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
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(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
March 31, 2000
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 9, 2000, at the Cone Corporate Center, 3101 North
Elm Street, Greensboro, North Carolina.
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/ John L. Bakane
John L. Bakane
President and Chief Executive Officer
<PAGE>
CONE MILLS CORPORATION
CONE CORPORATE CENTER
3101 NORTH ELM STREET
GREENSBORO, NC 27415-6540
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 31, 2000
TO THE HOLDERS OF COMMON STOCK OF
CONE MILLS CORPORATION:
The Annual Meeting of Shareholders of Cone Mills Corporation will be
held at the Cone Corporate Center, 3101 North Elm Street, in Greensboro, North
Carolina, on Tuesday, May 9, 2000, at 10:00 a.m. for the following purposes:
1. To elect three directors as Class II Directors for a term of three
years, two Class I Directors for a term of two years, and one Class III Director
for a term of one year, or until their successors are elected and qualified.
2. To consider and act upon a proposal to approve the 2000 Stock
Compensation Plan for Non-Employee Directors.
3. To ratify the appointment of McGladrey & Pullen, LLP as independent
auditors for the Corporation for the current fiscal year.
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 10, 2000 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.
/s/ Neil W. Koonce
NEIL W. KOONCE
Vice President, General Counsel 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 9, 2000
DATED: MARCH 31, 2000
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 II) named herein for terms of three years, election
of the two nominees for Director (Class I) named herein for terms of two years,
and election of the nominee for Director (Class III) named herein for a term of
one year; (ii) approval of the 2000 Stock Compensation for Non-Employee
Directors; and (iii) ratification of the Board of Directors' appointment of
McGladrey & Pullen, LLP as independent auditors.
This proxy statement and the enclosed proxy are being first mailed to
shareholders on or about March 31, 2000. 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 Shareholder
Communications 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 10,
2000 will be entitled to vote at the meeting. On that date 25,479,717 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 Group
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402-4115.............. 3,480,100(2) 13.7%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401.................. 2,013,700(3) 7.9%
</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
2,524,184 shares of Common Stock on March 10, 2000. This represents 9.9% 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, and 16 other holders, a
Section 13(d)(3) group, the group beneficially owns 3,480,100 shares with
various combinations of sole voting power, shared voting power, sole
dispositive power, and shared dispositive power.
(3) 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 2,013,700 shares, shared voting power on no
shares, sole dispositive power on 2,013,700 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 10, 2000:
<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)............................. 320,357 1.2%
Doris R. Bray.................................. 23,000 *
Geo. Watts Carr III (3)........................ 0 *
Anthony L. Furr (3)............................ 17,434 *
Haynes G. Griffin ............................. 0 *
Bruce H. Hendry (9)............................ 1,252,700 4.9%
Jeanette C. Kimmel............................. 135,000 *
David T. Kollat................................ 0 *
Neil W. Koonce (3)(4).......................... 181,078 *
Marc H. Kozberg (5)(9)......................... 355,000 1.4%
Charles M. Reid................................ 24,000 *
John W. Rosenblum.............................. 9,000 *
Gary L. Smith (3)(6)........................... 50,461 *
Dewey L. Trogdon (7)........................... 476,700 1.9%
Terry L. Weatherford (3)....................... 37,071 *
Cyrus C. Wilson................................ 6,000 *
Marvin A. Woolen, Jr. (3)(8)................... 39,498 *
All Directors and Executive Officers as a Group
(20 persons)(3).............................. 3,093,352 12.0%
</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 10, 2000 as follows: Mr. Bakane
(152,550 shares); Mr. Carr (0 shares); Mr. Furr (7,600 shares); Mr. Koonce
(39,000 shares); Mr. Smith (31,200 shares); Mr. Weatherford (23,200
shares); Mr. Woolen (21,200 shares); 6,000 for each of Mrs. Bray, Mrs.
Kimmel, Mr. Reid, Mr. Rosenblum and Mr. Trogdon; 2,000 for Mr. Wilson; and
all Directors and Executive Officers as a Group (329,950 shares). Does not
include an option to purchase 1,000 shares to be granted to each
nonemployee director as of May 16, 2000, 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 10, 2000 as follows:
<TABLE>
<S> <C>
Mr. Bakane..................................................... 36,143 shares
Mr. Carr....................................................... 0 shares
Mr. Furr....................................................... 5,358 shares
Mr. Koonce..................................................... 31,493 shares
Mr. Smith...................................................... 9,924 shares
Mr. Weatherford................................................ 9,221 shares
Mr. Woolen..................................................... 6,298 shares
All Directors and Executive Officers as a group (20 persons) 128,665 shares
</TABLE>
(4) Includes 6,000 shares owned of record by Mr. Koonce's wife and 4,912 shares
allocated to Mrs. Koonce's individual account in the Company Stock Fund of
the 401(k) Program as of March 10, 2000.
(5) Includes 255,000 shares owned directly by others with whom Mr. Kozberg
shares voting power.
(6) Includes 1,000 shares owned of record by Mr. Smith's wife.
(7) Includes 125,000 shares owned of record by Mr. Trogdon's wife.
(8) Includes 500 shares held in a custodian account for Mr. Woolen's minor son.
(9) As noted above, Mr. Hendry and Mr. Kozberg are members of a Section
13(d)(3) group which beneficially owns 3,480,100 shares (13.7%).
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 Board of Directors currently consists of eleven (11) members.
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.
Three Class II Directors, two Class I Directors and one Class III
Director are to be voted on at the 2000 Annual Meeting. The persons elected at
the Annual Meeting to the Class II directorships will serve terms of three years
to expire at the Annual Meeting in the year 2003, the Class I directorships will
serve terms of two years to expire at the Annual Meeting in the year 2002, and
the Class III Director will serve a term of one year to expire at the Annual
Meeting in the year 2001, or until their successors are elected and qualified.
Each person nominated below for a directorship is an incumbent director of the
Corporation.
The persons nominated below will be elected if they receive a plurality
of the votes cast for their class of directorship. 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 II - TERM EXPIRING 2003)
Jeanette C. Kimmel 61 Private Investment Management. 1971
David T. Kollat 61 Founder and President of 22, Inc., a company specializing in research and 1999
consulting for retailers and soft goods manufacturers (1987 - Present);
Executive Vice President, The Limited Inc. (1976 - 1984);
Director, Cooker Restaurant Corporation, Cheryl and Co.,
AEI Music Network, Consolidated Stores, Wolverine World Wide,
SBC Advertising, Christy and Associates, and Select Comfort Resource
Marketing.
John W. Rosenblum 56 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.
NOMINEES TO COMPLETE REMAINING TERM (CLASS I - TERM EXPIRING 2002)
Haynes G. Griffin 53 Member, Prospect Partners LLC, a business advisory firm, and 1999
Chief Executive Officer, Gemini Networks, Inc., a supplier of high-speed
data access to Internet and other content providers (1999 - Present);
Founding President and Chief Executive Officer of Vanguard Cellular
Systems, Inc. which was acquired by AT&T in 1999; Director,
Lexington Global Asset Managers, Inc.
Bruce H. Hendry 57 Member, Dougherty Summit Securities LLC (1994 - Present); 1999
Chairman, Minnesota Brewing Company (1991 -
Present); Chairman and Chief Executive
Officer, Kaiser Steel Corporation (1986 -
1987).
NOMINEE TO COMPLETE REMAINING TERM (CLASS III - TERM EXPIRING 2001)
Marc H. Kozberg 38 President of Dougherty Summit Advisors and a General Partner of Summit 1999
Capital Appreciation Fund LP (1998 -
Present); Senior Vice President of
Investments, Dougherty Summit Securities LLC
(1995 - 1998); Director, Urometrics, Inc.
B. The following information is furnished with respect to directors continuing in office:
CLASS I (TERM EXPIRING 2002)
John L. Bakane 49 President and Chief Executive Officer of the Corporation (1998 - Present); 1989
Executive Vice President of the Corporation
(1995 - 1998); President, Apparel Products
Group (1997 - 1999); Chief Financial Officer
of the Corporation (1988 - 1997); Vice
President of the Corporation (1986 - 1995).
Charles M. Reid 65 Director, President and Chief Executive Officer, United Guaranty 1988
Corporation, a private mortgage insurer and
member company of American International
Group (1987 - Present).
CLASS III (TERM EXPIRING IN 2001)
Doris R. Bray 62 Partner, Schell Bray Aycock Abel & Livingston P.L.L.C. , Attorneys at Law 1989
(1987 - Present).
Dewey L. Trogdon 68 Chairman of the Board of Directors (1981 - Present); 1978
Chief Executive Officer of the Corporation
(1980 - 1990); President of the Corporation
(1979 - 1980; 1987 - 1989).
Cyrus C. Wilson 62 Independent Consultant in international marketing and sales and business 1998
development (1993 - Present); Partner, Price Waterhouse L.L.P. (1985 - 1993).
</TABLE>
4
<PAGE>
COMMITTEES AND DIRECTOR ATTENDANCE
During the year ended January 2, 2000, the Board of Directors of the
Corporation held nine meetings and the Executive, Audit, and Compensation
Committees held five, six, and three 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 1999,
except for Mr. Wilson who attended 67% of the Board meetings, missing three
Board meetings and the Audit Committee meetings on those dates or the day prior.
He also missed an additional Audit Committee meeting; however, he was in
attendance at the Board meeting the next day.
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, Marc H. Kozberg, 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 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% 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 1999 or prior fiscal years. All of these filing requirements were
satisfied except the initial beneficial ownership reports on behalf of director
David T. Kollat and executive officers Michael K. Horrigan and Christopher F.
Conlon, all inadvertently filed less than 30 days late. In addition, one
transaction involving the purchase of 2,000 shares of the Company's Common Stock
by Mr. Horrigan, and the exercise of stock options in the Company's Common Stock
by executive officers Gary L. Smith and David E. Bray for 2,000 and 800 shares,
respectively, were not timely filed unintentionally. All transactions were
subsequently reported. A Form 4 on behalf of Dewey L. Trogdon, a director, was
also amended to correct a clerical error listing the number of shares of the
Company's Common Stock held directly. 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 2, 2000. Information is also provided on Geo.
Watts Carr III and Terry L. Weatherford who were executive officers during part
of 1999. The CEO and the four most highly compensated officers, and Mr. Carr and
Mr. Weatherford, 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, 1999, unless
otherwise indicated. Any such compensation earned and paid to the Named
Executive Officers during 2000 will be recorded in the proxy statement for the
Corporation's 2001 Annual Meeting of Shareholders, unless such compensation is
required to be reported previously.
5
<PAGE>
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>
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ -------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
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>
John L. Bakane President and 1999 425,000 -- -- -- 30,000 -- 6,606
Chief Executive Officer 1998 310,000 -- -- -- 30,000 -- 7,110
1997 300,000 -- -- 85,000 20,000 -- 7,090
Anthony L. Furr 1999 272,500 -- -- 47,500 -- -- 8,770
Executive Vice President, acting 1998 245,000 65,000 -- -- 15,000 -- 6,704
President, Cone Finishing Division, 1997 160,000 -- -- 17,000 4,000 -- --
former Chief Financial Officer
Geo. Watts Carr III 1999 235,000 -- -- -- -- -- 7,990
former Executive Vice President and 1998 275,000 145,000 -- -- 20,000 -- 5,941
President, Cone Textile Group 1997 260,000 -- -- 42,500 8,000 -- 3,285
Marvin A. Woolen, Jr 1999 232,000 -- -- -- -- -- 9,300
Vice President 1998 222,000 40,000 -- -- 15,000 -- 9,156
Cotton Purchasing 1997 210,000 -- -- 34,000 8,000 -- 9,281
Neil W. Koonce 1999 195,000 -- -- -- -- -- 8,383
Vice President, 1998 190,000 15,000 -- -- 10,000 -- 6,196
General Counsel & Secretary 1997 185,000 -- -- 17,000 5,000 -- 6,624
Terry L. Weatherford 1999 170,000 -- -- -- -- -- 6,256
Assistant Vice President, 1998 163,000 20,000 -- -- 10,000 -- 6,714
former Vice President & Secretary 1997 155,000 -- -- 25,500 3,000 -- 6,913
Gary L. Smith 1999 167,500 -- -- -- -- -- 4,828
Executive Vice President and 1998 142,000 45,000 -- -- 15,000 -- 4,589
Chief Financial Officer 1997 132,000 -- -- 25,500 3,000 -- --
</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 in 1998. 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
2, 2000 for each of the Named Executive Officers are as follows: Mr.
Bakane -- 10,000 shares ($45,000); Mr. Furr -- 12,000 shares ($54,000);
Mr. Carr -- 0 shares ($0); Mr. Woolen -- 4,000 shares ($18,000); Mr.
Koonce -- 2,000 shares ($9,000); Mr. Weatherford -- 3,000 shares
($13,500); and Mr. Smith -- 3,000 shares ($13,500).
(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:
6
<PAGE>
A. 401(k) Plan matching contributions for 1999 were $3,840 for each of
Mr. Bakane, Mr. Furr, Mr. Carr, Mr. Woolen, Mr. Koonce, Mr. Weatherford, and Mr.
Smith.
B. Insurance premiums for 1999, respectively: Mr. Bakane ($2,766); Mr.
Furr ($4,930); Mr. Carr ($4,150); Mr. Woolen ($5,460); Mr. Koonce ($2,043); Mr.
Weatherford ($2,416); and Mr. Smith ($988).
C. A service award of $2,500 was granted to Mr. Koonce in 1999 pursuant
to the Company's service award program.
OPTION/SAR GRANTS TABLE
The following sets forth certain information with respect to options
granted to the Named Executive Officers during the fiscal year ended January 2,
2000.
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------
(A) (B) (C) (D) (E) (F)
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING TO EMPLOYEES OR
OPTIONS GRANTED BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED (#) (1) IN FISCAL YEAR ($/SH) DATE PRESENT VALUE $(2)
- ---- --------------- -------------- ------ ---- ------------------
<S> <C> <C> <C> <C> <C>
John L. Bakane 30,000 6.40 4.875 2/10/2009 $81,300
Anthony L. Furr -- -- -- -- --
Geo. Watts Carr III -- -- -- -- --
Marvin A. Woolen, Jr. -- -- -- -- --
Neil W. Koonce -- -- -- -- --
Terry L. Weatherford -- -- -- -- --
Gary L. Smith -- -- -- -- --
</TABLE>
- -----------------
(1) The Corporation did not grant SAR's in 1999. Of the options granted to Mr.
Bakane in 1999, 20,500 were Incentive Stock Options ("ISO's") and 9,500
were Nonqualified Stock Options. Mr. Bakane's shares are fully exercisable
after January 1, 2000.
(2) The Black-Scholes option pricing model was used to estimate the present
value of the options as $2.71 per share. The model assumed a dividend
yield of 0%, a risk-free interest rate of 6.00%, expected price volatility
based on historical experience of 41%, and an expected option life of 8
years based on historical experience. The assumptions are deemed to be
reasonable, but there is no assurance that the assumptions will be true
and an accurate determination of present value. The actual value, if any,
will ultimately depend upon the excess of the market price of shares of
Common Stock over the exercise price on the date the option is exercised.
(3) Does not include phantom stock units awarded under an incentive program to
certain senior managers. See "Compensation Committee Report on Executive
Compensation."
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
The following table shows stock option exercises by the Named Executive
Officers during 1999, including the aggregate value of gains on the date of
exercise ("Value Realized"). The table also sets forth the number of shares
covered by exercisable and unexercisable options as of January 2, 2000, and the
values of "in-the-money" options, which are options with a positive spread
between the fiscal year-end market price of the underlying Common Stock and the
exercise price of such stock options.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT 1/02/2000 AT 1/02/2000 ($)(1)
------------ -------------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
John L. Bakane -- -- 143,050/26,950 1,500/375
Anthony L. Furr -- -- 4,600/14,000 188/750
Geo. Watts Carr III -- -- 0/0 0/0
Marvin A. Woolen, Jr. -- -- 15,200/22,800 188/750
Neil W. Koonce -- -- 35,000/15,000 125/500
Terry L. Weatherford -- -- 19,200/13,800 125/500
Gary L. Smith 2,000 $2,125 26,200/17,800 188/750
</TABLE>
- ------------------
(1) Based on $4.50 fair market value (closing price of NYSE) on December 31,
1999, the last trading day of fiscal year 1999.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The Corporation had no long-term incentive plan in effect in 1999.
PENSION PLAN TABLE
The following table sets forth in the "ERP" column the estimated annual
benefits payable upon retirement in 1999 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, 2000 for the Named Executive Officers
are: Mr. Bakane -- 24 years; Mr. Furr -- 4 years; Mr. Carr - 3 years; Mr. Woolen
- -- 4 years; Mr. Koonce -- 26 years; Mr. Weatherford - 6 years; and Mr. Smith --
18 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 1999 and $135,000 in 2000. In addition, the Code limits annual
compensation of each employee that can be taken into account in computing
pension benefits to $160,000 in 1999 and $170,000 in 2000. These amounts may be
adjusted for cost of living as provided in the Code. Pension benefits that
cannot be paid from the ERP by reason of the limitations in the Code are
provided by the Corporation's Excess Benefit Plan and by the Supplemental
Executive Retirement Plan, both of which are unfunded, nonqualified benefit
plans. Such amounts are identified in the following table in the columns headed
"NQP". The Corporation has established a "rabbi" trust agreement that will be
funded upon a change of control with the accrued vested benefits in these
nonqualified plans. A change of control is defined as a transaction in which a
50% change in the ownership of the outstanding shares occurs, a report is filed
with the Securities and Exchange Commission on Schedule 13D or 14D-1 which
discloses a person has become the beneficial owner of more than 50% of the
Common Stock, or a change in the majority of the directors during a two year
period of time not approved by two-thirds of the directors who were in office at
the beginning of the period.
The Corporation accrues annually the estimated expense for providing
benefits under the ERP and the nonqualified plans, as determined by an
independent consulting actuary; however, this expense cannot be specifically
allocated to any individual or to the Named Executive Officers as a group under
the funding method used by the actuary.
8
<PAGE>
PENSION PLAN TABLE
APPROXIMATE ANNUAL BENEFIT FOR YEARS OF SERVICE INDICATED ($)(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 58,666 3,162 77,079 3,162 89,615 1,932 101,042 1,812 108,002 1,054
$250,000 58,832 19,465 77,333 24,317 89,957 26,018 101,433 28,868 108,442 29,708
$300,000 58,832 35,933 77,333 45,726 89,957 50,447 101,433 56,315 108,442 58,802
$400,000 58,832 68,870 77,333 88,544 89,957 99,303 101,433 111,210 108,442 116,991
$500,000 58,832 101,807 77,333 131,362 89,957 148,160 101,433 166,105 108,442 175,180
$600,000 58,832 134,744 77,333 174,180 89,957 197,016 101,433 221,000 108,442 233,368
$700,000 58,832 167,681 77,333 216,998 89,957 245,873 101,433 275,895 108,442 291,557
$800,000 58,832 200,618 77,333 259,817 89,957 294,729 101,433 330,790 108,442 349,746
$900,000 58,832 233,555 77,333 302,635 89,957 343,586 101,433 385,685 108,442 407,934
$1,000,000 58,832 266,492 77,333 345,453 89,957 392,442 101,433 440,580 108,442 466,123
</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, 1999 was: Mr. Bakane -- $82,731; Mr. Furr --
$0; Mr. Carr -- $0; Mr. Woolen -- $0; Mr. Koonce -- $59,669; Mr.
Weatherford -- $0; and Mr. Smith -- $32,578.
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 1999,
retainers and attendance fees paid to all directors totaled $205,229. As set
forth in Item 2 below, it is proposed that future compensation of directors will
be paid in the Company's Common Stock rather than cash.
The Shareholders approved at the 1994 Annual Meeting the 1994 Stock
Option Plan for Non-Employee Directors 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.
Effective fourth quarter 1999, Dewey L. Trogdon elected to serve
without cash retainer or attendance fee while on the Board of Directors of the
Corporation. This election does not effect 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. Upon his being
named President and Chief Executive Officer on November 9, 1998, Mr. Bakane's
salary was established at the annual rate of $425,000 for 1999, and he has
received a 4% salary increase for 2000. In general, adjustments to the salaries
of the Named Executive Officers were made to place salaries closer to the market
median rate for 1999 and increased at the 4% level for 2000.
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 1999 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 1999 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 nor
were any discretionary bonuses paid.
However, on November 7, 1999 the Committee awarded 354,000 phantom
stock units under an incentive program to certain of its senior managers. Each
unit awarded provides that the holder will be given at either cancellation or
vesting date the difference between the market value of the Company's Common
Stock on that date and the base price which was the market value of the
Company's Common Stock at the date of the award ($4.75 per unit). Such
compensation will be provided either in the form of a lump sum payment, deferred
compensation, new shares of Common Stock of the Company, restricted Common Stock
of the Company or any other form of remuneration as determined by the Company in
its sole discretion. Such units vest at a rate of 20% in each twelve month
period, beginning six months after the date of the awards. The Company may
cancel any awards at its sole discretion. The Company did not recognize any
compensation expense during 1999 for these phantom stock units.
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) to assure that any
"compensation" realized was tax deductible.
11
<PAGE>
It is the belief of the Committee that because 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% 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 1999 to the
Chief Executive Officer and the Named Executive Officers are set forth in the
Summary Compensation Table and Stock Option/SAR table above.
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 for 1999. 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. Mr. Bakane has received a 4% salary
increase to $442,000 for the year 2000 consistent with the adjustment made for
the Named Executive Officers. In November 1999, Mr. Bakane was also awarded
40,000 phantom stock units as described above.
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 1999 or 2000 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, 1994 to December 31, 1999 (assuming the
reinvestment of any dividends and an investment of $100 in each on December 31,
1994). 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.
COMPARISON OF SHAREHOLDER RETURN
AMONG CONE, S&P 500 AND PEER GROUP
(Graph appears here with the following plot points:)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
12/31/1994 12/31/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cone $100 $95 $66 $65 $47 $38
S&P 500 $100 $134 $161 $211 $268 $320
Peer Group $100 $93 $100 $103 $79 $53
- -------------------------------------------------------------------------------------------
</TABLE>
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 - PROPOSAL TO APPROVE THE 2000 STOCK COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
The Board of Directors of the Company adopted as of March 7, 2000, the
Cone Mills Corporation 2000 Stock Compensation Plan for Non-Employee Directors
(the "Plan") and approved its submission to the shareholders for approval. The
following summary of the Plan is qualified in its entirety by reference to the
Plan, and the provisions of the Plan will control if the descriptions contained
herein are inconsistent with the Plan.
The purpose of the Plan is to provide for (a) the payment of directors'
fees to nonemployee directors in the Common Stock of the Company rather than in
cash in order to conserve the Company's cash and more closely align the
interests of the directors and the Company's shareholders and (b) to allow
nonemployee directors to defer payment of such fees. An aggregate of 300,000
shares of Common Stock will be available for grant under the Plan, subject to
proportionate adjustments for any increase or decrease in the number of issued
shares resulting from a subdivision or consolidation of shares or the payment of
a stock dividend on shares of Common Stock or any other increase or decrease in
the number of shares affected without receipt of consideration by the Company.
Pursuant to the terms of the Plan, each eligible director of the
Company is granted on a quarterly basis either shares or equivalent deferred
stock units as compensation for director's fees earned as a retainer for serving
as a director in that period and as fees for attendance at regular or special
meetings of the Board of Directors or any committee of the Board. The election
to receive deferred stock units is effective on an annual basis. The number of
shares or deferred stock units is determined by the fair market value (average
of highest and lowest prices) of the Common Stock on the fifth trading day after
the Company announces its earnings for the most recently ended fiscal quarter.
As of March 10, 2000, the fair market value of the Company's Common Stock was
$3.9375 per share. An eligible director is defined as a director, who at the
time of the grant, is not an employee of the Company or any of its affiliates or
subsidiaries. Currently, ten directors would be eligible to receive grants under
the Plan. A dollar value of the shares or deferred stock units to be received is
not presently determinable. The following table sets forth the benefits of the
eligible group, and the cash savings to the Company, if the Plan had been in
effect for fiscal year 1999.
NEW PLAN BENEFITS
2000 STOCK COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
<TABLE>
<CAPTION>
Name and Position(s) Dollar Value Number of Shares or Units
- -------------------- ------------ -------------------------
<S> <C> <C>
Non-executive Director Group (10 persons) (1) $205,229 39,990
</TABLE>
(1) Named Executive Officers, executives, and employees are not eligible to
receive grants under the Plan.
The Plan is administered by an administrator who will be a director,
other than an eligible director, appointed by the Board of Directors to
administer the Plan. The administrator shall not be eligible to participate in
the Plan. The Board of Directors has no discretion as to the date of the grants
or the determination of the fair market value of shares or deferred stock units
thereof.
The Plan will be effective April 3, 2000, subject to shareholder
approval, and will terminate April 2, 2005.
Deferred stock units credited pursuant to the plan may not be assigned
or transferred other than by will or the laws of descent and distribution, and
no participant shall have any rights as a shareholder with respect to deferred
stock units credited to an account.
The Plan may not be amended or modified without shareholder approval.
Eligible directors are also eligible for participation in the 1994
Stock Option Plan for Non-Employee Directors. See "Compensation of Directors."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 2000 STOCK
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS.
14
<PAGE>
ITEM 3 -- 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 2000. 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.
VOTE REQUIRED FOR APPROVAL
Votes with respect to matters submitted to shareholders at the 2000
Annual Meeting will be tabulated and certified by a representative of First
Union National Bank, the Company's transfer agent, who will be appointed as an
independent inspector of election. The presence in person or by proxy of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
at the Annual Meeting shall constitute a quorum for the transaction of business
at the Annual Meeting. Although abstentions and broker nonvotes (matters subject
to vote on validly submitted proxies for which no vote is indicated) are counted
for purposes of determining whether a quorum is present at the Annual Meeting,
they are not treated as votes cast on any matter as to which no voting
instruction is indicated. The vote required to elect directors is a plurality of
the votes cast for their class of directorship at the Annual Meeting. On all
matters other than the election of directors, the affirmative vote of the
holders of a majority of the shares of Common Stock present in person or by
proxy at the Annual Meeting and entitled to vote is required. Abstentions and
broker nonvotes will not be counted.
OTHER MATTERS
In the event any shareholder wishes to present a proposal at the 2001
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 1, 2000, 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 2001, other than pursuant to
the foregoing paragraph, will be considered untimely if not received by the
Corporation prior to February 14, 2001. 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.
/s/ Neil W. Koonce
NEIL W. KOONCE
VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY
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