIPSA, approximately 10% of its holdings, for $.8 million.
Based upon the reduction in its ownership to 18%, and certain other factors, the
Company will account for its investment in CIPSA by the cost method in future
periods.
In the first quarter of 1996, the Company completed the sale of its
Olympic Products Division to British Vita PLC. Proceeds will be realized in
excess of $50 million associated with the sale of fixed assets and inventories
and the liquidation of receivables. As a result of this sale, the Company
expects a first quarter gain of more than $.10 per share. This strategic action
was taken to allow the Company to focus on its core strengths.
As part of its strategy to maintain modern manufacturing facilities through
reinvestment, the Company made significant capital expenditures of $137.9
million from 1993 through 1995, including $14.6 million for the jacquard plant,
and plans to spend approximately $52 million in 1996. In addition, the Company
has set priorities for the use of cash flow and debt capacity. Cone's first
priority is investment in international denim manufacturing and marketing
opportunities. Cone's second priority is acquisitions in related home
furnishings product lines. The Company 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.
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 March 22, 1996, 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. No
repurchases have been made since January 1995.
Segment Information
Cone operates in two principal business segments, apparel fabrics and home
furnishings products. The following table sets forth for years 1995, 1994 and
1993 certain net sales and operating income (loss) information regarding these
segments as well as net sales of the principal product groups.
(DOLLAR AMOUNTS IN MILLIONS)
Net Sales 1995 1994 1993
Apparel
Denim $552.0 60.6% $423.5 52.5% $421.8 54.9
Specialty Sportswear 148.1 16.3 177.0 22.0 154.0 20.0
Total 700.1 76.9 600.5 74.5 575.8 74.9
Home Furnishings
Fabrics 98.4 10.8 93.7 11.6 94.4 12.3
Foam Products 1 94.7 10.4 93.9 11.6 84.6 11.0
Real Estate and other 17.0 1.9 18.1 2.3 14.4 1.8
Total 210.1 23.1 205.7 25.5 193.4 25.1
Total Net Sales $910.2 100.0% $806.2 100.0% $769.2 100.0%
Operating Income (Loss) 2
Apparel $ 39.9 5.7% $ 47.5 7.9% $ 68.8 12.0%
Home Furnishings (.6) (.3) 19.0 9.2 19.5 10.1
1 Foam Products represents the Olympic Products Division was sold in January
1996.
2 Operating income (loss) excludes general corporate expenses. Percentages
reflect operating income (loss) as a percentage of segment net sales.
13
<PAGE>
Exhibit 13 (continued) Page 239
Management's Discussion and Analysis of Results of Operations and
Financial Condition (continued)
Results of Operations
FISCAL YEAR ENDED DECEMBER 31,
1995 COMPARED WITH FISCAL YEAR ENDED JANUARY 1, 1995
Net sales for 1995 were a record $910.2 million dollars, up 12.9% from 1994
sales of $806.2 million. This increase resulted from strong denim and export
sales and the sales of the Raytex and Greeff acquisitions, partially offset by
weak specialty sportswear and decorative print fabric sales in the second half
of the year. Export sales were $180.3 million, or 19.8% of sales, as compared
with 17.6% for 1994.
The Company had a net loss for 1995 of $3.3 million, or $.22 per share
after preferred dividends, which included losses of $16.9 million (net of tax),
or $.62 per share, arising from losses primarily associated with peso
devaluations and the write-down of Cone's investment in CIPSA to current net
realizable value. Without these losses from unconsolidated affiliates, Cone
Mills had income of $13.6 million or $.39 per share. This earnings decline from
the previous year resulted from deteriorating sportswear and home furnishings
markets and from higher cotton costs unrecovered in pricing in the first half of
the year. For comparison, net income in 1994 was $35.0 million, or $1.16 per
share.
Gross profit for 1995 (net sales less cost of sales and depreciation) as a
percentage of sales was 13.7%, down from 17.4% for the previous year. The
decrease was primarily the result of higher cotton costs not recovered in
prices in the first half of 1995 and the poor market conditions for specialty
sportswear and printed decorative fabrics.
APPAREL FABRICS
Apparel fabric segment sales for 1995 were a record $700.1 million, up 16.6%
from 1994 levels. Denim sales were up 30.3% as the Company benefited from both
higher volume and prices. However, specialty sportswear sales were down 16.3%
from 1994 amounts, the result of overall weak retail apparel markets and
corresponding excess inventory in the softgoods pipeline. Operating margins for
1995 for the apparel segment were 5.7% as compared with 7.9% in 1994. Denim
margins as a percentage of sales were lower, the result of higher cotton costs
unrecovered in first-half 1995 pricing. Specialty sportswear fabrics experienced
an operating loss arising from deteriorating sales and the impact of operating
sportswear fabric and print facilities at less than capacity. Average prices
adjusted for product mix were up approximately 4% compared with 1994. Apparel
segment export sales, primarily denims, were up 29.3% as compared with previous
year amounts.
HOME FURNISHINGS
Home furnishings segment sales for 1995 were $210.1 million, up 2.1% from
1994 amounts. Sales additions from the acquisitions of Raytex and Greeff were
essentially offset by lower sales at Carlisle and John Wolf. Decorative print
markets deteriorated during 1995, the result of overall weak furniture markets
and customer fashion preferences for fabrics other than prints. The home
furnishings segment had an operating loss of $.6 million compared with income of
$19.0 million for the 1994 period. The operating loss was primarily the result
of lower sales volume and under-absorbed overhead in decorative print
facilities.
Total Company selling and administrative expenses were 9.8% of sales, a
slight increase from 9.7% for 1994. Net interest expense increased to $14.5
million from $7.3 million, the result of increased borrowings to support the
Company's expansion strategy in core businesses.
Before losses from unconsolidated affiliates, income taxes as a
percentage of taxable income were 34.9% in 1995 compared with 35.7% in 1994.
Both periods reflect tax benefits resulting from operation of the Company's
foreign sales corporation.
FISCAL YEAR ENDED JANUARY 1, 1995 COMPARED WITH
FISCAL YEAR 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.
14
<PAGE>
Exhibit 13 (continued) Page 240
Gross profit (net sales less cost of sales and depreciation) as a
percentage of 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
poly-urethane 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 a result of 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.
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 began 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.
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 with 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 were 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.
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 issued on March 15, 1995 and due on March 15, 2005 (the
"Debentures"), 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. Terms of these various agreements
are described in Notes 2 and 9 to Consolidated Financial Statements. On December
31, 1995, the Company had funds available of $90.0 million under its Revolving
Credit Facility and Receivables Purchase Agreement.
On March 15, 1995, the Company completed the sale of $100 million of
investment grade Debentures through an underwritten public offering. A portion
of the proceeds were used to repay all outstanding borrowings under the
Revolving Credit Facility.
During 1995, the Company generated $48.0 million from earnings before
noncash charges from depreciation, amortization and unconsolidated Mexican
affiliate results, which was a
15
<PAGE>
Exhibit 13 (continued) Page 241
Management's Discussion and Analysis of Results of Operations and
Financial Condition (continued)
19.2% decrease as compared with 1994. Investments in working capital were
higher primarily as a result of an increase in inventories and other assets
partially offset by an increase in accounts payable and accruals, resulting in a
net cash flow of $32.1 million provided by operating activities. Additional uses
of cash included capital spending of $61.7 million, investments of $30.3
million in unconsolidated Mexican affiliates, and the preferred stock dividend
of $2.7 million. Funding came primarily from the $100 million of debentures sold
in March of 1995.
The Company believes that the proceeds from the sales of both the
Debentures and the Olympic Products Division, 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.
On December 31, 1995, the Company's long-term capital structure
consisted of $161.8 million of long-term debt and $222.1 million of
stockholders' equity. For comparison, at January 1, 1995, the Company had $126.1
million of long-term debt and $236.9 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 44% on December 31, 1995, compared
with 35% at January 1, 1995.
Accounts receivables on December 31, 1995, were $61.0 million, up from
$56.7 million at year-end 1994. At the end of 1995, the Company had sold $40
million of accounts receivable, a decrease of $10 million from the amount sold
at the end of fiscal 1994. Receivables, including those sold pursuant to the
Receivables Purchase Agreement, represented 43 days of sales outstanding at
year-end 1995 compared with 49 days at year-end 1994, as more payments in 1995
were made in advance of due dates by customers seeking early payment discounts.
Inventories on December 31, 1995, were $162.4 million, up $13.0 million
from year-end 1994 levels of $149.4 million, primarily the result of additional
raw materials and the acquisition of Greeff inventories.
Capital spending in 1995 was $61.7 million, including $14.6 million for the
new jacquard plant. Other projects included new weaving machines, additional
dyeing capacity to increase production flexibility and an additional screen
printing machine. In addition to 1995 capital expenditures, the Company invested
approximately $30 million in Mexican affiliates, of which $24.6 million was
invested in the Company's joint venture. The Company has agreements with CIPSA
to purchase up to an additional 33% of the outstanding common stock of the joint
venture for an amount of $20 million or book value, if CIPSA does not meet
certain financial obligations.
Capital spending in 1996 is expected to be $52 million. Projects include
new weaving machines that replace 1970s vintage weaving machines and
approximately $4 million for computers, software and information systems.
Approximately $.6 million of the budgeted capital expenditures for 1996 had been
committed at year-end 1995.
Federal, state and local regulations relating to the workplace and the
discharge of materials into the environment continue to change and,
consequently, it is difficult to gauge the total future impact of such
regulations on the Company. Existing government regulations are not expected to
cause a material change on the Company's competitive position, operating results
or planned capital expenditures. The Company has an active environmental
committee which fosters protection of the environment and compliance with laws.
The Company is a party to various legal claims and actions. Management
believes that none of these claims or actions, either individually or in the
aggregate, will have a material adverse effect on the financial condition of the
Company.
16
<PAGE>
Exhibit 13 (continued) Page 242
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
................................................................................
YEARS ENDED DECEMBER 31, 1995, JANUARY 1, 1995 AND JANUARY 2, 1994 1995 1994 1993
................................................................................
<S> <C> <C> <C>
NET SALES (NOTE 18) $ 910,217 $ 806,167 $ 769,230
OPERATING COSTS AND EXPENSES:
Cost of sales 756,975 642,472 589,314
Selling and administrative 89,561 77,823 73,326
Depreciation 28,257 23,269 20,991
874,793 743,564 683,631
INCOME FROM OPERATIONS 35,424 62,603 85,599
OTHER INCOME (EXPENSE):
Interest income 563 614 521
Interest expense (15,081) (7,924) (6,950)
(14,518) (7,310) (6,429)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY IN EARNINGS (LOSS)
OF UNCONSOLIDATED AFFILIATES 20,906 55,293 79,170
INCOME TAXES (NOTE 13) 7,306 19,764 29,884
INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY IN EARNINGS (LOSS) OF UNCONSOLIDATED
AFFILIATES 13,600 35,529 49,286
EQUITY IN EARNINGS (LOSS) OF UNCONSOLIDATED AFFILIATES -- (NET OF INCOME TAX BENEFIT
OF $2,992 -- 1995) (NOTE 4) (16,856) 223 317
INCOME (LOSS) FROM CONTINUING OPERATIONS (3,256) 35,752 49,603
GAIN ON DISPOSAL -- DISCONTINUED OPERATIONS -- (NET OF INCOME TAX OF $276) (NOTE 19) -- 439 --
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE (3,256) 36,191 49,603
CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR POSTEMPLOYMENT BENEFITS -- (NET OF INCOME
TAX BENEFIT OF $772) (NOTE 12) -- (1,228) --
NET INCOME (LOSS) $ (3,256) $ 34,963 $ 49,603
INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS (NOTE 17):
Income (Loss) from Continuing Operations $ (6,088) $ 33,064 $ 46,808
Income (Loss) before Cumulative Effect of Accounting Change $ (6,088) $ 33,503 $ 46,808
Cumulative Effect of Accounting Change -- (1,228) --
Net Income (Loss) $ (6,088) $ 32,275 $ 46,808
EARNINGS (LOSS) PER SHARE -- FULLY DILUTED (NOTE 17):
Income (Loss) from Continuing Operations $ (.22) $ 1.19 $ 1.68
Income (Loss) before Cumulative Effect of Accounting Change $ (.22) $ 1.20 $ 1.68
Cumulative Effect of Accounting Change -- (.04) --
Net Income (Loss) $ (.22) $ 1.16 $ 1.68
WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE EQUIVALENTS OUTSTANDING -- FULLY
DILUTED (NOTE 17) 27,380 27,834 27,894
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
18
<PAGE>
Exhibit 13 (continued) Page 243
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PAR VALUE DATA)
................................................................................
<TABLE>
<CAPTION>
DECEMBER 31, 1995 AND JANUARY 1, 1995 1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 336 $ 1,158
Accounts receivable -- trade, less provision for doubtful accounts $3,200;
1994, $3,000 (Notes 2 and 18) 60,955 56,654
Inventories (Note 3):
Greige and finished goods 84,822 83,377
Work in process 14,786 15,796
Raw materials 29,274 19,973
Supplies and other 33,492 30,274
162,374 149,420
Other current assets 10,227 6,007
Total Current Assets 233,892 213,239
INVESTMENTS IN UNCONSOLIDATED AFFILIATES (NOTE 4) 37,680 34,294
OTHER ASSETS (NOTE 6) 45,540 38,803
PROPERTY, PLANT AND EQUIPMENT:
Land 19,615 20,662
Buildings 89,128 79,418
Machinery and equipment 322,361 284,401
Other 34,292 30,581
465,396 415,062
Less accumulated depreciation 198,188 177,321
Property, Plant and Equipment -- Net 267,208 237,741
$ 584,320 $ 524,077
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 7) $ 8,875 $ 10,700
Current maturities of long-term debt (Note 9) 11,236 414
Accounts payable -- trade 40,023 38,430
Sundry accounts payable and accrued expenses (Note 8) 64,800 39,881
Deferred income taxes (Note 13) 25,938 28,148
Total Current Liabilities 150,872 117,573
LONG-TERM DEBT (NOTE 9) 161,782 126,108
DEFERRED ITEMS:
Deferred income taxes (Note 13) 40,836 36,789
Other deferred items 8,705 6,727
49,541 43,516
STOCKHOLDERS' EQUITY:
Class A Preferred Stock -- $100 par value; authorized 1,500,000 shares; issued and outstanding
383,948 shares -- Employee Stock Ownership Plan (Note 14) 38,395 38,395
Class B Preferred Stock -- no par value; authorized 5,000,000 shares (Note 14) -- --
Common Stock -- $.10 par value; authorized 42,700,000 shares; issued and outstanding 27,380,409
shares; 1994, 27,403,621 shares (Notes 14 and 15) 2,738 2,740
Capital in excess of par 71,090 71,354
Retained earnings 119,825 125,771
Currency translation adjustment (9,923) (1,380)
Total Stockholders' Equity 222,125 236,880
$ 584,320 $ 524,077
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
19
<PAGE>
Exhibit 13 (continued) Page 244
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
................................................................................
<TABLE>
<CAPTION>
CLASS A PREFERRED CLASS A PREFERRED STOCK -- ESCROW NONVOTING COMMON
STOCK STOCK COMMON STOCK
YEARS ENDED SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 3, 1993 459,282 $45,928 (75,330) $ (7,533) 1,231,327 $ 123 26,435,888 $2,644
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 -- -- -- -- (1,231,327) (123 ) 1,231,327 123
Common Stock:
Options exercised -- -- -- -- -- -- 100,000 10
Purchase of common
shares -- -- -- -- -- -- (22,432) (3)
BALANCE, JANUARY 2, 1994 465,077 $46,508 (81,125) $ (8,113) -- $-- 27,744,783 $2,774
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 -- -- -- -- -- -- 21,000 2
Purchase of common
shares -- -- -- -- -- -- (362,162) (36)
BALANCE, JANUARY 1, 1995 383,948 $38,395 -- $ -- -- $-- 27,403,621 $2,740
Net loss -- -- -- -- -- -- -- --
Currency translation loss
(net of income tax
benefit of $3,630) -- -- -- -- -- -- -- --
Class A Preferred Stock --
Employee Stock
Ownership Plan:
Cash dividends paid -- -- -- -- -- -- -- --
Common Stock:
Options exercised -- -- -- -- -- -- 4,000 1
Purchase of common
shares -- -- -- -- -- -- (27,212) (3)
BALANCE, DECEMBER 31, 1995 383,948 $38,395 -- $ -- -- $-- 27,380,409 $2,738
</TABLE>
CAPITAL IN CURRENCY
EXCESS OF RETAINED TRANSLATION
YEARS ENDED PAR EARNINGS ADJUSTMENT
<TABLE>
(S) <C> <C> <C>
BALANCE, JANUARY 3, 1993 $ 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 -- -- --
Common Stock:
Options exercised 525 -- --
Purchase of common
shares (355) -- --
BALANCE, JANUARY 2, 1994 $ 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 113 -- --
Purchase of common
shares (4,156) -- --
BALANCE, JANUARY 1, 1995 $ 71,354 $125,771 $ (1,380)
Net loss -- (3,256) --
Currency translation loss
(net of income tax
benefit of $3,630) -- -- (8,543)
Class A Preferred Stock --
Employee Stock
Ownership Plan:
Cash dividends paid -- (2,690) --
Common Stock:
Options exercised 25 -- --
Purchase of common
shares (289) -- --
BALANCE, DECEMBER 31, 1995 $ 71,090 $119,825 $ (9,923)
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
20
<PAGE>
Exhibit 13 (continued) Page 245
(AMOUNTS IN THOUSANDS)
................................................................................
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1995, JANUARY 1, 1995 AND JANUARY 2, 1994 1995 1994 1993
................................................................................
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (3,256) $ 34,963 $ 49,603
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation 28,257 23,269 20,991
Gain on sale and writedown of property, plant and equipment, net (1,794) (2,519) (1,657)
Amortization 3,116 777 444
Equity in losses (earnings) -- unconsolidated affiliates 19,848 (223) (317)
Dividend received -- unconsolidated affiliate -- 541 --
Change in assets and liabilities, net of acquisitions:
Decrease (increase) in trade receivables (4,075) (9,577) 13,182
Decrease (increase) in inventories (10,920) 5,317 (6,363)
Decrease (increase) in other assets (12,968) (2,989) (2,045)
Increase (decrease) in accounts payable and accrued expenses 10,072 1,644 (19,299)
Increase (decrease) in income taxes payable -- -- (276)
Increase (decrease) in deferred income taxes 1,837 990 3,771
Increase (decrease) in other liabilities 1,977 3,113 (835)
Net cash provided by operating activities 32,094 55,306 57,199
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in unconsolidated affiliates (30,316) (9,572) (26,103)
Acquisitions, net of cash acquired* (2,038) (57,647) --
Proceeds from sale of property, plant and equipment 5,924 2,903 4,869
Capital expenditures (61,662) (37,494) (38,712)
Net cash used in investing activities (88,092) (101,810) (59,946)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings under line of credit agreements (1,825) 5,601 (1,554)
Increase in checks issued in excess of deposits 14,727 -- --
Principal payments -- long-term debt (97,414) (47,606) (77,307)
Proceeds from long-term debt borrowings 48,000 94,578 77,746
Proceeds from debentures issued 99,831 -- --
Debt issuance costs (915) -- --
Payment on interest hedge transaction (4,272) -- --
Purchase of outstanding capital stock -- Common (292) (2,869) (358)
Proceeds from issuance of capital stock -- Common 26 115 535
Dividends paid -- Class A Preferred (2,690) (2,660) (3,097)
Net cash provided by (used in) financing activities 55,176 47,159 (4,035)
Net (decrease) increase in cash (822) 655 (6,782)
CASH AT BEGINNING OF PERIOD 1,158 503 7,285
CASH AT END OF PERIOD $ 336 $ 1,158 $ 503
*Acquisitions, net of cash acquired:
Working capital, other than cash $ (2,008) $ (1,377)
Property, plant and equipment (30) (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 $ (2,038) $ (57,647)
SUPPLEMENTAL DISCLOSURES OF ADDITIONAL CASH FLOW INFORMATION:
Cash payments for:
Interest, net of interest capitalized $ 12,758 $ 7,703 $ 7,125
Income taxes, net of refunds $ 3,861 $ 17,938 $ 23,926
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Stock dividend paid to ESOP trustee for Cone escrow account $ -- $ 567 $ 580
Class A Preferred Stock issued $ -- $ 567 $ 580
Class A Preferred Stock received from ESOP trustee and closure of escrow account $ -- $ 8,860 $ --
Purchase of outstanding capital stock -- Common through incurrence of accounts payable $ -- $ 1,323 $ --
Common Stock issued $ -- $ -- $ 123
Nonvoting Common Stock converted to Voting Common Stock $ -- $ -- $ 123
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
21
<PAGE>
Exhibit 13 (continued) Page 246
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 December 31, 1995, January 1, 1995, and January 2,
1994, contained 52 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 $32,000,000 higher at December 31, 1995, and
$30,000,000 higher at January 1, 1995. LIFO inventories valued for financial
statement purposes exceed their income tax basis by approximately $83,000,000 at
December 31, 1995, and January 1, 1995.
INVESTMENTS IN UNCONSOLIDATED AFFILIATES Investments in unconsolidated
affiliated companies are accounted for by the equity method. The Company's
equity in earnings/losses and currency translation adjustments are recorded on a
one quarter delay basis.
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. The carrying value of these assets is reviewed on a routine basis or
when circumstances occur which impact their value. Depreciation is computed by
the straight-line method for financial reporting purposes over the following
estimated useful lives:
................................................................................
Buildings 15-39 Years
Machinery and Equipment 12-20 Years
Other 3-20 Years
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.
ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
.............................................................................
Note 2
SALE OF ACCOUNTS RECEIVABLES
The Company has an agreement with the subsidiary of a major financial
institution which allows the sale without recourse of up to $50 million
undivided interest in eligible trade receivables. This agreement is extendable
to August 1997. The Company acts as an agent for the purchaser by performing
record keeping and collection functions of receivables sold. The cost of
receivables sold by the Company is the commercial paper rate plus 45 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 $40 million sold at December 31,
1995, and net of $50 million sold at January 1, 1995, under this agreement. As a
result of the sale of interest in these receivables, cash flows provided by
operating activities include a decrease of $10 million for 1995, and an increase
of $15 million and $11 million for 1994 and 1993, respectively.
22
<PAGE>
Exhibit 13 (continued) Page 247
Note 3
INVENTORY LIQUIDATIONS (AMOUNTS IN THOUSANDS)
During 1995, 1994 and 1993, 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 or
decreased net losses by $513 in 1995, $218 in 1994 and $303 in 1993.
............................................................................
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. In October 1995 and December
1994, CIPSA elected to increase capital through the sale of additional shares of
capital stock, and the Company retained its 20% ownership level by additional
investments of $5.7 million and $6.7 million, respectively. Through 1995 the
Company accounted 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:
................................................................................
YEAR YEAR
ENDED ENDED
SEPT. 30, SEPT. 30,
FINANCIAL INFORMATION 1995 1994
(AMOUNTS IN THOUSANDS)
INCOME STATEMENT DATA
Net sales $ 132,565 $ 90,648
Gross profit 1,5831 17,025
Net income (loss) (57,138)1 1,114
Company's equity in net income
(loss) (11,429)2 223
SEPT. 30, SEPT. 30,
(AMOUNTS IN THOUSANDS) 1995 1994
BALANCE SHEET DATA
Current assets $ 76,619 $ 70,310
Noncurrent assets 89,645 178,573
Current liabilities 109,451 109,409
Noncurrent liabilities 34,019 30,242
Net assets 22,794 109,232
Company's equity in net assets 4,558 21,847
1INCLUDES WRITE-OFF OF ACQUISITION GOODWILL OF $17,857.
2INCLUDES WRITE-OFF OF ACQUISITION GOODWILL OF $3,571.
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. The peso continued to devalue versus the
U.S. dollar in 1995 sending the Mexican economy into a severe recession. On
September 30, 1995, the peso was trading at 6.38 pesos per U.S. dollar versus an
exchange rate of approximately 3.45 prior to the devaluation. Due to the peso
devaluation CIPSA recognized large foreign currency transaction losses related
to debt denominated in U.S. dollars. In the fourth quarter of 1995 the peso
continued to devalue and was trading at 7.69 pesos per U.S. dollar on December
31, 1995. Due to the continued devaluation of the peso and the deepening of the
recession in the Mexican economy the Company accelerated the amortization of
goodwill associated with its initial investment in CIPSA increasing its 1995
loss by $3.6 million. In 1995, based upon the above factors and the share price
for the fourth quarter 1995 capital increase, the Company recognized an
additional $7.3 million charge, reduced by a tax benefit of $3.0 million, to
adjust its investment in CIPSA to expected net realizable value. Pursuant to a
December 22, 1995 agreement the Company sold 1.5 million shares of CIPSA
(approximately 10% of its holdings) for $.8 million in January 1996. Based upon
the reduction in its ownership to 18% and certain other factors the Company will
account for its investment in CIPSA by the cost method in future periods.
The Company and CIPSA also formed a joint venture company, Parras Cone de
Mexico, S.A. ("Parras Cone"), to build and operate a world-class denim
manufacturing facility in Parras, Mexico. The partners invested a total of
approximately $60 million, with each partner providing 50% of this investment.
Parras Cone 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. Construction on the facility was completed in 1995 and Parras Cone
began production of denim in the fourth quarter of 1995.
23
<PAGE>
Exhibit 13 (continued) Page 248
.............................................................................
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 as the Raytex Division("Raytex"). Raytex prints primarily wide
fabrics used in home furnishings, including comforters and bedspreads. The
assets purchased consisted 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 were included in the 1994 consolidated
financial statements from date of acquisition.
.............................................................................
Note 6
OTHER ASSETS
Other assets consist of the following:
.....................................................................
(AMOUNTS IN THOUSANDS) 1995 1994
Excess of cost over net assets acquired $19,871 $19,863
Trade names 14,317 14,317
Other intangible assets 8,010 6,838
$42,198 $41,018
Less accumulated amortization (3,052) (2,567)
Net intangible assets $39,146 $38,451
Other assets 6,394 352
Total other assets $45,540 $38,803
......................................................................
Note 7
NOTES PAYABLE
The Company's real estate subsidiary had unsecured notes payable outstanding of
$8,875,000 at December 31, 1995 and $8,700,000 at January 1, 1995. Interest
rates for these notes were 7.875% for 1995 and 8.250% for 1994. 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%. Weighted average interest
rates applicable to outstanding notes payable were 7.875% and 7.951% at December
31, 1995 and at January 1, 1995, respectively.
24
<PAGE>
Exhibit 13 (continued) Page 249
Note 8
SUNDRY ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Sundry accounts payable and accrued expenses consist of the following:
......................................................................
(AMOUNTS IN THOUSANDS) 1995 1994
Accrued salaries, wages and commissions $13,946 $14,414
Checks issued in excess of deposits 25,538 10,811
Other 25,316 14,656
$64,800 $39,881
.......................................................................
Note 9
LONG-TERM DEBT
Long-term debt consists of the following:
................................................................................
DECEMBER 31, 1995
CURRENT
(AMOUNTS IN THOUSANDS) TOTAL MATURITY LONG-TERM
8% Senior Note $ 75,000 $10,714 $ 64,286
Revolving Credit Agreement -- -- --
8 1/8% Debentures 95,910 -- 95,910
Capital Lease Obligation 1,455 336 1,119
Industrial Revenue Bonds 533 149 384
Other 120 37 83
$173,018 $11,236 $161,782
JANUARY 1, 1995
CURRENT
(AMOUNTS IN THOUSANDS) TOTAL MATURITY LONG-TERM
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
The Senior Note is a ten year $75 million 8% Promissory Note, dated August 13,
1992. Annual principal payments of $10.7 million begin August 1996 with the
remaining principal amount due August 2002.
The Revolving Credit Agreement, dated August 13, 1992, and extended by
amendment to August 1997, provides for borrowings up to $80 million. Borrowings
under this Agreement may be 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. The Company had no
borrowings under this Agreement at December 31, 1995. The total Revolving Credit
Facility of $80 million remains available for future working capital
requirements and represents unused funding capacity at December 31, 1995.
These financing agreements contain certain covenants regarding the operations
and financial condition of the Company. The Company was in compliance with all
loan covenants on December 31, 1995.
On March 15, 1995 the Company completed the sale of $100 million 8 1/8%
Debentures through an underwritten public offering. The unsecured debentures are
due March 15, 2005, and are not redeemable prior to maturity. Interest is
payable semiannually each March 15 and September 15. Proceeds were used to repay
all outstanding borrowings under the Revolving Credit Facility and for general
corporate purposes. In early 1995, considering the uncertainty in the bond
market,
25
<PAGE>
Exhibit 13 (continued) Page 250
the Company entered into an interest rate hedge contract to fix the interest
rate on the debentures. The contract was terminated in conjunction with the
pricing of the debentures at a cost of $4.3 million. Amortization of the loss on
the interest rate hedge and original issue discount, both over a 10-year life,
will result in an 8.57% effective rate for the issue.
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 $3.4 million secures the lease and is included in
property, plant and equipment. Aggregate future minimum lease payments of $1.8
million consist of the present value of minimum payments of $1.5 million and
interest expense of $.3 million. Future minimum capital lease payments are:
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 $120,000 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:
.........................................................................
1996 $10,900,000
1997 10,878,000
1998 10,881,000
1999 10,850,000
2000 10,714,000
.........................................................................
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 $5,157,000 in 1995, $4,100,000 in 1994, and $2,445,000 in 1993. 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 1995, 1994, and 1993 included the following
components:
................................................................................
(AMOUNTS IN THOUSANDS) 1995 1994 1993
Service cost, benefits
earned during period $ 2,748 $2,144 $1,284
Interest cost on projected
benefit obligation 2,552 1,752 1,180
Actual loss (return) on
assets (2,174) 93 (571)
Net amortization and
deferral 2,031 111 552
$ 5,157 $4,100 $2,445
Assumptions used in determining the periodic pension cost of the pension plans
are as follows:
...................................................................
(AMOUNTS IN THOUSANDS) 1995 1994 1993
Discount rate 8.0% 7.5% 8.5%
Average rate of increase in
compensation levels 5.0 4.0 4.0
Expected long-term rate of
return on assets 9.0 8.5 9.0
26
<PAGE>
Exhibit 13 (continued) Page 251
recognized in the Company's consolidated balance sheets at December 31, 1995 and
January 1, 1995:
.............................................................................
<TABLE>
<S> <C> <C> <C> <C>
1995 1994
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
(AMOUNTS IN THOUSANDS) BENEFITS ASSETS BENEFITS ASSETS
Actuarial present value of accumulated benefit obligation --vested
portion $ 24,190 $ 4,271 $ 9,449 $ 4,511
Actuarial present value of accumulated benefit
obligation -- nonvested portion 2,466 62 1,261 174
Accumulated benefit obligation -- total 26,656 4,333 10,710 4,685
Additional amounts related to projected compensation levels 14,944 1,354 12,202 1,068
Total actuarial projected benefit obligation for service rendered
to date 41,600 5,687 22,912 5,753
Less: Plan assets at fair value 28,387 -- 11,624 1,749
Projected benefit obligation in excess of plan assets (13,213) (5,687) (11,288) (4,004)
Unrecognized net actuarial loss, difference in assumptions and
actual experience 25,161 2,497 15,067 1,111
Unrecognized prior service cost (income) (963) 508 (1,164) 651
Initial unrecognized net liability at date of adoption, being
recognized over 14-16 years 397 566 364 752
Adjustment to recognize minimum liability through recording an
intangible asset -- (2,217) -- (1,446)
Pension related assets (liabilities) included in the consolidated
balance sheets $ 11,382 $(4,333) $ 2,979 $(2,936)
</TABLE>
Assumptions used in determining the funded status of the pension plans (shown
above) are as follows:
................................................................................
1995 1994
Discount rate 7.0% 8.0%
Average rate of increase in compensation
levels 5.0 5.0
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:
................................................................................
(AMOUNTS IN THOUSANDS) 1995 1994 1993
EEP (combined) $ 1,197 $ 1,090 $ 544
SRP (combined) 712 630 631
27
<PAGE>
Exhibit 13 (continued) Page 252
............................................................................
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:
................................................................................
(AMOUNTS IN THOUSANDS) 1995 1994 1993
Service cost for benefits
earned during the year $ 132 $ 113 $ 188
Interest cost on accumulated
benefit obligation 244 197 379
Amortization of the
unrecognized net gain (101) (130) --
Amortization of transition
obligation 230 230 230
Total expense $ 505 $ 410 $ 797
The actuarial and recorded liabilities for postretirement benefits, none of
which have been funded, are as follows:
............................................................................
(AMOUNTS IN THOUSANDS) 1995 1994
Accumulated postretirement benefit
obligation:
Retirees $ 575 $ 571
Fully eligible active plan
participants 1,274 703
Other active plan participants 2,001 1,466
Total 3,850 2,740
Plus unrecognized gain 1,007 2,149
Less unrecognized transition obligation 3,908 4,138
Accrued postretirement benefit cost $ 949 $ 751
For measurement purposes, a 12% annual rate of increase in per capita health
care costs of covered benefits was assumed for 1996, 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 December 31, 1995 by $475,000 and increase net periodic
postretirement benefit expense by approximately $54,000 in 1995. The accumulated
postretirement benefit obligation was computed using an assumed discount rate of
7% for 1995 and 8% for 1994.
...............................................................................
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.
28
<PAGE>
Exhibit 13 (continued) Page 253
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.
................................................................................
<TABLE>
<CAPTION>
PROVISION (CREDIT) FOR INCOME TAXES
<S> <C> <C> <C>
(IN THOUSANDS) 1995 1994 1993
Continuing operations before equity in losses in unconsolidated affiliates $ 7,306 $ 19,764 $ 29,884
Equity in losses in unconsolidated affiliates (2,992) -- --
Subtotal -- Provision for income taxes on continuing operations 4,314 19,764 29,884
Discontinued operations -- 276 --
Cumulative effect of accounting change -- (772) --
Stockholders' equity, currency translation adjustment (3,630) (1,002) --
Total provision for income taxes $ 684 $ 18,266 $ 29,884
</TABLE>
........................................................................
<TABLE>
<CAPTION>
COMPONENTS OF INCOME TAX PROVISION FROM CONTINUING OPERATIONS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993
(IN THOUSANDS) CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
Federal $2,271 $1,417 $3,688 $15,928 $1,145 $17,073 $22,303 $3,470 $25,773
State, local and foreign 206 420 626 2,350 341 2,691 3,810 301 4,111
Total income tax provision $2,477 $1,837 $4,314 $18,278 $1,486 $19,764 $26,113 $3,771 $29,884
</TABLE>
.........................................................................
<TABLE>
<CAPTION>
RECONCILIATION OF INCOME TAX PROVISION FROM CONTINUING
OPERATIONS
<S> <C> <C> <C>
(IN THOUSANDS) 1995 1994 1993
Statutory U.S. tax $ 370 $ 19,431 $ 27,820
State income taxes, net
of federal benefit 407 1,749 2,672
Tax benefit from foreign
sales corporation (1,210) (1,262) (1,542)
Equity in losses in
unconsolidated
affiliates considered
permanent in duration 4,387 -- --
Nondeductible meals and
entertainment expenses 189 175 71
Company owned life
insurance (178) (8) (73)
Impact on deferred taxes
from federal tax rate
increase -- -- 1,650
Other 349 (321) (714)
Total income tax
provision $ 4,314 $ 19,764 $ 29,884
</TABLE>
................................................................................
<TABLE>
<CAPTION>
COMPONENTS OF NET DEFERRED
INCOME TAX LIABILITY
<S> <C> <C> <C>
(IN THOUSANDS) 1995 1994 1993
Deferred income tax
liabilities $ 83,231 $ 75,391 $ 75,160
Deferred income tax
assets (16,457) (10,454) (11,213)
Net deferred income
tax liability $ 66,774 $ 64,937 $ 63,947
</TABLE>
................................................................................
<TABLE>
<CAPTION>
ITEMS COMPRISING NET DEFERRED
INCOME TAX LIABILITY
<S> <C> <C> <C>
(IN THOUSANDS) 1995 1994 1993
Property, plant &
equipment -- principally
depreciation $ 41,348 $ 38,804 $ 37,538
Alternative minimum tax (3,825) -- --
Inventories 31,979 32,313 32,853
Other -- net (2,728) (6,180) (6,444)
Net deferred income tax
liability $ 66,774 $ 64,937 $ 63,947
</TABLE>
29
<PAGE>
Exhibit 13 (continued) Page 254
Notes to Consolidated Financial Statements (Continued)
............................................................................
Note 14
CAPITAL STOCK
All Class A Preferred Stock is held by the Cone Mills Corporation 1983 ESOP
except 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 7.5% for 1996, 7.0% for 1995, and 7.0% for 1994.
Dividends on the Class A Preferred Stock are, at the option of the Board of
Directors, paid in cash or by delivery of shares of the Company's Class A
Preferred Stock, Common Stock or by delivery of other "qualifying employer
securities" of the Company as that term is used, on the date of such delivery,
in Section 407 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (or the corresponding section of any future law) or by a
combination of the foregoing; provided, however, that on the date of delivery
the fair market value of any stock or qualifying employer securities used to pay
dividends shall be equal to or greater than the amount of dividends paid
therewith. All dividends paid to date on the Class A Preferred Stock have been
paid in additional shares of Class A Preferred Stock or cash.
Class A Preferred Stock held by the 1983 ESOP may be redeemed, in whole or in
part, at the option of the Company by a vote of the Board of Directors, at a
price equal to the greater of $100 per share or the fair market value thereof,
plus dividends accrued and unpaid thereon to the date fixed for redemption. The
redemption price shall be paid in cash or by delivery of shares of the Company's
Class A Preferred Stock, Common Stock or by delivery of other qualifying
employer securities or a combination of the foregoing, at the Company's option;
provided, however, that on the date of delivery the fair market value of any
stock or other qualifying employer securities used to pay the redemption price
shall be equal to or greater than the redemption price (or portion thereof) paid
therewith. The fair market value of Class A Preferred Stock was determined to be
$100.19 per share at December 31, 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 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.
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
30
<PAGE>
Exhibit 13 (continued) Page 255
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. Holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of holders of Common Stock.
............................................................................
Note 15
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. Such options may
be incentive stock options or nonqualified stock options.
The 1993 and 1994 option grants have a term of ten years and an exercise price
equal to the market price of the Company's common stock on the date of grant.
Options granted in 1993 are incentive stock options and options granted in 1994
are nonqualified stock options with a tax reimbursement feature. The options 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 Company has in effect the 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 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.
The Company applies Accounting Principles Board Opinion Number 25, "Accounting
for Stock Issued to Employees" ("APB 25") and related Interpretations in
31
<PAGE>
Exhibit 13 (continued) Page 256
accounting for these plans which requires compensation expense for the Company's
options to be recognized only if the market price of the underlying stock
exceeds the exercise price on the date of grant. Accordingly, the Company has
not recognized compensation expense for its options granted in 1995, 1994, and
1993. Statement of Financial Accounting Standards Number 123, "Accounting for
Stock-Based Compensation," ("FAS 123") issued in October 1995, requires pro
forma disclosures for option grants made after December 31, 1994, when
accounting for stock-based compensation plans in accordance with APB 25. The pro
forma effects on net income and earnings per share of applying FAS 123 during
1995 are insignificant.
A reconciliation of the Company's stock option activity, and related
information, for the years ended December 31 follows:
................................................................................
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1993 EXERCISE 1994 EXERCISE 1995 EXERCISE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
OF WEIGHTED OF WEIGHTED OF WEIGHTED
OPTIONS AVERAGE OPTIONS AVERAGE OPTIONS AVERAGE
Outstanding -- beginning of year 302,000 $ 5.71 699,000 $12.86 1,086,000 $12.66
Granted 500,000 15.63 416,000 12.01 7,000 11.63
Exercised (100,000) 5.35 (21,000) 5.49 (4,000) 6.50
Forfeited (3,000) 5.25 (8,000) 15.63 (42,000) 15.63
Outstanding -- end of year 699,000 $12.86 1,086,000 $12.66 1,047,000 $12.55
Exercisable at end of year 218,150 326,900 512,050
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1995:
................................................................................
<TABLE>
<CAPTION>
NUMBER NUMBER
EXERCISE OUTSTANDING EXERCISABLE EXPIRATION
PRICE AT 12/31/95 AT 12/31/95 DATE
<S> <C> <C> <C>
$ 5.250 78,200 78,200 June, 1999
$ 6.500 95,800 68,850 February, 2002
$ 11.625 7,000 7,000 May, 2002
$ 12.000 410,000 82,000 November, 2004
$ 12.875 6,000 6,000 May, 2001
$ 15.625 450,000 270,000 February, 2003
1,047,000 512,050
</TABLE>
...........................................................................
Note 16
LEASES AND COMMITMENTS
The Company has various leases accounted for as operating leases. Rent expense
was $6,024,000, $5,132,000 and $5,053,000 for 1995, 1994, and 1993,
respectively. Future minimum rental payments required under lease agreements are
$4,823,000 for 1996, $4,011,000 for 1997, $3,033,000 for 1998, $2,401,000 for
1999, $1,130,000 for 2000 and thereafter $759,000. Aggregate future minimum
rental payments total $16,157,000. Commitments for improvements of and additions
to property, plant and equipment were approximately $641,000 at December 31,
1995.
32
<PAGE>
Exhibit 13 (continued) Page 257
Note 17
EARNINGS PER SHARE
............................................................
<TABLE>
<CAPTION>
1995 1994 1993
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE FULLY FULLY FULLY
DATA) PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing operations $(3,256) $(3,256) $35,752 $35,752 $49,603 $49,603
Less: Class A Preferred dividends (2,832) (2,832) (2,688) (2,688) (2,795) (2,795)
Adjusted income (loss) from continuing
operations (6,088) (6,088) 33,064 33,064 46,808 46,808
Gain on disposal -- discontinued
operations -- -- 439 439 -- --
Adjusted income (loss) before cumulative
effect of accounting change (6,088) (6,088) 33,503 33,503 46,808 46,808
Cumulative effect of accounting change -- -- (1,228) (1,228) -- --
Adjusted net income (loss) $(6,088) $(6,088) $32,275 $32,275 $46,808 $46,808
Weighted average common shares
outstanding 27,380 27,380 27,728 27,728 27,694 27,694
Common share equivalents from assumed
exercise of outstanding options, less
shares assumed repurchased -- -- 106 106 192 200
Weighted average common shares and common
share equivalents outstanding 27,380 27,380 27,834 27,834 27,886 27,894
Earnings (loss) per common share and
common share equivalent:
Income (loss) from continuing
operations $ (0.22) $ (0.22) $ 1.19 $ 1.19 $ 1.68 $ 1.68
Income (loss) before cumulative effect
of accounting change $ (0.22) $ (0.22) $ 1.20 $ 1.20 $ 1.68 $ 1.68
Cumulative effect of accounting change -- -- (.04) (.04) -- --
Net income (loss) $ (0.22) $ (0.22) $ 1.16 $ 1.16 $ 1.68 $ 1.68
</TABLE>
Primary and fully diluted earnings per share have been computed by dividing the
net earnings (loss) available to common stockholders by the sum of the weighted
average common shares and common share equivalents outstanding for 1994 and
1993. Common stock equivalents have been excluded for 1995 since they would be
antidilutive.
..........................................................................
Note 18
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 sells its products worldwide and presently has no foreign
operations. Sales to unaffiliated foreign customers, principally in Europe, were
19.8% of sales in 1995, 17.6% in 1994 and 17.2% in 1993. 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 39.1% in 1995, 33.9% in 1994, and 35.3%
in 1993. At January 1, 1995, this customer had an outstanding accounts
receivable balance with the Company of approximately $24.7 million. The Company
has not incurred any losses in past years related to this customer's accounts
receivable.
33
<PAGE>
Exhibit 13 (continued) Page 258
Operating profit for each segment is total revenue less operating expenses
applicable to that segment. General corporate expenses, interest, income taxes,
equity in earnings/losses of unconsolidated affiliates, gains from discontinued
operations 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.
SEGMENT INFORMATION
The Company operates in two major industry segments: products for apparel and
home furnishings. Sales, operating income, identifiable assets, depreciation and
amortization and capital expenditures for these segments are as follows:
................................................................................
<TABLE>
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS) 1995 1994 1993
Sales
Apparel $700,147 $600,477 $575,800
Home Furnishings 210,070 205,690 193,430
Total $910,217 $806,167 $769,230
Operating Income (Loss)
Apparel $ 39,928 $ 47,498 $ 68,828
Home Furnishings (615) 18,970 19,470
39,313 66,468 88,298
General corporate expenses 3,889 3,865 2,699
Interest expense -- net 14,518 7,310 6,429
18,407 11,175 9,128
Income from Continuing Operations before Income Taxes and Equity in
Earnings (Loss) of Unconsolidated Affiliates $ 20,906 $ 55,293 $ 79,170
Operating Margin
Apparel 5.7% 7.9% 12.0%
Home Furnishings (0.3) 9.2 10.1
Total 4.3% 8.2% 11.5%
Identifiable Assets
Apparel $311,917 $289,929 $269,412
Home Furnishings 203,689 182,510 113,780
Corporate 31,034 17,344 16,227
Investments in Unconsolidated Affiliates 37,680 34,294 26,420
Discontinued Operations -- -- 5,772
Total $584,320 $524,077 $431,611
Depreciation and Amortization
Apparel $ 19,691 $ 17,964 $ 16,561
Home Furnishings 9,330 4,523 3,451
Corporate 2,352 1,559 1,423
Total $ 31,373 $ 24,046 $ 21,435
Capital Expenditures
Apparel $ 33,904 $ 25,234 $ 28,083
Home Furnishings 21,660 9,077 8,927
Corporate 6,098 3,183 1,702
Total $ 61,662 $ 37,494 $ 38,712
</TABLE>
...........................................................................
Note 19
DISCONTINUED OPERATIONS
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.
34
<PAGE>
Exhibit 13 (continued) Page 259
Note 20
DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company utilizes derivative financial instruments to manage risks associated
with changes in cotton prices, foreign exchange rates and interest rates. The
Company does not use derivative financial instruments for trading purposes.
The Company enters into options and futures contracts to manage the risk of
cotton price fluctuations. The Company hedges both committed and anticipated
transactions. At December 31, 1995, the Company held less than $400 thousand of
cotton futures and options and at January 1, 1995, no cotton futures and options
were held. Gains and losses on these hedges are deferred and matched to
inventory purchases and credited or charged to cost of sales as such inventory
is sold. For 1995, gains of $1.3 million were credited to cost of sales and in
1994 and 1993 losses charged to cost of sales were less than $40,000 per year.
The Company enters foreign exchange contracts to hedge transactions
denominated in foreign currencies related to export sales and machinery
purchases. The fair value of these contracts is estimated using the end of year
exchange rates. At December 31, 1995, the Company had outstanding foreign
exchange contracts of $947,000 with a fair value of $964,000. At January 1,
1995, outstanding foreign exchange contracts aggregated $1,680,000 with a fair
value of $1,669,000.
The carrying value of short-term financial instruments approximates fair value
due to the short maturity of those instruments.
The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered for debt of the same remaining maturities.
The carrying amount and estimated fair value of the Company's debt instruments
at December 31, 1995, and January 1, 1995 are as follows:
................................................................................
<TABLE>
<CAPTION>
1995 1994
CARRYING FAIR CARRYING FAIR
(AMOUNTS IN THOUSANDS) AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
Foreign Exchange Contracts $ 947 $ 964 $ 1,680 $ 1,669
Notes Payable 8,875 8,875 10,700 10,700
Long Term Debt:
8% Senior Note 75,000 79,575 75,000 73,374
Revolving Credit Agreement -- -- 49,000 49,000
8 1/8% Debentures 95,910 110,625 -- --
Other long-term debt 2,108 2,108 2,522 2,522
</TABLE>
...........................................................................
Note 21
TRANSACTIONS WITH AFFILIATED COMPANIES
The Company had various transactions in the normal course of business with its
unconsolidated affiliated companies during 1995. The Company purchased $44.8
million in finished goods from CIPSA and sold $1.7 million of finished goods to
CIPSA in 1995. In addition, for 1995 the Company had proceeds of $1.0 million
from the sale of used textile manufacturing equipment to CIPSA. The Company did
not have significant sales or purchases with CIPSA in 1994.
Parras Cone began production of denim during the fourth quarter of 1995.
Therefore, purchases from this affiliate were not significant in 1995.
............................................................................
Note 22
SUBSEQUENT EVENT
On January 22, 1996, the Company completed the sale of its Olympic Products
Division to British Vita PLC. The Company sold all inventory and substantially
all of the property, plant and equipment of this division and will collect the
trade accounts receivable as they become due. Proceeds, including the collection
of receivables, in excess of $50 million will be realized from the sale of this
division. The gain from disposal of this division will be recognized in the
Company's first quarter 1996 financial statements.
Sales revenues of the Olympic Product Division for 1995 were $94.7 million.
35
<PAGE>
Exhibit 13 (continued) Page 260
..........................................................................
Note 23
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for years 1995 and 1994:
................................................................................
<TABLE>
<CAPTION>
QUARTERS ENDED
APR. 2, JUL. 2, OCT. 1, DEC. 31,
(IN THOUSANDS, EXCEPT PER SHARE) 1995 1995 1995 1995
<S> <C> <C> <C> <C>
Net sales $226,205 $232,952 $231,699 $219,361
Gross profit1 33,056 34,446 33,863 23,620
Income (loss) from operations 12,229 12,496 11,788 (1,089)
Equity in earnings (loss) of unconsolidated affiliates (2,515) (6,423) 683 (8,601)
Net income (loss) $ 3,634 $ (872) $ 5,866 $(11,884)
Per share data (fully diluted):
Net income (loss) $ .11 $ (.06) $ .19 $ (.46)
Weighted average shares outstanding 27,465 27,380 27,530 27,380
Common stock prices*
High 12 1/4 13 1/2 14 3/8 13 1/4
Low 10 5/8 11 12 1/2 10 3/4
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
APR. 3, JUL. 3, OCT. 2, JAN. 1,
(IN THOUSANDS, EXCEPT PER SHARE) 1994 1994 1994 1995
<S> <C> <C> <C> <C>
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
Equity in earnings (loss) of unconsolidated affiliates 99 222 -- (98)
Income before cumulative effect of accounting change 10,464 9,847 8,559 7,321
Net income $ 9,236 $ 9,847 $ 8,559 $ 7,321
Per share data (fully diluted):
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
The number of holders of record of the Company's Common Stock as of
March 1, 1996 was 511.
</TABLE>
*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.
In the fourth quarter of 1995 the Company recorded a $10.9 million pre-tax
charge related to its investment in CIPSA for the write-off of acquisition
goodwill and the write-down of the investment to expected net realizable value.
In addition, the Company recorded a $2.5 million and a $1.2 million provision to
writedown its former corporate headquarters site and certain manufacturing
equipment to their realizable value, respectively. The net effect of these
charges was to increase fourth quarter loss by $10.2 million ($.37 per share).
36
<PAGE>
Exhibit 13 (continued) Page 261
.....................................................................
STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Cone Mills is responsible for the preparation and integrity of
the Company's published financial statements. The financial statements have been
prepared in accordance with generally accepted accounting principles and include
management's best estimates and judgment. Management has also prepared the other
information contained in this report and is responsible for its accuracy and
consistency with the financial statements.
The Company maintains a system of internal control over financial
reporting, which is designed to provide reasonable assurance to the Company's
management and Board of Directors regarding the preparation of reliable
published financial statements. The system includes a code of conduct to foster
a strong ethical climate, established policies and procedures, internal audit
processes, and the employment of qualified
personnel. The Company has established formal criteria against which the
internal control system is measured and as of December 31, 1995, the Company was
in compliance with these criteria.
The Board of Directors, assisted by its Audit Committee which is composed
entirely of directors who are not officers or employees of the Company, provides
oversight to the financial reporting process. The Committee meets regularly with
management, internal auditors and independent certified accountants to review
the scope and findings of audits, financial reporting issues and the adequacy of
the internal control system. To assure complete independence, representatives of
McGladrey & Pullen, LLP, Certified Public Accountants and Consultants, approved
by the shareholders, have free access to the Audit Committee with or without the
presence of management.
<TABLE>
<S> <C> <C>
(Signature of J. Patrick Danahy) (Signature of John L. Bakane) (Signature of J.D. Holder)
J. Patrick Danahy John L. Bakane J.D. Holder
PRESIDENT AND EXECUTIVE VICE PRESIDENT AND CONTROLLER
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
</TABLE>
.......................................................................
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 December 31, 1995 and January 1, 1995, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 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 man-
agement, 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 December 31, 1995 and
January 1, 1995, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 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.
(Signature of Mc Gladrey & Pullen, LLP)
McGladrey & Pullen, LLP
Greensboro, North Carolina
February 14, 1996
37
<PAGE>
Exhibit 13 (continued) Page 262
HISTORICAL FINANCIAL REVIEW
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
........................................................................
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
</TABLE>
........................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net Sales $ 910.2 $ 806.2 $ 769.2 $ 705.4 $ 633.0
Cost of Sales 757.0 642.5 589.3 540.8 523.5
Depreciation 28.2 23.3 21.0 18.5 17.1
Subtotal 785.2 665.8 610.3 559.3 540.6
Gross Profit 125.0 140.4 158.9 146.1 92.4
Selling and Administrative 89.6 77.8 73.3 67.6 56.8
Restructuring Charge -- -- -- -- 0.8
Income from Operations 35.4 62.6 85.6 78.5 34.8
Other Expense -- Net 14.5 7.3 6.4 8.3 18.4
Income from Continuing Operations Before Income Tax and
Equity in Earnings (Loss) of
Unconsolidated Affiliates 20.9 55.3 79.2 70.2 16.4
Income Tax 7.3 19.7 29.9 24.8 6.3
Income from Continuing Operations before Equity in
Earnings (Loss) of Unconsolidated Affiliates 13.6 35.6 49.3 45.4 10.1
Equity in Earnings (Loss) of Unconsolidated Affiliates (16.9) 0.2 0.3 -- --
Income (Loss) from Continuing Operations (3.3) 35.8 49.6 45.4 10.1
Discontinued Operations -- 0.4 -- -- (34.9)
Income before Extraordinary Item and Cumulative Effect
of Accounting Change (3.3) 36.2 49.6 45.4 (24.8)
Extraordinary Item -- -- -- (2.0) --
Cumulative Effect of Accounting Change -- (1.2) -- -- --
Net Income (Loss) $ (3.3) $ 35.0 $ 49.6 $ 43.4 $ (24.8)
Per Share of Common Stock
Income (loss) from Continuing Operations $ (.22) $ 1.19 $ 1.68 $ 1.67 $ 0.22
Net Income (Loss) (.22) 1.16 1.68 1.59 (1.58)
SEGMENT INFORMATION
Net Sales
Apparel $ 700.1 $ 600.5 $ 575.8 $ 520.0 $ 458.0
Home Furnishings 210.1 205.7 193.4 185.4 175.0
Total $ 910.2 $ 806.2 $ 769.2 $ 705.4 $ 633.0
Operating Income (Loss)
Apparel $ 39.9 $ 47.5 $ 68.8 $ 67.4 $ 20.4
Home Furnishings (0.6) 19.0 19.5 16.3 19.2
BALANCE SHEET DATA (AT YEAR END):
Current Ratio 1.6 1.8 1.9 1.8 1.9
Total Assets $ 584.3 $ 524.1 $ 431.6 $ 401.9 $ 432.7
Long-Term Debt 173.0 126.5 77.9 77.5 188.9
Stockholders' Equity 222.1 236.9 210.0 163.4 82.9
Long-Term Debt As a Percent of Stockholders' Equity and
Long-Term Debt 44% 35% 27% 32% 69%
Shares Outstanding (millions) Year End2,3 27.4 27.4 27.7 27.7 17.9
OTHER DATA:
Capital Expenditures-Continuing Operations $ 61.7 $ 37.5 $ 38.7 $ 25.4 $ 21.0
Return on Average Common Stockholders' Equity4 (3.2)% 17.9% 31.6% 55.3% 11.9%
Common Stock Dividend Paid -- -- -- -- --
Number of Employees at Year End 7,900 8,100 7,800 7,600 7,600
</TABLE>
1FISCAL YEAR 1992 REPRESENTS A 53 WEEK PERIOD
2INCLUDES PARTICIPATING PREFERRED SHARES
3INCLUDES 6.9 MILLION SHARES OF COMMON STOCK ISSUED IN MID-1992 INITIAL PUBLIC
OFFERING
4CONTINUING OPERATIONS
38
FORM 10-K Page 263
EXHIBIT 21 - SUBSIDIARIES
CONE MILLS CORPORATION AND 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 Co. Greensboro, NC North Carolina 100
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.
Comercializadora Cone Mills, Mexico City Mexico, D.F. 99
S.A. de C.V.
Cone Global Finance Corp. San Francisco, CA California 100
Cone Singapore, Pte., Ltd. Singapore Republic of Singapo 100
CIPCO, S.C., Inc. Carlisle, S.C. Delaware 100
FORM 10-K Page 264
Exhibit 23.1
McGLADREY & PULLEN, LLP
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; 33-67800 and 33-
53705) of our reports; dated February 14, 1996, 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 December 31, 1995.
/s/ McGLADREY & PULLEN, LLP
McGladrey & Pullen, LLP
Greensboro, North Carolina
March 28, 1996
