-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LPVGXnt91m6SemmsSr+14wGUEb/8zgZ1rZC1NLYDQXEhTEux9q3fu9REhJudWLhG XdB7YLtDt9RCz9IVvDrvqQ== 0000950168-96-000520.txt : 19960329 0000950168-96-000520.hdr.sgml : 19960329 ACCESSION NUMBER: 0000950168-96-000520 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIELDCREST CANNON INC CENTRAL INDEX KEY: 0000035469 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILLS, COTTON [2211] IRS NUMBER: 560586036 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-05137 FILM NUMBER: 96539684 BUSINESS ADDRESS: STREET 1: 326 E STADIUM DRIVE CITY: EDEN STATE: NC ZIP: 27288 BUSINESS PHONE: 9196273000 FORMER COMPANY: FORMER CONFORMED NAME: FIELDCREST MILLS INC DATE OF NAME CHANGE: 19860807 10-K405 1 FIELDCREST CANNON 10-K405 #42681.1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to Commission File No. 1-5137 FIELDCREST CANNON, INC. (Exact name of registrant as specified in its charter) DELAWARE 56-0586036 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Lake Drive Kannapolis, NC 28081 (Address of principal (Zip Code) executive offices) Registrant's telephone number (704) 939-2000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of each exchange Title of each class on which registered Common Stock, $1 Par Value New York Stock Exchange $3.00 Series A Convertible Preferred Stock, $.01 Par Value The Nasdaq SmallCap Market 6% Convertible Subordinated Debentures Due 2012 New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x . No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (x) The aggregate market value of voting stock held by non-affiliates of the registrant was $163,006,852 as of March 1, 1996. NUMBER OF SHARES OUTSTANDING AT MARCH 1, 1996 Common Stock 8,954,426 DOCUMENTS INCORPORATED BY REFERENCE Part II incorporates information by reference from the annual report to shareowners for the year ended December 31, 1995. Part III incorporates information by reference from the proxy statement for the annual meeting of shareowners to be held on April 29, 1996. Total pages 121 Page 1 Exhibit Index page 13 PART I Item 1. Business General The registrant was incorporated under the laws of Delaware in 1953. The registrant operates a single segment business in the textile industry and is principally involved in the manufacture and sale of home furnishing products. The registrant and its consolidated subsidiaries design, manufacture and market a broad range of household textile products consisting of towels, sheets, blankets, comforters and bath rugs. The registrant is vertically integrated in that it buys the basic raw materials consisting principally of cotton and synthetic fibers and manufactures a finished consumer product. These products are marketed primarily by the Company's own sales and marketing staff and distributed nationally to customers for ultimate retail sale. Customers consist principally of department stores, chain stores, mass merchants, specialty home furnishing stores, catalog warehouse clubs and other retail outlets, and institutional, government and contract accounts. In 1995 nearly all of the registrant's total sales were comprised of home furnishings products. Approximately 93% of the Company's 1995 net sales were from sales of products carrying the registrant's principal brand names of "Fieldcrest," "Royal Velvet," "Charisma," "St. Marys," "Cannon," "Monticello," "Royal Family," "Caldwell" and "Sure Fit"; the remaining 7% were from sales of private label products. During 1995 the Company reorganized its New York operations and relocated sales, marketing and design personnel to Kannapolis, N.C. In December 1995, the Company announced the closing of two sheeting yarn plants and contracted to purchase yarn from outside vendors for a portion of its sheeting yarn requirements. In March 1996, the Company announced it would close a towel weaving plant and a towel yarn plant as part of the Company's ongoing consolidation effort to utilize assets more effectively. The combined annual cost reductions from the reorganization of the New York operations and a related early retirement program total $8 million. The closing of the four plants including outsourcing of sheeting yarn and consolidation of towel operations are expected to provide annual cost savings of $16 to $18 million. On November 24, 1993 a newly formed and wholly owned subsidiary of the Company completed a tender offer for all of the outstanding shares of Amoskeag Company ("Amoskeag") for a cash price of $40 per share, or an aggregate of approximately $141.9 million including certain costs. The acquisition has been accounted for as a purchase by the Company for the net assets of Amoskeag held for sale at their net realizable values and as the purchase of treasury stock. Amoskeag owned 3,606,400 shares of the Company's common stock which was assigned a cost of $117.2 million after an allocation of $24.7 million to the net assets of Amoskeag. The operating assets of Amoskeag consisted primarily of the Bangor and Aroostook Railroad ("BAR") and certain real estate properties. During 1994 the BAR's operating income of $3 million was excluded from the Company's Page 2 consolidated income statement and $1.6 million of interest costs of the Company were allocated to the assets held for sale. On March 17, 1995 the Company sold the BAR for approximately $20 million of cash and $8 million of note receivables. Raw Materials The registrant's basic raw materials are cotton and synthetic fibers. These materials are generally available from a wide variety of sources, and no significant shortage of such materials is currently anticipated. Domestic cotton merchants are the registrant's primary source of cotton, and domestic fiber producers are the registrant's primary source of synthetic fibers. The registrant uses significant quantities of cotton which is subject to ongoing price fluctuations. The registrant in the ordinary course of business may arrange for purchase commitments with vendors for future cotton requirements. Patents and Licenses The registrant holds various patents resulting from company-sponsored research and development, and others are obtained that are deemed advantageous to company operations. The Company has license agreements with Waverly, Adrienne Vittadini, Ellen Tracy and others. The registrant is only partially dependent upon such patents and licenses in certain product lines, and the loss of any exclusiveness in these areas would not materially adversely affect overall profitability. Seasonality in the Company's Business Primarily because the Company's retail customers have higher sales in the second half of the calendar year, the Company also experiences greater sales volume in the last three quarters of the calendar year. It is likely that the Company's operating performance in the first quarter of a given calendar year will be less favorable than operating performance in the last three quarters. Working Capital Items The registrant carries normal inventory levels to meet delivery requirements of customers, and customer returns of merchandise shipped are not material. Payment terms on customer invoices are generally 30 to 60 days. Customers The registrant's customers consist principally of department stores, chain stores, specialty stores, mass merchants, warehouse clubs, other retail outlets and institutional, government and contract accounts. For the year ended December 31, 1995, the Company's five largest customers accounted for approximately 39% of net sales. Sales to one customer (Wal-Mart Stores and its affiliates) represented 16.6% of total sales of the Company. Although Page 3 management of the Company believes that the Company's relationship with Wal-Mart is excellent and the loss of this customer is unlikely, the loss of Wal-Mart as a customer would have a material adverse effect on the Company's business. No other single customer accounted for more than 10% of net sales in 1995. Order Backlog The registrant had normal unfilled order backlogs as of December 31, 1995 and 1994 amounting to approximately $76 million and $94 million, respectively. The majority of these unfilled orders are shipped during the first quarter of the subsequent fiscal year. The decrease in unfilled orders in 1995 compared to 1994 is believed to be primarily due to the timing of new orders. Unfilled orders have become less of an indicator of future sales as customers have trended toward placing orders as stock is required. Many orders are placed using electronic data interchange, and the Company has filled such orders on a quick response basis. Government Contracts No material portion of the business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the Government. Competition The home furnishing textile industry continues to be highly competitive. Among the registrant's competitors are a number of domestic and foreign companies with significant financial resources, experience, manufacturing capabilities and brand name identity. The registrant competes with numerous other domestic manufacturers in each of its principal markets. The domestic towel, sheet, blanket, comforter and bath rug markets are each comprised of three to five principal manufacturers (including the registrant) and several smaller domestic manufacturers. The registrant's principal methods of competition are price, design, service and product quality. The Company believes that large, low-cost producers with established brand names, efficient distribution networks and good customer service will profit in this competitive environment. The Company's ability to operate profitably in this environment will depend substantially on continued market acceptance of the Company's products and the Company's efforts to control costs and produce new and innovative products in response to competitive pressures and changes in consumer demand. Environmental Controls The registrant does not anticipate that compliance with federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, will have Page 4 a material effect upon the capital expenditures, earnings and competitive position of the registrant and its subsidiaries. Employees Total employment of the Company and its subsidiaries was 13,610 as of December 31, 1995. Approximately 31% of the Company's hourly employees are subject to collective bargaining agreements with the Union of Needle Trades, Industrial and Textile Employees ("UNITE") or the United Textile Workers of America and United Food and Commercial Workers International Union. Foreign Sales The registrant is not currently engaged in significant operations in foreign countries. Approximately 7% and 6% of the registrant's consolidated net sales were exported to foreign customers in 1995 and 1994, respectively. Item 2. Properties The registrant has 20 principal manufacturing plants, all located in the United States; 13 are in North Carolina, 1 in South Carolina, 1 in Georgia, 3 in Alabama, 1 in Pennsylvania and 1 in Virginia. In addition, there are 22 warehousing and distribution centers located in the manufacturing states, plus Texas. The manufacturing/ warehousing and distribution centers aggregate a floor area of approximately 17,393,000 square feet. All of the facilities are owned except: (1) 2 locations totaling approximately 618,000 square feet, title to which is held by the Development Authorities that issued the Industrial Development Bonds which were issued to finance the facilities; and (2) 7 locations, totaling approximately 795,000 square feet, where the machinery and equipment is owned and the buildings are under a long-term lease. Title to the facilities financed by Industrial Revenue Bonds as described above will be transferred to the registrant upon the retirement of such bonds. Such facilities therefore are accounted for as being owned by the registrant. The registrant owns office buildings in Kannapolis and Eden, North Carolina, which contain approximately 209,000 square feet. All other properties owned or controlled by the registrant aggregate approximately 584,000 square feet and are used for miscellaneous support services or for sales and marketing. Plants and equipment of the registrant are considered to be in excellent condition; substantial capital expenditures for new plants, modernization and improvements have been made in recent years. The plants generally operate on either a three shift basis for a five-day week or a four shift basis for a seven-day week during 50 weeks a year except during periods of curtailment. In the opinion of the registrant, all plants and properties are adequately covered by insurance. Page 5 Item 3. Legal Proceedings The registrant is involved in various claims and lawsuits incidental to its business. In the opinion of the registrant based in part on the advice of legal counsel, however, the outcome of these suits will not have a material effect on the registrant's financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Page 6 Identification of Executive Officers of the Registrant
Date from Which Officers Age at Have Served in Name 3/31/96 Positions Held Present Capacities James M. Fitzgibbons 61 Chairman of the Board Chairman of the Board and and Chief Executive Chief Executive Officer: 1990 Officer and Director Director: 1985 John M. Nevin 61 Executive Vice President Executive Vice President: 1995 Robert E. Dellinger 51 Vice President Vice President: 1989 M. Kenneth Doss 56 Vice President Vice President: 1988 and Secretary General Counsel: 1985 Secretary: 1986 Kevin M. Finlay 46 Vice President Vice President: 1993 Richard E. Reece 51 Vice President Vice President: 1996 Thomas R. Staab 53 Vice President and Vice President: 1992 Chief Financial Officer Chief Financial Officer: 1994 Gary R. Langford 34 Treasurer Treasurer: 1995 Clifford D. Paulsen 52 Controller Controller: 1992
None of the executive officers are related by blood, marriage or adoption to any other executive officer of the registrant or any director or executive officer of a parent, subsidiary, or affiliate of the registrant. With the exception of Messrs. Nevin and Langford, each executive officer has been employed by the registrant for more than five years. Prior to becoming Executive Vice President of the registrant on October 16, 1995, Mr. Nevin had been Senior Vice President of Strategic Services at James River Corporation during the last five years. Prior to joining the registrant in May, 1995, Mr. Langford had been Assistant Treasurer of AGCO Corporation since October 1990. Page 7 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters Incorporated by reference from the market and dividend data section of the 1995 Annual Report to Shareowners, page 25. Item 6. Selected Financial Data Selected financial and statistical data for the years 1991 to 1995 appearing in the line items "Net sales", "Income (loss) from continuing operations", "Per share of common stock: Primary income (loss) from continuing operations" and "Fully diluted income (loss)", "Total assets" and "Long-term debt" are incorporated by reference from the 1995 Annual Report to Shareowners, page 42. No cash dividends were declared on Common Stock for the five years in the period ended December 31, 1995. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Incorporated by reference from the 1995 Annual Report to Shareowners, pages 21 through 24. Item 8. Consolidated Financial Statements and Supplementary Data Incorporated by reference from the 1995 Annual Report to Shareowners, pages 25 through 41. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None. Page 8 PART III Item 10. Directors and Executive Officers of the Registrant Information regarding the Directors is incorporated herein by reference from the registrant's proxy statement for the annual meeting of shareowners to be held on April 29, 1996, pages 2 and 3. For information regarding the Executive Officers of the registrant, see Part I at page 7. Item 11. Executive Compensation Incorporated herein by reference from sections of the registrant's proxy statement for the annual meeting of shareowners to be held on April 29, 1996 entitled "Compensation of Directors", pages 6 and 7 and "Executive Compensation", pages 7 through 11. Item 12. Security Ownership of Certain Beneficial Owners and Management Incorporated herein by reference from the section of the registrant's proxy statement for the annual meeting of shareowners to be held on April 29, 1996 entitled "Security Ownership", pages 4 through 6. Item 13. Certain Relationships and Related Transactions Incorporated herein by reference from the registrant's proxy statement for the annual meeting of shareowners to be held April 29, 1996, entitled "Executive Compensation", pages 7 and 8. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. and 2. Financial statements and financial statement schedules The financial statements and schedules listed in the accompanying index to financial statements are filed as part of this annual report. 3. Exhibits The exhibits listed as applicable on the accompanying Exhibit Index at page 17 are filed as part of this annual report. Exhibit numbers (10)1. through (10)14. represent management contracts or compensatory plans or arrangements required to be filed as an exhibit by Item 601 of Regulation S-K. (b) Reports on Form 8-K None. Page 9 FIELDCREST CANNON, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14(a) 1 & 2) Page Numbers of the Annual report to Shareowners Consolidated statement of financial position at 27 December 31, 1995 and 1994 Consolidated statement of operations and retained 26 earnings for each of the three years in the period ended December 31, 1995 Consolidated statement of cash flows for each of the 28 three years in the period ended December 31, 1995 Notes to consolidated financial statements 29-40 Report of independent auditors 41 No schedules are filed because the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto. The consolidated financial statements listed in the above index which are included in the Annual Report to Shareowners of Fieldcrest Cannon, Inc. for the year ended December 31, 1995 are hereby incorporated by reference. With exception of the pages listed in the above index and the Items referred to in Part II, Items 5, 6, 7 and 8, the 1995 Annual Report to Shareowners is not to be deemed filed as part of this report. Page 10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. FIELDCREST CANNON, INC. March 12, 1996 By:/s/ James M. Fitzgibbons James M. Fitzgibbons, Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. /s/ James M. Fitzgibbons March 12, 1996 James M. Fitzgibbons, Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) /s/ M. Kenneth Doss March 12, 1996 M. Kenneth Doss Vice President and Secretary /s/ Thomas R. Staab March 12, 1996 Thomas R. Staab Vice President and Chief Financial Officer (Principal Financial Officer) /s/ Clifford D. Paulsen March 12, 1996 Clifford D. Paulsen Controller (Principal Accounting Officer) /s/ Tom H. Barrett March 12, 1996 Tom H. Barrett Director Page 11 /s/ William E. Ford March 12, 1996 William E. Ford Director /s/ John C. Harned March 12, 1996 John C. Harned Director /s/ Noah T. Herndon March 12, 1996 Noah T. Herndon Director /s/ S. Roger Horchow March 12, 1996 S. Roger Horchow Director /s/ W. Duke Kimbrell March 12, 1996 W. Duke Kimbrell Director /s/ C. J. Kjorlien March 12, 1996 C. J. Kjorlien Director /s/ Alexandra Stoddard March 12, 1996 Alexandra Stoddard Director Page 12 EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K FOR FIELDCREST CANNON, INC. FOR THE YEAR ENDED DECEMBER 31, 1995
Page Number Exhibit or Incorporation Number Description by Reference to (3) 1. Restated Certificate of Incorporation, Registrant's Registration Exhibit 3-1 to the as amended to date. Statement on Form S-3 filed on February 18, 1994. 2. Amended and Restated By-Laws of the Registrant Exhibit 3-1 to Report on as amended to November 24, 1993. Form 8-K Filed on December 9, 1993. (4) 1. Rights Agreement, dated as of November 24, 1993, Exhibit 1 to the between the Registrant and The First National Registrant's Registration Bank of Boston, which includes as filed December 3, 1993. Exhibit A the Statement on Form 8-A Form of Rights Certificate of Designations, as Exhibit B the Form of Rights Certificate, and as Exhibit C the Summary of Rights to Purchase Preferred Stock. 2. Indenture dated as of March 15, 1987, relating to Exhibit 4.9 to the the Registrant's 6% Convertible Subordinated Registrant's Registration Debentures Due 2012 between the Registrant and Statement on Form S-3 Wachovia Bank and Trust Company, N.A., (No. 33-12436) filed on including the form of debenture. March 6, 1987. 3. Indenture dated as of June 1, 1992, relating to Exhibit 4.7 of the Senior Subordinated Debentures Due 2004, Amendment No. 1 to the between the Registrant and First Union National Registrant's Registration Bank, as Trustee, including the form of Statement on Form S-3 debenture. (No. 33-47348) filed on June 3, 1992. 4. Amended and Restated Revolving Credit Exhibit 4-4 to Report Agreement dated as of March 10, 1994 by and on Form 10-K for among the Registrant, The First National Bank fiscal year ending of Boston as agent, Continental Bank N.A., December 31, 1993. Philadelphia National Bank, and First Union National Bank of North Carolina, as lead managers, and certain lenders. 5. First Amendment to the Restated Revolving Exhibit 4-5 to Report on Credit Agreement dated as of March 10, 1994 by Form 10-K for fiscal year and among the Registrant, The First National ending December 31, 1994. Bank of Boston as agent, Continental Bank N.A., Philadelphia National Bank, and First Union National Bank of North Carolina, as lead managers, and certain lenders. Page 13 6. Second Amendment to the Restated Revolving Exhibit 4-6 to Report on Credit Agreement dated as of March 10, 1994 by Form 10-K for fiscal year and among the Registrant, The First National ending December 31, 1994. Bank of Boston as agent, Continental Bank N.A., Philadelphia National Bank, and First Union National Bank of North Carolina, as lead managers, and certain lenders. 7. Third Amendment to the Restated Revolving Exhibit 4-7 to Report on Credit Agreement dated as of March 10, 1994 by Form 10-K for fiscal year and among the Registrant, The First National ending December 31, 1994. Bank of Boston as agent, Continental Bank N.A., Philadelphia National Bank, and First Union National Bank of North Carolina, as lead managers, and certain lenders. 8. Fourth Amendment to the Restated Revolving 17 - 29 Credit Agreement dated as of December 29, 1995 by and among the Registrant, The First National Bank of Boston as agent, Bank of America Illinois (formerly known as Continental Bank NA), Corestates Bank, NA (formerly known as Philadelphia National Bank, and First Union National Bank of North Carolina, as lead manager, and certain lenders.
The registrant, by signing this Report, agrees to furnish the Securities and Exchange Commission upon its request a copy of any instrument which defines the rights of holders of long-term debt of the Registrant and all of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed, and which authorizes a total amount of securities not in excess of 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis.
Page Number Exhibit or Incorporation Number Description by Reference to (10) *1. Amended and Restated Director Stock Option Exhibit A to the Plan of the Registrant approved by the Registrant's proxy stockholders of the Corporation on April 28, statement for the annual 1992. meeting of shareowners held on April 28, 1992. *2. Stock Option Agreement between the Registrant Exhibit 4.1 to the and James M. Fitzgibbons dated as of September Registrant's Registration 11, 1991. Statement on Form S-8 filed on December 23, 1991. *3. Employee Retention Agreement between Registrant Exhibit 10.2 to Report and James M. Fitzgibbons effective as of on Form 10-Q for the July 9, 1993. quarter ended September 30, 1993. *4. Employee Retention Agreement between the Exhibit 10.9 to Report Registrant and Robert E. Dellinger effective on Form 10-K for fiscal as of July 9, 1993. year ending December 31, 1993. *5. Instrument of Amendment dated July 29, 1993 Exhibit 10.10 to Report between the Registrant and Robert E. Dellinger, on Form 10-K for fiscal amending Exhibit 10.4 above. year ending December 31, 1993. *6. Employee Retention Agreement between the 30 - 50 Registrant and Kevin M. Finlay effective as of July 9, 1993. *7. Instrument of Amendment dated July 29, 1993 51 between the Registrant and Kevin M. Finlay amending Exhibit 10.6 above. *8. Employee Retention Agreement between the 52 - 72 Registrant and Thomas R. Staab effective as of July 9, 1993. *9. Instrument of Amendment dated July 29, 1993 73 between the Registrant and Thomas R. Staab amending Exhibit 10.6 above. *10. Employee Retention Agreement between the 74 - 94 Registrant and M. Kenneth Doss effective as of July 9, 1993.
----------- *Represents a management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of this report. Page 15
*11. Instrument of Amendment dated July 29, 1993 95 between the Registrant and M. Kenneth Doss, amending Exhibit 10.6 above. *12. Form of Employee Retention Agreement between Exhibit 10.6 to Report the Registrant and other executive officers of on Form 10-Q for the the Registrant effective as of July 9, 1993. quarter ended September 30, 1993. *13. Form of Instrument of Amendment dated July 29, Exhibit 10.7 to Report 1993 between the Registrant and other executive on Form 10-Q for the officers of the Registrant, amending Exhibit quarter ended September 10.12 above. 30, 1993. *14. 1995 Employee Stock Option Plan of Fieldcrest Exhibit 4.1 of Registrant's Cannon, Inc. Registration Statement of Form S-8 filed on May 8, 1995. (11) Computation of Primary and Fully Diluted Net Income 96 - 97 (Loss) per Share. (13) 1995 Annual Report to Shareowners. 98 - 119 (21) Subsidiaries of the Registrant. 120 (23) Consent of independent auditors. 121
----------- *Represents a management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of this report. EX-4 2 EXHIBIT 4.8 FOURTH AMENDMENT to THIRD AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT This FOURTH AMENDMENT (the "Amendment"), dated as of December 29, 1995, is by and among FIELDCREST CANNON, INC., a Delaware corporation (the "Company"), the lenders listed on the signature pages hereto (the "Lenders"), BANK OF AMERICA ILLINOIS (formerly known as Continental Bank N.A.), CORESTATES BANK, N.A. (formerly known as Philadelphia National Bank) and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as lead managers for the Lenders (collectively, the "Lead Managers"), and THE FIRST NATIONAL BANK OF BOSTON, as agent for the Lenders (the "Agent"). WHEREAS, the Company, the Lenders, the Lead Managers and the Agent are parties to that certain Third Amended and Restated Revolving Credit Agreement, dated as of March 10, 1994, as amended (as so amended, the "Credit Agreement"); and WHEREAS, the Company, the Lenders, the Lead Managers and the Agent have agreed, subject to the terms and conditions set forth herein, to amend certain provisions of the Credit Agreement as set forth herein; NOW, THEREFORE, the parties hereto hereby agree as follows: ss.1. CERTAIN DEFINED TERMS. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement. ss.2. AMENDMENT TO CREDIT AGREEMENT. (a) Section 1 of the Credit Agreement is hereby amended by adding the following new definitions in the appropriate places in the alphabetical sequence thereof: Fourth Amendment. The Fourth Amendment to Third Amended and Restated Revolving Credit Agreement dated as of December 29, 1995. Mortgages. The several mortgages from the Company and the Secured Guarantors to the Agent with respect to the fee interests of the Company and the Secured Guarantors in the real property listed and described on Schedule 7.20 attached hereto, each satisfactory to the Lenders and the Agent in all respects and as may be amended and in effect from time to time. Restructuring Charge. An amount equal to the one-time charge against Consolidated Net Income of the Company and its Subsidiaries for the nine months of the Company ending September 30, 1995 incurred as a result of the reorganization of the Company's New York operations, relocation of sales, marketing and design personnel to Kannapolis, North Carolina and the Company's voluntary retirement program, as such amount is reflected in the consolidated financial statements of the Company and its Subsidiaries for such fiscal periods; provided that in no event shall the Restructuring Charge include the Yarn Spinning Charge. Yarn Spinning Charge. The one-time charge against Consolidated Net Income of the Company and its Subsidiaries for the fiscal quarter of the Company ending December 31, 1995 incurred as a result of the restructuring charge related to closure of the yarn spinning facilities known as Plant 4 and Plant 7, the sale of a warehouse in Eden, North Carolina and related charges, as such amount is reflected in the consolidated financial statements of the Company and its Subsidiaries for such fiscal quarter. (b) Section 1 of the Credit Agreement is hereby further amended by deleting the definitions of "Applicable Margin" and "Security Documents" in their entirety, and substituting therefor the following: Applicable Margin. For each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date (each a "Rate Adjustment Period"), the Applicable Margin shall be the applicable percentage set forth below with respect to the Company's Interest Coverage Ratio, as determined at the end of the fiscal period of the Company and its Subsidiaries ending immediately prior to the applicable Rate Adjustment Period: Interest Coverage Commitment EuroRate C/D Rate Letter of Ratio Fee Amounts Amounts Credit Fees Less than or equal to 0.500% 2.250% 2.375% 2.250% 0.50 to 1.00 Greater than 0.50 to 0.500% 2.000% 2.125% 2.000% 1.00 and less than or equal to 1.00 to 1.00 Greater than 1.00 to 0.500% 1.750% 1.875% 1.750% 1.00 and less than or equal to 1.50 to 1.00 Greater than 1.50 to 0.375% 1.500% 1.625% 1.500% 1.00 Notwithstanding the foregoing, (a) for the period commencing on January 15, 1996 through the date immediately preceding the first Adjustment Date to occur after December 29, 1995, the Applicable Margin shall be deemed to be the highest Applicable Margin set forth above and (b) if the Company fails to deliver any Compliance Certificate pursuant to ss.7.5(d) hereof then, for the period commencing on the next Adjustment Date to occur subsequent to such failure through the date immediately preceding the Adjustment Date which occurs immediately following the date on which such Compliance Certificate is delivered, the Applicable Margin shall be deemed to be the highest Applicable Margin set forth above. Security Documents. The Security Agreement, the Crestfield Cotton Guaranty, the FCC Canada Guaranty, the Subsidiary Guaranty, the Fieldcrest Financing Guaranty, the Fieldcrest Licensing Guaranty, the Fieldcrest Transportation Guaranty, the Fieldcrest Sure Fit Guaranty, the Crestfield Cotton Security Agreement, the Subsidiary Security Agreement, the Encee Security Agreement, the Fieldcrest Financing Security Agreement, the Fieldcrest Licensing Security Agreement, the Fieldcrest Transportation Security Agreement, the Fieldcrest Sure Fit Security Agreement, the Assignment of Acquisition Documents, the Trademark Assignment, the Fieldcrest Licensing Trademark Assignment, the Mortgages and the Agency Agreements, and any and all instruments and documents required to be delivered pursuant thereto, in each case as originally executed, or if amended, restated, modified or supplemented, as so amended, restated, modified or supplemented. (c) Section 1 of the Credit Agreement is hereby further amended by deleting the word "and" at the end of clause (a) thereof and substituting therefor a comma and inserting before the period at the end of the definition of "Consolidated Net Income" the following text: ", (c) there shall be added to Consolidated Net Income for the fiscal quarters ending March 31, 1995, June 30, 1995 and September 30, 1995 an amount equal to the Restructuring Charge, as determined on a pre-tax basis, provided, that in no event shall the aggregate amount added to Consolidated Net Income pursuant to this clause (c) exceed $15,536,000 and (d) there shall be added to Consolidated Net Income for the fiscal quarter ending December 31, 1995 an amount equal to the Yarn Spinning Charge, as determined on a pre-tax basis, provided that in no event shall the aggregate amount added to Consolidated Net Income pursuant to this clause (d) exceed $5,000,000, all as determined in accordance with Generally Accepted Accounting Principles." (d) Section 1 of the Credit Agreement is hereby further amended by deleting from clause (ii) of the definition of "Net Security Value of Inventory", the parenthetical "(unless such security interests have been released by the Agent pursuant to ss.5(i) hereof)". (e) Section 2.2 of the Credit Agreement is hereby amended by deleting the last sentence of such section in its entirety. (f) Section 4.5 of the Credit Agreement is hereby amended by deleting the phrase "rate of .375% per annum on" in the first sentence thereof, and substituting therefor the phrase "Applicable Margin with respect to the Commitment Fee multiplied by". (g) Section 5 of the Credit Agreement is hereby amended by deleting clause (i) thereof in its entirety. (h) Section 6 of the Credit Agreement is hereby amended by inserting after ss.6.25 thereof the following new section: ss.6.26. Assets of Guarantors. Neither St. Mary's nor Fieldcrest International have or own any assets. (i) Section 7 of the Credit Agreement is hereby amended by inserting after ss.7.19 thereof the following new sections: ss.7.20. Mortgages. As soon as practicable but in any event on or prior to April 15, 1996, the Company and its Subsidiaries shall have granted to the Agent for the benefit of the Lenders a valid and enforceable first-priority mortgage over the properties described on Schedule 7.20 attached hereto, free and clear of all defects and encumbrances except for liens permitted under ss.8.2 hereof, or entered into amendments, satisfactory to the Agent and the Lenders, to the mortgages already existing in favor of the Agent for the benefit of the Lenders and which relate to the properties described on Schedule 7.20 attached hereto and shall have delivered to the Agent fully executed Mortgages or amendments to Mortgages, as the case may be, with respect to each such property, together with title insurance policies or endorsements to existing title insurance policies, if any, surveys, environmental reports, real estate appraisals, evidences of insurances with the Agent named as loss payee and additional insured, legal opinions, collateral notes, financing statements and other documents and certificates with respect to such properties reasonably required by the Agent, and all steps necessary to perfect such Mortgages shall have been take to the reasonable satisfaction of the Agent. The Company will reimburse the Agent for all of its reasonable out-of-pocket expenses, including but not limited to the reasonable attorneys' fees and disbursements of the Lender's Special Counsel and other reasonable attorneys' fees and disbursements, incurred or expended in connection with the preparation, interpretation, restructuring or termination of the Mortgages or any amendment thereof and real estate appraisals and surveys of the properties of the Company and its Subsidiaries. ss.7.21. Amendments to Security Agreements, Etc. As soon as practicable but in any event on or prior to March 15, 1996, the Company and each of the Secured Guarantors shall have executed and delivered an amendment to its respective Security Agreement granting an additional security interest in such Person's unencumbered equipment located at the facilities listed on Schedule 7.20 attached hereto and all such amendments shall be in form and substance satisfactory to the Agent and the Lenders. In addition, on or prior to March 15, 1996, duly executed amendments to financing statements originally filed against the Company and the Secured Guarantors shall have been received by the Agent and all filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Agent to protect and preserve the Agent's legal, valid and enforceable first security interest in and lien upon the Collateral shall have been duly effected and the Agent shall have received evidence thereof in form and substance satisfactory to the Agent. On or prior to March 15, 1996, the Agent also shall have received a complete and fully executed updated Perfection Certificate from the Company and each of the Secured Guarantors and the results of UCC searches with respect to the Collateral, indicating no liens other than Permitted Liens and otherwise in form and substance satisfactory to the Agent. Simultaneously with the delivery of the amendments to the Security Agreements, each of the Lenders shall have received from each of the Secured Guarantors a copy, certified by a duly authorized officer of such Person to be true and complete on the date hereof, of each of (i) its charter or other incorporation documents as in effect on such date of certification, and (ii) its by-laws as in effect on such date and each of the Lenders shall have received evidence satisfactory to the Lenders that all corporate action necessary for the valid execution, delivery and performance by each of the Secured Guarantors of such amendments to which it is or is to become a party shall have been duly and effectively taken. Each of the Lenders also shall have received from each of the Secured Guarantors on or before March 15, 1996 an incumbency certificate, dated as of the date as of which the amendment to such Person's Security Agreement is dated, signed by a duly authorized officer of such Person, and giving the name and bearing a specimen signature of each individual who shall be authorized: (i) to sign, in the name and on behalf of such Person, each of the Fourth Amendment, the amendment to its Security Agreement and the other documents to which such Person is or is to become a party; and (ii) to give notices and to take other action on its behalf under the Fourth Amendment, the Security Agreement and the other documents to which it is a party. (j) Section 8.1 of the Credit Agreement is hereby amended by deleting clause (r) thereof in its entirety, and substituting therefor the following: (r) so long as no Default or Event of Default exists or is continuing or would exist as a result thereof, unsecured Indebtedness of the Company not otherwise included in this ss.8.1 in an aggregate amount not at any time to exceed $20,000,000. (k) Section 8.3 of the Credit Agreement is hereby amended by deleting clause (e) thereof in its entirety, and substituting therefor the phrase "intentionally omitted;". (l) Section 8.3 of the Credit Agreement is hereby amended by deleting clause (h) thereof in its entirety, and substituting therefor the following: (h) so long as no Default or Event of Default exists or is continuing or would exist as a result thereof, Investments of the Company not otherwise included in this ss.8.3 in an aggregate amount not at any time to exceed $30,000,000, provided that any Investment by the Company in any Subsidiary of the Company pursuant to this ss.8.3(h) shall be limited to loans to such Subsidiary evidenced by a promissory note of such Subsidiary and that such promissory note shall be pledged to the Agent for the benefit of the Lenders and the Agent pursuant to the terms of the Security Documents to which the Company is a party; provided further that the aggregate amount of Investments by the Company in any joint ventures or any other entity in which the Company owns less than 100% of the ownership interests of such entity shall not at any time exceed $15,000,000. (m) Section 8.5 of the Credit Agreement is hereby amended by deleting the text of such section in its entirety, and substituting therefor the following: ss.8.5. Distributions. The Company shall not make any Distributions except as provided in this ss.8.5. The Company may declare and pay cash dividends in respect of its preferred stock subject to all of the following restrictions: (a) the aggregate amount of cash dividends paid in any fiscal year of the Company in respect of such preferred stock of the Company shall not exceed $4,500,000; (b) no Default or Event of Default shall have occurred and be continuing at the time of declaration or payment of any cash dividend, and no Default or Event of Default will exist after giving effect to the payment of any cash dividend; and (c) the Company shall have delivered to the Agent no later than one Business Day after the declaration of such cash dividend (but prior to payment thereof) a certificate signed by an authorized officer of the Company and evidence satisfactory to the Agent showing compliance with the provisions of clauses (a) and (b) hereof. (n) Section 8.9 of the Credit Agreement is hereby amended by deleting the text of such section in its entirety, and substituting therefor the following: ss.8.9. Capital Expenditures. The Company and its Subsidiaries will not make Consolidated Capital Expenditures in any fiscal year that exceed, (a) $38,000,000 in the aggregate for the fiscal year of the Company ending on December 31, 1996, and (b) $55,000,000 in the aggregate in any fiscal year of the Company thereafter; provided, however, that, if during any fiscal year the amount of Consolidated Capital Expenditures permitted for that fiscal year is not so utilized, such unutilized amount may be utilized in any succeeding fiscal year. (o) Section 8.10 of the Credit Agreement is hereby amended by deleting the table set forth at the end of such section in its entirety, and substituting therefor the following table: Quarter Ending Ratio December 31, 1995 0.55 to 1.00 March 31, 1996 0.01 to 1.00 June 30, 1996 0.01 to 1.00 September 30, 1996 0.25 to 1.00 December 31, 1996 1.25 to 1.00 The last day of each fiscal quarter 1.50 to 1.00 thereafter (p) Section 8.11 of the Credit Agreement is hereby amended by deleting the table set forth at the end of such section in its entirety, and substituting therefor the following table: Quarter Ending Ratio December 31, 1995 1.40 to 1.00 March 31, 1996 0.85 to 1.00 June 30, 1996 0.90 to 1.00 September 30, 1996 1.15 to 1.00 December 31, 1996 and 2.00 to 1.00 thereafter (q) Section 8.12 of the Credit Agreement is hereby amended by deleting the table set forth at the end of such section in its entirety, and substituting therefor the following table: Period Ratio 10/01/95 through 12/15/95 3.00 to 1.00 12/16/95 through 02/29/96 3.20 to 1.00 03/01/96 through 12/15/96 3.50 to 1.00 12/16/96 through 03/01/97 3.20 to 1.00 Each month thereafter 3.00 to 1.00 (r) The Credit Agreement is hereby further amended by deleting Schedule 6.1 thereto in its entirety, and substituting therefor the Schedule 6.1 attached hereto. (s) The Credit Agreement is hereby further amended by adding thereto as Schedule 7.20 the Schedule 7.20 attached hereto. ss.3. AMENDMENT FEE. The Company agrees to pay to the Agent, for the account of the Lenders in accordance with their pro rata share to the Loans, on or prior to the date on which all conditions set forth in 6 hereof are satisfied (other than the condition precedent set forth in 6(f) hereof), an amendment fee (the "Amendment Fee") equal to $243,750.00. ss.4. AFFIRMATION BY THE COMPANY AND THE GUARANTORS. (a) The Company hereby ratifies and confirms all of the Lender Obligations, including, without limitation, the Loans, and the Company hereby affirms its absolute and unconditional promise to pay to the Lenders the Loans and all other amounts due under the Credit Agreement as amended hereby. The Company hereby confirms that the Lender Obligations are and remain secured pursuant to the Security Documents to which the Company is a party. (b) Each of Crestfield Cotton, FCC Canada, Encee, Fieldcrest International, St. Mary's, Fieldcrest Transportation, Fieldcrest Financing, Fieldcrest Licensing and Fieldcrest Sure Fit hereby acknowledges the provisions of this Amendment and hereby reaffirms its absolute and unconditional guaranty of the Company's payment and performance of the Lender Obligations to the Banks as more fully described in the Guaranty to which such Person is a party. Each of the Secured Guarantors hereby confirms that its obligations under the Guaranty to which it is a party are and remain secured pursuant to the Security Documents to which it is a party. ss.5. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants to the Lenders as follows: (a) Representations and Warranties. The representations and warranties contained in ss.6 of the Credit Agreement were true and correct in all material respects when made. The representations and warranties contained in ss.6 of the Credit Agreement, as amended hereby, are true and correct on the date hereof. (b) Enforceability. The execution and delivery by the Company and the Secured Guarantors of this Amendment and all other instruments and agreements required to be executed and delivered by the Company and the Secured Guarantors, as the case may be, in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment Documents"), and the performance by the Company and the Secured Guarantors of the Amendment Documents and the Credit Agreement, as amended hereby, are within the corporate powers of the Company and the Secured Guarantors, as the case may be, and have been duly authorized by all necessary corporate action on the part of the Company and the Secured Guarantors, as the case may be. Each of the Amendment Documents and the Credit Agreement, as amended hereby, are valid and legally binding obligations of the Company and the Secured Guarantors, as the case may be, enforceable in accordance with their terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors' rights in general. (c) No Default. No Default or Event of Default has occurred and is continuing and no Default or Event of Default will exist after the execution and delivery of this Amendment or after the consummation of the transactions contemplated hereby. ss.6. EFFECTIVENESS. This Amendment shall become effective as of December 29, 1995 upon satisfaction of each of the following conditions precedent on or prior to January 15, 1996: (a) Delivery. The Company, the Lenders, the Agent and the guarantors referred to in ss.4(b) hereof shall have executed and delivered this Amendment. (b) Certified Copies of Corporate Documents. Each of the Lenders shall have received from the Company a copy, certified by a duly authorized officer of the Company to be true and complete on the date hereof, of each of (i) its charter or other incorporation documents as in effect on such date of certification, and (ii) its by-laws as in effect on such date. (c) Corporate Action. All corporate action necessary for the valid execution, delivery and performance by the Company of the Amendment Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Lenders shall have been provided to each of the Lenders. (d) Incumbency Certificate. Each of the Lenders shall have received from the Company an incumbency certificate, dated as of the date hereof, signed by a duly authorized officer of the Company, and giving the name and bearing a specimen signature of each individual who shall be authorized: (i) to sign, in the name and on behalf of the Company, each of the Amendment Documents to which such company is or is to become a party; and (ii) to give notices and to take other action on its behalf under the Amendment Documents to which it is a party. (e) Opinion of Counsel. Each of the Lenders and the Agent shall have received a favorable legal opinion addressed to the Lenders and the Agent, dated as of January 15, 1996, in form and substance satisfactory to the Lenders and the Agent, from M.K. Doss, general counsel to the Company and its Subsidiaries. (f) Amendment Fee. The Company shall have paid to the Agent the Amendment Fee. (g) Proceedings and Documents. All proceedings in connection with the transactions contemplated by this Amendment and all documents incident hereto shall be satisfactory in form and substance to the Agent, and the Agent shall have received all information and such counterpart originals or certified or other copies of such documents as the Agent may reasonably request. ss.7. MISCELLANEOUS PROVISIONS. (a) Except as otherwise expressly provided by this Amendment, all of the terms, conditions and provisions of the Credit Agreement shall remain the same. It is declared and agreed by each of the parties hereto that the Credit Agreement, as amended hereby, shall continue in full force and effect, and that this Amendment and such Credit Agreement shall be read and construed as one instrument. The consent granted hereunder is limited to the specific matters referred to herein and the Lenders shall not have any obligation to issue any further consent with respect to the subject matter of this consent or any other matter. (b) This Amendment is intended to take effect as an agreement under seal and shall be construed according to and governed by the laws of the Commonwealth of Massachusetts. (c) This Amendment may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this Amendment it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. (d) The Company hereby agrees to pay to the Agent, on demand by the Agent, all reasonable out-of-pocket costs and expenses incurred or sustained by the Agent in connection with the preparation of this Amendment and the documents referred to herein (including reasonable legal fees). IN WITNESS WHEREOF, the parties have executed this Fourth Amendment as of the date first above written. FIELDCREST CANNON, INC. By:/s/ T. R. Staab Title: Vice President and Chief Finanical Officer THE FIRST NATIONAL BANK OF BOSTON, as Agent By:/s/ Mitchell B. Feldman Title: Managing Director THE FIRST NATIONAL BANK OF BOSTON By:/s/ Mitchell B. Feldman Title: Managing Director BANK OF AMERICA ILLINOIS, individually and as Lead Manager By:/s/ Deirdre B. Doyle Title: Vice President CORESTATES BANK, N. A., individually and as Lead Manager By:/s/ James P. Richards Title: Vice President FIRST UNION NATIONAL BANK OF NORTH CAROLINA, individually and as Lead Manager By:/s/ J. M. Highsmith Title: Senior Vice President BANK OF MONTREAL By:/s/ Joseph A. Bliss Title: Director MELLON BANK, N. A. By:/s/ Charles H Staub Title: Vice President Each of the undersigned joins in this Fourth Amendment for purposes of ss.4(b) hereof. CRESTFIELD COTTON COMPANY By:/s/ T. R. Staab Title: Vice President and Treasurer FCC CANADA, INC. By:/s/ T. R. Staab Title: Vice President and Treasurer ENCEE, INC. By:/s/ T. R. Staab Title: Vice President and Treasurer FIELDCREST CANNON INTERNATIONAL, INC. By:/s/ T. R. Staab Title: Vice President and Treasurer ST. MARY'S, INC. By:/s/ T. R. Staab Title: Vice President and Treasurer FIELDCREST CANNON TRANSPORTATION, INC. By:/s/ T. R. Staab Title: President FIELDCREST CANNON LICENSING, INC. By:/s/ John E. Setliff, Jr. Title: Vice President FIELDCREST CANNON FINANCING, INC. By:/s/ John E. Setliff, Jr. Title: Vice President FIELDCREST CANNON SURE FIT, INC. By:/s/ T. R. Staab Title: Vice President and Chief Financial Officer EX-10 3 EXHIBIT 10.6 FIELDCREST CANNON, INC. Inter-Office Correspondence July 12, 1993 PERSONAL & CONFIDENTIAL Mr. K. M. Finlay Kannapolis RE: Employee Retention Agreement Dear Kevin: Fieldcrest Cannon, Inc. (the "Company") recognizes that, as is the case with many publicly-held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among key personnel, may result in the departure or distraction of key personnel to the detriment of the Company, its stockholders and its customers. The Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of the Company's key personnel, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company. In order to induce you to remain in its employ, the Company agrees that you shall receive the severance benefits set forth in this letter agreement (the "Agreement") in the event your employment with the Company is terminated under the circumstances described below subsequent to a "Change in Control" of the Company (as defined below). 1. Change in Control. As used herein, the following terms shall have the following respective meanings: (a) A "Change in Control" shall occur or be deemed to have occurred only if any of the following events occur: (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than Dumaines Trust, Amoskeag Company, a Delaware corporation ("Amoskeag"), or any majority owned subsidiary thereof, the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, any trustee or other fiduciary of a trust treated for federal income tax purposes as a grantor trust of which the Company is the grantor, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities or any matter which could come before its stockholders for approval; (ii) any "person" (other than the Dumaines Trust, the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, any trustee or other fiduciary of a trust treated for federal income tax purposes as a grantor trust of which the Company is the grantor, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner," directly or indirectly, of securities of Amoskeag representing 30% or more of the combined voting power of Amoskeag's then outstanding securities on any matter which could come before its stockholders for approval, at any time at which Amoskeag is the "beneficial owner," directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities on any matter which could come before the stockholders for approval; (iii) individuals who, as of the date hereof, constitute the Board (as of the date hereof, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; (iv) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (v) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (b) A "Potential Change in Control" shall be deemed to have occurred if: (i) the Company enters in an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company, (ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control of the Company; or (iii) the Board of Directors of the Company adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. 2. Term of the Agreement. The term of this Agreement (the "Term") shall commence on July 9, 1993 and shall continue in effect through December 31, 1994; provided, however, that commencing on January 1, 1995 and each January 1 thereafter, the Term shall be automatically extended for one additional year unless, not later than September 30 of the preceding calendar year, the Company shall have given you written notice that the Term will not be extended; and provided further that, if a Change in Control of the Company shall have occurred during the original or extended Term, this Agreement shall continue in effect for a period of not less than 24 months beyond the month in which such Change in Control occurred. 3. Change in Control; Potential Change in Control. (a) No benefits shall be payable under this Agreement unless there has been a Change in Control of the Company during the Term. (b) You agree that, notwithstanding any provision to the contrary in this Agreement, in the event of a Potential Change in Control of the Company, you will not voluntarily resign as an employee of the Company until the earliest of (A) a date which is six (6) months after the occurrence of such Potential Change in Control of the Company or (B) the termination by you of your employment by reason of Disability as defined in Section 4(b)(i) or for Good Reason as defined in Section 4(b)(iii). 4. Employment Status; Termination Following Change in Control. (a) You acknowledge that this Agreement does not constitute a contract of employment or impose on the Company any obligation to retain you as an employee and this Agreement does not prevent you from terminating your employment at any time except as provided in Section 3(b). If your employment with the Company terminates for any reason and subsequently a Change in Control shall have occurred, you shall not be entitled to any benefits hereunder. Any termination of your employment by the Company or by you following a Change in Control of the Company during the Term shall be communicated by written notice of termination ("Notice of Termination") to the other party hereto in accordance with Section 10. The "Date of Termination" shall mean the effective date of such termination as specified in the Notice of Termination (provided that no such Notice of Termination shall specify an effective date more than 180 days after the date of such Notice of Termination). (b) Notwithstanding anything to the contrary herein, you shall be entitled to the benefits provided in Section 5 only if a Change in Control shall have occurred during the Term and your employment with the Company is subsequently terminated or terminates within 24 months after such Change in Control, unless such termination is (A) because of your death, (B) by the Company for Disability [as defined in Section 4(b)(i)] or Cause [as defined in Section 4(b)(ii)], or (C) by you other than for Good Reason [as defined in Section 4(b)(iii)]. (i) Disability. If, as a result of incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for six (6) consecutive months and, within thirty (30) days after written notice of termination is given to you, you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability." Any termination for Disability under this Agreement shall not affect any rights you may otherwise have under the Company's Long-Term Disability Plan. (ii) Cause. Termination by the Company of your employment for "Cause" shall mean termination (A) upon your willful and continued failure to substantially perform your duties with the Company [other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by you for Good Reason as defined in Section 4(b)(iii)], provided that a written demand for substantial performance has been delivered to you by the Company specifically identifying the manner in which the Company believes that you have not substantially performed your duties and you have not cured such failure within 30 days after such demand, (B) by reason of your willful misconduct which is demonstrably and materially injurious to the Company or (c) your conviction of a felony from which no appeal is taken (or which is affirmed upon appeal). For purposes of this subsection, no act or failure to act on your part shall be deemed "willful" unless done or omitted to be done by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. (iii) Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your written consent, the occurrence after a Change in Control of the Company of any of the following circumstances unless, in the case of paragraphs (A), (C), (D), (F) or (G), such circumstances are fully corrected prior to the Date of Termination [as defined in Section 4(a)] specified in the Notice of Termination [as defined in Section 4(a)] given in respect thereof: (A) the failure of the Company to continue your employment in a senior executive position which, in your reasonable judgment, has authority and responsibility comparable to your authority and responsibility with the Company immediately preceding the date of a Change in Control or at any time thereafter; the assignment to you of any duties or responsibilities which, in your reasonable judgment are inconsistent with your authority or responsibility with the Company preceding the date of a Change in Control or at any time thereafter; or any removal of you from such authority or responsibility, except in connection with the termination of your employment for Disability, Cause, as a result of your death or by you other than for Good Reason; (B) any reduction in your annual base salary as in effect on the date hereof or as the same may be increased from time to time; (C) the failure of the Company to continue in effect any material compensation or benefit plan in which you participate immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the Change in Control or the failure by the Company to award cash bonuses to its executives in amounts substantially consistent with past practice in light of the Company's financial performance; (D) the failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Company's life insurance, medical, health and accident, or disability plans in which you were participating at the time of the Change in Control, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the Change in Control; (E) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform the Agreement, as contemplated in Section 8; or (F) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 10, which purported termination shall not be effective for purposes of this Agreement. 5. Compensation Upon Termination; Vesting of Stock. Following a Change in Control of the Company, you shall be entitled to the following benefits during a period of disability, or upon termination of your employment, as the case may be, provided that such period or termination occurs during the Term; provided, however, that the vesting set forth in Subsection 5(d) shall be required as of the occurrence of a Change in Control regardless of whether your employment terminates during the Term and regardless of the reason for the termination of employment: (a) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive base salary and all other earned compensation at the rate in effect at the commencement of any such period (offset by all compensation payable to you under the Company's disability plan or program or other similar plan during such period) until your employment is terminated pursuant to Section 4(b)(i) hereof. Thereafter, or in the event your employment is terminated by reason of death, your benefits shall be determined under the Company's long-term disability, retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs. (b) If your employment shall be terminated by the Company for Cause or by you other than for Good Reason following Change in Control, the Company shall pay you your full base salary and all other compensation through the Date of Termination at the rate in effect at the time the Notice of Termination is given, plus all other amounts to which you are entitled under any employment contract with the Company or under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. (c) If your employment with the Company is terminated by the Company (other than for Cause, Disability or your death) or by you for Good Reason within 24 months after Change in Control or if your employment with the Company is terminated by you or the Company for any reason (other than your death, Disability or retirement) within six (6) months after a Change in Control, then you shall be entitled to the benefits below: (i) the Company shall pay to you (A) your full base salary and all other compensation through the Date of Termination at the rate in effect at the time the Notice of Termination is given, no later than the full fifth day following the Date of Termination, plus all other amounts to which you are entitled under any compensation plan of the Company at the time such payments are due, (B) if you so elect, in lieu of your right to continue to receive deferred compensation under any deferred compensation plan of the Company then in effect, no later than the fifth full day following the Date of Termination, a lump-sum amount, in cash, equal to the deferred amounts together with any earnings credited on such amounts under such plan and (C) if you so elect, in lieu of your right to continued payments under any employment contract with the Company, no later than the fifth full day following the Date of Termination, a lump-sum amount, in cash, equal to the total of such continued payments; (ii) the Company shall pay as severance pay to you, at the time specified in Subsection (e) below, a lump-sum severance payment (together with the payments provided in paragraph (iv) below) (the "Severance Payments") in an amount equal to 200% of your highest annual base salary in effect during the three-year period ending the Date of Termination, offset by the amount, if any, which you are entitled to receive as severance benefits under any employment contract between the Company and you; (iii) the Company shall pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") to any payment or benefit provided hereunder); (iv) for a period of twelve (12) months after your Date of Termination, the Company shall arrange to provide you with life, disability, dental, accident and group health insurance benefits substantially similar to those which you were receiving immediately prior to the Notice of Termination. Notwithstanding the foregoing, the Company shall not provide any benefit otherwise receivable by you pursuant to this paragraph (iv) if an equivalent benefit is actually received by you prior to the end of such 12 month period, and any such benefit actually received by you shall be reported to the Company; and (v) you shall be entitled to any benefits or payments to which you may be entitled under any other plan or program of the Company in which you are a participant at the time of your termination. (d) As of the occurrence of the Change in Control you shall become vested in any shares of the Company awarded to you under the Long-Term Incentive Plan of the Company and not previously vested, or in any additional shares or substitute shares issued to reflect a change in the shares of Common Stock of the Company or a stock dividend or stock split distributable in shares of common stock of the Company or a change in capital structure of the Company, all as provided in Section 16 of the Long-Term Incentive Plan. (e) The payments provided for in Subsections 5(b) and (c) shall be made not later than the fifth day following the Date of Termination; provided, however, that, if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you, payable on the fifth day after demand by the Company (together with interest at the applicable federal rate provided in Section 7872(f)(2) of the Code). (f) Except as provided in the second sentence of Subsection 5(c)(iv) hereof, you shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 5 be reduced by any compensation earned by you as a result of employment by another employer, by retirement benefits or by offset against any amount claimed to be owed by you to the Company or otherwise. 6. Excise Tax Limitation. (a) Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by the Company to or for your benefit (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a "Payment") would be nondeductible by the Company for federal income tax purposes because of Section 280G of the Code, then the aggregate present value of amounts payable or distributable to you or for your benefit pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Total Payments") shall be reduced to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Total Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. For purposes of this Section 6, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations required to be made under this Section 6 shall be made by the Company's independent public accountants (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the employee. Any such determination by the Accounting Firm shall be binding upon the Company and the employee. (c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Payments will have been made by the Company which should not have been made ("Overpayment") or that the additional Payments which will not have been made by the Company could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against the employee which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the employee shall be treated for all purposes as a loan ab initio to the employee which the employee shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the employee to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the employee is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the employee together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. 7. Sale of Division. If the Company sells substantially all of its business assets to an entity (the "Purchaser") which is not controlled by Dumaines Trust or Amoskeag, you will be entitled to receive the Change in Control Severance Benefits on the effective date of such sale. In determining such benefits, the hospitalization or medical reimbursement plan in effect immediately preceding such effective date shall be continued in effect without change (except any change that may be mandated by law) for the period for which you are entitled to coverage. Notwithstanding the foregoing, the Change in Control Severance Benefits shall not be payable if you enter the employment of the Purchaser, or if you fail to enter such employment but the Purchaser offers you the following: (i) employment in a senior executive position having authority and responsibility comparable to your authority and responsibility with the Company immediately preceding the sale, and (ii) compensation and benefits at least as great as provided to you by the Company immediately preceding the sale, including without limitation severance benefits in the event of your termination of employment with the Purchaser at least as great as herein provided (but not conditioned on a change in control of the Purchaser). Notwithstanding the preceding sentence, the vesting set forth in Subsection 5(d) shall be required on the effective date of the sale, regardless of any subsequent events. For the purpose of determining whether the Purchaser is controlled by Dumaines Trust or Amoskeag, control shall mean the ownership of voting rights sufficient to elect at least a majority of the members of the Board of Directors of the Purchaser. 8. Waiver of Claims Notwithstanding any provisions of this Agreement to the contrary, no payments shall be made to you under Section 5(c) unless and until you shall have waived and released all claims which you may have against the Company as of the date of execution of the waiver and release, including, without limitation, claims under the Age Discrimination in Employment Act, but excluding claims for benefits under this Agreement or claims under any employee benefit plan maintained by the Company. 9. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you had terminated your employment for Good Reason immediately after a Change in Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or if there is no such designee, to your estate. 10. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be duly given when delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the General Counsel of the Company, at 326 East Stadium Drive, Eden, North Carolina, and to you at the address shown below or to such other address as either the Company or you may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 11. Miscellaneous. (a) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (b) The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina. (c) No waiver by you at any time of any breach of, or compliance with, any provision of this Agreement to be performed by the Company shall be deemed a waiver of that or any other provision at any subsequent time. (d) This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. (e) Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. (f) This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and cancelled. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company this letter, which will then constitute our agreement on this subject. Sincerely, FIELDCREST CANNON, INC. By: /s/ James M. Fitzgibbons James M. Fitzgibbons Chairman and Chief Executive Officer Agreed to this 26th day of July, 1993. /s/ K. M. Finlay (Signature) K. M. Finlay Print Name Address: 18912 Peninsula Pointe Drive Huntersville, NC 28078 EX-10 4 EXHIBIT 10.7 FIELDCREST CANNON, INC. Inter-Office Correspondence July 29, 1993 Mr. K. M. Finlay Kannapolis RE: Amendment to Employee Retention Agreement Dear Kevin: You and Fieldcrest Cannon, Inc. (the "Company") entered into an Employee Retention Agreement effective July 9, 1993. The Company now deems it appropriate to amend Subsection 5(c) of the Employee Retention Agreement by deleting the phrase "or if your employment with the Company is terminated by you or the Company for any reason (other than your death, Disability or Retirement) within six (6) months after a Change in Control" therefrom. For good and adequate consideration, the receipt of which is hereby acknowledged, you agree to the foregoing amendment. Kindly sign and return to the Company this letter, which will then constitute our agreement on this subject. Sincerely, FIELDCREST CANNON, INC. By: /s/ James M. Fitzgibbons Chairman and Chief Executive Officer Agreed to this 2nd day of August, 1993: /s/ K. M. Finlay Signature K. M. Finlay Print Name Address: 18912 Peninsula Pointe Dr. Huntersville, NC 28078 EX-10 5 EXHIBIT 10.8 FIELDCREST CANNON, INC. Inter-Office Correspondence July 12, 1993 PERSONAL & CONFIDENTIAL Mr. T. R. Staab Eden RE: Employee Retention Agreement Dear Tom: Fieldcrest Cannon, Inc. (the "Company") recognizes that, as is the case with many publicly-held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among key personnel, may result in the departure or distraction of key personnel to the detriment of the Company, its stockholders and its customers. The Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of the Company's key personnel, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company. In order to induce you to remain in its employ, the Company agrees that you shall receive the severance benefits set forth in this letter agreement (the "Agreement") in the event your employment with the Company is terminated under the circumstances described below subsequent to a "Change in Control" of the Company (as defined below). 1. Change in Control. As used herein, the following terms shall have the following respective meanings: (a) A "Change in Control" shall occur or be deemed to have occurred only if any of the following events occur: (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than Dumaines Trust, Amoskeag Company, a Delaware corporation ("Amoskeag"), or any majority owned subsidiary thereof, the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, any trustee or other fiduciary of a trust treated for federal income tax purposes as a grantor trust of which the Company is the grantor, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities or any matter which could come before its stockholders for approval; (ii) any "person" (other than the Dumaines Trust, the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, any trustee or other fiduciary of a trust treated for federal income tax purposes as a grantor trust of which the Company is the grantor, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner," directly or indirectly, of securities of Amoskeag representing 30% or more of the combined voting power of Amoskeag's then outstanding securities on any matter which could come before its stockholders for approval, at any time at which Amoskeag is the "beneficial owner," directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities on any matter which could come before the stockholders for approval; (iii) individuals who, as of the date hereof, constitute the Board (as of the date hereof, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; (iv) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (v) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (b) A "Potential Change in Control" shall be deemed to have occurred if: (i) the Company enters in an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company, (ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control of the Company; or (iii) the Board of Directors of the Company adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. 2. Term of the Agreement. The term of this Agreement (the "Term") shall commence on July 9, 1993 and shall continue in effect through December 31, 1994; provided, however, that commencing on January 1, 1995 and each January 1 thereafter, the Term shall be automatically extended for one additional year unless, not later than September 30 of the preceding calendar year, the Company shall have given you written notice that the Term will not be extended; and provided further that, if a Change in Control of the Company shall have occurred during the original or extended Term, this Agreement shall continue in effect for a period of not less than 24 months beyond the month in which such Change in Control occurred. 3. Change in Control; Potential Change in Control. (a) No benefits shall be payable under this Agreement unless there has been a Change in Control of the Company during the Term. (b) You agree that, notwithstanding any provision to the contrary in this Agreement, in the event of a Potential Change in Control of the Company, you will not voluntarily resign as an employee of the Company until the earliest of (A) a date which is six (6) months after the occurrence of such Potential Change in Control of the Company or (B) the termination by you of your employment by reason of Disability as defined in Section 4(b)(i) or for Good Reason as defined in Section 4(b)(iii). 4. Employment Status; Termination Following Change in Control. (a) You acknowledge that this Agreement does not constitute a contract of employment or impose on the Company any obligation to retain you as an employee and this Agreement does not prevent you from terminating your employment at any time except as provided in Section 3(b). If your employment with the Company terminates for any reason and subsequently a Change in Control shall have occurred, you shall not be entitled to any benefits hereunder. Any termination of your employment by the Company or by you following a Change in Control of the Company during the Term shall be communicated by written notice of termination ("Notice of Termination") to the other party hereto in accordance with Section 10. The "Date of Termination" shall mean the effective date of such termination as specified in the Notice of Termination (provided that no such Notice of Termination shall specify an effective date more than 180 days after the date of such Notice of Termination). (b) Notwithstanding anything to the contrary herein, you shall be entitled to the benefits provided in Section 5 only if a Change in Control shall have occurred during the Term and your employment with the Company is subsequently terminated or terminates within 24 months after such Change in Control, unless such termination is (A) because of your death, (B) by the Company for Disability [as defined in Section 4(b)(i)] or Cause [as defined in Section 4(b)(ii)], or (C) by you other than for Good Reason [as defined in Section 4(b)(iii)]. (i) Disability. If, as a result of incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for six (6) consecutive months and, within thirty (30) days after written notice of termination is given to you, you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability." Any termination for Disability under this Agreement shall not affect any rights you may otherwise have under the Company's Long-Term Disability Plan. (ii) Cause. Termination by the Company of your employment for "Cause" shall mean termination (A) upon your willful and continued failure to substantially perform your duties with the Company [other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by you for Good Reason as defined in Section 4(b)(iii)], provided that a written demand for substantial performance has been delivered to you by the Company specifically identifying the manner in which the Company believes that you have not substantially performed your duties and you have not cured such failure within 30 days after such demand, (B) by reason of your willful misconduct which is demonstrably and materially injurious to the Company or (c) your conviction of a felony from which no appeal is taken (or which is affirmed upon appeal). For purposes of this subsection, no act or failure to act on your part shall be deemed "willful" unless done or omitted to be done by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. (iii) Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your written consent, the occurrence after a Change in Control of the Company of any of the following circumstances unless, in the case of paragraphs (A), (C), (D), (F) or (G), such circumstances are fully corrected prior to the Date of Termination [as defined in Section 4(a)] specified in the Notice of Termination [as defined in Section 4(a)] given in respect thereof: (A) the failure of the Company to continue your employment in a senior executive position which, in your reasonable judgment, has authority and responsibility comparable to your authority and responsibility with the Company immediately preceding the date of a Change in Control or at any time thereafter; the assignment to you of any duties or responsibilities which, in your reasonable judgment are inconsistent with your authority or responsibility with the Company preceding the date of a Change in Control or at any time thereafter; or any removal of you from such authority or responsibility, except in connection with the termination of your employment for Disability, Cause, as a result of your death or by you other than for Good Reason; (B) any reduction in your annual base salary as in effect on the date hereof or as the same may be increased from time to time; (C) the failure of the Company to continue in effect any material compensation or benefit plan in which you participate immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the Change in Control or the failure by the Company to award cash bonuses to its executives in amounts substantially consistent with past practice in light of the Company's financial performance; (D) the failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Company's life insurance, medical, health and accident, or disability plans in which you were participating at the time of the Change in Control, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the Change in Control; (E) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform the Agreement, as contemplated in Section 8; or (F) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 10, which purported termination shall not be effective for purposes of this Agreement. 5. Compensation Upon Termination; Vesting of Stock. Following a Change in Control of the Company, you shall be entitled to the following benefits during a period of disability, or upon termination of your employment, as the case may be, provided that such period or termination occurs during the Term; provided, however, that the vesting set forth in Subsection 5(d) shall be required as of the occurrence of a Change in Control regardless of whether your employment terminates during the Term and regardless of the reason for the termination of employment: (a) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive base salary and all other earned compensation at the rate in effect at the commencement of any such period (offset by all compensation payable to you under the Company's disability plan or program or other similar plan during such period) until your employment is terminated ursuant to Section 4(b)(i) hereof. Thereafter, or in the vent your employment is terminated by reason of death, your enefits shall be determined under the Company's long-term isability, retirement, insurance and other compensation rograms then in effect in accordance with the terms of such rograms. (b) If your employment shall be terminated by the ompany for Cause or by you other than for Good Reason ollowing Change in Control, the Company shall pay you your ull base salary and all other compensation through the Date of Termination at the rate in effect at the time the Notice of Termination is given, plus all other amounts to which you are entitled under any employment contract with the Company or under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. (c) If your employment with the Company is terminated by the Company (other than for Cause, Disability or your death) or by you for Good Reason within 24 months after Change in Control or if your employment with the Company is terminated by you or the Company for any reason (other than your death, Disability or retirement) within six (6) months after a Change in Control, then you shall be entitled to the benefits below: (i) the Company shall pay to you (A) your full base salary and all other compensation through the Date of Termination at the rate in effect at the time the Notice of Termination is given, no later than the full fifth day following the Date of Termination, plus all other amounts to which you are entitled under any compensation plan of the Company at the time such payments are due, (B) if you so elect, in lieu of your right to continue to receive deferred compensation under any deferred compensation plan of the Company then in effect, no later than the fifth full day following the Date of Termination, a lump-sum amount, in cash, equal to the deferred amounts together with any earnings credited on such amounts under such plan and (C) if you so elect, in lieu of your right to continued payments under any employment contract with the Company, no later than the fifth full day following the Date of Termination, a lump-sum amount, in cash, equal to the total of such continued payments; (ii) the Company shall pay as severance pay to you, at the time specified in Subsection (e) below, a lump-sum severance payment (together with the payments provided in paragraph (iv) below) (the "Severance Payments") in an amount equal to 200% of your highest annual base salary in effect during the three-year period ending the Date of Termination, offset by the amount, if any, which you are entitled to receive as severance benefits under any employment contract between the Company and you; (iii) the Company shall pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") to any payment or benefit provided hereunder); (iv) for a period of twelve (12) months after your Date of Termination, the Company shall arrange to provide you with life, disability, dental, accident and group health insurance benefits substantially similar to those which you were receiving immediately prior to the Notice of Termination. Notwithstanding the foregoing, the Company shall not provide any benefit otherwise receivable by you pursuant to this paragraph (iv) if an equivalent benefit is actually received by you prior to the end of such 12 month period, and any such benefit actually received by you shall be reported to the Company; and (v) you shall be entitled to any benefits or payments to which you may be entitled under any other plan or program of the Company in which you are a participant at the time of your termination. (d) As of the occurrence of the Change in Control you shall become vested in any shares of the Company awarded to you under the Long-Term Incentive Plan of the Company and not previously vested, or in any additional shares or substitute shares issued to reflect a change in the shares of Common Stock of the Company or a stock dividend or stock split distributable in shares of common stock of the Company or a change in capital structure of the Company, all as provided in Section 16 of the Long-Term Incentive Plan. (e) The payments provided for in Subsections 5(b) and (c) shall be made not later than the fifth day following the Date of Termination; provided, however, that, if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you, payable on the fifth day after demand by the Company (together with interest at the applicable federal rate provided in Section 7872(f)(2) of the Code). (f) Except as provided in the second sentence of Subsection 5(c)(iv) hereof, you shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 5 be reduced by any compensation earned by you as a result of employment by another employer, by retirement benefits or by offset against any amount claimed to be owed by you to the Company or otherwise. 6. Excise Tax Limitation. (a) Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by the Company to or for your benefit (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a "Payment") would be nondeductible by the Company for federal income tax purposes because of Section 280G of the Code, then the aggregate present value of amounts payable or distributable to you or for your benefit pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Total Payments") shall be reduced to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Total Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. For purposes of this Section 6, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations required to be made under this Section 6 shall be made by the Company's independent public accountants (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the employee. Any such determination by the Accounting Firm shall be binding upon the Company and the employee. (c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Payments will have been made by the Company which should not have been made ("Overpayment") or that the additional Payments which will not have been made by the Company could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against the employee which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the employee shall be treated for all purposes as a loan ab initio to the employee which the employee shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the employee to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the employee is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the employee together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. 7. Sale of Division. If the Company sells substantially all of its business assets to an entity (the "Purchaser") which is not controlled by Dumaines Trust or Amoskeag, you will be entitled to receive the Change in Control Severance Benefits on the effective date of such sale. In determining such benefits, the hospitalization or medical reimbursement plan in effect immediately preceding such effective date shall be continued in effect without change (except any change that may be mandated by law) for the period for which you are entitled to coverage. Notwithstanding the foregoing, the Change in Control Severance Benefits shall not be payable if you enter the employment of the Purchaser, or if you fail to enter such employment but the Purchaser offers you the following: (i) employment in a senior executive position having authority and responsibility comparable to your authority and responsibility with the Company immediately preceding the sale, and (ii) compensation and benefits at least as great as provided to you by the Company immediately preceding the sale, including without limitation severance benefits in the event of your termination of employment with the Purchaser at least as great as herein provided (but not conditioned on a change in control of the Purchaser). Notwithstanding the preceding sentence, the vesting set forth in Subsection 5(d) shall be required on the effective date of the sale, regardless of any subsequent events. For the purpose of determining whether the Purchaser is controlled by Dumaines Trust or Amoskeag, control shall mean the ownership of voting rights sufficient to elect at least a majority of the members of the Board of Directors of the Purchaser. 8. Waiver of Claims Notwithstanding any provisions of this Agreement to the contrary, no payments shall be made to you under Section 5(c) unless and until you shall have waived and released all claims which you may have against the Company as of the date of execution of the waiver and release, including, without limitation, claims under the Age Discrimination in Employment Act, but excluding claims for benefits under this Agreement or claims under any employee benefit plan maintained by the Company. 9. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you had terminated your employment for Good Reason immediately after a Change in Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or if there is no such designee, to your estate. 10. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be duly given when delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the General Counsel of the Company, at 326 East Stadium Drive, Eden, North Carolina, and to you at the address shown below or to such other address as either the Company or you may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 11. Miscellaneous. (a) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (b) The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina. (c) No waiver by you at any time of any breach of, or compliance with, any provision of this Agreement to be performed by the Company shall be deemed a waiver of that or any other provision at any subsequent time. (d) This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. (e) Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. (f) This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and cancelled. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company this letter, which will then constitute our agreement on this subject. Sincerely, FIELDCREST CANNON, INC. By: /s/ James M. Fitzgibbons James M. Fitzgibbons Chairman and Chief Executive Officer Agreed to this 26th day of July, 1993. /s/ T. R. Staab (Signature) T. R. Staab Print Name Address: 3726 N.C. 65 Reidsville, NC 27320 FIELDCREST CANNON, INC. Inter-Office Correspondence July 29, 1993 Mr. T. R. Staab Eden RE: Amendment to Employee Retention Agreement Dear Tom: You and Fieldcrest Cannon, Inc. (the "Company") entered into an Employee Retention Agreement effective July 9, 1993. The Company now deems it appropriate to amend Subsection 5(c) of the Employee Retention Agreement by deleting the phrase "or if your employment with the Company is terminated by you or the Company for any reason (other than your death, Disability or Retirement) within six (6) months after a Change in Control" therefrom. For good and adequate consideration, the receipt of which is hereby acknowledged, you agree to the foregoing amendment. Kindly sign and return to the Company this letter, which will then constitute our agreement on this subject. Sincerely, FIELDCREST CANNON, INC. By: /s/ James M. Fitzgibbons Chairman and Chief Executive Officer Agreed to this 2nd day of August, 1993: /s/ T. R. Staab Signature T. R. Staab Print Name Address: 3726 N.C. 65 Reidsville, NC 27320 EX-10 6 EXHIBIT 10.9 FIELDCREST CANNON, INC. Inter-Office Correspondence July 12, 1993 PERSONAL & CONFIDENTIAL Mr. M. K. Doss Eden RE: Employee Retention Agreement Dear Ken: Fieldcrest Cannon, Inc. (the "Company") recognizes that, as is the case with many publicly-held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among key personnel, may result in the departure or distraction of key personnel to the detriment of the Company, its stockholders and its customers. The Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of the Company's key personnel, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company. In order to induce you to remain in its employ, the Company agrees that you shall receive the severance benefits set forth in this letter agreement (the "Agreement") in the event your employment with the Company is terminated under the circumstances described below subsequent to a "Change in Control" of the Company (as defined below). EX-10 7 EXHIBIT 10.10 1. Change in Control. As used herein, the following terms shall have the following respective meanings: (a) A "Change in Control" shall occur or be deemed to have occurred only if any of the following events occur: (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than Dumaines Trust, Amoskeag Company, a Delaware corporation ("Amoskeag"), or any majority owned subsidiary thereof, the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, any trustee or other fiduciary of a trust treated for federal income tax purposes as a grantor trust of which the Company is the grantor, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities or any matter which could come before its stockholders for approval; (ii) any "person" (other than the Dumaines Trust, the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, any trustee or other fiduciary of a trust treated for federal income tax purposes as a grantor trust of which the Company is the grantor, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner," directly or indirectly, of securities of Amoskeag representing 30% or more of the combined voting power of Amoskeag's then outstanding securities on any matter which could come before its stockholders for approval, at any time at which Amoskeag is the "beneficial owner," directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities on any matter which could come before the stockholders for approval; (iii) individuals who, as of the date hereof, constitute the Board (as of the date hereof, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; (iv) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (v) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (b) A "Potential Change in Control" shall be deemed to have occurred if: (i) the Company enters in an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company, (ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control of the Company; or (iii) the Board of Directors of the Company adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. 2. Term of the Agreement. The term of this Agreement (the "Term") shall commence on July 9, 1993 and shall continue in effect through December 31, 1994; provided, however, that commencing on January 1, 1995 and each January 1 thereafter, the Term shall be automatically extended for one additional year unless, not later than September 30 of the preceding calendar year, the Company shall have given you written notice that the Term will not be extended; and provided further that, if a Change in Control of the Company shall have occurred during the original or extended Term, this Agreement shall continue in effect for a period of not less than 24 months beyond the month in which such Change in Control occurred. 3. Change in Control; Potential Change in Control. (a) No benefits shall be payable under this Agreement unless there has been a Change in Control of the Company during the Term. (b) You agree that, notwithstanding any provision to the contrary in this Agreement, in the event of a Potential Change in Control of the Company, you will not voluntarily resign as an employee of the Company until the earliest of (A) a date which is six (6) months after the occurrence of such Potential Change in Control of the Company or (B) the termination by you of your employment by reason of Disability as defined in Section 4(b)(i) or for Good Reason as defined in Section 4(b)(iii). 4. Employment Status; Termination Following Change in Control. (a) You acknowledge that this Agreement does not constitute a contract of employment or impose on the Company any obligation to retain you as an employee and this Agreement does not prevent you from terminating your employment at any time except as provided in Section 3(b). If your employment with the Company terminates for any reason and subsequently a Change in Control shall have occurred, you shall not be entitled to any benefits hereunder. Any termination of your employment by the Company or by you following a Change in Control of the Company during the Term shall be communicated by written notice of termination ("Notice of Termination") to the other party hereto in accordance with Section 10. The "Date of Termination" shall mean the effective date of such termination as specified in the Notice of Termination (provided that no such Notice of Termination shall specify an effective date more than 180 days after the date of such Notice of Termination). (b) Notwithstanding anything to the contrary herein, you shall be entitled to the benefits provided in Section 5 only if a Change in Control shall have occurred during the Term and your employment with the Company is subsequently terminated or terminates within 24 months after such Change in Control, unless such termination is (A) because of your death, (B) by the Company for Disability [as defined in Section 4(b)(i)] or Cause [as defined in Section 4(b)(ii)], or (C) by you other than for Good Reason [as defined in Section 4(b)(iii)]. (i) Disability. If, as a result of incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for six (6) consecutive months and, within thirty (30) days after written notice of termination is given to you, you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability." Any termination for Disability under this Agreement shall not affect any rights you may otherwise have under the Company's Long-Term Disability Plan. (ii) Cause. Termination by the Company of your employment for "Cause" shall mean termination (A) upon your willful and continued failure to substantially perform your duties with the Company [other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by you for Good Reason as defined in Section 4(b)(iii)], provided that a written demand for substantial performance has been delivered to you by the Company specifically identifying the manner in which the Company believes that you have not substantially performed your duties and you have not cured such failure within 30 days after such demand, (B) by reason of your willful misconduct which is demonstrably and materially injurious to the Company or (c) your conviction of a felony from which no appeal is taken (or which is affirmed upon appeal). For purposes of this subsection, no act or failure to act on your part shall be deemed "willful" unless done or omitted to be done by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. (iii) Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your written consent, the occurrence after a Change in Control of the Company of any of the following circumstances unless, in the case of paragraphs (A), (C), (D), (F) or (G), such circumstances are fully corrected prior to the Date of Termination [as defined in Section 4(a)] specified in the Notice of Termination [as defined in Section 4(a)] given in respect thereof: (A) the failure of the Company to continue your employment in a senior executive position which, in your reasonable judgment, has authority and responsibility comparable to your authority and responsibility with the Company immediately preceding the date of a Change in Control or at any time thereafter; the assignment to you of any duties or responsibilities which, in your reasonable judgment are inconsistent with your authority or responsibility with the Company preceding the date of a Change in Control or at any time thereafter; or any removal of you from such authority or responsibility, except in connection with the termination of your employment for Disability, Cause, as a result of your death or by you other than for Good Reason; (B) any reduction in your annual base salary as in effect on the date hereof or as the same may be increased from time to time; (C) the failure of the Company to continue in effect any material compensation or benefit plan in which you participate immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the Change in Control or the failure by the Company to award cash bonuses to its executives in amounts substantially consistent with past practice in light of the Company's financial performance; (D) the failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Company's life insurance, medical, health and accident, or disability plans in which you were participating at the time of the Change in Control, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the Change in Control; (E) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform the Agreement, as contemplated in Section 8; or (F) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 10, which purported termination shall not be effective for purposes of this Agreement. 5. Compensation Upon Termination; Vesting of Stock. Following a Change in Control of the Company, you shall be entitled to the following benefits during a period of disability, or upon termination of your employment, as the case may be, provided that such period or termination occurs during the Term; provided, however, that the vesting set forth in Subsection 5(d) shall be required as of the occurrence of a Change in Control regardless of whether your employment terminates during the Term and regardless of the reason for the termination of employment: (a) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive base salary and all other earned compensation at the rate in effect at the commencement of any such period (offset by all compensation payable to you under the Company's disability plan or program or other similar plan during such period) until your employment is terminated pursuant to Section 4(b)(i) hereof. Thereafter, or in the event your employment is terminated by reason of death, your benefits shall be determined under the Company's long-term disability, retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs. (b) If your employment shall be terminated by the Company for Cause or by you other than for Good Reason following Change in Control, the Company shall pay you your full base salary and all other compensation through the Date of Termination at the rate in effect at the time the Notice of Termination is given, plus all other amounts to which you are entitled under any employment contract with the Company or under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. (c) If your employment with the Company is terminated by the Company (other than for Cause, Disability or your death) or by you for Good Reason within 24 months after Change in Control or if your employment with the Company is terminated by you or the Company for any reason (other than your death, Disability or retirement) within six (6) months after a Change in Control, then you shall be entitled to the benefits below: (i) the Company shall pay to you (A) your full base salary and all other compensation through the Date of Termination at the rate in effect at the time the Notice of Termination is given, no later than the full fifth day following the Date of Termination, plus all other amounts to which you are entitled under any compensation plan of the Company at the time such payments are due, (B) if you so elect, in lieu of your right to continue to receive deferred compensation under any deferred compensation plan of the Company then in effect, no later than the fifth full day following the Date of Termination, a lump-sum amount, in cash, equal to the deferred amounts together with any earnings credited on such amounts under such plan and (C) if you so elect, in lieu of your right to continued payments under any employment contract with the Company, no later than the fifth full day following the Date of Termination, a lump-sum amount, in cash, equal to the total of such continued payments; (ii) the Company shall pay as severance pay to you, at the time specified in Subsection (e) below, a lump-sum severance payment (together with the payments provided in paragraph (iv) below) (the "Severance Payments") in an amount equal to 200% of your highest annual base salary in effect during the three-year period ending the Date of Termination, offset by the amount, if any, which you are entitled to receive as severance benefits under any employment contract between the Company and you; (iii) the Company shall pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") to any payment or benefit provided hereunder); (iv) for a period of twelve (12) months after your Date of Termination, the Company shall arrange to provide you with life, disability, dental, accident and group health insurance benefits substantially similar to those which you were receiving immediately prior to the Notice of Termination. Notwithstanding the foregoing, the Company shall not provide any benefit otherwise receivable by you pursuant to this paragraph (iv) if an equivalent benefit is actually received by you prior to the end of such 12 month period, and any such benefit actually received by you shall be reported to the Company; and (v) you shall be entitled to any benefits or payments to which you may be entitled under any other plan or program of the Company in which you are a participant at the time of your termination. (d) As of the occurrence of the Change in Control you shall become vested in any shares of the Company awarded to you under the Long-Term Incentive Plan of the Company and not previously vested, or in any additional shares or substitute shares issued to reflect a change in the shares of Common Stock of the Company or a stock dividend or stock split distributable in shares of common stock of the Company or a change in capital structure of the Company, all as provided in Section 16 of the Long-Term Incentive Plan. (e) The payments provided for in Subsections 5(b) and (c) shall be made not later than the fifth day following the Date of Termination; provided, however, that, if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you, payable on the fifth day after demand by the Company (together with interest at the applicable federal rate provided in Section 7872(f)(2) of the Code). (f) Except as provided in the second sentence of Subsection 5(c)(iv) hereof, you shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 5 be reduced by any compensation earned by you as a result of employment by another employer, by retirement benefits or by offset against any amount claimed to be owed by you to the Company or otherwise. 6. Excise Tax Limitation. (a) Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by the Company to or for your benefit (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a "Payment") would be nondeductible by the Company for federal income tax purposes because of Section 280G of the Code, then the aggregate present value of amounts payable or distributable to you or for your benefit pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as "Total Payments") shall be reduced to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Total Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. For purposes of this Section 6, present value shall be determined in accordance with Section 280G(d)(4) of the Code. (b) All determinations required to be made under this Section 6 shall be made by the Company's independent public accountants (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the employee. Any such determination by the Accounting Firm shall be binding upon the Company and the employee. (c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Payments will have been made by the Company which should not have been made ("Overpayment") or that the additional Payments which will not have been made by the Company could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against the employee which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the employee shall be treated for all purposes as a loan ab initio to the employee which the employee shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the employee to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the employee is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the employee together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. 7. Sale of Division. If the Company sells substantially all of its business assets to an entity (the "Purchaser") which is not controlled by Dumaines Trust or Amoskeag, you will be entitled to receive the Change in Control Severance Benefits on the effective date of such sale. In determining such benefits, the hospitalization or medical reimbursement plan in effect immediately preceding such effective date shall be continued in effect without change (except any change that may be mandated by law) for the period for which you are entitled to coverage. Notwithstanding the foregoing, the Change in Control Severance Benefits shall not be payable if you enter the employment of the Purchaser, or if you fail to enter such employment but the Purchaser offers you the following: (i) employment in a senior executive position having authority and responsibility comparable to your authority and responsibility with the Company immediately preceding the sale, and (ii) compensation and benefits at least as great as provided to you by the Company immediately preceding the sale, including without limitation severance benefits in the event of your termination of employment with the Purchaser at least as great as herein provided (but not conditioned on a change in control of the Purchaser). Notwithstanding the preceding sentence, the vesting set forth in Subsection 5(d) shall be required on the effective date of the sale, regardless of any subsequent events. For the purpose of determining whether the Purchaser is controlled by Dumaines Trust or Amoskeag, control shall mean the ownership of voting rights sufficient to elect at least a majority of the members of the Board of Directors of the Purchaser. 8. Waiver of Claims Notwithstanding any provisions of this Agreement to the contrary, no payments shall be made to you under Section 5(c) unless and until you shall have waived and released all claims which you may have against the Company as of the date of execution of the waiver and release, including, without limitation, claims under the Age Discrimination in Employment Act, but excluding claims for benefits under this Agreement or claims under any employee benefit plan maintained by the Company. 9. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you had terminated your employment for Good Reason immediately after a Change in Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or if there is no such designee, to your estate. 10. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be duly given when delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the General Counsel of the Company, at 326 East Stadium Drive, Eden, North Carolina, and to you at the address shown below or to such other address as either the Company or you may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 11. Miscellaneous. (a) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (b) The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina. (c) No waiver by you at any time of any breach of, or compliance with, any provision of this Agreement to be performed by the Company shall be deemed a waiver of that or any other provision at any subsequent time. (d) This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. (e) Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. (f) This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and cancelled. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company this letter, which will then constitute our agreement on this subject. Sincerely, FIELDCREST CANNON, INC. By: /s/ James M. Fitzgibbons James M. Fitzgibbons Chairman and Chief Executive Officer Agreed to this 26th day of July, 1993. /s/ M. K. Doss (Signature) M. K. Doss Print Name Address: 7902 Southerland Drive Browns Summit, NC 27214 FIELDCREST CANNON, INC. Inter-Office Correspondence July 29, 1993 Mr. M. K. Doss Eden RE: Amendment to Employee Retention Agreement Dear Ken: You and Fieldcrest Cannon, Inc. (the "Company") entered into an Employee Retention Agreement effective July 9, 1993. The Company now deems it appropriate to amend Subsection 5(c) of the Employee Retention Agreement by deleting the phrase "or if your employment with the Company is terminated by you or the Company for any reason (other than your death, Disability or Retirement) within six (6) months after a Change in Control" therefrom. For good and adequate consideration, the receipt of which is hereby acknowledged, you agree to the foregoing amendment. Kindly sign and return to the Company this letter, which will then constitute our agreement on this subject. Sincerely, FIELDCREST CANNON, INC. By: /s/ James M. Fitzgibbons Chairman and Chief Executive Officer Agreed to this 2nd day of August, 1993: /s/ M. K. Doss Signature M. K. Doss Print Name Address: 7902 Southerland Drive Browns Summit, NC 27214 EX-11 8 EXHIBIT 11 Exhibit 11 Computation of Primary and Fully Diluted Net Income (Loss) Per Share
For the three months For the twelve months ended December 31 ended December 31 1995 1994 1995 1994 Average shares outstanding 8,913,175 8,727,971 8,860,065 8,677,811 Add shares assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options 8,129 16,212 15,295 18,204 Average shares and equivalents outstanding, primary 8,921,304 8,744,183 8,875,360 8,696 015 Average shares outstanding 8,913,175 8,727,971 8,860,065 8,677,811 Add shares giving effect to the conversion of the convertible subordinated debentures 2,824,859 2,824,859 2,824,859 2,824,859 Add shares giving effect to the conversion of the convertible preferred stock 2,564,100 2,564,103 2,564,100 2,564,103 Add shares assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options 8,129 16,212 15,480 19,132 Average shares and equivalents outstanding, assuming full dilution 14,310,263 14,133,145 14,264,505 14,085,905 Primary Earnings Net income (loss) $(17,729,000) $10,089,000 $(15,725,000) $30,745,000 Preferred dividends (1,125,000) (1,125,000) (4,500,000) (4,500,000) Earnings (loss) on Common $(18,854,000) $ 8,964,000 $(20,225,000) $26,245,000 Primary earnings (loss) per share Net income (loss) $ (2.11) $ 1.03 $ (2.28) $ 3.02
Exhibit 11 Computation of Primary and Fully Diluted Net Income (Loss) Per Share
For the three months For the twelve months ended December 31 ended December 31 1995 1994 1995 1994 Fully Diluted Earnings Income (loss) from continuing operations before extraordinary charge and accounting change $(18,854,000) $ 8,964,000 $(20,225,000) $26,245,000 Add convertible subordinated debenture interest, net of taxes (1) 1,144,000 (1) 4,575,000 Add convertible preferred dividends (1) 1,125,000 (1) 4,500,000 Net income (loss) $(18,854,000) $11,233,000 $(20,225,000) $35,320,000 Fully diluted earnings (loss) per share Net income (loss) $ (2) $ .80 $ (2) $ 2.51
(1) The assumed conversion of the Registrant's Convertible Subordinated Debentures and Convertible Preferred Stock for the three months and twelve months ended December 31, 1995 would have an anti-dilutive effect for the computation of earnings per share; therefore conversion has not been assumed for these periods. (2) Fully diluted net income per share for the three months and twelve months ended December 31, 1995 is not presented as effects are anti-dilutive. EX-13 9 EXHIBIT 13 FIELDCREST CANNON, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The following summary income statement from continuing operations sets forth the percentage relationship that certain costs and expenses and other items in the income statement bear to net sales (dollars in millions).
1995 1994 1993 Amount Percent Amount Percent Amount Percent NET SALES $1,095.2 100.0% $1,063.7 100.0% $1,000.1 100.0% Cost of sales 966.6 88.3 898.4 84.5 834.7 83.5 Selling, general and administrative 108.2 9.9 94.8 8.9 101.8 10.2 Restructuring charges 20.5 1.8 -- -- 10.0 1.0 OPERATING INCOME (LOSS) (.1) -- 70.5 6.6 53.6 5.3 Interest expense 27.6 2.5 23.3 2.2 27.7 2.7 Other (income) expense, net .1 -- .9 .1 (1.0) (.1) INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND ACCOUNTING CHANGES (27.8) (2.5) 46.3 4.3 26.9 2.7 Federal and state income taxes (benefit) (12.1) (1.1) 15.6 1.4 11.9 1.2 INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGES $ (15.7) (1.4)% $ 30.7 2.9% $ 15.0 1.5%
21 FIELDCREST CANNON, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS 1995 COMPARED TO 1994 Net sales for 1995 were $1,095.2 million compared to $1,063.7 million for 1994, an increase of 3%. The $31.5 million increase includes $47.0 million of furniture coverings from the Sure Fit business acquired in January 1995. The 1.5% decrease in sales, after adjusting for the Sure Fit acquisition, was due to lower volumes which were only partially offset by price increases implemented in the last half of 1994 and during 1995. The volume decline occurred in the second half of the year and is attributed primarily to weakness in retail sales. Gross profit margins decreased from 15.5% in 1994 to 11.7% in 1995 primarily because of higher raw material prices and lower mill activity. Selling, general and administrative expenses as a percent of sales increased from 8.9% in 1994 to 9.9% in 1995. The increase was due primarily to increased advertising and other selling expenses. Operating income for 1995 was also reduced by $20.5 million of restructuring charges resulting from the reorganization of the Company's New York operations, which included severance and termination benefits for 54 employees, a related voluntary early retirement program, which was accepted by 87 employees and closing two yarn mills. See Note 2 of the Notes to Consolidated Financial Statements. The reorganization of the New York office and related early retirement program are expected to reduce pre-tax annual costs by approximately $8 million. The Company has contracted to purchase yarn from outside vendors and expects annual pre-tax savings of $8 to $9 million. Before the restructuring charges, operating income in 1995 was $20.4 million, or 1.9% of sales, compared to $70.5 million, or 6.6% of sales, in 1994. Interest expense increased $4.3 million in 1995. The increase was due to higher rates under the revolver and an increase in average debt outstanding. Debt increased during 1995 because of the Sure Fit acquisition and the Company's increased level of capital expenditures. In 1994 the Company allocated $1.6 million of interest costs to the Amoskeag assets held for sale. An income tax benefit equal to 43.5% of the 1995 pre-tax loss was recognized in 1995, compared to an effective income tax rate of 33.6% on pre-tax income in 1994. A $1.7 million favorable settlement of prior years income taxes in 1994 reduced the 1994 effective tax rate by 3.7%. See Note 13 of the Notes to Consolidated Financial Statements. A loss from continuing operations of $15.7 million, or $2.28 per share, was incurred in 1995 compared to income of $30.7 million, or $3.02 per share, in 1994. The loss before restructuring charges was $3.6 million, or $.91 per share, in 1995 compared to income of $29.0 million, or $2.82 per share, in 1994 after excluding the favorable settlements of prior years income taxes of $1.7 million from 1994. On March 4, 1996 the Company announced it would close a towel weaving plant and a yarn manufacturing plant as part of the Company's ongoing consolidation effort to utilize assets more effectively. The Company expects to accrue a pre-tax charge of $4.5 to $5.0 million, or $.31 to $.35 per share, for the write-down of equipment and employee termination benefits in the first quarter of 1996. In addition, 1996 operating costs will be adversely affected by approximately $3 million of equipment relocation, training and other related transition costs. The move, when completed, is expected to produce annual cost savings of $8 to $9 million. 1994 COMPARED TO 1993 Net sales from continuing operations in 1994 increased to $1,063.7 million compared to $1,000.1 million in 1993. The 6.4% increase was due primarily to increased volume and to a lesser extent to price increases implemented during the third quarter of 1994. Increases in raw material and labor costs were not fully recovered by the selling price increases and gross margins declined to 15.5% in 1994 compared to 16.5% in 1993. Selling, general and administrative expenses as a percent of sales decreased from 10.2% in 1993 to 8.9% in 1994. The decrease was due primarily to reduced costs resulting from the voluntary early retirement program implemented in late 1993, lower bad debt expense and a decrease in other selling expenses. 22 FIELDCREST CANNON, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS Operating income as a percent of sales was 6.6% in 1994 compared to 5.3% in 1993. Operating income was reduced 1.0% in 1993 due to $10 million of restructuring charges. See Note 2 of the Notes to Consolidated Financial Statements. Before the restructuring charges operating income as a percent of sales was 6.3% in 1993. Interest expense decreased $4.4 million in 1994. The reduction of interest expense was primarily due to lower average debt resulting from the reduction of debt with the proceeds from the sale of the carpet and rug division in July 1993. In 1994 the Company allocated $1.6 million of interest costs to the Amoskeag assets held for sale. See Note 3 of the Notes to Consolidated Financial Statements. The effective income tax rate was 33.6% in 1994 compared to 44.3% in 1993. The decrease in the effective income tax rate is due primarily to a $1.7 million favorable settlement of prior years income taxes in 1994 and the unfavorable $1.4 million effect of the federal tax rate increase in 1993. See Note 13 of the Notes to Consolidated Financial Statements. Income from continuing operations before accounting changes was $30.7 million or $3.02 per share in 1994 compared to $15.0 million or $1.24 per share in 1993. Income before non-recurring items was $29.0 millon, or $2.82 per share, in 1994 compared to $22.5 million, or $1.88 per share, in 1993 after excluding the favorable settlements of prior years income taxes of $1.7 million from 1994, and the pre-tax restructuring charge of $10 million and a $1.4 million tax adjustment from 1993. LIQUIDITY AND CAPITAL RESOURCES The Company's primary capital requirements are for working capital, principally inventory and accounts receivable, and capital expenditures. The Company historically has financed these requirements, including its working capital requirements which follow a seasonal pattern, with funds generated from its operations and through borrowings under its revolving credit agreements. The table below summarizes the Company cash provided by operating and financing activities and cash used for additions to plant and equipment.
(Dollars in thousands) 1995 1994 CASH PROVIDED (USED): Net income (loss) $(15,725) $30,745 Depreciation and amortization 31,746 29,828 Deferred income taxes (2,384) 7,677 Working capital, excluding effects of acquisition of Sure Fit 12,613 (19,719) Other 1,597 (8,178) Financing activities 42,386 11,781 TOTAL CASH PROVIDED 70,233 52,134 CASH USED FOR: Additions to plant and equipment (64,153) (51,929) Sale of plant and equipment 1,218 1,815 Proceeds from net assets held for sale 23,241 -- Purchase of Sure Fit, net of cash acquired (27,300) -- TOTAL CASH (USED) (66,994) (50,114) INCREASE IN CASH $ 3,239 $2,020
Working capital requirements decreased in 1995 primarily because accounts receivables decreased $10.6 million. Working capital requirements increased in 1994 primarily because of a $17.9 million decrease in accounts payable and accrued liabilities, a $5.6 million increase in accounts receivable and a $4.2 million increase in inventories. Total debt as a percent of total capitalization (long-term debt, short-term debt and shareowners' equity) was 63% at December 31, 1995, compared to 58% at the end of 1994. Capital expenditures totalled $64.2 million in 1995 compared to $51.9 million spent in 1994. Capital expenditures for 1996 are expected to be approximately $38 million. Included in the 1995 and 1994 capital expenditures are $37.2 million and $33.8 million, respectively, for a new weaving plant at the Company's Columbus, Ga./Phenix City, Ala. towel mill. It is anticipated that financing of future capital expenditures will be provided by cash flows from operations, borrowings under the Company's revolving credit facility, and, possibly, the sale of long-term debt or equity securities. 23 FIELDCREST CANNON, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) On January 27, 1995 the Company purchased the Sure Fit furniture covering business of UTC Holdings, Inc., for a cash purchase price of $27.3 million. Sure Fit's 1995 sales were $47 million. With the acquisition, the Company amended its revolving credit facility to permit the transaction and increased the line from $160 million to $195 million. In March 1995, the Company sold the Bangor and Aroostook Railroad for approximately $20 million of cash and $8 million of notes receivable. Proceeds from the sale were used to reduce borrowings under the revolving credit facility. The Company's revolving credit facility allows the Company to borrow up to $195 million through January 3, 1998. The Company uses its revolving credit facility for long-term debt purposes and its seasonal borrowing requirements during the year. Short-term borrowings are required during the year to finance seasonal increases in inventories and receivables. As a result of the operating loss in the fourth quarter of 1995, the Company amended its revolving term debt agreement effective December 29, 1995, to modify certain financial covenants for 1995 and future periods to provide the Company with necessary operating flexibility. The revolving credit facility is secured by a first lien on substantially all of the Company's accounts receivables and inventories and a substantial portion of its plant and equipment and bears interest, at the Company's option, at the prime rate fixed by The First National Bank of Boston, or at a Euromarket-based rate plus 1.25%. Under the December 29, 1995, amendment the borrowing rate increases to a Euromarket-based rate plus 2% in February 1996 based upon the Company's 1995 interest coverage ratio. The revolving credit facility requires, among other things, that the Company maintain certain financial ratios with regard to working capital, interest coverage, funded debt and net worth. It allows payment of $4.5 million of preferred dividends annually, but does not allow dividends on Common Stock. The agreement also places restrictions on the Company's ability to incur debt or liens, to make certain investments and to effect certain mergers, consolidations or sales of assets or changes in control. At December 31, 1995, borrowings under the $195 million revolving term debt agreement totalled $142.5 million and $42.5 million of the facility was available and unused. A letter of credit to secure $10 million of industrial development bonds of the Company reduces the availability under the revolving credit facility by $10 million. As of December 31, 1995, the Company lowered its discount rate from 8.6% to 7.25% for valuing its accumulated pension benefit obligations under FAS 87, "Employers' Accounting for Pensions" and its accumulated postretirement health care and life insurance benefit obligations under FAS 106, "Employers' Accounting for Postretirement Benefits other than Pensions". The lower discount rate of 7.25% results in a higher value for the calculated obligations and will result in higher expenses in 1996 than would have been provided with the previous 8.6% discount rate. The increase in expense is not expected to materially effect the Company's future operating results or financial condition. In March 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," (FAS 121) which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. FAS 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company will adopt FAS 121 in the first quarter of 1996 and, based on current circumstances, does not believe the effect of adoption will be material. 24 FIELDCREST CANNON, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS MARKET AND DIVIDEND DATA The Company's Common Stock is listed on the New York Stock Exchange (trading symbol: FLD). At December 31, 1995, there were 2,082 shareholders of record of Common Stock. See Note 8 of the Notes to Consolidated Financial Statements regarding restrictions on the payment of dividends. No dividends were paid on Common Stock during the last two years. The high and low sale prices on the New York Stock Exchange composite tape for the last two years were as shown below:
Market price Common Stock Quarter, 1995 High Low 1st $ 25 3/8 $19 7/8 2nd 24 1/8 19 3/4 3rd 24 7/8 21 1/4 4th 22 1/4 15 3/4 Quarter, 1994 1st $ 34 3/8 $24 1/4 2nd 33 22 1/2 3rd 29 1/8 23 3/4 4th 27 3/4 23 3/8
QUARTERLY DATA (UNAUDITED) Data in millions, except per share information
1995 quarter ended March 31 June 30 Sept. 30 Dec. 31 Net sales $ 257.0 $ 273.1 $ 280.5 $ 284.6 Gross profit 43.0 34.4 40.1 11.1 Operating income (loss) 12.4 4.2 6.7 (23.4) Net income (loss) 3.6 (1.6) -- (17.7) Primary earnings (loss) per share .28 (.30) (.13) (2.11) Fully diluted earnings (loss) per share .28 (.30) (.13) (2.11) 1994 quarter ended March 31 June 30 Sept. 30 Dec. 31 Net sales $ 232.3 $ 254.8 $ 279.3 $ 297.3 Gross profit 37.4 40.5 44.2 43.2 Operating income 15.0 16.9 20.1 18.5 Net income 5.5 6.7 8.5 10.0 Primary earnings per share .51 .64 .84 1.03 Fully diluted earnings per share .47 .56 .68 .80
Annual earnings for 1995 were reduced by pre-tax restructuring charges of $20.5 million which increased the net loss by $12.1 million, or $1.37 per share. Quarterly earnings for 1995 were reduced by restructuring charges of $3.9 million, or $.28 per share; $4.5 million, or $.32 per share; $7.1 million, or $.53 per share; and $4.9 million or $.23 per share for the first, second, third and fourth quarter, respectively. The restructuring charges during the first three quarters were related to the reorganization of the Company's New York operations and a related early retirement program. The fourth quarter charges were the result of closing two yarn mills. The fourth quarter of 1994 includes favorable settlements of prior years income taxes of $1.7 million which increased net income by $1.7 million, or $.19 per common share on a primary basis and $.12 per share on a fully diluted basis. Quarterly earnings per share amounts presented for 1995 do not equal the annual 1995 earnings per share amount due to issuance of shares during the year. 25 FIELDCREST CANNON, INC. CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS Year Ended December 31 Dollars in thousands, except per share data
1995 1994 1993 Net sales $1,095,193 $1,063,731 $1,000,107 Cost of sales (notes 2, 5) 966,642 898,437 834,701 Selling, general and administrative 108,194 94,756 101,843 Restructuring charges (note 2) 20,469 -- 10,000 Total operating costs and expenses 1,095,305 993,193 946,544 Operating income (loss) (112) 70,538 53,563 OTHER DEDUCTIONS (INCOME): Interest expense 27,630 23,268 27,659 Other, net 67 987 (975) Total other deductions 27,697 24,255 26,684 Income (loss) before income taxes (27,809) 46,283 26,879 Federal and state income taxes (benefits) (note 13) (12,084) 15,538 11,913 Income (loss) from continuing operations before accounting changes (15,725) 30,745 14,966 Income from discontinued operations -- -- 3,201 Gain from disposition of discontinued operations -- -- 9,207 Cumulative effect of accounting changes -- -- (70,305) Net income (loss) (15,725) 30,745 (42,931) Preferred dividends (4,500) (4,500) (463) Earnings (loss) on common $ (20,225) $ 26,245 $ (43,394) Amount added to (subtracted from) retained earnings (20,225) 26,245 (43,394) Retained earnings, January 1 119,280 93,035 136,429 Retained earnings, December 31 $ 99,055 $ 119,280 $ 93,035 INCOME (LOSS) PER COMMON SHARE: Primary from continuing operations before accounting changes $ (2.28) $ 3.02 $ 1.24 Income from discontinued operations -- -- .27 Gain from disposition of discontinued operations -- -- .78 Cumulative effect of accounting changes -- -- (5.99) Primary earnings (loss) per common share $ (2.28) $ 3.02 $ (3.70) Fully diluted earnings (loss) per common share (note 1) $ -- $ 2.51 $ -- Average primary shares outstanding 8,875,360 8,696,015 11,732,505 Average fully diluted shares outstanding 14,264,504 14,085,905 11,733,276
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 26 FIELDCREST CANNON, INC. CONSOLIDATED STATEMENT OF FINANCIAL POSITION At December 31, Dollars in thousands, except per share data
1995 1994 ASSETS Cash $ 9,124 $ 5,885 Accounts receivable less allowances of $8,162 in 1995 and $9,506 in 1994, principally trade 168,112 170,001 Inventories (note 5) 228,167 213,994 Net assets held for sale -- 24,000 Other prepaid expenses and current assets 3,446 3,793 TOTAL CURRENT ASSETS 408,849 417,673 Plant and equipment, net (notes 6, 9) 342,285 314,726 Deferred charges and other assets 61,812 50,266 TOTAL ASSETS $ 812,946 $ 782,665 LIABILITIES AND SHAREOWNERS' EQUITY Accounts and drafts payable $ 54,274 $ 55,533 Federal and state income taxes -- 2,268 Deferred income taxes 17,593 21,988 Accrued liabilities (note 7) 67,725 53,958 Current portion of long-term debt 780 1,465 TOTAL CURRENT LIABILITIES 140,372 135,212 Senior long-term debt (note 8) 155,262 107,744 Subordinated long-term debt (note 8) 210,000 210,000 Total long-term debt 365,262 317,744 Deferred income taxes 40,475 42,859 Other non-current liabilities 51,406 55,648 TOTAL NON-CURRENT LIABILITIES 457,143 416,251 TOTAL LIABILITIES 597,515 551,463 Commitments (notes 9, 11, 12) Preferred Stock, $.01 par value (note 10) Shares authorized: 10,000,000 Shares issued: 1,500,000 (aggregate liquidation preference of $75,000) 15 15 Common Stock, $1 par value (note 10) Shares authorized: 25,000,000 Shares issued, 1995: 12,560,826 12,561 Shares issued, 1994: 12,360,252 12,360 Additional paid in capital 221,025 216,772 Retained earnings 99,055 119,280 Excess purchase price for Common Stock acquired and held in treasury -- 3,606,400 shares (117,225) (117,225) TOTAL SHAREOWNERS' EQUITY 215,431 231,202 TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 812,946 $ 782,665
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 27 FIELDCREST CANNON, INC. CONSOLIDATED STATEMENT OF CASH FLOWS For the years ended December 31, Dollars in thousands
1995 1994 1993 INCREASE (DECREASE) IN CASH Cash flows from operating activities: Net income (loss) $(15,725) $ 30,745 $ (42,931) Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting changes for FAS 106 and 109 -- -- 70,305 Income and gain on sale from discontinued operations -- -- (12,408) Depreciation and amortization 31,746 29,828 31,539 Deferred income taxes (2,384) 7,677 2,329 Other 1,597 (8,178) 1,726 Change in current assets and liabilities, excluding effects of acquisition of Sure Fit and of discontinued operations: Accounts receivable 10,579 (5,582) (13,132) Inventories 3,125 (4,160) (10,637) Current deferred income taxes (4,395) 7,189 (3,971) Other prepaid expenses and current assets 582 (1,302) 1,638 Accounts payable and accrued liabilities 4,990 (17,870) 8,700 Federal and state income taxes (2,268) 2,006 (3,362) NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES 27,847 40,353 29,796 Cash (used in) discontinued operations -- -- (17,405) Net cash provided by operating activities 27,847 40,353 12,391 Cash flows from investing activities: Additions to plant and equipment (64,153) (51,929) (21,594) Proceeds from disposal of plant and equipment 1,218 1,815 12,621 Proceeds (acquisition) of net assets held for sale 23,241 -- (32,536) Purchase of Sure Fit, net of cash acquired (27,300) -- -- Proceeds from disposition of discontinued operations -- -- 147,627 NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (66,994) (50,114) 106,118 Cash flows from financing activities: Increase (decrease) in revolving debt 48,298 17,798 (59,899) Proceeds from issuance of other long-term debt -- 10,000 -- Payments on long-term debt (1,469) (11,597) (14,811) Proceeds from issuance of common stock 57 80 339 Purchase of treasury stock -- -- (117,225) Proceeds from issuance of preferred stock -- -- 72,375 Dividends paid on preferred stock (4,500) (4,500) (88) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 42,386 11,781 (119,309) Net increase (decrease) in cash 3,239 2,020 (800) Cash at beginning of year 5,885 3,865 4,665 Cash at end of year $ 9,124 $ 5,885 $ 3,865 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest expense $ 25,471 $ 23,871 $ 30,163 Income tax payments 2,848 5,381 23,239
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 28 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (1) SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION -- The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year items have been reclassified to conform to the 1995 presentation. The Company operates in the textile industry and is principally involved in the manufacture and sale of home furnishings products. These sales are primarily to domestic department stores, mass retailers, specialty stores and large chain stores. Sales to one customer (Wal-Mart Stores and its affiliates) represented 16.6%, 18.3% and 17.4% of total sales of the Company in 1995, 1994 and 1993, respectively. USE OF ESTIMATES -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. INVENTORIES -- Inventories are valued at the lower of cost, determined principally on a last-in, first-out basis, or market. DEPRECIATION -- Buildings, machinery and equipment are depreciated for financial reporting purposes on the straight line method over the estimated useful lives of these assets. Depreciation for tax purposes is provided on an accelerated basis. DEFERRED FINANCING FEES -- Debt financing fees are amortized over the term of the related debt. INCOME TAXES -- The Company adopted Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes" (FAS 109), effective January 1, 1993. Under FAS 109, deferred income taxes are recognized, at enacted tax rates, to reflect the future income tax effect of reported differences between the book and tax bases of the Company's assets and liabilities, assuming they will be realized and settled, respectively, at the amount reported in the Company's financial statements. See Note 13 for additional information. INCOME PER COMMON SHARE -- Primary earnings per common share is based on net income after preferred dividend requirements and the weighted average number of shares of Common Stock and Class B Common Stock outstanding during the year and common stock equivalents attributable to outstanding stock options. Fully diluted earnings per common share are calculated assuming conversion, when dilutive, of the 6% convertible subordinated sinking fund debentures and the $3 Series A Convertible Preferred Stock. Fully diluted income from continuing operations and net income per common share for 1995 and 1993 are not presented as effects are anti-dilutive. 29 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (2) RESTRUCTURING CHARGES During 1995 the Company reorganized its New York operations and relocated sales, marketing and design personnel to Kannapolis, N.C. In conjunction with the reorganization, the Company offered a voluntary early retirement program to its salaried employees. In December 1995 the Company announced the closing of two yarn mills and agreed to sell a warehouse. As a result of these actions the Company incurred restructuring charges of $20.5 million in 1995. The restructuring charges include approximately $15.6 million primarily for severance and termination benefits for 54 employees, the voluntary early retirement program which was accepted by 87 employees and lease costs in connection with the New York reorganization and $4.4 million for the write-down of yarn equipment and $.5 million for termination benefits associated with closing the yarn mills. These charges increased the 1995 loss by $12.1 million, or $1.37 per share. Concurrent with the purchase of the capital stock of Amoskeag Company the Company implemented a number of programs to reduce overhead and cut costs in 1993. As a result of this process, restructuring charges were incurred in 1993 which reduced pre-tax operating income by $10 million. The restructuring charges include $8 million for the cost of a voluntary early retirement program which was accepted by 184 employees and severance for additional staff reductions, and $2 million for direct non-recurring expenses incurred by the Company in evaluating the purchase of the capital stock of Amoskeag Company. These expenses did not contribute to the ultimate consummation of the tender offer to acquire Amoskeag Company. These charges reduced 1993 net income by $6.1 million, or $.52 per share. (3) ACQUISITION AND MERGER WITH AMOSKEAG COMPANY On November 24, 1993 a newly formed and wholly owned subsidiary of the Company completed a tender offer for all of the outstanding shares of Amoskeag Company ("Amoskeag") for a cash price of $40 per share, or an aggregate of approximately $141.9 million including certain costs. The acquisition has been accounted for as a purchase by the Company of the net assets of Amoskeag held for sale at their net realizable values and as the purchase of treasury stock. Amoskeag owned 3,606,400 shares of the Company's common stock which was assigned a cost of $117.2 million after an allocation of $24.7 million to the net assets of Amoskeag. The Company is in the process of selling all of the operating assets of Amoskeag. These assets were primarily the Bangor and Aroostook Railroad ("BAR") and certain real estate properties. During 1994 the BAR's operating income of $3 million was excluded from the Company's consolidated income statement and $1.6 million of interest costs of the Company were allocated to the assets held for sale. In March, 1995 the Company sold the BAR for approximately $20 million of cash and $8 million of notes receivable. (4) DISCONTINUED OPERATIONS On July 30, 1993 the Company completed the sale of its carpet and rug operations to Mohawk Industries, Inc. Accordingly, the carpet and rug results have been classified as discontinued operations in the Statement of Income for 1993. Results of operations for the carpet and rug operations include an allocation of corporate interest based on net assets. The sale resulted in a $15.1 million pre-tax gain which increased after-tax net income by $9.2 million, or $.78 per share, in 1993. 30 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (5) INVENTORIES Inventories are valued at the lower of cost or market and consisted of the following at December 31:
1995 1994 Finished goods $117,776 $109,423 Work in progress 72,315 65,375 Raw materials and supplies 38,076 39,196 Total $228,167 $213,994
Approximately 73% of the inventories at year-end 1995 and 74% at year-end 1994 were valued on the last-in, first-out method (LIFO). If the first-in, first-out method of accounting had been used, inventories would have been greater by approximately $49 million and $40 million at December 31, 1995 and 1994, respectively. The LIFO reserve for continuing operations increased $9.2 million and $6.8 million in 1995 and 1994, respectively. (6) PLANT AND EQUIPMENT Plant and equipment is stated at cost and consisted of the following at December 31:
1995 1994 Land $ 5,376 $ 5,796 Buildings 213,205 184,902 Equipment 404,277 378,374 Plant additions in progress 24,903 40,509 Total 647,761 609,581 Accumulated depreciation (305,476) (294,855) Net plant and equipment $ 342,285 $ 314,726
(7) ACCRUED LIABILITIES Accrued liabilities were as follows at December 31:
1995 1994 Salaries and other compensation $ 9,749 $11,291 Pension, medical and other employee benefit plans 22,937 18,359 Advertising expense 4,301 1,436 Interest expense 4,267 3,240 Other 26,471 19,632 Total $67,725 $53,958
31 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (8) DEBT Long-term debt at December 31 was as follows:
1995 1994 SENIOR LONG-TERM DEBT: Revolving term debt $142,522 $ 94,224 Industrial development bonds, due 2021 10,000 10,000 Industrial revenue bonds, due in installments through 2002........................ 3,520 4,985 TOTAL SENIOR LONG-TERM DEBT 156,042 109,209 Less current portion 780 1,465 NET SENIOR LONG-TERM DEBT 155,262 107,744 SUBORDINATED LONG-TERM DEBT: 6% convertible subordinated sinking fund debentures due 1997 to 2012 125,000 125,000 11.25% senior subordinated debentures due 2002 to 2004 85,000 85,000 TOTAL SUBORDINATED LONG-TERM DEBT 210,000 210,000 TOTAL LONG-TERM DEBT $365,262 $317,744
The Company's revolving credit facility allows the Company to borrow up to $195 million through January 3, 1998. Accordingly, borrowings under the revolving credit facility are classified as long-term debt. Interest rates on the revolving term debt are, at the Company's option, at the prime rate fixed by The First National Bank of Boston, or at a Euromarket-based rate plus 1.25%. The borrowing rate increases to a Euromarket-based rate plus 2% in February 1996 based upon the Company's 1995 interest coverage ratio. The average interest rate on the revolving term debt was 7.1% on December 31, 1995. The revolving credit facility is secured by a first lien on substantially all of the Company's accounts receivables and inventories and a substantial portion of its plant and equipment and requires, among other things, that the Company maintain certain financial ratios with regard to working capital, interest coverage, funded debt and net worth. It allows payment of $4.5 million of preferred dividends annually, but does not allow dividends on Common Stock. The revolving term debt agreement also places restrictions on the Company's ability to incur debt or liens, to make certain investments and to effect certain mergers, consolidations or sales of assets or changes in control. The Company's 6% Convertible Subordinated Sinking Fund Debentures are convertible into shares of Common Stock of the Company at a conversion price of $44.25 per share. At December 31, 1995, the fair value of the Company's 6% Convertible Subordinated Debentures was $85.6 million compared to a carrying value of $125 million and the fair value of the 11.25% Subordinated Debentures was $80 million compared to a carrying value of $85 million. The fair value of the debentures is based on quoted market prices. Differences between fair value and carrying value of the Company's other debt were not significant. The aggregate principal and sinking fund payments required to be made on long-term debt during each of the five years subsequent to December 31, 1995 are: 1996, $.8 million; 1997, $7.0 million; 1998, $149.5 million; 1999, $6.6 million and 2000, $6.6 million. 32 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (9) LEASE OBLIGATIONS The Company leases certain real estate and equipment under various operating leases. Listed below are the future minimum rental payments required under these operating leases with noncancelable terms in excess of one year at December 31, 1995.
Real Estate Equipment Total 1996 $ 6,176 $ 10,313 $16,489 1997 5,809 9,391 15,200 1998 5,396 7,415 12,811 1999 4,741 6,518 11,259 2000 4,238 3,213 7,451 Subsequent years 34,914 657 35,571 Net minimum lease payments $61,274 $ 37,507 $98,781
Total rental expense for all operating leases was $22.0 million, $20.2 million, and $18.9 million for 1995, 1994 and 1993, respectively. (10) SHAREOWNERS' EQUITY In November 1993 the Company's shareowners authorized 10 million shares of undesignated preferred stock and the issuance of up to 1.8 million shares of preferred stock. On November 24, 1993, the Company sold 1.5 million shares of $3.00 Series A Convertible Preferred Stock ("$3.00 Preferred Stock") in a private offering and received net proceeds of $72.4 million. Each $3.00 Preferred Stock share is convertible into 1.7094 shares of Common Stock, equivalent to a conversion price of $29.25 on the $50 offering price. Annual dividends are $3.00 per share and are cumulative. The $3.00 Preferred Stock may be redeemed at the Company's option on or after September 1, 2004, in whole or in part, at $50 per share plus accrued and unpaid dividends. In the event the Company's 11.25% Senior Subordinated Debentures are not outstanding or have been defeased the $3.00 Preferred Stock may be redeemed, in whole or in part, at the option of the Company, at a redemption price of $51.50 per share beginning as of September 10, 1998 and at premiums declining to the $50 liquidation preference by September 2004. On November 24, 1993, the Board of Directors adopted a Stockholder Rights Plan and declared a dividend of one preferred stock purchase right ("right") for each outstanding share of the Company's Common Stock. Similar rights have been, and generally will be, issued in respect of Common Stock subsequently issued. Each right becomes exercisable, upon the occurrence of certain events, for one one-hundredth of a share of Series B Junior Participating Preferred Stock, $.01 par value, at a purchase price of $80 or, in certain circumstances, Common Stock or other securities, cash or other assets having a then current market price (as defined and subject to adjustment) equal to twice such purchase price. Under the Stockholder Rights Plan, 500,000 shares of Series B Junior Participating Preferred Stock have been reserved. The rights currently are not exercisable and will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company's outstanding shares of Common Stock. The rights, which expire on December 6, 2003, are redeemable in whole, but not in part, at the Company's option at any time for a price of $.02 per right. Following the acquisition of Amoskeag, the Company converted all shares of Class B Common Stock held by Amoskeag into an equivalent number of shares of Common Stock. Under the Company's Certificate of Incorporation, all remaining shares of Class B Common Stock were automatically converted into an equivalent number of shares of Common Stock, and no additional shares of Class B Common Stock may be issued in the future without the prior approval of the holders of Common Stock. 33 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (10) SHAREOWNERS' EQUITY (CONTINUED) The Company has an Employee Stock Option Plan which was adopted by the Board of Directors and approved by the shareowners in 1995. Under the Plan, options granted may be either incentive stock options or nonqualified stock options and are granted at not less than the fair market value of the Common Stock at the time of grant. Options generally become exercisable in four equal annual installments commencing one year from the date of grant. Options generally expire, if not exercised, within ten years from the date of grant. Under the option plan, 435,000 shares of Common Stock have been reserved for awards. During 1995 options to purchase 400,400 shares of Common Stock were awarded at an average exercise price of $22.17. None of the outstanding options are exercisable at December 31, 1995 and 34,600 shares are available for grant. The Company has a Director Stock Option Plan which was adopted by the Board of Directors and approved by the shareowners. Under the option plan, an annual grant of an option for 2,000 shares of Common Stock is awarded to each person who is a Director on the fifth business day after the annual meeting of shareowners. Options to Directors who are also employees of the Company are incentive stock options and to all others are nonqualified options. The price per share is the fair market value on the date each option is granted. Options may be exercised up to seven years from the date of grant, but no option may be exercised during the six-month period following its grant except in the case of death or disability. Under the option plan, 500,000 shares of Common Stock have been reserved for awards. The following is an analysis of options under the Director Stock Option Plan:
Number of Option Shares Price Outstanding, January 1, 1993 42,000 $17.625-13.00 Awarded 12,000 23.625 Exercised (21,000) 23.625-13.00 Cancelled (6,000) 23.625-13.00 Outstanding, January 1, 1994 27,000 23.625-13.00 Awarded 8,000 25.625 Exercised (5,000) 17.625-13.00 Outstanding, January 1, 1995 30,000 25.625-13.00 Awarded 16,000 22.125 Exercised (4,000) 17.625-13.00 Cancelled (2,000) 25.625-23.625 Outstanding and exercisable at December 31, 1995 40,000 25.625-13.00 Available for grant at December 31, 1995 427,000
34 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (10) SHAREOWNERS' EQUITY (CONTINUED) On September 11, 1991, the Board of Directors approved the grant of a nonqualified stock option to purchase 20,000 shares of Common Stock to the Company's chief executive officer. The per share price is $14.875, the fair market value on that date. This option became exercisable on January 1, 1992, and expires on September 10, 1998. The Company has a Long-Term Incentive Plan (the Plan) which was adopted by the Board of Directors and approved by the shareowners in 1988. Under the Plan, employees who are senior executives of the Company may be awarded shares of Common Stock without cost to the employee. The fair market value of the shares at the date of award is accounted for as deferred compensation and is amortized over the restricted period. At December 31, 1995, unamortized deferred compensation of $.9 million is included in shareowners' equity as a reduction of additional paid in capital. Awards under the Plan are vested after the employee completes four years of continuous employment beginning with the year for which the award is made. Vesting occurs prior to completion of four years of employment if the employee dies while employed, reaches normal retirement or becomes disabled. Under the Plan, 650,000 shares of Common Stock have been reserved for awards. The following is an analysis of shares of restricted stock under the Long-term Incentive Plan:
1995 1994 1993 Number of Shares: Outstanding at beginning of year 151,111 111,674 156,526 Awarded 70,000 70,000 75,000 Cancelled (5,460) -- (4,450) Issued (74,505) (30,563) (115,402) Outstanding at end of year 141,146 151,111 111,674 Available for grant at end of year 190,008 254,548 324,548 Market value on date of grant for shares granted during year $22.00 $28.625 $18.75
35 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (10) SHAREOWNERS' EQUITY (CONTINUED) Transactions with respect to common stock and additional paid in capital during the three years ended December 31, 1995, were as follows:
Additional Class B Paid in Common Stock Common Stock Capital Shares Amount Shares Amount Amount Balance 12/31/92 8,338,941 $ 8,339 3,635,114 $3,635 $ 136,075 Shares issued to employee savings plans 120,562 120 -- -- 2,883 Restricted shares award 75,000 75 -- -- (75) Restricted shares cancelled (4,450) (4) -- -- 4 Earned compensation, restricted stock -- -- -- -- 1,126 Director stock options exercised 21,000 21 -- -- 426 Net proceeds from sale of preferred stock in excess of par value -- -- -- -- 72,360 Exchange or conversion of shares 3,635,114 3,635 (3,635,114) (3,635 ) -- Balance 12/31/93 12,186,167 12,186 -- -- 212,799 Shares issued to employee savings plans 99,085 99 -- -- 2,571 Restricted shares awarded 70,000 70 -- -- (70) Earned compensation, restricted stock -- -- -- -- 1,431 Preferred stock issuance expense -- -- -- -- (73) Director stock options exercised 5,000 5 -- -- 114 Balance 12/31/94 12,360,252 12,360 -- -- 216,772 Shares issued to employee savings plans 132,034 132 -- -- 2,563 Restricted shares awarded 70,000 70 -- -- (70) Restricted shares cancelled (5,460) (5) -- -- -- Earned compensation, restricted stock -- -- -- -- 1,747 Director stock options exercised 4,000 4 -- -- 71 Balance 12/31/95 12,560,826 $12,561 -- $ -- $ 221,025
Total shares of Common Stock outstanding as of December 31, 1995 are reduced to 8,954,426 shares by 3,606,400 shares of treasury stock acquired with the acquisition of Amoskeag. The $117.2 million cost of the treasury stock reduces total shareowners' equity. 36 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (11) EMPLOYEE PENSION AND SAVINGS PLANS The Company has trusteed pension plans covering essentially all employees. The plans provide pension benefits that are based on the employees' compensation and service. The Company's policy is to fund amounts required by applicable regulations. Pension expense amounted to $8.2 million in 1995, $6.9 million in 1994 and $13.2 million in 1993. Net pension expense for 1995, 1994 and 1993 consisted of the following components:
1995 1994 1993 Service cost (benefits earned during the period) $ 6,530 $ 8,076 $ 8,802 Interest cost on projected benefit obligation 17,572 16,668 15,124 Actual return on assets (52,465) 4,845 (20,985) Net amortization and deferral 34,197 (22,703) 4,023 Curtailment and special termination benefits 2,359 -- 6,263 Net pension cost $ 8,193 $ 6,886 $ 13,227
The Company recognized a curtailment loss with the sale of its carpet and rug division in 1993 and special termination benefits from voluntary early retirement programs in 1995 and 1993. The table below sets forth the plans' funded status at December 31:
1995 1994 Projected benefit obligation: Vested benefits $243,767 $199,034 Non-vested benefits 6,265 6,058 Accumulated benefit obligation 250,032 205,092 Additional amounts related to projected compensation levels 8,121 6,332 Total projected benefit obligation 258,153 211,424 Plan assets at fair value, primarily publicly traded stocks and bonds 253,378 208,170 Plan assets over (under) projected benefit obligation (4,775) (3,254) Unrecognized net loss 31,752 29,911 Unrecognized net transition assets (1,556) (2,579) Unrecognized prior service cost 2,470 2,798 Net pension asset recognized in the Consolidated Statement of Financial Position $ 27,891 $ 26,876
Assumptions used in determining the funded status of the pension plans were as follows:
1995 1994 1993 Discount rate 7.25 % 8.6 % 7.25 % Increase in compensation levels 4.5 % 4.5 % 4.5 % Expected long-term rate of return on assets 9 % 9 % 9 %
The Company also sponsors employee savings plans which cover substantially all employees. The Company provides a match of 70% of employee contributions up to two percent of compensation and a match of 20% of employee contributions for the next two percent of compensation. The matching formula may be changed yearly at the discretion of the Company. The match is contributed quarterly in Common Stock of the Company. Expense of the Company match was $2.7 million in 1995, $2.7 million in 1994 and $3.0 million in 1993. 37 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (12) POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS The Company adopted FAS 106, "Employers' Accounting for Postretirement Benefits other than Pensions", effective January 1, 1993. The cumulative effect on prior years of the accounting change was charged to income in 1993 which resulted in a pre-tax charge of $35.1 million and reduced net income by $21.8 million, or $1.86 per share. The Company provides medical insurance premium assistance and life insurance benefits to retired employees. The medical premium assistance payments are at a fixed dollar amount based on the retiree's years of service. Essentially all of the Company's employees become eligible for these benefits when they reach retirement age while working for the Company. The Company's policy is to fund the plans as benefits are paid. The table below sets forth the plans' combined status at December 31:
1995 1994 Accumulated postretirement benefit obligation -- Retirees $25,057 $23,592 Fully eligible active participants 8,892 8,020 Other active participants 5,838 4,728 Total 39,787 36,340 Unrecognized net gain (loss) (1,422) 2,114 Accrued postretirement benefit cost recognized in the Consolidated Statement of Financial Position at December $38,365 $38,454 31
The discount rate used in determining the accumulated postretirement benefit obligation was 7.25% as of December 31, 1995 and 8.6% as of December 31, 1994. Medical premium assistance payments are at a fixed dollar amount based on the retiree's years of service and, therefore, the plan is not affected by a health care cost trend rate assumption. Net periodic postretirement benefit cost for 1995, 1994 and 1993 included the following components:
1995 1994 1993 Service cost (benefits earned during the period) $ 818 $ 979 $ 974 Interest cost on projected benefit obligation 2,945 2,820 3,033 Net amortization and deferral (171) 206 (93) Curtailment gain -- -- (1,850) Net periodic postretirement benefit cost $3,592 $4,005 $ 2,064
During 1993 the Company recognized a curtailment gain with the sale of its carpet and rug division. 38 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (13) INCOME TAXES The Company adopted FAS 109, "Accounting for Income Taxes", effective January 1, 1993. The cumulative effect on prior years of the accounting change was charged to net income in 1993 which reduced net income by $48.5 million, or $4.13 per share. Under FAS 109, assets and liabilities acquired in purchase business combinations are assigned their fair values, and deferred taxes are provided for the lower or higher tax bases. Under APB 11, values were assigned net-of-tax. In adopting FAS 109, the Company adjusted the carrying amounts of assets and liabilities acquired in the Cannon and Bigelow acquisitions in 1986 and reduced deferred income tax liabilities to reflect the then current federal tax rate of 34% as opposed to the higher federal tax rates that were in effect when the deferred taxes originated. The carrying amounts have subsequently been adjusted to reflect the increase in the 1993 federal tax rate to 35%. At December 31, 1995, the Company had $52.1 million of deferred tax assets and $110.2 million of deferred income tax liabilities which have been netted for presentation purposes. The significant components of these amounts as shown on the balance sheet are as follows:
12/31/95 12/31/94 Current Noncurrent Current Noncurrent Liability Liability Liability Liability Depreciation $ 636 $ 52,899 $ -- $ 51,176 Inventory valuation 35,924 -- 36,472 -- Deferred compensation (360) (5,031) (392) (5,262) Accruals and allowances (16,401) (4,129) (14,686) (6,439) Operating loss carryforwards (2,155) -- -- -- Other (51) (3,264) 594 3,384 Total deferred tax liabilities $ 17,593 $ 40,475 $ 21,988 $ 42,859
The provision for income taxes for continuing operations included in the Consolidated Statement of Income and Retained Earnings for continuing operations consisted of the following:
1995 1994 1993 Current Federal $ (5,611) $ 5,397 $ 5,483 State 306 56 1,130 Deferred Federal (3,977) 8,327 4,605 State (2,802) 1,758 695 Total income taxes on income from continuing operations before accounting changes $(12,084) $15,538 $11,913
39 FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tabular Amounts in thousands except per share (13) INCOME TAXES (CONTINUED) The income tax effect of items which altered the Company's effective income tax rate from the statutory federal rate were as follows:
1995 1994 1993 Amount Percent Amount Percent Amount Percent Tax at statutory rate $ (9,733) 35.0% $16,199 35.0% $9,408 35.0% State taxes, net (1,623) 5.8 2,037 4.4 1,186 4.4 Effect of tax rate change -- -- -- -- 1,400 5.2 Tax credits (543) 2.0 (567) (1.2) -- -- Prior years tax settlements -- -- (1,714) (3.7) -- -- Other (185) .7 (417) (.9) (81) (.3) Net taxes $(12,084) 43.5% $15,538 33.6% $11,913 44.3%
At December 31, 1995, the Company has net operating loss carryforwards of $49.1 million for state income tax purposes that expire in 2000 through 2010. 40 FIELDCREST CANNON, INC. REPORT OF MANAGEMENT The integrity and objectivity of the information presented in this Annual Report are the responsibility of Fieldcrest Cannon, Inc. management. The financial statements contained in this report were audited by Ernst & Young LLP independent auditors, whose report appears on this page. The Company maintains a system of internal controls which is independently assessed on an ongoing basis through a program of internal audits. These controls include the selection and training of the Company's employees, organizational arrangements that provide a division of responsibilities and communication programs explaining the Company's policies and standards. We believe this system provides reasonable assurance that transactions are executed in accordance with management's authorization; that transactions are appropriately recorded to permit preparation of financial statements that, in all material respects, are presented in conformity with generally accepted accounting principles; and that assets are properly accounted for and safeguarded against loss from unauthorized use. The Board of Directors pursues its responsibilities for the financial statements through its Audit Committee, which consists solely of directors who are neither officers nor employees of the Company. The Audit Committee meets periodically with the independent public accountants, the internal auditors and representatives of management to discuss internal accounting control, auditing and financial reporting matters. Thomas R. Staab VICE PRESIDENT AND CHIEF FINANCIAL OFFICER REPORT OF INDEPENDENT AUDITORS The Shareowners and Board of Directors of Fieldcrest Cannon, Inc. We have audited the accompanying consolidated statement of financial position of Fieldcrest Cannon, Inc. as of December 31, 1995 and 1994, and the related consolidated statements of operations and retained earnings, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fieldcrest Cannon, Inc. at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As explained in Notes 12 and 13 to the consolidated financial statements, effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Greensboro, North Carolina January 30, 1996 41 FIELDCREST CANNON, INC. SELECTED FINANCIAL AND STATISTICAL DATA In thousands of dollars, except per share data SUMMARY OF CONTINUING OPERATIONS (A) 1995 1994 1993 1992 1991 Net sales $1,095,193 $1,063,731 $1,000,107 $981,773 $960,663 Depreciation $ 30,248 $ 28,779 $ 29,524 $ 29,480 $ 28,473 Operating income (loss) (112)(b) 70,538 53,563 60,855 39,613 Income (loss) from continuing operations $ (15,725)(b) 30,745(c) 14,966(d) 15,690(e) 1,395 PER SHARE OF COMMON STOCK: Primary income (loss) from continuing operation $ (2.28)(b) $ 3.02(c) $ 1.24(d) $ 1.39(e) $ 0.13 Fully diluted income (loss) --(b) 2.51(c) --(d) --(e) 0.13 Shareowners' equity 15.68 17.84 13.79 23.76 23.33 Number of employees 13,610 13,926 14,090 14,636 14,935 Number of shareholders 2,082 2,191 2,401 2,735 2,980 SUMMARY OF FINANCIAL POSITION Capital expenditures $ 64,153 $ 51,929 $ 21,594 $ 20,687 $ 41,000 Working capital 268,477 282,461 262,326 296,580 138,227 Total assets 812,946 782,665 740,446 863,991 882,662 Long-term debt 365,262 317,744 294,611 353,419 253,493 Shareowners' equity 215,431 232,202 193,330 284,478 243,173 FINANCIAL RATIOS Return on net sales (1.4)% 2.9% 1.5% 1.6% 0.1% Return on average shareowners' equity (7.0) 14.5 6.8 6.0 0.6 Return on average total assets (2.0) 4.0 1.9 1.8 0.2
(a) On July 30, 1993, the Company completed the sale of its carpet and rug operations. Accordingly, the summary of continuing operations excludes the discontinued carpet and rug operations for all periods presented. (b) Reflects pre-tax restructuring charges of $20.5 million which increased 1995 loss by $12.1 million, or $1.37 per common share. Fully diluted income per share is not presented as effects are anti-dilutive. (c) 1994 income was increased $1.7 million, or $.20 per common share on a primary basis and $.12 per share on a fully diluted basis, as a result of favorable settlements of prior years income taxes. (d) Reflects pre-tax restructuring charges of $10 million and income tax adjustments of $1.4 million which reduced 1993 income from continuing operations before accounting changes by $7.5 million, or $.64 per common share. The Company adopted FAS 106, "Employers' Accounting for Postretirement Benefits other than Pensions" and FAS 109, "Accounting for Income Taxes", effective January 1, 1993. The cumulative effect of these accounting changes reduced 1993 net income by $70.3 million, or $5.99 per common share. Fully diluted income per share is not presented as effects are anti-dilutive. Financial ratios for 1993 are based on income from continuing operations before accounting changes. (e) Before extraordinary charge for early retirement of debt which reduced 1992 net income by $5.2 million ($.46 per common share). Fully diluted income per share is not presented as effects are anti-dilutive. Financial ratios for 1992 are based on income from continuing operations before the extraordinary charge. 42 EX-21 10 EXHIBIT 21 Exhibit 21 Subsidiaries of the Registrant State or Jurisdiction Name in Which Incorporated Amoskeag Company Delaware Amoskeag Management Company Delaware Bangor Investment Company Maine Communications Resource Associates, Inc. Maine Crestfield Cotton Company Tennessee Downeast Securities Corporation Delaware Duxbury Marina Corporation Massachusetts Encee, Inc. Delaware FCC Canada, Inc. Delaware Fieldcrest Cannon Financing, Inc. Delaware Fieldcrest Cannon Licensing, Inc. Delaware Fieldcrest Cannon International, Inc. Delaware Fieldcrest Cannon International Sales Corporation Barbados Fieldcrest Cannon Sure Fit, Inc. Delaware Fieldcrest Cannon Transportation, Inc. Delaware Karafield Wool Company Pennsylvania Moore's Falls Corporation Delaware St. Marys, Inc. Delaware EX-23 11 EXHIBIT 23 Exhibit 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Fieldcrest Cannon, Inc. of our report dated January 30, 1996, included in the 1995 Annual Report to Shareholders of Fieldcrest Cannon, Inc. We also consent to the incorporation by reference in the Registration Statements (Form S-8, Nos. 33-44703, 33-59149, and 33-44705 and Form S-3, No. 33-52325) pertaining to the Director Stock Option Plan of Fieldcrest Cannon, Inc., the 1995 Employee Stock Option Plan of Fieldcrest Cannon, Inc., the Stock Option Agreement between Fieldcrest Cannon, Inc. and James M. Fitzgibbons and the $3.00 Series A Convertible Preferred Stock, respectively, and in the related Prospectuses of our report dated January 30, 1996, with respect to the consolidated financial statements incorporated herein by reference in this Annual Report (Form 10-K) for the year ended December 31, 1995. ERNST & YOUNG LLP Greensboro, North Carolina March 28, 1996 EX-27 12 EXHIBIT 27
5 1,000 US DOLLAR 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 1 9,124 0 168,112 0 228,167 408,849 342,285 0 812,946 140,372 365,262 12,561 0 15 202,855 812,946 1,095,193 1,095,193 966,642 966,642 128,663 0 27,630 (27,809) (12,084) (15,725) 0 0 0 (15,725) (2.28) (2.28)
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