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)
Neil W. Koonce, Vice President, General Counsel and 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:
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[ ] 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. 27415-6540
April 1, 1999
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 11, 1999, 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,
(Signature of Dewey L. Trogdon appears here)
Dewey L. Trogdon
Chairman of the Board
(Signature of John L. Bakane appears here)
John L. Bakane
President and Chief Executive Officer
(Cone Mills Corporation logo appears here)
<PAGE>
<PAGE>
CONE MILLS CORPORATION
Cone Corporate Center
3101 North Elm Street
Greensboro, NC 27415-6540
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 1, 1999
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 11, 1999, at 10:00 a.m. for the following purposes:
1. To elect three directors as Class I Directors for a term of three years 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 take the necessary steps to
declassify the Board of Directors 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 12, 1999 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.
NEIL W. KOONCE
Vice President, General Counsel and
Secretary
<PAGE>
<PAGE>
CONE MILLS CORPORATION
Cone Corporate Center
3101 North Elm Street
Greensboro, NC 27415-6540
PROXY STATEMENT FOR
ANNUAL MEETING TO BE HELD MAY 11, 1999
DATED: April 1, 1999
Your proxy is solicited on behalf of the Board of Directors of Cone Mills
Corporation (the "Corporation", the "Company" 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 I) named herein for terms of three years and (ii)
ratification of the Board of Directors' appointment of McGladrey & Pullen, LLP
as independent auditors and against (iii) the shareholder proposal relating to
the declassification of the Board of Directors of the Corporation.
This proxy statement and the enclosed proxy are being first mailed to
shareholders on or about April 1, 1999. 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 $7,500 in fees plus
expenses.
Holders of Common Stock of record at the close of business March 12, 1999
will be entitled to vote at the meeting. On that date 25,432,233 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>
Hendry, Kozberg, Kessler Group
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402-4115 ......... 2,586,700(2) 10.2%
Reich & Tang Asset Management, L.P.
600 Fifth Ave.
New York, NY 10020 ................. 2,190,000(3) 8.6%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 ............. 1,902,500(4) 7.5%
</TABLE>
- ---------
(1) Does not include Vanguard Fiduciary Trust Company, trustee of the Company
Stock Fund of the 401(k) Program, which held of record for the plan
2,570,549 shares of Common Stock on March 12, 1999. This represents 10.1%
of the Company's outstanding Common Stock. The plan trustee votes shares
held in the plan pursuant to the instructions provided by participants
through the exercise of pass-through voting rights. Shares for which no
voting instructions are received from the participants to whose accounts
the shares are allocated are voted by the trustee in the same proportion
as the instructions received on voted shares. Because the plan trustee
exercises investment or dispositive rights only in accordance with the
instructions of the participants, the trustee disclaims beneficial
ownership.
1
<PAGE>
(2) According to a Schedule 13D/A filed with the Securities and Exchange
Commission by Bruce E. Hendry, Marc H. Kozberg, Irvin Kessler, and 22
other holders, a Section 13(d)(3) group, the group beneficially owns
2,586,700 shares with various combinations of sole voting power, shared
voting power, sole dispositive power, and shared dispositive power.
(3) According to a Schedule 13G/A filed with the Securities and Exchange
Commission by Reich & Tang Asset Management, L.P., it has shared voting
power with respect to 2,190,000 shares, sole voting power on no shares,
shared dispositive power on 2,190,000 shares, and no sole dispositive
power.
(4) According to a Schedule 13G filed with the Securities and Exchange
Commission by Dimensional Fund Advisors Inc. ("Dimensional"), it has sole
voting power with respect to 1,902,500 shares, shared voting power on no
shares, sole dispositive power on 1,902,500 shares, and no shared
dispositive power. All securities reported on the Schedule 13G are owned
by advisory clients of Dimensional, none of which to the knowledge of
Dimensional beneficially owns more than 5% of the outstanding shares of
the Company's Common Stock. Dimensional disclaims beneficial ownership of
all such securities.
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES
AND NAMED EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 12, 1999:
<TABLE>
<CAPTION>
Name of Director Amount and Nature of
Nominee or Officer Beneficial Ownership (1)(2) Percentage of Class
- ----------------------------------------------- ----------------------------- --------------------
<S> <C> <C>
John L. Bakane (3) ............................ 281,964 1.1%
Doris R. Bray ................................. 22,000 *
James S. Butner (3) ........................... 142,989 *
J. Patrick Danahy (3)(4) ...................... 391,448 1.5%
Anthony L. Furr (3) ........................... 9,681 *
Jeanette C. Kimmel ............................ 134,000 *
Neil W. Koonce (3)(5) ......................... 175,007 *
Charles M. Reid ............................... 20,000 *
John W. Rosenblum ............................. 8,000 *
Nicholas Shreiber ............................. 0 *
Dewey L. Trogdon (6) .......................... 481,700 1.9%
Gary L. Smith (3)(7) .......................... 46,587 *
Marvin A. Woolen, Jr. (3)(8) .................. 31,361 *
Cyrus C. Wilson ............................... 1,100 *
All Directors and Executive Officers as a Group
(17 persons)(3) .............................. 1,970,921 7.6%
</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 12, 1999 as follows: Mr. Bakane
(113,050 shares); Mr. Butner (33,000 shares); Mr. Danahy (120,500 shares);
Mr. Furr (4,600 shares); Mr. Koonce (35,000 shares); Mr. Smith (28,200
shares); Mr. Woolen (15,200 shares); 5,000 for each of Mrs. Bray, Mrs.
Kimmel, Mr. Reid, Mr. Rosenblum and Mr. Trogdon; 1,000 for both Mr. Wilson
and Mr. Shreiber; and all Directors and Executive Officers as a Group
(427,000 shares). Does not include an option to purchase 1,000 shares to
be granted to each nonemployee director as of May 18, 1999, 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.
2
<PAGE>
(3) Includes shares of Common Stock allocated to the individual accounts of
directors and Named Executive Officers in the Company Stock Fund of the
401(k) Program as of March 12, 1999 as follows:
<TABLE>
<S> <C>
Mr. Bakane .................................................. 34,250 shares
Mr. Butner .................................................. 18,625 shares
Mr. Danahy .................................................. 33,550 shares
Mr. Furr .................................................... 3,081 shares
Mr. Koonce .................................................. 29,394 shares
Mr. Smith ................................................... 9,387 shares
Mr. Woolen .................................................. 4,161 shares
All Directors and Executive Officers as a group (17 persons) 170,045 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 4,940
shares allocated to Mrs. Koonce's individual account in the Company Stock
Fund of the 401(k) Program as of March 12, 1999.
(6) Includes 125,000 shares owned of record by Mr. Trogdon's wife.
(7) Includes 1,000 shares owned of record by Mr. Smith's wife.
(8) Includes 7,500 shares acquired by Mr. Woolen for his mother pursuant to a
power of attorney held by Mr. Woolen and held in an account in which Mr.
Woolen may have a pecuniary interest and 500 shares held in a custodian
account for his minor son.
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 I Directors expire at the 1999 Annual Meeting.
The persons elected at the Annual Meeting for the Class I directorships will
serve terms of three years to expire at the Annual Meeting in year 2002 or
until their successors are elected and qualified. Each person nominated below
for a Class I directorship is an incumbent director of the Corporation. A
vacancy exists in the Class II directorships, and the Board intends to fill the
vacancy. However, a nominee has not yet been identified. If the Board of
Directors fills the position, the nominee will be submitted to the shareholders
for election at the 2000 annual meeting.
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.
3
<PAGE>
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>
Principal Occupation; Business Director
Name of Nominee Present Age Experience Past Five Years; Since
- -------------------- ------------- and other Directorships ---------
<S> <C> <C> <C>
NOMINEES FOR THREE YEAR TERM (CLASS I)
John L. Bakane 48 President and Chief Executive Officer of the Corporation (1998-Present); 1989
Executive Vice President of the Corporation (1995-1998); President, Apparel
Products Group (1997-February 12, 1999); Chief Financial Officer of the
Corporation (1988-1997); Vice President of the Corporation (1986-1995)
Charles M. Reid 64 Director, President and Chief Executive Officer, United Guaranty 1988
Corporation (private mortgage insurer), a member company of American
International Group (1987-Present)
Nicholas Shreiber 50 President and Chief Executive Officer, Tetra Pak Americas Inc., a member 1998
company of Tetra Pak Group (processing and packaging systems for liquid
foods) (1991-Present); Director, Grupo Prove-Quim (chemical distributing
company in Mexico)
B. The following information is furnished with respect to directors continuing in office:
CLASS II (Term expiring in 2000)
Jeanette C. Kimmel 60 Private Investment Management 1971
John W. Rosenblum 55 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 Grantham, Mayo, Van Otterloo & Co., LLC
CLASS III (Term expiring in 2001)
Doris R. Bray 61 Partner, Schell Bray Aycock Abel & Livingston P.L.L.C. (Attorneys at Law) 1989
(1987-Present); Director, Vanguard Cellular Systems, Inc.
Dewey L. Trogdon 67 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)
Cyrus C. Wilson 61 Independent Consultant in international marketing and sales and business 1998
development (1993-Present); Partner, Price Waterhouse L.L.P. (1985-1993)
</TABLE>
COMMITTEES AND DIRECTOR ATTENDANCE
During the year ended January 3, 1999, the Board of Directors of the
Corporation held eight meetings and the Executive, Audit, and Compensation
Committees held two, three, and four 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 1998.
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, 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, Jeanette C. Kimmel, and Cyrus C. Wilson.
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
4
<PAGE>
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 Corporation's directors, its executive
officers, and any persons holding more than 10 percent of the Corporation's
stock are required to report their ownership of the Corporation'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 Corporation is
required to report in this proxy statement any failure to file by these dates
during fiscal 1998 or prior fiscal years. All of these filing requirements were
satisfied in 1998. In making this statement, the Corporation has relied on the
written representations of certain reporting persons and the Corporation's
directors and officers and copies of reports filed with the Commission.
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 January 3, 1999. Information is also provided on Mr.
Danahy who retired and Mr. Butner who resigned as executive officers on
November 9, 1998 and December 17, 1998, respectively. The CEO and the four most
highly compensated officers, and Mr. Danahy and Mr. Butner, 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, 1998, unless
otherwise indicated. Any such compensation earned and paid to the Named
Executive Officers during 1999 will be recorded in the proxy statement for the
Corporation's 2000 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).
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------
(a) (b) (c) (d) (e)
Other Annual
Name and Principal Salary Bonus Compensation
Position Year ($) ($)(1) ($)(2)
- ----------------------------------- ------ --------- -------- --------------
<S> <C> <C> <C> <C>
J. Patrick Danahy 1998 505,000 -- --
former President and Chief 1997 490,000 -- --
Executive Officer 1996 490,000 -- --
John L. Bakane President and 1998 310,000 -- --
Chief Executive Officer, 1997 300,000 -- --
former Executive Vice 1996 300,000 -- --
President and President,
Cone Apparel Products
Anthony L. Furr 1998 245,000 65,000 --
Vice President and 1997 160,000 -- --
Chief Financial Officer 1996 -- -- --
Marvin A. Woolen, Jr. 1998 222,000 40,000 --
Vice President 1997 210,000 -- --
Cotton Purchasing 1996 210,000 -- --
Neil W. Koonce 1998 190,000 15,000 --
Vice President and 1997 185,000 -- --
General Counsel 1996 185,000 -- --
James S. Butner 1998 183,000 10,000 --
former Vice President 1997 175,000 -- --
Industrial and Public Relations 1996 175,000 -- --
Gary L. Smith 1998 142,000 45,000 --
Controller 1997 132,000 -- --
1996 120,000 -- --
<CAPTION>
Long-Term Compensation
-----------------------------------------
Awards Payouts
------------------------------- ---------
(a) (f) (g) (h) (i)
Securities
Underlying LTIP All Other
Name and Principal Restricted Stock Options Payouts Compensation
Position Awards ($)(3) (#) ($) ($)(4)
- ----------------------------------- ------------------ ------------ --------- -------------
<S> <C> <C> <C> <C>
J. Patrick Danahy -- -- -- 10,190
former President and Chief 127,500 35,000 -- 10,717
Executive Officer -- 50,000 -- 12,146
John L. Bakane President and -- 30,000 -- 7,110
Chief Executive Officer, 85,000 20,000 -- 7,090
former Executive Vice -- 40,000 -- 6,556
President and President,
Cone Apparel Products
Anthony L. Furr -- 15,000 -- 6,704
Vice President and 17,000 4,000 -- --
Chief Financial Officer -- -- -- --
Marvin A. Woolen, Jr. -- 15,000 -- 9,156
Vice President 34,000 8,000 -- 9,281
Cotton Purchasing -- 15,000 -- 3,855
Neil W. Koonce -- 10,000 -- 6,196
Vice President and 17,000 5,000 -- 6,624
General Counsel -- 10,000 -- 6,167
James S. Butner -- -- -- 5,898
former Vice President 17,000 5,000 -- 9,285
Industrial and Public Relations -- 10,000 -- 6,243
Gary L. Smith -- 15,000 -- 4,589
Controller 25,500 3,000 -- --
-- 10,000 -- --
</TABLE>
- ---------
(1) No incentives were paid pursuant to a management incentive plan for the
fiscal years shown. However, discretionary bonuses were paid to certain
individuals. 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 January 3, 1999 for
each of the Named Executive Officers are as follows: Mr. Danahy -- 15,000
shares ($84,375); Mr. Bakane -- 10,000 shares ($56,250); Mr. Furr -- 2,000
shares ($11,250); Mr. Woolen -- 4,000 shares ($22,500); Mr. Koonce --
2,000 shares ($11,250); Mr. Butner -- 2,000 shares ($11,250); and Mr.
Smith -- 3,000 shares ($16,875).
(4) Represents the Corporation's matching contributions to the 401(k) Program
and 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 as follows:
A. 401(k) Plan matching contributions for 1998 was $4,800 for Mr. Danahy;
$4,615 for Mr. Bakane; $2,450 for Mr. Furr; $4,395 for Mr. Woolen; $4,315
for Mr. Koonce; $3,840 for Mr. Butner; and $3,763 for Mr. Smith.
B. Insurance premiums for 1998, respectively: Mr. Danahy ($6,100); Mr.
Bakane ($2,495); Mr. Furr ($4,254); Mr. Woolen ($4,761); Mr. Koonce
($1,881); Mr. Butner ($2,058); and Mr. Smith ($826).
6
<PAGE>
On November 9, 1998, J. Patrick Danahy, Director, President and Chief
Executive Officer retired from the Corporation and resigned as a member of the
Board of Directors. The Corporation and Mr. Danahy entered into an agreement
that provided, among other things, that the Corporation continue his salary at
the rate of $505,000 per year through December 31, 1998, and then at the rate
of $520,000 per year through December 31, 1999.
During this period, Mr. Danahy will be covered under the Corporation's
terminal leave policy for salaried employees, which provides for continued
coverage under Cone's group insurance and pension plan, but not the long-term
disability plan. Under the terms of the agreement all stock options previously
granted to Mr. Danahy will continue in effect in accordance with their terms
through the period. Mr. Danahy will forfeit 10,000 shares of the 15,000 shares
of restricted stock granted to him on November 10, 1997 under the terms of a
Restricted Stock Award Agreement and, assuming his compliance with the terms of
this agreement, the remaining 5,000 shares of restricted stock will vest on
December 31, 1999.
Stock Option/SAR Grants in Last Fiscal Year
The following sets forth certain information with respect to options
granted to the Named Executive Officers during the fiscal year ended January 3,
1999.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Number of Percent of
Securities Total Options Exercise
Underlying to Employees or
Options Granted Base Price Expiration Grant Date
Name Granted (#) (1) in Fiscal Year ($/Sh) Date Present Value $(2)
- ------------------------- ----------------- ---------------- ------------ ------------ -------------------
<S> <C> <C> <C> <C> <C>
J. Patrick Danahy -- -- -- -- --
John L. Bakane 30,000 8.81 4.4375 11/04/2008 $70,200
Anthony L. Furr 15,000 4.41 4.4375 11/04/2008 $35,100
Marvin A. Woolen, Jr. 15,000 4.41 4.4375 11/04/2008 $35,100
Neil W. Koonce 10,000 2.94 4.4375 11/04/2008 $23,400
James S. Butner -- -- -- -- --
Gary L. Smith 15,000 4.41 4.4375 11/04/2008 $35,100
</TABLE>
(1) The Corporation did not grant SAR's in 1998. All options granted in 1998
were Incentive Stock Options ("ISO's") except that 7,500 of options
granted to Mr. Bakane were Nonqualified Stock Options. All options except
as noted below are exercisable six months after grant date (November 4,
1998) with 20% of the shares covered becoming exercisable at that time and
an additional 20% of the option shares becoming exercisable on each
successive anniversary date. Mr. Bakane's ISO's are fully exercisable
after May 4, 1999.
(2) The Black-Scholes option pricing model was used to estimate the present
value of the options as $2.34 per share. The model assumed a dividend
yield of 0%, a risk-free interest rate of 5.00%, expected price volatility
based on historical experience of 38.11%, and an expected option life of 8
years based on historical experience. The assumptions are deemed to be
reasonable, but there is no assurance that the assumptions will be true
and an accurate determination of present value. The actual value, if any,
will ultimately depend upon the excess of the market price of shares of
Common Stock over the exercise price on the date the option is exercised.
Aggregated Option Exercises and Year-End Option Value Table
There were no stock option exercises by the Named Executive Officers
during 1998. The following table includes the number of shares covered by
exercisable and unexercisable options as of January 3, 1999. Also reported,
both as to exercisable and unexercisable options, are the values of
"in-the-money" options, which are options with a positive spread between the
fiscal year-end market price of the underlying Common Stock and the exercise
price of such stock options.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998 AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at 1/03/99 at 1/03/99 ($)(1)
--------------------- ---------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ----------------------- -------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
J. Patrick Danahy -- -- 98,400/56,600 0/0
John L. Bakane -- -- 74,400/65,600 0/35,625
Anthony L. Furr -- -- 800/18,200 0/17,813
Marvin A. Woolen, Jr. -- -- 7,600/30,400 0/17,813
Neil W. Koonce -- -- 28,000/22,000 0/11,875
James S. Butner -- -- 28,000/12,000 0/0
Gary L. Smith -- -- 21,400/24,600 750/17,813
</TABLE>
- ---------
(1) Based on $5.625 fair market value (closing price of NYSE) on December 31,
1998, the last trading day of fiscal year 1998.
Long-Term Incentive Plan Awards Table
The Corporation had no long-term incentive plan in effect in 1998.
Pension Plan Table
The following table sets forth in the "ERP" column the estimated annual
benefits payable upon retirement in 1998 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, 1999 for the Named Executive
Officers are: Mr. Danahy -- 27 years; Mr. Bakane -- 23 years; Mr. Furr -- 3
years; Mr. Woolen -- 3 years; Mr. Koonce -- 25 years; Mr. Butner -- 26 years;
and Mr. Smith -- 17 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 $130,000 in
1998 and 1999. In addition, the Code limits annual compensation of each
employee that can be taken into account in computing pension benefits to
$160,000 in 1998 and 1999. These amounts may be adjusted for cost of living as
provided in the Code. Pension benefits that cannot be paid from the ERP by
reason of the limitations in the Code are provided by the Corporation's Excess
Benefit Plan and by the Supplemental Executive Retirement Plan, both of which
are unfunded, nonqualified benefit plans. Such amounts are identified in the
following table in the columns headed "NQP". The Corporation has established a
"rabbi" trust agreement that will be funded upon a change of control with the
accrued vested benefits in these nonqualified plans. A change of control is
defined as a transaction in which a 50% change in the ownership of the
outstanding shares occurs, a report is filed with the Securities and Exchange
Commission on Schedule 13D or 14D-1 which discloses a person has become the
beneficial owner of more than 50% of the Common Stock, or a change in the
majority of the directors during a two year period of time not approved by
two-thirds of the directors who were in office at the beginning of the period.
The Corporation accrues annually the estimated expense for providing
benefits under the ERP and the nonqualified plans, as determined by an
independent consulting actuary; however, this expense cannot be specifically
allocated to any individual or to the Named Executive Officers as a group under
the funding method used by the actuary.
8
<PAGE>
Approximate Annual Benefit for Years of Service Indicated ($)(1)
<TABLE>
<CAPTION>
Average Annual
Compensation for
Highest Consecutive
Five Years During 15th Year 20th Year 25th Year 30th Year 35th Year
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 58,016 4,436 76,716 4,381 89,933 2,657 101,378 2,657 108,894 1,449
$ 250,000 58,138 20,782 76,905 25,601 90,188 26,830 101,670 29,812 109,223 30,215
$ 300,000 58,138 37,250 76,905 47,010 90,188 51,258 101,670 57,260 109,223 59,309
$ 400,000 58,138 70,187 76,905 89,828 90,188 100,115 101,670 112,155 109,223 117,498
$ 500,000 58,138 103,124 76,905 132,646 90,188 148,971 101,670 167,050 109,223 175,687
$ 600,000 58,138 136,061 76,905 175,464 90,188 197,828 101,670 221,945 109,223 233,875
$ 700,000 58,138 168,998 76,905 218,282 90,188 246,684 101,670 276,840 109,223 292,064
$ 800,000 58,138 201,935 76,905 261,100 90,188 295,541 101,670 331,735 109,223 350,253
$ 900,000 58,138 234,872 76,905 303,919 90,188 344,398 101,670 386,630 109,223 408,441
$1,000,000 58,138 267,809 76,905 346,737 90,188 393,254 101,670 441,525 109,223 466,630
</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, 1998 was: Mr. Danahy -- $131,123; Mr. Bakane
-- $70,322; Mr. Furr -- $0; Mr. Woolen -- $0; Mr. Koonce -- $50,719; Mr.
Butner -- $24,661; and Mr. Smith -- $30,210.
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 1998,
retainers and attendance fees paid to all directors totaled $178,086.
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.
A Consulting Agreement between the Corporation and Dewey L. Trogdon
whereby Mr. Trogdon provided consultation and advice was in effect from 1993
until first quarter 1998. Mr. Trogdon's consulting fee was $15,000 per calendar
quarter, and he was reimbursed for expenses incurred in providing such
consulting services. The consulting fee payments were in addition to any
pension or other supplemental retirement benefits that Mr. Trogdon was entitled
to receive by reason of his service as an employee of the Corporation.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Charles M. Reid,
Jeanette C. Kimmel, and John W. Rosenblum, all of whom are directors who are
not currently or formerly employees of the Corporation.
9
<PAGE>
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 performance 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 Performance 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 judgment 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 1998 a
salary increase for the Chief Executive 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 were made.
10
<PAGE>
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 preestablished 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 judgmental
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 performance-based compensation under Code Section 162(m).
Pursuant to the 1997 Plan, participants could earn for 1998 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. Performance 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 earnings per share and return on capital
employed for 1998 did not meet the minimum goal for the payment of incentives
for corporate performance under the 1997 Plan. Accordingly, no incentive
payments based on corporate performance were granted for the year. However, in
order to encourage the continuing efforts of key management employees in the
current business environment and to recognize the achievement of divisional and
individual functional goals, the Committee approved the recommendation of the
Chief Executive Officer for payment of discretionary bonuses to certain
individuals.
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 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
11
<PAGE>
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 1998 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.
Chief Executive Officer Compensation
Compensation for the Chief Executive Officer is established in accordance
with the principles described above. As indicated, the Committee reviews the
Chief Executive Officer's performance and establishes his base salary
considering the various factors described above. The amount of incentive
compensation for the Chief Executive Officer under the 1997 Plan is based upon
the achievement of certain goals established by the Committee at the beginning
of each year. 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. Upon being named President and Chief Executive Officer on
November 9, 1998, John L. Bakane's salary was established at the annual rate of
$425,000. The Committee did not grant Mr. Bakane any incentive compensation for
1998. In February 1999 the Committee awarded Mr. Bakane stock options for
30,000 shares at $4.875 per share in order to align further his interests with
those of the shareholders.
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 Corporation. 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 1998 or 1999 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
12
<PAGE>
Performance Graph
The following graph compares the percentage change in the cumulative total
shareholder return in the Corporation's Common Stock with the cumulative return
of the Standard & Poor's 500 Stock Index and with a peer group index for the
period from December 31, 1993 to December 31, 1998 (assuming the reinvestment
of any dividends and an investment of $100 in each on December 31, 1993). 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.; Dyersburg Corporation; Galey & Lord,
Inc; Guilford Mills, Inc.; and Russell Corporation. The return of each peer
company was weighted according to its stock market capitalization as of the
beginning of the period. The Corporation has revised its peer group companies
to include those companies that focus on apparel fabrics or have significant
apparel fabric operations together with home furnishings products lines that
have similar distribution to those of the Corporation. Deleted have been Dixie
Yarns, Inc. (which has been exiting the industry); Fieldcrest Cannon, Inc.
(which was acquired in 1997 by Pillowtex Corporation, a personal and household
products company whose products have consumer brand recognition); and Springs
Industries, Inc. (which produces primarily home decorative fabrics with
consumer brand recognition and has exited the apparel fabrics business). Added
have been Dyersburg Corporation, Galey & Lord, Inc., and Russell Corporation
which, like the Corporation, produce apparel fabrics directed at a casual and
active life style.
COMPARISON OF SHAREHOLDER RETURN
AMONG CONE, S&P 500 AND PEER GROUP
A line chart appears here with the following plot points:
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
Cone Mills $100 $70 $67 $47 $46 $33
S&P 500 $100 $98 $132 $159 $208 $264
Peer Group $100 $96 $93 $97 $103 $79
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Doris R. Bray, a Class III director, is a partner of Schell Bray Aycock
Abel & Livingston P.L.L.C., a law firm that regularly serves as counsel to the
Corporation.
13
<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 1999. McGladrey & Pullen, LLP or its predecessor,
has acted as auditors for the Corporation since 1943 and continues 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 this 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 REGARDING CLASSIFIED BOARD
Robert E. Grumbine, P.O. Box 260203, Lakewood, CO 80226-0230, E-mail
[email protected], who owns 3,300 registered shares of Common Stock, has
submitted the following proposal and supporting statement for inclusion in the
proxy statement for and presentation at the 1999 Annual Meeting of
Shareholders:
ELIMINATE CLASSIFIED BOARD OF DIRECTORS RESOLUTION
"RESOLVED, that the stockholders of the Corporation request that the Board
of Directors take the necessary steps, in accordance with state law, to
declassify the Board of Directors so that all directors are elected
annually, such declassification to be effected in a manner that does not
affect the unexpired terms of directors previously elected."
SUPPORTING STATEMENT
"The election of directors is the primary venue for stockholders to
influence corporate governance and to hold management accountable. The
great majority of New York Stock Exchange listed corporations elect all
their directors each year. Annual election of ALL directors insures that
the Board will be more accountable to ALL shareholders and to a certain
extent prevents the self-perpetuation of the Board.
Cone Mills' stock price has declined in stepwise fashion from $19.625 in
March 1993, not long after the initial public offering, to recent levels
below $4.00 per share. The Corporation has never paid a dividend to its
stockholders since resuming public status. That compound annual return of
worse than -23% per year demonstrates one of the disadvantages of
continuity of board membership during the six years leading up to the 1999
Annual Meeting of Stockholders. The elapsed time has been more than
sufficient for corrective action to have been taken, yet the value of the
Corporation to its stockholders has continued to be reduced while
continuity of board membership remained.
The diminution of value experienced by Cone Mills' stockholders is
particularly stark in context of the massive improvement in stock
valuations generally during the same period. Compared to the worse than
MINUS 23% per annum experienced by Cone Mills' holders, the general market
as measured by the Standard & Poor's 500 stock average has *risen* more
than PLUS 17% per annum in the same period.
As a concerned stockholder, I urge you to join me in voting FOR this
resolution."
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.
Abstentions and broker non-votes will not affect the vote. [Abstentions
indicated on such a proxy will not be counted as either "for" or "against" this
proposal. "Broker non-votes" specified on proxies returned by brokers holding
shares for beneficial owners who have not provided instructions as to voting on
this issue will be treated as not present for voting on this issue.]
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.
14
<PAGE>
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
The Board of Directors does not believe that the proposal is in the best
interests of the Corporation or its shareholders. It recommends a vote AGAINST
the proposal.
The articles of incorporation of the Corporation require that the Board of
Directors be divided into three classes with the number of directors in each
class being as nearly equal as possible. Each director serves a three-year term
and directors for one of the three classes are elected each year. This
corporate governance feature has been a part of the Corporation's articles
since prior to the initial public offering in 1992 which was made after several
years of being a privately held corporation. Classification of the board of
directors is a fairly common practice and is believed to be adopted by a
majority of the Fortune 500 companies.
The classification of the directors into classes is intended to provide a
continuity of experienced membership on the Board and to prevent a precipitous
change in the composition of the Board. With staggered elections, at least two
annual meetings of shareholders are required to effect a change in control of
the Board of Directors. The entire Board can be replaced in three annual
meetings held within approximately two years. One benefit derived from this
situation is an enhancement of the Board's ability to negotiate with a person
seeking to gain control of the Corporation. It provides the incumbent directors
the time and leverage necessary to review any takeover proposal, to assure that
shareholder value is maximized by obtaining a more favorable result, and to
consider alternative strategies. A further benefit is the assurance of
continuity and stability in the management of the business and affairs of the
Corporation since a majority of the directors will always have prior experience
as directors of the Corporation. This consistency in the Board composition
allows for a degree of continuity in the strategic planning and management
process for a reasonable period of time into the future.
Approval of this proposal would require the affirmative vote of a majority
of the outstanding shares of common stock present in person or by proxy and
entitled to vote. However, approval of the proposal would not eliminate the
classified board as its adoption would serve only as a recommendation to the
Board of Directors to initiate action to end the staggered system of electing
directors. Elimination of the classified board would require the affirmative
vote of at least 66 2/3% of the outstanding shares on a proposal submitted by
the Board at a later shareholder meeting to amend Article 8(b) of the Restated
Articles of Incorporation.
The Board believes that the election of one-third of the directors each
year provides shareholders with the opportunity to influence corporate policy
each year while avoiding any sudden and disruptive changes in corporate
operations and corporate policies that could arise if an entirely new group of
directors were elected in a single year. The continuity and quality of
leadership that results from a classified board provides the proper environment
in which to foster the creations of long-term value for shareholders.
For the foregoing reasons, the Board of Directors recommends that
shareholders vote AGAINST the proposal.
OTHER MATTERS
In the event any shareholder wishes to present a proposal at the 2000
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 3, 1999, and must conform to such other
requirements as may be imposed by the Securities and Exchange Commission.
Notice of a matter to be presented by a shareholder for consideration at
the Annual Meeting of Shareholders in the year 2000, other than pursuant to the
foregoing paragraph, will be considered untimely if not received by the
Corporation prior to February 16, 2000. Failure to give timely notice of such
matter will result in discretionary authority being conferred on management
proxies to vote with respect to the matter without any requirement for the
proxy statement to disclose how management intends to exercise its discretion.
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.
NEIL W. KOONCE
Vice President, General Counsel and
Secretary
15
<PAGE>
************************* APPENDIX ****************************
(Cone Mills Logo appears here)
Annual Meeting of
Shareholders
to be held on May 11, 1999
- - - FOLD AND DETACH HERE
- ------------------------------------------------------------------------------
CONE MILLS CORPORATION
Proxy for Annual Meeting of Shareholders
To Be Held May 11, 1999
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 11, 1999, and any adjournment thereof, as follows:
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS (CLASS I). [Directors recommend a vote FOR all nominees] [ ] WITHHOLD AUTHORITY to vote for
[ ] FOR all Nominees listed below except as marked to the contrary below all nominees listed below
John L. Bakane, Charles M. Reid, and Nicholas Shreiber
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below).
</TABLE>
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 TAKE THE NECESSARY STEPS TO DECLASSIFY THE BOARD OF DIRECTORS.
[Directors recommend a vote AGAINST]
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on Reverse Side)
<PAGE>
- - - FOLD AND DETACH HERE
- ------------------------------------------------------------------------------
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: , 1999
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