SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Cone Mills Corporation
- ------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Terry L. Weatherford, Vice President, Secretary
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
- ------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
CONE MILLS CORPORATION
GREENSBORO, N.C. 27415
April 1, 1998
Dear Shareholder:
On behalf of the Board of Directors, we are pleased to invite you to
attend the Annual Meeting of Shareholders of Cone Mills Corporation to be held
at 10:00 a.m. on Tuesday, May 12, 1998, at the Cone Corporate Center, 3101
North Elm Street, Greensboro, NC.
The notice of meeting and proxy statement accompanying this letter
describe the matters on which action will be taken. At the Annual Meeting we
will also review the Corporation's activities and provide time for questions
from shareholders.
Please sign and return the enclosed proxy form in the envelope provided as
soon as possible to ensure that your shares will be voted at the meeting.
Sincerely,
/s/ Dewey L. Trogdon
Dewey L. Trogdon
Chairman of the Board
/s/ J. Patrick Danahy
J. Patrick Danahy
President and Chief Executive Officer
[CONE MILLS CORPORATION LOGO APPEARS HERE]
<PAGE>
CONE MILLS CORPORATION
Cone Corporate Center
3101 North Elm Street
Greensboro, NC 27415-6540
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 1, 1998
To the Holders of Common Stock of
Cone Mills Corporation:
The Annual Meeting of the Shareholders of Cone Mills Corporation will be
held at the Cone Corporate Center, 3101 North Elm Street, in Greensboro, North
Carolina, on Tuesday, May 12, 1998, at 10:00 a.m. for the following purposes:
1. To elect three directors as Class III Directors, for a term of three
years, and a Class I Director for a term of one year, or until their successors
are elected and qualified.
2. To ratify the appointment of McGladrey & Pullen, LLP, as independent
auditors for the Corporation for the current fiscal year.
3. To consider and act upon a proposal made by a shareholder for adoption
of a nonbinding resolution urging the directors to arrange for the sale of the
Corporation.
4. To consider and act upon such other business as may properly come
before the meeting and any adjournment thereof.
The Board of Directors of the Corporation has fixed the close of business
on March 13, 1998, as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting.
Your proxy is enclosed. You are cordially invited to attend the meeting,
but whether or not you plan to attend, please date and sign your proxy and
return it in the enclosed postage paid envelope. The giving of this proxy will
not affect your right to vote in person in the event you find it convenient to
attend.
TERRY L. WEATHERFORD
Vice President and Secretary
<PAGE>
CONE MILLS CORPORATION
Cone Corporate Center
3101 North Elm Street
Greensboro, NC 27415-6540
PROXY STATEMENT FOR
ANNUAL MEETING TO BE HELD MAY 12, 1998
DATED: April 1, 1998
Your proxy is solicited on behalf of the Board of Directors of Cone Mills
Corporation (the "Corporation" or "Cone") for use at the Annual Meeting of
Shareholders to be held at the time and place set forth in the accompanying
Notice of Annual Meeting. It may be revoked by you at any time before it is
exercised. All unrevoked proxies that are properly executed will be voted and,
if a choice is specified with respect to any matter to be acted on, the shares
will be voted in accordance with such specifications. If no specifications are
given, the persons named in the accompanying proxy intend to vote the shares
represented thereby in favor of (i) election of the three nominees for Director
(Class III) named herein for terms of three years and the election of a nominee
for Director (Class I) for a term of one year and (ii) ratification of the
Board of Directors' appointment of McGladrey & Pullen, LLP as independent
auditors and against the shareholder proposal relating to sale of the
Corporation.
This Proxy Statement and the enclosed proxy are being first mailed to
shareholders on or about April 1, 1998. The cost of soliciting proxies will be
borne by the Corporation. In addition to solicitation by mail, arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to send proxy materials to their principals, and the Corporation
will reimburse them for their expenses in so doing. Personal solicitation may
also be conducted by telephone and mail by officers and employees of Cone
without added compensation. In addition the Corporation has retained Georgeson
& Company, Inc. to assist in the solicitation of proxies and distribution of
proxy materials for which it will pay approximately $6,000 in fees plus
expenses.
Holders of Common Stock of record at the close of business March 13, 1998,
will be entitled to vote at the meeting. On that date 26,166,933 shares of
Common Stock were outstanding. Each share is entitled to one vote and a
majority of the shares of Common Stock outstanding is necessary to constitute a
quorum for the meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth each person or entity who may be deemed to
have beneficial ownership of more than five percent (5%) of the Company's
outstanding Common Stock:
<TABLE>
<CAPTION>
Name of and Address Amount and Nature of
of Beneficial Owner (1) Beneficial Ownership Percentage of Class
- --------------------------------------------- ---------------------- --------------------
<S> <C> <C>
Norwest Corporation ......................... 1,461,800(2) 5.59%
Sixth and Marquette
Minneapolis, MN 55479-1026
Reich & Tang Asset Management, L.P. ......... 2,142,800(3) 8.19%
600 Fifth Ave.
New York, NY 10020
</TABLE>
- ---------
(1) Does not include Crestar Bank, trustee of the Cone Employee Equity Plan,
which held of record for the plan 2,611,860 shares of Common Stock on
March 13, 1998. This represents 9.98% of the Company's outstanding Common
Stock. The plan trustee votes shares held in the plan only if participants
do not exercise pass-through voting rights, and exercises investment or
dispositive rights only in accordance with the terms of the plan. The
trustee, therefore, disclaims beneficial ownership.
(2) According to a Schedule 13G filed with the Securities and Exchange
Commission by Norwest Corporation on behalf of itself and its subsidiary,
Norwest Bank Colorado, N.A., Norwest Corporation beneficially owns the
1,461,800 shares which includes 1,450,700 shares deemed to be beneficially
owned by Norwest Bank Colorado, N.A. Of the 1,461,800, Norwest has sole
voting power with respect to 1,461,300 shares and shared power to vote as
to 500 shares. It has sole power to dispose of or direct the disposition
of 1,456,400 shares and shared power with respect to 0 shares.
1
<PAGE>
(3) According to a Schedule 13G filed with the Securities and Exchange
Commission by Reich & Tang Asset Management, L.P., it has shared voting
power with respect to 2,142,800 shares, sole voting power on 0 shares,
shared dispositive power on 2,142,800 shares, and no sole dispositive
power.
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES
AND NAMED EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
beneficial ownership of the Corporation's Common Stock as of March 13, 1998:
<TABLE>
<CAPTION>
Name of Director Amount and Nature of
Nominee or Officer Beneficial Ownership (l)(2) Percentage of Class
- ----------------------------------------------- ----------------------------- --------------------
<S> <C> <C>
John L. Bakane (3) ............................ 236,019 *
Doris R. Bray ................................. 19,000 *
James S. Butner (3) ........................... 137,444 *
J. Patrick Danahy (3)(4) ...................... 379,467 1.44%
Jeanette C. Kimmel ............................ 129,000 *
Neil W. Koonce (3)(5) ......................... 165,598 *
Charles M. Reid ............................... 19,000 *
John W. Rosenblum ............................. 7,000 *
Dewey L. Trogdon (6) .......................... 491,250 1.88%
Marvin A. Woolen, Jr. (3)(7) .................. 13,670 *
Cyrus C. Wilson ............................... 100 *
All Directors and Executive Officers as a Group
(15 persons)(3) .............................. 1,811,679 6.84%
</TABLE>
- ---------
* Represents less than 1%.
(1) Unless otherwise indicated, all shares are owned of record and the
beneficial ownership consists of sole voting power and sole investment
power. Includes shares subject to options which are presently exercisable
or are exercisable within 60 days of March 13, 1998 as follows: Mr. Bakane
(74,400 shares), Mr. Butner (28,000 shares), Mr. Danahy (98,310 shares),
Mr. Koonce (28,000 shares), Mr. Woolen (7,600), and 4,000 for each of Mrs.
Bray, Mrs. Kimmel, Mr. Reid, Mr. Rosenblum and Mr. Trogdon, and all
Directors and Executive Officers as a Group (303,310 shares). Does not
include an option to purchase 1,000 shares to be granted to each
nonemployee director as of May 19, 1998, pursuant to the 1994 Stock Option
Plan for Non-Employee Directors.
(2) Does not include shares of the Corporation's Class A Preferred Stock
allocated to the individual accounts of officers in the Cone Mills
Corporation 1983 ESOP.
(3) Includes shares of Common Stock allocated to the individual accounts of
directors and Named Executive Officers in the Cone Mills Corporation
Employee Equity Plan of the 401(k) Program as of December 31, 1997, as
follows:
<TABLE>
<S> <C>
Mr. Bakane .................................................. 31,955 shares
Mr. Butner .................................................. 18,080 shares
Mr. Danahy .................................................. 43,809 shares
Mr. Koonce .................................................. 26,907 shares
Mr. Woolen .................................................. 1,570 shares
All Directors and Executive Officers as a group (15 persons) 164,065 shares
</TABLE>
(4) Includes 72,000 shares owned of record by Mr. Danahy's wife.
(5) Includes 6,000 shares owned of record by Mr. Koonce's wife and 5,018 shares
allocated to Mrs. Koonce's individual account in the Cone Mills
Corporation Employee Equity Plan of the 401(k) Program as of December 31,
1997.
(6) Includes 125,000 shares owned of record by Mr. Trogdon's wife.
(7) Includes 500 shares held in custodian account for minor son.
2
<PAGE>
ITEM 1 -- ELECTION OF DIRECTORS
The Restated Articles of Incorporation of Cone Mills Corporation provide
for a Board of Directors consisting of not less than nine (9) or more than
fifteen (15) members as determined by the majority vote of the entire Board of
Directors. The Restated Articles of Incorporation further provide that the
Board shall be divided into three classes, as nearly equal in number as the
then total number of directors constituting the entire Board permits.
The terms of three Class III Directors expire at the 1998 Annual Meeting.
The persons elected at the Annual Meeting for the Class III directorships will
serve terms of three years to expire at the Annual Meeting in year 2001 or
until their successors are elected and qualified. Each person nominated below
for a Class III directorship is an incumbent director of the Corporation - Mr.
Wilson was elected as a director by the Board of Directors on February 12,
1998. A vacancy exists in the Class I directorships. Nicholas Shreiber is being
nominated for election as a Class I director to serve until the term of the
Class I directors expire at the 1999 Annual Meeting or until his successor is
elected and qualified.
The persons nominated below will be elected if they receive a plurality of
the votes cast for their election. Abstentions and broker nonvotes will not
affect the election results if a quorum is present. Unless otherwise specified,
the persons named in the accompanying proxy intend to vote the shares
represented by proxy for election of the nominees named below. If any nominee
should not be available to serve for any reason (which is not anticipated), the
proxy holders may vote for substitute nominees designated by the Board of
Directors. A proxy cannot be voted for more than the number of nominees named.
The Board of Directors recommends a vote FOR the Nominees for election as
directors.
A. The following information is furnished with respect to the nominees:
<TABLE>
<CAPTION>
Name of Nominee Present Age
- ------------------------------------------ -------------
<S> <C>
NOMINEES FOR THREE YEAR TERM (CLASS III)
Doris R. Bray 60
Dewey L. Trogdon 66
Cyrus C. Wilson 60
NOMINEE FOR ONE YEAR TERM (CLASS I)
Nicholas Shreiber 49
<CAPTION>
Principal Occupation; Business
Experience Past Five Years; Director
Name of Nominee and other Directorships Since
- ------------------------------------------ ----------------------------------------------------------------------------- ---------
<S> <C> <C>
NOMINEES FOR THREE YEAR TERM (CLASS III)
Doris R. Bray Partner, Schell Bray Aycock Abel & Livingston, P.L.L.C. (Attorneys at 1989
Law) (1987-Present); Director, Vanguard Cellular Systems, Inc.
Dewey L. Trogdon Retired March 31, 1992; Chairman of the Board of Directors 1978
(1981-Present); Chief Executive Officer of the Corporation (1980-1990);
President of the Corporation (1979-1980; 1987-1989); Director, First Union
Corporation
Cyrus C. Wilson Independent Consultant in international marketing and sales and business 1998
development (1993-present); Partner, Price Waterhouse LLP (1985-1993)
NOMINEE FOR ONE YEAR TERM (CLASS I)
Nicholas Shreiber Director, President and Chief Executive Officer, Tetra Pak Americas Inc., a --
member company of Tetra Pak Group (processing and packaging systems
for liquid foods) (1991-present); Director, Grupo Prove-Quim (chemical
distributing company in Mexico).
</TABLE>
3
<PAGE>
B. The following information is furnished with respect to directors continuing
in office.
<TABLE>
<S> <C> <C> <C>
CLASS I (Term expiring in 1999)
John L. Bakane 47 Executive Vice President of the Corporation (1995-present); President, Apparel 1989
Product Group (1997-present); Chief Financial Officer of the Corporation
(1988-1997); Vice President of the Corporation (1986-1995)
Charles M. Reid 63 Director, President and Chief Executive Officer, United Guaranty Corporation 1988
(private mortgage insurer), a member company of American International
Group (1987-Present)
CLASS II (Term expiring in 2000)
J. Patrick Danahy 54 President and Chief Executive Officer of the Corporation (1990-Present); 1989
President and Chief Operating Officer (1989-1990); Vice President of the
Corporation and President of the Cone Finishing Division (1986-1989)
Jeanette C. Kimmel 59 Private Investment Management 1971
John W. Rosenblum 54 Dean, Jepson School of Leadership Studies, University of Richmond 1993
(1996-Present); Tayloe Murphy Professor of the Darden Graduate School of
Business Administration, University of Virginia (1993-1996); Dean, Darden
Graduate School of Business Administration (1982-1993); Director, Cadmus
Communications Corporation; Chesapeake Corporation; Comdial Corporation;
and T. Rowe Price Associates.
</TABLE>
COMMITTEES AND DIRECTOR ATTENDANCE
During the year ended December 31, 1997, the Board of Directors of the
Corporation held eight meetings and the Executive, Audit, and Compensation
Committees held five, four, and two meetings, respectively. Each director
attended at least 75% of the aggregate of Board of Directors' meetings and
meetings of Committees of the Board on which he or she served during 1997.
The Executive Committee generally has the same authority as the Board to
manage the affairs of the Corporation but may not make determinations with
respect to dissolutions, mergers, amendments to the Articles of Incorporation
or Bylaws, compensation or removal of directors, or declaration of dividends.
Executive Committee members are Dewey L. Trogdon, Chair, John L. Bakane, Doris
R. Bray, J. Patrick Danahy and Charles M. Reid.
The Audit Committee's principal responsibilities consist of recommending
to the Board of Directors the selection of the Corporation's independent
accountants, reviewing the scope and results of completed audits, reviewing the
Corporation's internal audit staff functions and evaluating the quality of the
Corporation's financial reporting and internal control systems. Audit Committee
members are Doris R. Bray, Chair, and Jeanette C. Kimmel.
The Corporation also has a Compensation Committee. See "Compensation
Committee Report on Executive Compensation" and "Compensation Committee
Interlocks and Insider Participation."
The Board of Directors does not have a standing nominating committee;
however, with respect to nominations, the Executive Committee considers and
makes recommendations to the Board with respect to the size and composition of
the Board and candidates for membership on the Board. The Committee has not
established procedures for the submission by shareholders of proposed
candidates for its consideration.
SECTION (16)(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, the Company's directors, its executive
officers, and any persons holding more than 10 percent of the Company's stock
are required to report their ownership of the Company's stock and any changes
in that ownership to the Securities and Exchange Commission. Specific due dates
for these reports have been established and the Company is required to report
in this proxy statement any failure to file by these dates during fiscal 1997
or prior fiscal years. All of these filing requirements were satisfied by its
directors and officers except for a report relating to beneficial ownership of
shares held by his spouse in the 401(k) Program was filed late by Neil W.
Koonce and an initial report on ownership of a stock option under an employee
stock plan was filed late by Marvin A. Woolen. In making these statements, the
Company has relied on the written representations of its directors and officers
and copies of the reports that they have filed with the Commission. The Company
is not aware of the existence of any ten percent (10%) holders of the Company's
stock.
4
<PAGE>
EXECUTIVE COMPENSATION
The following information relates to all compensation awarded to, earned
by or paid pursuant to a plan or otherwise, to (i) the Chief Executive Officer
of the Corporation (the "CEO") and (ii) the four most highly compensated
executive officers, other than the CEO, who were serving as executive officers
of the Corporation on December 28, 1997. The CEO and the four most highly
compensated officers are referred to herein as the Named Executive Officers.
The following information does not reflect any compensation earned and
paid to the Named Executive Officers subsequent to December 31, 1997, unless
otherwise indicated. Any such compensation earned and paid to the Named
Executive Officers during 1998 will be recorded in the proxy statement for the
Corporation's 1999 Annual Meeting of Shareholders, unless such compensation is
required to be reported previously.
Summary Compensation Table
The following table sets forth for the Named Executive Officers for each
of the last three fiscal years annual compensation amounts as indicated by the
applicable table headings. Annual Compensation, columns (c), (d) and (e),
includes base salary and bonus earned during the year covered and, if
applicable, other annual compensation not properly categorized as salary or
bonus. Long-Term Compensation, column (g), reports the number of shares
underlying stock option grants to the Named Executive Officers during the
respective fiscal year. The Named Executive Officers were not awarded, granted
or paid any forms of compensation that are required to be reported in the
Long-Term Compensation column (h).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------------
Annual Compensation Awards Payouts
--------------------------------- ------------------------------- ---------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Other Annual Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Restricted Stock Options Payouts Compensation
Position Year ($) ($)(1) ($)(2) Awards ($)(3) (#) ($) ($)(4)
- ------------------------ ------ --------- -------- -------------- ------------------ ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Patrick Danahy 1997 490,000 -- -- 127,500 35,000 -- 10,717
President and 1996 490,000 -- -- -- 50,000 -- 12,146
Chief Executive 1995 450,000 -- -- -- -- -- 9,038
Officer
John L. Bakane 1997 300,000 -- -- 85,000 20,000 -- 7,090
Executive Vice 1996 300,000 -- -- -- 40,000 -- 6,556
President and 1995 280,000 -- -- -- -- -- 6,344
President, Cone
Apparel Products
Marvin A. Woolen, Jr. 1997 210,000 -- -- 34,000 8,000 -- 9,281
Vice President 1996 210,000 -- -- -- 15,000 -- 3,855
Cotton Purchasing 1995 98,415 10,000 -- -- -- -- 928
Neil W. Koonce 1997 185,000 -- -- 17,000 5,000 -- 6,624
Vice President and 1996 185,000 -- -- -- 10,000 -- 6,167
General Counsel 1995 177,000 15,000 -- -- -- -- 6,045
James S. Butner 1997 175,000 -- -- 17,000 5,000 -- 9,285
Vice President 1996 175,000 -- -- -- 10,000 -- 6,243
Industrial and 1995 167,000 18,000 -- -- -- -- 6,243
Public Relations
</TABLE>
- ---------
(1) All bonuses were paid pursuant to a management incentive plan for the
fiscal years shown. See "Compensation Committee Report on Executive
Compensation."
(2) Does not include the amount of the incremental cost of certain incidental
benefits, perquisites and other benefits, securities or property which in
the aggregate do not exceed the lesser of $50,000 or 10% of the total
amount of salary and bonus reported for the Named Executive Officers.
(3) Represents the market value on the date of grant of the award of restricted
stock pursuant to the 1992 Amended and Restated Stock Plan. The number and
value of the aggregate restricted stock holdings as of December 28, 1997
for each of the Named Executive Officers are as follows: Mr. Danahy --
15,000 shares ($120,000); Mr. Bakane -- 10,000 shares ($80,000); Mr.
Woolen -- 4,000 shares ($32,000); Mr. Koonce -- 2,000 shares ($16,000);
and Mr. Butner -- 2,000 shares ($16,000).
5
<PAGE>
(4) Represents the Corporation's matching contributions to the 401(k) Program
(Supplemental Retirement Plan and Employee Equity Plan), the dollar value
of insurance premiums paid by the Corporation with respect to group term
life insurance and universal life insurance for benefit of the Named
Executive Officers and service awards as follows:
A. 401(k) Plan matching contributions for 1997 were $4,750 each for: Messrs.
Danahy, Bakane, Woolen, Koonce, and Butner.
B. Insurance Premiums for 1997 respectively: Mr. Danahy ($5,967); Mr. Bakane
($2,340); Mr. Woolen ($4,531); Mr. Koonce ($1,874) and Mr. Butner
($2,035).
C. A service award of $2,500 was granted to Mr. Butner in 1997 pursuant to
the Company's service award program.
Stock Option/SAR Grants in Last Fiscal Year
The following sets forth certain information with respect to options
granted to the Named Executive Officers during the fiscal year ended December
28, 1997.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Number of Percent of
Securities Total Options Exercise
Underlying Granted or
Options to Employees Base Price Expiration Grant Date
Name Granted (#) (1) in Fiscal Year ($/Sh) Date Present Value $(2)
- ----------------------- ----------------- ---------------- ------------ ------------ -------------------
<S> <C> <C> <C> <C> <C>
J. Patrick Danahy 35,000 14.83 8.50 11/09/2007 $154,350
John L. Bakane 20,000 8.47 8.50 11/09/2007 $ 88,200
Marvin A. Woolen, Jr. 8,000 3.39 8.50 11/09/2007 $ 35,280
Neil W. Koonce 5,000 2.12 8.50 11/09/2007 $ 22,050
James S. Butner 5,000 2.12 8.50 11/09/2007 $ 22,050
</TABLE>
- ---------
(1) The Corporation did not grant SARs in 1997. All options granted in 1997
were Incentive Stock Options ("ISO's") except that 23,250 and 8,250 of
options granted respectively to Messrs. Danahy and Bakane were
Nonqualified Stock Options. All options except as noted below are
exerciseable six months after grant date (November 10, 1997) with 20% of
the shares covered becoming exerciseable at that time and an additional
20% of the option shares becoming exerciseable on each successive
anniversary date. Messrs. Danahy's and Bakane's ISO's are fully
exerciseable after May 10, 1998.
(2) The Black-Scholes option pricing model was used to estimate the present
value of the options as $4.41 per share. The model assumed a dividend
yield of 0%, a risk-free interest rate of 5.75%, expected price volatility
based on historical experience of 34.35%, and an expected option life of 8
years based on historical experience. The assumptions are deemed to be
reasonable but there is no assurance that the assumptions will be true and
an accurate determination of present value. The actual value, if any, will
ultimately depend upon the excess of the market price of shares of Common
Stock over the exercise price on the date the option is exercised.
Aggregated Option Exercises and Year-End Option Value Table
There were no stock option exercises by the Named Executive Officers
during 1997. The following table includes the number of shares covered by
exercisable and unexercisable options as of December 28, 1997. Also reported,
both as to exercisable and unexercisable options, are the values of
"in-the-money" options, which are options with a positive spread between the
fiscal year-end market price of the underlying Common Stock and the exercise
price of such stock options.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997 AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at 12/28/97 at 12/28/97 ($)(1)
--------------------- ---------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ----------------------- ------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
J. Patrick Danahy -- -- 64,000/91,000 0/0
John L. Bakane -- -- 48,000/62,000 0/0
Marvin A. Woolen, Jr. -- -- 3,000/20,000 0/0
Neil W. Koonce -- -- 23,000/17,000 0/0
James S. Butner -- -- 23,000/17,000 0/0
</TABLE>
- ---------
(1) Based on $8.00 fair market value (closing price of NYSE) on December 26,
1997, the last trading day of fiscal year 1997.
Long-Term Incentive Plan Awards Table
The Corporation had no long-term incentive plan in effect in 1997.
Pension Plan Table
The following table sets forth in the ERP column the estimated annual
benefits payable upon retirement in 1997 at age 65 under the Employees'
Retirement Plan of Cone Mills Corporation (the "ERP") in the compensation and
years of service categories indicated. Benefit amounts shown are payable for
life with no contingent death benefits. Benefits are based upon total annual
salary and bonus, compensation in excess of the amount covered by Social
Security as determined in the year of retirement and total years of service.
The years of service credited as of March 31, 1998, for the Named Executive
Officers are: Mr. Danahy -- 26 years; Mr. Bakane -- 22 years; Mr. Woolen -- 2
years; Mr. Koonce -- 24 years; and Mr. Butner -- 25 years.
Pension benefits under the ERP are subject to certain limitations imposed
by the Internal Revenue Code of 1986, as amended (the "Code"). The aggregate
annual pension that may be paid under the ERP and all other defined benefit
plans of the Corporation taken together is generally restricted to $125,000 in
1997 and $130,000 in 1998. In addition, the Code limits annual compensation of
each employee that can be taken into account in computing pension benefits to
$160,000 in 1997 and 1998. These amounts may be adjusted for cost of living as
provided in the Code. Pension benefits that cannot be paid from the ERP by
reason of the limitations in the Code are provided by the Corporation's Excess
Benefit Plan and by the Supplemental Executive Retirement Plan, both of which
are unfunded, nonqualified benefit plans. Such amounts are identified in the
following table in the columns headed "NQP". The Corporation has established a
"rabbi" trust agreement that will be funded upon a change of control with the
accrued vested benefits in these nonqualified plans. A change of control is
defined as a transaction in which a 50% change in the ownership of the
outstanding shares occurs, a report is filed with the Securities and Exchange
Commission on Schedule 13D or 14D-1 which discloses a person has become the
beneficial owner of more than 50% of the Common Stock, or a change in the
majority of the directors during a two year period of time not approved by
two-thirds of the directors who were in office at the beginning of the period.
The Corporation accrues annually the estimated expense for providing
benefits under the ERP and the nonqualified plans, as determined by an
independent consulting actuary; however, this expense cannot be specifically
allocated to any individual or to the Named Executive Officers as a group under
the funding method used by the actuary.
7
<PAGE>
Approximate Annual Benefit for Years of Service Indicated (1)
<TABLE>
<CAPTION>
Average Annual
Compensation for
Highest Consecutive 15th Year 20th Year 25th Year 30th Year 35th Year
Five Years During ------------------- ------------------- ------------------- -------------------- --------------------
Last Ten Years Before
Retirement ERP NQP ERP NQP ERP NQP ERP NQP ERP NQP
- ---------------------- -------- ---------- -------- ---------- -------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 57,970 4,545 76,627 4,545 89,859 2,778 101,305 2,778 108,852 1,515
$ 250,000 58,092 20,892 76,816 25,766 90,115 26,951 101,597 29,933 109,181 30,281
$ 300,000 58,092 37,360 76,816 47,175 90,115 51,379 101,597 57,381 109,181 59,375
$ 400,000 58,092 70,297 76,816 89,993 90,115 100,236 101,597 112,276 109,181 117,564
$ 500,000 58,092 103,234 76,816 132,811 90,115 149,092 101,597 167,171 109,181 175,753
$ 600,000 58,092 136,171 76,816 175,629 90,115 197,949 101,597 222,066 109,181 233,941
$ 700,000 58,092 169,108 76,816 218,447 90,115 246,805 101,597 276,961 109,181 292,130
$ 800,000 58,092 202,045 76,816 261,265 90,115 295,662 101,597 331,856 109,181 350,319
$ 900,000 58,092 234,982 76,816 304,083 90,115 344,518 101,597 386,751 109,181 408,507
$1,000,000 58,092 267,919 76,816 346,901 90,115 393,375 101,597 441,646 109,181 466,696
</TABLE>
- ---------
(1) Pension benefits provided by the ERP with respect to service after 1983 are
subject to a "floor offset" arrangement in conjunction with the Cone Mills
Corporation 1983 ESOP (the "1983 ESOP"), a separate defined contribution
pension plan maintained by the Corporation. The amounts shown in the above
table are calculated on the assumption that the participant elects to
receive the maximum pension benefit available under the ERP, and in
accordance with the terms of each plan, authorizes a transfer of funds in
his 1983 ESOP account to the trustee of the ERP in a dollar amount equal
to the actuarial equivalent of the pension benefit attributable to service
after 1983. The balance, if any, in the 1983 ESOP account will be
distributed to the participant. To the extent that a participant's 1983
ESOP account is insufficient to fund the pension benefits attributable to
service after 1983, the cost of benefits not covered by the 1983 ESOP will
be funded through the ERP. If the participant does not elect to transfer
funds from his 1983 ESOP account to the trustee of the ERP, his account
balance will be distributed in accordance with the terms of the 1983 ESOP,
and his pension payable from the ERP with respect to service after 1983
will be reduced (but not below zero) by the actuarial equivalent of his
1983 ESOP account balance. The 1983 ESOP is designed to invest primarily
in qualifying securities under ERISA. Assets of the 1983 ESOP consist of
shares of the Corporation's Class A Preferred Stock and other money market
and marketable debt securities that are allocated to individual accounts
of participants. The fair market value of the stock is determined by
independent appraisal performed several times each year. No contributions
to the 1983 ESOP have been made for salaried employees since 1986. The
value of the account in the 1983 ESOP for each of the Named Executive
Officers as of December 31, 1996, was: Mr. Danahy -- $126,129; Mr. Bakane
-- $67,644; Mr. Woolen -- $0; Mr. Koonce -- $48,787; and Mr. Butner --
$23,722.
Compensation of Directors
Directors who are also officers of the Corporation do not receive
additional compensation for service as directors or as members of committees of
the Board of Directors. Nonemployee directors receive a retainer fee of $17,000
per year and an attendance fee of $1,000 per diem for meetings of the Board of
Directors. No additional fee is paid for meetings of any committee of the Board
held on the same day as a Board meeting. The fee for a Committee meeting not
held on the same day as a Board meeting is $500. Travel expenses of directors
incurred in attending meetings are reimbursed by the Corporation. In 1997,
retainers and attendance fees paid to all directors totaled $140,510.
The Shareholders approved at the 1994 annual meeting the 1994 Non-Employee
Director Stock Option Plan whereby each nonemployee director receives each year
after the annual meeting of shareholders a stock option grant to purchase 1,000
shares of Common Stock at the fair market value of a share of Common Stock on
the grant date. The grant date is the fifth business day after the annual
meeting.
The Board of Directors has approved a Consulting Agreement between the
Corporation and Dewey L. Trogdon whereby Mr. Trogdon provides consultation and
advice. Mr. Trogdon's consulting fee is $15,000 per calendar quarter and he is
reimbursed for expenses incurred in providing such consulting services. The
consulting fee payments are in addition to any pension or other supplemental
retirement benefits that Mr. Trogdon is entitled to receive by reason of his
service as an employee of the Corporation. The consulting agreement has been in
effect since 1993 and has been renewed each year upon agreement by the parties.
8
<PAGE>
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Mr. Charles M. Reid,
Mrs. Jeanette C. Kimmel, and Dr. John W. Rosenblum, all of whom are directors
who are not currently or formerly employees of the Corporation.
Compensation Committee Report on Executive Compensation
The Corporation's executive compensation program is administered by the
Compensation Committee of the Board of Directors. The Committee's membership is
comprised of nonemployee directors, none of whom participate in any of the
plans administered by the Committee. It is the responsibility of the
Compensation Committee to review and make recommendations to the Board of
Directors concerning the salaries and to approve grants of incentive
compensation, stock options, restricted stock or performance shares for the
Chief Executive Officer and the other executive officers of the Corporation.
Compensation Policy
The Corporation strives to provide executives an opportunity to earn
compensation that is fair, reasonable and competitive with that paid by
comparable companies to executives in similar positions with similar duties and
responsibilities. In accordance with the policy, the Committee is guided by
three goals as it considers the compensation of executive officers. First,
executive compensation must be effective in attracting, motivating and
retaining executives who possess the skills and experience necessary to ensure
the Corporation's success. Second, the Corporation should recognize and reward
executives for their contributions to the success of the business. Third, the
corporation must be aware of the importance of planning and controlling the
cost of executive compensation.
To implement this policy, the Corporation maintains an executive
compensation program that consists of base salaries, annual incentive plans,
stock plans and competitive benefits. It is the belief of the Committee that
through these components executives are provided compensation and benefits that
are competitive; are provided incentives for additional annual compensation
that is earned only upon achievement of performance standards as established
and approved each year; and are provided long-term incentive compensation
through the grant of stock options, restricted stock or performance shares that
can appreciate in value.
In managing the compensation policy, the Committee considers the salary,
annual incentive and bonus, and long term incentives for each executive
position as total direct cash compensation. The long term incentive portion is
comprised of stock options, valued by the Black-Scholes method, and restricted
or perfomance shares. An analysis of total direct cash compensation is prepared
specifically for the Corporation and the Compensation Committee by the
consulting firm, William M. Mercer, Incorporated. In the analysis, the
Corporation's executive positions are matched with similar positions at other
companies based on data from executive compensation surveys, a proprietary
survey of the textile industry, and proxy statements of companies that are in
the Peer Group for the Perfomance Graph set forth below. From the survey, a
"target" of total direct cash compensation and the "mix" of the components for
each executive position are developed by the Committee in consultation with the
consulting firm. These respective benchmarks are used as guidelines in
developing the total compensation and the components for each position
analyzed.
Salaries
The Committee's objective in establishing the base salaries of the Named
Executive Officers is to provide salaries at competitive market levels with
other industry leaders in order to reward and encourage individual performance.
The salary of the Chief Executive Officer is evaluated solely by the
Compensation Committee and the salary of other executive officers is determined
by the Committee based upon recommendations from the Chief Executive Officer.
Final approval of salaries of the Chief Executive Officer and the other
executive officers are made by the independent members of the Board of
Directors after receiving recommendations of the Committee. The Committee deems
its compensation decisions to be a cumulative process involving a substantial
amount of judgement concerning an executive's experience and responsibilities
against objective information furnished by the compensation consultant.
In developing current salary levels, including that of the Chief Executive
Officer, the Committee reviewed the Corporation's assessment of salaries in the
textile industry in addition to the analysis of the total direct cash
compensation prepared by the consulting firm. In the analysis, a weighted
composite for salaries was developed, and the Committee compared executive
salaries to the market composite and considered those comparisons in making
salary decisions. In general, the Committee targets executive salaries at the
market median; however, in a given year an individual executive's salary may
vary from median due to experience, performance, or other factors deemed
relevant by the Committee and considered on a subjective basis. For 1997 the
Corporation imposed a salary wage freeze and the salaries of the Chief
Executive Officer and the Named Executive Officers were similarly affected;
however, for 1998 a salary increase for the Chief Executive
9
<PAGE>
Officer was recommended and approved in order to place his salary closer to the
market median rate. Similar adjustments to the salaries of the Named Executive
Officers was made.
Incentive Compensation
The Corporation maintains the 1997 Senior Management Incentive
Compensation Plan ("1997 Plan") for the officers and division presidents and
other key management employees as selected by the Committee. The 1997 Plan,
approved by the shareholders at the 1996 annual meeting, was specifically
designed to assure compensation paid is qualified performance based
compensation as defined in Section 162(m) of the Internal Revenue Code. (See
discussion below entitled Deductibility of Compensation). The 1997 Plan sets
forth the business criteria on which incentive compensation can be granted
according to pre-established objective, numerical formulae and the process by
which goals are established and compensation is awarded. Up to 90% of base
salary can be paid as incentive compensation to a participant. The Committee
believes that not all incentive compensation can be objectively measured even
though it is based upon strategic performance goals and that some judgemental
discretion is warranted in administering compensation plans. Upon the
Committee's recommendation, the Board of Directors established in 1996 a
separate plan entitled the 1997 Senior Management Discretionary Bonus Plan
("1997 Bonus Plan") that authorizes the grant of a completely discretionary
bonus in an amount not to exceed 30% of base salary if the Committee and the
Board deem special circumstances warrant. An award under the 1997 Bonus Plan
would not qualify as perfomance based compensation under Code Section 162(m).
Pursuant to the 1997 Plan, participants could earn for 1997 annual cash
incentive awards based upon the achievement of corporate and individual goals
established at the beginning of the year. Performance goals were set at the
corporate level and at division levels depending upon the responsibilities of
each of the executives. Corporate level performance targets were determined by
measuring return on capital employed and earnings per share. The Committee
examined the returns on capital employed and earnings of other public companies
(including companies that appear in the Performance Graph below) as it
established and approved these targets. Division-level goals were established
based upon return on capital employed for the division. Perfomance against the
goals is reviewed by the Committee and awards, if any, are made after the close
of the fiscal year.
The achievable incentive award for each participant was based upon a blend
of corporate and/or division and individual goals tailored to that particular
executive, based upon his or her responsibilities. Specifically, for the Chief
Executive Officer, the corporate goals of return on capital employed and
earnings per share account for 80% of his incentive compensation and 20% is
attributable to individual goals. The weight given to each factor comprising
the incentive award varies per each executive.
The Corporation's performance for 1997 did not meet the minimal level of
profitability for the payment of incentives pursuant to the 1997 Plan even
though some business units achieved their respective divisional goals as to
return on capital employed. Accordingly, no incentive payments based on
corporate, divisional, or individual performance were granted for the year to
any participant including the Chief Executive Officer and the Named Executive
Officers pursuant to the 1997 Plan nor were any bonuses paid pursuant to the
1997 Bonus Plan.
Stock Options, Performance Shares, and Restricted Stock
The Corporation maintains the Amended and Restated 1992 Stock Plan through
which key management employees have received grants of stock options and
restricted shares and may receive in the future grants of performance shares.
Grants of options or shares comprise the long term incentive component of the
total direct cash compensation analysis discussed above and the Committee uses
the analysis and recommendations of the Chief Executive Officer, for other
participants, as a guideline in making awards.
At the 1996 annual meeting of shareholders, a proposal to amend and
restate the 1992 plan as the Amended and Restated 1992 Stock Plan was approved.
The amendments (i) authorized the grant of "restricted stock" and "performance
shares" in a total aggregate amount not to exceed 200,000 shares and (ii) added
a provision that no individual grantee may receive grants of restricted stock,
performance shares, or options to purchase shares exceeding in the aggregate
more than 200,000 shares under the plan. The addition of the limitation on the
number of shares that could be awarded or granted to any one individual was to
conform to a requirement of Code Section 162(m) so as to assure that any
"compensation" realized was tax deductible.
It is the belief of the Committee that, since executives earn no rewards
through stock options unless the stock price increases, this form of executive
compensation has the potential to benefit shareholders as well as executives by
aligning the interests of the Corporation's executives with those of
shareholders. The plan permits the granting of both incentive stock
10
<PAGE>
options, as defined under the Internal Revenue Code, and nonqualified options.
The exercise price of these options may not be less than 100 percent of the
fair market value of the Common Stock on the date the option is granted.
Nonqualified stock options granted by the Committee may include a provision
whereby the Corporation will pay to the executive an amount that is equal to
the savings the Corporation realizes through tax deductions related to the
option exercise. The amount of payments, if any, to the Named Executive
Officers under this tax reimbursement feature of the stock option plans is
reported in column (e) of the Summary Compensation table for the fiscal year
indicated. The Committee believes this form of compensation is in accordance
with the Compensation Policy of the Committee because it enables the executives
to retain shares that otherwise may be sold to meet tax obligations.
The Plan authorizes the Committee (i) to award restricted stock which
shall contain conditions by which rights to the stock issued to the grantee are
forfeited and (ii) to grant performance shares which shall confer upon the
grantee the right to receive a specified number of shares contingent upon the
achievement of specified corporate or individual performance objectives. The
Committee recommended amending the plan to authorize the grant of up to 200,000
in total of shares of restricted stock or performance shares as such capability
would give it greater flexibility in structuring a stock-based long term
incentive program to meet the purposes of the plan for different levels of key
management employees.
The Compensation Committee currently operates under the general objective
that grants to executives of stock options or restricted or performance shares
should be considered on an annual basis. The Corporation's consultant provides,
as part of its comparative analysis, advice as to equity ownership of and the
size of grants to the named executive officers of public companies within the
textile industry including members of the Corporation's Peer Group. The grants
of restricted shares and stock options in 1997 to the Chief Executive Officer
and the Named Executive Officers are set forth in the Summary Compensation
Table and Stock Option/SAR table above. The Committee's grant of stock options
and restricted shares in the latter part of 1997 reflected an intent to
increase the value of the long term incentive component for the Chief Executive
Officer as compared to annual salary and opportunities for annual incentives.
Deductibility of Compensation
As part of the Omnibus Budget Reconciliation Act passed by Congress in
1993, the Internal Revenue Code of 1986 was amended to add Section 162(m),
which limits the deductibility for federal income tax purposes of compensation
paid to the Chief Executive Officer and the next four most highly compensated
executive officers of the Company. Under Section 162(m), compensation paid to
each of these officers in excess of $1 million per year is not deductible
unless it is "performance based." The Committee did not consider the
deductibility limits in making its compensation decisions for any one of the
Named Executive Officers for 1997 or 1998 fiscal years as the deductibility
limits would not be exceeded under any circumstances. However, the Committee's
policy is to design and administer compensation programs that meet the
objectives set forth above and that reward executives for corporate performance
which meets established financial goals, and to the extent reasonably
practicable and to the extent consistent with its other compensation
objectives, to maximize the amount of compensation expense that is tax
deductible by the Corporation. The adoption of the 1997 Senior Management
Incentive Compensation Plan and the amendments to the 1992 Stock Option Plan
described above were recommended as part of such policy.
Compensation Committee
Charles M. Reid, Chair
Jeanette C. Kimmel
John W. Rosenblum
Performance Graph
The following graph compares the percentage change in the cumulative total
shareholder return on the Corporation's Common Stock with the cumulative return
of the Standard & Poor's 500 Stock Index and with a peer group index developed
by KPMG Peat Marwick, assuming reinvestment of dividends. The Peer Group index
has been constructed by calculating the cumulative total return of the common
stock of the following companies: Burlington Industries, Inc.; Delta Woodside
Industries, Inc.; Dixie Yarns, Inc.; Fieldcrest Cannon, Inc.; Guilford Mills,
Inc.; and Springs Industries, Inc. The return of each peer company was weighted
according to its stock market capitalization as of the beginning of the period.
11
<PAGE>
COMPARISON OF SHAREHOLDER RETURN
AMONG CONE MILLS, S&P 500 AND PEER GROUP
[GRAPHIC APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
Cone Mills $100 $118 $ 83 $ 79 $ 55 $ 54
S&P 500 $100 $110 $112 $153 $189 $252
Peer Group $100 $102 $ 87 $ 90 $ 92 $123
12
<PAGE>
ITEM 2 -- SELECTION OF AUDITORS
The Corporation's Board of Directors has appointed McGladrey & Pullen,
LLP, independent certified public accountants, as auditors of the Corporation's
records for the fiscal year 1998. McGladrey & Pullen, LLP, or its predecessor
has acted as auditors for the Corporation since 1943 and continue to be
considered by the Board to be well qualified.
Although not required to do so, the Board believes it is desirable to
submit its appointment of said firm to the shareholders at the Annual Meeting
for ratification. Representatives of McGladrey & Pullen, LLP, are expected to
be present at the meeting and will be available to respond to appropriate
questions or make a statement if they desire to do so. The Board of Directors
recommends a vote FOR the ratification of the appointment of McGladrey &
Pullen, LLP.
ITEM 3 -- SHAREHOLDER PROPOSAL
William Steiner, 4 Radcliff Drive, Great Neck, New York 11024, who owns
500 shares of Common Stock in a street name account, has submitted the
following proposal and supporting statement for inclusion in the proxy
statement for and presentation at the 1998 annual meeting of shareholders:
MAXIMIZE VALUE RESOLUTION
"Resolved that the shareholders of Cone Mills Corporation urge the Cone
Mills Corporation Board of Directors to arrange for the prompt sale of Cone
Mills Corporation to the highest bidder.
The purpose of the Maximize Value Resolution is to give all Cone Mills
Corporation shareholders the opportunity to send a message to the Cone
Mills Corporation Board of Directors that they support the prompt sale of
Cone Mills Corporation to the highest bidder. A strong and or majority vote
by the shareholders would indicate to the board the displeasure felt by the
shareholders of the financial performance of the Company over many years
and the drastic action that should be taken. Even if it is approved by the
majority of the Cone Mills Corporation shares represented and entitled to
vote at the annual meeting, the Maximize Value Resolution will not be
binding on the Cone Mills Corporation Board. The proponent, however,
believes that if this resolution receives substantial support from the
shareholders, the board may choose to carry out the request set forth in
the resolution.
The prompt auction of Cone Mills Corporation should be accomplished by any
appropriate process the board chooses to adopt including a sale to the
highest bidder whether in cash, stock or a combination of both. It is
expected that the board will uphold its fiduciary duties to the utmost
during the process.
The proponent further believes that if the resolution is adopted, the
management and the board will interpret such adoption as a message from the
Company's stockholders that it is no longer acceptable for the board to
continue with its current management plan and strategies."
The affirmative vote of a majority of the votes cast, in person or by
proxy, on this matter is required to approve the above-described proposal.
Abstensions and broker non-votes will not affect the vote. The Board of
Directors recommends a vote AGAINST this proposal for the reasons cited below.
Proxies, unless they contain contrary written instructions, will be voted
AGAINST the proposal.
13
<PAGE>
BOARD OF DIRECTORS STATEMENT IN OPPOSITION
The Board of Directors believes that this proposal would not serve the
Company's best interests and, in fact, believes the adoption of the proposal
would be detrimental to the interest of the shareholders. The Board recommends
a vote AGAINST the proposal.
The Board of Directors is aware of its duty to act in the best interest of
all shareholders in managing and supervising the affairs of the corporation.
Maximizing shareholder value is considered by the Board to be an important
component of that duty and the subject of shareholder values is a consideration
in all deliberations of the Board of Directors and management. All directors of
the Company are also shareholders and share a commonality of interest with
other shareholders.
The Board of Directors reviews annually the business plan for each
operating unit of the Company for the forthcoming year and on a regular basis
reviews a strategic plan for the Company's operations on a continuing
two-to-five year time line. Management quarterly evaluates the contributions of
each business unit to the Company's performance and assesses the performance
against the strategic business plan. These reports along with the prospects for
the business units are constantly analyzed and this analytical process in part
forms the basis for decisions on long-term capital investments, on divestitures
or closing of operating units or facilities that are not meeting the desired
returns on capital employed, on the sale of businesses for the employment of
after-tax proceeds in other operations that prospectively can provide greater
returns, on consideration of acquisition prospects, and on other strategic
initiatives.
The Board is aware of the unsatisfactory performance of the Company
relative to profitability and constantly reviews and assesses the elements that
have contributed to the lack of earnings, such as market conditions,
extraordinary charges due to currency devaluations, management, industry
trends, business segments and operating inefficiencies. The Company's long term
strategic initiatives have been impacted in the past several years by
short-term adverse market conditions in its core business segments. These
depressed short-term conditions have been addressed through a
management-directed program to focus on the core franchises, to develop more
responsive marketing efforts, to control costs, to reconfigure manufacturing
facilities to provide more efficiencies and customer service, and to conserve
capital. The implementation of this program has resulted in improved earnings
for some business units and is expected to return the Company to profitability
without impairing the long term strategic plan of investing and growing in the
product areas where the Company has core competencies, e.g. global denim. The
Board is committed to the Company's return to profitability and will continue
to direct its efforts toward that end.
The adoption of the proposal would be detrimental to the Company and in
opposition to the best interests of the Company and all shareholders. A
resolution to urge the directors "to arrange for the prompt sale of the ...
[corporation] ... to the highest bidder" would in effect place the Company for
auction in a bidding process that might not enhance, and may in fact depress,
the market value of the Company. The resolution is urging the sale of the
Company at the highest bid and not necessarily one that would represent the
true value of the Company. It would in effect eliminate a process of prudent
consideration of other strategic initiatives including, for example (a)
significant investments in segments of the business to provide both domestic
and international facilities in order to grow with an expanded customer base or
(b) confidential negotiations for a merger with a Company that might provide
greater synergies resulting in greater value to the shareholders than a public
sale. The adoption of the proposal could damage shareholder value by creating
uncertainty about the future of the Company among its vendors, customers,
employees, communities, and other constituencies. The Board is comprised of
directors that are familiar with the manufacturing and retail aspects of the
textile and apparel industry and the many economic and demographic factors
impacting the fragmented and volatile textile business. The Board should retain
the discretion to consider all possible future strategies for the Company that
are in the best interests of shareholders and not be urged to pursue only one
course of action.
For the foregoing reasons, the Board of Directors recommends that
shareholders vote AGAINST the proposal.
14
<PAGE>
OTHER MATTERS
In the event any shareholder wishes to present a proposal at the 1999
Annual Meeting of Shareholders, such proposal must be received by the
Corporation for inclusion in the proxy statement and form of proxy relating to
such meeting on or before December 2, 1998, and must conform to such other
requirements as may be imposed by the Securities and Exchange Commission.
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, and has not been informed of any matter to be acted upon at
the Annual Meeting other than those specifically referred to in this Proxy
Statement. If other matters should properly come before the Annual Meeting it
is intended that the holders of the proxies will act in respect thereto in
accordance with their best judgment.
By order of the Board of Directors.
TERRY L. WEATHERFORD
Vice President and Secretary
15
<PAGE>
Cone Mills Corporation
3101 North Elm Street
P.O. Box 26540
Greensboro, NC 27415-6540
CONE MILLS CORPORATION
April 1, 1998
VIA EDGAR
Securities and Exchange Commission
50 Fifth Street, NW
Washington, DC 20549
RE: Cone Mills Corporation
Preliminary Proxy Materials
File No. 1-3634
Gentlemen:
On behalf of Cone Mills Corporation (the "Corporation") and pursuant to
the Commission's Rule 14a-6, I hereby file with the Commission the definitive
copy of the Notice of Annual Meeting of Shareholders, Proxy Statement and Form
of Proxy that will be sent as of this date to the shareholders of the
Corporation in connection with the Annual Meeting of Shareholders to be held on
May 12, 1998, (the "Annual Meeting"). These materials are being transmitted by
EDGAR pursuant to the requirements of the Commission's Regulation S-T.
A filing fee has not been remitted in accordance with Rule 14a-6(i)(2).
As of the date hereof, we are sending by overnight mail copies of the
definitive proxy materials to the New York Stock Exchange, as required by the
Regulation 14a-6(b).
By copy of this letter, a paper copy of the performance graph appearing in
the Proxy Statement will be sent by mail to the Branch Chief of Branch 7 in the
Division of Corporation Finance, pursuant to Rule 304(d) of Regulation S-T.
Paper copies of the Annual Report to Shareholders are being sent to the
Commission as of the date hereof under separate cover.
If there are any questions or comments regarding the contents of the
materials in this transmission please contact the undersigned, telephone (336)
379-6246.
Very truly yours,
CONE MILLS CORPORATION
/S/ TERRY L. WEATHERFORD
-------------------------------------
Title: Vice President and Secretary
cc: Branch Chief (Branch 7)
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
<PAGE>
CONE MILLS CORPORATION
Proxy for Annual Meeting of Shareholders
To Be Held May 12, 1998
Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Terry L. Weatherford and Neil W. Koonce,
or either of them, proxies with full power of substitution to vote all shares
of Common Stock of Cone Mills Corporation, standing in the name of the
undersigned at the Annual Meeting of Shareholders of the Corporation to be held
May 12, 1998, and any adjournment thereof, as follows:
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS. [Directors recommend a vote FOR all nominees]
[ ] FOR all Nominees listed below (except [ ] WITHHOLD AUTHORITY to vote for
as marked to the contrary below) all nominees listed below
</TABLE>
Doris R. Bray (Class III); Dewey L. Trogdon (Class III); Cyrus C.
Wilson (Class III); and Nicholas Shreiber (Class I)
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below).
<TABLE>
<S> <C>
2. TO RATIFY APPOINTMENT OF McGLADREY & PULLEN, LLP AS INDEPENDENT AUDITORS. [Directors
recommend a vote FOR]
[ ] FOR[ ] AGAINST[ ] ABSTAIN
3. SHAREHOLDER PROPOSAL FOR ADOPTION OF A NONBINDING RESOLUTION URGING THE DIRECTORS TO
ARRANGE FOR THE SALE OF THE CORPORATION. [Directors
recommend a vote AGAINST]
[ ] FOR[ ] AGAINST[ ] ABSTAIN
(Continued on Reverse Side)
</TABLE>
<PAGE>
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted for the nominees named in the Proxy Statement, for proposal 2, and
against proposal 3.
Please sign exactly as your name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED: ___________________, 1998
________________________________
________________________________
