FIELDCREST CANNON INC, DEF 14A, 1995-03-22

FIELDCREST CANNON INC
DEF 14A, 1995-03-22
BROADWOVEN FABRIC MILLS, COTTON

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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (section mark)240.14a-11(c) or
(section mark)240.14a-12
FIELDCREST CANNON, INC.
(Name of Registrant as Specified In Its Charter)
FIELDCREST CANNON, INC.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange
Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

<PAGE>

FIELDCREST CANNON, INC.
326 EAST STADIUM DRIVE
EDEN, NORTH CAROLINA 27288
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1995
TO THE STOCKHOLDERS OF
FIELDCREST CANNON, INC.
The annual meeting of stockholders of Fieldcrest Cannon, Inc. will
be held at the Company's Offices at 1271 Avenue of the Americas, New
York, New York, on April 24, 1995 at 10:00 a.m., for the following
purposes:
I. To elect eight directors to the Company's Board of Directors;
II. To consider and vote upon a proposal to adopt the 1995
Employee Stock Option Plan;
III. To consider and vote upon a proposal to amend the Director
Stock Option Plan to increase the number of shares subject to
annual option grant from 1,000 to 2,000 shares;
IV. To consider and vote upon a proposal to amend the Director
Stock Option Plan to extend the option exercise period for
options granted under the plan in the event of a Director's
termination from service on the Board;
V. To consider and vote upon a proposal to ratify the selection of
Ernst & Young as independent accountants to audit the accounts
of the Company for the year ending December 31, 1995;
and to act upon such other matters as may properly come before the
meeting or any adjournment thereof.
Only holders of Common Stock at the close of business on March 6,
1995, will be entitled to vote at the meeting or any adjournment
thereof.
By Order of the Board of Directors,
M. KENNETH DOSS
SECRETARY
Eden, North Carolina
March 22, 1995
IMPORTANT -- YOUR PROXY IS ENCLOSED
Stockholders are requested to execute and promptly return the enclosed
proxy in the enclosed envelope. No postage is required for mailing in the
United States.

<PAGE>
March 22, 1995
(Fieldcrest Cannon logo)
FIELDCREST CANNON, INC.
326 EAST STADIUM DRIVE
EDEN, NORTH CAROLINA 27288
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1995
The enclosed proxy is solicited by the Board of Directors of Fieldcrest
Cannon, Inc., a Delaware corporation (the "Company"). Arrangements will be made
with brokerage houses and other custodians, nominees and fiduciaries to send
proxy material to their principals, and the Company will reimburse them for
their reasonable expenses in doing so. Copies of this proxy statement and
accompanying proxy card will first be mailed to stockholders on or about March
22, 1995.
The expense of this solicitation will be paid by the Company. In addition
to solicitation by mail, officers and other employees of the Company may solicit
proxies by personal interview, telephone or other methods of telecommunication.
The Company has retained Morrow & Company, Inc. ("Morrow") to assist in such
solicitation. The Company has been advised that the fee of Morrow is estimated
not to exceed $4,000, plus reasonable out-of-pocket costs and expenses.
When the enclosed proxy is properly executed and returned, the shares it
represents will be voted in accordance with the directions indicated thereon, or
if no direction is indicated, it will be voted in favor of the election of the
eight nominees for director identified below, in favor of the adoption of the
1995 Employee Stock Option Plan, in favor of the amendments to the Director
Stock Option Plan, and in favor of the ratification of the selection of Ernst &
Young as independent accountants. Any stockholder giving a proxy has the power
to revoke it at any time before it is voted.
Only the holders of Common Stock of record at the close of business on
March 6, 1995, will be entitled to vote at the meeting. On that date 8,823,852
shares of Common Stock having one vote each were outstanding.
Under the Company's Amended and Restated By-Laws and applicable law, the
holders of a majority of the shares of capital stock of the Company issued and
outstanding and entitled to vote, present in person or represented by proxy,
will constitute a quorum for the transaction of business at the 1995 annual
meeting of stockholders. Abstentions, votes withheld for director nominees and
shares held of record by a broker, as nominee ("Broker Shares"), that are voted
on any matter will be included in determining the number of shares present or
represented at the meeting. Broker Shares that are not voted on any matter at
the meeting will not be included in determining the number of shares present or
represented at the meeting. Under the Company's Restated Certificate of
Incorporation, each proposal to be presented to stockholders for their
consideration at the 1995 annual meeting will be approved if the holders of a
majority of the votes which may be cast vote in favor of such proposal.
Abstentions, votes withheld for director nominees and Broker Shares that are not
properly voted will have the same effect as negative votes with respect to each
proposal.

<PAGE>
I. ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of directors of the Company
shall be determined by resolution of the Board of Directors. The Board of
Directors presently consists of eight directors. Eight persons have been
nominated to serve for one-year terms and until their successors have been duly
elected and qualified. Each nominee for director has indicated a willingness to
being named in the proxy statement and to serve if elected, and the persons
named as proxies intend to vote for such nominees absent instructions to the
contrary on the enclosed proxy. However, if any nominee for director becomes
unavailable for election, the persons named on the enclosed proxy intend to vote
for such other person as the Board of Directors may recommend in his place. Each
nominee is currently a director of the Company and has served as such since the
year set forth in the table below, except for Noah T. Herndon, who served as a
director of the Company from 1982 through 1993. Mr. Herndon has been nominated
to replace Charles G. Horn who has declined to stand for re-election. None of
the nominees is related by blood, marriage or adoption to any other nominee or
any executive officer of the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE SINCE BOARD COMMITTEE MEMBERSHIPS
<S> <C> <C>
Tom H. Barrett, 64...................................... 1992 Compensation; Nominating
James M. Fitzgibbons, 60................................ 1985 Executive
William E. Ford, 69..................................... 1993 Audit Review; Retirement Review
John C. Harned, 67...................................... 1985 Audit Review; Compensation; Retirement Review
Noah T. Herndon, 63.....................................
S. Roger Horchow, 66.................................... 1994 Audit Review; Nominating
W. Duke Kimbrell, 70.................................... 1993 Executive; Compensation; Nominating
C. J. Kjorlien, 78...................................... 1989 Audit Review; Retirement Review; Nominating
</TABLE>

TOM H. BARRETT formerly served as Chairman of the Board (from 1989 until
June 1991), Chief Executive Officer (from 1988 until June 1991), President (from
1983 until April 1991) and Chief Operating Officer (from 1983 until 1988) of
Goodyear Tire & Rubber Company prior to his retirement in June 1991. He is also
a Director of A.O. Smith Corporation, Rubbermaid, Inc., Mutual Life Insurance
Company of New York and Air Products and Chemicals, Inc., and a partner in
American Investment Partners, a private investment company.
JAMES M. FITZGIBBONS was appointed Chairman of the Company's Board of
Directors and Chief Executive Officer on October 15, 1990. Mr. Fitzgibbons
served as President of Amoskeag Company (from March 9, 1987 until March 6, 1992)
and previously served as President and a Director of Howes Leather Company,
Inc., a company which manufactures sole leather for the shoe industry. Mr.
Fitzgibbons continues to serve as Chairman of Howes Leather Company, Inc., and
is also a Trustee of Dreyfus Laurel Funds, which provides a variety of
investment services through a series of mutual funds, and a Director of Barrett
Resources Corporation, an oil and gas exploration company.
WILLIAM E. FORD was appointed the Goodyear Executive Professor at Kent
State University's College of Business Administration and Graduate School of
Management in January 1994, and is presently teaching a course entitled
"Strategy and Operations in a Global Economy." Mr. Ford has served as President
of Bejai, Inc., a venture capital company, since 1991. He served as President of
VMI, a Dutch Company producing high tech equipment for the tire industry, from
1986 until 1991. In addition, he has served as a consultant on international
ventures to the United Nations and as a senior advisor to a development project
in China.
JOHN C. HARNED has been President of Bedford Advisors, Inc., a corporate
financial consulting company, for more than five years. Mr. Harned also has
served as Executive Vice President, Chief Financial Officer and Director of
Financial Protection Services, Inc. (from 1989 - 1990), Vice President of
Dartmouth College and Executive Vice President and Chief Financial Officer of
Penn Central Corporation.
NOAH T. HERNDON has been a partner for more than five years of Brown
Brothers Harriman & Co., a private commercial bank and investment advisory and
stock brokerage firm. Mr. Herndon served as a Director of the Company from 1982
through 1993. Mr. Herndon is also a Director of Watts Industries, Inc., and
National Auto Credit, Inc.
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S. ROGER HORCHOW has served as Chairman of R. Horchow Productions, Inc.
since 1990. He was Chairman of the Horchow Collection from 1973 until 1990. He
has been active in numerous civic and charitable organizations and has produced
the award winning Broadway play CRAZY FOR YOU. He is also a Director of the
Dallas Symphony, Public Radio International, White House Endowment Fund,
Smithsonian Institution, American Institute for Public Service, Friends of Art
and Preservation in Embassies, Better Business Bureau of Dallas and serves on
the Board of Governors of the Yale University Art Gallery.
W. DUKE KIMBRELL has been Chairman of the Board, Chief Executive Officer,
and a Director of Parkdale Mills, Inc., a textile manufacturer, since 1961. He
is also a Director of Wachovia Corporation, Inman Mills, Wrap Spun Yarns,
Textile/Clothing Technology Corporation, Foundation of University of North
Carolina/Charlotte, and North Carolina State Textile Foundation.
C. J. KJORLIEN was President of West Point-Pepperell, Inc. for a number of
years prior to his retirement in 1986. He is also a Director of Johnston
Industries, Inc. and Service America, Inc.
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SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company knows of no one who beneficially owns in excess of five percent
of a class of the Company's voting securities except as set forth in the table
below. Except as indicated in the footnotes, each stockholder set forth below
has, to the best of the Company's knowledge, the sole power to vote and to
dispose of the shares beneficially owned by such stockholder. Common Stock has
one vote per share.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
TITLE OF BENEFICIAL PERCENT
CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
<S> <C> <C> <C>
Common Stock Gabelli Funds, Inc. 892,302 (1) 9.7%
One Corporate Center
Rye, New York 10580-1434
Common Stock FMR Corp. 676,633 (2) 7.3%
82 Devonshire Street
Boston, MA 02109-3614
Common Stock The Guardian Life Insurance Company of 474,400 (3) 5.4%
America
201 Park Avenue South
New York, NY 10003
</TABLE>

(1) According to information contained in a statement on Schedule 13D filed with
the Securities and Exchange Commission, as of February 1, 1995, Gabelli
Funds, Inc., GAMCO Investors, Inc., Gabelli & Company, Inc., Safety Railway,
and Mario J. Gabelli had the sole dispositive power over 892,302 shares of
the Company's Common Stock (including 379,002 shares that may be acquired
upon the conversion of $16,770,000 principal amount of the Company's 6%
Convertible Subordinated Debentures) and sole voting power with respect to
829,302 of these shares. Mr. Gabelli is deemed to have beneficial ownership
of the securities beneficially owned by each of the foregoing persons, and
Gabelli Funds, Inc. is deemed to have beneficial ownership of the securities
owned beneficially by each of the foregoing persons other than Mr. Gabelli.
(2) FMR Corp. has advised the Company that, as of January 31, 1995, it is the
beneficial owner of 676,633 shares of the Company's Common Stock (including
393,333 shares of Common Stock that may be acquired upon the conversion of
230,100 shares of the Company's $3.00 Convertible Preferred Stock). FMR
Corp. has sole voting power with respect to 72,479 shares and sole
dispositive power with respect to all 676,633 shares.
(3) According to information contained in a statement on Schedule 13D filed with
the Securities and Exchange Commission, as of February 10, 1995, The
Guardian Life Insurance Company of America is the beneficial owner of
474,400 shares of the Company's Common Stock and has sole voting and
dispositive power with respect to 147,100 of these shares.
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership at March 6, 1995, of each class of equity securities of the
Company, by each director, nominee for director and executive officer named in
the Summary Compensation Table under the heading "Executive Compensation,"
below, and for all directors and executive officers of the Company as a group.
Unless otherwise indicated, the individuals named below hold sole voting power
and investment power as to the shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AS OF MARCH 6, 1995
FIELDCREST CANNON
COMMON STOCK
NO. OF PERCENT
DIRECTORS AND NOMINEES FOR DIRECTOR SHARES OF CLASS
<S> <C> <C>
Tom H. Barrett..................................................................... 4,000(1) *
James M. Fitzgibbons............................................................... 62,877(2)(3)(4) *
William E. Ford.................................................................... 1,700(5) *
John C. Harned..................................................................... 9,000(2) *
Noah T. Herndon.................................................................... 6,000 *
S. Roger Horchow................................................................... 1,000(5) *
Charles G. Horn.................................................................... 45,642(2)(4)(6) *
W. Duke Kimbrell................................................................... 109,282(5)(7) 1.24%
C. J. Kjorlien..................................................................... 26,000(2) *
NON-DIRECTOR EXECUTIVES:
Chris L. Kametches................................................................. 26,091(4) *
Robert E. Dellinger................................................................ 13,400(4) *
R. B. Dale......................................................................... 7,638(4)(8) *
All directors and executive officers of the Company as a group
(17 persons, including the ones listed above)..................................... 356,075(9) 3.99%
</TABLE>

* Represents less than 1%.
(1) Includes 3,000 shares of Common Stock which may be purchased upon the
exercise of options granted under the Director Stock Option Plan.
(2) Includes 6,000 shares of Common Stock which may be purchased upon the
exercise of options granted under the Director Stock Option Plan.
(3) Includes 20,000 shares of Common Stock covered by an option that the Company
granted to Mr. Fitzgibbons pursuant to a Stock Option Agreement dated as of
September 11, 1991 between the Company and Mr. Fitzgibbons. The option is
exercisable at $14.875 per share, which was the closing price per share of
the Common Stock on the New York Stock Exchange on September 11, 1991, and
may be exercised in whole or in part at any time before September 10, 1998,
provided Mr. Fitzgibbons is on the date of exercise an employee of the
Company. In the event of his death, the option will terminate unless
exercised by Mr. Fitzgibbons' legal representative within 12 months after
the date of death. The number of shares subject to the option and the option
price may be adjusted in the event of certain changes in the Common Stock in
order to prevent dilution or enlargement of Mr. Fitzgibbons' rights under
the option.
(4) Includes outstanding shares of stock granted under the Long-Term Incentive
Plan as of March 6, 1995.
(5) Includes 1,000 shares of Common Stock which may be purchased upon the
exercise of options granted under the Director Stock Option Plan.
(6) Mr. Horn resigned from the Company on March 3, 1995.
(7) Includes 51,282 shares that may be acquired upon the conversion of 30,000
shares of $3.00 Convertible Preferred Stock owned by Parkdale Mills, Inc.,
of which Mr. Kimbrell is a principal shareholder and the Chairman of the
Board and Chief Executive Officer. Mr. Kimbrell shares voting and investment
power as to all the shares owned by Parkdale Mills.
(8) Mr. Dale resigned from the Company on March 3, 1995.
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(9) Includes 30,000 shares of Common Stock that may be purchased by Directors
upon the exercise of options granted under the Director Stock Option Plan,
61,628 shares that have been granted to Directors and executive officers
under the Long-Term Incentive Plan and 20,000 shares covered by the option
granted to Mr. Fitzgibbons as described in note (3).
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1994, the Board of Directors held eight meetings. Each director
attended more than 75 percent of the 1994 Board meetings and meetings of Board
Committees of which he was a member.
The business of the Company is under the general management of the Board of
Directors as provided by the laws of Delaware and the Bylaws of the Company. The
Board of Directors has established an Executive Committee, Audit Review
Committee, Compensation Committee, Retirement Review Committee and Nominating
Committee.
The Executive Committee may exercise, during intervals between meetings of
the Board, all the powers of the Board of Directors except to the extent limited
by law. The Executive Committee consists of three members and did not meet
during 1994.
The Audit Review Committee consists of four members who are not salaried
employees and who are, in the opinion of the Board of Directors, free from any
relationship that would interfere with their exercise of independent judgment as
Audit Review Committee members. During 1994, the Audit Review Committee held
three meetings. The functions of the Audit Review Committee are to recommend the
engagement of the Company's independent auditors and to review with them the
plan and scope of their audit for each year, the status of their audit during
the year, the results of the audit when completed, the auditors' letter on their
observations and recommendations to the Company and their fees for services
performed. The Committee also reviews the results of the annual audit with
management, both jointly with the independent auditors and separately, reviews
financial statements and filings with the Securities and Exchange Commission,
discusses with management the adequacy of internal controls, monitors the work
of the Company's Internal Audit Department and reports to the entire Board with
respect to audit-related matters.
The Compensation Committee consists of three non-employee directors and met
twice during 1994. The functions of the Committee are to review the compensation
of the Company's corporate officers and to make adjustments with respect
thereto. The Compensation Committee also administers other aspects of the
Company's executive compensation program and makes recommendations to the full
Board with respect to compensation for Board service.
The Retirement Review Committee consists of three members and met seven
times during 1994. This Committee monitors, reviews and reports to the Board on
the Company's defined benefit and contribution plans, and any future, new or
substituted plans, the level of benefits provided and proposed thereunder, and
the investment of assets by investment managers of such plans.
The Nominating Committee consists of four members and met informally from
time to time during 1994. The function of the Committee is to make
recommendations to the full Board as to the desirable number of directors and
candidates to fill any positions on the Board. The Committee will consider
candidates suggested by stockholders of the Company, and suggestions for
candidates, accompanied by biographical information for evaluation and certain
other information, should be sent to the Secretary of the Company at the address
appearing on the first page of this Proxy Statement. See "Stockholder
Proposals."
COMPENSATION OF DIRECTORS
Effective January 1, 1994, non-employee directors of the Company are paid
quarterly retainers of $4,500 and a fee of $1,000 for each Board or Committee
meeting attended, except that Committee Chairmen are paid a fee of $1,500 per
Committee meeting. Non-employee directors are also paid a fee of $600 for each
short telephonic meeting. Directors, including employee directors, are
reimbursed for travel and other expenses relating to their functions served as
directors. In addition, the Company presently has a consulting arrangement with
C. J. Kjorlien pursuant to which Mr. Kjorlien provides from time to time
consulting services to certain executive
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officers of the Company. During 1994, Mr. Kjorlien received $6,591 in
consideration for his services under this arrangement.
DIRECTOR STOCK OPTION PLAN
On February 7, 1990, the Board of Directors adopted, and on April 24, 1990
the stockholders approved, the Director Stock Option Plan of Fieldcrest Cannon,
Inc. The purpose of the plan is to encourage and enable directors to acquire or
increase their ownership of the Company's common stock and to promote a closer
identification of their interests with those of the Company and its
stockholders. The plan currently provides for an annual grant of an option for
1,000 shares of Common Stock to each person who is a director. The grant is made
on the fifth business day after the annual meeting of stockholders. The Company
has reserved 500,000 shares of Common Stock for issuance pursuant to the plan.
In 1994 options for 8,000 shares were granted at a per share price of $25.625.
At March 6, 1995, all of these options were outstanding and exercisable.
The Director Stock Option Plan is proposed to be amended. See "Amendments
to Director Stock Option Plan."
DIRECTOR STOCK APPRECIATION RIGHTS PLAN
On May 22, 1994, each non-employee director was granted stock appreciation
rights ("SARs") with respect to 1,000 shares of Common Stock under the plan. The
SARs may be exercised up to seven years from the grant date for cash equal to
the increase in the market value of the Company's Common Stock above $25.625,
the closing price on May 22, 1994.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Chief
Executive Officer and the other four most highly compensated executive officers
(the "Named Executives") for the years ended December 31, 1994, 1993, and 1992.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
SECURITIES
RESTRICTED UNDERLYING
NAME AND ANNUAL COMPENSATION STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(A) AWARDS ($)(B) SARS (#)(C) COMPENSATION ($)(D)
<S> <C> <C> <C> <C> <C> <C>
C. G. Horn (e) 1994 $481,353 $ 81,830 $ 105,732 1,000/15,450 $34,284
President and Chief 1993 515,000 174,998 93,718 1,000/0 36,296
Operating Officer 1992 500,000 200,000 52,856 4,000/0 29,859
J. M. Fitzgibbons (f) 1994 439,966 74,794 96,646 1,000/30,000 34,284
Chairman and Chief 1993 515,000 174,998 93,718 1,000/0 36,296
Executive Officer 1992 500,000 200,000 52,856 4,000/0 29,859
C. L. Kametches (f) 1994 224,503 38,166 49,302 0/7,206 19,691
Senior Vice President 1993 240,196 81,619 53,615 -- 20,258
1992 233,200 93,280 30,263 -- 12,102
R. E. Dellinger (f) 1994 224,503 38,166 49,302 0/7,206 19,691
Vice President and 1993 240,196 81,619 53,615 -- 20,258
President Bath Division 1992 233,200 93,280 30,263 -- 12,102
R. B. Dale (f) (g) 1994 222,385 37,805 48,840 0/7,138 19,483
Vice President and 1993 237,930 80,849 53,271 -- 20,089
President Bed Division 1992 231,000 92,400 30,075 -- 11,996
</TABLE>

(a) The amount shown in this column represents annual bonuses under the
Company's Short-term Incentive Compensation Plan. Awards under this plan are
made at the discretion of the Board of Directors.
(b) Amounts set forth in this column represent the value of shares awarded to
the Named Executives during 1994, 1993, and 1992 under the Company's
Long-Term Incentive Plan. The value of such shares is determined by
multiplying the number of shares of stock earned by the value of the
Company's Common Stock at the close of business on the date of award. The
number (and value) of shares of stock held by the Named Executives at
December 31, 1994 (including 1991 shares which vested on January 2, 1995) is
as follows: C. G. Horn -- 14,523 shares ($370,337); J. M.
Fitzgibbons -- 10,486 shares ($267,393); C. L. Kametches -- 7,323 shares
($186,737); R. E. Dellinger -- 7,323 shares ($186,737); and R. B.
Dale -- 7,280 shares
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<PAGE>
($185,640). The Named Executives are entitled to dividends and voting rights
with respect to such stock awards as of the grant date.
(c) Includes options granted under the Director Stock Option Plan. In 1992, the
Company amended its Director Stock Option Plan to, among other things,
increase the period during which options granted under the plan (including
options outstanding at the time of the amendment) may be exercised from one
year to seven years. Options outstanding at the time of this amendment may
be deemed to have been regranted and are therefore shown as granted during
1992. At the time of the amendment, J. M. Fitzgibbons and C. G. Horn each
held options to purchase 3,000 shares of the Company's Common Stock under
the plan.
Effective March 1, 1994 the Board of Directors initiated a salary reduction
plan under which Mr. Fitzgibbons' annual salary was reduced by $100,000 and
the annual salaries of all other executive officers were reduced by 10%. In
connection with such reduction, stock appreciation rights ("SARs") equal to
300 shares per $1,000 of salary reduction were granted to these employees.
The SARs may be exercised up to seven years from the grant date for cash
equal to increases in the market value of the Company's Common Stock above
$28.50, the closing market value on March 1, 1994. The annual salaries of
all executive officers were increased as of January 1, 1995 by the amount of
the March 1, 1994 reduction.
(d) The amount shown in this column consists of deferred compensation allocated
by the Company to the account of the Named Executives under the Executive
Capital Accumulation Plan, a nonqualified deferred compensation profit
sharing plan, and the value of Common Stock as of the grant date
representing the Company match under the Company's Retirement Savings Plan.
The account balance in the Capital Accumulation Plan of each of the Named
Executives at December 31, 1994 is as follows: C. G. Horn -- $133,932; J. M.
Fitzgibbons -- $94,544; C. L. Kametches -- $59,714; R. E.
Dellinger -- $59,237; and R. B. Dale -- $58,806. The number (and value) of
shares held by each of the Named Executives at December 31, 1994 in the
Company's Retirement Savings Plan is as follows: C. G. Horn -- 391 shares
($9,970); J. M. Fitzgibbons -- 391 shares ($9,970); C. L. Kametches -- 360
shares ($9,180); R. E. Dellinger -- 360 shares ($9,180); and R. B.
Dale -- 358 shares ($9,129). The Named Executives are entitled to dividends
and voting rights with respect to shares held in the plan.
(e) Compensation was paid to Mr. Horn under the terms of an employment contract
covering his services from January 1, 1988 through December 31, 1995 at an
annual salary of at least $515,000, exclusive of normal incentive
compensation, supplemental retirement and other employee benefits. Mr. Horn
resigned from the Company on March 3, 1995, effective July 31, 1995. In
connection with Mr. Horn's resignation, the Company agreed to pay Mr. Horn
certain benefits provided for under the employment agreement. Specifically,
Mr. Horn will receive on July 31, 1995 a lump sum cash payment equal to
three times his annual salary. In addition, Mr. Horn will receive benefits
to which he is entitled as of July 31, 1995 under existing retirement and
benefit plans, including the Long-Term Incentive Plan, the Stock
Appreciation Rights Plan and the Director Stock Option Plan. Mr. Horn will
also be entitled to medical coverage until age 60.
(f) Certain executives of the Company are parties to agreements under which they
are entitled to a lump-sum payment of an amount based on their base salary
in the event of a change in control of the Company. Under the agreements,
upon a change in control of the Company, the following executive officers
will be entitled to receive a lump-sum payment of their base salary
otherwise payable over the following number of years: J. M. Fitzgibbons, 3
years; C. L. Kametches, 2 years; and R. E. Dellinger, 2 years.
(g) Mr. Dale resigned from the Company on March 3, 1995. In connection with his
resignation, Mr. Dale will continue to receive, until July 31, 1995, his
salary as though he were still an employee of the Company. In addition, he
will receive a cash payment equal to two times his annual salary and the
present value of certain pension benefits. Mr. Dale also will continue to
participate in certain other benefit and compensation programs of the
Company for periods ranging from July 31, 1995 to July 31, 1997. Restricted
stock granted to Mr. Dale under the Long-Term Incentive Plan and SARs
granted under the SAR Plan became fully vested as of March 8, 1995.
8

<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to the stock
options and SARs granted to the Named Executives during 1994, including the
potential realizable value of such options and SARs at assumed annual rates of
stock price appreciation of 5% and 10% for the option and SARs terms.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/SARS, ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE
UNDERLYING EMPLOYEES IN EXERCISE APPRECIATION FOR
OPTIONS/SARS FISCAL OR BASE EXPIRATION OPTION TERM
NAME GRANTED (#)(A) YEAR(B) PRICE ($/SH) DATE 5% ($)
<S> <C> <C> <C> <C> <C>
C. G. Horn (c) 1,000/15,450 12.5%/6.6% $25.625/$28.50 5-22-2001/3-1-2001 $10,432/$179,256
President and Chief
Operating Officer
J. M. Fitzgibbons 1,000/30,000 12.5%/12.9% 25.625/28.50 5-22-2001/3-1-2001 10,432/348,071
Chairman and Chief
Executive Officer
C. L. Kametches -- /7,206 -- /3.1% -- /28.50 -- /3-1-2001 -- /83,607
Senior Vice President
R. E. Dellinger -- /7,206 -- /3.1% -- /28.50 -- /3-1-2001 -- /83,607
Vice President and
President Bath Division
R. B. Dale (d) -- /7,138 -- /3.1% -- /28.50 -- /3-1-2001 -- /82,818
Vice President and
President Bed Division
<CAPTION>
NAME 10% ($)
<S> <C> <C>
C. G. Horn (c) $24,311/$417,744
President and Chief
Operating Officer
J. M. Fitzgibbons 24,311/811,153
Chairman and Chief
Executive Officer
C. L. Kametches -- /194,839
Senior Vice President
R. E. Dellinger -- /194,839
Vice President and
President Bath Division
R. B. Dale (d) -- /193,000
Vice President and
President Bed Division
</TABLE>
(a) The number of options set forth in this table represents options granted
under the Company's Director Stock Option Plan. Options granted under this
plan are exercisable immediately for a period of seven years from the date
of grant. See "Compensation of Directors -- Director Stock Option Plan" and
"Amendments to Director Stock Option Plan" for more information with respect
to the terms and conditions of options granted under the Director Stock
Option Plan. The number of SARs set forth in this table represents SARs
granted under the Company's Stock Appreciation Rights Plan. The SAR price
equals the fair market value of the Common Stock on the date of grant. SARs
granted under this plan are exercisable beginning March 1, 1995 for a period
of six years.
(b) Percent of total options/SARs granted to employees includes options granted
to non-employee directors and SARs granted to other executives.
(c) Mr. Horn resigned from the Company on March 3, 1995.
(d) Mr. Dale resigned from the Company on March 3, 1995.
9

<PAGE>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth the number of unexercised options and SARs
held by the Named Executives at December 31, 1994 and the value of such options
and SARs at December 31, 1994, as represented by the positive spread between the
exercise price of such options and the value of shares of the Company's Common
Stock at December 31, 1994. No options and SARs were exercised by any of the
Named Executives during 1994.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS
OPTIONS/SARS AT FY-END AT FY-END
DECEMBER 31, 1994 (#) DECEMBER 31, 1994 ($)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
C. G. Horn (a) 6,000/0 0/15,450 $ 47,250 0
President and Chief Operating Officer
J. M. Fitzgibbons 26,000/0 0/30,000 259,750 0
Chairman and Chief Executive Officer
C. L. Kametches 0/0 0/7,206 -- 0
Senior Vice President
R. E. Dellinger 0/0 0/7,206 -- 0
Vice President and President Bath Division
R. B. Dale (b) 0/0 0/7,138 -- 0
Vice President and President Bed Division
</TABLE>
(a) Mr. Horn resigned from the Company on March 3, 1995.
(b) Mr. Dale resigned from the Company on March 3, 1995.
RETIREMENT PLAN FOR SALARIED EMPLOYEES
Each of the Named Executives listed in the summary compensation table and
all other salaried employees are participants in this plan. The plan is a
qualified, defined benefit plan which, until January 1, 1981, was contributory
on the part of the participants. For the calendar year 1994, the Company's
aggregate contribution for all participants in the plan amounted to
approximately 9.99% of the total plan compensation of the participants. Plan
compensation of participants is limited to base salary and incentive bonuses
earned and specifically excludes items required to be added to W-2 wages such as
moving expenses and other similar forms of compensation. The plan provides
benefits upon early or normal retirement of the Named Executives and employees.
Upon normal retirement at age 65 or early retirement, the participant is
paid a monthly pension by the plan trust based on years of participation in the
plan. The participant's annual benefit at normal retirement is 1.5% of career
average earnings, as defined, times the number of years of service up to a
maximum of 20 years, plus .75% of career average earnings times the number of
years of service in excess of 20 years. The normal form of benefit is a life
annuity. Actuarially computed reductions in vested benefits are made in the
event of early retirement or termination. The table below illustrates the
estimated annual pension benefit payable by the Company under this formula to a
person at normal retirement based on specified average salary "Remuneration" and
years of service classifications.
10

<PAGE>
<TABLE>
<CAPTION>
YEARS OF SERVICE
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
<S> <C> <C> <C> <C> <C>
125,000 28,125 37,500 42,188 46,875 51,563
150,000 33,750 45,000 50,625 56,250 61,875
175,000 39,375 52,500 59,063 65,625 72,188
200,000 45,000 60,000 67,500 75,000 82,500
225,000 50,625 67,500 75,938 84,375 92,813
250,000 56,250 75,000 84,375 93,750 103,125
300,000 67,500 90,000 101,250 112,500 123,750
350,000 78,750 105,000 118,125 131,250 144,375
400,000 90,000 120,000 135,000 150,000 165,000
450,000 101,250 135,000 151,875 168,750 185,625
500,000 112,500 150,000 168,750 187,500 206,250
550,000 123,750 165,000 185,625 206,250 226,875
600,000 135,000 180,000 202,500 225,000 247,500
700,000 157,500 210,000 236,250 262,500 288,750
800,000 180,000 240,000 270,000 300,000 330,000
900,000 202,500 270,000 303,750 337,500 371,250
</TABLE>

The Company funds the entire cost of the plan by periodic contributions to
the Fieldcrest Cannon, Inc. Retirement Plan Trust, which are determined on an
actuarial basis. To the extent that the annual retirement benefit exceeds
certain limits established by the Internal Revenue Code of 1986, as amended (the
"Code"), for payments from qualified trust funds, the difference will be paid
from the general operating funds of the Company in accordance with the Company's
Excess Benefit Plan described below. The Company's contributions are not
allocated to the account of any particular employee. Officers participate in the
plan on the same basis as approximately 2,100 other salaried employees of the
Corporation.
To protect employees (including the Named Executives) from the loss of
benefits resulting from these limitations imposed by the Code, the Company
sponsors a non-qualified plan, the Fieldcrest Cannon, Inc. Excess Benefit Plan
(the "Excess Benefit Plan"). Should benefits under the Retirement Plan otherwise
payable to participating employees be reduced to comply with these limitations,
the Excess Benefit Plan will pay to such employees the difference between the
benefits actually paid under the Retirement Plan and the benefits which would
have been paid thereunder if the limitations had not been in effect. Payments
are made to participants in the Excess Benefit Plan in the same manner and at
the same time or times as under the Retirement Plan.
At December 31, 1994, the credited service for pension calculations for the
Named Executives was as follows: C. G. Horn -- 31 years; J. M. Fitzgibbons -- 3
years; C. L. Kametches -- 34 years; R. E. Dellinger -- 9 years; and R. B.
Dale -- 25 years.
Credited compensation covered by either the Retirement Plan or the Excess
Benefit Plan for 1994 for the Named Executives listed in the summary
compensation table was as follows: C. G. Horn -- $656,351; J. M.
Fitzgibbons -- $614,964; C. L. Kametches -- $306,122; R. E.
Dellinger -- $306,122; and R. B. Dale -- $303,234. Directors who are not
employees are not eligible to participate in the plan.
The benefit amounts in the table shown above are not subject to deduction
for Social Security benefits or other offset amounts.
11

<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock with the
cumulative total return of the Standard & Poor's 500 Stock Index and a peer
group, constructed by the Company, consisting of four corporations (Fieldcrest
Cannon, Inc., Crown Crafts, Inc., Springs Industries, Inc., and Thomaston Mills,
Inc.) that are engaged principally in the manufacture and sale of home
furnishing textile products.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG FIELDCREST CANNON, INC., S&P 500 INDEX & PEER GROUP

(Comparison Graph appears here see plot points below)
1990 1991 1992 1993 1994
Fieldcrest Cannon $30 $57 $84 $113 $117
S&P 500 $97 $126 $136 $150 $152
Peer Group $60 $85 $116 $126 $122

REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
This report of the Compensation Committee of the Board of Directors of the
Company sets forth the Committee's compensation policies applicable to the Named
Executives and the other executive officers of the Company, including the
specific relationship of corporate performance to executive compensation, with
respect to compensation reported in this proxy statement for 1994.
EXECUTIVE COMPENSATION POLICIES
Decisions on compensation of the Company's executive officers are made by
the Compensation Committee of the Board consisting of non-employee directors.
The Committee's executive compensation policies are to motivate key senior
executives to achieve short-term and long-term goals, while providing
competitive levels of compensation that will assist the Company in attracting
and retaining qualified executives. As discussed below, these policies are
implemented through annual bonuses paid under short-term incentive compensation
criteria established each year by the Committee (the "Annual Bonus" or "Annual
Bonuses"), awards of stock under the Long-Term Incentive Plan (the "Long-Term
Plan"), stock appreciation rights under the 1994 Employee and Director Stock
Appreciation Rights Plan (the "SAR Plan"), deferred compensation paid pursuant
to the Executive Capital Accumulation Plan (the "Capital Accumulation Plan") and
the payment of base salaries at a level that is consistent with the
incentive-based aspects of the Committee's policies.
12

<PAGE>
RELATIONSHIP OF CORPORATE PERFORMANCE TO EXECUTIVE COMPENSATION
The key mechanism of the Committee's incentive-based compensation policies
are the Annual Bonuses, which are paid to the Company's executive officers if
the Company achieves a minimum return on equity ("ROE") for the year. The
Committee believes that ROE usually provides a reasonably accurate comparison of
corporate performance with that of the Company's peers. The criteria for Annual
Bonuses for 1994 provided that each of the Company's executive officers could
earn a bonus equal to certain specified percentages of his base salary,
depending on the Company's ROE for the year. Based on the ROE achieved by the
Company for 1994, which increased over the ROE achieved in 1993, the Named
Executives received bonuses equalling 17% of their base salaries.
The Committee believes that stock ownership and stock-based compensation
are important tools to improve the Company's long-term performance and enhance
stockholder value and has used awards of Common Stock under the Long-Term Plan
and cash SAR awards under the SAR Plan to help achieve this goal.
Share awards under the Long-Term Plan vest after four years of continued
employment (or earlier in the event of death, disability or normal retirement).
Accordingly, executives who receive awards of shares are motivated to improve
corporate performance and increase stockholder value on a long-term basis. By
this means, the interests of such executives are further aligned with those of
the Company's stockholders. In determining the amount of shares of stock to be
awarded, the Committee considers, in addition to the incentive-based purpose of
the plan, the recent performance of the Company and other factors such as
whether actions during the year that promote long-term goals of the Company may
have been at the expense of short-term performance, thereby reducing ROE and the
amount of the Annual Bonuses.
The SAR Plan enables selected key employees and non-employee Directors to
receive cash-only SAR awards, which entitle the recipient to a cash-only payment
based on the increase in the fair market value of the Common Stock from the date
of grant of the SAR to the date of exercise. The plan is designed to motivate
participants to increase long-term stockholder value. Each non-employee Director
receives an annual award for 1,000 units.
Two executives of the Company also are Directors and, accordingly,
participate in the Company's Director Stock Option Plan. Under this plan, each
Director is automatically awarded an annual option to purchase 1,000 shares,
which may be exercised during a term of seven years. This plan also is designed
to promote a closer identification of the interests of the Directors with those
of the stockholders and stimulate efforts to enhance stockholder value.
The Capital Accumulation Plan, a nonqualified deferred compensation profit
sharing plan, also is designed to motivate the Company's executives to improve
corporate performance. The plan provides for the Company to credit to the
executives' deferred compensation accounts, as of each December 31, an aggregate
amount as determined with respect to each Plan Year in the discretion of the
Committee. This aggregate amount is allocated among the several executives'
accounts pro rata based on their relative compensation. Amounts credited to the
accounts of the Named Executives for 1994, 1993 and 1992 are set forth in the
Summary Compensation Table.
The base salaries of the Company's executives are generally set at levels
that will attract and retain qualified executives, taking into account the
Compensation Committee's desire to link a significant percentage of an
executive's compensation to corporate performance. Year-to-year adjustments are
made on a subjective basis each year based on a number of factors, including the
Company's performance and company-wide salary adjustments. Salary increases for
executives in the past three years have been relatively modest, in keeping with
the Committee's view of the level of improvement in corporate performance.
Effective March 1, 1994 the Board of Directors initiated a salary reduction plan
under which Mr. Fitzgibbons' annual salary was reduced by $100,000 and the
annual salaries of all other executive officers were reduced by 10%. In
connection with such reduction, stock appreciation rights ("SARs") equal to 300
shares per $1,000 of salary reduction were granted to these employees. The SARs
may be exercised up to seven years from the grant date for cash equal to
increases in the market value of the Company's Common Stock above $28.50, the
closing market value on March 1, 1994. The annual salaries of all executive
officers were increased as of January 1, 1995 by the amount of the March 1, 1994
reduction. In 1994, the Company implemented a wage increase for its non-exempt
employees, and the salaries of the Company's executives were in general adjusted
accordingly.
13

<PAGE>
COMPENSATION PAID TO THE CHIEF EXECUTIVE OFFICER
1994 compensation paid to J. M. Fitzgibbons, the Company's Chief Executive
Officer, was based on the factors generally applicable to compensation paid to
executives of the Company as described above. The Annual Bonus of $74,794 paid
to Mr. Fitzgibbons for 1994 was based on the criteria established by the
Committee in late 1993 and applied generally to all recipients of Annual
Bonuses.
The Committee awarded Mr. Fitzgibbons 4,393 shares of Common Stock in
February 1995, under the Long-Term Plan with respect to 1994. This award, which
will vest in 1998, was based on moderate improvement in corporate performance
for 1994. Mr. Fitzgibbons was awarded 30,000 SARs in 1994 in recognition of a
$100,000 reduction in his annual base salary. The amount credited to Mr.
Fitzgibbons' deferred compensation account for 1994 was set by the terms of the
Capital Accumulation Plan.
The foregoing report is submitted by the members of the Compensation
Committee.
<TABLE>
<S> <C>
Tom H. Barrett
John C. Harned
W. Duke Kimbrell
</TABLE>

II. ADOPTION OF 1995 EMPLOYEE STOCK OPTION PLAN
BACKGROUND
The Board of Directors approved the adoption of the 1995 Employee Stock
Option Plan of Fieldcrest Cannon, Inc. on March 8, 1995, subject to the adoption
of the final form of the plan and related agreements by the Compensation
Committee of the Board of Directors (the "Committee") and the approval of the
plan by the stockholders at the 1995 annual meeting of stockholders. The
Committee approved the plan on March 8, 1995. Options may be granted under the
plan on and after the effective date (March 8, 1995) provided the stockholders
approve the plan, but no later than March 7, 2005. The discussion which follows
is qualified in its entirety by reference to the plan, a copy of which is
attached to the proxy statement as Exhibit A.
A maximum of 435,000 shares of Common Stock may be issued pursuant to
options granted under the plan, and the Board of Directors has reserved such
number of shares for this purpose. The number of shares reserved for issuance
under the plan may be adjusted in the event of an adjustment in the capital
stock structure of the Company or a related corporation affecting the Common
Stock (due to a merger, consolidation, reorganization, stock split, stock
dividend or similar event), and the Committee is authorized to adjust options
and terms of the plan in the event of a change in the capital stock in order to
prevent dilution or enlargement of options. On March 8, 1995, the closing sales
price of the Common Stock as reported on the New York Stock Exchange was $21.50
per share.
PURPOSE AND ELIGIBILITY
The purpose of the plan is to encourage and enable selected key employees
of the Company to acquire or increase their holdings of Common Stock in the
Company in order to promote a closer identification of their interests with
those of the Company and its stockholders, thereby further stimulating their
efforts to enhance the efficiency, soundness, profitability, growth and
stockholder value of the Company. The purpose will be carried out by the
granting of incentive stock options ("incentive options") and nonqualified stock
options ("nonqualified options") (collectively, "options") to key employees
selected to participate in the plan. The material terms of each type of option
are discussed below.
A "key employee" is defined in the plan to mean an employee of the Company
or a related corporation who is in a position materially to affect the profits
of the Company or such related corporation by reason of the nature and extent of
such employee's duties, responsibilities, personal capabilities, performance and
potential. Under the plan, the Committee shall determine those persons who
qualify as key employees. Approximately 20 persons qualify as key employees at
this time.
ADMINISTRATION; AMENDMENT AND TERMINATION
The plan shall be administered by the Committee. Members of the Committee
are intended to qualify as "disinterested persons," as that term is defined in
Rule 16b-3 under the Securities Exchange Act of 1934, as
14

<PAGE>
amended (the "Exchange Act"). Under the terms of the plan, the Committee has
full and final authority to take any action with respect to the plan, including,
without limitation, the authority to (i) determine the individuals to receive
options, the nature of each option as an incentive option or nonqualified option
(as described below), the times when options shall be granted, the number of
shares subject to each option, the option price, the option period, the time or
times when each option shall be exercisable and the other terms, conditions,
restrictions and limitations of an option; (ii) prescribe the form or forms of
agreements related to options granted under the plan; (iii) establish, amend and
rescind rules and regulations for the administration of the plan; and (iv)
construe and interpret the plan and agreements related to options, establish and
interpret rules and regulations for administering the plan and make all other
determinations deemed necessary or advisable for administering the plan. The
plan is intended to comply with Rule 16b-3 under the Exchange Act.
The plan may be amended or terminated by the Board of Directors, subject to
the following: (i) no amendment or termination may adversely affect the rights
of an optionee recipient with respect to an option previously granted without
the optionee's consent; and (ii) stockholder approval is required of any
amendment that would increase the aggregate number of shares issuable under the
plan (except to the extent of adjustments, as discussed above), or materially
change the requirements for eligibility to receive an option or be required
under Section 16(b) of the Exchange Act. In addition, no incentive option may be
amended without (i) the consent of the optionee, and (ii) if deemed necessary by
the Committee, the opinion of legal counsel to the Company that such an
amendment will not be a "modification" under Section 424 of the Code.
OPTIONS
The plan authorizes the grant of both incentive options and nonqualified
options, both of which are exercisable for shares of Common Stock. However,
nonqualified options are only intended to be granted to the extent that an
option does not qualify as an incentive option. The option price at which an
option may be exercised shall be the fair market value per share of Common Stock
on the date of the option grant, as determined in good faith by the Committee.
The "fair market value" shall mean the closing price per share of the Common
Stock on the New York Stock Exchange on the last trading day prior to the date
the option was granted; or if there was no such sale on such day, the fair
market value as determined in accordance with Section 20.2031-2 of the Federal
Estate Tax Regulations, or in any other manner consistent with the Code.
The period during which an option may be exercised shall be determined by
the Committee at the time of option grant and may not extend more than ten years
from the date of grant. Subject to the foregoing, an option shall be exercisable
over the option period as follows: (i) no option may be exercised before the
expiration of one year from the date of grant, and (ii) thereafter, 25 percent
of the total number of shares to which the option relates may be exercised
within the first year, and options for 25 percent of such total may be exercised
within each of the next three years. In addition, the Committee may in its
discretion accelerate the date for exercising all or any part of an option. Any
option or portion thereof that is not exercised before expiration of the
applicable option period shall terminate. The option price may be paid in cash,
shares of Common Stock owned by the optionee at the time of exercise (valued at
fair market value as of the date of exercise), or, if the Committee so permits,
by cashless exercise.
Pursuant to the terms of the plan, an employee must be continuously
employed by the Company or a related corporation since the time of grant in
order to exercise an option. If an employee becomes disabled (as determined by
the Committee), shares acquired upon exercise of an incentive option shall be
subject to Sections 421 and 422 of the Code only if and to the extent that the
option exercise occurs within twelve months less one day following the date the
optionee's employment is terminated due to disability. If the employment of an
optionee is terminated due to death, the option may be exercised only to the
extent exercisable on the date of the optionee's death (unless the Committee, in
its discretion, accelerates the exercise period), and such option must be
exercised prior to the earlier of the end of the twelve-month period after the
optionee's death or the end of the option period. If the employment of an
optionee is terminated for any reason other than death or disability, options
are exercisable only to the extent exercisable on the date of termination,
unless the Committee, in its discretion, accelerates the date that an option not
otherwise exercisable may be exercised. Such options must be exercised before
the earlier of the end of the option period or the end of the three-month period
less one day after the optionee's termination.
15

<PAGE>
NONTRANSFERABILITY; DIVIDEND AND VOTING RIGHTS; WITHHOLDING
The terms of the plan provide that options are not transferable other than
by will or the laws of intestate succession, except to the extent that such
transfer may be permitted by the Code, Rule 16b-3 or any successor thereto.
Optionees subject to Section 16 of the Exchange Act may not, without the consent
of the Committee, transfer shares of Common Stock acquired pursuant to an option
until six months have elapsed since the grant of the option. Shares acquired
upon the exercise of an incentive option may be entitled to the favorable tax
treatment described in Section 421 of the Code only if such shares are not
disposed by the optionee before two years from the date of option grant or one
year from the date of transfer of the shares to the optionee. With respect to
nonqualified options, the plan requires recipients to pay in cash the amount of
withholding taxes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary generally describes the principal federal (and not
state and local) income tax consequences of awards granted under the plan. The
summary is general in nature and is not intended to cover all tax consequences
that may apply to a particular employee or to the Company. The provisions of the
Code and regulations thereunder relating to these matters are complicated and
their impact in any one case may depend upon the particular circumstances.
INCENTIVE STOCK OPTIONS
Incentive options granted under the plan are intended to qualify as
incentive stock options under Section 422 of the Code. Pursuant to Section 422,
the grant and exercise of an incentive stock option will generally not result in
taxable income to the optionee (with the possible exception of alternative
minimum tax liability) if the optionee does not dispose of shares received upon
exercise of such option less than one year after the date of exercise and two
years after the date of grant, and if the optionee has continuously been an
employee of the Company from the date of grant to three months before the date
of exercise (except in the event of death or disability). The Company will not
be entitled to a deduction for income tax purposes in connection with the
exercise of an incentive option. Upon the disposition of shares acquired upon
exercise of an incentive option, the optionee will be taxed on the amount by
which the amount realized upon such disposition exceeds the option price, and
such amount will be treated as long-term capital gain or loss. If the holding
period requirements for incentive option treatment described above are not met,
the option will be treated as a nonqualified stock option.
Pursuant to the Code and the terms of the plan, in no event can there first
become exercisable by an optionee in any one calendar year incentive options
granted by the Company with respect to shares having an aggregate fair market
value (determined at the time an option is granted) greater than $100,000. To
the extent an incentive option granted under the plan exceeds the foregoing
limitation, it will be treated for all purposes under the plan as a nonqualified
option. In addition, no incentive option may be granted to an individual who
owns, immediately before the time that the option is granted, stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company unless the option price is at least equal to 110% of the
fair market value of the stock on the date the option is granted and the period
of the option does not exceed five years. For this purpose, an individual will
be deemed to own stock which is attributable to him under Section 424(d) of the
Code.
NONQUALIFIED STOCK OPTIONS
If an optionee receives a nonqualified option, the difference between the
market value of the stock on the date of exercise and the option price will
constitute taxable ordinary income to the optionee on the date of exercise. The
Company will be entitled to a deduction in the same year in an amount equal to
the income taxable to the optionee. The optionee's basis in shares of Common
Stock acquired upon exercise of an option will equal the option price plus the
amount of income taxable at the time of exercise. Any subsequent disposition of
the stock by the optionee will be taxed as a capital gain or loss to the
optionee, and will be long-term capital gain or loss if the optionee has held
the stock for more than one year at the time of sale.
Pursuant to the terms of the plan, the Committee will require any recipient
of shares of Common Stock pursuant to exercise of a nonqualified stock option to
pay the corporation in cash the amount of any tax or other amount required by
any governmental authority to be withheld and paid over by the corporation to
such authority for the account of such recipient.
16

<PAGE>
CHANGE OF CONTROL
The plan provides that, upon a change of control, all options outstanding
as of the date of the change of control shall become fully exercisable, whether
or not then otherwise exercisable. Notwithstanding the foregoing, the plan
authorizes the Committee, in the event of a merger, share exchange,
reorganization or other business combination affecting the Company or a related
corporation, to determine that any or all awards shall not vest or become
exercisable on an accelerated basis, if the Board of Directors or the surviving
or acquiring corporation takes such action (including but not limited to the
grant of substitute awards) which, in the opinion of the Committee, is equitable
or appropriate to protect the rights and interests of participants under the
plan.
For the purposes of this section, a "change of control" is considered to
have occurred on the earliest of the following dates: (i) the date any entity or
person shall become the beneficial owner, or shall have obtained voting control
over 30 percent or more of the outstanding Common Stock; (ii) the date the
stockholders of the Company approve a definitive agreement (A) to merge or
consolidate the Company with or into another corporation in a transaction in
which the Company is not the surviving corporation or pursuant to which shares
of Common Stock are converted into cash, securities or property of another
corporation (other than a merger in which the proportionate ownership of the
shareholders of the Company remains unchanged) or (B) to sell or dispose of
substantially all of the assets of the Company; or (iii) the date there shall
have been a change in a majority of the Board of Directors of the Company within
a twelve-month period (unless the nomination for election by the Company's
stockholders of each new director was approved by a two-thirds vote of the
directors then still in office who were in office at the beginning of the
twelve-month period).
PLAN BENEFITS
The Committee has discretion to determine the amount of options to be
granted to key employees under the plan. Therefore, the amount of options that
will be received by any key employee, and the value thereof, are not presently
determinable.
The Board of Directors recommends that the stockholders vote "FOR" the
proposal to adopt the plan.
III AND IV. AMENDMENTS TO DIRECTOR STOCK OPTION PLAN
BACKGROUND; OPERATION OF PLAN
The Director Stock Option Plan of Fieldcrest Cannon, Inc. was adopted
effective April 24, 1990, and amended and restated effective April 28, 1992. The
purpose of the plan is to encourage and enable Directors to acquire or increase
their ownership of the Common Stock and to promote a closer identification of
their interests with those of the Company and its stockholders. This purpose is
carried out through the granting to Directors of options to purchase shares of
Common Stock of the Company. Under the terms of the plan, Directors who are
employees of the Company or a related corporation are granted options intended
to qualify as incentive options and Directors who are not employees of the
Company or a related corporation are granted nonqualified options.
The plan currently provides for an annual grant of an option for 1,000
shares of Common Stock to each person who is a Director at the time of grant.
The grant is made on the fifth business day after the annual meeting of
stockholders. The Company has reserved 500,000 shares of Common Stock for
issuance pursuant to the plan (subject to adjustments due to a merger,
consolidation, stock split, stock dividend or similar event). As of March 8,
1995, eight Directors were eligible to receive options under the plan. On March
8, 1995, the closing sales price of the Common Stock as reported on the New York
Stock Exchange was $21.50 per share. The plan is administered by the
Compensation Committee of the Board of Directors (the "Committee").
Under the terms of the plan, the option exercise price is the per share
fair market value of the Common Stock on the date of grant, as determined in
good faith by the Committee. The "fair market value" is deemed to be the closing
price per share of the Common Stock on the New York Stock Exchange on the last
trading day prior to the date the option is granted, or, if there was no such
sale on such trading day, the fair market value as determined in accordance with
Section 20.2031-2 of the Federal Estate Tax Regulations or in any other manner
consistent with the Code. The period during which an option may be exercised is
seven years, and, upon exercise, the option price must be paid in cash.
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The plan currently provides that no option may be exercised unless (subject
to certain exceptions) the optionee is a Director at the time of exercise and
has continuously served as a Director since the date of grant. Any option (or
portion thereof) which is not exercised before the expiration of the option will
terminate. Options granted under the plan are not transferable other than by
will or the laws of intestate succession (subject to certain exceptions).
Optionees subject to Section 16 of the Exchange Act may not, without the consent
of the Committee, transfer shares of Common Stock acquired upon exercise of an
option until six months have elapsed since the date of the option grant.
The plan may be amended by the Board of Directors, provided that (i) no
amendment or termination may adversely affect the rights of an optionee
recipient with respect to an option previously granted without the optionee's
consent; and (ii) stockholder approval is required of any amendment that would
require such approval pursuant to Rule 16b-3 under the Exchange Act. In
addition, plan provisions regarding the amount of shares for which options may
be granted, the timing of grants and the method of determining the option price
may not be amended more often than once every six months, unless required
pursuant to the Code or related rules.
PROPOSED AMENDMENTS
On March 8, 1995, the Board of Directors adopted a resolution to amend the
plan, subject to stockholder approval, to increase the number of shares subject
to each annual grant from 1,000 to 2,000 shares of Common Stock and to permit
Directors to exercise options granted under the plan until up to 90 days after
termination from service as a Director. The proposed amendment to increase the
annual option grant is intended to further encourage Directors of the Company to
acquire or increase their holdings of Common Stock, and to compensate the
Directors for their services to the Company and related corporations. Employee
Directors are eligible under the plan to receive incentive stock options and
nonqualified stock options. Non-employee Directors are eligible to receive only
nonqualified stock options. For a discussion of the federal income tax
consequences of incentive stock options and nonqualified stock options, see
"Proposal to Adopt the 1995 Employer Stock Option Plan -- Certain Federal Income
Tax Consequences."
If the proposal to amend the plan to increase the annual grant as described
above is approved by the stockholders, each nominee for Director of the Company
named under "Election of Directors" above, if he is elected by the stockholders
at the annual meeting, will receive an option to purchase 2,000 shares of Common
Stock on the fifth business day after the annual meeting, and will receive an
option for an equal number of shares annually thereafter for so long as he is a
Director. The value of such options is not presently determinable.
The proposed amendment to extend the option period would permit a Director
to exercise options for up to 90 days after termination of service, provided the
Director has continuously served as a Director since the date of option grant
and the option period has not expired. Directors who receive incentive stock
options are subject to additional restrictions on the period of exercise. The
purpose of the amendment is to afford Directors more flexibility in exercising
options granted under the plan.
The Board of Directors recommends that the stockholders vote "FOR" the
proposals to adopt the foregoing amendments to the plan.
V. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company, upon the recommendation of its Audit
Review Committee, has selected the firm of Ernst & Young LLP as independent
auditors for the Company and its subsidiaries for the year 1995, subject to
ratification by the stockholders. This firm has audited the accounts of the
Company since its organization and has advised the Company that it does not
have, and has not had, any direct or indirect financial interest in the Company
or its subsidiaries in any capacity other than that of independent auditors.
Ernst & Young LLP representatives are expected to attend the Annual Meeting of
Stockholders. They will have an opportunity to make a statement if they desire
to do so, and will also be available to respond to appropriate questions.
The Board of Directors recommends a vote "FOR" ratification.
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STOCKHOLDER PROPOSALS
Stockholders having proposals which they desire to present at next year's
annual meeting should, if they desire that such proposals be included in the
Board of Directors' proxy and proxy statement relating to such meeting, submit
such proposals in time to be received by the Company at its principal executive
office in Eden, North Carolina, not later than December 8, 1995. To be so
included, all such submissions must comply with the requirements of Rule 14a-8
under the Exchange Act and the Board of Directors directs the close attention of
interested stockholders to that Rule. In addition, the Company's By-Laws provide
that in order for business to be brought before an annual meeting of
stockholders, a stockholder must deliver written notice of such business to the
Secretary of the Company not less than 60 days nor more than 90 days prior to
the meeting (or if less than 70 days' notice or prior public disclosure of the
meeting date is given by the Company, the stockholder's written notice must be
delivered by the 10th day following announcement of the meeting date). In
addition to briefly describing the business to be brought before the meeting and
the reason for conducting such business at the meeting, the notice must identify
the stockholder's name and address as they appear on the Company's books, the
class and number of shares beneficially owned by the stockholder and the
stockholder's interest in the business to be brought before the meeting if such
interest is material.
Under the Company's By-Laws, a stockholder may nominate a candidate for
election to the Board of Directors of the Company by giving written notice to
the Secretary of the Company. The notice must be delivered not less than 60 days
nor more than 90 days prior to the meeting (or if less than 70 days' notice or
prior public disclosure of the meeting date of the meeting is given by the
Company, such nomination must have been mailed or delivered to the Secretary by
the 10th day following announcement of the meeting date). Such notice must set
forth (a) as to each proposed nominee (i) the name, age, business address and,
if known, residence address of each such nominee, (ii) the principal occupation
or employment of each such nominee, (iii) the number of shares of stock of the
Company which are beneficially owned by each such nominee, and (iv) any other
information concerning the nominee that must be disclosed as to nominees in
proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended (including such person's written consent to be named as a
nominee and to serve as a director if elected) and (b) as to the stockholder
giving the notice (i) the name and address as they appear on the Company's books
of such stockholder and (ii) the class and number of shares of the Company which
are beneficially owned by such stockholder. The Company may require any proposed
nominee to furnish such other information as may reasonably be required by the
Company to determine the eligibility of such proposed nominee to serve as a
director of the Company.
OTHER MATTERS
The shares represented by each properly executed proxy received by the
Company will be voted in accordance with the instructions, if any, given
therein. The Company does not know of any other business to be brought before
the meeting, but it is intended that, as to any such other business, the shares
will be voted pursuant to the proxy in accordance with the judgment of the
person or persons acting thereunder.
By Order of the Board of Directors,
M. KENNETH DOSS
SECRETARY
326 East Stadium Drive
Eden, North Carolina 27288
March 22, 1995
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EXHIBIT A
1995 EMPLOYEE STOCK OPTION PLAN
OF
FIELDCREST CANNON, INC.

<PAGE>
1995 EMPLOYEE STOCK OPTION PLAN OF
FIELDCREST CANNON, INC
1. PURPOSE.
The purpose of the 1995 Employee Stock Option Plan of Fieldcrest Cannon,
Inc. (the "Plan") is to encourage and enable selected key employees of
Fieldcrest Cannon, Inc. (the "Corporation") to acquire or to increase their
holdings of common stock of the Corporation (the "Common Stock") in order to
promote a closer identification of their interests with those of the Corporation
and its stockholders, thereby further stimulating their efforts to enhance the
efficiency, soundness, profitability, growth and stockholder value of the
Corporation. This purpose will be carried out through the granting of incentive
stock options ("Incentive Options") and nonqualified stock options
("Nonqualified Options"). Incentive Options and Nonqualified Options shall be
referred to herein collectively as "Options."
2. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Corporation (the "Board"),
each member of which shall be a "disinterested person," as such term is
defined in Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Committee shall be comprised of
no fewer than the minimum number of disinterested persons as may be
required by Rule 16b-3 (or any successor rule).
(b) Any action of the Committee may be taken by a written instrument
signed by all of the members of the Committee and any action so taken by
written consent shall be as fully effective as if it had been taken by a
majority of the members at a meeting duly held and called. Subject to the
provisions of the Plan, the Committee shall have full and final authority,
in its discretion, to take any action with respect to the Plan including,
without limitation, the following: (i) to determine the individuals to
receive Options, the nature of each Option as an Incentive Option or (to
the extent provided in Section 6(c) herein) a Nonqualified Option, the
times when Options shall be granted, the number of shares to be subject to
each Option, the Option price (determined in accordance with Section 6),
the Option period, the time or times when each Option shall be exercisable
and the other terms, conditions, restrictions and limitations of an Option;
(ii) to prescribe the form or forms of the agreements evidencing any
Options granted under the Plan; (iii) to establish, amend and rescind rules
and regulations for the administration of the Plan; and (iv) to construe
and interpret the Plan, the rules and regulations, and the agreements
evidencing Options granted under the Plan, and to make all other
determinations deemed necessary or advisable for administering the Plan.
3. EFFECTIVE DATE.
The effective date of the Plan shall be March 8, 1995. Options may be
granted under the Plan on and after the effective date, but not after March 7,
2005.
4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
The number of shares of Common Stock that may be issued pursuant to Options
shall not exceed in the aggregate 435,000 shares of authorized but unissued
Common Stock, or shares of Common Stock held in the Corporation's treasury,
including shares purchased on the market. The Corporation hereby reserves
sufficient authorized shares to provide for the exercise of such Options. Any
shares subject to an Option which, for any reason, expires or is terminated
unexercised as to such shares may again be subject to an Option granted under
the Plan. If there is any change in the shares of Common Stock because of a
merger, consolidation or reorganization involving the Corporation or a related
corporation, or if the Board declares a stock dividend or stock split
distributable in shares of Common Stock, or if there is a change in the capital
structure of the Corporation or a related corporation affecting the Common
Stock, the number of shares of Common Stock reserved for issuance under the Plan
shall be correspondingly adjusted, and the Committee shall make such adjustments
to Options or to any provisions of this Plan as the Committee deems equitable to
prevent dilution or enlargement of Options.
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5. ELIGIBILITY.
An Option may be granted only to an individual who satisfies the following
eligibility requirements on the date the Option is granted:
(a) The individual is an employee of the Corporation or a related
corporation. For this purpose, an individual shall be considered to be an
"employee" only if there exists between the individual and the Corporation
or a related corporation the legal and bona fide relationship of employer
and employee. In determining whether such a relationship exists, the
regulations of the United States Treasury Department relating to the
determination of the employment relationship for the purpose of collection
of income tax on wages at the source shall be applied.
(b) The individual falls within the classification of key employees of
the Corporation or a related corporation. For this purpose, a "key
employee" is an employee of the Corporation or a related corporation who
the Committee determines is in a position materially to affect the profits
of the Corporation or such related corporation by reason of the nature and
extent of such employee's duties, responsibilities, personal capabilities,
performance and potential.
(c) With respect to the grant of Incentive Options, the individual
does not own, immediately before the time that the Option is granted, stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Corporation or a related corporation; provided,
that an individual owning more than ten percent of the total combined
voting power of all classes of stock of the Corporation or a related
corporation may be granted an Option if the price at which such Option may
be exercised is greater than or equal to 110 percent of the fair market
value of the shares on the date the Option is granted and the period of the
Option does not exceed five years. For this purpose, an individual will be
deemed to own stock which is attributed to him under Section 424(d) of the
Internal Revenue Code of 1986, as amended (the "Code").
(d) The individual, being otherwise eligible under this Section 5, is
selected by the Committee as an individual to whom an Option shall be
granted (an "Optionee").
6. OPTION PRICE.
The price per share at which an Option may be exercised (the "Option
price") shall be the fair market value per share of the Common Stock on the date
the Option is granted. For this purpose, the following rules shall apply:
(a) An Option shall be considered to be granted on the date that the
Committee acts to grant the Option, or on any later date specified by the
Committee as the effective date of the Option.
(b) The fair market value of the Common Stock on the date the Option
is granted shall be determined in good faith by the Committee and shall be
the price per share of the last sale of such shares on the New York Stock
Exchange on the last trading day prior to the date the Option is granted;
or if there was no such sale on such trading day, the fair market value
shall be determined in accordance with the applicable provisions of Section
20.2031-2 of the Federal Estate Tax Regulations, or in any other manner
consistent with the Code and accompanying regulations.
(c) In no event shall there first become exercisable by the Optionee
in any one calendar year Incentive Options granted by the Corporation or
any related corporation with respect to shares having an aggregate fair
market value (determined at the time an Option is granted) greater than
$100,000. To the extent that any Option does not qualify as an Incentive
Option, it shall constitute a separate Nonqualified Option.
7. OPTION PERIOD AND LIMITATIONS ON THE RIGHT TO EXERCISE OPTIONS.
(a) The period during which an Option may be exercised (the "Option
period") shall be determined by the Committee when the Option is granted
and shall extend from the date the Option is granted to a date not more
than ten years from the date on which the Option is granted. Subject to the
restriction contained in the preceding sentence and except as otherwise
provided in this Plan, an Option shall be exercisable over the Option
period in the following amounts: none before the expiration of one year
from the date the Option is granted; thereafter, twenty-five percent (25%)
of the total number of shares to which the Option relates within the first
year and twenty-five percent (25%) of such total within each of the
subsequent three years;
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<PAGE>
provided, that the Committee may in its discretion accelerate the date for
exercising all or any part of the Option which was not otherwise
exercisable on such date. If the Option for a particular year is not
exercised in full, the unexercised Option (or unexercised portion) may be
carried over and exercised at any time during the Option period. Any Option
or portion thereof not exercised before the expiration of the Option period
shall terminate.
(b) An Option may be exercised by giving written notice to the
Secretary of the Corporation. Such notice shall specify the number of
shares to be purchased pursuant to an Option and the aggregate purchase
price to be paid therefor and shall be accompanied by the payment of such
purchase price. Such payment shall be in the form of (i) cash, (ii) shares
of Common Stock owned by the Optionee at the time of exercise, or (iii) in
any combination of the foregoing. Shares of Common Stock tendered in
payment upon the exercise of an Option shall be valued at their fair market
value on the date of exercise, as determined by the Committee by applying
the provisions of Section 6(b). Notwithstanding the foregoing, the
Committee, in its sole discretion and subject to such terms and conditions
as it determines, may also permit all or a portion of the purchase price of
an Option to be paid by the Optionee made by delivery of a properly
executed written notice of exercise to the Corporation and delivery to a
broker of written notice of exercise and irrevocable instructions to
promptly deliver to the Corporation the amount of sale or loan proceeds to
pay the Option price.
(c) No Option shall be exercised unless the Optionee is, at the time
of exercise, an employee as described in Section 5(a), and has been an
employee continuously since the date the Option was granted, subject to the
following:
(i) An Option shall not be affected by any change in the terms,
conditions or status of the Optionee's employment, provided that the
Optionee continues to be an employee of the Corporation or a related
corporation.
(ii) The employment relationship of an Optionee shall be treated as
continuing intact for any period that the Optionee is on military or
sick leave or other bona fide leave of absence, provided that the period
of such leave does not exceed ninety days, or, if longer, as long as the
Optionee's right to reemployment is guaranteed either by statute or by
contract. The employment relationship of an Optionee shall also be
treated as continuing intact while the Optionee is not in active service
because of disability; provided, that shares acquired by the Optionee
pursuant to exercise of an Incentive Option shall be subject to Sections
421 and 422 of the Code only if and to the extent that such exercise
occurs within twelve months less one day following the date the
Optionee's employment is considered to be terminated because of such
disability under Section 422. For purposes of this subparagraph (c)(ii),
"disability" shall mean the inability of the Optionee to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death,
or which has lasted or can be expected to last for a continuous period
of not less than twelve months. The Committee shall determine whether an
Optionee is disabled within the meaning of this subparagraph.
(iii) If the employment of an Optionee is terminated because of
death, the Option may be exercised only to the extent exercisable on the
date of the Optionee's death, except that the Committee may in its
discretion accelerate the date for exercising all or any part of the
Option which was not otherwise exercisable on such date. The Option must
be exercised, if at all, prior to the earlier of: (A) the close of the
period of twelve months next succeeding the date of death, or (B) the
close of the Option period. Such Option shall be exercisable by such
person or persons as shall have acquired the right to exercise the
Option by will or by the laws of intestate succession.
(iv) If the employment of the Optionee is terminated for any reason
other than disability or death, the Option may be exercised only to the
extent exercisable on the date of such termination of employment, except
that the Committee may in its discretion accelerate the date of
exercising all or any part of the Option which was not otherwise
exercisable on the date of such termination of employment. The Option
must be exercised, if at all, prior to the earlier of: (A) the close of
the period of three months less one day next succeeding the date of
termination of employment, or (B) the close of the Option period.
4

<PAGE>
(d) An Optionee or his legal representative, legatees or distributees
shall not be deemed to be the holder of any shares subject to an Option
unless and until certificates for such shares are issued to him or them
under the Plan. A certificate or certificates for shares of Common Stock
acquired upon exercise of an Option shall be issued in the name of the
Optionee and distributed to the Optionee (or his beneficiary) as soon as
practicable following receipt of notice of exercise.
(e) Nothing in the Plan shall confer upon the Optionee any right to
continue in the employment of the Corporation or a related corporation, or
to interfere in any way with the right of the Corporation or a related
corporation to terminate the Optionee's employment at any time.
8. NONTRANSFERABILITY OF OPTIONS AND SHARES.
Except to the extent, if any, as may be permitted by the Code, Rule 16b-3
under the Exchange Act or any successor statute or rule:
(a) An Option shall not be transferable (including by pledge or
hypothecation) other than by will or the laws of intestate succession. The
designation of a beneficiary does not constitute a transfer. An Option
shall be exercisable during the Optionee's lifetime only by him or by his
guardian or legal representative.
(b) If an Optionee is subject to Section 16 of the Exchange Act,
shares of Common Stock acquired upon the exercise of an Option shall not,
without the consent of the Committee, be transferable (including by pledge
or hypothecation) until the expiration of six months after the date the
Option was granted.
(c) Shares acquired upon exercise of an Incentive Option shall be
entitled to the tax treatment described in Section 421 of the Code only if
the shares are not disposed of by the Optionee before two years from the
date of grant of the Incentive Option nor before one year from the date of
transfer of such shares to the Optionee.
9. WITHHOLDING.
The Corporation shall require any recipient of shares pursuant to the
exercise of a Nonqualified Option to pay to the Corporation in cash the amount
of any tax or other amount required by any governmental authority to be withheld
and paid over by the Corporation to such authority for the account of such
Optionee.
10. CERTAIN DEFINITIONS.
For purposes of the Plan, the following terms shall have the meaning
indicated:
(a) "Related corporation" means any parent, subsidiary or predecessor
of the Corporation.
(b) "Parent" or "parent corporation" shall mean any corporation (other
than the Corporation) in an unbroken chain of corporations ending with the
Corporation if, at the time as of which a determination is being made, each
corporation other than the Corporation owns stock possessing fifty percent
or more of the total combined voting power of all classes of stock in
another corporation in the chain.
(c) "Subsidiary" or "subsidiary corporation" means any corporation
(other than the Corporation) in an unbroken chain of corporations beginning
with the Corporation if, at the time as of which a determination is being
made, each corporation other than the last corporation in the unbroken
chain owns stock possessing fifty percent or more of the total combined
voting power of all classes of stock in another corporation in the chain.
(d) "Predecessor" or "predecessor corporation" means a corporation
which was a party to a transaction described in Section 424(a) of the Code
(or which would be so described if a substitution or assumption under that
section had occurred) with the Corporation, or a corporation which is a
parent or subsidiary of the Corporation, or a predecessor of any such
corporation.
(e) In general, terms used in the Plan shall, where appropriate, be
given the meaning ascribed to them under the provisions of the Code
applicable to incentive stock options.
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11. STOCK OPTION AGREEMENT.
The grant of any Option under the Plan shall be evidenced by the execution
of an agreement (the "Agreement") between the Corporation and the Optionee. Such
Agreement shall set forth the type of Option, the date of grant of the Option,
the Option price, and the time or times when and the conditions upon the
happening of which the Option shall become exercisable. Such Agreement shall
also set forth the restrictions, if any, with respect to which the shares to be
purchased thereunder shall be subject, and such other terms and conditions as
the Committee shall determine, which are consistent with the provisions of the
Plan and applicable law and regulations.
12. RESTRICTIONS ON SHARES.
The Corporation may impose such restrictions on any shares purchased under
the Plan as it may deem advisable, including, without limitation, restrictions
under the Securities Act of 1933, as amended, and under any requirements of the
New York Stock Exchange and any blue sky or securities laws applicable to such
shares. The Corporation may cause a restrictive legend to be placed on any
certificate issued pursuant to the exercise of an Option in such form as may be
prescribed from time to time by applicable laws and regulations or as may be
advised by legal counsel.
13. AMENDMENT OR TERMINATION; TERM.
The Plan may be amended or terminated by action of the Board; provided,
that:
(a) Such amendment or termination shall not, without the consent of an
Optionee, adversely affect the rights of the Optionee with respect to an
Option previously granted;
(b) Any amendment which would (i) increase the aggregate number of
shares of Common Stock which may be issued under the Plan (other than
adjustments as described in Section 4) or (ii) materially change the
requirements for eligibility to receive Options under the Plan shall be
made only with the approval of the stockholders of the Corporation.
(c) No Incentive Option shall be amended without (i) the consent of
the Optionee and (ii) the opinion of legal counsel to the Corporation that
such amendment will not constitute a "modification" within the meaning of
Section 424 of the Code if the Committee determines such an opinion is
necessary.
Notwithstanding the foregoing, stockholder approval shall be required for any
other amendments which require such approval in order to secure an exemption
from Section 16(b) of the Exchange Act (or any successor statute or rule). The
term of the Plan shall end on the earlier of: (i) the effective date of
termination of the Plan by the Board, or (ii) that date the Committee shall have
granted Options to purchase the last of the aggregate shares which are available
for Options hereunder. Any Options outstanding at the end of the term shall
continue to be outstanding and exercisable for the remainder of the Option
period.
14. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control (as defined in Section 14(b)
herein), all Options then outstanding under the Plan shall become fully
exercisable as of the date of the Change of Control, whether or not then
otherwise exercisable. Notwithstanding the foregoing, an Optionee who is subject
to Section 16 of the Exchange Act may not sell or otherwise transfer shares of
Common Stock acquired upon exercise of an Option until the expiration of six
months after the date the Option was granted.
(b) For the purposes herein, a "Change of Control" shall be deemed to have
occurred on the earliest of the following dates:
(i) The date any entity or person shall have become the beneficial
owner of, or shall have obtained voting control over, thirty percent (30%)
or more of the outstanding Common Stock of the Corporation;
(ii) The date the stockholders of the Corporation approve a definitive
agreement (A) to merge or consolidate the Corporation with or into another
corporation, in which the Corporation is not the continuing or surviving
corporation or pursuant to which any shares of Common Stock of the
Corporation would be converted into cash, securities or other property of
another corporation, other than a merger of the Corporation in which
holders of Common Stock immediately prior to the merger have the same
proportionate ownership
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of Common Stock of the surviving corporation immediately after the merger
as immediately before, or (B) to sell or otherwise dispose of all or
substantially all the assets of the Corporation; or
(iii) The date there shall have been a change in a majority of the
Board of Directors of the Corporation within a twelve (12) month period
unless the nomination for election by the Corporation's stockholders of
each new director was approved by the vote of two-thirds of the directors
then still in office who were in office at the beginning of the twelve (12)
month period. (For the purposes herein, the term "person" shall mean any
individual, corporation, partnership, group, association or other person,
as such term is defined in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act, other than the Corporation, a subsidiary of the Corporation
or any employee benefit plan(s) sponsored or maintained by the Corporation
or any subsidiary thereof, and the term "beneficial owner" shall have the
meaning given the term in Rule 13d-3 of the Exchange Act.)
(c) Notwithstanding the foregoing, in the event of a Change of Control, the
Committee may, in its sole and absolute discretion, determine that any or all
Options may not become immediately exercisable if the Board of Directors of the
Corporation or the surviving or acquiring corporation, as the case may be, shall
have taken such action, including but not limited to the making of substitute
awards, as in the opinion of the Committee is equitable or appropriate to
protect the rights and interests of participants in the Plan.
15. COMPLIANCE WITH APPLICABLE LAWS AND RULES.
The Plan is intended to comply with Rule 16b-3 under the Exchange Act and
Section 422 of the Code (to the extent applicable to Incentive Options), or any
successor statute or rule, and shall be construed in accordance with such
provisions. If any Plan provision is found not to be in compliance with Section
422 of the Code or Rule 16b-3 of the Exchange Act, the provision shall be deemed
null and void. Further, if the plan does not contain any provision required to
be included herein under Section 422 of the Code or Rule 16b-3 under the
Exchange Act, then, to the extent permitted by the foregoing statute or rule,
such provision shall be deemed to be incorporated herein with the same force and
effect as if such provision had been set out at length herein. Notwithstanding
anything in the Plan to the contrary, the Committee, in its sole and absolute
discretion, may bifurcate the Plan so as to restrict, limit or condition the use
of any provision of the Plan to participants who are subject to Section 16 of
the Exchange Act without so restricting, limiting or conditioning the Plan with
respect to other participants.
16. STOCKHOLDER APPROVAL.
The Plan is subject to the approval of the stockholders of the Corporation,
which approval must occur, if at all, within twelve months following the
effective date of the Plan, and in no event later than the next annual meeting
of the stockholders following the grant of Options under the Plan. All Options
granted prior to stockholder approval of the Plan shall be conditional upon such
approval, and no Option shall be exercisable prior to such approval.
17. APPLICABLE LAW.
Except as otherwise provided herein, the Plan shall be construed and
enforced according to the laws of the State of North Carolina.
7

<PAGE>
IN WITNESS WHEREOF, this 1995 Employee Stock Option Plan of Fieldcrest
Cannon, Inc. has been executed in behalf of the Corporation effective as of the
8th day of March, 1995.
FIELDCREST CANNON, INC.
By:
Chairman and Chief Executive
Officer
Attest:

Secretary
[CORPORATE SEAL]
8

*****************************************************************************
APPENDIX
The undersigned hereby appoints James M. Fitzgibbons proxy, with
power of substitution, and all powers the undersigned would possess if
personally present to vote at the meeting of stockholders of Fieldcrest
Cannon, Inc. called to be held at the Company's offices at 1271 Avenue of the
Americas, New York, New York, April 24, 1995 at 10 o'clock a.m., and any
adjournment thereof, upon the following matters, all as more fully
described in the Notice of Meeting and Proxy Statements, receipt of which
is hereby acknowledged, and in their discretion upon other matters properly
coming before the meeting:

I. Election of Directors
FOR Tom H. Barrett, James M. Fitgbbons, Williams E. Ford,
[ ] John C. Harned, Noah T. Herndon, S. Roger Horchow, W. Duke
Kimbrell, C. John Kjorlien

VOTE WITHHELD To withhold authority to vote for any individual
[ ] nominee strike a line through the nominee's name
in the list above.
II. FOR AGAINST ABSTAIN Adoption of 1995 Employee Stock Option Plan.
[ ] [ ] [ ]
III. FOR AGAINST ABSTAIN Amendment to Director Stock Option Plan to increase
[ ] [ ] [ ] annual option grant from 1,000 to 2,000 shares.
IV. FOR AGAINST ABSTAIN Amendment to Director Stock Option Plan to extend
[ ] [ ] [ ] period.
V. FOR AGAINST ABSTAIN Ratification of the Board of Directors' selection
[ ] [ ] [ ] of Ernst & Young, independent accountants, as
auditors for the Company.

(Continued and to be signed on reverse side)

<PAGE>

VI. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.

THIS PROXY IS ENTITLED TO ONE VOTE PER SHARE AND WHEN PROPERLY EXECUTED, WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS, I, II, III, IV, AND
V.

Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized persons.

1995
Date Signature

Signature if held jointly

Common Stock
This Proxy is entitled to one vote per share.
Please, Date, Sign and Mail This Proxy in the Enclosed Envelope. No Postage is
Required.