<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-6922
GUILFORD MILLS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-1995928
-------------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) number)
4925 West Market Street, Greensboro, N.C. 27407
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code - (910) 316-4000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Number of shares of common stock outstanding
at December 29, 1996 - 14,518,125
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GUILFORD MILLS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 29,1996
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
The consolidated financial statements included herein have been
prepared by Guilford Mills, Inc. (the "Company" or "Guilford"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The Consolidated Balance Sheet as of September 29, 1996 has been taken from the
audited financial statements as of that date. Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
latest annual report on Form 10-K for the year ended September 29, 1996.
The consolidated financial statements included herein reflect all
adjustments (none of which are other than normal recurring accruals) which are,
in the opinion of management, necessary for a fair presentation of the
information included. The following consolidated financial statements are
included:
Consolidated Statements of Income for the thirteen weeks ended December
29, 1996 and December 31, 1995
Consolidated Balance Sheets as of December 29, 1996 and
September 29, 1996
Consolidated Statements of Cash Flows for the thirteen weeks ended
December 29, 1996 and December 31, 1995
Condensed Notes to Consolidated Financial Statements
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Guilford Mills, Inc.
C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E
For the Thirteen Weeks Ended December 29, 1996 and December 31, 1995
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------- ------------------ ------------------
DECEMBER 29, December 31,
1996 1995
- ---------------------------------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
NET SALES $ 210,863 $ 174,185
- ---------------------------------------------------------------------------------------- ------------------ ------------------
COSTS AND EXPENSES:
Cost of goods sold 173,014 146,586
Selling and administrative 23,243 19,091
- ---------------------------------------------------------------------------------------- ------------------ ------------------
196,257 165,677
- ---------------------------------------------------------------------------------------- ------------------ ------------------
OPERATING INCOME 14,606 8,508
INTEREST EXPENSE 5,172 3,400
OTHER EXPENSE, NET 843 1,010
- ---------------------------------------------------------------------------------------- ------------------ ------------------
INCOME BEFORE INCOME TAXES 8,591 4,098
INCOME TAX PROVISION 3,182 1,350
- ---------------------------------------------------------------------------------------- ------------------ ------------------
NET INCOME $ 5,409 $ 2,748
- ---------------------------------------------------------------------------------------- ------------------ ------------------
NET INCOME PER SHARE:
Primary $.37 $.20
Fully Diluted .36 .20
- ---------------------------------------------------------------------------------------- ------------------ ------------------
DIVIDENDS PER SHARE $.15 $.15
- ---------------------------------------------------------------------------------------- ------------------ ------------------
</TABLE>
See accompanying condensed notes to consolidated financial statements.
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Guilford Mills, Inc.
C O N S O L I D A T E D B A L A N C E S H E E T S
December 29, 1996 and September 29, 1996
(In thousands except share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------ -------------------- ------------------
DECEMBER 29, September 29,
1996 1996
(UNAUDITED)
- ------------------------------------------------------------------------ -------------------- ------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 35,195 $ 31,448
Accounts receivable, net 162,380 172,033
Inventories (Note 3) 144,736 137,993
Prepaid income taxes 2,886 2,437
Other current assets 5,100 7,977
- ------------------------------------------------------------------------ -------------------- ------------------
Total current assets 350,297 351,888
Property, net ( Note 4) 304,823 309,964
Cash surrender value of life insurance, net of policy loans 42,518 41,715
Other 24,329 25,263
- ------------------------------------------------------------------------ -------------------- ------------------
Total assets $721,967 $728,830
- ------------------------------------------------------------------------ -------------------- ------------------
LIABILITIES
Short-term borrowings $ 29,784 $ 47,979
Current maturities of long-term debt 19,518 18,837
Accounts payable 58,826 63,551
Accrued liabilities 52,116 43,863
- ------------------------------------------------------------------------ -------------------- ------------------
Total current liabilities 160,244 174,230
Long-term debt 208,130 209,435
Deferred income taxes 20,885 19,969
Other deferred liabilities 24,827 24,970
Minority interest 2,269 2,167
- ------------------------------------------------------------------------ -------------------- ------------------
Total liabilities 416,355 430,771
- ------------------------------------------------------------------------ -------------------- ------------------
STOCKHOLDERS' INVESTMENT
Preferred stock, $1 par; 1,000,000 shares authorized, none issued --- ---
Common stock, $.02 par; 40,000,000 shares authorized,19,629,199
shares issued, 14,518,125 shares outstanding at December 29, 1996
and 14,455,711 shares outstanding September 29, 1996 393 393
Capital in excess of par 41,664 41,089
Retained earnings 314,453 311,217
Foreign currency translation loss (8,993) (11,988)
Unamortized stock compensation (252) (287)
Treasury stock, at cost (5,111,074 shares at December 29, 1996 and
5,173,488 shares at September 29, 1996) (41,653) (42,365)
- ------------------------------------------------------------------------ -------------------- ------------------
Total stockholders' investment 305,612 298,059
- ------------------------------------------------------------------------ -------------------- ------------------
Total liabilities and stockholders' investment $721,967 $728,830
- ------------------------------------------------------------------------ -------------------- ------------------
</TABLE>
See accompanying condensed notes to consolidated financial statements.
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Guilford Mills, Inc.
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
For the Thirteen Weeks Ended December 29, 1996 and December 31, 1995
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------- ------------- -------------------- ---------------------
DECEMBER 29, December 31,
1996 1995
- --------------------------------------------------------------- ------------- -------------------- ---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,409 $ 2,748
Non-cash items included in net income --
Depreciation and amortization 16,171 12,164
(Gain)Loss on disposition of property (159) 9
Minority interest in net income(loss) 146 (35)
Deferred income taxes 765 650
Increase in cash surrender value of life insurance, net of policy loans (1,095) (913)
Compensation earned under restricted stock plan 35 334
Changes in assets and liabilities --
Receivables 10,908 21,879
Inventories (6,008) (9,315)
Other current assets 3,162 (580)
Accounts payable (6,830) (10,936)
Accrued liabilities 7,181 (6,885)
Other 1,064 57
- --------------------------------------------------------------- ------------- -------------------- ---------------------
Net cash provided by operating activities 30,749 9,177
- --------------------------------------------------------------- ------------- -------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property (10,522) (8,411)
Proceeds from dispositions of property 2,096 --
Increase(Decrease) in other assets 619 (1,868)
- --------------------------------------------------------------- ------------- -------------------- ---------------------
Net cash used in investing activities (7,807) (10,279)
- --------------------------------------------------------------- ------------- -------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings (repayments), net (16,531) 5,365
Payments of long-term debt (1,758) (2,450)
Cash dividends (2,173) (2,118)
Common stock options exercised 1,287 167
- --------------------------------------------------------------- ------------- -------------------- ---------------------
Net cash (used in) provided by financing activities (19,175) 964
- --------------------------------------------------------------- ------------- -------------------- ---------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (20) (415)
- --------------------------------------------------------------- ------------- -------------------- ---------------------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 3,747 (553)
EQUIVALENTS
- --------------------------------------------------------------- ------------- -------------------- ---------------------
BEGINNING CASH AND CASH EQUIVALENTS 31,448 17,964
ENDING CASH AND CASH EQUIVALENTS $35,195 $17,411
- --------------------------------------------------------------- ------------- -------------------- ---------------------
</TABLE>
See accompanying condensed notes to consolidated financial statements.
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GUILFORD MILLS, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 29, 1996
(In thousands except share data)
(Unaudited)
1. Seasonal Fluctuations -- Results for any portion of a year are not
necessarily indicative of the results to be expected for a full year, due to
seasonal aspects of the textile industry.
2. Per Share Information -- Primary net income per share information has been
computed by dividing net income by the weighted average number of shares of
common stock, par value $.02 per share, of the Company (the "Common Stock") and
Common Stock equivalents outstanding during the periods. The average shares used
in computing primary net income per share for the thirteen weeks ended December
29, 1996 and December 31, 1995 were 14,520,000 and 14,082,000, respectively.
Fully diluted income per share information also considers as applicable (i)
the dilutive effect, if any, assuming that the Company's convertible debentures
were converted at the beginning of the current fiscal period, with earnings
being increased by the interest expense, net of income taxes, that would not
have been incurred had conversion taken place and (ii) any additional dilutive
effect for stock options and restricted stock grants. The average shares used in
computing fully diluted net income per share for the thirteen weeks ended
December 29, 1996 and December 31, 1995 were 16,789,000 and 14,082,000,
respectively.
3. Inventories -- Inventories are carried at the lower of cost or market. Cost
is determined by using the LIFO (last-in, first-out) method for the majority of
inventories. Cost for all other inventories has been determined principally by
the FIFO (first-in, first-out) method.
Inventories at December 29, 1996 and September 29, 1996 consisted of the
following:
<TABLE>
<CAPTION>
December 29, September 29,
1996 1996
------------------ -----------------
<S> <C> <C>
Finished Goods $ 50,389 $ 45,515
Raw Materials and work in process 98,796 95,439
Manufacturing supplies 13,269 13,892
------------------ -----------------
Total inventories valued at first-in, first-out (FIFO) cost 162,454 154,846
Less -- Adjustments to reduce FIFO cost to LIFO cost, net 17,718 16,853
------------------
=================
Total inventories $144,736 $137,993
================== =================
</TABLE>
4. Accumulated Depreciation -- Accumulated depreciation at December 29, 1996 and
September 29, 1996 was $369,057 and $353,364 respectively.
5. Acquisition --- On January 17, 1996, the Company acquired 100% of the
outstanding capital stock of Hofmann Laces, Ltd., Raschel Fashions
Interknitting, Ltd., and Curtains and Fabrics, Inc. (collectively "Hofmann
Laces"). Hofmann Laces designs and produces lace fabrics for the intimate
apparel, apparel and home fashions markets. It produces stretch knit fabrics for
the apparel swimwear and intimate apparel markets. Additionally, it cuts and
sews lace fabrics into finished home fashions products which are sold directly
to retailers. The purchase price was comprised of cash of $45,480 and the
issuance of 200,000 shares of the Company's common stock. The acquisition was
accounted for using the purchase method of accounting. Excess purchase price
over fair market value of the underlying assets of $7,575 was allocated to
goodwill, other intangible assets and property based upon preliminary estimates
of fair values. The Company does not believe that the
<PAGE>
Page 7
final purchase price allocation will differ significantly from the preliminary
purchase price allocation recorded at December 29, 1996. Additional purchase
price may be paid based on Hofmann Laces' earnings for the five year period
ending on December 31, 2000.
The operating results of Hofmann Laces have been included in the
consolidated statement of income from the date of acquisition. The following
unaudited pro forma information reflects the results of the Company's operations
assuming the purchase had been made at the beginning of the fiscal year ended
September 29, 1996: for the thirteen-weeks ended December 31, 1995, sales of
$192.9 million, net income of $3.2 million and primary earnings per share of $
.22. In management's opinion, the unaudited pro forma combined results of
operations are not indicative of the actual results that would have occurred had
the acquisition been consummated at the beginning of fiscal 1996 or of future
operations of the combined companies under the ownership and management of the
Company.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
For the first quarter of fiscal 1997, consolidated sales of $210.9 million
increased $36.7 million from the comparable period of the previous year.
Sales in the apparel and home fashions business unit increased 14.3% from
the comparable period of the previous year. A sales decline of 31.6% in intimate
apparel was more than offset by increases of 1.9% in swimwear and shapewear, and
4.0% in women's ready-to-wear warp knit and circular knit products.
Additionally, sales increased significantly for specialty fabric products which
include increases of 32.9% in home fashions/linings and 106.0% in fastener and
other industrial products. Sales of furniture fabric, which are now included as
part of the Apparel business unit, increased 29.4%.
Sales in the U.S. automotive business unit were down from the comparable
period of the previous year. This resulted from an 11.4% decrease in sales to
domestic automotive original equipment manufacturers (OEMs) and a 14.8% decrease
in sales of fabrics for recreational vehicles and vans. This decline is due
primarily to a reduction in Ford placements on platforms such as Windstar,
Contour and Mystique.
Sales of the Company's U.K. business unit increased 27.4% from the
comparable period of the previous year. This relates primarily to market share
penetration with new technology placements and to new business.
Sales from the Company's Mexican subsidiary increased 20.5% compared to the
prior year period. Sales increased from continued domestic demand for apparel
due to the improvements in the Mexican economy and strong demand for exported
garments. The Company anticipates that the peso's uncertainty will continue to
impact future revenue translation and total sales of its Mexican subsidiary.
Margins for the first quarter of fiscal 1997 increased to 17.9% compared to
last year's 15.8%. Margins improved primarily due to the inclusion of Hofmann
Laces in the current year quarter and due to volume increases and efficiencies
in the Apparel Home Fashions, European Automotive and Fibers Business units.
Selling and administrative expenses for the first quarter increased to
$23.2 million compared to last year's $19.1 million. The current year includes
higher expenses primarily due to the inclusion of Hofmann Lace and increases in
variable incentive compensation.
Interest expense for the first quarter increased to $5.2 million compared
to last year's $3.4 million primarily as a result of additional borrowings
related to the acquisition and consolidation of Hofmann Laces and for additional
working capital needs. Short-term requirements were partially offset by lower
interest rates in the current year.
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The effective income tax rate was 37.0% in the first quarter of fiscal 1997
compared to 32.9% in the comparable quarter of the prior year. Most of this rate
increase was due to the relative proportionate impact of credits to pre-tax
income which has increased substantially from year to year. The rate increase is
also affected by the statutory suspension of the R&D tax credit. The Company
expects the effective tax rate for the year to be higher than the prior year's
rate but less than the first quarter rate.
Net income for the first quarter was $5.4 million, or $.37 per primary
share, compared to $2.7 million, or $.20 per primary share, for the comparable
period of the previous year.
The results of operations on a consolidated basis for the first quarter
of 1997 were not significantly impacted on a consolidated basis by the continued
devaluation of the Mexican peso. In the balance sheet, the result of this
translation loss is a reduction in stockholders' investment, as required by
Statement of Financial Accounting Standards No. 52, (SFAS No. 52) and
accordingly is not reflected in the Company's' results of operations. In
management's view, a risk of loss of earnings exists in the future related to
net U.S. dollar transactions. Effective January 1, 1997, the Mexican economy is
considered "highly inflationary" for financial reporting purposes because the
cumulative Mexican inflation rate for the immediately preceding three years
exceeds 100%. As a result, under SFAS No. 52, the U.S. dollar will be used as
the functional currency for translating the balance sheet and results of
operations of the Company's Mexican operation, until the Mexican economy is no
longer considered highly inflationary. Under this method of accounting, foreign
currency translation gains and losses are recognized currently in the results of
operations, rather than as a direct change in stockholders' investment. While
management expects that the peso will devalue even further in fiscal 1997, it
believes that economic growth, spurred by a return of domestic demand and a
reduction in inflation, will result in continued growth for its operations. The
Company cannot determine to what extent this growth may be offset by the
negative impact of economic uncertainty.
Liquidity and Capital Requirements
At December 29, 1996, working capital was $190.1 million compared to $177.7
million at September 29, 1996. This increase in working capital is due primarily
to a reduction in short-term borrowings as cash generated from operating
activities allowed the repayment of over $18 million of debt. The Company
maintains flexibility with respect to its seasonal working capital needs through
a committed revolving credit facility of $150 million and its continued access
to other traditional sources of funds, including available uncommitted lines of
credit aggregating over $125 million, and the ability to receive advances
against its factored accounts receivable. Management believes that the Company's
financial position and operating performance will continue to provide the
Company with the ability to obtain necessary capital from appropriate financial
markets.
Contingencies and Future Operations
Since January 1992, the Company has been involved in discussions with the
United States Environmental Protection Agency ("EPA") regarding remedial actions
at its Gold Mills, Inc. ("Gold") facility in Pine Grove, Pennsylvania which was
acquired in October 1986. Between 1988 and 1990, the Company implemented a
number of corrective measures at the facility in conjunction with the
Pennsylvania Department of Environmental Resources and incurred approximately
$3.5 million in costs. Subsequently, through negotiations with the EPA, Gold
entered into a Final Administrative Consent Order with the EPA, effective
October 14, 1992. Pursuant to such order, Gold has performed (i) certain
measures designed to prevent any potential threats to the environment at the
facility and (ii) an investigation to fully determine the nature of any release
of hazardous substances at the facility. The Company has not received a response
to its report filed with the EPA. Upon receipt of EPA comments, Gold will
conduct a study to evaluate alternatives for any corrective action which may be
necessary at the facility. The failure of Gold to comply with the terms of the
Consent Order may result in the imposition of monetary penalties against Gold.
In the fourth quarter of 1992, a pre-tax charge of $8.0 million was provided for
the estimated future cost of the additional remediation.
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During the fourth quarter of 1992, the Company also received a Notice of
Violation from the North Carolina Division of Environmental Management
concerning ground water contamination on or near one of its North Carolina
facilities. The Company has voluntarily agreed to allow the installation of
monitoring wells at the site but denies that such contaminants originated from
the Company's operations or property. An additional pre-tax charge of $1.3
million was provided in the fourth quarter of 1992 to reflect the estimated
future costs of monitoring this and other environmental matters including the
removal of underground storage tanks at the Company's facilities. The Company
has removed substantially all underground storage tanks at its facilities.
At December 29, 1996, environmental accruals amounted to $5.5 million of
which $4.5 million is non-current and is included in other deferred liabilities
in the balance sheet.
The Company is also involved in various litigation arising in the ordinary
course of business. Although the final outcome of these legal and environmental
matters cannot be determined, based on the facts presently known, it is
management's opinion that the final resolution of these matters will not have a
material adverse effect on the Company's financial position or future results of
operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Reference is made to Item 3 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 29, 1996, which item is
incorporated herein by reference.
Items 2 - 3. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders. The Company's
fiscal 1996 Annual Meeting of Stockholders was held on February 6, 1997. At such
meeting, the stockholders elected each of Tomokazu Adachi, John A. Emrich, Bruno
Hofmann, Sherry R. Jacobs and Stig A. Kry to serve as directors for a three-year
term expiring after the Company's 1999 fiscal year. In addition, the
stockholders at such meeting approved the adoption of certain amendments to the
Company's 1991 Stock Option Plan and an amendment to the Company's 1989
Restricted Stock Plan. Finally, the stockholders at such meeting ratified the
selection of Arthur Andersen LLP as independent auditors for the fiscal year
ending September 28, 1997. The number of votes cast for, against or withheld, as
well as the number of abstentions and broker non-votes, as the case may be, with
respect to each matter voted upon at the fiscal 1996 Annual Stockholders'
Meeting is set forth below:
(1) Election of Directors
<TABLE>
<CAPTION>
Director Votes For Votes Withheld
<S> <C> <C>
Tomokazu Adachi 12,041,653 561,765
John A. Emrich 12,046,958 556,460
Bruno Hofmann 12,045,001 558,417
Sherry R. Jacobs 12,046,288 557,130
Stig A. Kry 12,047,367 556,051
</TABLE>
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Page 10
(2) Proposal to Approve Amendments to the Company's 1991 Stock
Option Plan
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions Broker Non-Votes
<S> <C> <C> <C>
10,619,027 948,969 94,162 933,460
</TABLE>
(3) Proposal to Approve Amendment to the Company's 1989 Restricted
Stock Plan
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions Broker Non-Votes
<S> <C> <C> <C>
10,611,466 946,715 103,977 933,460
</TABLE>
(4) Ratification of Selection of Auditors
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions
<S> <C> <C> <C>
12,559,189 17,446 26,783
</TABLE>
Item 5. Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description of Exhibit
(10)(a) * Guilford Mills, Inc. Excess Benefit Plan
(10)(b) * Guilford Mills, Inc. Trust For Non-Qualified Plans
* Items denoted with an asterisk represent management contracts or compensatory
plans or arrangements
(b) Reports on Form 8-K
Not Applicable
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Page 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GUILFORD MILLS, INC.
(Registrant)
Date: February 12, 1997 By: /s/ Terrence E. Geremski
Terrence E. Geremski
Senior Vice President/Chief Financial
Officer and Treasurer
<PAGE>
GUILFORD MILLS, INC.
EXCESS BENEFIT PLAN
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
ARTICLE I PURPOSE OF PLAN........................................................................1
ARTICLE II DEFINITIONS............................................................................2
2.01. Definitions...........................................................2
ARTICLE III ELIGIBILITY AND PARTICIPATION..........................................................5
3.01. Eligibility and Participation.........................................5
3.02. Participation Upon Reemployment.......................................5
ARTICLE IV EMPLOYER CONTRIBUTIONS.................................................................6
4.01. Amount of Employer's Contributions....................................6
4.02. Determination of Contribution.........................................6
4.03. Time and Method of Payment of Contribution............................6
4.04. Return of Employer Contributions......................................6
ARTICLE V ALLOCATIONS............................................................................7
5.01. Participant Accounts..................................................7
5.02. Valuation of Accounts.................................................7
5.03. Allocation Does Not Create Rights.....................................7
ARTICLE VI RETIREMENT BENEFIT.....................................................................8
6.01. Eligibility...........................................................8
6.02. Amount of Retirement Benefit..........................................8
6.03. Form and Commencement of Retirement Benefit...........................8
6.04. Early Retirement......................................................8
6.05. Death of Participant..................................................8
ARTICLE VII DEATH BENEFIT...................................................................................9
7.01. Eligibility...........................................................9
7.02. Amount of Supplemental Death Benefit..................................9
7.03. Form and Commencement of Death Benefit................................9
ARTICLE VIII SEVERANCE BENEFIT..............................................................................10
8.01. Eligibility..........................................................10
8.02. Amount of Benefit....................................................10
8.03. Form and Commencement of Severance Benefit...........................10
8.04. Vested Percentage....................................................10
8.05. Forfeitures..........................................................10
8.06. Death of Participant.................................................11
<PAGE>
ARTICLE IX DISABILITY BENEFIT....................................................................12
9.01. Eligibility..........................................................12
9.02. Amount of Benefit....................................................12
9.03. Form and Commencement of Benefit.....................................12
9.04. Death of Participant.................................................12
ARTICLE X ADMINISTRATION OF THE PLAN............................................................13
10.01. General..............................................................13
10.02. Prepayment...........................................................13
10.03. Amendment and Termination............................................13
10.04. Withholding..........................................................13
ARTICLE XI PARTICIPANT ADMINISTRATIVE PROVISIONS.................................................14
11.01. Beneficiary Designation..............................................14
11.02. Non-Designation or Death of Designated Beneficiary...................14
11.03. Personal Data to Advisory Committee..................................14
11.04. Address for Notification.............................................14
11.05. Assignment or Alienation.............................................14
11.06. Appeal Procedure For Denial of Benefits..............................15
11.07. No Rights Implied....................................................16
ARTICLE XII MISCELLANEOUS..................................................................................17
12.01. No Trust Created.....................................................17
12.02. No Employment Agreement..............................................17
12.03. Incapacity of Recipient..............................................17
12.04. Binding Effect.......................................................17
12.05. Entire Plan..........................................................17
ARTICLE XIII CONSTRUCTION...................................................................................18
13.01. Governing Law........................................................18
13.02. Gender...............................................................18
13.03. Headings.............................................................18
</TABLE>
ii
<PAGE>
ARTICLE I
PURPOSE OF PLAN
Guilford Mills, Inc. hereby continues the Guilford Mills, Inc. Excess
Benefit Plan it previously established effective January 1, 1993 to provide
supplemental retirement and death benefits in excess of the maximum benefit
limitations of Section 415 of the Internal Revenue Code or the compensation
limits of Section 401(a)(17) of the Internal Revenue Code, for a select group of
management and highly compensated employees who are determined to be eligible to
participate in this Plan.
<PAGE>
ARTICLE II
DEFINITIONS
2.01. DEFINITIONS. For the purpose of this Plan, the following
definitions shall apply unless the context requires otherwise:
(a) "Account" shall mean the separate account maintained to record the
interest of a Participant under the Plan.
(b) "Accrued Benefit" shall mean the amount in a Participant's Account
as of any date derived from Employer contributions.
(c) "Act" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
(d) "Advisory Committee" shall mean the Plan's Advisory Committee as
appointed by the Board of Directors.
(e) "Affiliated Entity" shall mean an entity, regardless of whether or
not such entity has adopted the Plan, within the controlled or affiliated
service group of the Employer, as determined by Sections 414(b), (c), (m) and
(o) of the Code.
(f) "Board of Directors" shall mean the Board of Directors of the
Company.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(h) "Company" shall mean Guilford Mills, Inc., or any successor
thereto.
(i) "Compensation" shall mean the total cash compensation, including
bonuses and overtime, paid to a Participant by the Employer or an Affiliated
Entity during the Plan Year (regardless of when earned) while a Participant in
the Plan, and reported on the Participant's Form W-2 for income tax purposes,
but excluding commissions, reimbursement for expenses and Employer contributions
paid under this Plan or any qualified retirement plan, deferred compensation
plan or welfare plan. For any Plan Year in which a Participant was not a
participant in the Plan at the beginning of the year, his Compensation shall be
deemed to be remuneration as determined above for that portion of the calendar
year during which he is a Participant.
(j) "Designated Beneficiary" shall mean any person or fiduciary
designated in writing by the Participant to the Advisory Committee, in
accordance with the requirements of Section 11.01 hereof, to whom payments
becoming due by reason of or after a Participant's death shall be
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made.
(k) "Disability Retirement Date" shall mean the date on which a
Participant is first determined to be eligible to receive a disability benefit
under the Plan.
(l) "Early Retirement Date" shall mean the date on which a Participant
attains age fifty-five (55) with ten (10) Years of Service.
(m) "Employee" shall mean any person who performs services for an
Employer, other than an independent contractor and other than any person who is
a leased employee within the meaning of Section 414(n)(2) of the Code.
(n) "Employer" shall mean the Company, and each other subsidiary,
affiliate, successor or other corporation that shall, with the consent of the
Board of Directors, elect to join the Plan.
(o) "ESOP" shall mean the Guilford Mills, Inc. Employee Stock Ownership
Plan as amended from time to time and each predecessor, successor, or
replacement defined contribution pension plan.
(p) "Former Participant" shall mean any individual who has been a
Participant hereunder, and who has not yet received the entire benefit to which
he is entitled under the Plan.
(q) "Hour of Service" shall mean each hour for which the Employer,
either directly or indirectly, pays a Participant, or for which a Participant is
entitled to payment, for the performance of duties, as determined in accordance
with the provisions of the Qualified Profit Sharing Plan.
(r) "Normal Retirement Date" shall mean the later of (i) the date on
which the Participant attains sixty-five (65) years of age, or (ii) the fifth
(5th) anniversary of the date the person became a Participant in the Plan.
(s) "Participant" shall mean an Employee who has been selected to
participate in this Plan by the Advisory Committee in accordance with Article
III hereof.
(t) "Plan" shall mean the Guilford Mills, Inc. Excess Benefit Plan as
established herein and amended from time to time.
(u) "Plan Year" shall mean the twelve consecutive month period ending
each September 30.
(v) "Qualified Plans" shall mean the Qualified Profit Sharing Plan and
the ESOP.
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(w) "Qualified Profit Sharing Plan" shall mean the Guilford Mills, Inc.
Profit-Sharing Plan as amended from time to time, and each predecessor,
successor or replacement defined contribution pension plan.
(x) "Spouse" shall mean the person recognized by the state in which the
Participant is domiciled as the Participant's legal spouse. A Participant shall,
in the Advisory Committee's sole discretion, be deemed not to have a Spouse if
the Participant or a Designated Beneficiary establishes to the satisfaction of
the Advisory Committee that the person recognized by such state as the
Participant's legal spouse cannot be located. The Advisory Committee shall be
entitled to rely upon a representation of a Participant that the Participant has
no Spouse.
(y) "Termination Date" shall mean the date of the Participant's
retirement, death, or other termination of employment with the Company.
(z) "Valuation Date" shall mean the last business day of each calendar
quarter and any other date or dates selected by the Advisory Committee.
(aa) "Year of Service" shall mean any Plan Year for which a Participant
receives credit under the Qualified Profit Sharing Plan.
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ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.01. ELIGIBILITY AND PARTICIPATION. The Advisory Committee, in its
sole discretion, shall select the Employees who are eligible to become
Participants in the Plan at such time and in such manner as the Advisory
Committee shall determine. Notwithstanding the foregoing, in selecting the
Employees eligible to participate in the Plan, the Advisory Committee shall
limit participation to Employees who experience a reduction in benefits under
the Qualified Plans as a result of the maximum benefit limitations imposed by
Section 415 of the Code or the compensation limits of Section 401(a)(17) of the
Code, and who are members of a select group of management or highly compensated
employees, as defined for purposes of the Act. The Advisory Committee shall
notify those Employees selected for participation of the existence of the Plan
and of its basic provisions.
3.02. PARTICIPATION UPON REEMPLOYMENT. A Participant who terminates his
employment with an Employer and who is reemployed may resume participation in
the Plan upon approval of the Advisory Committee, if he is otherwise eligible.
5
<PAGE>
ARTICLE IV
EMPLOYER CONTRIBUTIONS
4.01 AMOUNT OF EMPLOYER'S CONTRIBUTIONS. For each year an Employee is a
Participant in the Plan, the Employer shall contribute to the Participant's
Account an amount equal to the amount, if any, by which the Participant's share
of the Employer's contribution(s) to the Qualified Plans, calculated under the
terms of the Qualified Plans as then in effect before the application of any
provision of the Qualified Plans designed to comply with the maximum benefit
limitations of Section 415 of the Code or compensation limits of Section
401(a)(17) of the Code, exceeds the Participant's actual share of the Employer's
contributions to the Qualified Plan as then in effect.
4.02 DETERMINATION OF CONTRIBUTION. The Employer, from its records,
shall determine the amount of any contributions to be made by it under the terms
of the Plan.
4.03 TIME AND METHOD OF PAYMENT OF CONTRIBUTION. The Employer may pay
its contribution for each Plan Year in one or more installments. The Employer's
contribution for any Plan Year shall be due and payable on the last day of its
taxable year with or within which such Plan Year ends, or as soon thereafter as
practicable, but not later than the time prescribed by law for filing the
Employer's Federal income tax return (including extensions thereof) for such
taxable year, without interest. Contributions shall be paid in cash.
4.04 RETURN OF EMPLOYER CONTRIBUTIONS. Notwithstanding any provision
herein to the contrary, upon the Employer's request, a contribution which was
made upon a mistake of fact shall be returned to the Employer within one year
after payment of the contribution.
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ARTICLE V
ALLOCATIONS
5.01 PARTICIPANT ACCOUNTS. The Advisory Committee shall establish an
Account for each Participant which will reflect the Participant's share of
contributions and the income, losses, appreciation, and depreciation
attributable to such items.
5.02 VALUATION OF ACCOUNTS. As of each Valuation Date, the Advisory
Committee shall adjust the Accounts of Participants as follows:
(a) Distributions. The Advisory Committee shall subtract from
each Account any distributions made from such Account to a Participant
or Designated Beneficiary since the immediately preceding Valuation
Date.
(b) Allocation of Investment Gains or Losses. Second, the
Advisory Committee shall add the net investment gain to, or subtract
the net investment loss from, the Accounts. Such gain or loss shall be
allocated among the Accounts in the proportion that the balance of each
Account as of the immediately preceding Valuation Date bears to the sum
of the balances of all Accounts as of such Valuation Date.
(c) Payments to or for the Benefit of the Company's General
Creditors. Third, the Advisory Committee shall subtract from the
Accounts payments made to or for the benefit of creditors of the
Company. Such payments shall be allocated to Accounts in the proportion
that the balance of each Account as of the immediately preceding
Valuation Date bears to the sum of the balances of all Accounts as of
such Valuation Date.
(d) Contributions. Fourth, the Advisory Committee shall credit
to the Account of each such Participant any contributions made by the
Employer for the benefit of such Participant in accordance with the
provisions of Section 4.01 hereof.
5.03 ALLOCATION DOES NOT CREATE RIGHTS. No Participant shall acquire
any right to or interest in any specific asset held in any trust as a result of
the allocations provided for in the Plan.
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ARTICLE VI
RETIREMENT BENEFIT
6.01. ELIGIBILITY. Upon termination of a Participant's employment for
any reason on or after his Normal Retirement Date, a Participant shall become
entitled to the retirement benefit described in this Article VI.
6.02 AMOUNT OF RETIREMENT BENEFIT. The amount of the retirement benefit
payable to the Participant shall be equal to the full value of the Participant's
Accrued Benefit under the Plan, determined as of the Valuation Date immediately
preceding the Participant's Normal Retirement Date or the date of his actual
retirement, whichever is later. A Participant shall become 100% vested in his
Accrued Benefit on his Normal Retirement Date.
6.03. FORM AND COMMENCEMENT OF RETIREMENT BENEFIT. The retirement
benefit shall be payable to the Participant in a lump sum. However, before
payment to the Participant of his retirement benefit commences hereunder, the
Participant may irrevocably elect, subject to the approval of the Advisory
Committee, to receive his retirement benefit in quarterly or annual installments
over a fixed period of time, not exceeding fifteen (15) years. Payments
hereunder shall begin within sixty (60) days following the later of the
Participant's Normal Retirement Date or the date of his actual retirement, or as
soon thereafter as administratively practicable.
6.04. EARLY RETIREMENT. Upon thirty (30) days prior written notice to
the Advisory Committee, a Participant who has a separation from service on or
after his Early Retirement Date may elect, on the first day of any month
thereafter, to receive the full value of his Accrued Benefit, as if such
Participant had then attained his Normal Retirement Date.
6.05. DEATH OF PARTICIPANT. If a Participant entitled to a retirement
benefit under this Article VI dies after terminating employment with the Company
and before payment of such benefit has begun, then the Participant's Designated
Beneficiary shall receive the Participant's retirement benefit in a lump sum.
However, before payment to the Designated Beneficiary commences hereunder, such
Designated Beneficiary may irrevocably elect, subject to the approval of the
Advisory Committee, to receive the Participant's retirement benefit in quarterly
or annual installments over a fixed period of time, not exceeding fifteen (15)
years. Payments hereunder shall begin within sixty (60) days following the date
on which the Participant's death occurs, or as soon thereafter as
administratively practicable.
If a Participant was receiving his retirement benefit in installments,
and he dies before receiving all of the payments due him hereunder, the
remaining installment payments shall be made to the Participant's Designated
Beneficiary, at the same intervals paid to the Participant.
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ARTICLE VII
DEATH BENEFIT
7.01. ELIGIBILITY. Upon the death of a Participant while in the active
employment of the Company, the Participant's Designated Beneficiary shall become
entitled to the death benefit described in this Article VII.
7.02. AMOUNT OF SUPPLEMENTAL DEATH BENEFIT. The amount of the death
benefit payable to the Participant's Designated Beneficiary shall be equal to
the full value of the Participant's Accrued Benefit under the Plan determined as
of the Valuation Date immediately preceding the Participant's death. A
Participant who dies prior to his separation from service with the Employer
shall immediately become 100% vested in his Accrued Benefit under the Plan.
7.03. FORM AND COMMENCEMENT OF DEATH BENEFIT. The death benefit shall
be payable to the Participant's Designated Beneficiary in a lump sum. However,
before payment to the Designated Beneficiary of the death benefit commences
hereunder, such Designated Beneficiary may irrevocably elect, subject to the
approval of the Advisory Committee, to receive the death benefit in quarterly or
annual installments over a fixed period of time, not exceeding fifteen (15)
years. Payments hereunder shall begin within sixty (60) days following the date
on which the Participant's death occurs, or as soon thereafter as
administratively practicable.
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ARTICLE VIII
SEVERANCE BENEFIT
8.01. ELIGIBILITY. If a Participant terminates employment with the
Employer prior to his Normal Retirement Date or Early Retirement Date, for any
reason other than death, disability, or cause, he shall be entitled to receive a
severance benefit under the Plan described in this Article VIII. For purposes of
this Plan, termination for cause shall include termination because of the
Participant's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses).
8.02. AMOUNT OF BENEFIT. The Participant shall be entitled to receive a
severance benefit equal to his Accrued Benefit under the Plan, multiplied by his
vested percentage (as defined in Section 8.04 hereof), determined as of the
Valuation Date immediately preceding the date of his termination of service.
8.03. FORM AND COMMENCEMENT OF SEVERANCE BENEFIT. The severance benefit
shall be payable to the Participant in a lump sum. However, before payment to
the Participant of his severance benefit commences hereunder, the Participant
may elect, subject to the approval of the Advisory Committee, to receive his
severance benefit in quarterly or annual installments over a fixed period of
time, not exceeding fifteen (15) years. Payments hereunder shall begin within
sixty (60) days following the Participant's Normal Retirement Date, or as soon
thereafter as administratively practicable.
8.04. VESTED PERCENTAGE. For purposes of calculating a Participant's
severance benefit under this Article VIII, a Participant's vested percentage
shall be determined in accordance with the following schedule:
Full Years of Service
with the Employer Vested Percentage
--------------------- -----------------
Less than 3 0
3 20%
4 40%
5 60%
6 80%
7 or more 100%
8.05. FORFEITURES. At the end of the Plan Year next following a
one-year break in service by a Participant, the non-vested portion of such
Participant's Accrued Benefit under the Plan shall be forfeited and shall be
used by the Employer to reduce its contributions to the Plan for the year of
forfeiture. For this purpose, a one-year break in service shall be defined as
any
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<PAGE>
Plan Year during which the Participant has a one-year break in service for
purposes of the Qualified Profit Sharing Plan.
8.06. DEATH OF PARTICIPANT. If a Participant entitled to a severance
benefit under this Article VIII dies before his Normal Retirement Date, then the
Participant's Designated Beneficiary shall receive the amount of the severance
benefit described in this Article VIII in a lump sum. However, before payment to
the Designated Beneficiary commences hereunder, such Designated Beneficiary may
irrevocably elect, subject to the approval of the Advisory Committee, to receive
the Participant's severance benefit in quarterly or annual installments over a
fixed period of time, not exceeding fifteen (15) years. Payments hereunder shall
begin within sixty (60) days following the date on which the Participant's death
occurs, or as soon thereafter as administratively practicable.
If a Participant was receiving his severance benefit in installments,
and he dies before receiving all of the payments due him hereunder, the
remaining installment payments shall be made to the Participant's Designated
Beneficiary, at the same intervals paid to the Participant.
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ARTICLE IX
DISABILITY BENEFIT
9.01. ELIGIBILITY. A Participant who becomes totally disabled while
employed by the Employer is eligible to receive a disability benefit under the
Plan. A Participant shall be considered totally disabled for purposes of this
Plan on the date he is determined to be totally disabled for purposes of the
Qualified Plans.
9.02. AMOUNT OF BENEFIT. A disabled Participant shall be entitled to a
disability benefit equal to the full value of his Accrued Benefit under the
Plan, determined as of the Valuation Date immediately preceding his Disability
Retirement Date.
9.03. FORM AND COMMENCEMENT OF BENEFIT. The disability benefit shall be
payable to the Participant in a lump sum. However, before payment to the
Participant of his disability benefit commences hereunder, the Participant may
irrevocably elect, subject to the approval of the Advisory Committee, to receive
his disability benefit in quarterly or annual installments over a fixed period
of time, not exceeding fifteen (15) years. Payments hereunder shall begin within
sixty (60) days following the date on which the Advisory Committee determines
the Participant is totally disabled for purposes of the Plan, or as soon
thereafter as administratively practicable.
9.04. DEATH OF PARTICIPANT. If a Participant entitled to a disability
benefit under this Article IX dies prior to commencement of payment of his
disability benefit hereunder, then the Participant's Designated Beneficiary
shall receive the amount of the disability benefit described in this Article IX
in a lump sum. However, before payment to the Designated Beneficiary commences
hereunder, such Designated Beneficiary may irrevocably elect, subject to the
approval of the Advisory Committee, to receive the Participant's disability
benefit in quarterly or annual installments over a fixed period of time, not
exceeding fifteen (15) years. Payments hereunder shall begin within sixty (60)
days following the date on which the Participant's death occurs, or as soon
thereafter as administratively practicable.
If a Participant was receiving his disability benefit in installments,
and he dies before receiving all of the payments due him hereunder, the
remaining installment payments shall be made to the Participant's Designated
Beneficiary, at the same intervals paid to the Participant.
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ARTICLE X
ADMINISTRATION OF THE PLAN
10.01. GENERAL. The Plan shall be administered by the Advisory
Committee. The Advisory Committee shall have full power to interpret and
construe the Plan; provided, however, if any member of the Advisory Committee is
also a Participant in the Plan, he shall not participate in any decision of the
Advisory Committee concerning the form or amount of his benefit under the Plan.
Members of the Board of Directors who are not members of the Advisory Committee
shall not be liable for any action or determination made by the Advisory
Committee in good faith with respect to the Plan.
10.02. PREPAYMENT. The Advisory Committee may, in its sole and absolute
discretion, prepay all or any part of the quarterly or annual installments
remaining to be paid to a Participant or his Designated Beneficiary who has
elected to receive benefits under this Plan in the form of installments. The
amount of such prepayment shall equal the then discounted present value of the
remaining installments to be prepaid, using the prime rate of Wachovia Bank of
North Carolina, N.A. plus one percent (1%), as such bank's prime rate is
published in the WALL STREET JOURNAL at the time of such payment, and receipt
thereof by the Participant or Designated Beneficiary shall be in full
satisfaction of all remaining obligations of the Company under the Plan.
10.03. AMENDMENT AND TERMINATION. The Company reserves the right, at
any time and from time to time by action of the Board of Directors, to modify or
amend in whole or in part any or all provisions of the Plan. In addition, the
Company reserves the right by action of the Board of Directors to terminate the
Plan in whole or in part at any time; provided, however, any such modification,
amendment or termination shall not result in a reduction of the Participant's
retirement benefit calculated at the time of such modification, amendment or
termination. Upon termination of the Plan, each Participant shall become 100%
vested in his retirement benefit hereunder.
10.04. WITHHOLDING. The Company may withhold from any benefits payable
under the Plan all federal, state or local taxes that may be required to be
withheld pursuant to any applicable law.
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ARTICLE XI
PARTICIPANT ADMINISTRATIVE PROVISIONS
11.01. BENEFICIARY DESIGNATION. Any Participant may from time to time
designate, in writing, any person or persons to whom the Advisory Committee
shall pay any benefits due in the event of his death. The Advisory Committee
shall prescribe the form for the written designation of a beneficiary and, upon
the Participant's filing the form with the Advisory Committee, it effectively
shall revoke all designations filed prior to that date by the same Participant.
Notwithstanding the foregoing, a married Participant's sole Designated
Beneficiary shall be his Spouse, unless the Participant designates another
person or persons in writing as his Designated Beneficiary, in the manner
described in this Section 11.01.
11.02. NON-DESIGNATION OR DEATH OF DESIGNATED BENEFICIARY. If an
unmarried Participant has not given written notification of a Designated
Beneficiary to the Advisory Committee prior to the Participant's death, or if
the Participant's Designated Beneficiary is not living or in existence at the
time of the Participant's death, any benefits due under the Plan shall be paid
to the Participant's estate. If the Designated Beneficiary is a person who
survives the Participant but dies prior to full payment of the benefits due
hereunder, all payments after the death of the Designated Beneficiary shall be
paid to the estate of the Designated Beneficiary.
11.03. PERSONAL DATA TO ADVISORY COMMITTEE. Each Participant and
Designated Beneficiary must furnish to the Advisory Committee such evidence,
data, or information as the Advisory Committee considers necessary or desirable
for the purpose of administering the Plan. The provisions of this Plan are
effective for the benefit of each Participant upon the condition precedent that
each Participant will furnish promptly full, true, and complete evidence, data,
and information when requested by the Advisory Committee, provided the Advisory
Committee shall advise each Participant of the effect of his failure to comply
with its request.
11.04. ADDRESS FOR NOTIFICATION. Each Participant and each Designated
Beneficiary of a deceased Participant shall file with the Advisory Committee, in
writing, his post office address, and each subsequent change of such post office
address. Any payment or distribution hereunder, and any communication addressed
to a Participant or his Designated Beneficiary, mailed to the last address filed
with the Advisory Committee, or if no such address has been filed, then to the
last address indicated on the records of the Employer, shall be deemed to have
been delivered to the Participant or his Designated Beneficiary on the date that
such distribution or communication is deposited in the United States Mail, first
class postage prepaid.
11.05. ASSIGNMENT OR ALIENATION. No benefit payable under the Plan
shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary, including any such
14
<PAGE>
liability which is for alimony or other payments for the
support of a spouse or former spouse, or for any other relative of the
Participant, prior to actually being received by the person entitled to the
benefit under the terms of the Plan. Any attempt to alienate, sell, transfer,
assign, pledge, encumber, charge, garnish, execute or levy under the Plan
shall be void. If a Participant or any Designated Beneficiary hereunder
shall become bankrupt, or attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber, or charge any right hereunder, then such right or
benefit shall, in the discretion of the Advisory Committee, cease and terminate,
and in such event, the Advisory Committee may hold or apply the same or any part
thereof for the benefit of the Participant or his Designated Beneficiary,
spouse, children, or other dependents, or any of them in such manner and in such
amounts and proportions as the Advisory Committee may deem proper.
11.06. APPEAL PROCEDURE FOR DENIAL OF BENEFITS. The Advisory Committee
shall provide adequate notice in writing to any Participant or to any Designated
Beneficiary ("Claimant") whose claim for benefits under the Plan has been
denied. The Advisory Committee's notice to the Claimant shall set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which
the Advisory Committee based its denial;
(c) A description of any additional material and information
needed for the Claimant to perfect his claim and an explanation of why
the material or information is needed;
(d) A statement that the Claimant may:
(i) request a review upon written application to the
Advisory Committee;
(ii) review pertinent Plan documents; and
(iii) submit issues and comments in writing; and
(e) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Advisory Committee within sixty
(60) days after receipt of the Advisory Committee's notice of denial of
benefits. The Advisory Committee's notice must further advise the
Claimant that his failure to appeal the action to the Advisory
Committee in writing within the sixty (60) day period will render the
Advisory Committee's determination final, binding, and conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his
duly authorized representative, may submit, in writing, whatever issues and
comments he, or his duly authorized representative, feels are pertinent. The
Advisory Committee shall re-examine all facts related to
15
<PAGE>
the appeal and make a final determination as to whether the
denial of benefits is justified under the circumstances. The Advisory Committee
shall advise the Claimant of its decision within sixty (60) days of the
Claimant's written request for review, unless special circumstances (such as a
hearing) would make a rendering of a decision within the sixty (60) day limit
infeasible, but in no event shall the Advisory Committee render a decision with
respect to a denial of a claim for benefits later than one hundred twenty (120)
days after its receipt of a request for review. A written statement stating the
decision on review, the specific reasons for the decision, and the specific Plan
provisions on which the decision is based shall be mailed or delivered to the
Claimant within such sixty (60) (or one hundred twenty (120)) day period.
The Advisory Committee's notice of denial of benefits shall identify
the name of each member of the Advisory Committee and the name and address of
the Advisory Committee member to whom the Claimant may forward his appeal.
11.07. NO RIGHTS IMPLIED. Nothing contained in this Plan, or any
modification or amendment to the Plan, or in the creation of any benefit, or the
payment of any benefit, shall give any employee, Participant, or any Designated
Beneficiary any right to continue employment with the Employer, or any legal or
equitable right against the Company or any officer, director, or employee of the
Company, or its agents or employees, except as expressly provided by the Plan,
or the Act.
16
<PAGE>
ARTICLE XII
MISCELLANEOUS
12.01. NO TRUST CREATED. The obligation of the Company to make payments
hereunder to a Participant shall constitute an unsecured liability of the
Company. Such payments shall be made from the general funds of the Company, and
the Company shall not be required to establish or maintain any special or
separate fund, to purchase or acquire life insurance on a Participant's life, or
otherwise to segregate assets to assure that such payments shall be made.
Neither a Participant nor any other person shall have any interest in any
particular asset of the Company by reason of its obligations hereunder, and the
right of any of them to receive payments under this Plan shall be no greater
than the right of any other unsecured general creditor of the Company. Nothing
contained in the Plan shall create or be construed as creating a trust of any
kind or any other fiduciary relationship between the Company and a Participant
or any other person.
12.02. NO EMPLOYMENT AGREEMENT. Neither the execution of this Plan nor
any action taken by the Company pursuant to this Plan shall be held or construed
to confer on a Participant any legal right to be continued as an employee of an
Employer or to restrict the right of an Employer to terminate his employment.
12.03. INCAPACITY OF RECIPIENT. If the Advisory Committee shall find
that any person to whom any distribution is to be made under this Plan is unable
to care for his affairs because of accident or illness, or is a minor, any
payment due (unless a prior claim therefor shall have been made by a duly
appointed guardian, committee or other legal representative) may be paid to the
spouse, child, parent, or brother or sister of such person, or to any person
deemed by the Advisory Committee to have incurred expense for such person
otherwise entitled to payment, in such manner and proportions as the Advisory
Committee may determine. Any such payment shall be a complete discharge of the
liabilities of the Company under the Plan.
12.04. BINDING EFFECT. Obligations incurred by the Company pursuant to
this Plan shall be binding upon and inure to the benefit of the Company, its
successors and assigns, and the Participant, his Designated Beneficiaries,
personal representatives, heirs, and legatees.
12.05. ENTIRE PLAN. This document and any amendments to said document
contain all the terms and provisions of the Plan and shall constitute the entire
Plan, any other alleged terms or provisions being of no effect.
17
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ARTICLE XIII
CONSTRUCTION
13.01. GOVERNING LAW. This Plan shall be construed and governed in
accordance with the laws of the State of North Carolina.
13.02. GENDER. The masculine gender, when appearing in the Plan, shall
be deemed to include the feminine gender, and the singular may include the
plural, unless the context clearly indicates to the contrary.
13.03. HEADINGS. The cover page of this Plan, the table of contents,
and all headings used in this Plan are for convenience of reference only and are
not part of the substance of this Plan.
IN WITNESS WHEREOF, this Plan, having been duly approved and adopted by
the Board of Directors of the Company, is executed by the duly authorized
officers of the Company and dated for purposes of reference this the
__27__ day of ____November__________, 1996.
GUILFORD MILLS, INC.
By: /s/ Terrence E. Geremski
Terrence E. Geremski
Vice President
ATTEST: /s/ Robert A. Emken, Jr.
Robert A. Emken, Jr.
Assistant Secretary
(CORPORATE SEAL)
18
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GUILFORD MILLS, INC.
TRUST FOR NON-QUALIFIED PLANS
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page #
<S> <C>
RECITALS..........................................................................................................1
ARTICLE I TITLE AND DESCRIPTIONS..........................................................................3
1.01 TITLE.........................................................................3
1.02 TERMS DEFINED IN PLAN.........................................................3
1.03 WORD USAGE....................................................................3
ARTICLE II ESTABLISHMENT OF TRUST..........................................................................4
2.01 GRANTOR TRUST.................................................................4
2.02 ASSETS SUBJECT TO CLAIMS OF EMPLOYER'S
CREDITORS.....................................................................4
2.03 TRUST IS IRREVOCABLE..........................................................4
ARTICLE III CONTRIBUTIONS...................................................................................5
3.01 CONTRIBUTIONS BY EMPLOYER.....................................................5
3.02 RECEIPT OF CONTRIBUTIONS......................................................5
3.03 COMMINGLING OF FUNDS..........................................................5
ARTICLE IV PAYMENTS FROM TRUST FUND........................................................................6
4.01 DISTRIBUTIONS.................................................................6
4.02 DIRECTION BY PLAN COMMITTEE...................................................6
4.03 LIABILITY FOR PAYMENTS........................................................6
4.04 INSOLVENCY OF EMPLOYER........................................................6
4.05 ASSETS SUBJECT TO CLAIMS OF CREDITORS.........................................7
4.06 RESUMPTION OF PAYMENTS........................................................8
4.07 CONDITION SUBSEQUENT..........................................................8
4.08 DISTRIBUTIONS TO QUALIFIED PROFIT SHARING PLAN................................9
ARTICLE V INVESTMENT OF TRUST FUND.......................................................................10
5.01 INVESTMENTS..................................................................10
5.02 INVESTMENT MANAGER...........................................................10
5.03 DIRECTION OF INVESTMENTS.....................................................11
5.04 STOCK OF EMPLOYER............................................................11
5.05 SUBSTITUTION OF ASSETS.......................................................12
ARTICLE VI POWERS OF THE TRUSTEE..........................................................................13
6.01 INVESTMENT POWERS............................................................13
6.02 ANCILLARY TRUSTEE............................................................15
6.03 RESTRICTION ON TRUSTEE POWERS................................................15
<PAGE>
ARTICLE VII ADMINISTRATIVE PROVISIONS............................................................................16
7.01 ACCOUNTS AND RECORDS.........................................................16
7.02 PLAN COMMITTEE ACTION........................................................16
7.03 VALUATION OF TRUST...........................................................16
7.04 EMPLOYER ACTION..............................................................16
7.05 RELIANCE ON WRITTEN INSTRUMENT...............................................17
7.06 LIABILITY FOR PAYMENT OF FUNDS...............................................17
7.07 LIABILITY OF TRUSTEE.........................................................17
7.08 COURT PROCEEDINGS............................................................17
7.09 ENFORCEMENT OF TRUST AGREEMENT AND
LEGAL PROCEEDINGS............................................................17
7.10 THIRD PARTY..................................................................18
7.11 AUTHORIZATION WITH RESPECT TO TAXES..........................................18
7.12 CONSULTATION WITH COUNSEL....................................................18
7.13 NO INTEREST IN EMPLOYER......................................................18
7.14 FEES AND EXPENSES............................................................18
7.15 BONDING OF TRUSTEE...........................................................19
7.16 RELATIONSHIP OF FIDUCIARIES..................................................19
7.17 PRUDENT MAN RULE.............................................................19
7.18 ALIENATION...................................................................19
7.19 LIMITATION ON LIABILITY - IF INVESTMENT
MANAGER APPOINTED............................................................19
7.20 INSURANCE COMPANY PROTECTED..................................................20
ARTICLE VIII SUBSTITUTION OF TRUSTEE.............................................................................21
8.01 TRUSTEE......................................................................21
8.02 RESIGNATION..................................................................21
8.03 REMOVAL......................................................................21
8.04 SUCCESSION OF TRUSTEE........................................................21
8.05 MERGER OF CORPORATE TRUSTEE..................................................21
ARTICLE IX AMENDMENT AND TERMINATION......................................................................23
9.01 AMENDMENT PRIOR TO A CHANGE IN CONTROL.......................................23
9.02 AMENDMENT FOLLOWING CHANGE IN CONTROL........................................23
9.03 TERMINATION..................................................................23
9.04 SUSPENSION OF CONTRIBUTIONS..................................................23
9.05 COMPLIANCE WITH ERISA AND THE CODE...........................................24
9.06 CHANGE IN CONTROL............................................................24
ARTICLE X OTHER EMPLOYERS; SUCCESSOR EMPLOYERS...........................................................25
10.01 ADOPTION BY OTHER EMPLOYERS..................................................25
10.02 CONTINUATION BY EMPLOYER'S SUCCESSOR.........................................25
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ARTICLE XI MISCELLANEOUS PROVISIONS.......................................................................26
11.01 CONTRIBUTIONS NOT RECOVERABLE................................................26
11.02 LIMITATIONS ON PARTICIPANTS' RIGHTS..........................................26
11.03 INDEMNIFICATION OF INDIVIDUAL TRUSTEE........................................26
11.04 RECEIPT OF RELEASE...........................................................26
11.05 ACCEPTANCE...................................................................26
11.06 ACCOUNTING PERIOD............................................................26
11.07 TITLE OF TRUST ASSETS........................................................26
11.08 NOTICE.......................................................................26
11.09 HEADINGS.....................................................................27
11.10 GOVERNING LAW................................................................27
11.11 EXECUTIONS AND COUNTERPARTS..................................................27
</TABLE>
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GUILFORD MILLS, INC.
TRUST FOR NON-QUALIFIED PLANS
This Amended and Restated Trust Agreement, made and entered into at
Greensboro, North Carolina, by and between GUILFORD MILLS, INC., a Delaware
corporation with its principal office located at Greensboro, North Carolina (the
"Employer" and sometimes referred to herein as the "Company"), and NORTH
CAROLINA TRUST COMPANY, a North Carolina corporation having its principal office
located at Greensboro, North Carolina (the "Trustee").
RECITALS
WHEREAS, the Employer has previously established the Guilford Mills,
Inc. Non-Qualified Profit Sharing Plan (the "Non-Qualified Plan") for the
benefit of certain of its highly compensated employees, and in connection
therewith, established the Guilford Mills, Inc. Non-Qualified Profit Sharing
Trust; and
WHEREAS, the Employer has previously established the Guilford Mills,
Inc. Excess Benefit Plan (the "Excess Plan") for the benefit of those
highly-compensated employees of the Employer whose contributions under certain
of the Employer's qualified plans are limited by Section 415 and Section
401(a)(17) of the Internal Revenue Code and applicable regulations; and
WHEREAS, the Employer wishes to amend and restate the trust it
previously established and to contribute to such trust assets that shall be held
therein, subject to the claims of the Employer's creditors in the event of the
Employer's insolvency, as herein defined, until paid to participants and their
beneficiaries in such manner and at such times as specified in the Excess Plan
or the Non-Qualified Plan, as applicable (hereinafter referred to individually
as a "Plan" and collectively as the "Plans"); and
WHEREAS, the Trustee is willing to accept the additional assets under
such trust; and
WHEREAS, it is the intention of the parties that this trust shall
continue to constitute an unfunded arrangement and shall not affect the status
of the Plans as unfunded plans maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of the Employer to make contributions to
the trust to
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provide itself with a source of funds to assist it in the meeting of its
liabilities under the Plans.
NOW, THEREFORE, the parties do hereby amend and restate the Guilford
Mills, Inc. Non-Qualified Profit Sharing Trust as the Guilford Mills, Inc. Trust
for Non-Qualified Plans and agree that such trust shall be comprised, held and
disposed of as follows:
2
<PAGE>
ARTICLE I
TITLE AND DESCRIPTIONS
1.01 TITLE. This Trust Agreement shall be known as the Guilford Mills,
Inc. Trust for Non-Qualified Plans.
1.02 TERMS DEFINED IN PLAN. The definitions set forth in the Excess
Plan are hereby incorporated by reference and shall be given the same meaning as
set forth in the Excess Plan, unless another meaning is attributed to such term
in this Trust Agreement.
1.03 WORD USAGE. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of the Plans dictates, the
plural shall be read as the singular and the singular as the plural.
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<PAGE>
ARTICLE II
ESTABLISHMENT OF TRUST
2.01 GRANTOR TRUST. This trust is intended to be a grantor trust, of
which the Employer is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as
amended, and shall be construed accordingly.
2.02 ASSETS SUBJECT TO CLAIMS OF EMPLOYER'S CREDITORS. The principal of
this trust, and any earnings thereon, shall be held separate and apart from
other funds of the Employer and shall be used exclusively for the uses and
purposes of participants in the Plans and general creditors as herein set forth.
Plan participants and their beneficiaries shall have no preferred claim on, or
any beneficial ownership interest in, any assets of this trust. Any rights
created under the Plans and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their beneficiaries against the
Employer. Any assets held by this trust will be subject to the claims of the
Employer's general creditors under federal and state law in the event of the
Employer's Insolvency, as defined in Section 4.04 hereof.
2.03 TRUST IS IRREVOCABLE. The trust hereby established is irrevocable
by the Employer.
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<PAGE>
ARTICLE III
CONTRIBUTIONS
3.01 CONTRIBUTIONS BY EMPLOYER. The Employer in its sole discretion,
may at any time, or from time to time, make deposits of cash or other property
in trust with the Trustee to be held, administered and disposed of by the
Trustee as provided in this Trust Agreement. Neither the Trustee nor any Plan
participant or beneficiary shall have any right to compel such deposits.
3.02 RECEIPT OF CONTRIBUTIONS. The Trustee shall receive all
contributions made to it in cash. All contributions so received, together with
the income therefrom and any other increment thereon, shall be held, managed,
and administered by the Trustee pursuant to the terms of this Trust Agreement
without distinction between principal and income. The Trustee shall be
accountable to the Employer for the funds contributed to it by the Employer, but
shall have no duty to administer the Plans nor to determine that the assets of
the trust are adequate to provide any benefit payable pursuant to the Plans. The
Trustee shall not be obligated to collect any contributions from the Employer.
3.03 COMMINGLING OF FUNDS. Unless otherwise directed by the Board of
Directors, the Trustee shall hold, invest, and administer the trust assets as a
single fund without identification of any part of the trust assets to the
Employer or to any Plan participant or group of Plan participants or their
beneficiaries. Notwithstanding the foregoing, the Trustee will keep separate
accounts on its books for contributions made by the Employer to meet its
obligations under each Plan, if so identified by the Employer.
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<PAGE>
ARTICLE IV
PAYMENTS FROM TRUST FUND
4.01 DISTRIBUTIONS. Payments shall be made from trust assets by the
Trustee to such persons, in such manner, at such times, and in such amounts as
the Advisory Committee of the Excess Plan or the Committee appointed under the
Non-Qualified Plan (hereinafter referred to as the "Plan Committees" or a "Plan
Committee") shall from time to time direct in writing, provided, however, the
Trustee may withhold compliance with a Plan Committee's direction to the extent
that, and so long as, the Trustee shall deem such withholding necessary to
insure payment of the Trustee's expenses or to protect the Trustee against
liability for taxes or any other liability.
4.02 DIRECTION BY PLAN COMMITTEE. The Trustee shall not be liable for
any distribution made or acts done by it pursuant to written directions of a
Plan Committee. The Trustee shall not be obligated to inquire as to whether any
payee or distributee is entitled to any payment or whether the distribution is
proper or within the terms of the Plan, or as to the manner of making any
payment or distribution. The Trustee shall be accountable only to the Advisory
Committee for any payment or distribution made by it on the order or direction
of the Advisory Committee, and only to the Committee appointed under the
Non-Qualified Plan for any payment or distribution made by it on the order or
direction of that Committee.
4.03 LIABILITY FOR PAYMENTS. The liability of the Trustee to make
payments from the trust is limited to the available assets of the trust.
4.04 INSOLVENCY OF EMPLOYER. The Trustee shall cease payment of
benefits to Plan participants and their beneficiaries if the Company is
Insolvent. The Company shall be considered Insolvent or under an Insolvency for
purposes of this Trust Agreement in the event of any of the following:
(a) the Company's inability to pay its debts as they fall due;
(b) the Company's making of a general assignment for the
benefit of its creditors;
(c) the voluntary commencement by the Company of any
proceeding under Title 11 of the United States Code or any other law of
any jurisdiction for the relief, liquidation or rehabilitation of
debtors (all of which proceedings are hereinafter collectively referred
to as "insolvency proceedings");
(d) the Company's making of an admission of any of the
material allegations of or consenting to or acquiescing in a petition,
application, motion or complaint commencing an insolvency proceeding or
the Company's seeking of the appointment of a
6
<PAGE>
receiver, custodian, liquidator, sequestrator, trustee or similar
official of or for the Company or of or for a substantial part of its
assets;
(e) the involuntary commencement of an insolvency proceeding
against the Company which is not fully stayed, timely controverted or
dismissed within 120 days after the filing thereof; or
(f) the appointment of or taking possession by a receiver,
custodian, liquidator, sequestrator, trustee or similar official of or
for the Company or of or for a substantial part of its assets.
4.05 ASSETS SUBJECT TO CLAIMS OF CREDITORS. At all times during the
continuance of this trust, the principal and income of the trust shall be
subject to the claims of the general creditors of the Employer under federal and
state law as set forth below.
(a) The Board of Directors and the Chief Executive Officer of
the Employer shall have the duty to inform the Trustee in writing of
the Employer's Insolvency. If a person claiming to be a creditor of the
Employer alleges in writing to the Trustee that the Employer has become
Insolvent, the Trustee shall determine whether the Employer is
Insolvent and, pending such determination, the Trustee shall
discontinue payment of benefits to Plan participants or their
beneficiaries.
(b) Unless the Trustee has actual knowledge of the Employer's
Insolvency, or has received notice from the Employer or a person
claiming to be a creditor alleging that the Employer is Insolvent, the
Trustee shall have no duty to inquire whether the Employer is
Insolvent. The Trustee may in all events rely on such evidence
concerning the Employer's solvency as may be furnished to the Trustee
and that provides the Trustee with a reasonable basis for making a
determination concerning the Employer's solvency.
(c) If at any time the Trustee has determined that the
Employer is Insolvent, the Trustee shall discontinue payments to Plan
participants or their beneficiaries, shall hold the assets of the trust
for the benefit of the Employer's general creditors, and shall transfer
or distribute trust assets only as a court of competent jurisdiction,
or receiver duly appointed by such court, may order or direct for the
purpose of making the trust assets available to satisfy the claims of
the Employer's general creditors. Nothing in this Trust Agreement shall
in any way diminish any rights of Plan participants or their
beneficiaries to pursue their rights as general creditors of the
Employer with respect to benefits due under a Plan or otherwise.
(d) The Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with this Article IV
only after the Trustee has determined that the Employer is not
Insolvent (or is no longer Insolvent). In making such determination,
the Trustee may retain outside experts competent to advise the Trustee
as to whether the Employer is, in fact, Insolvent. The expense of
retaining such outside
7
<PAGE>
experts shall be an expense of this trust within the meaning of Section
7.14 hereof.
(e) If amounts are paid from the trust assets to the
Employer's general creditors pursuant to Section 4.05(c) above, then
within ninety (90) days following the date the Employer is no longer
Insolvent, the Employer shall contribute to the trust assets in an
amount equal to the amount paid from the trust to such creditors.
(f) In addition to the contributions required pursuant to
Section 4.05(c) and Section 3.01 hereof, with respect to each Valuation
Date, the Employer shall make a "reimbursement contribution" to the
trust in the amount of any taxes, fees, or administrative expenses
charged to the trust during the previous plan year pursuant to Sections
7.11 or 7.14 hereof and not paid by the Employer, and, if so requested
by the Trustee, shall make an "estimated expense contribution" to the
trust of cash in such amount as the Trustee estimates as the amount of
administrative expenses the trust will incur during the current plan
year. Within thirty (30) days following each Valuation Date, the
Trustee shall give written notice to the Employer stating the amount of
any reimbursement contribution required and the amount of the estimated
expense contribution required, and the Employer shall transfer such
amounts to the Trustee within thirty (30) days of receipt of such
notice.
4.06 RESUMPTION OF PAYMENTS. Provided that there are sufficient assets
in the trust, if the Trustee discontinues the payment of benefits from the trust
pursuant to Section 4.05 hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the aggregate amount
of all payments due to Plan participants or their beneficiaries under the terms
of the Plans for the period of such discontinuance, less the aggregate amount of
any payments made to Plan participants or their beneficiaries by the Employer in
lieu of the payments provided for hereunder during any such period of
discontinuance.
4.07 CONDITION SUBSEQUENT. Notwithstanding any provision of this Trust
Agreement to the contrary, if at any time the trust is finally determined by the
Internal Revenue Service (the "IRS") not to be a "grantor trust," with the
result that the income of the trust is not treated as income of the Company
pursuant to Sections 671 through 679 of the Code, or if a tax is finally
determined by the IRS to be payable by a Plan participant or beneficiary with
respect to whom an account is kept under a Plan, with respect to the vested
interest in the entire value of the accounts under such Plan, prior to the final
distribution of the value of such accounts to such Plan participants and
beneficiaries, then the trust shall immediately terminate and to the extent
vested, an amount equal to the assets allocated to such accounts under the Plans
shall be liquidated and paid by the Trustee in a lump cash sum as soon as
practicable to each such Plan participant or beneficiary, regardless of whether
such person's employment with the Employer has terminated and regardless of the
form and time of payment specified in or pursuant to the Plans. All remaining
assets (less any expenses or costs of the trust) shall then be paid by the
Trustee to the Company.
8
<PAGE>
If a tax is finally determined by the IRS to be payable by one or more
Plan participants or beneficiaries with respect to less than the vested interest
in the entire value of the accounts maintained under the Plans for all Plan
participants and beneficiaries, prior to the payment to such persons of the
assets of the portion of such accounts which are subject to tax, then that part
of the trust assets which are subject to tax shall be liquidated and paid in a
lump cash sum as soon as practicable by the Trustee to such Plan participants
and beneficiaries, upon whom such tax is imposed, and the trust shall continue
in effect. For this purpose the Trustee shall be entitled, but not required, to
rely on an affidavit of a Plan participant or beneficiary which attests to his
incurrence of the tax.
4.08 DISTRIBUTIONS TO QUALIFIED PROFIT SHARING PLAN. Notwithstanding
any provision of this Trust Agreement to the contrary, if at any time it is
determined in the sole discretion of the Committee provided for in Article 7 of
the Non-Qualified Plan (the "Committee") that participants in the Nonqualified
Plan who were excluded from participation in the Qualified Profit Sharing Plan
for a given plan year by reason of the Third Amendment to the Qualified Profit
Sharing Plan effective July 1, 1989, did not need to be excluded from the
Qualified Profit Sharing Plan to enable that plan to satisfy the applicable
discrimination requirements of Code Section 410(b) for such plan year, then with
the consent of each beneficiary hereunder to such withdrawal, the assets of this
trust attributable to contributions made to the Non-Qualified Plan on behalf of
such participants for the applicable plan year, exclusive of the earnings
thereon, shall be distributed by the Trustee to the trustee of the Qualified
Profit Sharing Plan upon the direction of the Committee to that effect.
9
<PAGE>
ARTICLE V
INVESTMENT OF TRUST FUND
5.01 INVESTMENTS. The assets held in the trust (the "Trust Fund"),
except such estimated amounts as in the opinion of the Trustee are required by
current payments and expenses, and except such amounts as are used to purchase
insurance contracts, if any, shall be invested and reinvested by the Trustee
without distinction between principal and income. Subject to the provisions of
this Article V and Article VI hereof, the Trustee is authorized to invest and
reinvest the Trust Fund in such bonds, notes, debentures, mortgages,
interest-bearing accounts and certificates (including those maintained by the
Trustee, if the Trustee is a bank), investment trust certificates, preferred or
common stock, real estate, savings and loan accounts, interests in oil, gas and
minerals, insurance contracts, with or without cash surrender value, or in such
other property, real, personal or mixed, either within or without the state of
North Carolina, without being limited by any statute or rule of law regarding
investments by trustees. The Trustee may invest in any common collective trust
fund or pooled investment fund maintained by any bank (including itself, if the
Trustee is a bank) in North Carolina or in any other state of the United States.
The Trustee may hold any portion of the Trust Fund in cash for a reasonable
period pending investment or payment of expenses or benefits. The Trustee shall
have the further right, to the extent permissible under applicable law, to (a)
purchase, sell, exchange, and retain preferred or common stocks or other
marketable obligations, consisting of bonds, debentures, notes, certificates, or
other evidences of indebtedness, issued by an Employer or by an Affiliate and
(b) acquire and hold parcels or real property (and related personal property)
which is leased, or is to be leased, to an Employer or to an Affiliate. For the
purposes of this Section 5.01, an Affiliate shall mean any corporation which is
an Affiliate (within the meaning of Section 407(d)(7) of the Act) of any
Employer.
5.02 INVESTMENT MANAGER. The Plan Committees are given the power to
jointly appoint one or more Investment Managers (herein so called) to exercise
full investment management authority with respect to all or a portion of the
assets of the Trust Fund and to authorize payment of the fees and expenses of
such Investment Manager from the assets of the Trust Fund. In the event the Plan
Committees exercise this right, the Plan Committees shall certify to the Trustee
and such Investment Manager the scope of the duties and responsibilities of the
Investment Manager. Such Investment Manager shall be either (a) registered as an
investment adviser under the Investment Advisers Act of 1940, (b) a bank, as
defined in the Investment Advisers Act of 1940, or (c) an insurance company
qualified to manage, acquire or dispose of plan assets under the laws of more
than one state. Upon its appointment, the Investment Manager shall certify and
acknowledge in writing to the Plan Committees and the Trustee that he is a
fiduciary with respect to the Plans and this trust, and that he has assumed the
duties and responsibilities conferred upon him by the Plan Committees. The
duties, responsibilities, and authority of any such Investment Manager may be
revoked or modified by the Plan Committees acting jointly at any time by written
notice to such Investment Manager and to the Trustee. Any Investment Manager
duly appointed and authorized by the Plan Committees,
10
<PAGE>
shall, during the period of his appointment, possess fully and absolutely those
powers, rights, and duties of the Trustee (to the extent delegated by the Plan
Committees and to the extent permissible under the terms of this Trust
Agreement) with respect to the investment or reinvestment of that portion of the
plan assets over which such Investment Manager has investment management
authority. During any period of time when such Investment Manager is so
appointed and serving, and with respect to those assets of the Trust Fund over
which such Investment Manager exercises investment management authority, the
Trustee's responsibility shall be limited to holding such assets as a custodian,
providing accounting services, disbursing benefits as authorized, and executing
such investment instructions only as directed by such Investment Manager. The
Trustee shall not be responsible for any acts or omissions of such Investment
Manager. Any certificates or other instrument duly signed by such Investment
Manager (or the authorized representative of such Investment Manager),
purporting to evidence any instruction, direction or order of such Investment
Manager with respect to the investment of those assets of the Plans over which
the Investment Manager has investment management authority shall be accepted by
the Trustee as conclusive proof thereof. The Trustee shall also be fully
protected in acting in good faith upon any notice, instruction, direction,
order, certification, opinion, letter, telegram, or other document believed by
the Trustee to be genuine and to be by such Investment Manager (or the
authorized representative of such Investment Manager). The Trustee shall not be
liable for any action taken or omitted by such Investment Manager or for any
mistakes of judgment or other action made, taken or omitted by the Trustee in
good faith upon direction of such Investment Manager.
5.03 DIRECTION OF INVESTMENTS. Notwithstanding any provision contained
herein to the contrary, the Plan Committees shall each have the right and power
at any time and from time to time (but shall not be obliged) to direct the
Trustee in writing to purchase, sell, lease, retain, or otherwise act for the
Trustee in regard to any property, real, personal, or mixed, tangible or
intangible, and the Trustee shall comply with and carry out such directions
without being liable or responsible in any way for any losses or unfavorable
results resulting from its compliance with such directions; provided that:
(a) So long as, and to the extent that, the Plan Committees
fail to deliver directions to the Trustee under this Section 5.03, the
Trustee shall manage, control, invest, and reinvest the Trust Fund
under the powers granted in Article VI hereof with the same force and
effect as if this Section were not a part of this Agreement.
(b) No person dealing with the Trustee shall be required to
determine whether any sale or purchase by the Trustee has been
authorized or directed by a Plan Committee, but each person shall be
fully protected in dealing with the Trustee in the same manner as if
this Section were not a part of this Agreement.
5.04 STOCK OF EMPLOYER. In no event may the Trustee invest in
securities (including stock or rights to acquire stock) or obligations issued by
the Employer, other than a de minimis amount held in common investment vehicles
in which the Trustee invests. All rights
11
<PAGE>
associated with assets of this trust shall be exercised by the Trustee or the
person designated by the Trustee, and shall in no event be exercisable by or
rest with Plan participants.
5.05 SUBSTITUTION OF ASSETS. The Employer shall have the right at any
time, and from time to time in its sole discretion, to substitute assets of
equal fair market value for any asset held in this trust. This right is
exercisable by the Employer in a non-fiduciary capacity without the approval or
consent of any person or Trustee.
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<PAGE>
ARTICLE VI
POWERS OF THE TRUSTEE
6.01 INVESTMENT POWERS. Subject to the provisions of Article V, the
Trustee is authorized and empowered, but not by way of limitation, with the
following powers, rights, and duties:
(a) Property Transactions. To sell, exchange, convey,
transfer, or dispose of and also to grant options with respect to any
property, whether real or personal, at any time held by it, and any
sale may be made by private contract or by public auction, and no
person dealing with the Trustee shall be bound to see to the
application of the purchase money or to inquire into the validity,
expediency, or propriety of any such sale or other disposition.
(b) Operation and Lease. To retain, manage, operate, repair,
and improve and to mortgage or lease for any period and on such terms
as the Trustee shall deem proper any real estate or personal property
held by the Trustee, including power to demolish any buildings or other
improvements in whole or in part; to erect buildings or other
improvements; to make leases that may extend beyond the term of this
trust; and to foreclose, extend, renew, assign, release or partially
release and discharge mortgages or other liens.
(c) Vote. To vote in person or by proxy, with or without power
of substitution, any stocks, bonds, or other securities held in this
trust.
(d) Stock Rights. To exercise any options appurtenant to any
stocks, bonds, or other securities for the conversion thereof into
other stocks, bonds or securities, or to exercise any rights to
subscribe for additional stocks, bonds, or other securities and to make
any and all necessary payments thereof; to join in, dissent from, or
oppose the reorganization, recapitalization, consolidation, sale, or
merger of corporations or properties in which it may be interested as
Trustee, upon such terms and conditions as it may deem wise and to
accept any securities which may be issued upon any such reorganization,
recapitalization, consolidation, sale, or merger and thereafter to hold
the same.
(e) Bank Trustee: Transaction by Trustee with Itself. If the
Trustee is a bank, to contract or otherwise enter into transactions
between itself as Trustee and as a bank, between itself as Trustee and
the Employer, its subsidiaries and affiliates or any of them, or
between itself as Trustee and any other institution for which it then,
theretofore, or thereafter may be acting as Trustee, subject to the
provisions of the Act.
(f) Borrow. To borrow money from any source in such amounts
and upon such
13
<PAGE>
terms and for such purposes as the Trustee may determine and in
connection therewith to execute promissory notes, mortgages, or other
obligations and to pledge or mortgage any trust assets as security.
(g) Cash. To retain in cash so much of the assets of the trust
as it may deem advisable to satisfy liquidity needs of the Plans and to
deposit any cash held in the trust in a bank account without liability
for the highest rate of interest available, including, if a bank is
acting as Trustee, specified authority to invest in deposits of the
Trustee.
(h) Investments. To invest and reinvest all or any part of the
trust assets in bonds, debentures, mortgages, notes, common or
preferred stocks, with or without par value, real estate, and such
other property as the Trustee deems proper.
(i) Mineral Investments. To purchase, convey, lease, and
otherwise deal with oil, gas and other minerals, mineral rights, and
royalties; to operate and develop oil, gas, and other mineral
properties and interests, including, but not limited to, the power to
make and release oil, gas, and mineral leases and subleases; to make
mineral deeds and royalty transfers; to create, reserve and dispose of
overriding royalties, oil payments, gas payments, and any other
interests; to execute division orders and transfer orders; to enter
into development and drilling contracts, operating agreements and
utilization agreements; and to make agreements for present or future
pooling of any and all interests in oil, gas and other minerals.
(j) Agents. To employ and compensate accountants, attorneys,
brokers, attorneys-in-fact, attorneys-at-law, tax specialists,
appraisers, and other advisers and agents deemed by the Trustee
necessary or appropriate for the proper administration of the trust
created hereunder.
(k) Nominee. To hold securities or other property in the name
of the Trustee or its nominee, or in another form as it may deem best,
with or without disclosing the trust relationship.
(l) Documents. To make, execute and deliver any and all
contracts, deeds, leases, waivers, releases, guaranties, pledges,
conveyances, powers of attorney, or other instruments necessary or
proper for the accomplishment of any of the powers herein granted.
(m) Litigation. To begin, maintain, or defend any litigation
necessary in connection with the administration of the Plans or this
trust, except that the Trustee shall not be obliged or required to do
so unless indemnified to its satisfaction.
(n) Compromise Claims. To compromise, arbitrate, contest, or
abandon any claims or demands.
(o) Taxes. To file all tax returns required of the Trustee and
pay any estate,
14
<PAGE>
inheritance, income, or other tax, charge or assessment attributable to
any benefit payable under the Plans required of the Trustee; to defer
making payment of any tax, charge, or assessment if it is indemnified
to its satisfaction in the premises; and to require before making any
payment a release or other document from any lawful taxing authority.
(p) Retention of Funds. To retain any funds or property
subject to any dispute, and to decline to make payment or delivery of
the funds or property until final adjudication is made by a court of
competent jurisdiction.
(q) Common Funds. To invest in undivided interests, in common
with any other trust, or trusts, however created, or any other
individual, or individuals, including investments in so-called "common
funds", or in partnerships or joint ventures, operated or created by
any person, trust, or corporation.
(r) General Authorization. To exercise all the further rights,
powers, options, and privileges granted, provided for, or vested in
trustees generally under applicable Federal and North Carolina laws, as
amended from time to time, it being intended that, except as herein
otherwise provided, the powers conferred upon the Trustee herein shall
not be construed as being in limitation of any authority conferred by
law, but shall be construed as in addition thereto.
6.02 ANCILLARY TRUSTEE. Whenever and as often as the Trustee deems such
action desirable, it may by written instrument appoint any person or corporation
in any State of the United States to act as "Ancillary Trustee" with respect to
any portion of the trust assets then held or about to be acquired on behalf of
this trust. Each such Ancillary Trustee shall have such rights, powers, duties,
and discretions as are delegated to it by the Trustee, but shall exercise the
same subject to limitations or further directions of the Trustee as shall be
specified in the instrument evidencing its appointment.
The Ancillary Trustee may resign or may be removed by the Trustee as to
all or any portion of the assets so held at any time or from time to time by
written instrument delivered one to the other, and the Trustee may thereupon
appoint another Ancillary Trustee as successor to whom such assets shall be
transferred, or may itself receive such assets in termination of the Ancillary
Trusteeship to that extent. Each Ancillary Trustee shall be accountable solely
to the Trustee. The Trustee may pay the Ancillary Trustee reasonable
compensation and may absolve it from any requirement that it post bond or other
security.
6.03 RESTRICTION ON TRUSTEE POWERS. Notwithstanding any powers granted
to the Trustee pursuant to this Trust Agreement or applicable law, the Trustee
shall not have any power that could give this trust the objective of carrying on
a business and dividing the gains therefrom, within the meaning of Section
301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant
to the Code.
15
<PAGE>
ARTICLE VII
ADMINISTRATIVE PROVISIONS
7.01 ACCOUNTS AND RECORDS. The Trustee shall maintain accurate records
and accounts of all transactions hereunder, which shall be available at all
reasonable times for inspection or audit by any person or persons designated by
the Employer. If the Employer so directs, the Trustee shall submit to the
Employer such interim valuations, reports, or other information as the Employer
may reasonably require. Within ninety (90) days following (a) the close of each
Plan Year or (b) the effective date of the removal or resignation of the
Trustee, the Trustee shall file with the Employer a written account setting
forth all transactions effected by it subsequent to the end of the period for
the last previous report and account, in such form and detail as the Employer
may request. The approval of any such report and account by the Employer shall
be a full acquittance and discharge by the Employer of the Trustee with respect
to the matters therein set forth. Nothing herein contained, however, shall be
deemed to preclude the Trustee from its right to have its accounts judicially
settled by a court of competent jurisdiction, in which event only the Trustee
and the Employer shall be necessary parties.
7.02 PLAN COMMITTEE ACTION. The Employer shall promptly notify the
Trustee of the names of the members of the Advisory Committee of the Excess Plan
and of the Committee appointed under the Non-Qualified Plan as of the date of
this Trust Agreement and of any subsequent changes in committee membership. In
the absence of any notification of changes, the Trustee may assume that the
members of the Plan Committees are the same as last reported by the Employer to
the Trustee. The Plan Committees shall furnish the Trustee with all the
necessary factual information required by it to perform its duties as Trustee
hereunder, including a specimen signature of each member and the secretaries of
the Plan Committees. The Trustee shall not be required to verify the facts so
furnished by the Plan Committees. The Trustee, in following the directions of
the Plan Committees, is authorized to act upon the written instructions of a
majority of each Plan Committee or the written instruction of any member of such
committee designated in writing by all members of the applicable Plan Committee
to act for it, and shall not be liable for its acts with respect to payments
from the trust when following such instructions or directions, or for failure to
act in the absence of such instructions or directions.
7.03 VALUATION OF TRUST. The Trustee shall value the trust as of the
last business day of each calendar quarter to determine the fair market value of
its assets, and on such other date(s) as may be requested by the Employer.
7.04 EMPLOYER ACTION. Any action by the Employer hereunder, pursuant to
a Plan, shall be evidenced by a certified copy of a resolution of its Board of
Directors, or by written instrument executed by any person authorized by the
Board of Directors to take such action, and the Trustee shall be fully protected
in acting in accordance with such written instrument or resolution delivered to
it.
16
<PAGE>
7.05 RELIANCE ON WRITTEN INSTRUMENT. The Trustee shall be fully
protected in acting upon any instrument, certificate, resolution, instruction,
direction, order, opinion, letter, telegram, or other document believed by it to
be genuine, and to be signed or presented by the proper person or persons, and
the Trustee shall be under no duty to make any investigation or inquiry as to
any statement contained in any such writing but may accept the same as
conclusive evidence of the truth and accuracy of the statements therein
contained.
7.06 LIABILITY FOR PAYMENT OF FUNDS. The Trustee shall not be liable
for its action in making payment or delivery of any cash or other property to
any person at the direction of a Plan Committee and, in the event of litigation,
the Trustee shall not be liable for declining to make delivery thereof until
final adjudication shall be made in a court of competent jurisdiction or by
agreement of the parties. The Trustee, at its discretion, may bring any action
in the nature of an interpleader, but shall not be obligated to do so.
7.07 LIABILITY OF TRUSTEE. The Trustee shall not be liable for any
action taken or omitted upon direction of a Plan Committee or the Employer. If
at any given time the Plan Committees or the Employer should fail to give
directions or instructions to the Trustee as provided in this Trust Agreement,
the Trustee shall act or refrain from acting without such directions or
instructions and may exercise its own discretion and judgment as seems
appropriate and advisable under the circumstances in carrying out the purposes
of this Trust Agreement, without liability to the Plan Committees or the
Employer therefor.
7.08 COURT PROCEEDINGS. The Trustee may institute, maintain, or defend
any litigation necessary in connection with the administration of the trust,
provided, the Trustee shall be under no duty or obligation to do so unless it
shall have been indemnified to its satisfaction against all expenses and
liabilities which it may sustain or reasonably anticipate by reason thereof. All
costs and expenses of litigation for which the Trustee would be liable shall be
paid by the Employer, or if not paid by the Employer, from the trust.
7.09 ENFORCEMENT OF TRUST AGREEMENT AND LEGAL PROCEEDINGS. The Company
shall have the right to enforce any provision of this Trust Agreement and, on or
after a Change in Control, either the Trustee on behalf of Plan participants or
their beneficiaries (the "Trust Beneficiaries") or any Trust Beneficiary shall
have the right to enforce any provision of this Trust Agreement that affects the
right, title, and interest of such Trust Beneficiary in the trust. In any action
or proceeding affecting the trust the only necessary parties shall be the
Company, the Trustee and the Trust Beneficiaries and, except as otherwise
required by applicable law, no other person shall be entitled to any notice or
service of process. Any judgment entered in such an action or proceeding shall,
to the maximum extent permitted by applicable law, be binding and conclusive on
all persons having or claiming to have any interest in the trust. Time is of the
essence of this Trust Agreement and in case any provision of this Trust
Agreement is enforced by the Trustee or by any Trust Beneficiary by law or
through an attorney-at-law, or under advice therefrom, including but not limited
to the collection of amounts due either the Trustee or any such Trust
Beneficiary, or for the benefit of such Trust Beneficiary,
17
<PAGE>
then the Company shall pay all costs of such enforcement or collection,
including reasonable attorney's fees. The Trustee may request that the Company
furnish evidence to enable the Trustee to determine whether a Change in Control
has occurred. In performing any of its obligations or taking any discretionary
action under this Trust Agreement which is dependent upon a Change in Control,
the Trustee may rely on its determination, including opinion of counsel (who may
be counsel to the Company), that a Change in Control has occurred.
7.10 THIRD PARTY. No person dealing with the Trustee shall be obligated
to see to the proper application of any money paid or property delivered to the
Trustee, or to inquire whether the Trustee has acted pursuant to any of the
terms of this Trust Agreement. Each person dealing with the Trustee may act upon
any notice, request, or representation in writing by the Trustee, or by the
Trustee's duly authorized agent, and shall not be liable to any person whomever
in so doing. The certificate of the Trustee that it is acting in accordance with
the provisions of the Trust Agreement shall be conclusive in favor of the person
relying on the certificate.
7.11 AUTHORIZATION WITH RESPECT TO TAXES. The Trustee may pay out of
the assets of the trust all real and personal property taxes, income taxes, and
other taxes of any and all kinds levied or assessed under existing or future
laws against the trust, or against the Trustee by reason of its office, if not
paid by the Employer; provided, however, that the Trustee may seek reimbursement
for such taxes if paid from the assets of the trust, as provided in Section
4.05(f) hereof. The Trustee is further authorized, but not required, to withhold
from distributions to any payee such sum as the Trustee may reasonably estimate
as necessary to cover Federal and states taxes for which the Trustee may be
liable, which are, or may be, assessed with regard to the amount distributable
to such payee. Prior to making any payment or distribution hereunder, the
Trustee may require such releases or other documents from any lawful taxing
authority and may require such indemnity from any payee or distributee as the
Trustee shall reasonably deem necessary for its protection.
7.12 CONSULTATION WITH COUNSEL. Trustee may consult with legal counsel,
who (except following a Change in Control) may be counsel for the Employer, if
appropriate, with respect to any of its rights, duties, or obligations
hereunder.
7.13 NO INTEREST IN EMPLOYER. Neither the creation of this trust nor
anything contained in this Trust Agreement shall be construed as giving any
person entitled to benefits hereunder or other employee of the Employer any
equity or other interest in the assets, business, or affairs of the Employer.
7.14 FEES AND EXPENSES. The Trustee shall be reimbursed for all of its
expenses incurred in the administration of this trust and shall be paid such
reasonable fees as may be agreed upon from time to time by the Employer and the
Trustee. Such fees and compensation shall be paid from the assets of the trust
if not paid by the Employer; provided, however, that the Trustee may seek
reimbursement for such expenses if paid from the assets of the trust, as
18
<PAGE>
provided in Section 4.05(f) hereof. Any person who already receives full-time
pay from the Employer shall not receive any fees for his services as Trustee.
Members of the Plan Committees shall not receive any fees for their services on
such committees.
7.15 BONDING OF TRUSTEE. The Trustee shall not be required to furnish
any bond or security for the performance of its powers and duties hereunder,
unless, irrespective of this provision, the Trustee is required to do so by
state or Federal statute or regulation.
7.16 RELATIONSHIP OF FIDUCIARIES. It is the intent of all fiduciaries
under the Plans and this Trust Agreement that each fiduciary shall be solely
responsible for its own acts or omissions. Except to the extent imposed by the
Act or the Code, no fiduciary shall have the duty to question whether any other
fiduciary is fulfilling all of the responsibilities imposed upon such other
fiduciary by the Act or by any regulations or rulings issued thereunder. No
fiduciary shall have any liability for a breach of fiduciary responsibility of
another fiduciary with respect to the Plans and this trust unless he
participates knowingly in such breach, knowingly undertakes to conceal such
breach, has actual knowledge of such breach and fails to take reasonable
remedial action to remedy said breach or, through his negligence in performing
his own specific fiduciary responsibilities which give rise to his status as a
fiduciary, has enabled such other fiduciary to commit a breach of the latter's
fiduciary responsibilities.
7.17 PRUDENT MAN RULE. The Trustee shall act with the care, skill,
prudence and diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims, provided,
however, that the Trustee shall incur no liability to any person for any action
taken pursuant to a direction, request or approval given by the Employer which
is contemplated by, and in conformity with, the terms of a Plan or this trust
and is given in writing by the Employer. In the event of a dispute between the
Employer and a party, the Trustee may apply to a court of competent jurisdiction
to resolve the dispute.
7.18 ALIENATION. The benefits, proceeds, payments, or claims of any
Plan participant or beneficiary payable from the assets of this trust shall not
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary, including any such liability which is for
alimony or other payments for support of a spouse or former spouse. Any attempt
to anticipate, alienate, sell, transfer, assign, pledge, encumber, garnish,
levy, or otherwise dispose of or execute upon any right or benefit payable
hereunder shall be void. The assets of this trust shall not in any manner be
liable for or subject to the debts, contracts, liabilities, engagements, or
torts of any Plan participant entitled to benefits hereunder and such benefits
shall not be considered an asset of such participant in the event of his
insolvency or bankruptcy. Notwithstanding the foregoing, the trust shall at all
times remain subject to the claims of creditors of the Company in the event the
Company becomes Insolvent as provided in Section 4.04 hereof.
19
<PAGE>
7.19 LIMITATION ON LIABILITY - IF INVESTMENT MANAGER APPOINTED. The
Trustee shall not be liable for the acts or omissions of any Investment Manager
or Managers the Plan Committees may appoint, nor shall the Trustee be under any
obligation to invest or otherwise manage any assets of the Plans which are
subject to the management of a properly appointed Investment Manager.
7.20 INSURANCE COMPANY PROTECTED. No insurance company shall be under
any duty to inquire into the terms of this Trust Agreement or see to the
application of any proceeds of insurance paid to the Trustee pursuant to any
policy of insurance payable to this trust. The receipt of the Trustee for any
such payment shall be a full and complete acquittance to the insurance company
making payment.
20
<PAGE>
ARTICLE VIII
SUBSTITUTION OF TRUSTEE
8.01 TRUSTEE. There shall be one Trustee, which must be a corporate
trustee, as determined from time to time by the Employer. Each Trustee shall
serve until a successor Trustee shall be named by the Employer or until such
Trustee's resignation or removal, in which event the Employer shall name a
successor Trustee. The word "Trustee" as used herein, shall include the original
and any successor Trustee.
8.02 RESIGNATION. Any Trustee may resign at any time upon giving thirty
(30) days' written notice in advance to the Employer unless such notice shall be
waived.
8.03 REMOVAL. At any time prior to a Change in Control, as that term is
defined in Section 9.05 hereof, the Company may remove the Trustee with or
without cause upon at least thirty (30) days notice in writing to the Trustee.
Removal of the Trustee shall not be effective until the Company has appointed,
in writing, a successor Trustee, which must be a corporate trustee, and such
successor has accepted the appointment in writing. Subsequent to a Change in
Control, the Trustee may be removed in accordance with the following procedure:
(a) upon request of five (5) or more Trust Beneficiaries, as
that term is defined in Section 7.09 hereof, the Trustee shall deliver
to such Trust Beneficiaries a list of the names and addresses of all
Trust Beneficiaries;
(b) upon receipt of a written request, signed by ten percent
(10%) or more of the Trust Beneficiaries, for the removal of any
Trustee and the appointment of a specified successor, the Trustee shall
conduct a vote of Trust Beneficiaries with respect to such removal and
designation of a successor; and
(c) a vote of seventy-five percent (75%) of all Trust
Beneficiaries shall be required for the removal of any Trustee and the
appointment of the specified successor.
8.04 SUCCESSION OF TRUSTEE. Each successor Trustee shall succeed to the
title to the trust vested in his predecessor by accepting in writing his
appointment as successor Trustee and filing the acceptance with the former
Trustee and the Employer without the signing or filing of any further statement.
The resigning or removed Trustee, upon receipt of acceptance in writing of the
trust by the successor Trustee, shall execute all documents and do all acts
necessary to vest the title of record in any successor Trustee. Each successor
Trustee shall have and enjoy all of the powers, both discretionary and
ministerial, conferred under this Trust Agreement upon his predecessor. No
successor Trustee shall be personally liable for any act or failure to act of
any predecessor Trustee.
8.05 MERGER OF CORPORATE TRUSTEE. If any corporate Trustee should,
21
<PAGE>
before or after qualification, change its name, become consolidated or merged
with another corporation or otherwise should reorganize, any resulting
corporation which succeeds to the fiduciary business of such corporate Trustee
shall become a Trustee hereunder in lieu of such corporate Trustee.
22
<PAGE>
ARTICLE IX
AMENDMENT AND TERMINATION
9.01 AMENDMENT PRIOR TO A CHANGE IN CONTROL. Prior to a Change in
Control, the Board of Directors may from time to time amend, in whole or in
part, any or all of the provisions of this Trust Agreement without the consent
of any Trust Beneficiary; provided, however, that (a) no amendment will be made
to this Trust Agreement or the Plan which will cause this Trust Agreement, a
Plan, or the assets of the trust to be governed by or subject to Parts 2, 3, or
4 of Title I of ERISA, (b) no amendment will be made which will cause the assets
of the trust to be taxable to Trust Beneficiaries as that term is defined in
Section 7.09 hereof prior to the distribution of such assets, (c) no amendment
shall reduce or otherwise adversely affect any Plan benefits of Trust
Beneficiaries accrued as of the date of such amendment in respect of any Trust
Beneficiary or the amount of assets of the trust allocable thereto, and (d) no
amendment shall increase the duties or responsibilities of the Trustee unless
the Trustee consents thereto in writing.
9.02 AMENDMENT FOLLOWING CHANGE IN CONTROL. Following a Change in
Control, this Trust Agreement may be amended (subject to Section 9.01) only with
the prior written consent of seventy-five percent (75%) of those who are Trust
Beneficiaries at the time such amendment is sought. Upon receipt of a request
from the Board of Directors for an amendment, the Trustee shall be responsible
for securing such consents in a timely fashion, and unless ordered by a court of
competent jurisdiction, shall not reveal to the Company or to any other person
any information concerning such consents, except whether the required majority
has been achieved.
9.03 TERMINATION. The trust shall continue until the Plans have been
terminated and (a) all payments required by the Plans or other provisions of
this Trust Agreement have been made or (b) the trust contains no assets and
retains no claims to recover assets from the Company pursuant to any provision
hereof, whichever shall occur first. If the trust terminates pursuant to this
Section 9.03, the Trustee, after its final account has been settled as provided
in Section 7.01, shall distribute to the Employer the assets of the trust
remaining after all Plan benefits and expenses have been paid. Such distribution
shall be allocated among the participating Employers in the proportion that each
participating Employer's total cumulative contributions to the trust bears to
the total cumulative contributions of all participating Employers.
Upon making distribution of the trust assets pursuant to this Section
9.03, the Trustee shall be relieved from all further liability. The powers of
the Trustee hereunder shall continue so long as any assets of the trust remain
in its hands.
9.04 SUSPENSION OF CONTRIBUTIONS. Nothing in this Trust Agreement shall
be construed to prevent the Employer from suspending contributions to the trust
for any period whatsoever or permanently. Such a suspension, whether temporary
or permanent, shall not, of
23
<PAGE>
itself, terminate the trust.
9.05 COMPLIANCE WITH ERISA AND THE CODE. Notwithstanding anything in
this Article IX to the contrary, this Trust Agreement and the Plans shall be
amended from time to time (without the consent of any Trust Beneficiaries) to
maintain the Plans as unfunded plans maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees for purposes of the Act, the Code, or any other applicable
law, to maintain the trust as a "grantor trust," to ensure that contributions to
the trust by the Company will not constitute a taxable event and income and
gains of the trust will not be taxable as income and gains to the trust or to
Trust Beneficiaries, and that benefits paid to Trust Beneficiaries from the
trust will be deductible by the Company in the year of payment.
9.06 CHANGE IN CONTROL. A Change in Control shall be deemed to have
occurred upon the happening of any of the following:
(a) the consummation of a plan of merger or consolidation of
Guilford Mills, Inc. with any other corporation or association other
than a subsidiary of Guilford Mills, Inc. as a result of which the
holders of the voting capital stock of Guilford Mills, Inc. receive
less than fifty-one percent (51%) of the voting capital stock of the
surviving or resulting corporation;
(b) the sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of
Guilford Mills, Inc. (other than as security for the obligations of
Guilford Mills, Inc.);
(c) the approval by the shareholders of Guilford Mills, Inc.
of any plan or proposal for the liquidation or dissolution of Guilford
Mills, Inc.;
(d) the acquisition by any person (as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, (the "Exchange Act")), after the date this trust is executed,
directly or indirectly, of beneficial ownership (as defined in Rule
13d-3 under the Exchange Act) of securities of Guilford Mills, Inc.
representing in the aggregate twenty percent (20%) or more of the
voting power of all then outstanding securities of Guilford Mills, Inc.
having the right under ordinary circumstances to vote in an election of
the Board of Directors; or
(e) the failure, for any reason, during any period of two
consecutive years, of the individuals who, at the beginning of such
period, constitute the entire Board of Directors and any new directors
whose election by the Board, or whose nomination for election by the
shareholders, shall have been approved by a vote of at least two-thirds
(2/3) of the directors of the Board then still in office who either
were directors at the beginning of the period or whose election or
nomination for election shall previously
24
<PAGE>
have been so approved, to constitute a majority of the members of the
Board.
ARTICLE X
OTHER EMPLOYERS; SUCCESSOR EMPLOYERS
10.01 ADOPTION BY OTHER EMPLOYERS. Pursuant to the Plans, any business
entity which is eligible to and does in fact adopt the Plans, may, pursuant to
resolutions of its board of directors, adopt this trust by written instrument,
duly executed, acknowledged, and delivered to the Trustee, the Plan Committees,
and the Board of Directors of the Company.
10.02 CONTINUATION BY EMPLOYER'S SUCCESSOR. Any corporation succeeding
to the interest of an Employer by sale, transfer, consolidation, merger, or
bankruptcy, may elect to continue this trust by adopting this Trust Agreement
and assuming the duties and responsibilities of the Employer under this Trust
Agreement.
25
<PAGE>
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01 CONTRIBUTIONS NOT RECOVERABLE. Except where contributions are
required or permitted to be returned to the Employer by the provisions of the
Plans or this Trust Agreement, no part of the principal or income of this trust
shall be used for, or diverted to, purposes other than the exclusive benefit of
Plan participants or beneficiaries.
11.02 LIMITATIONS ON PARTICIPANTS' RIGHTS. Participation in this trust
shall not give any Employee the right to be retained as an Employee of the
Employer or any right to any interest in this trust other than as herein
provided. The Employer reserves the right to dismiss any Employee without any
liability for any claim either against this trust, except to the extent provided
herein, or against the Employer.
11.03 INDEMNIFICATION OF INDIVIDUAL TRUSTEE. The Employer hereby agrees
to indemnify and hold harmless any individual Trustee for any claim, suit,
judgment, or liability arising from the performance of the Trustee hereunder and
as otherwise required by the Plans, so long as such claim, suit, judgment, or
liability does not result from the willful or reckless misconduct of the
individual Trustee. The Trustee assumes no obligation or responsibility with
respect to any action required by this Trust Agreement or by the Plans on the
part of the Employer.
11.04 RECEIPT OF RELEASE. Any payment to any Plan participant or
beneficiary in accordance with the provisions of this Trust Agreement shall, to
the extent thereof, be in full satisfaction of all claims against the Trustee,
the applicable Plan Committee, and the Employer, and the Trustee may require
such participant or beneficiary, as a condition precedent to such payment, to
execute a receipt and release to such effect.
11.05 ACCEPTANCE. The Trustee accepts the trust created under this
Trust Agreement and agrees to perform the obligations imposed herein.
11.06 ACCOUNTING PERIOD. This trust shall adopt for accounting purposes
the fiscal year beginning October 1 of each year and ending on the last day of
September.
11.07 TITLE OF TRUST ASSETS. The legal and equitable title and
ownership of all assets at any time constituting a part of the trust shall be
and remain with the Trustee and neither the Employer nor any Plan participant
shall ever have legal or equitable estate therein, save and except that a Plan
participant shall be entitled to receive distributions as and when lawfully made
under the terms hereof.
11.08 NOTICE. Any notices required to be given herein by the Trustee
shall be deemed delivered when placed in the United States mails, first class
postage prepaid, in an envelope
26
<PAGE>
addressed to the last known address of the person to whom the notice is given.
11.09 HEADINGS. The titles and headings of Articles and Sections are
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
11.10 GOVERNING LAW. All questions arising with respect to the
provisions of this Trust Agreement shall be determined by application to the
laws of the State of North Carolina.
11.11 EXECUTIONS AND COUNTERPARTS. This Trust Agreement may be executed
in a number of counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, this Trust Agreement is dated for purposes of
reference this __27___ day of __November___, 1996.
A S E M P L O Y E R
GUILFORD MILLS, INC.
By: /s/ Terrence E. Geremski
Terrence E. Geremski
Vice President
ATTEST: /s/ Robert A. Emken, Jr.
Robert A. Emken, Jr.
Assistant Secretary
(Corporate Seal)
A S T R U S T E E
NORTH CAROLINA TRUST COMPANY
By: /s/ Elden J. LeGaux
Elden J. LeGaux
Managing Director
ATTEST:
Secretary
(Corporate Seal)
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Guilford Mills, Inc. for the year ended September
29, 1996, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-START> SEP-30-1996
<PERIOD-END> DEC-29-1996
<EXCHANGE-RATE> 1
<CASH> 35,195
<SECURITIES> 0
<RECEIVABLES> 172,317
<ALLOWANCES> (9,937)
<INVENTORY> 144,736
<CURRENT-ASSETS> 350,297
<PP&E> 673,880
<DEPRECIATION> 369,057
<TOTAL-ASSETS> 721,967
<CURRENT-LIABILITIES> 160,244
<BONDS> 208,130
0
0
<COMMON> 393
<OTHER-SE> 305,219
<TOTAL-LIABILITY-AND-EQUITY> 721,967
<SALES> 210,863
<TOTAL-REVENUES> 210,863
<CGS> 173,014
<TOTAL-COSTS> 196,257
<OTHER-EXPENSES> 843
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,172
<INCOME-PRETAX> 8,591
<INCOME-TAX> 3,182
<INCOME-CONTINUING> 5,409
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,409
<EPS-PRIMARY> .37
<EPS-DILUTED> .36
</TABLE>
