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 June 29, 1997
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 June 29, 1997 - 22,299,800
<PAGE>
GUILFORD MILLS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 29,1997
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 Thirty-Nine Weeks Ended June
29, 1997 and June 30, 1996
Consolidated Statements of Income for the Thirteen Weeks Ended June 29,
1997 and June 30, 1996
Consolidated Balance Sheets as of June 29, 1997 and September 29, 1996
Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended
June 29, 1997 and June 30, 1996
Condensed Notes to Consolidated Financial Statements
<PAGE>
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 Thirty-Nine Weeks Ended June 29, 1997 and June 30, 1996
(In thousands except per share data)
(Unaudited)
- --------------------------------------------------- ----------------------------
JUNE 29, June 30,
1997 1996
- --------------------------------------------------- ----------------------------
NET SALES $668,365 $613,485
- --------------------------------------------------- ----------------------------
COSTS AND EXPENSES:
Cost of goods sold 538,359 507,441
Selling and administrative 71,609 58,754
- --------------------------------------------------- ----------------------------
609,968 566,195
- --------------------------------------------------- ----------------------------
OPERATING INCOME 58,397 47,290
INTEREST EXPENSE 12,999 12,733
OTHER EXPENSE, NET 3,110 2,498
- ---------------------------------------------------- ------------------ --------
INCOME BEFORE INCOME TAXES 42,288 32,059
INCOME TAX PROVISION 14,861 10,789
- ---------------------------------------------------- ------------------ --------
NET INCOME $ 27,427 $ 21,270
- ---------------------------------------------------- ------------------ --------
NET INCOME PER SHARE:
Primary $1.25 $1.00
Fully Diluted 1.15 .93
- ---------------------------------------------------- ------------------ --------
DIVIDENDS PER SHARE $ .31 $.30
- ---------------------------------------------------- ------------------ --------
See accompanying condensed notes to consolidated financial statements.
<PAGE>
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 June 29, 1997 and June 30, 1996
(In thousands except per share data)
(Unaudited)
- ------------------------------------------ ------------------ ----------------
JUNE 29, June 30,
1997 1996
- ------------------------------------------ ------------------ ----------------
NET SALES $238,358 $232,202
- ------------------------------------------ ------------------ ----------------
COSTS AND EXPENSES:
Cost of goods sold 187,248 187,134
Selling and administrative 24,234 20,089
- ------------------------------------------ ------------------ ----------------
211,482 207,223
- ------------------------------------------ ------------------ ----------------
OPERATING INCOME 26,876 24,979
INTEREST EXPENSE 3,665 4,867
OTHER EXPENSE, NET 1,051 1,059
- ------------------------------------------ ------------------ ----------------
INCOME BEFORE INCOME TAXES 22,160 19,053
INCOME TAX PROVISION 7,617 6,413
- ------------------------------------------ ------------------ ----------------
NET INCOME $14,543 $12,640
- ------------------------------------------ ------------------ ----------------
NET INCOME PER SHARE:
Primary $.66 $.59
Fully Diluted .59 .53
- ------------------------------------------ ------------------ ----------------
DIVIDENDS PER SHARE $.11 $.10
- ------------------------------------------ ------------------ ----------------
See accompanying condensed notes to consolidated financial statements.
<PAGE>
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
June 29, 1997 and September 29, 1996
(In thousands except share data)
<TABLE>
<CAPTION>
------------------------------------------------------------------------ -------------------- ------------------
JUNE 29, September 29,
1997 1996
(UNAUDITED)
------------------------------------------------------------------------ -------------------- ------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 33,095 $ 31,448
Accounts receivable, net 170,069 172,033
Inventories 144,052 137,993
Prepaid income taxes 2,604 2,437
Other current assets 6,814 7,977
------------------------------------------------------------------------ -------------------- ------------------
Total current assets 356,634 351,888
Property, net 305,676 309,964
Cash surrender value of life insurance, net of policy loans 43,294 41,715
Other 30,721 25,263
------------------------------------------------------------------------ -------------------- ------------------
Total assets $736,325 $728,830
------------------------------------------------------------------------ -------------------- ------------------
LIABILITIES
Short-term borrowings $ 41,553 $ 47,979
Current maturities of long-term debt 17,093 18,837
Accounts payable 56,744 63,551
Accrued liabilities 50,535 43,863
------------------------------------------------------------------------ -------------------- ------------------
Total current liabilities 165,925 174,230
Long-term debt 196,749 209,435
Deferred income taxes 20,476 19,969
Other non-current liabilities 25,760 27,137
------------------------------------------------------------------------ -------------------- ------------------
Total liabilities 408,910 430,771
------------------------------------------------------------------------ -------------------- ------------------
STOCKHOLDERS' INVESTMENT
Preferred stock, $1 par; 1,000,000 shares authorized, none issued --- ---
Common stock, $.02 par; 60,000,000 shares authorized, 29,443,799
shares issued, 22,299,800 shares outstanding at June 29, 1997
and 21,683,567 shares outstanding September 29, 1996 589 589
Capital in excess of par 46,889 40,893
Retained earnings 331,847 311,217
Foreign currency translation loss (7,598) (11,988)
Unamortized stock compensation (4,054) (287)
Treasury stock, at cost (7,143,999 shares at June 29, 1997 and
7,760,232 shares at September 29, 1996) (40,258) (42,365)
------------------------------------------------------------------------ -------------------- ------------------
Total stockholders' investment 327,415 298,059
------------------------------------------------------------------------ -------------------- ------------------
Total liabilities and stockholders' investment $736,325 $728,830
------------------------------------------------------------------------ -------------------- ------------------
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
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 Thirty-Nine Weeks Ended June 29, 1997 and June 30, 1996
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------- ----------------------- ------------------------
JUNE 29, June 30,
1997 1996
- ----------------------------------------------------------------------------- ----------------------- ------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $27,427 $21,270
Non-cash items included in net income:
Depreciation and amortization 46,899 40,894
Loss on disposition of property 704 102
Minority interest in net income(loss) 475 (37)
Deferred income taxes 765 3,102
Increase in cash surrender value of life insurance, net of policy (1,871) (3,085)
loans
Compensation earned under restricted stock plan 363 641
Changes in assets and liabilities:
Receivables 3,661 (14,909)
Inventories (5,008) (3,105)
Other current assets 1,499 (493)
Accounts payable (7,289) (4,513)
Accrued liabilities 6,842 8,551
Other (1,408) (1,313)
- ----------------------------------------------------------------------------- ----------------------- ------------------------
Net cash provided by operating activities 73,059 47,105
- ----------------------------------------------------------------------------- ----------------------- ------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property (42,238) (42,480)
Proceeds from dispositions of property 2,239 1,136
Increase in other assets (2,820) (4,272)
Purchase of business, net of cash acquired (7,119) (19,302)
- ----------------------------------------------------------------------------- ----------------------- ------------------------
Net cash used in investing activities (49,938) (64,918)
- ----------------------------------------------------------------------------- ----------------------- ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term (repayments) borrowings, net (7,019) 47,529
Payments of long-term debt (13,309) (67,001)
Proceeds from issuance of long-term debt ----- 58,777
Cash dividends (6,799) (6,471)
Common stock options exercised 4,431 640
- ----------------------------------------------------------------------------- ----------------------- ------------------------
Net cash (used in) provided by financing activities (22,696) 33,474
- ----------------------------------------------------------------------------- ----------------------- ------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 1,222 (731)
- ----------------------------------------------------------------------------- ----------------------- ------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,647 14,930
EQUIVALENTS
- ----------------------------------------------------------------------------- ----------------------- ------------------------
BEGINNING CASH AND CASH EQUIVALENTS 31,448 17,964
ENDING CASH AND CASH EQUIVALENTS $ 33,095 $ 32,894
- ----------------------------------------------------------------------------- ----------------------- ------------------------
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
GUILFORD MILLS, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 29, 1997
(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. Stock Split-- On April 21, 1997, the Company's Board of Directors approved a
three-for-two split of the Company's common stock, par value $.02 per share (
the "Common Stock"). The split was effected in the form of a 50% stock dividend
paid on May 6, 1997 to stockholders of record on May 1, 1997. The stock dividend
increased the Company's issued Common Stock by approximately 9.8 million shares.
The par value of the additional 9.8 million shares of Common Stock issued has
been credited to Common Stock and a like amount charged to Capital in Excess of
Par. All share and per share data contained herein have been restated for all
periods presented to reflect the stock split.
3. 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 and Common Stock equivalents outstanding during the periods. The
weighted average shares of Common Stock and Common Stock equivalents used in
computing primary net income per share for the thirty-nine weeks ended June 29,
1997 and June 30, 1996 were 22,011,000 and 21,306,000, respectively. The
weighted average shares of Common Stock and Common Stock equivalents used in
computing primary net income per share for the thirteen weeks ended June 29,
1997 and June 30, 1996 were 22,261,000 and 21,708,000, 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 weighted average
shares used in computing fully diluted net income per share for the thirty-nine
weeks ended June 29, 1997 and June 30, 1996 were 25,425,000 and 24,829,000,
respectively. The weighted average shares used in computing fully diluted net
income per share for the thirteen weeks ended June 29, 1997 and June 30, 1996
were 25,557,000 and 25,103,000, respectively.
In March of 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS No. 128").
This Statement requires the presentation of basic earnings per share (net income
available to common shareholders divided by the weighted average number of
shares of common stock outstanding) and a disclosure reconciling the numerator
and the denominator of the earnings per share calculations. SFAS No. 128 is
effective for interim and annual periods ending after December 15, 1997, and
early application is prohibited. Accordingly, the accompanying financial
statements do not reflect the provisions of SFAS No. 128. The Company will adopt
the provisions of SFAS No. 128 in the first quarter of fiscal 1998. The Company
has not yet determined the impact of adoption of SFAS No. 128.
4. 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.
<PAGE>
Inventories at June 29, 1997 and September 29, 1996 consisted of the
following:
<TABLE>
<CAPTION>
June 29, September 29,
1997 1996
------------------ -----------------
<S> <C> <C>
Finished Goods $ 48,529 $ 45,515
Raw Materials and Work in Process 99,727 95,439
Manufacturing Supplies 13,731 13,892
------------------ -----------------
Total inventories valued at first-in, first-out (FIFO) cost 161,987 154,846
Less -- Adjustments to reduce FIFO cost to LIFO cost, net 17,935 16,853
------------------
=================
Total inventories $144,052 $137,993
================== =================
</TABLE>
5. Accumulated Depreciation -- Accumulated depreciation at June 29, 1997 and
September 29, 1996 was $402,305 and $353,364, respectively.
6. Acquisitions --- 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 300,000 shares of Common Stock as adjusted for the May 6, 1997
three-for-two Common Stock split. The acquisition was accounted for using the
purchase method of accounting. Excess purchase price over fair market value of
the underlying assets of approximately $8,429 was allocated to goodwill.
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 statements 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 thirty-nine weeks ended June 30, 1996, sales of
$632.1 million, net income of $21.7 million and primary earnings per share of
$1.02. In management's opinion, the unaudited pro forma combined results of
operations are not necessarily 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.
Effective June 27, 1997, the Company acquired an additional 20% ownership
interest in Grupo Ambar, S.A. de C.V. ("Grupo Ambar") for approximately $7,100.
The acquisition increased the Company's ownership interest in Grupo Ambar from
75% to 95%. The purchase price was allocated to the fair market value of assets
and liabilities acquired. Excess purchase price over fair market value of
underlying assets of approximately $4,900 was allocated to goodwill.
7. Subsequent Event---On June 25, 1997, the Company issued a call for the
redemption of the Company's outstanding 6.0% Convertible Subordinated Debentures
to be redeemed as of August 8, 1997 at 100.6% of the principal amount. Holders
had the right to convert debentures into shares of Common Stock through July 29,
1997 at $19.67 per share. Of the $66,180 debentures outstanding at June 24,
1997, $65,039 or 98.3% were converted into Common Stock. This conversion
resulted in the issuance of 3,306,423 shares of Common Stock, from treasury. The
remaining debentures of $1.1 million were redeemed. On a proforma basis, had the
3,306,423 common shares been outstanding from the beginning of each respective
period for the thirty-nine weeks and the thirteen weeks ended July 29, 1997 and
June 30, 1996, primary earnings per share would have approximated fully diluted
earnings per share, as reported for these periods.
8. Comprehensive income---In June of 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," ("SFAS No. 130"). This Statement establishes standards
for the prominent reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. Comprehensive
income is the total of net income and other changes in equity that bypass net
income. The Statement is effective for fiscal years beginning after
December 15 1997, with earlier application permitted. The Company has not yet
determined the impact of adoption of SFAS No. 130.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net sales for the nine months ended June 29, 1997 were $668.4 million,
an increase of $54.9 million, or 8.9%, over net sales of $613.5 million for the
nine months ended June 30, 1996. Net sales for the third quarter of fiscal 1997
were $238.4 million, an increase of $6.2 million, or 2.7%, over net sales of
$232.2 million for the comparable period of the prior year.
For the nine months ended June 29, 1997, net sales in the apparel home
fashions business unit increased 9.4% over the nine months ended June 30, 1996.
The increase resulted from net sales increases in shapewear and swimwear fabrics
of 9.0%, fastener, medical and industrial fabrics of 67.4%, and home fashions
and linings fabrics of 24.4% . These increases were partially offset by declines
in net sales of intimate apparel fabrics (lingerie, sleepwear and robewear) of
21.7% and women's ready to wear fabrics of 8.5%. The overall increase in net
sales for the apparel home fashions business unit reflects consumer confidence
in the economy and a shift in customer demand from traditional apparel fabrics
to specialty and technically engineered apparel, home fashions, and industrial
fabrics. For the quarter ended June 29, 1997, net sales for the apparel home
fashions business unit increased 6.2%, over the comparable period of the
previous year. This resulted from net sales increases in shapewear and swimwear
fabrics of 11.0%, fastener, medical and industrial fabrics of 45.5%, and home
fashions and linings fabrics of 24.3%. These increases were partially offset by
net sales declines in intimate apparel fabrics of 11.8% and women's ready to
wear fabrics of 14.8%.
Net sales for Hofmann Laces for the nine months of fiscal 1997
increased significantly from the nine months of fiscal 1996. The Company
acquired Hofmann Laces in the second quarter of fiscal 1996, and, therefore, the
Company's net sales for the nine months of fiscal 1996 do not include Hofmann
Laces net sales for the first quarter of fiscal 1996. On a pro forma basis, as
if the Hofmann Laces acquisition had occurred at the beginning of fiscal 1996,
Hofmann Laces net sales for the nine months of fiscal 1997 increased 29.0% over
the nine months of fiscal 1996. The increase resulted from strong demand for
intimate apparel lace fabrics and home fashion fabrics. For the quarter ended
June 29, 1997, net sales for Hofmann Laces increased 31.7% over the same quarter
a year ago.
Net sales for the U.S. automotive business unit for the nine months
ended June 29, 1997 declined 12.0% from the nine months ended June 30, 1996. Net
sales to domestic original equipment manufacturers declined 12.7% primarily as a
result of certain platform production declines experienced by a certain
customer. Net sales of fabrics for recreational vehicles and vans declined 6.6%
as a result of reduced demand for these vehicles. For the quarter ended June 29,
1997, net sales for the U.S. automotive business unit declined 14.7% from the
quarter ended June 30, 1996.
Net sales for the Company's European automotive business unit
increased 11.9% for the nine months of fiscal 1997 over the same period a year
ago. The increase was due to new product offerings which resulted in market
share growth, increased sales to a certain customer which partially offset the
effect of production declines in certain platforms of another customer, and the
effect of strengthening of the U.K. pound sterling compared to the U.S. dollar.
Net sales for the Company's European automotive business unit for third quarter
of fiscal 1997 increased by 13.9% from the same quarter a year ago.
Net sales for the Company's Mexican subsidiary for the nine months of
fiscal 1997 increased 17.9% over the nine months of fiscal 1996. The increase
reflects the strengthening of the Mexican economy, the increased demand for
exported garments under the North American Free Trade Agreement (NAFTA) and an
increase in the demand for domestic automotive vehicles. For the quarter ended
June 29, 1997, net sales for the Company's Mexican subsidiary increased by 20.8
% over the same quarter a year ago. The Company anticipates that the peso's
uncertainty will continue to impact future revenue translation and total sales
of its Mexican subsidiary.
Gross margin for the nine months of fiscal 1997 increased to $130.0
million, or 19.5% of net sales, compared to $106.0 million, or 17.3% of net
sales, for the nine months of fiscal 1996. The total gross margin increase and
increased gross margin as a percentage of net sales resulted from the increase
in net sales volumes and product mix. For the quarter
<PAGE>
ended June 29, 1997, gross margin increased to $51.1 million, or 21.4 % of net
sales, from $45.1 million, or 19.4% of net sales, for the same quarter a year
ago.
Selling and administrative expenses increased to $71.6 million, or
10.7% of net sales, for the nine months ended June 29, 1997, compared to $58.8
million, or 9.6% of net sales, for the same period a year ago. The increase in
selling and administrative expenses as a percentage of net sales is primarily
due to increased variable incentive compensation costs resulting from increased
net sales. In addition, the company opened sales offices in Hong Kong and
incurred additional advertising and promotional costs associated with the
increase in net sales. For the quarter ended June 29, 1997, selling and
administrative expenses were $24.2 million, or 10.2% of net sales, compared to
20.1 million, or 8.7% of net sales, for the same quarter a year ago.
Interest expense for the nine months ended June 29, 1997 was $13.0
million compared to $12.7 million for the same period a year ago. The increase
in interest expense of $0.3 million is due primarily to additional borrowings
related to the acquisition of Hofmann Laces in the second quarter of fiscal 1996
partially offset by payments of current maturities and lower short term interest
rates. For the quarter ended June 29, 1997, interest expense was $3.7 million
compared to $4.9 million for the quarter ended June 30, 1996. The decline is due
to the decrease in average borrowings.
Income tax expense for the nine months of 1997 was $14.9 million, or
35.1% of income before income taxes, compared to $10.8 million, or 33.7% of
income before income taxes for the same period a year ago. The increase in the
effective tax rate is primarily due to the relative proportionate impact of
credits to pre-tax income which decreased significantly from fiscal 1996 to
fiscal 1997 and the acquisition of Hofmann Laces. Income tax expense for the
third quarter of 1997 was $7.6 million, or a 34.4% effective tax rate, compared
to $6.4 million or a 33.7% effective tax rate for the third quarter of 1996.
Net income for the nine months ended June 29, 1997 was $27.4 million,
or $1.25 per primary share, compared to $21.3 million, or $ 1.00 per primary
share, for the comparable period of the previous year. For the quarter ended
June 29, 1997, net income was $14.5 million or $.66 per primary share, compared
to net income of $12.6 million, or $.59 per primary share, for the same quarter
a year ago.
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 exceeded 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 subsidiary 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. The
results of operations, on a consolidated basis, for the Company's quarter and
nine months ended June 29, 1997 were not significantly affected by the
continuing devaluation of the Mexican peso or the change in method of accounting
for currency translation . While management expects that the peso will devalue
even further in fiscal 1997, it believes that economic growth, spurred by the
continued Mexican domestic demand for apparel fabrics and reduced inflation,
will result in continued growth for its Mexican 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 June 29, 1997, working capital was $190.7 million compared to $177.7
million at September 29, 1996. This increase in working capital is due primarily
to a reduction in borrowings as cash generated from operating activities allowed
for the repayment of $20.3 million of current debt and short-term borrowings.
The Company maintains flexibility with respect to its seasonal working capital
needs through a revolving credit facility of $150 million and its continued
access to other traditional sources of funds, including uncommitted bank lines
of credit aggregating $135 million, and the ability to receive advances against
its factored accounts receivable. At June 29, 1997 no borrowings were
outstanding against the Company's $150 million credit facility, and the
Company's borrowing availability under its uncommitted bank lines of credit was
$33.9 million. 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.
<PAGE>
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.
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
June 29, 1997, environmental accruals amounted to $5.3 million of which $4.3
million is non-current and is included in other non-current 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 - 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No.
(10)(a)* Form of Restricted Stock Agreement between the Company and certain of
its officers pursuant to the 1989 Restricted Stock Plan
(10)(b)* Form of Stock Option Contract between the Company and certain of its
officers pursuant to the 1991 Stock Option Plan
<PAGE>
(10)(c)* Form of Stock Option Contract between the Company and certain of its
key employees pursuant to the 1991 Stock Option Plan
(10)(d) Third Amendment, dated May 23, 1997, to Stockholders' Agreement, dated
as of June 22, 1990, by and among the Company, Charles A. Hayes, Maurice Fishman
and George Greenberg.
(10)(e) Fourth Amendment, dated May 23, 1997, to Stockholders' Agreement, dated
as of April 30, 1991, by and among the Company, Charles A. Hayes and Maurice
Fishman.
* Items denoted with an asterisk represent management contracts or compensatory
plans or arrangements
(b) Reports on Form 8-K:
Not Applicable
<PAGE>
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: August 13, 1997 By: /s/ Terrence E. Geremski
------------------------
Terrence E. Geremski
Senior Vice President/Chief Financial Officer
<PAGE>
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: August 13, 1997 By: /s/ Terrence E. Geremski
------------------------
Terrence E. Geremski
Senior Vice President/Chief Financial Officer
<PAGE>
EXHIBIT (10)(a)
GUILFORD MILLS, INC.
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT is entered into this 27th day of May,
1997, by and between Guilford Mills, Inc. (the "Company") and ____________ (the
"Executive").
WITNESSETH:
WHEREAS, the Company has approved the grant of restricted stock to the
Executive pursuant to the terms and conditions of the Company's 1989 Restricted
Stock Plan (the "Plan").
NOW, THEREFORE, the Company and the Executive hereby agree as follows:
1. Restricted Stock Award. Subject to the terms and conditions of the
Plan and this Agreement, the Company hereby awards to the Executive _________
shares of Company Common Stock, par value $.02 per share, the vesting of which
shall be subject to the Executive's continued employment with the Company or a
Subsidiary, as defined in the Plan, as described below (the "Restricted Stock").
2. Restrictions. The following restrictions apply to each share of
Restricted Stock until it vests in accordance with Section 3 below: (i) one or
more stock certificates representing the Restricted Stock will be issued in the
Executive's name, but will be held in custody by the Company or an escrow agent
appointed by the Company; (ii) the Executive shall not sell, transfer, assign,
give, place in trust, or otherwise dispose of or pledge, grant a security
interest in, or otherwise encumber the Restricted Stock; (iii) dividends on the
Restricted Stock will be subject to the provisions set forth in Section 4 below;
and (iv) upon termination of the Executive's employment with the Company or a
Subsidiary for any reason whatsoever the Executive shall automatically forfeit
any and all rights, claims or interests in the Restricted Stock not then vested,
and in any dividends or interest thereon, unless the Compensation Committee of
the Company's Board of Directors determines otherwise in its sole and absolute
discretion, except that if the Executive's employment with the Company or a
Subsidiary is terminated Without Cause, as hereinafter defined in Section 11, or
by reason of death or disability, then the Executive, or his estate, as the case
may be, shall become vested in the Restricted Stock, and all dividends and
interest paid thereon, on the date of such termination.
3. Vesting of Restricted Stock. The Executive shall vest in _______
shares of Restricted Stock on the date hereof and, subject to the Executive's
continuous employment with the Company or a Subsidiary from and after the date
of this Agreement,
<PAGE>
the Executive shall become vested in _______ shares of Restricted Stock on each
of May 27, 2001, May 27, 2002, May 27, 2003 and May 27, 2004 (each such date a
"Vesting Date").
4. Dividends. Dividends on each share of Restricted Stock shall be paid
to the escrow agent appointed by the Company. The escrow agent shall invest the
escrowed dividends and, to the extent the annual yield thereon is less than 9%,
the Company shall make payments to the escrow agent from time to time so that
dividends held in escrow shall be credited with interest at the rate of 9% per
annum, compounded annually. Earnings on escrowed dividends in excess of 9% per
annum shall be paid to the Company. The Executive shall be entitled to receive
the dividends paid on each share of Restricted Stock and held in escrow,
together with interest thereon at the rate of 9% per annum, at the same time he
becomes vested in that share of Restricted Stock under the vesting provisions
set forth in Section 3 above.
5. Change in Control. Notwithstanding the foregoing, if there is a
Change in Control of the Company (as defined in the Plan), all shares of
Restricted Stock not previously forfeited will immediate vest, and the Executive
shall be entitled to receive any dividends previously paid on the Restricted
Stock and then held in escrow, together with interest thereon, provided,
however, that in the event of any conflict between the provisions of this
Section and any other contract or arrangement between the Executive and the
Company relating to a Change in Control of the Company, the provisions of such
other contract or arrangement shall control.
6. Delivery of Restricted Stock; Voting. Subject to the provisions of
the Plan and this Agreement, upon the vesting of any shares of Restricted Stock,
the Executive shall thereupon become entitled to receive a stock certificate
evidencing such shares. The Executive shall have the right to vote Restricted
Stock issued in his name on all matters that come before the stockholders of the
Company.
7. Regulatory Compliance and Listing. The issuance or delivery of any
stock certificates representing vested shares of Restricted Stock may be
postponed by the Company for such period as may be required to comply with any
applicable requirements under the federal securities laws, any applicable
listing requirements of any national securities exchange and requirements under
any other law or regulation applicable to the issuance or delivery of such
shares. The Company shall not be obligated to deliver any vested shares of
Restricted Stock to the Executive if the Company believes that such delivery
would constitute a violation of any governmental authority or any national
securities exchange.
8. Investment Representations and Related Matters. The Executive hereby
represents that the Restricted Stock awarded him pursuant to this Agreement is
being acquired for investment and not for sale or with a view to distribution
thereof. The Executive acknowledges and agrees that any sale or distribution of
shares of Restricted Stock that have become vested may be made only pursuant to
either (a) a Registration
2
<PAGE>
Statement on an appropriate form under the Securities Act of 1933, as amended
(the "Act"), which Registration Statement has become effective and is current
with regard to the shares being sold, or (b) a specific exemption from the
registration requirements of the Act that is confirmed in a favorable written
opinion of counsel, in form and substance satisfactory to counsel for the
Company, prior to any such sale or distribution. The Executive hereby consents
to such action as the Company deems necessary or appropriate from time to time
to prevent a violation of, or to perfect an exemption from, the registration
requirements of the Act or to implement the provisions of this Agreement,
including but not limited to placing restrictive legends on certificates
evidencing shares of Restricted Stock (whether or not vested) and delivering
stop transfer instructions to the Company's transfer agent.
9. Withholding. The Executive acknowledges that the Company will have
certain withholding obligations when he becomes vested in shares of Restricted
Stock. It shall be a condition to his receipt of a stock certificate covering
shares of Restricted Stock that have vested and to his receipt of dividends
previously paid on such shares and interest thereon that the Executive pay to
the Company such amounts as it is required to withhold or, with the consent of
the Company, otherwise provide for the discharge of the Company's withholding
obligations. If any such payment is not made by the Executive, the Company or
any Subsidiary may deduct the amounts required to be withheld, plus interest
thereon, from payments of any kind to which the Executive would otherwise be
entitled.
10. No Right To Continued Employment. This Agreement does not confer
upon the Executive any right to continued employment by the Company or any
Subsidiary or affiliated company, nor shall it interfere in any way with the
right of the Executive's employer to terminate his employment at any time for
any reason or no reason.
11. Restrictive Covenants.
(a) The Executive acknowledges that by virtue of his position
with Guilford, as defined herein, he has had and will continue to have access at
the highest level to, and intimate knowledge of, valuable confidential and
proprietary information relating to Guilford's businesses including, without
limitation, Guilford's trade secrets. Accordingly, in consideration of the
Restricted Stock award evidenced by this Agreement, which award the Executive
acknowledges is being made in the Company's discretion, the Executive hereby
undertakes and covenants that at all times during the continuation of his
employment with Guilford and during the Restrictive Period, as defined herein,
he shall:
(i) refrain, alone, or as a partner, member, employee
or agent of any partnership, or as an officer, employee, agent, director,
stockholder or investor (except as to not more than 5% of the outstanding stock
of any corporation, the securities of which are traded on a securities exchange
or in the over-the-counter market) of any
3
<PAGE>
corporation, or in any other individual or representative capacity, from
directly or indirectly owning, managing, operating or controlling, or
participating in the ownership, management, operation or control of, or working
for or providing consulting services to, or permitting the use of his name by,
any business or activity in competition with Guilford's Business, as defined
herein, within the Territory, as defined herein (the foregoing clause shall
prohibit, among other activities, soliciting or accepting the business of, for
himself or others (other than for Guilford), any person or entity which is a
customer of Guilford's Business within the Territory); and
(ii) refrain, without first obtaining the written
consent of Guilford, from directly or indirectly soliciting, enticing,
persuading, inducing or hiring any employee, consultant, agent, independent
contractor or other person (other than secretarial and clerical personnel) who
is employed by Guilford on the date the Executive's employment with Guilford
terminates or who has been employed by Guilford during the 12 month period
preceding such date to become employed by any person, firm, entity or
corporation or approach any such person for any of the foregoing reasons.
The term "Business" shall mean (i) the business
(which the Executive acknowledges Guilford is engaged in as of the date hereof)
of developing, knitting, weaving, dyeing and finishing, designing, printing or
marketing yarns, fabrics or lace for any of the following applications:
automotive (including, without limitation, headliner and bodycloth fabric for
cars, vans, sport utility vehicles, trucks and other passenger vehicles),
apparel (including, without limitation, linings, swimwear, intimate apparel,
activewear, outerwear, sleepwear, robewear, ready-to-wear and shapewear),
upholstery, home furnishings or industrial (including, without limitation, "hook
and loop" fastening systems, medical and health care products, component parts
of shoes and carpet backings) and (ii) any other business in which Guilford
becomes engaged during the Executive's employment with Guilford.
The term "Territory" shall mean the United States of
America, its territories and possessions, Europe, the United Kingdom, the
Republic of Mexico, Brazil, Argentina, Japan and Canada; PROVIDED, HOWEVER, that
if the area described in the preceding clause shall be determined by judicial
action to define too broad a territory to be enforceable, then the term
"Territory" shall mean the United States of America, its territories and
possessions, the Republic of Mexico and Canada; and, PROVIDED FURTHER, that if
the area described in the immediately preceding clause shall be determined by
judicial action to define too broad a territory to be enforceable, then the term
"Territory" shall mean the United States of America, its territories and
possessions; and, PROVIDED FURTHER, that if the area described in the
immediately preceding clause shall be determined by judicial action to define
too broad a territory, then the term "Territory" shall mean those states in the
United States of America in which Guilford maintains operations at which it
conducts the Business. The Executive hereby acknowledges that Guilford's
Business is national and international in scope and that Guilford has customers
throughout the United States of America, its territories and possessions, the
Republic of Mexico, Canada, the United Kingdom, Europe and throughout other
parts of the world.
4
<PAGE>
Accordingly, the Executive acknowledges and agrees that the scope of the
covenants in this Section 11 are reasonable and necessary in order to protect
the interests of Guilford's Business sought to be protected hereby.
The term "Cause" shall mean, as determined by the
Board of Directors or the Compensation Committee, as the case may be, in its
sole discretion, (i) the willful commission by the Executive of an act that
causes or may cause substantial damage to Guilford, (ii) the commission by the
Executive of an act of fraud in the performance of his duties on behalf of
Guilford, (iii) conviction of the Executive for commission of a felony in
connection with the performance of his duties on behalf of Guilford, or (iv) the
continuing failure of the Executive to perform his duties to Guilford after
written notice thereof and a reasonable opportunity to be heard and cure such
failure are given to the Executive by the Board of Directors or the Compensation
Committee, as the case may be.
The term "Without Cause" shall mean termination of
the Executive's employment by Guilford for reasons other than Cause.
The term "Guilford" shall mean the Company or any of
its Subsidiaries, affiliated companies, successors or assigns.
The term "Restrictive Period" shall mean a period of
two years following the Executive's voluntary termination of his employment with
Guilford or the termination of his employment by Guilford for Cause.
(b) Recognizing that the knowledge of Guilford's customers,
suppliers, agents, business methods, systems, plans, policies, trade secrets,
knowledge, know-how, information, materials or documents are valuable and unique
assets, the Executive agrees that he shall not divulge, furnish or make
accessible to any person, firm, corporation or other entity (other than as is
necessary and appropriate in the regular course of Guilford's Business) for any
reason or purpose whatsoever, directly or indirectly, or use for the benefit of
himself or others (other than for Guilford's benefit), any such knowledge or
information. The provisions of this Section 11(b) shall not apply to information
which is or shall become generally known to the public (except by reason of the
Executive's breach of his obligations hereunder) and information which the
Executive is required to disclose by law or by an order of a court of competent
jurisdiction. If the Executive is required by law or a court order to disclose
such information, he shall notify Guilford of such requirement and provide
Guilford an opportunity (if it so elects) to contest such law or court order.
(c) The Executive acknowledges that all developments,
including, without limitation, inventions, patentable or otherwise, discoveries,
improvements, patents, trade secrets, designs, reports, computer software, flow
charts and diagrams, procedures, data, documentation, ideas and writings and
applications thereof relating to Guilford's Business or planned business of
Guilford that, alone or jointly with others, the
5
<PAGE>
Executive may conceive, create, make, develop, reduce to practice or acquire
during his employment with Guilford (collectively, the "Developments") are works
made for hire and shall remain the sole and exclusive property of Guilford and
the Executive hereby assigns to Guilford all of his right, title and interest in
and to all such Developments. The Executive agrees that he will, at any time
upon request and at the expense of Guilford, promptly execute all instruments
and papers and perform all acts whatsoever, which are necessary or desired by
Guilford to vest and confirm in Guilford, and its successors, assigns and
nominees, fully and completely, all rights created by this section and which may
be necessary or desirable to enable Guilford, and its successors, assigns and
nominees, to secure and enjoy the full benefits and advantages thereof.
(d) In the event of any breach or threatened breach of the
provisions of this Section 11 by the Executive, Guilford, in addition to any
other rights and remedies it may have, shall be entitled to an injunction
(and/or other equitable relief) restraining such breach or threatened breach, it
being stipulated and agreed that a breach by the Executive would cause
irreparable damage to Guilford and that its remedies at law would be inadequate.
The existence of any claim or cause of action on the part of the Executive
against Guilford shall not constitute a defense to the enforcement of these
provisions. The Executive agrees that the terms of the foregoing covenants,
including, without limitation, the Restrictive Period and the Territory, are
reasonable in all respects and necessary for the protection of Guilford, and
represents and warrants to Guilford that he will be able to support himself and
his dependents notwithstanding the covenants. If any court of competent
jurisdiction shall finally adjudicate that any of the covenants provided for
herein are too broad as to area, activity or time covered, such area, activity
or time covered may be reduced to whatever extent the court deems reasonable and
the covenants herein and the remedy of injunctive and/or other equitable relief
may be enforced as to such reduced area, activity or time.
12. Miscellaneous.
(a) The Plan and this Agreement shall be construed by and
administered under the supervision of the Compensation Committee of the Board of
Directors of the Company, and all determinations of the Compensation Committee
shall be final and binding on the Executive.
(b) Nothing in the Plan or this Agreement will restrict or
limit in any way the right of the Board of Directors of the Company to issue or
sell stock of the Company (or securities convertible into stock of the Company)
on such terms and conditions as it deems to be in the best interests of the
Company, including, without limitation, stock and securities issued or sold in
connection with mergers and acquisitions, stock issued or sold in connection
with any stock option or similar plan, and stock issued or contributed to any
qualified stock bonus or employee stock ownership plan.
6
<PAGE>
(c) The Executive hereby irrevocably constitutes and appoints
Terrence E. Geremski and Charles A. Hayes, or either of them, as his true and
lawful agents and attorneys in fact, with full power to appoint a substitute or
substitutes to act hereunder, (i) to sign in his name and on his behalf, stock
certificates and stock powers covering some or all of the Restricted Stock,
checks and other negotiable instruments evidencing dividends paid on the
Restricted Stock, and to sign such other documents and instruments and to take
such other action as either of the attorneys-in-fact deems necessary or
desirable to carry out the terms of this Agreement; (ii) to transfer shares of
Restricted Stock in accordance with the terms of this Agreement; and (iii) to
deposit, invest, reinvest and transfer, in accordance with the terms of this
Agreement, dividends paid on the Restricted Stock and interest thereon. This
power, being coupled with an interest, is irrevocable. The Executive agrees to
execute such other stock powers and documents as may be reasonably requested
from time to time by the Company to effectuate the terms of this Agreement.
(d) The Executive hereby agrees to be bound by all of the
terms and provisions of the Plan, as amended, a copy of which is available to
him upon request.
(e) Any notice to be given hereunder shall be given in writing
by hand delivery or sent by overnight courier or registered or certified mail,
return receipt requested, postage prepaid, addressed to the party to receive the
same at his or its respective address as follows: if to the Company, at its
principal offices, 4925 West Market Street, Greensboro, North Carolina 27407,
Attention: Law Department; and if to the Executive, at his current address as
reflected in the personnel records of the Company, subject to the right of
either party to designate at any time hereafter in writing some other address.
(f) This Agreement may be executed in counterparts, each of
which taken together shall constitute one and the same instrument.
(g) In case any one or more of the provisions of this
Agreement should be found to be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
(h) No failure by either party hereto to exercise and no delay
in exercising, any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right hereunder by either party preclude
any other or future exercise of that right or any other right hereunder by that
party.
(i) This Agreement may not be amended, terminated or suspended
except by an agreement in writing between the Company and the Executive.
(j) This Agreement, which constitutes the entire agreement of
the parties with respect to the Restricted Stock, shall be governed by, and
construed and
7
<PAGE>
enforced in accordance with, the laws of the State of Delaware. The provisions
of Section 11 of this Agreement supersede any and all prior similar covenants
contained in any agreement entered into prior to the date hereof between the
Executive and the Company. Any controversy or dispute arising out of or relating
to this Agreement shall be settled exclusively in the courts (federal and state)
situated in the State of North Carolina, Guilford County. The Executive consents
to personal jurisdiction in the State of North Carolina and in the courts
thereof for the enforcement of this Agreement and waives any rights he may have
under the law of any jurisdiction to object on any basis (including, without
limitation, inconvenience of forum) to jurisdiction or venue within the State of
North Carolina for purposes of litigation to enforce this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
GUILFORD MILLS, INC.
By:__________________________
Name:________________________
Title:_________________________
_____________________________
[Name of Executive]
EXHIBIT (10)(b)
STOCK OPTION CONTRACT
FOR
KEY ASSOCIATES
IN THE
GUILFORD MILLS, INC. 1991 STOCK OPTION PLAN
Pursuant to the Guilford Mills, Inc. 1991 Stock Option Plan (the "Plan"), the
Option Committee has approved granting ____________, who as of the date of grant
is a salaried employee (the "Key Associate") of Guilford Mills, Inc. (the
"Company") or a subsidiary corporation of the Company, an option to purchase
shares of Common Stock, par value $.02 per share ("Common Stock"), of the
Company on the terms and subject to the conditions set forth in the Plan and in
this Contract. Terms not defined in this Contract shall have the meanings
ascribed to them in the Plan.
Therefore, the Company and Key Associate hereby agree this 27th day of May, 1997
(the "Date of Grant") as follows:
1. GRANT OF OPTION. The Company hereby grants to the Key Associate, as a matter
of separate inducement and not in lieu of any salary or other compensation for
services, the right and option to purchase (the "Option"), in the aggregate,
______ shares of Common Stock, at the following exercise prices (hereinafter
referred to collectively as the "Exercise Prices" and singularly as an "Exercise
Price"): an exercise price of Nineteen Dollars and 75/100 ($19.75) per share
with respect to _______ Shares subject to the Option; an exercise price of
Twenty-One Dollars and 725/1,000 ($21.725) per share with respect to ______
Shares subject to the Option; and an exercise price of Twenty-Three Dollars and
70/100 ($23.70) per share with respect to ______ Shares subject to the Option.
The term of the Option shall be ten (10) years from the Date of Grant, subject
to earlier termination as provided in the Plan and in this Contract. Subject to
all other terms and conditions in the Plan and this Contract, the Option shall
be irrevocable. The Option is not intended to be an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
2. EXERCISE OF OPTION.
(a) Subject to all other terms of the Plan and this Contract, the Key
Associate may exercise the Option in whole at any time, or in part from time to
time, during a period of eight (8) years commencing two (2) years from the Date
of Grant and terminating at the close of business on May 27, 2007; PROVIDED,
HOWEVER, that the Option shall be exercisable with respect to thirty-three and
one-third percent (33 1/3%) of the aggregate number of Shares initially subject
to the Option during each of the third, fourth and fifth years of the Option;
and, PROVIDED FURTHER, that to the extent otherwise exercisable, the Option
shall be exercisable at any Exercise Price or at a combination of Exercise
Prices, except that in no event shall the number of Shares with respect to which
the Option is exercised at a given
<PAGE>
Exercise Price exceed the number of Shares subject to the Option at such
Exercise Price. The term "year of the Option" shall mean a one (1) year period
commencing with the Date of Grant, or the anniversary of the Date of Grant, as
the case may be.
(b) The right to purchase Shares under the Option shall be cumulative,
so that if the full number of Shares purchasable in a period shall not be
purchased, the balance may be purchased at any time or from time to time
thereafter, but not after May 27, 2007. Notwithstanding the foregoing, in no
event (i) may the Option be exercised in whole or in part after the tenth
anniversary of the Date of Grant, or (ii) may a fraction of a Share be purchased
under the Option.
3. PAYMENT OF OPTION PRICE.
(a) The Key Associate shall exercise the Option by giving written
notice, in substantially the form attached hereto, to the Corporate Secretary of
the Company, at the Company's principal business office, 4925 West Market
Street, Greensboro, North Carolina 27407, specifying the number of Shares to be
purchased. Payment of the purchase price for the Shares purchased may be made by
delivery of (i) a check payable to the order of the Company, (ii) previously
acquired shares of Company Common Stock (in proper form for transfer and
accompanied by all requisite stock transfer tax stamps or cash in lieu thereof)
owned by such holder having a fair market value equal to the exercise price
applicable to that portion of the Option being exercised (such fair market value
to be determined in accordance with the Plan), or (iii) a combination of the
foregoing.
(b) The Option will be considered exercised on the date that the
Company receives full payment of the aggregate purchase price for the Shares at
the Company's principal business office, 4925 West Market Street, Greensboro,
North Carolina 27407, Attn: Corporate Secretary.
4. TERMINATION OF EMPLOYMENT.
(a) Upon termination of employment of the Key Associate with the
Company and all subsidiary corporations and parent corporations of the Company,
the unexercised portion of the Option shall terminate and become null and void;
provided, however, that:
(i) if the Key Associate shall die while in the employ of such
corporation or during either the three (3) month or one (1) year
period, whichever is applicable, specified in clause (ii) below and at
a time when the Key Associate was entitled to exercise the Option as
provided herein or in the Plan, the legal representative of such
employee, or such person who acquired the Option by bequest or
inheritance or by reason of the death of the Key Associate, may, not
later than one (1) year from the date of death, exercise the
unexercised portion of the Option in respect of any or all of such
number of shares which the Key Associate would have been entitled to
under the Option at the date of death; and
2
<PAGE>
(ii) if the employment of the Key Associate shall terminate by
reason of the Key Associate's retirement (at such age or upon such
conditions as shall be specified by the Option Committee in its sole
discretion), disability (as described in Section 22(e)(3) of the Code)
or dismissal by the employer other than for Cause (as defined in the
Plan), and while such employee is entitled to exercise the Option, as
provided herein or in the Plan, the Key Associate or the Key
Associate's legal representative shall have the right to exercise the
unexercised portion of the Option in respect of any or all of such
number of Shares which the Key Associate would have been entitled to
under the Option, at any time up to and including (x) three (3) months
after the date of such termination of employment in the case of
termination by reason of retirement or dismissal other than for cause
and (y) one (1) year after the date of termination of employment in the
case of termination by reason of disability.
(b) If the Key Associate voluntarily terminates his employment, or is
discharged for cause, then the Option shall forthwith terminate with respect to
any unexercised portion thereof.
5. REGISTRATION AND LISTING OF SHARES.
(a) Unless there is in effect at the time of exercise a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Shares to be received upon the exercise of the Option (and,
if required, there is available for delivery a prospectus meeting the
requirements of Section (10)(a)(3) of the Securities Act), the Key Associate
shall, upon the exercise of the Option (i) represent and warrant to the Company
that the Shares to be issued upon the exercise of the Option are being acquired
by the Key Associate for his own account, for investment only and not with a
view to the resale or distribution thereof and (ii) acknowledge and confirm that
such Shares may not be sold unless registered for sale under the Securities Act
or pursuant to an exemption from the registration requirements of the Securities
Act, but in claiming such an exemption the Key Associate shall obtain a
favorable opinion of counsel, in form satisfactory to the Company, as to the
application of such exemption and (iii) agree that the certificates evidencing
such shares shall bear a legend to the effect of the foregoing.
(b) The Key Associate acknowledges that the Company may endorse a
legend upon the certificate evidencing the Shares as the Company, in its sole
discretion, determines to be necessary or appropriate to implement the terms of
the Plan and this Contract.
(c) Notwithstanding anything herein to the contrary, if at any time the
Option Committee shall determine in its sole discretion that the listing or
qualification of the Shares subject to the Option on any securities exchange or
under any applicable law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of an option, or the issuing of Shares thereunder, the Option
may not be exercised in whole or in part unless such listing, qualification,
consent
3
<PAGE>
or approval shall have been effected or obtained free of any conditions not
acceptable to the Option Committee.
6. ADJUSTMENT OF SHARES; CHANGE IN CONTROL.
(a) In the event of any change in the outstanding Common Stock of the
Company by reason of a stock dividend, reorganization, recapitalization, merger,
consolidation, stock split, split-up, split-off, spin-off, combination or
exchange of shares or other like change in capital structure of the Company, the
aggregate number of Shares subject to the Option and the exercise price per
Share shall be appropriately adjusted by the Option Committee, whose
determination shall be conclusive.
(b) Subject to the terms and conditions of the Plan, in the event of a
Change in Control of the Company, any unexercised portion of the Option shall
immediately become exercisable.
7. WITHHOLDING TAXES. As provided in the Plan, the Company may withhold from
sums due or to become due to the Key Associate from the Company an amount
necessary to satisfy its obligation to withhold taxes incurred by reason of the
grant or exercise of the Option, the disposition of the Option or the
disposition of the underlying shares of Common Stock, or require the Key
Associate to reimburse the Company in such amount. The Company may hold the
stock certificate to which the Key Associate is entitled upon the exercise of
the Option as security for the payment of withholding tax liability, until cash
sufficient to pay such liability has been accumulated.
8. NON-TRANSFERABILITY OF OPTION. The Option is not transferable other than by
will or the laws of descent and distribution and, except as expressly provided
in the Plan, the Option shall be exercisable during the lifetime of the Key
Associate only by the Key Associate.
9. COVENANT NOT TO COMPETE; CONFIDENTIALITY.
(a) The Key Associate acknowledges that by virtue of his
position with Guilford, as defined herein, he has had and will continue to have
access at the highest level to, and intimate knowledge of, valuable confidential
and proprietary information relating to Guilford's businesses including, without
limitation, Guilford's trade secrets. Accordingly, in consideration of the
Option award evidenced by this Contract, which award the Key Associate
acknowledges is being made in the Company's discretion, the Key Associate hereby
undertakes and covenants that at all times during the continuation of his
employment with Guilford and during the Restrictive Period, as defined herein,
he shall:
(i) refrain, alone, or as a partner, member, employee
or agent of any partnership, or as an officer, employee, agent, director,
stockholder or investor (except as to not more than 5% of the outstanding stock
of any corporation, the securities
4
<PAGE>
of which are traded on a securities exchange or in the over-the-counter market)
of any corporation, or in any other individual or representative capacity, from
directly or indirectly owning, managing, operating or controlling, or
participating in the ownership, management, operation or control of, or working
for or providing consulting services to, or permitting the use of his name by,
any business or activity in competition with Guilford's Business, as defined
herein, within the Territory, as defined herein (the foregoing clause shall
prohibit, among other activities, soliciting or accepting the business of, for
himself or others (other than for Guilford), any person or entity which is a
customer of Guilford's Business within the Territory); and
(ii) refrain, without first obtaining the written
consent of Guilford, from directly or indirectly soliciting, enticing,
persuading, inducing or hiring any employee, consultant, agent, independent
contractor or other person (other than secretarial and clerical personnel) who
is employed by Guilford on the date the Key Associate's employment with Guilford
terminates or who has been employed by Guilford during the 12 month period
preceding such date to become employed by any person, firm, entity or
corporation or approach any such person for any of the foregoing reasons.
The term "Business" shall mean (i) the business
(which the Key Associate acknowledges Guilford is engaged in as of the date
hereof) of developing, knitting, weaving, dyeing and finishing, designing,
printing, selling or marketing yarns, fabrics or lace for any of the following
applications: automotive (including, without limitation, headliner and bodycloth
fabric for cars, vans, sport utility vehicles, trucks and other passenger
vehicles), apparel (including, without limitation, linings, swimwear, intimate
apparel, activewear, outerwear, sleepwear, robewear, ready-to-wear and
shapewear), upholstery, home furnishings or industrial (including, without
limitation, "hook and loop" fastening systems, medical and health care products,
component parts of shoes and carpet backings) and (ii) any other business in
which Guilford becomes engaged during the Key Associate's employment with
Guilford.
The term "Territory" shall mean the United States of
America, its territories and possessions, Europe, the United Kingdom, the
Republic of Mexico, Brazil, Argentina, Japan and Canada; PROVIDED, HOWEVER, that
if the area described in the preceding clause shall be determined by judicial
action to define too broad a territory to be enforceable, then the term
"Territory" shall mean the United States of America, its territories and
possessions, the Republic of Mexico and Canada; and, PROVIDED FURTHER, that if
the area described in the immediately preceding clause shall be determined by
judicial action to define too broad a territory to be enforceable, then the term
"Territory" shall mean the United States of America, its territories and
possessions; and, PROVIDED FURTHER, that if the area described in the
immediately preceding clause shall be determined by judicial action to define
too broad a territory, then the term "Territory" shall mean those states in the
United States of America in which Guilford maintains operations at which it
conducts the Business. The Key Associate hereby acknowledges that Guilford's
Business is national and international in scope and that Guilford has customers
throughout the United States of America, its territories and possessions, the
Republic of
5
<PAGE>
Mexico, Canada, the United Kingdom, Europe and throughout other parts of the
world. Accordingly, the Key Associate acknowledges and agrees that the scope of
the covenants in this Section 9 are reasonable and necessary in order to protect
the interests of Guilford's Business sought to be protected hereby.
The term "Cause" shall mean, as determined by the
Board of Directors or the Compensation Committee, as the case may be, in its
sole discretion, (i) the willful commission by the Key Associate of an act that
causes or may cause substantial damage to Guilford (ii) the commission by the
Key Associate of an act of fraud in the performance of his duties on behalf of
Guilford, (iii) conviction of the Key Associate for commission of a felony in
connection with the performance of his duties on behalf of Guilford, or (iv) the
continuing failure of the Key Associate to perform his duties to Guilford after
written notice thereof and a reasonable opportunity to be heard and cure such
failure are given to the Key Associate by the Board of Directors or the
Compensation Committee, as the case may be.
The term "Without Cause" shall mean termination of
the Key Associate's employment by Guilford for reasons other than Cause.
The term "Guilford" shall mean the Company or any of
its Subsidiaries, affiliated companies, successors or assigns.
The term "Restrictive Period" shall mean a period of
two years following the Key Associate's voluntary termination of his employment
with Guilford or the termination of his employment by Guilford for Cause.
(b) Recognizing that the knowledge of Guilford's customers,
suppliers, agents, business methods, systems, plans, policies, trade secrets,
knowledge, know-how, information, materials or documents are valuable and unique
assets, the Key Associate agrees that he shall not divulge, furnish or make
accessible to any person, firm, corporation or other entity (other than as is
necessary and appropriate in the regular course of Guilford's Business) for any
reason or purpose whatsoever, directly or indirectly, or use for the benefit of
himself or others (other than for Guilford's benefit), any such knowledge or
information. The provisions of this Section 9(b) shall not apply to information
which is or shall become generally known to the public (except by reason of the
Key Associate's breach of his obligations hereunder) and information which the
Key Associate is required to disclose by law or by an order of a court of
competent jurisdiction. If the Key Associate is required by law or a court order
to disclose such information, he shall notify Guilford of such requirement and
provide Guilford an opportunity (if it so elects) to contest such law or court
order.
(c) The Key Associate acknowledges that all developments,
including, without limitation, inventions, patentable or otherwise, discoveries,
improvements, patents, trade secrets, designs, reports, computer software, flow
charts and diagrams, procedures, data, documentation, ideas and writings and
applications thereof relating to
6
<PAGE>
Guilford's Business or planned business of Guilford that, alone or jointly with
others, the Key Associate may conceive, create, make, develop, reduce to
practice or acquire during his employment with Guilford (collectively, the
"Developments") are works made for hire and shall remain the sole and exclusive
property of Guilford and the Key Associate hereby assigns to Guilford all of his
right, title and interest in and to all such Developments. The Key Associate
agrees that he will, at any time upon request and at the expense of Guilford,
promptly execute all instruments and papers and perform all acts whatsoever,
which are necessary or desired by Guilford to vest and confirm in Guilford, and
its successors, assigns and nominees, fully and completely, all rights created
by this section and which may be necessary or desirable to enable Guilford, and
its successors, assigns and nominees, to secure and enjoy the full benefits and
advantages thereof.
(d) In the event of any breach or threatened breach of the
provisions of this Section 9 by the Key Associate, Guilford, in addition to any
other rights and remedies it may have, shall be entitled to an injunction
(and/or other equitable relief) restraining such breach or threatened breach, it
being stipulated and agreed that a breach by the Key Associate would cause
irreparable damage to Guilford and that its remedies at law would be inadequate.
The existence of any claim or cause of action on the part of the Key Associate
against Guilford shall not constitute a defense to the enforcement of these
provisions. The Key Associate agrees that the terms of the foregoing covenants,
including, without limitation, the Restrictive Period and the Territory, are
reasonable in all respects and necessary for the protection of Guilford, and
represents and warrants to Guilford that he will be able to support himself and
his dependents notwithstanding the covenants. If any court of competent
jurisdiction shall finally adjudicate that any of the covenants provided for
herein are too broad as to area, activity or time covered, such area, activity
or time covered may be reduced to whatever extent the court deems reasonable and
the covenants herein and the remedy of injunctive and/or other equitable relief
may be enforced as to such reduced area, activity or time.
10. NOTICES. Any notice to be given under this Contract shall be given in
writing by hand delivery or sent by overnight courier or registered or certified
mail, return receipt requested, postage prepaid, addressed to the party to
receive the same at his or its respective address as follows: if to the Company,
at its principal business office, 4925 West Market Street, Greensboro, North
Carolina 27407, Attn: Corporate Secretary; and if to the Key Associate, his
current address as reflected in the personnel records of the Company. Either
party may, by notice given to the other in accordance with the provisions of
this Section, change the address to which subsequent notices shall be sent.
11. GOVERNING LAW. This Contract shall be governed by, and construed in
accordance with, the laws of the State of Delaware. Any controversy or dispute
arising out of or relating to this Agreement shall be settled exclusively in the
courts (federal and state) situated in the State of North Carolina, Guilford
County. The Key Associate consents to personal jurisdiction in the State of
North Carolina and in the courts thereof for the enforcement of this Agreement
and waives any rights he may have under the law of any jurisdiction to object on
any basis (including, without limitation, inconvenience of forum) to
7
<PAGE>
jurisdiction or venue within the State of North Carolina for purposes of
litigation to enforce this Agreement.
12. MISCELLANEOUS.
(a) At least six months must elapse from the Date of Grant of the
Option to the date of disposition of the Option (other than upon exercise) or
the Shares underlying the Option if the Key Associate is subject to the
reporting requirements of Section 16(a) of the Securities Exchange Act of 1934,
as amended.
(b) Nothing in the Plan or in this Contract shall confer upon the Key
Associate any right to continue in the employ of the Company, or any parent or
subsidiary thereof, or interfere in any way with the right of the Company, or
any parent or subsidiary thereof, to terminate such employment at any time for
any reason whatsoever without liability to the Company, or any parent or
subsidiary thereof.
(c) The Company and the Key Associate agree that they will both be
subject to and bound by all the terms and conditions of the Plan, which is
incorporated herein and made a part hereof. In the event of a conflict or
inconsistency between the terms of this Contract and the terms of the Plan, the
terms of the Plan shall govern. The provisions of Section 9 of this Contract
supersede any and all prior similar covenants contained in any agreement entered
into prior to the date hereof between the Key Associate and the Company.
(d) The Key Associate represents and agrees that he will comply with
all applicable laws relating to the Plan and the grant and exercise of the
Option and the disposition of the Shares acquired upon exercise of the Option,
including without limitation, federal and state securities laws.
(e) This Contract shall be binding upon and inure to the benefit of any
successor or assign of the Company and to any heir, distributee, executrix,
administrator or legal representative entitled by law to the Key Associate's
rights hereunder.
(f) The invalidity or illegality of any provision herein shall not
affect the validity of any other provision.
(g) The Key Associate agrees that the Company may amend the Plan and
any options granted to the Key Associate under the Plan, subject to the
limitations contained in the Plan.
8
<PAGE>
Guilford Mills, Inc. has caused this Contract to be executed in its
corporate name and the Key Associate has executed the same in evidence of the
Key Associate's acceptance hereof upon the terms and conditions herein set forth
as of the Date of Grant.
GUILFORD MILLS, INC.
___________________________ By:___________________________
Signature of Key Associate
Name:_________________________
___________________________
Print Name of Key Associate Title:________________________
9
EXHIBIT (10)(c)
STOCK OPTION CONTRACT
FOR
KEY ASSOCIATES
IN THE
GUILFORD MILLS, INC. 1991 STOCK OPTION PLAN
Pursuant to the Guilford Mills, Inc. 1991 Stock Option Plan (the
"Plan"), the Option Committee has approved granting __________, who as of the
date of grant is a salaried employee (the "Key Associate") of Guilford Mills,
Inc. (the "Company") or a subsidiary corporation of the Company, an option to
purchase shares of Common Stock, par value $.02 per share ("Common Stock"), of
the Company on the terms and subject to the conditions set forth in the Plan and
in this Contract. Terms not defined in this Contract shall have the meanings
ascribed to them in the Plan.
Therefore, the Company and Key Associate hereby agree this 27th day of
May, 1997 (the "Date of Grant") as follows:
1. GRANT OF OPTION. The Company hereby grants to the Key Associate, as
a matter of separate inducement and not in lieu of any salary or other
compensation for services, the right and option to purchase (the "Option"), in
the aggregate, ______ shares of Common Stock, at an exercise price of Nineteen
Dollars and 75/100 ($19.75) per share, such exercise price being, in the
judgment of the Option Committee, not less than one hundred percent (100%) of
the fair market value of such shares as of the Date of Grant. The term of the
Option shall be ten (10) years from the Date of Grant, subject to earlier
termination as provided in the Plan and in this Contract. Subject to all other
terms and conditions in the Plan and this Contract, the Option shall be
irrevocable. The Option is intended to be an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), but the Company makes no warranty as to the qualification of any Option
as an incentive stock option.
2. EXERCISE OF OPTION.
(a) Subject to all other terms of the Plan and this Contract,
the Key Associate may exercise the Option in whole at any time, or in part from
time to time, during a period of eight (8) years commencing two (2) years from
the Date of Grant and terminating at the close of business on May 27, 2007;
PROVIDED, HOWEVER, that the Option shall be exercisable with respect to
thirty-three and one-third percent (33 1/3%) of the aggregate number of shares
initially subject to the Option during each of the third, fourth and fifth years
of the Option. The term "year of the Option" shall mean a one (1) year period
commencing with the Date of Grant or the anniversary of the Date of Grant, as
the case may be.
<PAGE>
(b) The right to purchase Shares under the Option shall be
cumulative, so that if the full number of Shares purchasable in a period shall
not be purchased, the balance may be purchased at any time or from time to time
thereafter, but not after May 27, 2007. Notwithstanding the foregoing, in no
event (i) may the Option be exercised in whole or in part after the tenth
anniversary of the Date of Grant, or (ii) may a fraction of a Share be purchased
under the Option.
(c) Except to the extent otherwise provided under the Code, to
the extent that the aggregate fair market value of stock, for which the Option
and any other incentive stock options under any stock option plans of the
Company and of any parent corporation or subsidiary corporation of the Company
are exercisable for the first time by the Key Associate during any calendar
year, exceeds one hundred thousand dollars ($100,000), such options shall be
treated as options that do not meet the requirements for incentive stock options
within the meaning of Section 422 of the Code. For purposes of this limitation,
(i) the fair market value of stock is determined as of the time the option is
granted, (ii) the limitation will be applied by taking into account options in
the order in which they were granted, and (iii) incentive stock options granted
before 1987 shall not be taken into account.
3. PAYMENT OF OPTION PRICE.
(a) The Key Associate shall exercise the Option by giving
written notice, in substantially the form attached hereto, to the Corporate
Secretary of the Company, at the Company's principal business office, 4925 West
Market Street, Greensboro, North Carolina 27407, specifying the number of Shares
to be purchased. Payment of the purchase price for the Shares purchased may be
made by delivery of (i) a check payable to the order of the Company, (ii)
previously acquired shares of Company Common Stock (in proper form for transfer
and accompanied by all requisite stock transfer tax stamps or cash in lieu
thereof) owned by such holder having a fair market value equal to the exercise
price applicable to that portion of the Option being exercised (such fair market
value to be determined in accordance with the Plan), or (iii) a combination of
the foregoing.
(b) The Option will be considered exercised on the date that
the Company receives full payment of the aggregate purchase price for the Shares
at the Company's principal business office, 4925 West Market Street, Greensboro,
North Carolina 27407, Attn: Corporate Secretary.
4. TERMINATION OF EMPLOYMENT.
(a) Upon termination of employment of the Key Associate with
the Company and all subsidiary corporations and parent corporations of the
Company, the unexercised portion of the Option shall terminate and become null
and void; provided, however, that:
<PAGE>
(i) if the Key Associate shall die while in the employ of such
corporation or during either the three (3) month or one (1) year period,
whichever is applicable, specified in clause (ii) below and at a time when the
Key Associate was entitled to exercise the Option as provided herein or in the
Plan, the legal representative of such employee, or such person who acquired the
Option by bequest or inheritance or by reason of the death of the Key Associate,
may, not later than one (1) year from the date of death, exercise the
unexercised portion of the Option in respect of any or all of such number of
shares which the Key Associate would have been entitled to under the Option at
the date of death; and
(ii) if the employment of the Key Associate shall terminate by
reason of the Key Associate's retirement (at such age or upon such conditions as
shall be specified by the Option Committee in its sole discretion), disability
(as described in Section 22(e)(3) of the Code) or dismissal by the employer
other than for Cause (as defined in the Plan), and while such employee is
entitled to exercise the Option, as provided herein or in the Plan, then the Key
Associate or the Key Associate's legal representative shall have the right to
exercise the unexercised portion of the Option in respect of any or all of such
number of Shares which the Key Associate would have been entitled to under the
Option, at any time up to and including (x) three (3) months after the date of
such termination of employment in the case of termination by reason of
retirement or dismissal other than for Cause and (y) one (1) year after the date
of termination of employment in the case of termination by reason of disability.
(b) If the Key Associate voluntarily terminates his or her
employment, or is discharged for Cause, then the Option shall forthwith
terminate with respect to any unexercised portion thereof.
5. REGISTRATION AND LISTING OF SHARES.
(a) Unless there is in effect at the time of exercise a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Shares to be received upon the exercise
of the Option (and, if required, there is available for delivery a prospectus
meeting the requirements of Section (10)(a)(3) of the Securities Act), the Key
Associate shall, upon the exercise of the Option (i) represent and warrant to
the Company that the Shares to be issued upon the exercise of the Option are
being acquired by the Key Associate for his own account, for investment only and
not with a view to the resale or distribution thereof and (ii) acknowledge and
confirm that such Shares may not be sold unless registered for sale under the
Securities Act or pursuant to an exemption from the registration requirements of
the Securities Act, but in claiming such an exemption the Key Associate shall
obtain a favorable opinion of counsel, in form satisfactory to the Company, as
to the application of such exemption.
(b) The Key Associate acknowledges that the Company may
endorse a legend upon the certificate evidencing the Shares as the Company, in
its sole discretion,
3
<PAGE>
determines to be necessary or appropriate to implement the terms of the Plan and
this Contract.
(c) Notwithstanding anything herein to the contrary, if at any
time the Option Committee shall determine in its sole discretion that the
listing or qualification of the Shares subject to the Option on any securities
exchange or under any applicable law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of an option, or the issuing of Shares thereunder,
the Option may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Option Committee.
6. ADJUSTMENT OF SHARES; CHANGE IN CONTROL.
(a) In the event of any change in the outstanding Common Stock
of the Company by reason of a stock dividend, reorganization, recapitalization,
merger, consolidation, stock split, split-up, split-off, spin-off, combination
or exchange of shares or other like change in capital structure of the Company,
the aggregate number of Shares subject to the Option and the exercise price per
Share shall be appropriately adjusted by the Option Committee, whose
determination shall be conclusive. Notwithstanding the foregoing, (i) each such
adjustment shall comply with the rules of Section 424(a) of the Code and (ii) in
no event shall any adjustment be made which would render the Option other than
an "incentive stock option" for purposes of Section 422 of the Code.
(b) Subject to the terms and conditions of the Plan, in the
event of a Change in Control of the Company, any unexercised portion of the
Option shall immediately become exercisable.
7. WITHHOLDING TAXES. As provided in the Plan, the Company may withhold
from sums due or to become due to the Key Associate from the Company an amount
necessary to satisfy its obligation to withhold taxes incurred by reason of the
disposition of the underlying shares of Common Stock in a disqualifying
disposition (within the meaning of Section 421(b) of the Code), or require the
Key Associate to reimburse the Company in such amount. The Company may hold the
stock certificate to which the Key Associate is entitled upon the exercise of
the Option as security for the payment of withholding tax liability, until cash
sufficient to pay such liability has been accumulated.
8. NON-TRANSFERABILITY OF OPTION. The Option is not transferable other
than by will or the laws of descent and distribution and, except as expressly
provided in the Plan, the Option shall be exercisable during the lifetime of the
Key Associate only by the Key Associate.
4
<PAGE>
9. COVENANT NOT TO COMPETE; CONFIDENTIALITY.
(a) The Key Associate acknowledges that by virtue of his
position with Guilford, as defined herein, he has had and will continue to have
access at the highest level to, and intimate knowledge of, valuable confidential
and proprietary information relating to Guilford's businesses including, without
limitation, Guilford's trade secrets. Accordingly, in consideration of the
Option award evidenced by this Contract, which award the Key Associate
acknowledges is being made in the Company's discretion, the Key Associate hereby
undertakes and covenants that at all times during the continuation of his
employment with Guilford and during the Restrictive Period, as defined herein,
he shall:
(i) refrain, alone, or as a partner, member, employee or agent
of any partnership, or as an officer, employee, agent, director, stockholder or
investor (except as to not more than 5% of the outstanding stock of any
corporation, the securities of which are traded on a securities exchange or in
the over-the-counter market) of any corporation, or in any other individual or
representative capacity, from directly or indirectly owning, managing, operating
or controlling, or participating in the ownership, management, operation or
control of, or working for or providing consulting services to, or permitting
the use of his name by, any business or activity in competition with Guilford's
Business, as defined herein, within the Territory, as defined herein (the
foregoing clause shall prohibit, among other activities, soliciting or accepting
the business of, for himself or others (other than for Guilford), any person or
entity which is a customer of Guilford's Business within the Territory); and
(ii) refrain, without first obtaining the written consent of
Guilford, from directly or indirectly soliciting, enticing, persuading, inducing
or hiring any employee, consultant, agent, independent contractor or other
person (other than secretarial and clerical personnel) who is employed by
Guilford on the date the Key Associate's employment with Guilford terminates or
who has been employed by Guilford during the 12 month period preceding such date
to become employed by any person, firm, entity or corporation or approach any
such person for any of the foregoing reasons.
The term "Business" shall mean (i) the business (which the Key
Associate acknowledges Guilford is engaged in as of the date hereof) of
developing, knitting, weaving, dyeing and finishing, designing, printing,
selling or marketing yarns, fabrics or lace for any of the following
applications: automotive (including, without limitation, headliner and bodycloth
fabric for cars, vans, sport utility vehicles, trucks and other passenger
vehicles), apparel (including, without limitation, linings, swimwear, intimate
apparel, activewear, outerwear, sleepwear, robewear, ready-to-wear and
shapewear), upholstery, home furnishings or industrial (including, without
limitation, "hook and loop" fastening systems, medical and health care products,
component parts of shoes and carpet backings) and (ii) any other business in
which Guilford becomes engaged during the Key Associate's employment with
Guilford.
5
<PAGE>
The term "Territory" shall mean the United States of America,
its territories and possessions, Europe, the United Kingdom, the Republic of
Mexico, Brazil, Argentina, Japan and Canada; PROVIDED, HOWEVER, that if the area
described in the preceding clause shall be determined by judicial action to
define too broad a territory to be enforceable, then the term "Territory" shall
mean the United States of America, its territories and possessions, the Republic
of Mexico and Canada; and, PROVIDED FURTHER, that if the area described in the
immediately preceding clause shall be determined by judicial action to define
too broad a territory to be enforceable, then the term "Territory" shall mean
the United States of America, its territories and possessions; and, PROVIDED
FURTHER, that if the area described in the immediately preceding clause shall be
determined by judicial action to define too broad a territory, then the term
"Territory" shall mean those states in the United States of America in which
Guilford maintains operations at which it conducts the Business. The Key
Associate hereby acknowledges that Guilford's Business is national and
international in scope and that Guilford has customers throughout the United
States of America, its territories and possessions, the Republic of Mexico,
Canada, the United Kingdom, Europe and throughout other parts of the world.
Accordingly, the Key Associate acknowledges and agrees that the scope of the
covenants in this Section 9 are reasonable and necessary in order to protect the
interests of Guilford's Business sought to be protected hereby.
The term "Cause" shall mean, as determined by the Board of
Directors or the Compensation Committee, as the case may be, in its sole
discretion, (i) the willful commission by the Key Associate of an act that
causes or may cause substantial damage to Guilford (ii) the commission by the
Key Associate of an act of fraud in the performance of his duties on behalf of
Guilford, (iii) conviction of the Key Associate for commission of a felony in
connection with the performance of his duties on behalf of Guilford, or (iv) the
continuing failure of the Key Associate to perform his duties to Guilford after
written notice thereof and a reasonable opportunity to be heard and cure such
failure are given to the Key Associate by the Board of Directors or the
Compensation Committee, as the case may be.
The term "Without Cause" shall mean termination of the Key
Associate's employment by Guilford for reasons other than Cause.
The term "Guilford" shall mean the Company or any of its
Subsidiaries, affiliated companies, successors or assigns.
The term "Restrictive Period" shall mean a period of two years
following the Key Associate's voluntary termination of his employment with
Guilford or the termination of his employment by Guilford for Cause.
(b) Recognizing that the knowledge of Guilford's customers,
suppliers, agents, business methods, systems, plans, policies, trade secrets,
knowledge, know-how, information, materials or documents are valuable and unique
assets, the Key Associate agrees that he shall not divulge, furnish or make
accessible to any person, firm,
6
<PAGE>
corporation or other entity (other than as is necessary and appropriate in the
regular course of Guilford's Business) for any reason or purpose whatsoever,
directly or indirectly, or use for the benefit of himself or others (other than
for Guilford's benefit), any such knowledge or information. The provisions of
this Section 9(b) shall not apply to information which is or shall become
generally known to the public (except by reason of the Key Associate's breach of
his obligations hereunder) and information which the Key Associate is required
to disclose by law or by an order of a court of competent jurisdiction. If the
Key Associate is required by law or a court order to disclose such information,
he shall notify Guilford of such requirement and provide Guilford an opportunity
(if it so elects) to contest such law or court order.
(c) The Key Associate acknowledges that all developments,
including, without limitation, inventions, patentable or otherwise, discoveries,
improvements, patents, trade secrets, designs, reports, computer software, flow
charts and diagrams, procedures, data, documentation, ideas and writings and
applications thereof relating to Guilford's Business or planned business of
Guilford that, alone or jointly with others, the Key Associate may conceive,
create, make, develop, reduce to practice or acquire during his employment with
Guilford (collectively, the "Developments") are works made for hire and shall
remain the sole and exclusive property of Guilford and the Key Associate hereby
assigns to Guilford all of his right, title and interest in and to all such
Developments. The Key Associate agrees that he will, at any time upon request
and at the expense of Guilford, promptly execute all instruments and papers and
perform all acts whatsoever, which are necessary or desired by Guilford to vest
and confirm in Guilford, and its successors, assigns and nominees, fully and
completely, all rights created by this section and which may be necessary or
desirable to enable Guilford, and its successors, assigns and nominees, to
secure and enjoy the full benefits and advantages thereof.
(d) In the event of any breach or threatened breach of the
provisions of this Section 9 by the Key Associate, Guilford, in addition to any
other rights and remedies it may have, shall be entitled to an injunction
(and/or other equitable relief) restraining such breach or threatened breach, it
being stipulated and agreed that a breach by the Key Associate would cause
irreparable damage to Guilford and that its remedies at law would be inadequate.
The existence of any claim or cause of action on the part of the Key Associate
against Guilford shall not constitute a defense to the enforcement of these
provisions. The Key Associate agrees that the terms of the foregoing covenants,
including, without limitation, the Restrictive Period and the Territory, are
reasonable in all respects and necessary for the protection of Guilford, and
represents and warrants to Guilford that he will be able to support himself and
his dependents notwithstanding the covenants. If any court of competent
jurisdiction shall finally adjudicate that any of the covenants provided for
herein are too broad as to area, activity or time covered, such area, activity
or time covered may be reduced to whatever extent the court deems reasonable and
the covenants herein and the remedy of injunctive and/or other equitable relief
may be enforced as to such reduced area, activity or time.
7
<PAGE>
10. NOTICES. Any notice to be given under this Contract by the Key Associate
shall be sent by mail addressed to the Company at its principal business office,
4925 West Market Street, Greensboro, North Carolina 27407, Attn: Corporate
Secretary, and any notice by the Company to the Key Associate shall be sent by
mail addressed to the Key Associate at the Key Associate's address on record
with the Company. Either party may, by notice given to the other in accordance
with the provisions of this Section, change the address to which subsequent
notices shall be sent.
11. GOVERNING LAW. This Contract shall be governed by, and construed in
accordance with, the laws of the State of Delaware. Any controversy or dispute
arising out of or relating to this Agreement shall be settled exclusively in the
courts (federal and state) situated in the State of North Carolina, Guilford
County. The Key Associate consents to personal jurisdiction in the State of
North Carolina and in the courts thereof for the enforcement of this Agreement
and waives any rights he may have under the law of any jurisdiction to object on
any basis (including, without limitation, inconvenience of forum) to
jurisdiction or venue within the State of North Carolina for purposes of
litigation to enforce this Agreement.
12. MISCELLANEOUS.
(a) At least six months must elapse from the Date of Grant to
the date of disposition of the Option (other than upon exercise) or the Shares
underlying the Option if the Key Associate is subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934, as
amended.
(b) Nothing in the Plan or in this Contract shall confer upon
the Key Associate any right to continue in the employ of the Company, or any
parent or subsidiary thereof, or interfere in any way with the right of the
Company, or any parent or subsidiary thereof, to terminate such employment at
any time for any reason whatsoever without liability to the Company, or any
parent or subsidiary thereof.
(c) If the Key Associate sells or otherwise disposes of the
Common Stock underlying the Option within the later of (i) one (1) year from the
date the Option is exercised or (ii) two (2) years from the Date of Grant, the
Key Associate shall notify the Company of such transfer within ten (10) days of
such transfer.
(d) The Company and the Key Associate agree that they will
both be subject to and bound by all the terms and conditions of the Plan, which
is incorporated herein and made a part hereof. In the event of a conflict or
inconsistency between the terms of this Contract and the terms of the Plan, the
terms of the Plan shall govern.
(e) The Key Associate represents and agrees that he will
comply with all applicable laws relating to the Plan and the grant and exercise
of the Option and the disposition of the Shares acquired upon exercise of the
Option, including without limitation, federal and state securities laws.
8
<PAGE>
(f) This Contract shall be binding upon and inure to the
benefit of any successor or assign of the Company and to any heir, distributee,
executrix, administrator or legal representative entitled by law to the Key
Associate's rights hereunder.
(g) The invalidity or illegality of any provision herein shall
not affect the validity of any other provision.
(h) The Key Associate agrees that the Company may amend the
Plan and any options granted to the Key Associate under the Plan, subject to the
limitations contained in the Plan.
Guilford Mills, Inc. has caused this Contract to be executed in its
corporate name and the Key Associate has executed the same in evidence of the
Key Associate's acceptance hereof upon the terms and conditions herein set forth
as of the Date of Grant.
GUILFORD MILLS, INC.
__________________________ By:________________________
Signature of Key Associate
Name:______________________
__________________________
Print Name of Associate Title:_____________________
9
EXHIBIT (10)(d)
THIRD AMENDMENT TO STOCKHOLDERS' AGREEMENT
THIS THIRD AMENDMENT TO STOCKHOLDERS' AGREEMENT is entered into this
23rd day of May, 1997, by and among CHARLES A. HAYES, MAURICE FISHMAN, GEORGE
GREENBERG (Messrs. Hayes, Fishman and Greenberg being collectively hereinafter
referred to as the "Stockholders"), and GUILFORD MILLS, INC., a Delaware
corporation (the "Company").
WITNESSETH:
WHEREAS, the Stockholders and the Company entered into a Stockholders'
Agreement, dated June 22, 1990, as amended, pursuant to which the Company has a
right of first refusal in the event any Stockholder transfers (other than by
gift) his shares of Company common stock (the "1990 Stockholders' Agreement");
and
WHEREAS, the Stockholders and the Company believe that it is desirable
to amend the 1990 Stockholders' Agreement as more fully set forth below.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
l. Section 1(d) of the 1990 Stockholders' Agreement is hereby deleted
in its entirety and the following section is inserted in its place:
(d) upon June 22, 1999.
2. Except as otherwise expressly set forth above, the 1990
Stockholders' Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Third Amendment as
of the day and year first above written.
GUILFORD MILLS, INC. STOCKHOLDERS:
By: /s/ Terrence E. Geremski /s/ Charles A. Hayes
Terrence E. Geremski Charles A. Hayes
Senior Vice President and
Chief Financial Officer /s/ Maurice Fishman
Maurice Fishman
/s/ George Greenberg
George Greenberg
EXHIBIT (10)(e)
FOURTH AMENDMENT TO STOCKHOLDERS' AGREEMENT
THIS FOURTH AMENDMENT TO STOCKHOLDERS' AGREEMENT is entered into this
23rd day of May, 1997, by and among CHARLES A. HAYES ("Hayes"), MAURICE FISHMAN
("Fishman") (Hayes and Fishman being collectively hereinafter referred to as the
"Stockholders"), and GUILFORD MILLS, INC., a Delaware corporation (the
"Company").
WITNESSETH:
WHEREAS, the Stockholders and the Company entered into a Stockholders'
Agreement, dated April 30, 1991, as amended, pursuant to which the Company is
required to purchase, upon the death of either Hayes or Fishman, such number of
shares of his Company common stock as equals $5,000,000 and $4,000,000,
respectively (the "1991 Stockholders' Agreement"); and
WHEREAS, the Stockholders and the Company believe that it is desirable
to amend the 1991 Stockholders' Agreement as more fully set forth below.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Section 7(c) of the 1991 Stockholders' Agreement is hereby deleted
in its entirety and the following section is inserted in its place:
(c) June 22, 1999.
2. Except as otherwise expressly set forth above, the 1991
Stockholders' Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Fourth Amendment as
of the day and year first above written.
GUILFORD MILLS, INC. STOCKHOLDERS:
By: /s/ Terrence E. Geremski /s/ Charles A. Hayes
Terrence E. Geremski Charles A. Hayes
Senior Vice President and
Chief Financial Officer /s/ Maurice Fishman
Maurice Fishman
<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 28,
1997, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Sep-28-1997
<PERIOD-START> Sep-30-1996
<PERIOD-END> Jun-29-1997
<CASH> 33,095
<SECURITIES> 0
<RECEIVABLES> 170,069
<ALLOWANCES> 0
<INVENTORY> 144,052
<CURRENT-ASSETS> 356,634
<PP&E> 707,981
<DEPRECIATION> 402,305
<TOTAL-ASSETS> 736,325
<CURRENT-LIABILITIES> 165,925
<BONDS> 0
0
0
<COMMON> 589
<OTHER-SE> 326,826
<TOTAL-LIABILITY-AND-EQUITY> 736,325
<SALES> 238,358
<TOTAL-REVENUES> 238,358
<CGS> 187,248
<TOTAL-COSTS> 211,482
<OTHER-EXPENSES> 1,051
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,665
<INCOME-PRETAX> 22,160
<INCOME-TAX> 7,617
<INCOME-CONTINUING> 14,543
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,543
<EPS-PRIMARY> .66
<EPS-DILUTED> .59
</TABLE>
