As filed with the Securities and Exchange Commission on August 4, 2000
Registration No.333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CONE MILLS CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 2211 56-0367025
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code No.) Identification No.)
incorporation
or organization)
3101 N. Elm Street
Greensboro, North Carolina 27415-6540
(336) 379-6220
(Address, including Zip Code, and telephone
number, including area code, of registrant's principal
executive offices)
-------------------------
NEIL W. KOONCE, ESQ.
Vice President, General Counsel and Secretary
Cone Mills Corporation
3101 N. Elm Street
Greensboro, North Carolina 27415-6540
(336) 379-6220
(Name, address, including Zip Code, and telephone
number, including area code, of agent for
service)
------------------------
Copies to:
DORIS R. BRAY, ESQ.
Schell Bray Aycock Abel & Livingston P.L.L.C.
230 North Elm Street, Suite 1500
Greensboro, North Carolina 27401
(336) 370-8800
------------------------
Approximate date of commencement of the proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ___________
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] ___________
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price per Aggregate Offering Amount of
Registered Registered Unit Price Registration Fee
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
11% Secured
Subordinated
Debentures $85,000,000 N/A $85,000,000(2) $22,440.00
Common Stock, par
value $0.10 $25,000,000(1) N/A $25,000,000 $ 6,600.00
Common Stock par value
$0.10 850,000 N/A $ 4,675,000(3) $ 1,234.20
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
(1) In accordance with Rule 457 (o), the number of shares of common stock being
registered and the proposed maximum offering price per share of common stock are
not included in this table.
(2) Estimated solely for purposes of calculating the registration fee.
(3) In accordance with Rule 457(f)(1), the registration fee is based upon the
average of the high and low prices of the common stock of Cone Mills Corporation
on the the New York Stock Exchange on July 28, 2000.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion, dated August 4, 2000
PROSPECTUS AND CONSENT SOLICITATION
CONE MILLS CORPORATION
$85,000,000 Aggregate Principal Amount of 11% Secured Subordinated Debentures
Due March 15, 2005
_____________Shares of Common Stock
Exchange Offer and Consent Solicitation
Outstanding 8-1/8% Debentures Due March 15, 2005 of Cone Mills Corporation
Exchanged for
Common Stock and 11% Secured Subordinated Debentures Due March 15, 2005
We are offering to exchange Cone Mills Corporation common stock or a
combination of our 11% Secured Subordinated Debentures Due March 15, 2005 and
shares of Cone common stock for outstanding 8-1/8% Debentures Due March 15, 2005
of Cone and are soliciting consents to amend the indenture under which the
8-1/8% debentures were issued and to release the debentureholders' interest in
the collateral securing the 8-1/8% debentures.
Selected terms of the exchange offer and consent solicitation:
o The exchange offer and consent solicitation will expire at
5:00 p.m., New York City time, on September 18, 2000.
o For each $1,000 principal amount of 8-1/8% debentures tendered
and accepted for exchange, you will receive, at your election,
(1) ____ shares of our common stock or (2) $1,000 principal
amount of our new 11% debentures and 10 shares of our common
stock. The overall yield on the combination of debentures and
common stock will be about 12.79%, assuming a $6.00 common
stock price per share and 100% acceptance of the exchange
offer.
o If the exchange offer is not fully subscribed, we intend to
pass on some of the interest savings we realize from those
debentureholders who do not exchange their debentures to those
debentureholders who accept the exchange offer for 11%
debentures and common stock, thereby increasing the interest
rate on the 11% debentures up to a maximum rate of 14% and
resulting in an overall yield on the debentures and the common
stock as high as about 15.91%, assuming a $6.00
common stock price per share.
<PAGE>
o The new 11% debentures will be secured subject to
subordination to senior secured debt up to an amount equal to
55% of the Company's consolidated net tangible assets, which
totaled approximately $202 million at July 2, 2000.
If you tender your 8-1/8% debentures, you will automatically
consent to amendments to the indenture governing the 8-1/8%
debentures and to the release of the collateral securing the
8-1/8% debentures. These amendments make certain changes in
the lien covenant and related definitions and will apply to
the 8-1/8% debentures not tendered for exchange.
o We will not make any separate payment, other than the exchange
consideration in exchange for your 8-1/8% debentures, for
consents delivered in the consent solicitation.
o Up to $15,000,000 aggregate principal amount of 8-1/8%
debentures will exchanged for Cone common stock and up to
$85,000,000 aggregate principal amount of 8-1/8% debentures
will be exchanged for a combination of our new 11% debentures
and common stock. Any over-subscription for common stock or
the combination of 11% debentures and common stock will be
prorated to the other type of consideration.
o This exchange offer will be effective only if more than 50% of
debentureholders accept the exchange and approve the
amendments to the indenture and release of security relating
to the 8-1/8% debentures.
Our common stock is listed on the New York Stock Exchange under the
symbol "COE." On __________, 2000, our common stock closed at $____ per share.
You should consider carefully the risk factors discussed on page 10 of this
prospectus in evaluating the exchange offer and consent solicitation.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus and consent solicitation is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus and consent solicitation is August ____, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFER
AND CONSENT SOLICITATION...............................................iii
SUMMARY.........................................................................1
The Company............................................................1
Rationale for the Exchange Offer.......................................1
The Exchange Offer and Consent Solicitation............................2
Selected Financial Data................................................9
RISK FACTORS....................................................................10
Industry Risks.........................................................10
Company Risks..........................................................11
Exchange Offer and Consent Solicitation Risks..........................13
THE COMPANY AND ITS STRATEGY....................................................15
Revitalization Program.................................................15
Why We Plan to Expand in Mexico........................................17
BOOK VALUE PER SHARE............................................................18
CAPITALIZATION..................................................................19
RATIO OF EARNINGS TO FIXED CHARGES..............................................20
THE EXCHANGE OFFER AND CONSENT SOLICITATION.....................................20
Background and Purpose of the Exchange Offer and Consent Solicitation..20
Terms of the Exchange Offer and Consent Solicitation ..................22
Risk Factors Relating to Holders Who Do Not Tender Their Debentures....24
Proposed Amendments to the Indenture Governing 8-1/8% Debentures.......25
Release of Collateral Securing 8-1/8% Debentures.......................26
Acceptance for Exchange of Debentures; Acceptance of Consents..........27
Procedures for Exchanging Debentures and Delivering Consents ..........28
Withdrawal of Tendered 8-1/8% Debentures and Revocation of Consents....34
Conditions to the Exchange Offer and Consent Solicitation..............36
Federal Income Tax Considerations......................................37
Advisor, Exchange Agent and Information................................43
Conflicts of Interest..................................................43
Fees and Expenses......................................................44
Restrictions on Sales of Securities by Affiliates of Cone..............45
No Appraisal Rights....................................................45
Use of Proceeds........................................................45
Listing on the New York Stock Exchange.................................45
Miscellaneous..........................................................46
DESCRIPTION OF CONE CAPITAL STOCK...............................................46
Common Stock...........................................................46
Shareholder Rights Plan................................................47
Class A Preferred Stock................................................48
Class B Preferred Stock................................................49
Certain Provisions that May Have an Anti-Takeover Effect...............49
Indemnification of Directors and Officers..............................51
</TABLE>
i
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DESCRIPTION OF 11% DEBENTURES DUE MARCH 15, 2000..............................52
General Terms of 11% Debentures......................................52
Indenture............................................................53
Book-Entry System....................................................53
Certain Covenants....................................................55
Guaranties...........................................................59
Collateral...........................................................59
Merger, Consolidation, Sale, Lease or Conveyance.....................61
Subordination........................................................61
Events of Default....................................................61
Discharge, Defeasance and Covenant Defeasance........................63
Modification of the Indenture........................................64
LEGAL MATTERS.................................................................64
EXPERTS.......................................................................64
WHERE YOU CAN FIND MORE INFORMATION...........................................65
FORWARD-LOOKING STATEMENTS....................................................66
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFER AND CONSENT SOLICITATION
Q: WHY IS THE COMPANY PROPOSING THIS TRANSACTION?
A: For the past eighteen months a reenergized management team has focused
on three revitalization initiatives for Cone: reorganization and cost
reduction; enforced discipline during an industry cyclical downturn;
and continued execution of Cone's strategic growth in denim and home
furnishing fabrics. The Company believes that it has successfully
executed the first two initiatives and now it is focused on its third
initiative, strategic growth. The cornerstone of the Company's
strategic growth is its plan to begin construction in 2000 of a new
value-added denim plant on its site in the State of Tamaulipas, Mexico.
The Company believes that the present terms of the indenture for the
8-1/8% debentures and the related security interest in the Company's
assets granted in favor of the debentureholders in January of this year
are barriers to the immediate execution of the growth element of its
strategy and to the establishment of a stronger balance sheet more
appropriate for today's capital market conditions.
Q: WHAT IS THE PROPOSED TRANSACTION?
A: Cone is soliciting consents to amend the indenture under which the
8-1/8% debentures were issued and to release the collateral for the
8-1/8% debentures. To facilitate this amendment and release, Cone is
offering to exchange its common stock or a combination of its 11%
Secured Subordinated Debentures Due March 15, 2005 and Cone common
stock for any and all of Cone's outstanding 8-1/8% Debentures Due March
15, 2005.
Q: WHEN DOES THE EXCHANGE OFFER AND CONSENT SOLICITATION EXPIRE?
A: Unless Cone extends the exchange offer and consent solicitation, it
will expire at 5:00 p.m., New York City time, on September 18, 2000.
Q: HOW DID MY DEBENTURES BECOME SECURED AND WHY IS IT IMPORTANT THAT THE
SECURITY INTEREST BE RELEASED AND THE NEW DEBENTURES BE SUBORDINATED?
A: When the 8-1/8% debentures were issued, we had an investment grade
rating and the debentures, along with the Company's other principal
financings, were unsecured obligations of the Company. The 8-1/8%
debentures have historically been unsecured obligations of the Company
and the Company's other principal financings, with a bank group and an
insurance company, have similarly been unsecured. However, due to the
Company's 1999 financial performance and the industry-wide downturn
last year, the Company's bank group required that the Company's
revolving credit facility be refinanced on a secured basis. This grant
of security to the banks in turn triggered obligations contained in the
Company's other financing documents, including the indenture for the
8-1/8% debentures, to equally and ratably secure these creditors. As a
consequence of the banks' condition to refinancing and the equal and
ratable security
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<PAGE>
covenants in the Company's other financing documents, the 8-1/8%
debentures, as well as the Company's other principal financing
obligations, all became secured on January 28, 2000. This resulted in a
level of senior secured debt that made the Company's existing creditors
unwilling to permit additional financing critical to the Company's
strategic growth initiatives. With the release of the collateral
securing the 8-1/8% debentures and the exchange of many of these
debentures for new secured subordinated debentures, refinancing the
Company's U.S. based debt at better rates and more favorable terms and
financing of the Company's growth initiatives will again be possible.
The Company regards new financing, and therefore the modification of
security, as important to its ability to continue its leadership
position in the denim industry.
Q: ARE THE COMPANY'S OTHER SECURED CREDITORS RELEASING THEIR COLLATERAL?
A: No. It is the Company's intention to replace all of its existing
secured financing (other than the debentures) with one new asset-based
lending facility that will be secured by a priority lien on
substantially all of the Company's U.S. assets, affording the Company
the funds and the flexibility it needs to implement its strategies.
Cone anticipates that this facility will be arranged as soon as
practicable after the successful completion of the debenture exchange
offer and will be on substantially more favorable terms than the
Company's current financings.
Q: WILL THE NEW 11% DEBENTURES BE SECURED?
A: Yes. The new 11% debentures will be secured by a lien on substantially
all of the Company's U.S. assets, subordinated to senior debt not to
exceed an amount equal to 55% of consolidated net tangible assets
securing the 11% debentures.
Q: WHY DOES THE AMOUNT OF MY SUBORDINATION CHANGE WITH CHANGES IN
CONSOLIDATED NET TANGIBLE ASSETS?
A: As the Company expands, its consolidated net tangible assets should
increase. Increasing the subordination amount will allow for the
financing of the Company's growth, primarily working capital. Any
increase in consolidated net tangible assets will also increase the
collateral coverage for the debentureholders.
Q: WHAT U.S. ASSETS ARE EXCLUDED FROM COLLATERAL?
A: The excluded assets are miscellaneous assets not securing the senior
debt and stock of Cone Mills (Mexico) S.A. de C.V.
Q: HOW DOES MY SECURITY INTEREST FOR THE 11% DEBENTURES DIFFER FROM MY
COLLATERAL FOR THE 8-1/8% DEBENTURES?
A: Presently the 8-1/8% debentures have a pari passu lien with the
Company's other secured debt on substantially all of the Company's
assets, which means that the debentures share
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the collateral on a pro rata basis. However, certain of the Company's
assets may be excluded from the assets covered by the lien: (1) the
Company may sell its accounts receivable free of this lien under its
receivables securitization agreement; at July 2, 2000, the Company had
sold about $103 million of accounts receivable, with the Company's
secured creditors, including the debentureholders, having a lien on the
sold receivables on that date to the extent the proceeds from the sold
receivables exceed $60 million; and (2) the Company has the ability to
grant to other senior creditors a priority lien under the terms of the
indenture securing up to 10% of the Company's consolidated net tangible
assets, which totaled $36 million at July 2, 2000. In addition, if the
Company's other secured creditors are repaid, the debentures become
unsecured. Under the indenture relating to the 11% debentures, the 11%
debentures will have a direct security interest in substantially all of
the Company's U.S.-based assets. The security interest is subordinated
to senior secured debt outstanding equal to 55% of the Company's
consolidated net tangible assets securing the 11% debentures
(approximately $202 million at July 2, 2000). The security interest of
the 11% debentures will remain outstanding for the term of the
debentures even if there is no senior secured debt or if the senior
secured debt is less than the subordinated amount. The outstanding
balance of the receivables securitization will be included in the
definitions of senior secured debt and consolidated net tangible
assets. If the Company eliminates its receivables securitization
program the Company's U.S. accounts receivable will be included in the
collateral for the 11% debentures.
Q: WHAT WILL I RECEIVE IN THE EXCHANGE OFFER IF I TENDER MY DEBENTURES?
A: If you tender your 8-1/8% debentures prior to the expiration of the
exchange offer, you will receive, at your election, for each $1,000
principal amount of 8-1/8% debentures (1) ____ shares of Cone common
stock or (2) $1,000 principal amount of Cone's 11% debentures and 10
shares of Cone common stock.
Q: MAY I TENDER A PORTION OF MY DEBENTURES?
A. No. If you tender any of your 8-1/8% debentures, you must tender all
of them.
Q: ARE THERE ANY LIMITS ON THE NUMBER OF SHARES OF CONE COMMON STOCK OR
11% DEBENTURES THAT WILL BE ISSUED IN THE EXCHANGE OFFER?
A: Yes. Cone intends to issue up to ________________ shares of its common
stock for up to $15,000,000 aggregate principal amount of 8-1/8%
debentures exchanged and up to $85,000,000 aggregate principal amount
of 11% debentures. However, the Company reserves the right to increase
the number of shares of common stock to be issued in the exchange offer
to a maximum of ________________shares for up to $25,000,000 aggregate
principal amount of 8-1/8% debentures. Cone will also issue 10 shares
of its common stock with each $1,000 principal amount of 11% debentures
it issues.
Q: WHAT IF THE HOLDERS OF 8-1/8% DEBENTURES ELECT TO RECEIVE MORE THAN
________________ SHARES OF COMMON STOCK OR MORE THAN $85,000,000
PRINCIPAL AMOUNT OF 11% DEBENTURES?
v
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A: In the event more than $15,000,000 aggregate principal amount of 8-1/8%
debentures are tendered in exchange for common stock, the 8-1/8%
debentures will be accepted for exchange for common stock on a pro rata
basis rounded to the nearest $1,000 principal amount of 8-1/8%
debentures. In the event more than $85,000,000 aggregate principal
amount of 8-1/8% debentures are tendered in exchange for 11%
debentures, the 8-1/8% debentures will be accepted for exchange for 11%
debentures and common stock on a pro rata basis rounded to the nearest
$1,000 principal amount of 8-1/8% debentures.
If the common stock is oversubscribed, you will receive your pro rata
share of the common stock being offered rounded to the nearest $1,000
principal amount of 8-1/8% debentures, and the remainder of your
tendered 8-1/8% debentures will be exchanged for 11% debentures and
common stock. Cone may elect, however, to increase the number of shares
of common stock to be issued in the exchange offer to a maximum of
________ shares for up to $25,000,000 aggregate principal amount of
8-1/8% debentures if the common stock is oversubscribed. Similarly, if
the combination of 11% debentures and common stock is oversubscribed,
you will receive common stock for a portion of your 8-1/8% debentures.
Q: HOW IS THE NUMBER OF SHARES OF CONE COMMON STOCK I RECEIVE IN EXCHANGE
FOR MY 8-1/8% DEBENTURES CALCULATED?
A: If you elect to receive shares of Cone common stock in exchange for
your 8-1/8% debentures, the number of shares you will receive will be
based on a representative market value of the common stock set by the
Executive Committee of Cone's Board of Directors in its discretion
considering the daily market values of the common stock in the recent
past and other market considerations. If more than $15,000,000
principal amount of 8-1/8% debentures are tendered in exchange for
common stock, the number of debentures you will be able to exchange for
shares will be prorated with the remainder being exchanged for 11%
debentures and shares of Cone common stock.
Q: IS THERE ANY POSSIBILITY THAT THE NEW DEBENTURES TO BE ISSUED IN THE
EXCHANGE OFFER WILL CARRY A RATE OF INTEREST IN EXCESS OF 11%?
A: Yes. If more than $50,000,000 but less than $100,000,000 principal
amount of the 8-1/8% debentures are tendered and less than $85,000,000
8-1/8% debentures are tendered for 11% debentures, the interest rate on
the new debentures will be increased up to a maximum interest rate of
14% so as to pass on to the tendering debentureholders some of the
interest savings realized by Cone as a result of a portion of the
8-1/8% debentures' continuing to be outstanding.
Q: WILL MY RIGHTS AS A HOLDER OF 8-1/8% DEBENTURES CHANGE IF I TENDER
MY DEBENTURES IN THE EXCHANGE OFFER?
A: Yes. Currently, your rights as a holder of the 8-1/8% debentures are
governed by the indenture under which the 8-1/8% debentures were
issued. However, if you exchange
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your debentures for shares of Cone common stock, you will become a Cone
shareholder and your rights will be governed by North Carolina law and
Cone's articles of incorporation and bylaws, as described in this
prospectus. If you exchange your debentures for a combination of 11%
debentures and common stock, your rights as a debentureholder will be
governed by the indenture under which the 11% debentures will be issued
and your rights as a shareholder will be governed by North Carolina law
and Cone's articles of incorporation and bylaws.
Q: WHAT HAPPENS IF I FAIL TO TENDER MY 8-1/8% DEBENTURES PRIOR TO THE
EXPIRATION OF THE EXCHANGE OFFER?
A: If you fail to tender your 8-1/8% debentures and the indenture is
amended as proposed in this prospectus and the collateral is released,
your rights as a holder of the 8-1/8% debentures will be governed by
the terms and conditions of the indenture as they are modified by the
proposed amendments and your debentures will be unsecured. If you fail
to tender your 8-1/8% debentures and the indenture is not amended and
your collateral is not released as proposed in this prospectus, your
rights as a holder of 8-1/8% debentures will not change.
Q: HOW WOULD THE PROPOSED AMENDMENTS TO THE INDENTURE AND RELEASE OF
SECURITY MODIFY MY RIGHTS AS A HOLDER OF ANY 8-1/8% DEBENTURES THAT
I FAIL TO TENDER?
A: As described in this prospectus, if the indenture is amended and the
collateral is released, 8-1/8% debentures that you do not tender will
enjoy a less restrictive lien covenant and will be unsecured. In the
event the general secured indebtedness of Cone exceeds 55% of its
consolidated net tangible assets, as defined in the indenture as
proposed to be amended, the 8-1/8% debentures will be secured by a lien
on the assets securing the 11% debentures pari passu with such excess
indebtedness. That lien will be subordinate to the lien of the 11%
debentures as well as to other permitted liens under the indenture.
Q: WHY SHOULD I TENDER MY 8-1/8% DEBENTURES FOR COMMON STOCK OR A
COMBINATION OF NEW 11% DEBENTURES AND COMMON STOCK?
A: If you elect common stock, you will receive equity with instant
liquidity should you desire it and potential for appreciation should
you not. If you elect the new debentures, you will receive debentures
paying a higher interest rate than your present debentures as well as
shares of our common stock. Your new debentures will be secured by
substantially all of the Company's U.S. assets, subordinate to senior
secured debt of up to an amount equal to 55% of the Company's
consolidated net tangible assets and certain other liens presently
under 8-1/8% debentures. If you do not tender and the exchange offer
succeeds, you will have 8-1/8% unsecured debentures with reduced
indenture protections. If the exchange offer fails, you will have
8-1/8% secured debentures of a Company whose prospects are
significantly impaired by an ineffective debt structure.
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Q: WHEN WILL ACCRUED BUT UNPAID INTEREST ON MY 8-1/8% DEBENTURES BE PAID?
A: If you exchange your 8-1/8% debentures, your interest on the debentures
will be paid as of the effective date of the exchange offer and will be
mailed to you at the same time as your common stock or your 11%
debentures and common stock, as the case may be. If you do not accept
the exchange offer, your interest will be paid on the normal interest
payment date.
Q: WHAT DETERMINES WHETHER THE INDENTURE RELATING TO THE 8-1/8% DEBENTURES
IS AMENDED AND WHETHER THE COLLATERAL IS RELEASED?
A: Under the terms of the indenture, the proposed amendments will become
effective and the collateral will be released if the holders of at
least a majority in aggregate principal amount of the outstanding
8-1/8% debentures consent to the amendments and release. Tendering in
the exchange offer automatically constitutes approval of the amendments
and consent to the release of collateral.
Q: IF I TENDER MY 8-1/8% DEBENTURES AND CONSENT TO THE PROPOSED AMENDMENTS
AND THE RELEASE OF COLLATERAL, WILL I BE ABLE TO REVOKE THESE DECISIONS
IF I LATER CHANGE MY MIND?
A: Yes. You may revoke your consent to the proposed amendments and
release and withdraw your debentures at any time on or prior to the
expiration of the exchange offer and consent solicitation. By
withdrawing your debentures, you lose your right to receive the
exchange offer consideration.
Q: AM I ENTITLED TO APPRAISAL RIGHTS IN REGARDS TO THE EXCHANGE OFFER?
A: No. You will not have any right to dissent and receive an appraisal of
your 8-1/8% debentures.
Q: ARE THERE ANY CONDITIONS THAT MIGHT PREVENT THE EXCHANGE OFFER OR
CONSENT SOLICITATION FROM BECOMING EFFECTIVE?
A: Yes. Cone's obligation to consummate the exchange offer and consent
solicitation is conditioned on the receipt of consents to amend the
indenture and release the collateral securing the 8-1/8% debentures
from holders of more than a majority of the debentures, in addition to
the other conditions described in this prospectus.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the exchange offer or consent
solicitation or if you need additional copies of this prospectus, you
should contact:
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Cone Mills Corporation
3101 North Elm Street
P.O. Box 26540
Greensboro, North Carolina
Attention: David E. Bray or Gary L. Smith
Telephone: (336) 379-6220
Dougherty & Company LLC
90 South Seventh Street, Suite 4400
Minneapolis, Minnesota 55402-4115
Attention: Steven D. McWhirter
Toll Free: (800) 328-4000
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SUMMARY
We are soliciting consents to amend the indenture under which the
8-1/8% debentures were issued and to release the collateral for the 8-1/8%
debentures that was pledged on January 28, 2000. We believe that the present
terms of this indenture and the high level of senior secured debt created when
the Company was required to secure the 8-1/8% debentures are barriers to both
the execution of the Company's revitalizing operating strategy and the
establishment of a stronger balance sheet more appropriate for today's capital
market conditions.
To facilitate this amendment, we are offering to exchange Cone common
stock or a combination of Cone's 11% Secured Subordinated Debentures Due March
15, 2005 and Cone common stock in exchange for the outstanding Cone 8-1/8%
Debentures Due March 15, 2005. This summary highlights selected information from
this prospectus and may not contain all of the information that is important to
you. To understand the exchange offer and consent solicitation fully and for a
more complete description of the legal terms of the exchange offer and consent
solicitation, you should read carefully this entire prospectus and the other
documents to which we have referred you, including the consent and letter of
transmittal accompanying this prospectus. See "Where You Can Find More
Information" on page 65. We have included page references parenthetically to
direct you to a more complete description of the topics presented in this
summary.
The Company (page 15)
Founded in 1891, we are the world's largest producer of denim fabrics
and the largest commission printer of home furnishings fabrics in North America.
We are also a leading producer of decorative fabrics for the home furnishings
industry and a producer of specialty sportswear fabrics such as khaki.
We have our principal executive offices at 3101 North Elm Street,
Greensboro, North Carolina 27408 (336-379-6220). More information about us is
incorporated in this prospectus by reference. See "Where You Can Find More
Information" on page ____.
Rationale for the Exchange Offer (page 20)
Since our 8-1/8% debentures were issued in early 1995, the combination
of an industry-wide business downturn, our consequent restructuring of
operations and the presence of a more restrictive capital markets environment,
particularly among banks, has resulted in the downgrading of the 8-1/8%
debentures to less than investment grade. With the loss of our investment grade
status, our lenders require that our debt be secured by Company assets. The
8-1/8% debentures require that if any debt of the Company were secured (with
certain exceptions), the unsecured debt would be secured on a pro rata basis. As
a consequence, all of the Company's significant financing obligations, including
the 8-1/8% debentures, were secured by blanket liens on substantially all of the
Company's assets on January 28, 2000, resulting in a deficit of collateral
available for needed new financings. While the terms that created these liens
are common for investment-grade companies, these terms are a burden to
noninvestment grade companies who rely upon collateralized borrowings to grow
their businesses. Thus, the purpose
1
<PAGE>
of this transaction is to alter the Company's publicly held debt instruments to
permit us to make use of secured financing structures required by lenders to
noninvestment grade credits.
Our objectives in this transaction are to:
o Establish a capital structure that provides support for the
Company's operating strategy for the next three to five years.
o Improve earnings and cash flow by immediate execution of the
Company's expansion plans.
o Manage financial risk by holding total interest costs at present
levels and reducing total debt.
The Exchange Offer and Consent Solicitation (page 20)
The 8-1/8% Debentures We are making the exchange offer and consent
(page 20) solicitation with respect to all of our 8-1/8%
Debentures Due March 15, 2005.
The Exchange Offer We are offering (1) ____ shares of Cone common stock
(page 20) or (2) $1,000 of new debentures and 10 shares Cone
common stock for each $1,000 of the outstanding
8-1/8% debentures.
The new debentures will carry an interest rate of at
least 11% per annum. If more than $50,000,000 but
less than $100,000,000 principal amount of 8-1/8%
debentures are tendered and less than $85,000,000
8-1/8% debentures are tendered for 11% debentures,
the interest rate payable on the new debentures will
be increased up to a maximum of 14% so as to pass on
to the tendering holders some of the interest
savings we realize as a result of a portion of the
8-1/8% debentures' continuing to be outstanding.
Proration We expect to issue ____________ shares of common
(page 22) stock for $15,000,000 of 8-1/8% debentures and up to
$85,000,000 principal amount of 11% debentures and
850,000 shares of our common stock for $85,000,000
of 8-1/8% debentures. If more than $15,000,000
aggregate principal amount of 8-1/8% debentures are
tendered for common stock, the 8-1/8%
2
<PAGE>
debentures will be accepted for exchange for common
stock on a pro rata basis, rounded to the nearest
$1,000 principal amount of 8-1/8% debentures.
Similarly, if more than $85,000,000 aggregate
principal amount of 8-1/8% debentures are tendered
in exchange for 11% debentures, the 8-1/8%
debentures will be accepted for exchange for 11%
debentures and common stock on a pro rata basis,
rounded to the nearest $1,000 principal amount of
8-1/8% debentures. If the common stock is
oversubscribed, you will receive your pro rata share
of the common stock being offered, and the remainder
of your 8-1/8% debentures will be exchanged for 11%
debentures and common stock. If the combination of
11% debentures and common stock is oversubscribed,
you will receive common stock for a portion of your
8-1/8% debentures. We reserve the right, however, to
increase the common stock to be issued in the
exchange offer to a maximum of ________ shares if
the option to receive common stock is
oversubscribed.
The Solicitation We are also soliciting consents to the proposed
(page 22) amendments to the indenture under which the 8-1/8%
debentures were issued and to release all of the
collateral currently securing those debentures. If
you tender 8-1/8% debentures in the exchange offer
on or before the expiration of the consent
solicitation, you are obligated to consent to the
proposed amendments to the indenture and the release
of collateral, and to complete, execute and deliver
a consent and letter of transmittal on or before the
expiration of the consent solicitation to effect
delivery of your consent with respect to the
debentures tendered by you. You may deliver consents
in the consent solicitation without tendering your
debentures in the exchange offer.
The Amendments to the The supplemental indenture will amend the existing
Old Indenture indenture for the 8-1/8% debentures to (i) increase
(page 25) the "basket" for permitted general secured debt of
the Company and its subsidiaries from its current
limit of 10% of Consolidated Net Tangible Assets to
55% of Consolidated Net
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<PAGE>
Tangible Assets, (ii) add a permission for liens
securing the 11% debentures, (iii) amend the
definition of "Consolidated Net Tangible Assets" to
exclude current maturities of long term debt and
assets not securing the 11% debentures and to
include the outstanding balance of any receivables
securitization arrangements, and (iv) amend the
definition of "Subsidiary" to exclude foreign
subsidiaries, with the effect that foreign
subsidiaries would be excluded from the lien and
sale and leaseback covenants. After giving effect to
the supplemental indenture, each of the four
indenture provisions amended by the supplemental
indenture will be substantively identical to the
same provisions in the indenture for the 11%
debentures.
Release of the Collateral Since January 28, 2000, the 8-1/8% debentures,
(page___) together with the Company's other secured debt, have
been secured by a lien on substantially all the
Company's assets as a result of a covenant in the
existing indenture requiring that such a lien be
granted. The consent will act as your release of
this collateral, making the 8-1/8% debentures
unsecured once again.
In the event the general secured indebtedness of
Cone exceeds 55% of its consolidated net tangible
assets, as defined in the indenture as proposed to
be amended, the 8-1/8% debentures will be secured by
a lien on the assets securing the 11% debentures
pari passu with such excess indebtedness. That lien
will be subordinate to the lien of the 11%
debentures as well as to other permitted liens under
the indenture.
Requisite Consents Approval of the proposed amendments to the indenture
(page ___) governing the 8-1/8% debentures requires the consent
of the holders of at least a majority in aggregate
principal amount of 8-1/8% debentures outstanding.
Effectiveness of Proposed Cone and the trustee for the 8-1/8% debentures will
Amendments execute the supplemental indenture providing for the
(page ___) proposed amendments promptly following the
expiration of the consent solicitation, assuming
4
<PAGE>
that the requisite consents have been received. The
proposed amendments, however, will not become
operative until we have accepted for purchase all
debentures validly tendered (and not withdrawn) in
the exchange offer. If the proposed amendments
become operative, all persons who continue to hold
8-1/8% debentures thereafter will be subject to the
provisions of the indenture as amended by the
proposed amendments.
Terms of the New The new debentures will be on substantially the same
Debentures terms as the existing 8-1/8% debentures except that:
(page 52) (1) the interest rate will be higher; (2) the new
debentures will be secured but subordinated to
certain senior secured debt, where as the old
debentures will be unsecured if the exchange offer
is consummated; and (3) there will be expanded
permissions for secured debt and financing of
foreign subsidiaries.
Expiration of the 5:00 p.m., New York City time, on September 18,
Exchange Offer and Consent 2000, unless extended. The supplemental indenture
Solicitation will be executed promptly following the expiration
(page 25) of the exchange offer and consent solicitation,
assuming that the requisite consents have been
received.
Exchange Date The exchange of 8-1/8% debentures for Cone common
(page 23) stock or a combination of 11% debentures and common
stock will be made promptly following the expiration
of the exchange offer and the satisfaction or waiver
of all conditions.
Conditions to the The exchange offer and consent solicitation is
Exchange Offer and Consent conditioned upon receipt of the requisite consents
Solicitation for the proposed amendments to the indenture and
(page 36) release of collateral and the execution of the
supplemental indenture and the other general
conditions described in this prospectus.
Procedures for If you want to tender your 8-1/8% debentures in the
Tendering Debentures exchange offer and deliver your consent in the
and Delivering Consents solicitation, you must tender all of your debentures
(page 28) and you should either:
5
<PAGE>
o If you hold physical certificates
evidencing your 8-1/8% debentures,
complete and sign the enclosed consent
and letter of transmittal (or a manually
signed facsimile thereof) in accordance
with the instructions in that document,
have your signature guaranteed if
required by Instruction 4 of the consent
and letter of transmittal, and send or
deliver your manually signed consent and
letter of transmittal (or manually signed
facsimile), together with the
certificates evidencing the debentures
being tendered and any other required
documents, to the exchange agent; or
o If you hold your 8-1/8% debentures in
book-entry form, request your broker,
dealer, commercial bank, trust company or
other nominee to effect the transaction
for you.
If you own 8-1/8% debentures that are registered in
the name of a broker, dealer, commercial bank, trust
company or other nominee, you must contact that
broker, dealer, commercial bank, trust company or
other nominee if you desire to tender your
debentures and deliver consents.
If you are tendering your debentures by book-entry
transfer to the exchange agent's account at
Depositary Trust Company (which we refer to as
"DTC"), you can execute the tender through DTC's
Automated Tender Offer Program (which we refer to as
"ATOP"), for which the transaction will be eligible.
DTC participants that are accepting the exchange
offer must transmit their acceptance to DTC, which
will verify the acceptance and execute a book-entry
delivery to the exchange agent's account at DTC. DTC
will then send an agent's message to the exchange
agent for its acceptance. Delivery of the agent's
message by DTC will satisfy the terms of the
exchange offer as to the tender of debentures.
If you desire to tender 8-1/8% debentures in the
exchange offer and cannot comply with the procedures
for tender or delivery on a timely basis
6
<PAGE>
or if your debentures are not immediately available,
you may tender your debentures using the procedures
for guaranteed delivery described in this
prospectus.
Revocation of Consents You may revoke your consents at any time prior to
(page 34) the expiration of the consent solicitation, but not
thereafter. If you validly revoke your consent, it
will render your tender of debentures defective,
and, unless Cone waives that defect, you will not be
eligible to receive the exchange offer consideration
for your 8-1/8% debentures.
Withdrawal of You may withdraw your tender of 8-1/8% debentures at
Tenders of Debentures any time before the expiration of the exchange
(page 34) offer, but the exchange offer consideration will not
be payable for any debentures so withdrawn. If you
withdraw your tendered debentures before the
expiration of the consent solicitation, however, it
will be deemed a revocation of the related consent.
Untendered 8-1/8% If you do not tender your 8-1/8% debentures and they
Debentures are not exchanged in the exchange offer, they will
(page 24) remain outstanding. If the requisite consents to
amend the indenture and release collateral are
received and the proposed amendments become
operative under the supplemental indenture,
untendered debentures will be unsecured and will no
longer have the benefits of the restrictive
covenants that will be eliminated from the indenture
by the proposed amendments. In addition, as a result
of the consummation of the exchange offer, the
aggregate principal amount of the 8-1/8% debentures
that are outstanding will be significantly reduced,
which may adversely affect the liquidity of and,
consequently, the market price for the 8-1/8%
debentures, if any, that remain outstanding after
the completion of the exchange offer.
Acceptance of Upon the terms of the exchange offer and consent
Tendered Debentures solicitation and upon satisfaction or our waiver of
and Exchange the conditions to the exchange offer and consent
(page 27) solicitation, we will accept for exchange 8-1/8%
debentures validly tendered on or before the
7
<PAGE>
expiration of the exchange offer. Only if you
validly tender your debentures (including a properly
completed, executed and delivered consent) on or
before the expiration of the consent solicitation
(and do not withdraw your tender and revoke your
consent) will you receive the exchange
consideration. We will make payment of the exchange
consideration for debentures validly tendered and
accepted for payment, by deposit of the appropriate
number of shares of Cone common stock, and
appropriate amounts of 11% debentures, with the
exchange agent who will act as agent for the
tendering and consenting holders of 8-1/8%
debentures for the purpose of the exchange.
We expect such exchange to be made on the exchange
date described in this prospectus promptly following
our acceptance of the 8-1/8% debentures in the
exchange offer.
Federal Income You are referred to the discussion about the federal
Tax Considerations income tax consequences of the exchange offer on
(page 37) page 37. Tax matters are very complicated and the
tax consequences of the exchange offer to you will
depend on the facts of your own situation. You
should consult your own tax advisor for a full
understanding of the tax consequences to you of the
exchange offer and the implementation of the
proposed amendments.
No Appraisal Rights You will not have any right to dissent and receive
(page 45) an appraisal of your 8-1/8% debentures, under either
the indenture or North Carolina law, in connection
with the exchange offer.
Exchange Agent The Bank of New York is serving as exchange agent in
(page 43) connection with the exchange offer and the consent
solicitation. Its address and telephone number are
located on the back cover of this prospectus.
8
<PAGE>
Selected Financial Data
In the table below, we provide you with selected historical consolidated
financial data of Cone for each of the fiscal years 1995 through 1999 and for
the three months ended April 2, 2000 and April 4, 1999. We derived this
information from the audited consolidated financial statements of Cone, except
for the financial data for the three-month periods ended April 2, 2000, and
April 4, 1999 which are derived from unaudited financial statements. The
information is for illustrative purposes only and you should read it together
with Cone's historical financial statements and related notes contained in the
annual reports, quarterly reports and other information that we have filed with
the SEC and incorporated by reference. To obtain copies of these documents, see
"Where You Can Find More Information" on page 65.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(in millions, except per share data and number of employees) 1999 1998 (1) 1997 1996
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Summary of Operations
Net Sales $ 616.3 $ 728.6 $ 716.9 $ 745.9
Cost of Sales (2) 568.2 661.8 664.4 662.0
---------------------------------------------------------------
Gross Profit 48.1 66.8 52.5 83.9
Selling and Administrative (2) 48.7 57.4 55.6 65.9
Restructuring and Impairment of Assets 16.0 17.1 5.2 5.2
---------------------------------------------------------------
Income (Loss) from Operations (16.6) (7.7) (8.3) 12.8
Other Expense - Net 13.9 12.1 11.7 14.9
---------------------------------------------------------------
Income (Loss) from Operations Before Income Taxes
(Benefit), Equity in Earnings (Losses) of Unconsolidated
Affiliate and Cumulative Effect of Accounting Change (30.5) (19.8) (20.0) (2.1)
Income Taxes (Benefit) (10.7) (7.9) (8.0) (2.3)
---------------------------------------------------------------
Income (Loss) from Operations Before Equity in
Earnings (Losses) of Unconsolidated Affiliate and
Cumulative Effect of Accounting Change (19.8) (11.9) (12.0) 0.2
Equity in Earnings (Losses) of Unconsolidated Affiliate 1.7 5.2 2.6 (2.4)
---------------------------------------------------------------
Loss from Operations Before Cumulative
Effect of Accounting Change (18.1) (6.7) (9.4) (2.2)
Cumulative Effect of Accounting Change (1.0) - - -
---------------------------------------------------------------
Net Loss $ (19.1) $ (6.7) $ (9.4) $ (2.2)
---------------------------------------------------------------
Per Share of Common Stock
Loss Before Cumulative Effect of Accounting Change
Basic and Diluted $ (0.83) $ (0.37) $ (0.47) $ (0.19)
Net Loss
Basic and Diluted (0.87) (0.37) (0.47) (0.19)
Balance Sheet Data (at period end)
Total Assets $ 472.8 $ 488.5 $ 506.6 $ 530.0
Long-Term Debt 198.8 172.1 150.4 160.7
Stockholders' Equity 157.5 181.9 196.5 210.3
Long-Term Debt as a Percent of Stockholders' Equity
and Long-Term Debt 56% 49% 43% 43%
Shares Outstanding (millions) Period End 25.5 25.4 26.2 26.3
Other Data
Capital Expenditures $ 13.2 $ 32.8 $ 36.3 $ 36.2
Investments in unconsolidated affiliates 0.7 3.5 1.6 -
Common Stock Dividend Paid - - - -
Number of Employees at Period End 4,300 6,200 6,100 6,700
Pro Forma Data
EBITDA (4) (5) $ 38.6 $ 57.5 $ 34.0 $ 54.5
Net Income (Loss) (1.5) 12.4 (2.8) 4.3
Per Common Share Net Income (Loss) (0.18) 0.37 (0.22) 0.05
Three Months Ended
------------------------
(in millions, except per share data and number of employees) 1995 4/2/00 4/4/99
------------------------------------------------------------------------------------------------------------
Summary of Operations
Net Sales $ 910.2 $ 141.7 $ 157.2
Cost of Sales (2) 802.6 124.6 141.9
-----------------------------------------
Gross Profit 107.6 17.1 15.3
Selling and Administrative (2) 72.2 13.4 13.3
Restructuring and Impairment of Assets - (0.3) 12.9
-----------------------------------------
Income (Loss) from Operations 35.4 4.0 (10.9)
Other Expense - Net 14.5 5.1 3.2
-----------------------------------------
Income (Loss) from Operations Before Income Taxes
(Benefit), Equity in Earnings (Losses) of Unconsolidated
Affiliate and Cumulative Effect of Accounting Change 20.9 (1.1) (14.1)
Income Taxes (Benefit) 7.3 (0.4) (4.8)
-----------------------------------------
Income (Loss) from Operations Before Equity in
Earnings (Losses) of Unconsolidated Affiliate and
Cumulative Effect of Accounting Change 13.6 (0.7) (9.3)
Equity in Earnings (Losses) of Unconsolidated Affiliate (16.9) 0.4 0.8
-----------------------------------------
Loss from Operations Before Cumulative
Effect of Accounting Change (3.3) (0.3) (8.5)
Cumulative Effect of Accounting Change - - (1.0)
-----------------------------------------
Net Loss $ (3.3) $ (0.3) $ (9.5)
-----------------------------------------
Per Share of Common Stock
Loss Before Cumulative Effect of Accounting Change
Basic and Diluted $ (0.22) $ (0.04) $ (0.36)
Net Loss
Basic and Diluted (0.22) (0.04) (0.40)
Balance Sheet Data (at period end)
Total Assets $ 584.3 $ 487.3 $ 512.9
Long-Term Debt 173.0 199.9 192.2
Stockholders' Equity 222.1 156.2 172.5
Long-Term Debt as a Percent of Stockholders' Equity
and Long-Term Debt 44% 56% 53%
Shares Outstanding (millions) Period End 27.4 25.5 25.4
Other Data
Capital Expenditures $ 61.7 $ 1.0 $ 1.4
Investments in unconsolidated affiliates 30.3 0.6 -
Common Stock Dividend Paid - - -
Number of Employees at Period End 7,900 4,300 6,000
Pro Forma Data
EBITDA (4) (5) $ 68.6 $ 10.1 $ 14.2
Net Income (Loss) 4.3 (0.5) 1.2
Per Common Share Net Income (Loss) 0.05 (0.05) 0.02
-------------------------------------------------------------------
(1) Fiscal 1998 represents a 53 week period.
(2) Selling and administrative expenses for prior years were restated to conform to industry practices.
(3) Excludes restructuring charges, related expenses, operating losses associated with businesses exited in 1999 and the
cumulative effect of an accounting change.
(4) Reflects reclassification of expenses on receivables securitization.
(5) Fiscal 1995 adjusted for the writedown in value of CIPSA shares.
</TABLE>
9
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RISK FACTORS
Industry Risks
We face intense competition in the worldwide textile industry.
We are confronted with a variety of competitive challenges from other
domestic and foreign textile manufacturers. In recent years, pricing has become
the primary basis for competition as marginal competitors with excess capacity
are struggling just to meet cash interest costs and have all but given up on
pricing at levels sufficient for debt repayment, reinvestment and return to
shareholders. While prices cannot be supported at these levels for the long
term, it is difficult to determine when prices will improve to more appropriate
levels. Other than price, we compete with these companies primarily on the basis
of quality, service, and new product development, all of which require a
commitment of both human and financial resources, which are becoming
increasingly more competitive.
Our business is subject to changes in fashion trends.
The Company's success depends in large part on its ability and the
ability of its customers to anticipate, identify, and rapidly respond to ever
changing consumer preferences and fashion shifts in a timely manner. Failure to
do so results in a lessened demand for our products and could lead to a
substantial amount of unsold inventory and idled or curtailed production
facilities.
The demand for textile products varies with the U.S. and world economic cycles.
The textile industry is a cyclical industry and heavily dependent upon
the overall level of consumer spending on a global basis. As a result, any
substantial economic downturn or increase in interest rates in any of the
regions in which we or our competitors compete (e.g., the "Asian Flu") could
adversely affect the sales of our products.
As an agricultural commodity, cotton prices and availability are highly
variable.
The price and availability of cotton may fluctuate significantly,
depending on a variety of factors, including crop yields. Any raw material price
increases could increase our cost of sales and working capital requirements and
decrease profitability unless we are able to pass on the full impact of higher
prices to our customers, which historically does not occur. In addition, any
decrease in the availability or quality of cotton could impair our ability to
meet production requirements on a timely basis.
The textile industry is subject to risks associated with the import into the
U.S. of products from foreign competitors.
The textile industry is becoming more global due to the eventual
elimination of import quotas and the migration of its customers to lower costs
manufacturing platforms. While the company is pursuing a strategy of lower cost
sourcing in countries such as Mexico, there can be
10
<PAGE>
no assurance that U.S. textile manufacturers can successfully adjust to the
long-term implications of regional trade blocs and the effect of quota phaseout
and lowering of tariffs under the WTO trade regime.
The textile industry is subject to risks associated with importing products.
To support our operations and businesses, both in the U.S. and
internationally, we sometimes import raw materials, component and finished
products, as well as machinery and equipment, which are subject to quotas and
customs duties. From time to time, countries impose additional quotas, duties,
tariffs, or other restrictions or modify existing restrictions which could harm
our business.
Company Risks
We may be unable to reverse or recover from declines in sales and earnings over
the past several years that have impaired our overall competitive and financial
positions.
While our denim business has held its own competitively, despite the
difficulties of its major customer, Levi Strauss, our overall business has been
in decline for the past several years. In 1998 and 1999,
o net sales declined from $728.6 million in 1998 to $616.3 million in
1999, a decrease of 15%; and
o net income, excluding restructuring charges, related expenses, results
of businesses exited and the cumulative effect of an accounting change,
declined from $12.4 million in 1998 to a loss of $1.5 million in 1999.
Our declining business, and the actions we took in response to the
decline, prevented us from addressing our present capital structure and
strategic initiatives as quickly as we had intended. As a result, our financial
flexibility and strategic initiatives remain constrained; we suffer from
increases in prevailing interest rates; and our ability is reduced to respond to
developments in the worldwide textile industry as effectively as we would like.
We have made substantial strategic, operational and management changes in the
past two years. While encouraged by our progress, we do not know whether those
changes will have the ultimate desired effect.
We may be unable to maintain or increase our sales or profitability through our
current distribution channels.
In the U.S. and Europe, branded jeans and other pants manufacturers are
currently the primary distribution channel for our denim and khaki products.
Most of these customers in recent years have decided to an increasing degree to
outsource their production to independent contractors around the world,
primarily Mexico for our U.S. customers. This shift to a lower cost
manufacturing base also brings pressure to lower our prices. It further requires
us to create new relationships and adds a new level of complexity in doing
business. Doing business in
11
<PAGE>
developing countries and with less substantial companies has accompanying
business risks, such as credit risk.
Distribution channels are also changing in our home furnishings
products and services businesses as designers and other branded products have
taken on added importance in the market place. Our traditional customers,
jobbers, distributors, and other converters have given way to mass merchants in
the U.S. such as Wal-Mart Stores, Inc., Target Corporation, and Kmart
Corporation, a distribution channel that continues to increase its share of
overall retail spending, and with which we have less experience than our
competition. Moreover, we believe that consolidation in the retail and apparel
industries has centralized purchasing decisions, despite outsourcing of
production, and resulted in greater leverage over textile manufacturers like us,
and we expect that trend to continue throughout the world.
A group of key customers accounts for a significant portion of our sales.
One customer, Levi Strauss, accounted for 31% of our fiscal year 1999
net sales and 32% of our fiscal year 1998 sales.
Levi Strauss and other customers, who compete primarily on quality,
service and product development, are important to the distribution of Cone's
value-added fabrics. According to Levi Strauss, our sales to them accounted for
22% of their fabric purchases in 1999. Because they are transitioning from owned
facilities to a greater reliance on contractors, we cannot predict the long-term
impact on sales, if any, of this change in Levi Strauss's manufacturing
strategy. While we have sharply increased our share of other customers' business
in recent years, the loss of Levi Strauss as a customer, or a substantial
reduction in its purchases from us, would have a material adverse effect on our
financial position and results of operations. We have a supply agreement that
provides for a rolling five-year term unless either Levi Strauss or we elect not
to extend the agreement, upon which the agreement will terminate at the end of
the then-current term. Levi Strauss and the Company may also terminate the
agreement in the event of bankruptcy or insolvency of the other party or a
material breach by the other that is not cured within a specified time period.
Levi Strauss may also terminate the agreement at any time upon 30 days notice.
While we have other long-standing customer relationships, we do not have
long-term contracts with any of them. As a result, purchases generally occur on
an order-by-order basis, and the relationship, as well as the particular orders,
can be terminated by either party at any time.
In addition, during the past several years, various customers, and some
of their retail customers, have experienced significant changes and
difficulties, including consolidation of ownership, increased centralization of
buying decisions, restructurings, bankruptcies and liquidations. These problems
increase the risk when the Company extends trade credit to its customers. A
significant change in a customer relationship or in a customer's financial
position could cause us to limit or discontinue doing business with that
customer, require the assumption of more credit risk, or limit our ability to
collect amounts due, all of which could harm our business and financial
condition.
12
<PAGE>
We have recently made significant changes in our senior management team.
In the last two years, the Company has essentially replaced or
reorganized its senior management team. While, with one exception, the team has
prior experience with the Company or the industry, we cannot assure you that our
new management team will be able to execute successfully our strategy, and our
business and financial condition will suffer if they do not do so.
The success of our business depends on the ability to attract and retain key
personnel.
There is great competition for the services of qualified personnel. The
failure to retain our current key managers or key members of our design, product
development, manufacturing, merchandising or marketing staff could be
detrimental to our business. Factors that have affected our ability to retain
and attract employees include the competitive labor market in our various office
and plant locations, the disruption associated with restructuring initiatives,
our deteriorated financial position and the lack of attractive compensation and
incentive programs due to our financial performance.
Our international operations expose us to political and economic risks.
In fiscal year 1999, approximately 37% of our denim sales were exports,
we have a substantial investment in two locations in Mexico (including a key
joint venture manufacturing facility), and we have significant equity
investments in other textile companies in Mexico and India. As a result, we are
subject to the risks of doing business outside the United States, including:
o political and economic instability;
o exchange controls;
o language and other cultural barriers;
o foreign tax treaties and policies;
o restrictions on the transfer of funds to or from foreign countries; and
o fluctuation of exchange rates.
Exchange Offer and Consent Solicitation Risks
The rating of the 8-1/8% debentures may be adversely affected by the exchange
offer and consent solicitation.
If the exchange offer and consent solicitation is successful, the
ratings of the 8-1/8% debentures assigned to them by Moody's and Standard and
Poor's could be downgraded because of the changes in the terms of the
debentures, including the release of the collateral.
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<PAGE>
There is no established trading market for the new 11% debentures and any market
for the new 11% debentures may be illiquid.
The 11% debentures are a new issue of securities with no established
trading market. We cannot assure you that a liquid market will develop for the
debentures, that you will be able to sell your debentures at a particular time
or that the prices that you receive when you sell will be favorable. Moreover,
we do not intend to apply for the debentures to be listed on any securities
exchange or to arrange for quotation on any automated dealer quotation system.
The rating of the 11% debentures may be lower than the current rating of the
8-1/8% debentures.
Because of the subordination provisions of the 11% debentures, they may
be assigned a lower rating than the current 8-1/8% debentures by Moody's and
Standard and Poor's.
If you do not exchange your 8-1/8% debentures, they may be difficult to resell.
It may be difficult for you to sell 8-1/8% debentures that are not
exchanged in the exchange offer, since any not exchanged may become subject to
the supplemental indenture with its reduced debenture holder rights.
To the extent any 8-1/8% debentures are tendered and accepted in the
exchange offer, the trading market, if any, for the 8-1/8% debentures that
remain outstanding after the exchange offer would be adversely affected due to a
reduction in market liquidity.
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THE COMPANY AND ITS STRATEGY
Founded in 1891 and incorporated in North Carolina, Cone is the world's
largest producer of denim fabrics and the largest commission printer of home
furnishings fabrics in North America. The Company is also a leading producer of
decorative fabrics, such as jacquard fabrics, for the home furnishings industry
and a producer of specialty sportswear fabrics such as khaki. Cone competes
domestically and internationally on the basis of styling and product
development, management experience, versatility and size of manufacturing
facilities, competitive prices and the Cone name and reputation.
The Company operates in three principal business segments: (1) denim
and khaki; (2) commission finishing; and (3) decorative fabrics. The Company
seeks growth of our products through expansion into new geographic areas and
markets, product development and investment in value-added technology. Cone is
engaged in denim production in Mexico through a 50/50 joint venture facility
with Compania Industrial de Parras, S.A. de C.V. ("CIPSA"). This facility,
Parras Cone, has been producing basic denims and yarn since late 1995. Under a
marketing agreement, the Company markets and distributes 100% of the denim
production of Parras Cone. The Company also has an alliance with the Ashima
Group of India. This alliance consists of an equity investment in Ashima Ltd.,
technical service agreements and marketing agreements whereby Cone markets
Ashima denim and sportswear products outside the Indian sub-continent.
Cone has its principal executive offices at 3101 North Elm Street,
Greensboro, North Carolina 27408 (336-379-6220). More information about Cone is
incorporated in this prospectus by reference. See "Where You Can Find More
Information" on page 65.
Revitalization Program
In early 1999, the Company launched a major revitalization program
consisting of three initiatives: cost reduction, reorganization and
restructuring; disciplined management during a cyclical downturn; and continued
growth through expansion of denim.
Management believes that it has successfully implemented its cost
reduction, reorganization and restructuring program. This program has resulted
in a 30% decrease in employment, expected $40 million of annual savings and cost
reductions, and a revitalized attitude among its leadership team and associates.
The highlights of this program include:
o Closing of the Salisbury Plant and exit from yarn-dyed shirting fabrics
operations
o Closing of certain U.S. yarn manufacturing plants and entry into a U.S.
yarn manufacturing alliance that has reduced, and is expected to
continue to reduce, raw material costs
o Downsizing and reorganization of selling and administrative functions
o Restructuring of the Company's Carlisle Finishing operation with the
reduction of 25% of workforce and the simultaneous improvement in
quality and efficiency by
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approximately 10%
o Restructuring of the Decorative Fabrics Group concurrent with the
appointment of a new Group President
The Company also believes that it has successfully managed through the
cyclical downturn in the U.S. denim industry that resulted in an industry-wide
decline in domestic mill shipments of approximately 14% in 1999. Management
believes that while domestic retail sales of jeans were down only 3-5% in 1999
from 1998, adjustments in inventories throughout the softgoods pipeline resulted
in a major cyclical downturn in the business. The Company responded with cost
reduction programs, inventory control efforts, and reinforced emphasis on
quality, product development and customer service in order to gain market share.
As a result of these actions, as well as renewed consumer interest in denim and
stable inventory levels, denim backlog at July 2, 2000 was 58% higher on a
volume basis as compared with July 4, 1999. The Company is presently operating
its denim and jacquard decorative fabrics weaving plants at capacity.
The Company believes that completion of its third initiative, expansion
of its denim manufacturing capacity, will result in further strengthening of
Cone's leadership position in the denim industry, substantially improved
profitability and a strengthening financial position. However, the Company has
determined that the present structure of the Company's balance sheet is
inappropriate for the execution of the Company's growth initiatives. After
several months of study the Company is now proposing to amend the indenture
under which its 8-1/8% debentures were issued in order to implement a more
effective and efficient capital structure that will allow the Company to execute
its operating strategy.
The Company believes that it is recognized as a leader in the
production of denim in Mexico. In conjunction with CIPSA, Cone operates a large
state of the art denim facility in Parras, Mexico. The Company believes that
this plant is generally recognized as one of the most efficient and highest
quality basic denim plants in the world. As denim jeans sourcing from Mexico has
grown, Cone has gained momentum in denim manufacturing and distribution in
Mexico. As a result of Mexico's favorable cost of labor, availability of textile
and apparel workforce, favorable tariff treatment through NAFTA, proximity to
U.S. markets, and the newly enacted Mexico/EU Free Trade Agreement, Mexico is
expected to take market share from Asia, as well as the U.S. producers over the
coming decade.
Throughout the past 18 months, the Company has worked in conjunction
with Guilford Mills, Inc., the Mexican federal government and the State of
Tamaulipas, Mexico to develop a large-scale industrial park for textiles and
apparel manufacturing in the State of Tamaulipas, Mexico. By the end of 2000,
the Company intends to have approximately 200 acres of land with roads,
electricity, natural gas and water available. Upon successful completion of the
exchange offer and consent solicitation the Company plans to begin construction
of a state-of-the-art denim facility on this site; the site can accommodate up
to four large-scale textile plants.
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<PAGE>
Why We Plan To Expand In Mexico
Our goal is to further strengthen our leadership position in the denim
industry by beginning the construction of a new denim plant on the site in
Tamaulipas in 2000. We believe that now is the time for this expansion for
several reasons.
First, we have enjoyed more than 30% annual growth rates in the
sourcing of denim jeans from Mexico by the U.S. markets. NAFTA has made it more
advantageous to source jeans out of Mexico as compared with any other country in
the world. Our studies and experience confirm that Mexico is the most cost
efficient and effective location in the world from which to source basic denim
jeans for U.S. markets. Our Mexican plant is operating at capacity, our U.S.
plants are also operating at capacity and our customers, which include all of
the leading U.S. brands, are requesting more denim in general and particularly
more denim from Mexico. We have the most experience in denim production in
Mexico as compared with any other U.S. denim producer, and we are anxious to get
full use of our manufacturing, marketing, logistic and financial know-how in
Mexico by expanding our operations.
Second, we believe that through the combined efforts of Cone, Guilford
Mills, the Mexican Federal Government and the State Government of Tamaulipas we
have one of the finest sites available for denim manufacturing in North America
due to abundant water supplies, labor and transportation facilities.
Third, Cone is the largest North American exporter of denim fabrics to
Europe. The new plant will be located less than 10 miles from one of Mexico's
best ports with easy access to the U.S., Europe, Caribbean, and South America.
As a result of the newly enacted Mexican-European Union free trade agreement,
our Company will be positioned to expand its European markets.
Finally, as jeans manufacturing has evolved in Mexico from basic styles
to more complex products, our customers have asked us to supply them with entry
level, value-added products from Mexico. The new plant will be designed to
support the continued development of the Mexican garment industry.
Our site in Mexico can accommodate up to four manufacturing plants. The
first phase of our denim manufacturing complex is designed to produce about 20
million yards of denim and cost about $90 million. Most of the funds for this
facility are expected to be provided by project financing; but, the Company
plans to provide about $20 million of funds from its internal sources and lines
of credit. The plant is designed to be expandable by 100% but with a
substantially smaller additional investment. We expect this site to provide
ample opportunity to efficiently grow our denim and sportswear capacity through
the decade as Mexico becomes a leader in textile and apparel manufacturing.
Our production of denim in Mexico provides us with economic advantages
versus our U.S. competition. These economic advantages include labor savings,
government incentives to build our site, efficiencies associated with a new and
streamlined operation and lower
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transportation costs due to the proximity to customer's jeans production. In
addition and as described above, we will enjoy certain duty advantages for the
export of product to Europe.
BOOK VALUE PER SHARE
The following table presents (i) the book value per common share of the
Company as of the end of the fiscal years 1995 through 1999 and as of the end
of the first three months of fiscal years 1999 and 2000 and (ii) the pro
forma book value per common share for fiscal 1999 and for the first three months
of fiscal 2000. the pro forma book value per common share reflects the
adjustments to stockholders' equity resulting from the exchange offer and
consent solicitation for the 8-1/8% debentures.
<TABLE>
<CAPTION>
End of First Quarter Fiscal Years Ended
-------------------- ------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Actual book value per common share $4.66 $5.16 $4.69 $5.56 $5.95 $6.45 $6.63
Pro Forma book value per common share $4.77 $4.79
</TABLE>
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<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company as
of April 2, 2000, and (ii) the pro forma capitalization of the Company as of
April 2, 2000, assuming the exchange of the 8-1/8% Debentures for 11% Secured
Subordinated Debentures of $85 million and 3.35 million shares with an assumed
market value of $6.00 per share of the Company's common stock. The Company will
not receive any cash proceeds from the exchange offer. The 8-1/8% Debentures
surrendered in the exchange offer will be canceled.
<TABLE>
<CAPTION>
As of April 2, 2000
----------------------------------------------------
(in thousands) Actual Adjustments Pro Forma
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt (1):
Senior note $ 32,144 $ - $ 32,144
Revolving credit agreement 70,000 - 70,000
8-1/8% Debentures 97,797 (97,797) -
11% Secured subordinated debentures (2) - 79,009 79,009
----------------------------------------------------
Total long-term debt 199,941 (18,788) 181,153
----------------------------------------------------
Stockholders' equity:
Class A preferred stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 373,660 shares 37,366 - 37,366
Class B preferred stock - no par value; authorized
5,000,000 shares - - -
Common stock - $.10 par value; authorized 42,700,000
shares; issued and outstanding 25,479,717 shares
(28,829,717 shares as adjusted) (2) (3) 2,548 335 2,883
Capital in excess of par - common stock (2) (3) 57,435 19,765 77,200
Capital in excess of par - warrants (4) - 49 49
Retained earnings (5) (6) 67,594 (1,501) 66,093
Deferred compensation - restricted stock (236) - (236)
Accumulated other comprehensive loss, currency translation
adjustment (8,517) - (8,517)
----------------------------------------------------
Total stockholders' equity 156,190 18,648 174,838
----------------------------------------------------
Total capitalization $ 356,131 $ (140) $ 355,991
====================================================
(1) Long-term debt includes current maturities of long-term debt.
(2) Reflects issuance of $85 million of 11% secured subordinated debentures and 850,000 shares of common stock in exchange
for $85 million of 8-1/8% debentures. The 11% debentures are recorded net of the market value of the stock issued.
(3) Reflects issuance of 2.5 million shares of common stock in exchange for $15 million of 8-1/8% debentures.
(4) Represents differential between assumed market value of $6.00 per share for the Company's common stock at closing and a
warrant price of $5.025 per share multiplied by warrants for 50,000 shares.
(5) Adjustment to Retained Earnings is related to an extraordinary loss on early extinguishment of the 8-1/8% Debentures
associated with the write-off of an interest rate hedge and the discount on the original issue. The adjustment consists
of an extraordinary loss of $2.4 million net of tax benefit of $.9 million.
(6) The difference between the closing price of the Company's common stock at closing of the exchange offer (as reported on
the New York Stock Exchange Composite Tape on such date) and the market value per share used to calculate the exchange
rate multiplied by the number of shares issued will be recorded as an extraordinary gain or loss from an early
extinguishment of debt in the Company's Statement of Operations. The table has been prepared assuming a fair value equal
to the exchange value.
</TABLE>
19
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is computed by dividing earnings
by fixed charges. For this purpose, "earnings" include pretax income from
continuing operations plus fixed charges. "Fixed charges" include interest,
whether expensed or capitalized, amortization of debt expense and the portion of
rental expense which is representative of the interest factor in these rentals.
The following table presents (i) the ratio of earnings to fixed charges of the
Company for each of the fiscal years 1995 through 1999 and for the first three
months of fiscal years 1999 and 2000; and (ii) the pro forma ratio of earnings
to fixed charges for fiscal 1999 and for the first three months of fiscal 2000.
The pro forma ratios of earnings to fixed charges give effect to the Company's
related borrowings and other transactions described in the pro forma financial
statements incorporated by reference in this prospectus, in each case as if
those transactions had occurred at the beginning of the periods.
<TABLE>
<CAPTION>
First three months Fiscal Years
------------------ --------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Actual ratio of earnings to fixed charges 0.82 (2.42) (0.72) (0.17) (0.24) 0.88 2.19
Pro Forma ratio of earnings to fixed charges 0.83 (0.64)
Deficiency (in thousands) $1,101 $14,089 $30,458 $19,768 $20,003 $2,074
</TABLE>
THE EXCHANGE OFFER AND CONSENT SOLICITATION
This section of the prospectus describes material aspects of the
proposed exchange offer and consent solicitation. While we believe that the
description covers the material terms of the exchange offer and consent
solicitation, this summary may not contain all of the information that is
important to you. You should read this entire document and the other documents
we refer to carefully for a more complete understanding of the exchange offer
and consent solicitation.
Background and Purpose of the Exchange Offer and Consent Solicitation
When our 8-1/8% debentures were issued in early 1995, the U.S. textile
industry was growing, capital markets were liquid and our debentures were
unsecured and were rated investment grade. Today, because of the U.S. textile
industry's cyclical downturn of 1998-1999, the resulting need for, and the
disruption caused by, Cone's restructuring of operations, and a more restrictive
capital markets environment, particularly among banks, the credit rating of our
debentures were downgraded to less than investment grade by Standard & Poor's
and Moody's.
Since the Company's financial structure was formulated at a time when
the Company was considered by lenders an investment grade credit, substantially
all of the Company's debt was unsecured. Because of the loss of the Company's
investment grade status, its lending banks
20
<PAGE>
required that its debt be secured by Company assets. Since the governing
documents of the Company's principal debt, including the indenture relating to
the 8-1/8% debentures, provided that, if any debt were secured (with certain
exceptions discussed below), the unsecured debt would be secured on a pro rata
basis, all of the Company's significant financing obligations, including the
8-1/8% debentures, were secured by blanket liens on substantially all of the
Company's assets on January 28, 2000, resulting in a deficit of collateral
available for needed new financings.
The Company's indenture relating to the 8-1/8% debentures allows sales
of the Company's receivables (approximately $103 million on July 2, 2000), and
the 8-1/8% debentures are effectively subordinated to certain other priority
claims ($28,000,000 at July 2, 2000). Collateral above these amounts is shared
among the various secured creditors including the debentureholders on a pari
passu basis. While the terms that created these liens are common for
investment-grade companies, these terms are a burden to noninvestment grade
companies who rely upon collateralized borrowings to grow their businesses.
Thus, the purpose of this transaction is to alter the Company's publicly held
debt instruments to permit the Company to make use of secured financing
structures required by lenders to noninvestment grade credits. This is
accomplished primarily by the release of the existing collateral for the 8-1/8%
debentures and the elimination of certain existing restrictive indenture
covenants (both effected by the consent solicitation) and by including in the
indentures for both the 8-1/8% debentures and the 11% debentures permission for
secured financing equal to 55% of consolidated net tangible assets
(approximately $202 million on July 2, 2000) instead of the 10% of consolidated
net tangible assets (about $36 million at July 2, 2000) threshold for general
secured debt contained in the existing indenture for the 8-1/8% debentures. In
determining the permitted amount of secured debt, the outstanding balance of any
receivables securitization (which is excluded under the present 8-1/8%
debentures) would be considered debt.
During the past months, the Company's management, Board of Directors
and advisers have studied the Company's needs, the requirements of its investors
and the overall capital markets. Based upon this assessment, the Company's
objectives in this transaction are as follows:
1. Establish a capital structure that provides support for the Company's
operating strategy for the next three to five years. The Company
intends to enter into a new asset-based lending agreement that, in
conjunction with project financing, will achieve this objective. The
establishment of ample long-term liquidity is expected to be favorable
for both debentureholders and shareholders.
2. Improve earnings and cash flow by immediate execution of the Company's
expansion plans. Achieving this goal will protect the Company's debt
holders and enhance equity values.
3. Manage financial risk by holding total interest costs at present levels
and reducing total debt. The exchange offer, which reduces total debt
through the use of equity in exchange for a portion of the old
debentures, and the Company's plan to substitute lower cost asset-based
financing for its present bank financing and long-term notes are
expected to
21
<PAGE>
achieve this goal.
We believe this exchange offer, if successful, will assist the Company
in achieving these objectives. We believe we are providing debentureholders with
a generous incentive to approve the required amendments to the old indenture, as
well as protecting the collateral rights of the 11% debentureholders through a
carefully designed financial plan. At par, the yield, including the Cone common
stock (valued at $6.00 per share), of the 11% Debentures will be approximately
12.79% to 15.91% depending on the amount of debentures exchanged.
Terms of the Exchange Offer and Consent Solicitation
Upon the terms and subject to the conditions of the exchange offer set
forth in this prospectus and in the accompanying consent and letter of
transmittal, we are offering to exchange all of the outstanding 8-1/8%
debentures for shares of Cone common stock or a combination of 11% Secured
Subordinated Debentures Due March 15, 2005 of Cone and shares of Cone common
stock.
o The total consideration available for each $1,000 principal amount of
the 8-1/8% debentures tendered in the exchange offer is (1) ____ shares
of Cone common stock or (2) $1,000 principal amount of 11% Secured
Subordinated Debentures Due March 15, 2005 of Cone and 10 shares of
Cone common stock.
You may elect to receive either common stock or a new debenture and 10
shares of common stock for each $1,000 principal amount of 8-1/8%
debentures held by you. If you hold more than $1,000 in aggregate
principal amount of 8-1/8% debentures, you need not make the same
election for each $1,000 principal amount of debentures. For example,
if you hold $100,000 aggregate principal amount of 8-1/8% debentures
and you choose to tender your debentures in the exchange offer, you may
elect to receive common stock for $65,000 of your debentures and a
combination of new 11% debentures and common stock for the remaining
$35,000 of your debentures.
o If you elect to tender your 8-1/8% debentures in the exchange offer,
you must tender all of your 8-1/8% debentures.
o We do not intend to issue more than ___________ shares of our common
stock or more than $85,000,000 aggregate principal amount of new 11%
debentures and 850,000 shares of common stock in the exchange offer.
However, the Company reserves the right to increase the number of
shares of common stock to be issued in the exchange offer to a maximum
of _____________________________shares for up to $25,000,000 aggregate
principal amount of 8-1/8% debentures if the option to receive solely
common stock in exchange for 8-1/8% debentures is oversubscribed.
If more than $15,000,000 aggregate principal amount of 8-1/8%
debentures are tendered in the exchange offer with an election to
receive shares of Cone common stock and are not withdrawn prior to the
expiration of the exchange offer, the debentures so tendered will be
accepted for exchange for common stock on a pro rata basis (rounded to
the
22
<PAGE>
nearest $1,000 principal amount of 8-1/8% debentures) according to the
amount of 8-1/8% debentures validly tendered for common stock and not
withdrawn prior to the expiration of the exchange offer. The Remainder
of your 8-1/8% debentures will be exchanged for new 11% debentures and
common stock. However, the Company reserves the right to increase the
total amount of 8-1/8% debentures to be exchanged for shares of common
stock to be issued in the exchange offer to a maximum of $25,000,000.
The exchange agent will perform the proration with appropriate
instructions and guidance from Cone.
If more than $85,000,000 aggregate principal amount of 8-1/8%
debentures are tendered in the exchange offer with an election to
receive new 11% debentures and common stock, and are not withdrawn
prior to the expiration of the exchange offer, the debentures so
tendered will be accepted for exchange on a pro rata basis (rounded to
the nearest $1,000 principal amount of 8-1/8% debentures) according to
the amount of 8-1/8% debentures validly tendered for debentures and
common stock and not withdrawn prior to the expiration of the exchange
offer. The remainder of your 8-1/8% debentures will be exchanged for
common stock. The exchange agent will perform the proration with
appropriate instructions and guidance from Cone.
o We will make the exchange of common stock and 11% debentures for 8-1/8%
debentures validly tendered and accepted for exchange promptly
following the expiration of the exchange offer, which we refer to as
the "exchange date."
o If you elect to receive only Cone common stock for your 8-1/8%
debentures in the exchange offer, the number of shares you will receive
in the exchange offer and consent solicitation per $1,000 principal
amount of 8-1/8% debentures will be based on a representative market
value of the common stock set by the Executive Committee of Cone's
Board of Directors in its discretion considering the daily market
values of the common stock in the recent past and other market
considerations.
Upon the terms and subject to the conditions of the solicitation, we
are also soliciting consents to the proposed amendments to the indenture
governing the 8-1/8% debentures and the release of the existing collateral for
the 8-1/8% debentures.
o If you desire to tender your 8-1/8% debentures in the exchange offer
and receive the exchange consideration, you are required to tender
validly all of the debentures that you own and consent to the proposed
amendments and release of collateral on or before the expiration of the
consent solicitation.
o Your completion, execution and delivery of the consent and letter of
transmittal in connection with your tender of debentures will
constitute your consent to the proposed amendments and release of
collateral with respect to the 8-1/8% debentures.
o Cone is soliciting and will accept consents to the proposed amendments
and release of collateral from you if you are not also tendering your
debentures in the exchange offer.
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<PAGE>
Our obligation to accept and exchange debentures validly tendered in
the exchange offer is conditioned upon receiving the consents required for the
proposed amendments and release of collateral and the general conditions
described in this prospectus. See "--Conditions to the Exchange Offer and
Consent Solicitation." Subject to applicable securities laws and the terms and
conditions in this prospectus, we reserve the right, on or before the expiration
of the exchange offer, to:
o Waive any and all conditions to the exchange offer or the consent
solicitation;
o Extend or terminate the exchange offer or the consent solicitation; or
o Otherwise amend the exchange offer or the consent solicitation in any
respect.
The rights we reserve in this paragraph are in addition to our right to
terminate the exchange offer described under "--Conditions to the Exchange Offer
and Consent Solicitation."
Any extension, amendment or termination will be followed promptly by a
public announcement. In the case of an extension of the exchange offer, the
announcements will be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration of the exchange
offer. Without limiting the manner in which any public announcement may be made,
we will have no obligation to publish, advertise or otherwise communicate any
such public announcement other than by issuing a release to the Dow Jones News
Service.
Risk Factors Relating to Holders Who Do Not Tender Their Debentures
Consummation of the exchange offer and consent solicitation will have
consequences to you if you do not tender your 8-1/8% debentures. These
consequences include the amendment of certain provisions contained in the
indenture governing the 8-1/8% debentures, release of the collateral presently
securing the 8-1/8% debentures and a reduced trading market for the 8-1/8%
debentures.
Failure to tender your debentures could also have tax consequences, see
"--Federal Income Tax Considerations."
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<PAGE>
Proposed Amendments to the Indenture and Release of Collateral
This section sets forth a brief description of the proposed amendments
to the indenture for which we are seeking consents in the consent solicitation
and an explanation of the purpose and effect of the proposed release of the
existing collateral for the 8-1/8% debentures. The proposed amendments and
release of collateral constitute a single proposal, and if you tender and
consent, you must consent to the proposed amendments as an entirety AND to the
release of collateral and may not consent selectively to specific proposed
amendments nor to the amendments without the release of collateral or vice
versa. The valid tender by you of your 8-1/8% debentures in the exchange offer
will be deemed to constitute your consent to all proposed amendments and the
release of collateral with respect to those debentures.
The proposed amendments and collateral release will be embodied in an
amendment to the indenture in the form set forth in the supplemental indenture.
The supplemental indenture will become effective after it is approved by the
required number of holders of debentures, as described below, and is signed by
Cone and the trustee on the expiration of the consent solicitation. The proposed
amendments and the release of collateral, however, will not become operative
until we accept the 8-1/8% debentures for exchange in the exchange offer.
Thereafter, the proposed amendments and the release of collateral will be
binding on all nontendering holders of 8-1/8% debentures. The indenture will
remain in effect, without giving effect to the proposed amendments, until the
proposed amendments become operative and the 8-1/8% debentures will remain
secured by the collateral until the release of collateral becomes effective. If
the exchange offer is terminated or withdrawn, or the 8-1/8% debentures are
never accepted for exchange, the supplemental indenture will never become
operative and the collateral will not be released.
Under the terms of the indenture, the proposed amendments and release
each require the written consent of the holders of at least a majority in
aggregate principal amount of the 8-1/8% debentures outstanding and not owned or
held by Cone or its affiliates.
The following summary of provisions of the indenture set forth below
are qualified in their entirety by reference to the full and complete terms
contained in the indenture. A copy of the indenture is filed with the SEC as an
exhibit to the registration statement of which this prospectus forms a part and
is incorporated in this prospectus by reference. You may obtain copies of the
indenture and proposed form of supplemental indenture without charge from the
information agent.
Proposed Amendments to Indenture Governing 8-1/8% Debentures
The proposed amendments to the indenture for the 8-1/8% debentures
would change the Limitation on Liens covenant and the definitions of
"Consolidated Net Tangible Assets" and "Subsidiary" to conform them to the
proposed new provisions in the indenture for the 11% debentures and add a new
paragraph to the Limitation on Liens covenant to permit liens securing the 11%
debentures.
Section 3.9(i) of the indenture, which permits a limited amount of
general secured indebtedness of the Company and its Subsidiaries (as defined in
the indenture) which can have priority over the 8-1/8% debentures, would be
amended to increase the amount of that limitation
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from its present level of 10% of Consolidated Net Tangible Assets (as defined in
the indenture) (approximately $36 million at July 2, 2000) to 55% of
Consolidated Net Tangible Assets (approximately $202 million at July 2, 2000). A
new clause (k) to Section 3.9 [Limitation on Liens] would also be added to
permit liens securing the new 11% debentures and refinancings thereof.
The definition of "Consolidated Net Tangible Assets" would be amended
to exclude current maturities of long term debt and assets not securing the 11%
debentures as a deduction from the calculation of that amount and to include the
outstanding balance of any receivables securitization, thereby increasing the
amount of Consolidated Net Tangible Assets determined under that definition.
The definition of "Subsidiary" would be amended (i) to exclude foreign
subsidiaries of the Company but (ii) to include any special purpose entity that
purchases accounts receivable from the Company and securitizes them. The first
change has the effect of allowing foreign subsidiaries to incur secured
indebtedness and to enter into sale and leaseback transactions without
restriction by the indenture covenants. The second change has the effect of
including obligations incurred in connection with the accounts receivable
securitization program in the Section 3.9(i) permitted lien basket. These
obligations are presently not included in the lien basket.
The net effect of the changes to the three provisions of the indenture
made by the proposed amendments would be to enhance the Company's ability to
obtain secured financing for both its domestic and foreign operations.
Release of Collateral Securing 8-1/8% Debentures
From the time when the 8-1/8% debentures were originally issued in 1995
through the beginning of this year, the debentures have been unsecured
obligations of Cone. This means that they had no special claim on any of Cone's
assets over and above the claims of all of Cone's other creditors. Until January
of this year, all of Cone's other creditors were unsecured as well, with the
only priority claim on its assets being the claim on its accounts receivable by
the entity to whom Cone sells its accounts receivable on an ongoing basis.
Following Cone's loss of its investment grade status, the industry
downturn and a deterioration in Cone's operating performance, however, the bank
group that provides Cone's revolving credit facility required Cone to secure its
revolving credit obligations to them. The act of securing these obligations in
turn triggered requirements in Cone's other financing documents, including the
requirement in Section 3.9(i) of the indenture for the 8-1/8% debentures, that
Cone's other financing obligations, including the 8-1/8% debentures, be
similarly secured. On January 28, 2000, Cone signed a number of security
instruments, the net effect of which was (1) to grant a priority lien to
substantially all of Cone's creditors other than the debentureholders and trade
creditors in Cone's principal real properties and substantially all of its
personal properties (other than accounts receivable sold to the receivables
purchaser), securing a pro rata portion of the indebtedness of Cone to such
creditors in the amount of 10% of Cone's then consolidated net tangible assets
($28,000,000) as permitted by
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Section 3.9(i) of the existing indenture and (2) to grant a secondary lien
(subject to prior satisfaction of the priority lien) to these same creditors as
well as the debentureholders as required by Section 3.9(i) of the existing
indenture in the same real and personal property collateral. Thus, on January
28, 2000, the 8-1/8% debentures became secured for the first time, albeit on a
subordinated basis to the priority liens and receivables securitization.
The grant of the security interest in favor of the debentureholders and
Cone's other creditors, however, left Cone with a level of secured debt that
other potential lenders regarded as unacceptably high at the same time that (1)
the costs of Cone's existing financings had risen to a level that Cone viewed as
unacceptably high and (2) Cone's existing creditors were unwilling to permit
financing of new strategic initiatives that Cone regards as imperative to its
long term prospects. To be in a position to find new financing or refinancing on
acceptable terms, Cone needed either to reduce its overall level of secured debt
or to obtain permission for its bank and other financings to be secured on a
priority basis.
As part of the consent solicitation, all exchanging debentureholders,
as well as any non-exchanging debentureholders who so elect, will sign a consent
to release of all of the collateral granted to the trustee on behalf of the
debentureholders on January 28, 2000. The 8-1/8% debentures would then once
again be unsecured and the new 11% debentures would be secured but subordinated
to present and future senior financings. The other creditors, namely the bank
group and Cone's senior note lender would remain secured under the January 28,
2000 security instruments but it is Cone's intention to refinance these
creditors' obligations, as well as its obligations to the purchaser of Cone's
accounts receivable, as soon as practicable, through a single asset-based
lending facility. Cone expects that this new facility would be on substantially
more favorable terms to Cone than its current financings and would either
finance, or permit financing of, Cone's strategic initiatives. Cone therefore
believes it imperative to its future performance and prospects that the security
for the 8-1/8% debentures be released to permit a comprehensive refinancing of
Cone's secured debt. In the event the general secured indebtedness of Cone
exceeds 55% of its consolidated net tangible assets, as defined in the indenture
as proposed to be amended, the 8-1/8% debentures will be secured by a lien on
the assets securing the 11% debentures pari passu with such excess indebtedness.
That lien will be subordinate to the lien of the 11% debentures as well as to
other permitted liens under the indenture.
Acceptance for Exchange of Debentures; Acceptance of Consents
Upon the terms and subject to the conditions of the exchange offer
(including if the exchange offer is extended or amended, the terms and
conditions of any such extension or amendment) and applicable law, we will
exchange shares of common stock and 11% debentures for:
o All 8-1/8% debentures validly tendered and not withdrawn under the
exchange offer on or before the expiration of the exchange offer; and
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o All consents validly delivered and not revoked under the consent
solicitation on or before the expiration of the consent solicitation
that are coupled with 8-1/8% debentures validly tendered and not
withdrawn under the exchange offer on or before the expiration of the
exchange offer.
This exchange will be made by the deposit by us of the exchange
consideration, consisting of shares of common stock and 11% debentures, with the
exchange agent as soon as practicable after the expiration of the exchange offer
so that the exchange consideration may be paid to you on the exchange date. The
exchange agent will act as agent for you for the purpose of issuing the exchange
consideration for the 8-1/8% debentures and consents. Under no circumstances
will interest on the exchange consideration be paid by us due to any delay on
behalf of the exchange agent in making the exchange.
We expressly reserve the right, in our sole discretion and subject to
Rule 14e-1(c) under the Securities Exchange Act of 1934, to delay acceptance for
exchange of, or the exchange of, 8-1/8% debentures to comply, in whole or in
part, with any applicable law. See "--Conditions to the Exchange Offer and
Consent Solicitation."
In all cases, exchange by the exchange agent of shares of common stock
and 11% debentures for 8-1/8% debentures accepted for exchange under the
exchange offer will be made only after timely receipt by the exchange agent of:
o Certificates representing your debentures or timely confirmation of a
book-entry transfer of your debentures into the exchange agent's
account at DTC. See "--Procedures for Exchanging Debentures and
Delivering Consents;"
o A properly completed and duly executed consent and letter of
transmittal (or a manually signed facsimile thereof); and
o Any other documents required by the consent and letter of transmittal.
For purposes of the exchange offer, validly tendered debentures (or
defectively tendered debentures for which we have waived that defect) will be
deemed to have been accepted for exchange by us if, as and when we give written
notice thereof to the exchange agent. For purposes of the consent solicitation,
consents delivered to the exchange agent will be deemed to have been accepted by
us if, as and when the supplemental indenture is executed.
If the exchange offer is terminated or withdrawn, or the debentures are
not accepted for exchange, no exchange offer consideration will be paid or
payable.
Procedures for Exchanging Debentures and Delivering Consents
To receive the exchange consideration you must:
o Tender your 8-1/8% debentures under the exchange offer; and
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o Deliver consents to the proposed amendments and release of collateral
with respect to those debentures on or before the expiration of the
consent solicitation.
On or before the expiration of the consent solicitation, we are
soliciting and we will accept consents to the proposed amendments and release of
collateral from you even if you choose not to tender your 8-1/8% debentures in
the exchange offer.
The method of delivery of 8-1/8% debentures and consents and letters of
transmittal, any required signature guarantees and all other required documents,
including delivery through DTC and any acceptance of any agent's message
transmitted through ATOP, is at your election and risk. Except as otherwise
provided in the consent and letter of transmittal, delivery will be deemed made
only when actually received by the exchange agent. If delivery is by mail, we
suggest that you use properly insured registered mail with return receipt
requested, and that the mailing be made sufficiently in advance of the
expiration of the consent solicitation or expiration of the exchange offer, as
applicable.
All shares and 11% debentures will be delivered only in book-entry form
through DTC. Accordingly, if you anticipate tendering other than through DTC,
you are urged promptly to contact a bank, broker or other intermediary that has
the capability to hold securities custodially through the DTC, to arrange for
the receipt of any shares and 11% debentures to be delivered as the exchange
offer consideration and to obtain the information necessary in the letter of
transmittal.
Tenders of Debentures and Delivery of Consents
Your tender of 8-1/8% debentures and delivery of consents (and
subsequent acceptance by us) by one of the procedures set out below will
constitute a binding agreement between us in accordance with the terms and
subject to the conditions set forth in this prospectus, in the consent and
letter of transmittal and, if applicable, in the notice of guaranteed delivery.
Tenders of Debentures Held in Physical Form
To tender effectively 8-1/8% debentures held in physical form (and
deliver the related consents):
o You must complete and duly execute a consent and letter of transmittal
(or a manually signed facsimile thereof) and any other documents
required by the consent and letter of transmittal, and those documents
must be received by the exchange agent at its address set out on the
back cover of this prospectus; and
o You must ensure that certificates representing those debentures are
received by the exchange agent at that address on or prior to the
expiration of the consent solicitation or the expiration of the
exchange offer, as applicable.
Consents and letters of transmittal and debentures should be sent only
to the exchange agent and should not be sent to Cone, the information agent or
the trustee.
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If your 8-1/8% debentures are registered in the name of a person other
than the signatory to the consent and letter of transmittal, then, to tender
those debentures under the exchange offer, the debentures must be endorsed or
accompanied by an appropriate written instrument or instruments of transfer
signed exactly as that name appears on the debentures, with the signature on the
debentures or instruments of transfer guaranteed as provided below. If these
procedures are followed by a beneficial owner tendering debentures on or prior
to the expiration of the consent solicitation, the registered holder of these
debentures must sign a valid proxy set forth in the consent and letter of
transmittal.
Tender of Debentures Held Through a Custodian
If your 8-1/8% debentures are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and if you wish to
tender 8-1/8% debentures and deliver a consent and letter of transmittal, you
should contact that registered holder promptly and instruct him, her or it to
tender debentures and deliver a consent and letter of transmittal on your
behalf. A letter of instructions is enclosed in the solicitation materials
provided along with this prospectus which may be used by you in this process to
instruct the registered holder to tender debentures and deliver consents. If you
wish to tender those debentures and deliver consents yourself, you must, prior
to completing and executing the consent and letter of transmittal and delivering
those debentures, either make appropriate arrangements to register ownership of
the 8-1/8% debentures in your name or follow the procedures described in the
immediately preceding paragraph. The transfer of record ownership may take
considerable time.
Tender of Debentures Held Through DTC
To tender effectively 8-1/8% debentures (and deliver the related
consents) that are held through DTC, if you are a DTC participant, you should
either:
o Properly complete and duly execute the consent and letter of
transmittal (or a manually signed facsimile thereof), together with any
other documents required by the consent and letter of transmittal, and
mail or deliver the consent and letter of transmittal and those other
documents to the exchange agent; or
o Electronically transmit your acceptance through ATOP (and thereby
tender debentures), for which the transaction will be eligible,
followed by a properly completed and duly executed consent and letter
of transmittal delivered to the exchange agent to effectuate the
delivery of the related consent. Upon receipt of your acceptance
through ATOP, DTC will edit and verify the acceptance and send an
agent's message (as described below) to the exchange agent for its
acceptance.
Delivery of tendered debentures must be made to the exchange agent
subject to the book-entry delivery procedures set out below, or you must comply
with the guaranteed delivery procedures set out below.
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Except as provided below, unless the 8-1/8% debentures being tendered
are deposited with the exchange agent on or prior to the expiration of the
consent solicitation or on or prior to the expiration of the exchange offer, as
the case may be (accompanied by a properly completed and duly executed consent
and letter of transmittal or a properly transmitted agent's message), we may, at
our option, treat that tender as defective for purposes of the right to receive
the exchange offer consideration. Exchange for the debentures will be made only
against deposit of the tendered debentures and delivery of any other required
documents.
To validly deliver a consent with respect to debentures transferred
subject to ATOP, if you are a DTC participant using ATOP, you must also properly
complete and duly execute the consent and letter of transmittal and deliver it
to the exchange agent. Subject to authority granted by DTC, if you are a DTC
participant who has debentures credited to your DTC account at any time (and
thereby held of record by DTC's nominee), you may directly provide a consent to
the proposed amendments as though you were the registered holder by so
completing, executing and delivering the consent and letter of transmittal.
Book-Entry Delivery Procedures
The exchange agent will establish accounts with respect to the 8-1/8%
debentures at DTC for purposes of the exchange offer within two business days
after the date of this prospectus. Any financial institution that is a
participant in DTC may make book-entry delivery of the debentures by causing DTC
to transfer those debentures into the exchange agent's account in accordance
with DTC's procedures for that transfer.
Although delivery of debentures may be effected through book-entry
transfer into the exchange agent's account at DTC, the consent and letter of
transmittal (or a manually signed facsimile thereof) with any required signature
guarantees, or an agent's message (as described below) in connection with a
book-entry transfer, and any other required documents, must, in any case, be
transmitted to and received by the exchange agent at one or more of its
addresses set out on the back cover of this prospectus on or prior to the
expiration of the consent solicitation or the expiration of the exchange offer
in connection with the tender of those debentures. Delivery of documents to DTC
does not constitute delivery to the exchange agent.
The confirmation of a book-entry transfer into the exchange agent's
account at DTC as described above is referred to in this prospectus as a
"book-entry confirmation." The term "agent's message" means a message
transmitted by DTC to, and received by, the exchange agent and forming a part of
the book-entry confirmation, which states that DTC has received an express
acknowledgment from a DTC participant that such participant has received the
consent and letter of transmittal and agrees to be bound by the terms of the
consent and letter of transmittal.
Signature Guarantees
Signatures on all consents and letters of transmittal must be
guaranteed by a recognized participant in the Securities Transfer Agents
Medallion Program, unless your tender of 8-1/8% debentures tendered and delivery
of consents delivered are tendered and delivered:
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o By a registered holder of 8-1/8% debentures (or by a participant in DTC
whose name appears on a security position listing as the owner of those
debentures) who has not completed any of the boxes entitled "Special
Payment Instructions" or "Special Delivery Instructions" on the consent
and letter of transmittal; or
o For the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers,
Inc. or a commercial bank or trust company having an office or
correspondent in the United States (which entities we refer to as
"eligible institutions").
If your 8-1/8% debentures are registered in the name of a person other
than the signatory to the consent and letter of transmittal or if 8-1/8%
debentures not accepted for exchange or not tendered are to be returned to a
person other than the registered holder, then the signature on the consent and
letter of transmittal accompanying the tendered debentures must be guaranteed.
See Instruction 4 of the consent and letter of transmittal.
Mutilated, Lost, Stolen or Destroyed Certificates
If you desire to tender 8-1/8% debentures, but the certificates
evidencing those debentures have been mutilated, lost, stolen or destroyed, you
should contact the trustee to receive information about the procedures for
obtaining replacement certificates for debentures at the following address or
telephone number: The Bank of New York, 101 Barclay Street, New York, New York,
10286, Attention: Ming Shiang, telephone (212) 815-2745.
Guaranteed Delivery
If you want to tender 8-1/8% debentures under the exchange offer after
the expiration of the consent solicitation prior to the expiration of the
exchange offer and
o Your certificates representing those debentures are not immediately
available,
o Time will not permit your consent and letter of transmittal, the
certificates representing your debentures and all other required
documents to reach the exchange agent on or before the expiration of
the exchange offer, or
o The procedures for book-entry transfer (including delivery of an
agent's message) cannot be completed on or prior to the expiration of
the exchange offer, you may nevertheless tender your 8-1/8% debentures
with the effect that tender will be deemed to have been received on or
prior to the expiration of the exchange offer if all the following
conditions are satisfied:
o the tender is made by or through an eligible institution;
o a properly completed and duly executed notice of guaranteed delivery
or an agent's message with respect to guaranteed delivery that is
accepted by us is
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received by the exchange agent on or prior to the expiration of the
exchange offer as provided below; and
o the certificates for the tendered debentures, in proper form for
transfer (or a book-entry confirmation of the transfer of those
debentures into the exchange agent's account at DTC as described
above), together with a consent and letter of transmittal (or
manually signed facsimile thereof) that is properly completed and
duly executed, with any signature guarantees and any other documents
required by the consent and letter of transmittal, or a properly
transmitted agent's message, are received by the exchange agent
within two business days after the date of execution of the notice
of guaranteed delivery.
The notice of guaranteed delivery may be sent by hand delivery,
facsimile transmission or mail to the exchange agent and must include a
guarantee by an eligible institution in the form set out in the notice of
guaranteed delivery.
Under no circumstances will interest be paid by us by reason of any
delay in exchanging 8-1/8% debentures for the exchange offer consideration to
any person using the guaranteed delivery procedures that results from this
guaranteed delivery. The exchange offer consideration for debentures tendered
under the guaranteed delivery procedures will be the same as for debentures
delivered to the exchange agent after the expiration of the consent solicitation
and on or prior to the expiration of the exchange offer, even if the debentures
to be delivered subject to the guaranteed delivery procedures are not so
delivered to the exchange agent, and therefore exchange by the exchange agent on
account of those debentures is not made, until after the exchange date.
Backup United Stated Federal Income Tax Withholding
To prevent backup federal income tax withholding you must provide the
exchange agent with your current taxpayer identification number and certify that
you are not subject to backup federal income tax withholding by completing the
Substitute Form W-9 included in the consent and letter of transmittal.
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of any tendered debentures or consents subject to any of
the procedures described above will be determined by us, in our sole discretion
(which determination shall be final and binding).
We reserve the right to reject any or all tenders of any 8-1/8%
debentures or consents that we determine not to be in proper form or, in the
case of debentures, if the acceptance for tender of those debentures may, in the
opinion of our counsel, be unlawful. We also reserve the rights to waive any of
the conditions of the exchange offer or any defect or irregularity in any tender
of your debentures or delivery of your consents, whether or not similar defects
or irregularities are waived in the case of other holders of debentures.
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Our interpretation of the terms and conditions of the exchange offer
and the consent solicitation (including the consent and letter of transmittal
and the instructions thereto) will be final and binding. Neither we, the
exchange agent, the trustee nor any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification. If we waive our right to
reject a defective tender of debentures, you will be entitled to the exchange
offer consideration.
Withdrawal of Tendered 8-1/8% Debentures and Revocation of Consents
You may withdraw tenders of 8-1/8% debentures at any time on or prior
to the expiration of the exchange offer, but the exchange offer consideration
will not be payable in respect of debentures so withdrawn. You may only revoke
consents on or before the expiration of the consent solicitation.
A valid withdrawal of tendered debentures effected on or before the
expiration of the consent solicitation will constitute the concurrent valid
revocation of your related consent. To revoke a consent, you must withdraw the
related tendered debentures.
Tenders of debentures may be validly withdrawn if the exchange offer is
terminated without any debentures being exchanged thereunder. In this case, the
debentures tendered under the exchange offer will be promptly returned to you,
the supplemental indenture will not become operative and the consents will not
be deemed revoked.
If the consent solicitation is amended on or prior to the expiration of
the consent solicitation in a manner determined by us, in our sole discretion,
to constitute a material adverse change to you, we promptly will disclose that
amendment and, if necessary, extend the consent solicitation for those
debentures for period deemed by us to be adequate to permit you to withdraw your
debentures and revoke your consents. In addition, we may, if we deem
appropriate, extend the consent solicitation for any other reason.
If we make a material change in the terms of the exchange offer or the
information concerning the exchange offer or waive a material condition of the
exchange offer, we will disseminate additional exchange offer materials and
extend that exchange offer to the extent required by law. In addition, we may,
if we deem appropriate, extend the exchange offer for any other reason. If the
consideration to be paid in the exchange offer is increased or decreased or the
principal amount of 8-1/8% debentures subject to the exchange offer is
decreased, the exchange offer will remain open at least 10 business days from
the date we first give notice to you, by public announcement or otherwise, of
that increase or decrease.
For a withdrawal of tendered debentures or the revocation of consents,
as the case may be, to be effective, a written or facsimile transmission notice
of withdrawal or revocation must be received by the exchange agent on or prior
to the expiration of the exchange offer and the consent solicitation, as
applicable, at its address set out on the back cover of this prospectus. Any
such notice of withdrawal must:
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o Specify the name of the person who tendered the debentures to be
withdrawn or to which the revocation of consents relates;
o Contain the description of the 8-1/8% debentures to be withdrawn and
identify the certificate number or numbers shown on the particular
certificates evidencing those debentures (unless those debentures
were tendered by book-entry transfer) and the aggregate principal
amount represented by those debentures; and
o Be signed in the same manner as the original signature on the
consent and letter of transmittal by which those debentures were
tendered (including any required signature guarantees) or the
related consent was given, or be accompanied by evidence sufficient
to us that the person withdrawing the tender or revoking the consent
has succeeded to the beneficial ownership of the debentures.
If the debentures to be withdrawn have been delivered or otherwise
identified to the exchange agent, a signed notice of withdrawal is effective
immediately upon written or facsimile notice of that withdrawal even if physical
release is not yet effected.
Any valid revocation of consents will automatically render the prior
tender of the debentures to which those consents relate defective, and we will
have the right, which we may waive, to reject that tender as invalid. Any
permitted withdrawal of debentures and revocation of consents may not be
rescinded, and any debentures properly withdrawn will thereafter be deemed not
validly tendered and any consents revoked will be deemed not validly delivered
for purposes of the exchange offer. Withdrawn debentures may, however, be
re-tendered and revoked consents may be re-delivered by again following one of
the appropriate procedures described in this prospectus at any time on or prior
to the expiration of the exchange offer and consent solicitation.
If we extend the exchange offer or if for any reason (whether before or
after any debentures have been accepted for tender) the acceptance for tender of
debentures is delayed or if we are unable to accept the tender of debentures
under the exchange offer, then, without prejudice to our rights under the
exchange offer, tendered debentures may be retained by the exchange agent on our
behalf and may not be withdrawn (subject to Rule 14e-l(c) under the Exchange
Act, which requires that an offeror pay the consideration offered or return the
securities deposited by or on behalf of the investor promptly after the
termination or withdrawal of a tender offer), except as otherwise provided in
this section.
All questions as to the validity, form and eligibility (including time
of receipt) of notices of withdrawal and revocation of consents will be
determined by us, in our sole discretion (which determination shall be final and
binding). Neither we, the exchange agent, the information agent, the trustee nor
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or revocation of consents, or incur
any liability for failure to give any such notification.
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Conditions to the Exchange Offer and Consent Solicitation
Notwithstanding any other provisions of the exchange offer and consent
solicitation and in addition to (and not in limitation of) our rights to extend
or amend the exchange offer and consent solicitation, we shall not be required
to accept for exchange or exchange, and may delay the acceptance for exchange
of, or exchange of, any tendered 8-1/8% debentures, in each event subject to
Rule 14e-l(c) under the Exchange Act, and may terminate the exchange offer and
consent solicitation, if:
o We have not received the requisite consents with respect to the
proposed amendments and release of collateral and the execution of the
supplemental indenture providing for the proposed amendments and
release of collateral;
o Our registration statement on Form S-4 does not become effective; or
o The general conditions described below shall not have been satisfied.
The "general conditions" are set forth below in paragraphs (i) and (ii)
below. The general conditions shall be deemed to have been satisfied or waived
unless any of the following events or conditions shall occur on or prior to the
expiration of the exchange offer:
(i) There shall be no third-party proceeding or investigation pending that
questions the validity or legality of, or seeks to restrain or prohibit
the performance of the exchange offer and consent solicitation or of
any action taken or to be taken pursuant to or in connection with the
exchange offer and consent solicitation; or
(ii) An order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction shall have been enacted, entered, issued,
promulgated, enforced or deemed applicable by any court or
governmental, regulatory or administrative agency or instrumentality
that, in our reasonable judgment, would prohibit, prevent, or
materially restrict or delay consummation of the exchange offer and
consent solicitation.
The foregoing conditions are for our sole benefit and we may assert
them in our reasonable discretion, regardless of the circumstances giving rise
to any such condition (including any action or inaction by us) and we may waive
such conditions, in whole or in part, at any time and from time to time, in our
reasonable discretion, whether any other condition of the exchange offer and
consent solicitation is also waived. Our failure at any time to exercise any of
the foregoing rights will not be deemed a waiver of any other right and each
right will be deemed an ongoing right that may be asserted at any time and from
time to time.
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Federal Income Tax Considerations
The federal income tax consequences of the exchange offer to the
holders are complex and uncertain. The following summary is not intended to be a
complete analysis or description of all potential United States federal income
tax consequences or any other tax consequences to the holders of the 8-1/8%
debentures pursuant to the exchange offer or the adoption of the proposed
amendments to the indenture for the 8-1/8% debentures. This summary is included
for general information only and is not intended as a substitute for careful tax
planning or for an individual analysis of the tax consequences of the exchange
offer to each holder. Each holder should consult his or her own tax advisor as
to the specific tax consequences (foreign, federal, state, local and other tax
laws) of the exchange offer to him or her.
The following general discussion summarizes the principal federal
income tax considerations applicable to the holders of the 8-1/8% debentures in
the exchange offer. This discussion assumes that each 8-1/8% debenture holder is
a citizen or resident of the United States for federal income tax purposes, and
holds the debentures as capital assets. This discussion does not purport to be a
complete analysis of all the potential tax effects that may be relevant to a
particular debenture holder and does not address the federal income tax
consequences relevant to particular categories of debenture holders subject to
special treatment under the federal income tax laws, such as broker-dealers,
financial institutions, life insurance companies, tax-exempt entities, and
foreign individuals and entities. In addition, it does not describe any tax
consequences arising out of the laws of any state, locality, or foreign
jurisdiction.
This discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), temporary and final Treasury Regulations promulgated
thereunder, proposed Treasury Regulations, published rulings, notices and other
administrative pronouncements of the Internal Revenue Service, and judicial
decisions now in effect, all of which are subject to change at any time by
legislative, judicial, or administrative action so as to result in Federal
income tax consequences different from those discussed below. Any such changes
may be retroactively applied in a manner that could adversely affect a debenture
holder. Moreover, substantial uncertainties, resulting from the lack of
definitive judicial or administrative authority and interpretation, apply to
various tax aspects of exchanges pursuant to the exchange offer. Accordingly,
although the Company believes that the following discussion covers all of the
material federal income tax consequences of the exchange offer to the holders,
no absolute assurance can be given with respect to any particular federal income
tax consequence. No rulings have been requested from the Internal Revenue
Service concerning any aspects of the exchange offer. In some cases,
particularly those as to which the discussion below is qualified, there is a
risk that the Internal Revenue Service will disagree with the conclusions set
forth.
The federal income tax consequences applicable to the 8-1/8%
debenture holders in the exchange offer will depend in part upon whether the
8-1/8% debentures and 11% debentures constitute "securities." The term
"security" for purposes of Code Section 354 is not defined in the Code or
applicable regulations and has not been clearly defined by court decisions. The
determination of whether an instrument constitutes a "security" for federal
income tax purposes is based upon all the facts and circumstances. Although the
term of the debt is a significant factor in determining whether a debt
instrument constitutes a security, an overall evaluation of
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the nature of the debt, the degree of participation and continuing interest in
the business of the issuers, the extent of proprietary interest compared with
the similarity of the debt instrument to a cash payment, the purpose of the debt
and other factors must be considered. In general, debt instruments with terms of
less than five years are usually not considered "securities;" debt instruments
with terms between five and ten years may be "securities" and debt instruments
with terms of longer than 10 years are usually "securities." The 11% debentures
have an original term of less than five years, therefore it is more likely than
not that they will not be classified as "securities."
1. Tax consequences Upon the Exchange of 8-1/8% Debentures for Cone Common
Stock. The Company believes that the 8-1/8% debentures, which had an original
term to maturity of ten years, will qualify as "securities" for purposes of Code
Section 354. The following discussion of the material federal income tax
consequences of the exchange of each $1,000 principal amount 8-1/8% debenture
for ___ shares of Cone common stock is based on this belief. No assurance can be
given that the Internal Revenue Service will accept the Company's determination
that the 8-1/8% debentures are "securities." If the Internal Revenue Service
successfully challenges the Company's belief that the 8-1/8% debentures are
"securities," the material federal income tax consequences of the exchange of
each $1,000 principal amount 8-1/8% debenture for ___ shares of Cone common
stock may be different from those described below:
a. Income Tax Consequences. The exchanging holders will
not recognize gain or loss with respect to the 8-1/8%
debentures surrendered in exchange for Cone common
stock.
b. Basis of Cone Common Stock. Each holder's aggregate
tax basis in the shares of Cone common stock received
in the exchange will be the same as the aggregate tax
basis of the 8-1/8% debentures surrendered in the
exchange.
c. Holding Period. The holding period of the shares of
Cone common stock received in the exchange will
include the holding period for the debentures
surrendered in exchange therefor.
d. Market Discount. Market discount with respect to a
debt instrument is generally an amount equal to the
excess of the face amount of the debt instrument over
the basis of the instrument in the hands of the
holder immediately after its acquisition by the
holder. If the market discount on a debt instrument
is de minimis (less than 1/4 of 1 percent of the
stated redemption price of the debt instrument at
maturity multiplied by the number of complete years
to maturity (after the holder acquired the debt
instrument)), then the market discount is considered
to be zero. Market discount on the 8-1/8% debentures,
if any, will generally only apply to a debenture
holder who did not purchase or otherwise acquire his
or her debentures on their original issuance.
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Provided the 8-1/8% debentures qualify as
"securities" for purposes of Code Section 354(a), any
accrued, unrecognized market discount on the 8-1/8%
debentures at the time of the exchange will carry
over to the Cone common stock, and the debenture
holder will not recognize ordinary income to the
extent of such accrued, unrecognized market discount
until the debenture holder sells or otherwise
disposes of the Cone common stock. Upon such sale or
other disposition of the Cone common stock any gain
recognized by the holder will be treated as ordinary
income to the extent of the accrued market discount.
Any gain in excess of the accrued market discount
will generally be capital gain or loss.
A holder who elects to include market discount in
income currently as it accrues (on either a
straight-line basis or constant interest method)
would not be required to treat gain recognized on the
disposition of an instrument subject to such market
discount as ordinary income. Exchanging debenture
holders should consult their tax advisors concerning
the effect of the market discount provisions and the
associated elections.
2. Tax Consequences Upon the Exchange of 8-1/8% Debentures for 11% Debentures
and 10 Shares of Cone Common Stock. The description of the income tax
consequences of the exchange of each $1,000 principal amount 8-1/8% debenture
for each $1,000 principal amount 11% debenture and 10 shares of Cone common
stock set forth below is based on (a) the belief of the Company that the 8-1/8%
debentures constitute "securities" for purposes of Code Section 354 and (b) the
belief of the Company that the 8-1/8% debentures and the 11% debentures are not
traded on an established market for purposes of Code Section 1273 and the
Treasury Regulations promulgated thereunder. If the Internal Revenue Service
successfully challenges the Company's belief that the 8-1/8% debentures are
"securities" or that the 8-1/8% debentures or the 11% debentures are not traded
on an established market, the material federal income tax consequences of the
exchange of each $1,000 principal amount 8-1/8% debenture for each $1,000
principal amount 11% debenture and 10 shares of Cone common stock may be
different from those described below:
a. If (as the Company believes is likely) the 11% debentures
are not "securities" for purposes of Code Section 354, the
following should be the material federal income tax
consequences of the exchange of each $1,000 principal amount
8-1/8% debenture for each $1,000 principal amount 11%
debenture and 10 shares of Cone common stock:
i. Income Tax Consequences. In general, no gain or loss
is recognized if stock or securities in a
corporation, which is a party to a reorganization,
are exchanged solely for stock or securities in the
same corporation, except that gain, shall be
recognized to the extent of any "other property"
received in such exchange. If the 11% debentures are
not "securities" they constitute "other property" for
purposes of Code Section 356. The "amount realized"
on the exchange of 8-1/8% debentures for 11%
debentures and Cone common stock is the sum of the
fair market value of
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the Cone common stock and the "amount realized" with
respect to the 11% debenture (discussed below);
however, the gain realized (the "amount realized"
minus the holder's basis) on the exchange should only
be recognized for income tax purposes to the extent
of the "fair market value" of the 11% debentures
received. In determining the "amount realized" with
respect to the 11% debentures Treasury Regulation
Section 1.1001-1(g)(1) will likely apply to provide
that the "amount realized" with respect to an 11%
debenture is its stated principal amount of $1,000,
although, under the circumstances of this exchange
offer, it is possible that the "fair market value" of
the 11% debentures may be the appropriate measure of
the "amount realized" with respect to the 11%
debentures.
No loss will be recognized on the exchange even if
the "amount realized" on the exchange is less than
the holder's basis in the 8-1/8% debentures.
For accounting purposes, the Company intends to treat
the "fair market value" of each $1,000 principal
amount 11% debentures as an amount equal to $1,000
minus the fair market value of the 10 shares of Cone
common stock on the date of the exchange. It is
unclear for purposes of determining gain and
allocating basis whether the "fair market value" of
the 11% debentures should be (x) the value assigned
to the debentures by the Company for accounting
purposes, (y) their stated principal amount of $1,000
pursuant to Treasury Regulation Section
1.1001-1(g)(1) or (z) some other higher or lower
value based on the price at which such debentures
would change hands between a willing buyer and
seller. In summary, the federal income tax
consequences to an exchanging holder will depend on
the "amount realized" and the "fair market value"
assigned to the debentures, the determination of
which is complex and uncertain. Note also that if
more than $50,000,000 but less than $100,000,000
principal amount 8-1/8% debentures are exchanged, the
interest rate on the 11% debentures issued pursuant
to the exchange may increase. Such increase may cause
the "fair market" value of the new debentures to
increase.
Under the foregoing analysis if the "amount realized"
with respect to an 11% debenture is $1,000, then a
holder who purchased his 8-1/8% debentures at their
principal amount, will recognize taxable gain on the
exchange of such debentures for 11% debentures and
Cone common stock. The amount of such gain will be
equal to the fair market value of the shares of Cone
common stock received in the exchange.
ii. Holding Period. The holding period for the Cone
common stock received will include the holding period
for the 8-1/8% debentures and the holding period for
the 11% debentures will begin on the day after the
exchange.
iii. Basis. The holder's basis in the Cone common stock
received will be the same as the aggregate tax basis
of the 8-1/8% debentures surrendered in
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the exchange decreased by the "fair market" value of
the 11% debentures and increased by the amount of any
gain recognized on the exchange. The holder's basis
in the 11% debentures received will be equal to their
"fair market value" (the determination of which is
discussed in Section (2)(a)(i) above).
iv. Character of Gain. Except as discussed below with
respect to debentures subject to market discount any
gain or loss recognized on the exchange of the 8-1/8%
debentures for the 11% debentures and Cone common
stock will generally be capital gain to a holder who
held the 8-1/8% debentures as capital assets, and
such gain will be long-term capital gain if the
holding period for the debentures surrendered exceeds
one year at the time of the exchange.
b. If (as the Company believes is not likely) the 11% debentures
constitute "securities" for federal income tax purposes, for
each $1,000 principal amount of 8-1/8% debentures exchanged
for $1,000 principal amount 11% debentures and 10 shares of
Cone common stock, the material federal income tax
consequences should be as follows:
i. Income Tax Consequences. Since the principal amount
of the 8-1/8% debentures is equal to the principal
amount of the 11% debentures, no gain or loss will be
recognized by a holder upon receipt of the 11%
debentures and Cone common stock in exchange for the
8-1/8% debentures.
ii. Holding Period. The holding period of the 11%
debentures and Cone common stock will include the
holding period of the 8-1/8% debentures.
iii. Basis. Each holder's aggregate tax basis in the 11%
debentures and Cone common stock received in the
exchange will be the same as the aggregate tax basis
of the 8-1/8% debentures surrendered in the exchange.
The aggregate tax basis of the 8-1/8% debentures
shall be allocated between the 11% debentures and
Cone common stock in proportion to their "fair market
values".
c. Market Discount. Market discount with respect to a
debt instrument is generally an amount equal to the
excess of the face amount of the debt instrument over
the basis of such instrument in the hands of the
holder immediately after its acquisition by the
holder. If the market discount on a debt instrument
is de minimis (less than 1/4 of 1 percent of the
stated redemption price of the debt instrument at
maturity multiplied by the number of complete years
to maturity (after the holder acquired the debt
instrument)), then the market discount is considered
to be zero. Market discount on the 8-1/8% debentures
will generally apply only to a debenture holder who
did not purchase or otherwise acquire such debentures
on their original issuance.
i. Effect of Market Discount If 11% Debentures
Constitute "Securities." If (as the Company believes
is not likely) the 11% debentures qualify as
"securities" for purposes of Code Section
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354, (x) a portion of accrued, unrecognized market
discount on the 8-1/8% debentures will be carried
over to the shares of Cone common stock received and
any gain on the disposition of the shares of Cone
common stock will be treated as ordinary income to
the extent of the portion of the accrued,
unrecognized market discount allocated to such Cone
common stock and (y) a portion of the accrued,
unrecognized market discount will be treated as
accrued market discount with respect to the 11%
debentures received in the exchange. It is unclear
how the accrued, unrecognized market discount on the
8-1/8% debentures will be allocated between the 11%
debentures and Cone common stock. Holders should
consult their own tax advisors regarding this
allocation of the market discount.
ii. Effect of Market Discount If 11% Debentures Do Not
Constitute "Securities". If (as the Company believes
is likely) the 11% debentures are not "securities"
for purposes of Code Section 354, an exchanging
debenture holder will be required to treat any gain
recognized on the exchange of the 8-1/8% debentures
for 11% debentures and Cone common stock as ordinary
income to the extent of any market discount that has
not previously been included in the holder's income
and is treated as having accrued on the 8-1/8%
debentures at the time of the exchange. If the market
discount exceeds the amount of gain recognized on the
exchange, the excess, accrued, unrecognized market
discount will be carried over to the Cone common
stock. The holder will not recognize ordinary income
to the extent of such excess, accrued, unrecognized
market discount until the holder sells or otherwise
disposes of the Cone common stock. Upon such sale or
other disposition of the Cone common stock, any gain
recognized by the holder will be treated as ordinary
income to the extent of the excess, accrued,
unrecognized market discount.
A holder who elects to include market discount in
income currently as it accrues (on either a
straight-line basis or constant interest method)
would not be required to treat gain recognized on the
disposition of property subject to such market
discount as ordinary income. Exchanging debenture
holders should consult their tax advisors concerning
the effect of the market discount provisions and the
associated elections.
d. Original Issue Discount ("OID"). Under Section 1273 of the
Code, since the stated redemption price at maturity of the 11%
debentures ($1,000) is equal to their issue price (which is
$1,000, provided the 8-1/8% debentures and the 11% debentures
are not traded on an established market within the meaning of
Code Section 1273 and the regulations promulgated thereunder),
the 11% debentures are being issued without OID.
e. Bond Premium. After application of the basis rules set forth
in this Section, if the tax basis of an exchanging holder in
the 11% debentures exceeds the principal
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amount of such debentures, then the excess may constitute
amortizable bond premium that is deductible by the exchanging
holder over the term of the 11% debentures. To amortize bond
premium, the exchanging holder must make the necessary
election under Section 171 of the Code, and the election will
apply to all debt instruments held by him. Exchanging holders
should consult their own tax advisors concerning the existence
of bond premium and the associated election.
3. Tax Consequences if Proration Provisions Apply. If, as described in this
prospectus, the shares of Cone common stock are oversubscribed, a holder
exchanging 8-1/8% debentures for Cone common stock may also receive $1,000
principal amount 11% debentures and an additional 10 shares of Cone common stock
for each $1,000 principal amount 11% debentures received. In addition, if, as
described in this prospectus, the 11% debentures are oversubscribed, a holder
exchanging 8-1/8% debentures for $1,000 principal amount 11% debentures and ___
shares of Cone common stock for each $1,000 principal amount 11% debentures
received may also receive additional shares of Cone common stock. In either
case, the tax consequences to the exchanging 8-1/8% debenture holders will be
determined pursuant to the same methods applicable to an exchanging 8-1/8%
debenture holder receiving 11% debentures and Cone common stock described in
part 2 of this section above. All of the consideration received by the
exchanging holder will be treated as received in exchange for all of the
holder's 11% debentures in one integrated transaction and the receipt of Cone
common stock and 11% debentures will not be analyzed as separate exchange
transactions. The tax consequences will also depend on whether the 11%
debentures are considered "securities" for purposes of Code Section 354.
4. Tax Consequences to Non-Exchanging Debenture Holders. If a debenture holder
does not participate in the exchange offer and the indenture for the 8-1/8%
debentures is not amended, there will be no change in such debenture holder's
tax position. If a debenture holder does not participate in the exchange offer
and the indenture for the 8-1/8% debentures is amended, the Company believes
that the proposed amendments to the indenture should not constitute a
"significant modification" of the 8-1/8% debentures pursuant to Code Section
1001 and the regulations promulgated thereunder. If there is no "significant
modification" of the 8-1/8% debentures, there should be no change in such
debenture holder's tax position if he does not participate in the exchange
offer. If the Internal Revenue Service successfully challenges the Company's
belief that the amendments to the 8-1/8% debentures are not a "significant
modification" of such debentures, the material federal income tax consequences
to nonexchanging debenture holders may be different from those described herein.
Advisor, Exchange Agent and Information
Dougherty & Company LLC has acted as an advisor to the Company in
connection with the exchange offer and consent solicitation. As advisor,
Dougherty participated with the Company in determining the terms and conditions
of the exchange offer and consent solicitation and has provided information to
us regarding comparable transactions in the marketplace. We have agreed to
indemnify the advisor against liabilities incurred in connection with any
obligation to be performed by Cone under the terms of the engagement, except to
the extent any such liability is the result of the advisor's gross negligence or
willful misconduct.
The advisor has nondiscretionary investment authority over client
accounts holding Cone common stock and 8-1/8% debentures. It is also a market
maker in the 8-1/8% debentures and from time to time holds substantial amounts
of the debentures in its trading account.
The Bank of New York has been appointed as exchange agent for the
exchange offer and consent solicitation. Consents and letters of transmittal and
all correspondence in connection with the exchange offer and consent
solicitation should be sent or delivered by you or your broker, dealer,
commercial bank, trust company or other nominee to the exchange agent at the
addresses and telephone numbers set forth on the back cover page of this
prospectus.
You may direct questions and requests for assistance or additional
copies of this prospectus, the consent and letter of transmittal or the notice
of guaranteed delivery to the Company at its address and telephone number set
forth in the forepart of this prospectus under "Questions and Answers About the
Exchange Offer and Consent Solicitation." You may also contact your broker,
dealer, commercial bank or trust company for assistance concerning the exchange
offer and consent solicitation.
Conflicts of Interest
Bruce H. Hendry, a director of the Company, owns $11,000,000 principal
amount of the 8-1/8% debentures, and Marc H. Kozberg, also a director of the
Company, owns $102,000 principal amount of the 8-1/8% debentures. No other
directors or executive officers of the Company own any 8-1/8% debentures. Both
Mr. Hendrey and Mr. Kozberg have indicated to the Company that they intend to
accept the exchange offer. Mr. Hendry is a registered representative of
Dougherty & Company LLC, the advisor. Mr. Kozberg is also a registered
representative of Dougherty and is the head of its investment advisory division.
Messrs. Hendry and Kozberg have no economic interest, however, in the completion
of the exchange offer except as holders of 8-1/8% debentures.
Fees and Expenses
The advisor will receive compensation for its services in connection
with, and at the completion of, the exchange offer and consent solicitation
equal to 0.75% of the outstanding principal balance of the 8-1/8% debentures. If
the exchange offer and consent solicitation are completed on the terms and
conditions described in this prospectus, the advisor will receive additional
compensation equal to 0.25% of the outstanding principal balance of the 8-1/8%
debentures and warrants to purchase 50,000 shares of Cone common stock. The
warrants will have an exercise price of $5.025 per share of common stock, which
is equal to 120% of the market price of Cone common stock on April 12, 2000, the
date the Company engaged Dougherty as advisor. The warrants will be exercisable
for a period of five years from the date of issue. The holder of the shares
issuable upon exercise of the warrants will have demand and piggyback
registration rights. The advisor will also be reimbursed for its reasonable
out-of-pocket expenses in connection with the exchange offer and consent
solicitation. The exchange agent will also receive reasonable and customary fees
and reimbursement for its reasonable out-of-pocket expenses in connection with
the exchange offer and consent solicitation. Brokerage houses and other
custodians, nominees and fiduciaries will be reimbursed for their reasonable
out-of-pocket expenses incurred in forwarding copies of this prospectus and
related documents to the beneficial owners of 8-1/8% debentures. We will pay all
such fees and expenses. In addition to the solicitation of consents by mail, our
directors, officers or employees may solicit consents by telephone, facsimile or
in person without receiving additional compensation. We have not engaged a
solicitation agent in connection with the exchange offer and consent
solicitation.
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Restrictions on Sales of Securities by Affiliates of Cone
The shares of Cone common stock and 11% debentures to be issued in
connection with the exchange offer will be registered under the Securities Act
of 1933 and will be freely transferable under the Securities Act, except for
those securities issued to any person in the exchange who is deemed to be an
"affiliate" of Cone under the Securities Act at the time of the exchange offer.
Persons who may be deemed to be affiliates include individuals or entities that
control, are controlled by, or are under common control with Cone and may
include some officers and directors, as well as principal shareholders.
Affiliates may not sell their shares of Cone common stock or 11% debentures
acquired in connection with the exchange except by means of:
o An effective registration statement under the Securities Act covering
the securities covering the resale of those securities;
o An exemption under paragraph (d) of Rule 145 under the Securities Act;
or
o Any other applicable exemption under the Securities Act.
No Appraisal Rights
You will not have any right to dissent and receive an appraisal of your
8-1/8% debentures in connection with the exchange offer.
Use of Proceeds
The Cone common stock and 11% debentures issued in connection with the
exchange offer are being issued in exchange for your 8-1/8% debentures. We will
not receive any cash proceeds from the issuance of common stock and 11%
debentures pursuant to the exchange offer.
Listing on the New York Stock Exchange
Cone will use its best efforts to cause the shares of Cone common stock
issued in the exchange offer and consent solicitation to be approved for listing
on the New York Stock Exchange, subject to official notice of issuance, before
the completion of the exchange offer.
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Miscellaneous
We are making this exchange offer and consent solicitation to all
holders of 8-1/8% debentures. We are not aware of any jurisdiction in which the
making of the exchange offer and consent solicitation is not in compliance with
applicable law. If we become aware of any jurisdiction in which the making of
the exchange offer and consent solicitation would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
If, after such good faith effort, we cannot comply with any such law, the
exchange offer and consent solicitation will not be made to, and tenders of
debentures and consents will not be accepted from, the holders of debentures
residing in that jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of Cone not contained in this prospectus or in the
consent and letter of transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
DESCRIPTION OF CONE CAPITAL STOCK
The following description of the common stock of Cone to be registered
in this prospectus and other capital stock of Cone is based on the provisions of
Cone's amended and restated articles of incorporation and bylaws and the
applicable provisions of North Carolina law. For information on how you can
obtain copies of Cone's articles of incorporation and bylaws, see "Where You Can
Find More Information."
The authorized capital stock of Cone Mills is 49,200,000 shares,
consisting of (i) 42,700,000 shares of common stock, par value $.10 per share,
(ii) 1,500,000 shares of Class A Preferred Stock, par value $100 per share
("Class A Preferred Stock") and (iii) 5,000,000 shares of Class B Preferred
Stock ("Class B Preferred Stock"). As of June 30, 2000, there were outstanding
357,700 shares of Class A Preferred Stock and 25,490,660 shares of common stock.
The shares of common stock were held in the name of approximately 368 holders of
record on June 30, 2000.
Common Stock
Holders of Cone common stock are entitled ratably, share for share, to
dividends, when, as and if declared by the Board of Directors, out of funds
legally available therefor. Common stock is junior to Class A Preferred Stock
with respect to dividend and liquidation preferences and may be junior to Class
B Preferred Stock depending upon the relative preferences, limitations and
relative rights the Board of Directors may determine upon issuance of such Class
B Preferred Stock. The only series of Class B Preferred Stock that has been
created by the Board of Directors to the date of this prospectus is Class B
Preferred Stock (Series A), which is senior to common stock in dividend and
liquidation preferences. After payment in liquidation has been made to the
senior capital stock, the remaining assets of the Company would be distributed
pro rata among the holders of common stock on a per share basis. Holders of
common stock are entitled to one vote per share on all matters submitted to a
vote of holders of common stock.
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Shareholder Rights Plan
On October 14, 1999, the Board of Directors of the Company adopted a
shareholder rights plan by authorizing and declaring a dividend distribution of
one right for each outstanding share of common stock to shareholders of record
at the close of business on October 25, 1999. Each right entitles the holder of
common stock to purchase from the Company a unit consisting of one one-hundredth
of a share of Class B Preferred Stock (Series A) of the Company at a purchase
price of $30 per unit (the "Purchase Price"), subject to adjustment. The
description and terms of the rights are set forth in the Rights Agreement, dated
as of October 14, 1999, between the Company and First Union National Bank, as
Rights Agent.
The rights will separate from the common stock upon the earlier of (i)
10 days following public announcement that a person or group of affiliated or
associated persons, with such exceptions as are set forth in the Rights
Agreement (an "Acquiring Person"), has acquired, or obtained the right to
acquire, beneficial ownership of 20% or more of the outstanding shares of Cone
common stock (the "Stock Acquisition Date") or (ii) 10 business days (or such
later date as the Board of Directors may determine) following the commencement
of, or first public announcement of the intent of a person or group to commence,
a tender offer or exchange offer that would result in a person or group (with
such exceptions as are set forth in the Rights Agreement) beneficially owning
20% or more of the outstanding shares of common stock (this date is referred to
as the "Distribution Date").
An Acquiring Person does not include (i) the Company, any subsidiary of
the Company, any employee benefit plan or employee stock plan of the Company or
of any subsidiary of the Company or (ii) any person or group whose ownership of
20% or more of the shares of common stock then outstanding results solely from
any action or transaction or series of related actions or transactions approved
by the Board of Directors before such person or group became an Acquiring
Person.
Until a right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. The rights are not exercisable until the
Distribution Date and will expire at the close of business on October 13, 2009
unless earlier redeemed or exchanged by the Company.
The rights have certain anti-takeover effects. The rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board of Directors of the Company. The rights
should not interfere with any merger or other business combination approved by
the Board of Directors of the Company since the Board of Directors may, at its
option, at any time prior to the close of business on the earlier of (i) the
tenth business day following the Stock Acquisition Date or (ii) October 13, 2009
redeem all, but not less than all, of the then outstanding rights at the
redemption price.
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Class A Preferred Stock
All of the issued and outstanding shares of Class A Preferred Stock are
held by the Cone Mills Corporation 1983 Employee Stock Ownership Plan ("ESOP")
except shares held by a former participant in the ESOP. Class A Preferred Stock
is nonvoting, except as otherwise required by law, and is senior in dividend
preference to all other classes of capital stock. Class A Preferred Stock also
has a liquidation preference of $100 per share plus accrued and unpaid
dividends, which is senior to all other classes of capital stock.
Holders of shares of Class A Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors from funds legally available
therefor, dividends payable in cash or stock on the 31st day of March of each
year, at the "applicable rate" in effect for the annual dividend period then
ended. The "applicable rate" is established on March 31 for the next succeeding
dividend period and is defined as that rate, determined by an independent
investment bank or appraisal firm selected by the Board of Directors to appraise
Class A Preferred Stock, subject to confirmation by the ESOP trustee, required
to make the fair market value of Class A Preferred Stock equal to its original
par value. In no event, however, can the "applicable rate" exceed 13% per annum
or be less than 7% per annum. The "applicable rate" for the annual dividend
period ended March 31, 2000, was 8.0% and is 11.75% for the annual dividend
period ended March 31, 2001. Dividends on Class A Preferred Stock are
cumulative, but accumulated dividends do not bear interest.
Dividends on the Class A Preferred Stock are, at the option of the
Board of Directors, payable in cash or by delivery of shares of the Company's
Class A Preferred Stock, common stock or by delivery of other "qualifying
employer securities" of the Company (as defined under ERISA) or by a combination
of the foregoing; provided, however, that on the date of delivery the fair
market value of any or qualifying employer securities used to pay dividends
shall be equal to or greater than the amount of dividends paid therewith. All
dividends paid to date on the Class A Preferred Stock have been paid in
additional shares of Class A Preferred Stock or cash.
Class A Preferred Stock held by the 1983 ESOP may be redeemed, in whole
or in part, at the option of the Company by a vote of the Board of Directors at
a price equal to the greater of $100 per share or the fair market value thereof,
plus dividends accrued and unpaid thereon to the date fixed for redemption. The
redemption price shall be paid in cash or by delivery of shares of any class of
the Company's Class A preferred Stock, common stock or by delivery of other
qualifying employer securities or a combination of the foregoing, at the
Company's option; provided, however, that on the date of delivery the fair
market value of any stock or other qualifying employer securities used to pay
the redemption price shall be equal to or greater than the redemption price (or
portion thereof) paid therewith.
Purchase of Class A Preferred Stock by the ESOP may be necessary to
provide all or part of the pension due under the Company's designed benefit
plans pursuant to the floor-offset arrangement in connection with the ESOP and
to make distributions due to retired or terminated employees. The ESOP is
obligated to purchase shares of Class A Preferred Stock from participants and
former participants of these plans in accordance with the terms and conditions
of the plans and the related trust agreements and liquidity agreements. To the
extent the ESOP has insufficient liquidity to make these purchases, it may
require the Company to repurchase share of Class A Preferred Stock. It is
within the control of the Company to satisfy the liquidity needs of
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the ESOP through cash contributions, cash dividends or optional repurchases of
the Class A Preferred Stock.
Holders of Class A Preferred Stock have no right to convert into any
other stock or securities of the Company.
Class B Preferred Stock
The articles of Cone authorize 5,000,000 shares of Class B preferred
Stock. The Cone Board of Directors may authorize the issuance of Class B
Preferred Stock and fix such preferences, limitations and relative rights at
such times, for such purpose and for such consideration as it may deem
advisable. In addition, the Board of Directors may divide and issue the Class B
Preferred Stock in series and may fix relative rights and preferences as between
different series. The issuance of Class B Preferred Stock under certain
circumstances may have the effect of discouraging an attempt by a third party to
acquire control of Cone without the prior approval of the Cone Board of
Directors.
On October 14, 1999, the Company's Board of Directors amended the
Company's Restated Articles of Incorporation creating a series of Class B
Preferred Stock (the "Class B Preferred Stock (Series A)"). The number of shares
constituting the Class B Preferred Stock (Series A) is 500,000. The Class B
Preferred Stock (Series A) is junior to the Class A preferred Stock and senior
to Common Stock in dividends or distributions of assets upon liquidation,
dissolution or winding up of the Company. Dividends on the Class B Preferred
Stock (Series A) are cumulative and accrue from the quarterly dividend payment
date. Each share of Class B Preferred Stock (Series A) entitles the holder
thereof to 100 votes on all matters submitted to a vote of shareholders of the
Company. These shares were reserved for issuance under the shareholder rights
plan described above.
Certain Provisions That May Have an Anti-Takeover Effect
In addition to the shareholder rights plan and the ability of the Board
of Directors to authorize the issuance of Class B Preferred Stock with such
preferences, limitations and relative rights as the Board may deem advisable,
each discussed above, the Company's articles of incorporation and bylaws contain
other provisions that might have the effect of delaying, deferring or preventing
a change in control of Cone.
Special Vote Requirement. The Company's articles of incorporation
require that, in addition to any vote required by law, certain business
combinations ("Business Combinations") must be approved by the affirmative vote
of at least 66-2/3% of the outstanding shares of stock of the Company entitled
to vote generally in the election of directors, voting together as a single
class or voting group, unless the Business Combination was approved by the
"Disinterested Directors" of the Company.
In addition, except as described below, Business Combinations that
involve an "Interested Shareholder" who became the beneficial owner of any
shares of Common Stock or Nonvoting Common Stock by tender offer require the
affirmative vote of at least 66-2/3% of the
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outstanding voting stock that is not owned beneficially by the Interested
Shareholder, notwithstanding approval of the Business Combination by the
Disinterested Directors.
"Business Combinations" include (a) a merger, consolidation or share
exchange between the Company or any subsidiary and an Interested Shareholder or
an "Affiliate" of an Interested Shareholder; (b) the sale or other disposition
in one transaction or series of transactions to an Interested Shareholder or any
Affiliate of an Interested Shareholder of assets of the Company or any
subsidiary having an aggregate fair market value of more than 10% of the
aggregate fair market value of the Company's assets, as reflected on the most
recent audited consolidated balance sheet of the Company; (c) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
Company or any subsidiary (in one transaction or a series of transactions) of
any securities of the Company or any subsidiary to any Interested Shareholder or
any Affiliate of an Interested Shareholder; (d) the adoption of a plan or
proposal for the dissolution of the Company proposed by or on behalf of an
Interested Shareholder or any Affiliate of an Interested Shareholder; (e) the
reclassification, recapitalization or other transaction involving the Company or
any subsidiary which has the effect, directly or indirectly, of increasing the
percentage of the outstanding shares of any class of stock of the Company or a
subsidiary that is increasing the percentage of the outstanding shares of any
class of stock of the Company or a subsidiary that is beneficially owned by any
Interested Shareholder; and (f) any receipt by any Interested Shareholder or any
Affiliate of an Interested Shareholder of a disproportionate benefit, directly
or indirectly, in the form of loans, advances, guaranties, pledges or other
financial benefits provided by or through the Company or any subsidiary.
"Interested Shareholders" include the direct or indirect beneficial
owners of 15% or more of the outstanding shares of voting stock of the Company,
and Affiliates and Associates of the Company who at any time within the
three-year period immediately prior to any Business Combination were the
beneficial owners, directly or indirectly, of 15% or more of the then
outstanding shares of voting stock of the Company. "Affiliate" and "Associate"
are defined by reference to the definitions of those terms contained in Rule
12b-2 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934.
"Disinterested Directors" are directors who are neither affiliated with
nor a nominee of an Interested Shareholder, but only if they were either members
of the Board of Directors of the Company prior to the time the Interested
Shareholder became an Interested Shareholder or were recommended by a majority
of the Disinterested Directors then in office.
An additional high vote requirement is provided for Business
Combinations involving an Interested Shareholder who became the beneficial owner
of any shares of voting stock or nonvoting common stock of the Company by means
of a tender offer. This additional requirement is intended to protect the
shareholders against the two-tiered takeover technique in which an acquiror pays
cash in a tender offer to acquire a controlling interest in the Company and then
acquires the remaining equity interest in the Company by paying the remaining
shareholders a price for their shares that is lower than the price paid to
acquire control or by providing a less desirable form of compensation, such as
securities of the acquiror that may not have an established trading market at
the time of issuance, or both.
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Under the Company's Articles of Incorporation, approval of any Business
Combination involving an Interested Shareholder or any Affiliate of an
Interested Shareholder who became the beneficiary owner of any shares of voting
stock or nonvoting common stock of the Company by means of a tender offer would
require the affirmative vote of the holders of at least 66-2/3% of the voting
stock that is not beneficially owned by the Interested Shareholder, unless all
of the following conditions are satisfied: (1) at the time the Business
Combination becomes effective, holders of voting stock and nonvoting common
stock of the Company will be entitled to receive, in cash, a per share amount
that is not less that the highest price per share paid for any shares of voting
stock beneficially owned by the Interested Shareholder; (2) after becoming an
Interested Shareholder and prior to the consummation of such Business
Combination, the Interested Shareholder shall not have acquired any newly issued
shares of capital stock of the Company and shall not have received the benefit
of any loans, advances, guaranties, pledges or other financial assistance
provided by the Company or shall not have made any material changes in the
Company's business or equity capital structure; and (3) a proxy statement
complying with the Securities Exchange Act of 1934 shall be mailed to the
shareholders of the Company in connection with such Business Combination and
shall contain any recommendations as to the advisability (or inadvisability) of
the Business Combination which the Disinterested Directors may choose to state
and the opinion of a reputable national investment banking firm as to the
fairness (or not) of the terms of such Business Combination, from the point of
view of holders of voting stock and nonvoting common stock other than the
Interested Shareholder and its Affiliates and Associates.
Classification of the Board of Directors. The amended and restated
articles of incorporation of the Company provide for a classified Board of
Directors. The Cone Board is divided into three classes, as nearly equal in
number as possible, with each class of directors elected to staggered three-year
terms so that the terms of approximately one-third of Cone's directors expire
each year. Shareholders do not have cumulative voting rights with respect to the
election of directors.
North Carolina Law. The North Carolina General Statutes have two
provisions that may be deemed to have anti-takeover effects: The Control Share
Acquisition Act and the Shareholder Protection Act. As permitted, Cone has
elected to opt out of the provisions of both of these acts.
Indemnification of Directors and Officers
The articles of incorporation and bylaws of Cone provide for
indemnification of its directors and officers to the fullest extent permitted by
law. The North Carolina Business Corporation Act permits a corporation, with
certain exceptions, to indemnify a current or former officer or director against
liability and expenses if that person acted in good faith and in a manner he or
she reasonably believed was (i) in the case of conduct in his or her official
capacity with the corporation, in the best interest of the corporation, and (ii)
in all other cases, in a manner that was at least not opposed to the
corporation's best interest and, with respect to any criminal action or
proceeding, he or she had no reasonable cause to believe his or her conduct was
unlawful. In addition, a corporation is required to indemnify an officer or
director in the defense of any proceeding to which he or she was a party against
reasonable expenses to the extent that he or she is wholly successful on the
merits or otherwise. This indemnification generally may be
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made by the corporation only upon a determination that indemnification of the
director or officer is permissible under the circumstances because he or she met
the applicable standard for conduct set forth above.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Cone pursuant
to Cone's articles, bylaws or the North Carolina Business Corporation Act, Cone
has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
DESCRIPTION OF 11% DEBENTURES DUE MARCH 15, 2005
The 11% debentures will be issued under an Indenture dated as of
_________, 2000 between the Company and The Bank of New York, as Trustee. The
terms of the 11% debentures include those stated in the indenture and those made
part of the indenture by reference to the Trust Indenture Act of 1939. The 11%
debentures will be guaranteed by the Company's three principal United States
subsidiaries and secured by a security interest in substantially all of the
United States assets of the Company and those subsidiaries. This security
interest will be subordinated to certain senior indebtedness of the Company on
the terms set forth in the indenture and described below under the caption
"--Subordination." The indenture defines the terms of the security interests
that will secure the 11% debentures. The following descriptions are summaries of
the material provisions of the indenture. They do not restate the indenture in
its entirety. We urge you to read the indenture because it, and not the summary
descriptions below, defines your rights. A copy of the indenture is filed as an
exhibit to the registration statement of which this prospectus forms a part and
is also available for inspection at the office of the Trustee. Section
references below are to the indenture. Capitalized terms used below without
definition have the meanings assigned to them in the indenture.
General Terms of 11% Debentures
The general terms of the 11% debentures are identical to those of the
8-1/8% debentures, as proposed to be amended in the consent solicitation, except
for (1) an increase in the interest rate from 8-1/8% to 11% and (2) a reduction
in the overall principal amount outstanding (by virtue of the exchange of
certain 8-1/8% debentures for common stock of the Company) from $100,000,000 to
a maximum of $85,000,000. The Company will increase the interest on the 11%
debentures up to a maximum of 14% to the extent it realizes interest savings
because less than all of the 8-1/8% debentures are tendered and, as a result,
less than $85,000,000 principal amount of 11% debentures are issued.
The 11% debentures will mature on March 15, 2005. They will bear
interest from __________, 2000, at the rate of 11% per annum (or such higher
rate as may be applicable), payable semiannually on March 15 and September 15 of
each year, commencing March 15, 2001, to the persons in whose names the
debentures are registered (through payments to the depositary as described below
under "Book-Entry System") at the close of business on the March 1 and September
1, as the case may be, immediately preceding such interest payment date.
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The 11% debentures are not redeemable prior to maturity and are not
subject to any sinking fund.
The 11% debentures will be issued in the form of one or more registered
global securities and will be deposited with, or on behalf of, The Depository
Trust Company, as depositary, and registered in the name of the depositary's
nominee. A description of the depositary's procedures with respect to the global
securities is set forth below under "--Book-Entry System."
Principal will be payable, and the 11% debentures will be transferable
and exchangeable without any service charge, at the office of the Trustee.
However, the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with any such transfer or
exchange. (Section 2.8)
Indenture
The indenture for the 11% debentures is substantially identical to the
indenture for the 8-1/8% debentures except that: (1) guaranties by the Company's
three principal United States subsidiaries and provisions granting the security
interests in the collateral securing the 11% debentures have been added as
appropriate, (2) the "basket" permission in the Limitation on Liens covenant
(Section 3.9(i), for general secured indebtedness has been increased from 10% of
Consolidated Net Tangible Assets (approximately $36 million at July 2, 2000) in
the existing indenture for the 8-1/8% debentures to a limitation of 55% of
Consolidated Net Tangible Assets (approximately $202 million at July 2, 2000) in
the indenture for the 11% debentures, (3) a new permission has been added for
liens securing the 11% debentures, (4) the definition of "Consolidated Net
Tangible Assets" has been changed to exclude current maturities of long-term
debt, to exclude assets not securing the 11% debentures and to include amounts
outstanding under any receivables securitization, (5) the definition of
"Subsidiary" has been changed to exclude all foreign subsidiaries, in addition
to the Parras Cone joint venture in Mexico, (6) the definition of "Subsidiary"
has been further changed to include any special purpose entity that buys and
securitizes the Company's receivables, thereby increasing secured debt by
definition, and (7) subordination provisions have been added as described below.
All other provisions of the indenture for the 11% debentures are substantively
identical to the provisions of the indenture for the 8-1/8% debentures and are
as described below.
The indenture limits the aggregate principal amount of 11% debentures
that may be issued thereunder to $85,000,000. The 11% debentures will be direct
secured obligations of the Company and will be subordinate to certain senior
indebtedness of the Company as described below under "--Subordination," but will
have priority over unsecured indebtedness of the Company, including obligations
to trade creditors and the 8-1/8% debentures to the extent of permitted liens.
Except as described under "--Certain Covenants," the indenture governing the 11%
debentures does not limit other indebtedness or securities that may be incurred
or issued by the Company or any of its subsidiaries or contain financial or
similar restrictions on the Company or any of its subsidiaries.
Book-Entry System
The 11% debentures will be issued under a book-entry system in the form
of one or more global securities. Each global security will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York. The global
securities will be registered in the name of DTC or its nominee.
DTC has advised the Company that it is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of the New York banking law, a member of the Federal Reserve
System, a "clearing corporation within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of section 17A of the Exchange Act. DTC was created to hold securities of its
participants and to facilitate
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the clearance and settlement of securities transactions among its participants
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations, some of whom (and/or
their representatives) own DTC. Access to DTC's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a global security in registered form, DTC will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the 11% debentures represented by such global security to
the accounts of participants. The accounts to be credited will be designated by
the exchange agent Ownership of beneficial interests in the global security will
be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests by participants in the global
security will be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by DTC (with respect to participants'
interests) or its nominee and the participants (with respect to the owners of
beneficial interests in the global security). Ownership of beneficial interests
in the global security by persons that hold through participants will be shown
on, and the transfer of that ownership interest within such participants will be
effected only through, records maintained by such participants. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the ability
to transfer beneficial interests in a global security.
So long as DTC or its nominee is the registered owner of a global
security, it will be considered the sole owner or holder of the 11% debentures
represented by such global security for all purposes under the governing
indenture. Except as set forth below, owners of beneficial interests in such
global security will not be entitled to have the 11% debentures represented
thereby registered in their names, will not receive or be entitled to receive
physical delivery of certificates representing the 11% debentures and will not
be considered the owners or holders thereof under the indenture. Accordingly,
each person owning a beneficial interest in such global security must rely on
the procedures of DTC and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the indenture. The Company understands
that under existing practice, in the event that the Company requests any action
of the holders or a beneficial owner desires to take any action a holder is
entitled to take, DTC would act upon the instructions of, or authorize, the
participant to take such action.
Payment of principal of and interest on 11% debentures represented by a
global security will be made to DTC or its nominee, as the registered owner and
holder of the global security representing such 11% debentures. None of the
Company, the Trustee, any paying agent or registrar for such 11% debentures will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the global
security or for maintaining,
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supervising or reviewing any records relating to such beneficial ownership
interests.
The Company has been advised by DTC that DTC will credit participants'
accounts with payments of principal or interest on the payment date thereof in
amounts proportionate to their respective beneficial interests in the principal
amount of the global security as shown on the records of DTC. The Company
expects that payments by participants to owners of beneficial interests in the
global security held through such participants will be governed by standing
instructions and customary practices, as is now the case with the securities
held for the accounts of customers registered in "street name," and will be the
responsibility of such participants.
A global security may not be transferred except as a whole by DTC to a
nominee or successor of DTC or by a nominee of DTC to another nominee of DTC. A
global security representing all but not part of the 11% debentures being
offered hereby is exchangeable for 11% debentures in definitive form of like
tenor and terms if (i) DTC notifies the Company that it is unwilling or unable
to continue as depositary for such global security or if at any time DTC is no
longer eligible to be or in good standing as a clearing agency appointed by the
Company within 90 days of receipt by the Company of such notice or of the
Company becoming aware of such ineligibility, or (ii) the Company in its sole
discretion at any time determines not to have all of the 11% debentures
represented by a global security and notifies the Trustee thereof. A global
security exchangeable pursuant to the preceding sentence shall be exchangeable
for 11% debentures registered in such names and in such authorized denominations
as DTC for such global security shall direct. (Section 2.12)
Certain Covenants
Limitations on Liens. After the date of the indenture and so long as
any 11% debentures remain outstanding (but subject to defeasance as provided in
the indenture), the Company will not, and will not permit any Subsidiary (as
defined below) to, issue, assume or guarantee any Indebtedness (as defined
below) which is secured by a mortgage, pledge, security interest, lien or
encumbrance (each a "lien") upon any property or assets of the Company or such
Subsidiary or any shares of stock of or Indebtedness issued by any Subsidiary
(whether such property, assets, shares of stock or Indebtedness are now owned or
hereafter acquired) without effectively providing that, for so long as such lien
shall continue in existence with respect to such secured Indebtedness, the 11%
debentures (together with, if the Company shall so determine, any other
Indebtedness of the Company ranking equally with the 11% debentures) shall be
equally and ratably secured by a lien ranking ratably with or equal to (or at
the Company's option prior to) such secured Indebtedness, except that the
foregoing shall not apply to the following:
(a) liens on the property, assets, shares of stock or Indebtedness of a person
existing at the same time such person becomes a Subsidiary;
(b) liens on the property, assets, shares of stock or Indebtedness of a person
existing at the time such person is merged into or consolidated with the Company
or a Subsidiary
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or at the time all or substantially all of such property, assets or shares of
stock of such person are purchased, leased or otherwise acquired by the Company
or such Subsidiary;
(c) liens existing at the time of acquisition of the property or assets affected
thereby by the Company or a Subsidiary, or liens to secure the payment of all or
any part of the purchase price of such property or assets or to secure any
Indebtedness incurred, assumed or guaranteed by the Company or a Subsidiary
prior to, at the time of, or within one year after the acquisition of such
property or assets (or in the case of real property, the completion of
construction (including any improvements on an existing property or asset) or
commencement of full operation of such property or asset, whichever is later)
which Indebtedness is incurred, assumed or guaranteed for the purpose of
financing all or any part of the purchase price thereof or, in the case of real
property, construction or improvements thereon and which liens are limited to
the property or assets so acquired, constructed or improved;
(d) liens to secure Indebtedness of a Subsidiary to the Company or to another
Subsidiary;
(e) liens in favor of the United States or any State thereof, or any department,
agency or instrumentality or political subdivision of the United States or any
State thereof, or in favor of any other country, or any political subdivision
thereof, to secure partial, progress, advance or other payments pursuant to any
contract, statute, rule or regulation or to secure any Indebtedness pursuant to
any contract, statute, rule or regulation or to secure any Indebtedness incurred
or guaranteed for the purpose of financing all or any part of the purchase price
(or, in the case of real property, the cost of construction or improvement) of
the property or assets subject to such liens (including, but not limited to,
liens incurred in connection with pollution control, industrial revenue or
similar financings);
(f) pledges, liens or deposits under worker's compensation or similar
legislation and liens or judgments thereunder which are not currently
dischargeable, or in connection with bids, tenders, contracts (other than for
the payment of money) or leases to which the Company or any Subsidiary is a
party, or to secure the public or statutory obligations of the Company or any
Subsidiary, or in connection with obtaining or maintaining self-insurance, or to
obtain the benefits of any law, regulation or arrangement pertaining to
unemployment insurance, old age pensions, social security or similar matters, or
to secure surety, performance, appeal or customs bonds to which the Company or
any Subsidiary is a party, or in litigation or other proceedings such as, but
not limited to, interpleader proceedings, and other similar pledges, liens or
deposits made or incurred in the ordinary course of business;
(g) certain liens in connection with legal proceedings, including certain liens
arising out of judgments or awards, to the extent such proceedings are being
contested or appealed in good faith, or liens incurred for the purpose of
obtaining a stay or discharge in the course of any litigation or other
proceeding;
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(h) liens for certain taxes or assessments, landlord's lien and liens and
charges incidental to the conduct of the business of the Company or any
Subsidiary, or the ownership of their property or assets, which were not
incurred in connection with the borrowing of money and which do not, in the
opinion of the Board of Directors of the Company, materially impair the use of
such property or assets in the operation of the business of the Company or such
Subsidiary or the value of such property or assets for the purposes thereof;
(i) liens not permitted by the foregoing clauses (a) through (h) or clause (k)
below, inclusive, if at the time of, and after giving effect to, the execution
and delivery of the security document creating any such lien (or at the time,
and after giving effect to, the assumption of any such lien) the aggregate
amount of all outstanding Indebtedness of the Company and its Subsidiaries
(without duplication) secured by all liens not so permitted by the foregoing
clauses (a) through (h), inclusive, and clause (k) below, together with the
Attributable Debt (as defined below) in respect of Sale and Lease-Back
Transactions (as defined below) permitted by paragraph (a) under "Limitation on
Sale and Lease-Back Transactions" below does not exceed 55% of Consolidated Net
Tangible Assets (as defined below);
(j) certain extensions, renewals or replacements of liens permitted by the
foregoing clauses (a) through (e) above so long as the principal amount of
Indebtedness secured is not increased and the liens are limited to the
collateral for the prior Indebtedness (plus improvements and construction on
real property); or
(k) liens securing the 11% debentures. (Section 3.9)
Limitation on Sale and Lease-Back Transactions. The Company will not, and will
not permit any Subsidiary to, enter into any Sale and Lease-Back Transaction
unless (a) the Company or such Subsidiary would, at the time of entering into a
Sale and Lease-Back Transaction, be entitled to incur Indebtedness secured by a
lien on the property or assets to be leased in an amount at least equal to the
Attributable Debt in respect of such transaction, without equally and ratably
securing the 11% debentures pursuant to the provisions described under
"Limitations on Liens" above, or (b) the direct or indirect proceeds of the sale
of the property or assets to be leased are at least equal to the fair value of
such property or assets (as determined by the Company's Board of Directors) and
an amount equal to the net proceeds from the sale of the property or assets so
leased is applied, within 90 days of the effective date of such transaction, to
the purchase or acquisition (or, in the case of real property, commencement of
construction) of property or assets or to the retirement or repayment (other
than at maturity or pursuant to a mandatory sinking fund or mandatory redemption
provision) of 11% debentures or of Funded Indebtedness (as defined below) of the
Company ranking on a parity with or senior to the 11% debentures or of Funded
Indebtedness of a consolidated Subsidiary (subject to credits for certain
voluntary retirement of Funded Indebtedness and certain delivery of 11%
debentures to the Trustee for retirement and cancellation).
(Section 3.10)
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Definitions. (Section 1.1)
"Attributable Debt" means in connection with a Sale and Lease-Back Transaction,
as of any particular time, the aggregate of present values (discounted at a rate
per annum equal to the average interest borne by all outstanding 11% debentures
determined on a weighted average basis and compounded semi-annually) of the
obligations of the Company or any Subsidiary for net rental payments during the
remaining term of the applicable lease (including any period for which such
lease has been extended or may, at the option of the lessor, be extended). The
term "net rental payments" under any lease of any period shall mean the sum of
the rental and other payments required to be paid in such period by the lessee
thereunder, not including, however, any amounts required to be paid by such
lessee (whether or not designated as rental or additional rental) on account of
maintenance and repairs, reconstruction, insurance, taxes, assessments, water
rates or similar charges required to be paid by such lessee thereunder or any
amounts required to be paid by such lessee thereunder contingent upon the amount
of sales, maintenance and repairs, reconstruction, insurance, taxes,
assessments, water rates or similar charges.
"Consolidated Net Tangible Assets" means, at any date, the total assets
appearing on the most recently prepared consolidated balance sheet of the
Company and its Subsidiaries as of the end of a fiscal quarter of the Company,
prepared in accordance with generally accepted accounting principles, plus the
outstanding balance of any receivables securitization, less (a) all current
liabilities as shown on such balance sheet (other than current maturities of
long-term debt), (b) all intangible assets shown on such balance sheet, and (c)
all assets that do not constitute collateral securing payment of the 11%
debentures. "Intangible assets" means the value (net of any applicable
reserves), as shown on or reflected in such balance sheet of: (i) all trade
names, trademarks, licenses, patents, copyrights and goodwill; (ii)
organizational costs; and (iii) deferred charges (other than prepaid items such
as insurance, pensions, taxes, interest, commissions, rents and similar items
and tangible assets being amortized); but in no event shall the term "intangible
assets" include product development costs.
"Funded Indebtedness" means any Indebtedness maturing by its terms more
than one year from the date of the determination thereof, including any
Indebtedness renewable or extendible at the option of the obligor to a date
later than one year from the date of the determination thereof.
"Indebtedness" means, without duplication, (a) all obligations for
borrowed money, (b) all obligations evidenced by bonds, debentures, notes or
other similar instruments, (c) all obligations in respect of letters of credit
or bankers acceptances or similar instruments (or reimbursement obligations with
respect thereto), (d) all obligations to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (e) all obligations as lessee which are capitalized in
accordance with generally accepted accounting principles, (f) all Indebtedness
of others guaranteed by the Company or any of its Subsidiaries or for which the
Company or any of its Subsidiaries is legally responsible or liable (whether by
agreement to purchase indebtedness of, or to supply funds or to invest in,
others) and (g)
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the balance under any receivables securitization program.
"Sale and Lease-Back Transaction" means any arrangement with any person
providing for the leasing by the Company or a Subsidiary of any property or
asset whereby such property or asset has been or is to be sold or transferred by
the Company or any Subsidiary to such person; provided, however, that the
foregoing shall not apply to any such arrangement involving a lease for a term,
including renewal rights, for not more than three years.
"Senior Debt" means the principal of, premium, if any, interest owing
in respect of, and all other obligations arising under debt of the Company that
is secured by "permitted liens" as defined in the indenture, but only to the
extent that all such amounts, in the aggregate, do not exceed permitted liens.
"Permitted Liens" are listed under the heading "--Certain Covenants - Limitation
on Liens."
"Subsidiary" means any corporation, association, limited liability
company, partnership, joint venture or other business entity of which at least a
majority of the total voting power of outstanding securities or other interests
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time directly or
indirectly owned or controlled by the Company and one or more Subsidiaries or by
the Company and one or more Subsidiaries; provided, however, that the term
Subsidiaries; provided, however, that the term "Subsidiary" shall not include
(i) the joint venture between Cone Mills (Mexico), S.A. de C.V. and CIPSA, (ii)
Cone Mills (Mexico), S.A. de C.V. or (iii) any other corporation, association,
limited liability company, partnership, joint venture or business entity
substantially all the property of which is located, or substantially all of the
business of which is carried on, outside the United States of America; provided,
further, that, notwithstanding the foregoing, the term "Subsidiary" shall
include Cone Receivables II, LLC and any other special purpose entity which
purchases and securitizes accounts receivables of the Company and its
Subsidiaries and in which the Company and one or more Subsidiaries holds the
primary economic interest.
Guaranties
The obligation of the Company with respect to the 11% debentures will
be guaranteed, pursuant to Article 11 of the indenture, by Cone Global Finance
Corp., CIPCO S.C., Inc. and Cone Foreign Trading, LLC, each a wholly owned
subsidiary of the Company. These are the only U.S. subsidiaries of the Company
with significant assets. Each such subsidiary guarantor will secure its
guarantee of the Company's obligations by granting a security interest in
substantially all of its assets pursuant to the security agreement described
below under "--Collateral."
Collateral
The 11% debentures will be secured by the same U.S. assets as presently
secure the existing 8-1/8% debentures, namely the principal real properties of
the Company and
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subsidiary guarantors and substantially all of the personal property of the
Company and its subsidiary guarantors, except that an existing pledge of the
stock of Cone Mills (Mexico), S.A. de C.V. in favor of the 8-1/8% debentures
will be released and will not secure the 11% debentures. Accounts receivable of
the Company sold to a special purpose vehicle pursuant to the Company's accounts
receivable securitization program are excluded from the collateral for the
8-1/8% debentures and will continue to be excluded from the collateral for the
11% debentures so long as the Company continues an accounts receivable
securitization or factoring program.
The 11% debentures will be secured pursuant to the indenture by the
Company and the three subsidiary guarantors in favor of The Bank of New York, as
trustee for the holders of the 11% debentures. The collateral will consist of
substantially all of the personal property of the Company and the subsidiary
guarantors, but will exclude any accounts receivable sold as part of any
receivables securitization program and any equity interests of the Company in
its foreign subsidiaries. The Company will simultaneously enter into mortgages
in favor of The Bank of New York, as trustee, with respect to each of its 12
principal real properties in the United States. Both the real and personal
property liens securing the 11% debentures will be perfected but subordinated to
the liens of certain senior creditors as described below "--Subordination."
The Company and the subsidiary guarantors may, without the release or
consent of trustee:
(i) sell or dispose of in the ordinary course of business, free from the liens
of the indenture, any machinery, equipment, furniture, apparatus, tools or
implements, materials or supplies or other similar property which, in its
reasonable opinion, may have become obsolete or unfit for use in the conduct of
its businesses or the operation of the collateral upon replacing the same with
or substituting for the same, new property constituting collateral not
necessarily of the same character but being of at least reasonably equivalent
value and utility as the property so disposed of, so long as the new property
becomes subject to the lien of the indenture, which new property shall without
further action become collateral subject to the lien of the indenture;
(ii) abandon, sell, assign, transfer, license or otherwise dispose of in the
ordinary course of business any personal property the use of which is no longer
necessary or desirable in the proper conduct of the business of the Company or
the subsidiary and the maintenance of their respective earnings and is not
material to the conduct of the business of the Company or the subsidiary and
their subsidiaries taken as a whole;
(iii) grant in the ordinary course of business rights-of-way and easements over
or in respect of any property of the Company or a subsidiary that will not, in
the opinion of the Company's management, impair the usefulness of such property
in the conduct of the Company or the subsidiary's business, and will not be
prejudicial to the interests of the debentureholders;
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(iv) sell, transfer or otherwise dispose of inventory in the ordinary course of
business; or
(v) sell, collect, liquidate, securitize, factor or otherwise dispose of
accounts and accounts receivable in the ordinary course of business;
(vi) make cash payments (including for the scheduled repayment of indebtedness)
from cash that is at any time part of the collateral in the ordinary course of
business that are not otherwise prohibited by the indenture; or
(vii) sell or transfer any collateral if the sale, transfer or disposal is
approved by the holders having a permitted lien on such collateral under the
indenture and the proceeds of the sale or transfer is used to repay senior debt
after deduction of all expenses related to the sale or transfer.
Merger, Consolidation, Sale, Lease or Conveyance
The indenture provides that the Company will not merge or consolidate
with any other person or sell, lease or convey all or substantially all of its
assets to any person unless the Company shall be the continuing corporation, or
the resulting, surviving or transferee person shall be a corporation organized
and existing under the laws of the United States or a State thereof or the
District of Columbia and shall expressly assume the payment of principal of,
premium, if any, and interest on the 11% debentures and the performance and
observance of all of the covenants and agreements under the indenture to be
performed or observed by the Company, and immediately after such merger,
consolidation, sale, lease or conveyance, the Company or such resulting,
surviving or transferee person shall not be in default in the performance or
observance of the covenants and agreements contained in the indenture to be
performed or observed by the Company.
Subordination
The lien of the 11% debentures on the collateral that secures the
debentures is subordinated to all liens that secure senior debt, to the extent
such senior debt liens are permitted liens, as defined by the indenture. These
liens are described in detail above under the heading "--Certain Covenants
--Limitation on Liens." Thus, if there is a default under the 11% debentures
that permits the Collateral Agent to foreclose on the collateral, all senior
debt would first be paid in full before the proceeds from the sale of the
collateral could be applied to pay the 11% debentures.
Events of Default
An Event of Default with respect to 11% debentures is defined in the
indenture as being: default for 30 days in payment of any interest upon any 11%
debentures; default in any payment of principal of any 11% debentures; default
by the Company in
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performance of any other of the covenants or agreements in respect of the 11%
debentures which shall not have been remedied for a period of 60 days after
written notice to the Company by the Trustee or the holders of at least 25% of
the principal amount of all 11% debentures, specifying that such notice is a
"Notice of Default" under the indenture; default by the Company in the payment
at the final maturity thereof, after the expiration of any applicable grace
period, of principal of, premium, if any, or interest on indebtedness for money
borrowed in the principal amount then outstanding of $10,000,000 or more, or
acceleration of any indebtedness in such principal amount so that it becomes due
and payable prior to the date on which it would otherwise have become due and
payable and such acceleration is not rescinded within ten business days after
notice to the Company by the Trustee or the holders of at least 25% of the
principal amount of all of the 11% debentures at the time outstanding (treated
as one class); certain events involving bankruptcy, insolvency or reorganization
for the Company; or any other Event of Default established for the 11%
debentures (Section 4.1) The indenture governing the 11% debentures provides
that the Trustee shall transmit notice of any uncured default under the
indenture with respect to any series, within 90 days after the occurrence of
such default, to the holders of 11% debentures, except that the Trustee may
withhold notice to the holders of the 11% debentures of any default (except in
payment of principal of or interest on 11% debentures) if the Trustee considers
it in the interest of the holders of 11% debentures to do so. (Section 4.11)
The indenture provides that (a) if an Event of Default due to the
default in payment of principal of, premium, if any, or interest on, the 11%
debentures or due to the default in the performance or breach of any other
covenant or agreement of the Company shall have occurred and be continuing,
either the Trustee or the holders of not less than 25% in principal amount of
the 11% debentures then outstanding may declare the principal of all debentures
and interest accrued thereon to be due and payable immediately; and (b) if an
Event of Default due to a default in the performance of any other of the
covenants or agreements in the indenture, or due to a default in payment at
final maturity or upon acceleration of indebtedness for money borrowed in the
principal amount then outstanding of $10,000,000 or more, or to certain events
of bankruptcy, insolvency and reorganization of the Company shall have occurred
and be continuing, either the Trustee or the holders of not less than 25% in
principal amount of all debentures then outstanding may declare the principal of
all such debentures and interest accrued thereon to be due and payable
immediately, but upon certain conditions such declarations may be annulled and
past defaults may be waived (except a continuing default in payment of principal
of, premium, if any, or interest on such debentures) by the holders of a
majority in principal amount of the debentures then outstanding. (Sections 4.1
and 4.10)
The holders of a majority in principal amount of the 11% debentures
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee with respect to the
debentures of such series under the indenture, subject to certain limitations
specified in the indenture, provided that the holders of such debentures shall
have offered to the Trustee reasonable indemnity against expenses and
liabilities. (Sections 4.9 and 5.2(d))
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The indenture provides that no holder of 11% debentures may institute
any action against the Company under the indenture (except actions for payment
of overdue principal, premium, if any, or interest) unless such holder
previously shall have given to the Trustee written notice of default and
continuance thereof and unless the holders of not less than 25% in principal
amount of the debentures then outstanding shall have requested the Trustee to
institute such action and shall have offered the Trustee reasonable indemnity,
and the Trustee shall not have received direction inconsistent with such written
request by the holders of a majority in principal amount of the debentures then
outstanding. (Sections 4.6 and 4.7)
The indenture requires the annual filing by the Company with the
Trustee of a written statement as to compliance with the covenants and
agreements contained in the indenture. (Section 3.5)
Discharge, Defeasance and Covenant Defeasance
The Company can discharge or defease its obligations under the
indenture as set forth below.
Under terms satisfactory to the Trustee, the Company may discharge the
indenture with respect to the 11% debentures that have not already been
delivered to the Trustee for cancellation and that have either become due and
payable or are by the terms due and payable within one year (or which may be
called for redemption within one year) by irrevocably depositing with the
Trustee cash or direct obligations of the United States as trust funds in an
amount certified to be sufficient to pay at maturity (or upon redemption) the
principal of, premium, if any, and interest on such debentures. However, the
Company may not thereby avoid its duty to register the transfer or exchange of
such series of debentures, to replace any mutilated, destroyed, lost or stolen
debentures of such series or to maintain an office or agency in respect of such
series of debentures. (Section 9.1)
The Company at its option at any time may also (i) discharge any and
all of its obligations to holders of the 11% debentures ("defeasance"), but may
not thereby avoid its duty to register the transfer or exchange of such
debentures, to replace any mutilated, destroyed, lost, or stolen debentures or
to maintain an office or agency in respect of such debentures, (ii) be released
from the obligations imposed by the covenants described under the captions
"--Covenants" and "--Merger, Consolidation, Sale, Lease, or Conveyance" above
and omit to comply with such covenants without creating an Event of Default
("covenant defeasance"). Defeasance, covenant defeasance or collateral
defeasance may be effected only if, among other things: (i) the Company
irrevocably deposits with the Trustee cash and/or direct obligations of the
United States as trust funds in an amount certified by a nationally recognized
firm of independent public accountants to be sufficient to pay each installment
of principal of, premium, if any, and interest on all outstanding debentures of
such series issued under the indenture on the dates such installments of
principal, premium, if any, and interest are due; (ii) no default or Event of
Default shall have
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occurred and be continuing on the date of the deposit referred to in clause (i)
or, in respect of certain events of bankruptcy, insolvency or reorganization,
during the period ending on the 121st day after the date of such deposit (or any
longer applicable preference period); and (iii) the Company delivers to the
Trustee an opinion of counsel to the effect that the holders of the 11%
debentures will not recognize income, gain or loss for United States federal
income tax purposes as a result of such tax on the same amounts and in the same
manner and at the same times as would have been the case if such defeasance,
covenant defeasance or collateral defeasance had not occurred (in the date of
defeasance, such opinion must be based on a ruling of the Internal Revenue
Service or a change in the United States federal income tax law occurring after
the date of the indenture). (Sections 9.2, 9.3, 9.4 and 9.5)
Upon discharge or defeasance of the 11% debentures all claims of the
debentures with respect to the collateral will be released.
Modification of the Indenture
The indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority of
principal amount of the 11% debentures at the time outstanding to modify the
indenture or any supplemental indenture or the rights of the holders of the
debentures except that no such modification shall (i) extend the final maturity
of any of the debentures or reduce the principal amount thereof, or reduce the
rate redemption thereof, or reduce the amount of any original issue discount
security payable upon acceleration or provable in bankruptcy or impair or affect
the right of any holder of the debentures to institute suit for the payment
thereof without the consent of the holder of each of the debentures so affected
or (ii) reduce the aforesaid percentage in principal amount of debentures, the
consent of the holders of which is required for any such modification, without
the consent of the holders of all debentures then outstanding. (Section 7.2)
LEGAL MATTERS
The validity of the shares of Cone common stock and 11% debentures
offered by this prospectus will be passed upon for Cone by Neil W. Koonce, Esq.,
Vice President, General Counsel and Secretary of Cone.
EXPERTS
The consolidated financial statements of Cone as of January 2, 2000 and
January 3, 1999 and the related consolidated statements of operation,
shareholders' equity and cash flows for each of the three years in the period
ended January 2, 2000, and the related financial statement schedules, which
appear in Cone's annual report on Form 10-K for the year ended January 2, 2000,
have been incorporated in this prospectus and the registration statement by
reference in
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reliance upon the report of McGladrey & Pullen, LLP, independent accountants,
incorporated by reference herein, and upon the authority of that firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Cone files annual, quarterly and special reports and other information
with the Securities and Exchange Commission. You may read and copy any reports,
statements or other information that Cone files with the SEC at the SEC's public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. You may also read and copy these
reports, statements or other information at the SEC's regional offices located
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
information can also be obtained by mail from the public reference room of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Please
call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms.
Cone's filings with the SEC are also available to the public from
commercial document retrieval services and at the web site maintained by the SEC
at "http://www.sec.gov." Reports, proxy statements and other information about
Cone may also be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
Cone filed a registration statement on Form S-4 on August 4, 2000 to
register with the SEC the common stock and 11% debentures to be issued in the
exchange offer and consent solicitation. This prospectus is a part of that
registration statement. As allowed by SEC rules, this prospectus does not
contain all of the information you can find in the registration statement or the
exhibits to the registration statement.
The SEC permits Cone to "incorporate by reference" information into
this prospectus, which means that we can disclose important information to you
by referring you to other documents filed separately with the SEC. The
information incorporated by reference is considered part of this prospectus,
except for any information superseded by information contained directly in this
prospectus or in later filed documents incorporated by reference in this
prospectus.
The documents listed below are incorporated by reference into this
prospectus. These documents contain important business and financial information
about Cone.
o Cone's Annual Report on Form 10-K, for the fiscal year ended January 2,
2000;
o Cone's Current Report on Form 8-K dated February 11, 2000;
o Cone's Quarterly Report on Form 10-Q for the fiscal quarter ended April
2, 2000;
Cone also incorporates by reference additional documents that it may
file with the SEC under sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 between the date of this prospectus and the date the
exchange offer and consent solicitation is completed. These
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additional documents may include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
You can obtain any of the documents incorporated by reference in this
prospectus from us or from the SEC through the SEC's Internet world wide web
site at the address described above. Documents incorporated by reference are
available from us without charge, excluding any exhibits to those documents,
unless the exhibit is specifically incorporated by reference as an exhibit in
this prospectus. You can obtain documents incorporated by reference in this
prospectus by requesting them in writing or by telephone and directing your
request to: Cone Corporation, 3101 North Elm Street, P.O. Box 26540, Greensboro,
North Carolina 27415-6540, Attention: General Counsel. Any request for documents
should be made by _________, 2000 to ensure timely delivery of the documents.
We have not authorized anyone to give any information or make any
representation about the exchange offer and consent solicitation that is
different from, or in addition to, that contained in this prospectus or in any
of the materials that we have incorporated into this prospectus. Therefore, if
anyone does give you information of this sort, you should not rely on it. The
information contained in this document speaks only as of the date of this
document unless the information specifically indicates that another date
applies.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements within the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 with respect
to our financial condition, results of operations and business. Forward-looking
statements are statements other than historical information or statements of
current condition. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions identify
forward-looking statements. These forward-looking statements relate to our
plans, objectives and expectations for future operations and are subject to
risks and uncertainties, including those described under "Risk Factors" in this
prospectus, that could cause actual results to differ materially from the
results contemplated by the forward-looking statements. In light of the risks
and uncertainties inherent in all projected operational matters, you should not
regard the inclusion of forward-looking statements in this prospectus as a
representation by us or any other person that our objectives or plans will be
achieved or that any of our operating expectations will be realized.
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____________________, 2000
[CONE MILLS CORPORATION LOGO]
EXCHANGE OFFER AND CONSENT SOLICITATION
OUTSTANDING 8-1/8% DEBENTURES DUE MARCH 15, 2005
EXCHANGED FOR
11% SECURED SUBORDINATED DEBENTURES DUE MARCH 15, 2005 AND
COMMON STOCK OF CONE MILLS CORPORATION
------------------------------------------------------------------------
PROSPECTUS
AND
CONSENT SOLICITATION
-----------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By Registered or By Hand or By Facsimile
Certified Mail: Overnight Courier: for Eligible Institutions:
The Bank of New York The Bank of New York The Bank of New York
101 Barclay Street -7E 101 Barclay Street (212) 815-6339
New York, New York 10286 Corporate Trust Services Window Confirm by Telephone:
Attention: Mr. Santino Ginocchiette Ground Level (212) 815-6331
Reorganization Department New York, New York 10286
Reorganization Section
</TABLE>
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Article 6 of the Registrant's Restated Articles of Incorporation,
as amended, provides:
Article 6. INDEMNIFICATION
(a) Indemnification in Actions Other Than Actions by the Corporation or
by a Person Suing Derivatively. When by reason of the fact that he is or was
serving as a director, officer, employee or agent of the Corporation or while
serving in any such or like capacity at the request of the Corporation in any
other corporation, partnership, joint venture or other enterprise, any person is
or was a party or threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative (except any action, suit or proceeding brought by the
Corporation or by any person seeking derivatively to enforce any liability of
such person to the Corporation), such person shall be indemnified or reimbursed
by the Corporation for the expenses (including attorneys' fees) which he
actually and reasonably incurred and for any liabilities which he may have
incurred in consequence of such action, suit or proceeding, subject to the
following conditions:
(1) If, with respect to any action, suit or proceeding, or with
respect to any claim, matter or issue therein, such person is wholly
successful on the merits, or if the proceeding involving such person is
an administrative or investigative proceeding and does not result in
his indictment or a fine or penalty imposed upon him, then the
Corporation shall reimburse him for the expenses (including attorneys'
fees) which he actually and reasonably incurred in consequence of his
defense of or participation in such action, suit or proceeding, or of
any claim, issue or matter therein.
(2) If, with respect to any action, suit or proceedings, or with
respect to any claim, issue or matter therein, such person is wholly
successful in his defense otherwise than solely on the merits, the
Corporation shall reimburse him for the expenses (including attorneys'
fees) which he actually and reasonably incurred, in consequence of his
defense or participation in such action, suit or proceeding, or of any
claim, issue or matter therein, if
(A) The Board of Directors, by vote of a majority of a quorum
consisting of directors who were not parties to such action,
suit or proceeding, shall approve such reimbursement; or
(B) If no such quorum be obtainable, by vote of a majority of
the members of the Board of Directors then in office, acting
pursuant to a written opinion of independent legal counsel.
For this purpose, the General Counsel of the Corporation or
members of his staff shall not be deemed to be "independent
legal counsel"; or
<PAGE>
(C) In any event, by vote of the holders of a majority of the
shares entitled to vote at a meeting of the shareholders.
(3) If, with respect to any action, suit or proceedings, or with
respect to any claim, issue or matter therein, such person is not
wholly successful or is unsuccessful in his defense, or if the
proceeding to which he is a party results in his indictment, or in a
fine or penalty imposed upon him then the Corporation shall reimburse
him for the expenses (including attorneys' fees) which he actually and
reasonably incurred and the amount of any judgment, money decree, fine,
penalty or settlement for which he may have become liable, in either of
the following instances:
(A) The Board of Directors, by vote of a majority of a quorum
consisting of directors who are not parties to such action,
suit or proceedings, shall have determined that such person
acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, that
he also had no reasonable cause to believe his conduct was
unlawful, and the Corporation shall have given such
information to the shareholders of the Corporation with
respect thereto as is required by applicable law.
The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of
guilty or nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in
good faith and in a manner which he reasonably believed to be
in the best interests of the Corporation, or, with respect to
any criminal action, that he had no reasonable cause to
believe that his conduct was unlawful.
(B) A plan for such payment is submitted to the shareholders
for action at an annual or special meeting of the
shareholders, and the plan is approved by the holders of a
majority of the shares entitled to vote at such meeting,
excluding shares held directly or indirectly by any persons to
be benefited if the plan is approved. Whenever the Board of
Directors is required by this Article to determine the facts
requisite to awarding reimbursement or indemnification, their
determination as to such facts shall be conclusive in the
absence of fraud.
(b) Indemnification in Actions by the Corporation or by Any Person
Suing Derivatively. When because of his duties or activities while serving as a
director, officer, employee or agent of the Corporation or while serving in any
such or like capacity at the request of the Corporation in any other
corporation, partnership, joint venture or other enterprise, any person is a
party to an action, suit or proceeding by the Corporation or by any person suing
derivatively on behalf of the Corporation to establish his liability to the
Corporation arising out of his alleged dereliction of duty to the Corporation,
such person shall be entitled to reimbursement or indemnification from the
Corporation only to the extent permitted, and only pursuant to the procedure
authorized, by the General Statutes of North Carolina or otherwise by law.
<PAGE>
(c) General Provisions Relating to Indemnification Under this Article:
(1) In this Article 6 the term "officer" shall include any dominant
shareholder engaged to perform services for the Corporation, whether as
employee or independent contractor; and the term "dominant shareholder"
shall mean a shareholder of the Corporation who by virtue of his share
holdings has legal power, either directly or indirectly or through
another corporation or series of corporations, domestic or foreign, to
elect a majority of the directors of the Corporation.
(2) In this Article 6 the term "person" shall include the heirs,
executor, administrator, or other legal representative of such person.
(3) Expenses incurred or to be incurred by a person in defending or
participating in any action, suit or proceedings referred to in
subsection (a) may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding if authorized by the
Board of Directors in the specific case upon receipt of an undertaking
by or on behalf of such person to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized by this Article.
(4) Whenever the Corporation, whether by action of the Board of
Directors or by the shareholders, shall reimburse or indemnify a
director, officer, agent or employee as permitted by this Article, the
determination shall be made with respect to the particular case and the
particular applicant for indemnity or reimbursement.
(5) The indemnification authorized by this Article shall not be deemed
exclusive of any other rights to indemnification or reimbursement which
are or may hereafter be permitted by law.
(d) Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or who is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power, pursuant to law or pursuant to this Article, to indemnify him against
such liability.
Article XI of the Registrant's Bylaws, as amended, provides:
Article XI. INDEMNIFICATION
Section 11-1. Extent. In addition to the indemnification otherwise
provided for by law or by the Articles of Incorporation of the Corporation, the
Corporation shall indemnify and hold harmless its directors and officers against
all liability and litigation expense, including reasonable attorneys' fees,
arising out of their status as directors or officers or their activities in any
of such capacities or in any capacity in which any of them is or was serving, at
the
<PAGE>
Corporation's request, in another corporation, partnership, joint venture,
trust or other enterprise and the Corporation shall indemnify and hold harmless
its directors, officers, and employees who are deemed to be fiduciaries of the
Corporation's employee pension and welfare benefit plans as defined under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA
fiduciaries"), against all liability and litigation expense, including
reasonable attorneys' fees, arising out of their status or activities as ERISA
fiduciaries; provided, however, that the Corporation shall not indemnify a
director or officer against liability or litigation expense that he may incur on
account of his activities that at the time taken were known or reasonably should
have been known by him to be clearly in conflict with the best interests of the
Corporation, and the Corporation shall not indemnify an ERISA fiduciary against
any liability or litigation expense that he may incur on account of his
activities that at the time taken were known or reasonably should have been
known by him to be clearly in conflict with the best interests of the employee
benefit plan to which the activities relate. The Corporation shall also
indemnify the director, officer or ERISA fiduciary for reasonable costs,
expenses and attorneys' fees in connection with the enforcement of rights to
indemnification granted herein, if it is determined in accordance with Section
11-2 of this Article that the director, officer or ERISA fiduciary is entitled
to indemnification hereunder.
Section 11-2. Determination. Any indemnification under Section 11-1
shall be paid by the Corporation in any specific case only after a determination
that the director, officer or ERISA fiduciary did not act in a manner, at the
time the activities were taken, that was known or reasonably should have been
known by him to be clearly in conflict with the best interests of the
Corporation, or the employee benefit plan to which the activities relate, as the
case may be. Such determination shall be made (a) by the affirmative vote of a
majority (but not less than two) of directors who are or were not parties to
such action, suit or proceeding or against whom any such claim is asserted
("disinterested directors") even though less than a quorum, or (b) if a majority
(but not less than two) of disinterested directors so direct, by independent
legal counsel in a written opinion, or (c) by the vote of a majority of all of
the voting shares other than those owned or controlled by directors, officers or
ERISA fiduciaries who were parties to such action, suit or proceeding or against
whom such claim is asserted, or by a unanimous vote of all of the voting shares,
or (d) by a court of competent jurisdiction.
Section 11-3. Advanced Expenses. Expenses incurred by a director,
officer or ERISA fiduciary in defending a civil or criminal claim, action, suit
or proceeding may, upon approval of a majority (but not less than two) of the
disinterested directors, even though less than a quorum, or, if there are less
than two disinterested directors, upon unanimous approval of the Board of
Directors, be paid by the Corporation in advance of the final disposition of
such claim, action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer or ERISA fiduciary to repay such amount unless
it shall ultimately be determined that he is entitled to be indemnified against
such expenses by the Corporation.
Section 11-4. Corporation. For purposes of this Article, references to
directors, officers or ERISA fiduciaries of the "Corporation" shall be deemed to
include directors, officers and ERISA fiduciaries of Cone Mills Corporation, its
subsidiaries, and all constituent corporations absorbed into Cone Mills
Corporation or any of its subsidiaries by a consolidation or merger.
<PAGE>
Section 11-5. Reliance And Consideration. Any director, officer or
ERISA fiduciary who at any time after the adoption of this Bylaw serves or has
served in any of the aforesaid capacities or any other capacity for or on behalf
of the Corporation shall be deemed to be doing or to have done so in reliance
upon, and as consideration for, the right of indemnification provided herein.
Such right shall inure to the benefit of the legal representatives of any such
person and shall not be exclusive of any other rights to which such person may
be entitled apart from the provision of this Bylaw. No amendment, modification
or repeal of this Article XI shall adversely affect the right of any director,
officer or ERISA fiduciary to indemnification hereunder with respect to any
activities occurring prior to the time of such amendment, modification or
repeal.
Section 11-6. Insurance. The Corporation may purchase and maintain
insurance on behalf of its directors, officers, employees and agents and those
persons who were serving at the request of the Corporation as a director,
officer, partner or trustee of, or in some other capacity in, another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article or otherwise. Any full or partial payment made by an insurance company
under any insurance policy covering any director, officer, employee or agent
made to or on behalf of a person entitled to indemnification under this Article
shall relieve the Corporation of its liability for indemnification provided for
in this Article or otherwise to the extent of such payment, and no insurer shall
have a right of subrogation against the Corporation with respect to such
payment.
The North Carolina General Statutes contain provisions prescribing the
extent to which directors and officers shall or may be indemnified. These
statutory provisions are set forth below:
CH. 55 N.C. BUSINESS CORPORATION ACT
Part 5. Indemnification.
Section 55-8-50. Policy Statement and Definitions.
(a) It is the public policy of this State to enable corporations
organized under this Chapter to attract and maintain responsible, qualified
directors, officers, employees and agents, and, to that end, to permit
corporations organized under this Chapter to allocate the risk of personal
liability of directors, officers, employees and agents through indemnification
and insurance as authorized in this Part.
(b) Definitions in this Part:
(1) "Corporation" includes any domestic or foreign corporation
absorbed in a merger which, if its separate existence had continued,
would have had the obligation or power to indemnify its directors,
officers, employees, or agents, so that a person who would have been
entitled to receive or request indemnification from such corporation if
<PAGE>
its separate existence had continued shall stand in the same position
under this Part with respect to the surviving corporation.
(2) "Director" means an individual who is or was a director of
a corporation or an individual who, while a director of a corporation,
is or was serving at the corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise. A director is considered to be serving an employee
benefit plan at the corporation's request if his duties to the
corporation also impose duties on, or otherwise involve services by,
him to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate
or personal representative of a director.
(3) "Expenses" means expenses of every kind incurred in
defending a proceeding, including counsel fees.
(4)(a) "Officer", "employee", or "agent" includes, unless the
context requires otherwise, the estate or personal representative of a
person who acted in that capacity.
(4)(b) "Liability" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan), or reasonable expenses incurred
with respect to a proceeding.
(5) "Official capacity" means: (i) when used with respect to a
director, the office of director in a corporation; and (ii) when used
with respect to an individual other than a director, as contemplated in
G.S. 55-8-56, the office in a corporation held by the officer or the
employment or agency relationship undertaken by the employee or agent
on behalf of the corporation. "Official capacity" does not include
service for any other foreign or domestic corporation or any
partnership, joint venture, trust, employee benefit plan, or other
enterprise.
(6) "Party" includes an individual who was, is, or is
threatened to be made a named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative,
or investigative and whether formal or informal.
Section 55-8-51. Authority to Indemnify.
(a) Except as provided in subsection (d), a corporation may indemnify
an individual made a party to a proceeding because he is or was a director
against liability incurred in the proceeding if:
(1) He conducted himself in good faith; and
<PAGE>
(2) He reasonably believed (i) in the case of conduct in his
official capacity with the corporation, that his conduct was in its
best interests; and (ii) in all other cases, that his conduct was at
least not opposed to its best interests; and
(3) In the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose he reasonably believed to be in the interests of the participants in and
beneficiaries of the plan is conduct that satisfies the requirement of
subsection (a)(2)(ii).
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of no contest or its equivalent is not, of itself,
determinative that the director did not meet the standard of conduct described
in this section.
(d) A corporation may not indemnify a director under this section:
(1) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(2) In connection with any other proceeding charging improper
personal benefit to him, whether or not involving action in his
official capacity, in which he was adjudged liable on the basis that
personal benefit was improperly received by him.
(e) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation that is concluded without a
final adjudication on the issue of liability is limited to reasonable expenses
incurred in connection with the proceeding.
(f) The authorization, approval or favorable recommendation by the
board of directors of a corporation of indemnification, as permitted by this
section, shall not be deemed an act or corporate transaction in which a director
has a conflict of interest, and no such indemnification shall be void or
voidable on such ground.
Section 55-8-52. Mandatory Indemnification.
Unless limited by its articles of incorporation, a corporation shall
indemnify a director who was wholly successful, on the merits or otherwise, in
the defense of any proceeding to which he was a party because he is or was a
director of the corporation against reasonable expenses incurred by him in
connection with the proceeding.
Section 55-8-53. Advance For Expenses.
Expenses incurred by a director in defending a proceeding may be paid
by the corporation in advance of the final disposition of such proceeding as
authorized by the board of directors in the specific case or as authorized or
required under any provision in the articles of incorporation or bylaws or by
any applicable resolution or contract upon receipt of an
<PAGE>
undertaking by or on behalf of the director to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation against such expenses.
Section 55-8-54. Court-ordered Indemnification.
Unless a corporation's articles of incorporation provide otherwise, a
director of the corporation who is a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction. On receipt of an application, the court after giving any
notice the court considers necessary may order indemnification if it determines:
(1) The director is entitled to mandatory indemnification
under G.S. 55-8-52, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification; or
(2) The director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or
not he met the standard of conduct set forth in G.S. 55-8-51 or was
adjudged liable as described in G.S. 55-8-51(d), but if he was adjudged
so liable his indemnification is limited to reasonable expenses
incurred.
<PAGE>
Section 55-8-55. Determination and Authorization of Indemnification.
(a) A corporation may not indemnify a director under G.S. 55-8-51
unless authorized in the specific case after a determination has
been made that indemnification of the director is permissible in the
circumstances because he has met the standard of conduct set forth in
G.S. 55-8-51.
(b) The determination shall be made:
(1) By the board of directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under subdivision (1), by
majority vote of a committee duly designated by the board of directors
(in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to
the proceeding;
(3) By special legal counsel (i) selected by the board of
directors or its committee in the manner prescribed in subdivision (1)
or (2); or (ii) if a quorum of the board of directors cannot be
obtained under subdivision (1) and a committee cannot be designated
under subdivision (2), selected by majority vote of the full board of
directors (in which selection directors who are parties may
participate); or
(4) By the shareholders, but shares owned by or voted under
the control of directors who are at the time parties to the proceeding
may not be voted on the determination.
(c) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection
(b)(3) to select counsel.
Section 55-8-56. Indemnification of Officers, Employees, and Agents.
Unless a corporation's articles of incorporation provide otherwise:
(1) An officer of the corporation is entitled to mandatory
indemnification under G.S. 55-8-52, and is entitled to apply for
court-ordered indemnification under G.S. 55-8-54, in each case to the
same extent as a director.
(2) The corporation may indemnify and advance expenses under
this Part to an officer, employee, or agent of the corporation to the
same extent as to a director; and
(3) A corporation may also indemnify and advance expenses to
an officer, employee, or agent who is not a director to the extent,
consistent with public policy, that
<PAGE>
may be provided by its articles of incorporation, bylaws, general or
specific action of its board of directors, or contract.
Section 55-8-57. Additional Indemnification and Insurance.
(a) In addition to and separate and apart from the indemnification
provided for in G.S. 55-8-51, 55-8-52, 55-8-54, 55-8-55 and 55-8-56, a
corporation may in its articles of incorporation or bylaws or by contract or
resolution indemnify or agree to indemnify any one or more of its directors,
officers, employees, or agents against liability and expenses in any proceeding
(including without limitation a proceeding brought by or on behalf of the
corporation itself) arising out of their status as such or their activities in
any of the foregoing capacities; provided, however, that a corporation may not
indemnify or agree to indemnify a person against liability or expenses he may
incur on account of his activities which were at the time taken known or
believed by him to be clearly in conflict with the best interests of the
corporation. A corporation may likewise and to the same extent indemnify or
agree to indemnify any person who, at the request of the corporation, is or was
serving as a director, officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise or as a trustee or administrator under an employee benefit plan. Any
provision in any articles of incorporation, bylaw, contract, or resolution
permitted under this section may include provisions for recovery from the
corporation of reasonable costs, expenses, and attorneys' fees in connection
with the enforcement of rights to indemnification granted therein and may
further include provisions establishing reasonable procedures for determining
and enforcing the rights granted therein.
(b) The authorization, adoption, approval, or favorable recommendation
by the board of directors of a public corporation of any provision in any
articles of incorporation, bylaw, contract or resolution, as permitted in this
section, shall not be deemed an act or corporate transaction in which a director
has a conflict of interest, and no such articles of incorporation or bylaw
provision or contract or resolution shall be void or voidable on such grounds.
The authorization, adoption, approval, or favorable recommendation by the board
of directors of a nonpublic corporation of any provision in any articles of
incorporation, bylaw, contract or resolution, as permitted in this section,
which occurred prior to July 1, 1990, shall not be deemed an act or corporate
transaction in which a director has a conflict of interest, and no such articles
of incorporation, bylaw provision, contract or resolution shall be void or
voidable on such grounds. Except as permitted in G.S. 55-8-31, no such bylaw,
contract, or resolution not adopted, authorized, approved or ratified by
shareholders shall be effective as to claims made or liabilities asserted
against any director prior to its adoption, authorization, or approval by the
board of directors.
(c) A corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the
corporation, or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against liability asserted against or incurred by him in that
capacity or arising from his status as a director,
<PAGE>
officer, employee, or agent, whether or not the corporation would have power to
indemnify him against the same liability under any provision of this Chapter.
Section 55-8-58. Application of Part.
(a) If articles of incorporation limit indemnification or advance for
expenses, indemnification and advance for expenses are valid only to the extent
consistent with the articles.
(b) This Part does not limit a corporation's power to pay or reimburse
expenses incurred by a director in connection with his appearance as a witness
in a proceeding at a time when he has not been made a named defendant or
respondent to the proceeding.
(c) This Part shall not affect rights or liabilities arising out of
acts or omissions occurring before July 1, 1990.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
The following exhibits, listed in accordance with the number assigned
to each in the exhibit table of Item 601 of Regulation S-K, are included in Part
II of this Registration Statement. Exhibit numbers omitted are not applicable.
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
*2.1 Receivables Purchase and Servicing Agreement dated as of
September 1, 1999, by and among Cone Receivables II LLC,
as Seller, Redwood Receivables Corporation, as Purchaser,
the Registrant, as Servicer, and General Electric Capital
Corporation, as Operating Agent and Collateral Agent,
filed as Exhibit 2.1(h) to Registrant's report on Form
10-Q for the quarter ended October 3, 1999.
*2.2 Receivables Transfer Agreement dated as of September 1,
1999, by and among the Registrant, any other Originator
Party thereto, and Cone Receivables II LLC, filed as
Exhibit 2.1(i) to Registrant's report on Form 10-Q for the
quarter ended October 3, 1999.
*2.3.1 First Amendment and Waiver to Securitization Agreements
dated as of November 16, 1999, by and between Cone
Receivables II LLC, the Registrant, Redwood Receivables
Corporation and General Electric Capital Corporation,
together with all exhibits thereto, filed as Exhibit
2.1(c) to Registrant's report on Form 10-K for the fiscal
year ending January 2, 2000.
*2.3.2 Second Amendment to Securitization Agreements dated as of
January 28, 2000, by and between Cone Receivables II LLC,
the Registrant, Redwood Receivables Corporation, and
General Electric Capital Corporation, together with all
exhibits thereto, filed as Exhibit 2.1(d) to Registrant's
report on Form 10-K for the fiscal year ending January 2,
2000.
*2.3.3 Third Amendment to Securitization Agreements dated as of
March 31, 2000, by and between Cone Receivables II LLC,
the Registrant, Redwood Receivables Corporation, and
General Electric Capital Corporation, together with all
exhibits thereto, filed as Exhibit 2.1(e) to Registrant's
report on Form 10-Q for the quarter ended April 2, 2000.
*2.3.4 Fourth Amendment to Securitization Agreements dated as of
April 24, 2000 by and between Cone Receivables II LLC, the
Registrant, Redwood Receivables Corporation, and General
Electric Capital Corporation, together with all exhibits
thereto, filed as Exhibit 2.1(f) to Registrant's report on
Form 10-Q for the quarter ended April 2, 2000.
<PAGE>
Exhibit
No. Description
------- -----------
2.3.5 Fifth Amendment to Securitization Agreements dated as of
June 30, 2000 by and between Cone Receivables II LLC, the
Registrant, Redwood Receivables Corporation, and General
Electric Capital Corporation.
*2.4 Investment Agreement dated as of June 18, 1993, among
Compania Industrial de Parras, S.A. de C.V., Sr. Rodolfo
Garcia Muriel, and the Registrant, filed as Exhibit 2.2(a)
to Registrant's report on Form 10-Q for the quarter ended
July 4, 1993.
*2.5 Commercial Agreement dated as of July 1, 1999, among
Compania Industrial de Parras, S.A. de C.V., the
Registrant and Parras Cone de Mexico, S.A., filed as
Exhibit 2.2(b) to Registrant's report on Form 10-K for the
fiscal year ending January 2, 2000.
*2.6 Guaranty Agreement dated as of June 25, 1993, between the
Registrant and Compania Industrial de Parras, S.A. de
C.V., filed as Exhibit 2.2(c) to Registrant's report on
Form 10-Q for the quarter ended July 4, 1993.
*2.7 Joint Venture Agreement dated as of June 25, 1993, between
Compania Industrial de Parras, S.A. de C.V., and Cone
Mills (Mexico), S.A. de C.V., filed as Exhibit 2.2(d) to
Registrant's report on Form 10-Q for the quarter ended
July 4, 1993.
*2.7.1 First Amendment to Joint Venture Agreement dated as of
June 14, 1995, between Compania Industrial de Parras, S.A.
de C.V., and Cone Mills (Mexico), S.A. de C.V., filed as
Exhibit 2.2(e) to the Registrant's report on Form 10-Q for
the quarter ended July 2, 1995.
*2.8 Joint Venture Registration Rights Agreement dated as of
June 25, 1993, among Parras Cone de Mexico, S.A., Compania
Industrial de Parras, S.A. de C.V. and Cone Mills
(Mexico), S.A. de C.V., filed as Exhibit 2.2(e) to
Registrant's report on Form 10-Q for the quarter ended
July 4, 1993.
<PAGE>
Exhibit
No. Description
------- -----------
*2.9 Parras Registration Rights Agreement dated as of June 25,
1993, between Compania Industrial de Parras, S.A. de C.V.
and the Registrant, filed as Exhibit 2.2(f) to the
Registrant's report on Form 10-Q for the quarter ended
July 4, 1993.
*2.10 Support Agreement dated as of June 25, 1993, among the
Registrant, Sr. Rodolfo L. Garcia, Sr. Rodolfo Garcia
Muriel and certain other persons listed therein ("private
stockholders"), filed as Exhibit 2.2(g) to Registrant's
report on Form 10-Q for the quarter ended July 4, 1993.
*3.1 Restated Articles of Incorporation of the Registrant
effective August 25, 1993, filed as Exhibit 4.1 to
Registrant's report on Form 10-Q for the quarter ended
October 3, 1993.
*3.1.1 Articles of Amendment of the Articles of Incorporation of
the Registrant effective October 22, 1999, to fix the
designation, preferences, limitations, and relative rights
of a series of its Class B Preferred Stock, filed as
Exhibit 4.1(a) to Registrant's report on Form 10-Q for the
quarter ended October 3, 1999.
*3.2 Amended and Restated Bylaws of Registrant, effective June
18, 1992, filed as Exhibit 3.5 to the Registrant's
Registration Statement on Form S-1 (File No. 33-46907).
*4.1 Rights Agreement dated as of October 14, 1999, between the
Registrant and First Union National Bank, as Rights Agent,
with Form of Articles of Amendment with respect to the
Class B Preferred Stock (Series A), the Form of Rights
Certificate, and Summary of Rights attached, filed as
Exhibit 1 to the Registrant's report on Form 8-A dated
October 29, 1999.
*4.2 Note Agreement dated as of August 13, 1992, between the
Registrant and The Prudential Insurance Company of
America, with form of 8% promissory note attached, filed
as Exhibit 4.01 to the Registrant's report on Form 8-K
dated August 13, 1992.
<PAGE>
Exhibit
No. Description
------- -----------
*4.2.1 Letter Agreement dated September 11, 1992, amending the
Note Agreement dated August 13, 1992, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.2 to the Registrant's report
on Form 8-K dated March 1, 1995.
*4.2.2 Letter Agreement dated July 19, 1993, amending the Note
Agreement dated August 13, 1992, between the Registrant
and The Prudential Insurance Company of America, filed as
Exhibit 4.3 to the Registrant's report on Form 8-K dated
March 1, 1995.
*4.2.3 Letter Agreement dated June 30, 1994, amending the Note
Agreement dated August 13, 1992, between the Registrant
and The Prudential Insurance Company of America, filed as
Exhibit 4.4 to the Registrant's report on Form 8-K dated
March 1, 1995.
*4.2.4 Letter Agreement dated November 14, 1994, amending the
Note Agreement dated August 13, 1992, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.5 to the Registrant's report
on Form 8-K dated March 1, 1995.
*4.2.5 Letter Agreement dated as of June 30, 1995, amending the
Note Agreement dated August 13, 1992, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.3(e) to the Registrant's
report on Form 10-Q for the quarter ended July 2, 1995.
*4.2.6 Letter Agreement dated as of June 30, 1995, between the
Registrant and The Prudential Insurance Company of America
superseding Letter Agreement, filed as Exhibit 4.3(e) to
the Registrant's report on Form 10-Q for the quarter ended
July 2, 1995.
*4.2.7 Letter Agreement dated as of March 30, 1996, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.3(g) to the Registrant's
report on Form 10-Q for the quarter ended March 31, 1996.
<PAGE>
Exhibit
No. Description
------- -----------
*4.2.8 Letter Agreement dated as of January 31, 1997, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.3(h) to the Registrant's
report on Form 10-K for the year ended December 29, 1996.
*4.2.9 Letter Agreement dated as of July 31, 1997, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.3(i) to the Registrant's
report on Form 10-Q for the quarter ended September 28,
1997.
*4.2.10 Modification to Note Agreement dated as of February 14,
1998, between the Registrant and The Prudential Insurance
Company of America, filed as Exhibit 4.3(j) to
Registrant's report on Form 10-Q for the quarter ended
March 29, 1998.
*4.2.11 Letter Agreement dated as of September 1, 1999, amending
the Note Agreement dated August 13, 1992, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.3(i) on Form 10-Q for the
quarter ended October 3, 1999.
*4.2.12 Amendment of 1992 Note Agreement dated as of January 28,
2000, by and among the Registrant and The Prudential
Insurance Company of America, together with all exhibits
thereto, filed as Exhibit 9 to the Registrant's report on
Form 8-K dated February 11, 2000.
4.2.13 Waiver under Note Agreement dated as of July 3, 2000, by
and among the Registrant and The Prudential Insurance
Company of America.
4.2.14 Amendment of 1992 Note Agreement dated as of July 14,
2000, by and among the Registrant and The Prudential
Insurance Company of America.
*4.3 Credit Agreement dated as of January 28, 2000, by and
among the Registrant, as Borrower, Bank of America, N.A.,
as Agent and as Lender and the Lenders party thereto from
time to time, together with all exhibits thereto, filed as
Exhibit 1 to the Registrant's report on Form 8-K dated
February 11, 2000.
<PAGE>
Exhibit
No. Description
------- -----------
4.3.1 Amendment No. 1 to Credit Agreement dated as of July 14,
2000, by and among the Registrant, as Borrower, Cone
Global Finance Corp., CIPCO S.C. Inc. and Cone Foreign
Trading LLC, as Guarantors, Bank of America, N.A., as
Agent and as Lender, and the Lenders party thereto from
time to time.
*4.4 Guaranty Agreement dated as of January 28, 2000, made by
Cone Global Finance Corporation, CIPCO S.C., Inc. and Cone
Foreign Trading LLC in favor of Bank of America, N.A. as
Revolving Credit Agent for the Lenders, The Prudential
Insurance Company of America, SunTrust Bank, Morgan
Guaranty Trust Company of New York, Wilmington Trust
Company, as General Collateral Agent, Bank of America,
N.A., as Priority Collateral Agent, and Atlantic Financial
Group, Ltd., together with all exhibits thereto, filed as
Exhibit 2 to the Registrant's report on Form 8-K dated
February 11, 2000.
*4.5 Priority Security Agreement dated as of January 28, 2000,
by the Registrant and certain of its subsidiaries, as
Grantors, and Bank of America, N.A., as Priority
Collateral Agent, together with all exhibits thereto,
filed as Exhibit 3 to the Registrant's report on Form 8-K
dated February 11, 2000.
*4.6 General Security Agreement dated as of January 28,2000, by
the Registrant and certain of its subsidiaries, as
Grantors, and Wilmington Trust Company, as General
Collateral Agent, together with all exhibits thereto,
filed as Exhibit 4 to the Registrant's report on Form 8-K
dated February 11, 2000.
*4.7 Securities Pledge Agreement dated as of January 28, 2000,
by the Registrant in favor of Wilmington Trust Company, as
General Collateral Agent, together with all exhibits
thereto, filed as Exhibit 5 to the Registrant's report on
Form 8-K dated February 11, 2000.
*4.8 CMM Pledge Agreement dated as of January 28, 2000, by the
Registrant in favor of Wilmington Trust Company, as
General Collateral Agent, together with all exhibits
thereto, filed as Exhibit 6 to the Registrant's report on
Form 8-K dated February 11, 2000.
<PAGE>
Exhibit
No. Description
------- -----------
*4.9 Deed of Trust, Security Agreement, Fixture Filing,
Assignment of Leases and Rents and Financing Statement
dated as of January 28, 2000, between the Registrant, as
Grantor, TIM, Inc., as Trustee, Wilmington Trust Company,
as General Collateral Agent, and Bank of America, N.A., as
Designated Collateral Subagent, together with all exhibits
thereto, filed as Exhibit 7 to the Registrant's report on
Form 8-K dated February 11, 2000.
*4.10 Deed of Trust, Security Agreement, Fixture Filing,
Assignment of Leases and Rents and Financing Statement
dated as of January 28, 2000, between the Registrant, as
Grantor, TIM, Inc., as Trustee, and Bank of America, N.A.,
as Priority Collateral Agent, together with all exhibits
thereto, filed as Exhibit 8 to the Registrant's report on
Form 8-K dated February 11, 2000.
*4.11 Termination Agreement dated as of January 28, 2000,
between the Registrant and Morgan Guaranty Trust Company
of New York, as Agent for various banks terminating the
Credit Agent dated August 7, 1997, filed as Exhibit 4.4(h)
to Registrant's report on Form 10-K for the fiscal year
ending January 2, 2000.
*4.12 Specimen Class A Preferred Stock Certificate, filed as
Exhibit 4.5 to the Registrant's Registration Statement on
Form S-1(File No. 33-46907).
*4.13 Specimen Common Stock Certificate, effective June 18,
1992, filed as Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1 (File No. 33-46907).
*4.14 Cone Mills Corporation 1983 ESOP as amended and restated
effective December 1, 1994, filed as Exhibit 4.9 to the
Registrant's report on Form 10-K for year ended January 1,
1995.
*4.14.1 First Amendment to the Cone Mills Corporation 1983 ESOP
dated May 9, 1995, filed as Exhibit 4.9(a) to the
Registrant's report on Form 10-K for year ended December
31, 1995.
<PAGE>
Exhibit
No. Description
------- -----------
*4.14.2 Second Amendment to the Cone Mills Corporation 1983 ESOP
dated December 5, 1995, filed as Exhibit 4.9(b) to the
Registrant's report on Form 10-K for year ended December
31,1995.
*4.14.3 Third Amendment to the Cone Mills Corporation 1983 ESOP
dated August 7, 1997, filed as Exhibit 4.8(c) to the
Registrant's report on Form 10-Q for the quarter ended
September 28,1997.
*4.14.4 Fourth Amendment to the Cone Mills Corporation 1983 ESOP
dated December 4, 1997, filed as Exhibit 4.8(d) to the
Registrant's report on Form 10-K for the year ended
December 28,1997.
*4.15 Indenture dated as of February 14, 1995, between the
Registrant and Wachovia Bank of North Carolina, N.A. as
Trustee (The Bank of New York is successor Trustee), filed
as Exhibit 4.1 to Registrant's Registration Statement on
Form S-3 (File No. 33-57713).
4.15.1 Form of First Supplemental Indenture to the Indenture
dated as of February 14, 1995, between the Registrant and
Wachovia Bank of North Carolina, N.A. as Trustee (The Bank
of New York is successor Trustee), with respect to the
8-1/8% Debentures Due March 15, 2005.
4.16 Form of Indenture between the Registrant and The Bank of
New York, as Trustee, with respect to the 11% Secured
Subordinated Debentures Due March 15, 2005 being
registered.
**5.1 Opinion of Neil W. Koonce, Esq. re legality.
<PAGE>
Exhibit
No. Description
------- -----------
*10.1 Employees' Retirement Plan of Cone Mills Corporation as
amended and restated effective December 1, 1994, filed as
Exhibit 10.1 to the Registrant's report on Form 10-K for
the year ended January 1, 1995.
*10.1.1 First Amendment to the Employees' Retirement Plan of Cone
Mills Corporation dated May 9,1995, filed as Exhibit
10.1(a) to the Registrant's report on Form 10-K for the
year ended December 31, 1995.
*10.1.2 Second Amendment to the Employees' Retirement Plan of Cone
Mills Corporation dated December 5, 1995, filed as Exhibit
10.1(b) to the Registrant's report on Form 10-K for the
year ended December 31, 1995.
*10.1.3 Third Amendment to the Employees' Retirement Plan of Cone
Mills Corporation dated August 16, 1996, filed as Exhibit
10.1(c) to the Registrant's report on Form 10-K for the
year ended December 29, 1996
*10.1.4 Fourth Amendment to the Employees' Retirement Plan of Cone
Mills Corporation, filed as Exhibit 10 to the Registrant's
report on Form 10-Q for the quarter ended September 28,
1997.
*10.1.5 Fifth Amendment to Employees' Retirement Plan of Cone
Mills Corporation dated December 4, 1997, filed as Exhibit
10.1(e) to the Registrant's report on Form 10-K or the
year ended December 28, 1997.
*10.7 Cone Mills Corporation SERP as amended and restated as of
December 5, 1995, filed as Exhibit 10.2 to the
Registrant's report on Form 10-K for the year ended
December 31, 1995.
*10.8 Excess Benefit Plan of Cone Mills Corporation as amended
and restated as of December 5, 1995, filed as Exhibit 10.3
to the Registrant's report on Form 10-K for the year ended
December 31, 1995.
<PAGE>
Exhibit
No. Description
------- -----------
*10.9 1984 Stock Option Plan of Registrant filed as Exhibit 10.7
to the Registrant's Registration Statement on Form S-1
(File No. 33-28040).
*10.10 Form of Nonqualified Stock Option Agreement under 1984
Stock Option Plan of Registrant, filed as Exhibit 10.8 to
the Registrant's Registration Statement on Form S-1 (File
No. 33-28040).
*10.11 Form of Incentive Stock Option Agreement under 1984 Stock
Option Plan of Registrant, filed as Exhibit 10.9 to the
Registrant's Registration Statement on Form S-1 (File No.
33-28040).
*10.12 1992 Stock Option Plan of Registrant, filed as Exhibit
10.9 to the Registrant's report on Form 10-K for the year
ended December 29, 1991.
*10.12.1 Amended and Restated 1992 Stock Plan, filed as Exhibit
10.1 to Registrant's report on Form 10-Q for the quarter
ended March 31, 1996.
*10.13 Form of Incentive Stock Option Agreement under 1992 Stock
Option Plan, filed as Exhibit 10.10 to the Registrant's
report on Form 10-K for the year ended January 3, 1993.
*10.14 Form of Nonqualified Stock Option Agreement under 1992
Stock Option Plan, filed as Exhibit 10.8(a) to the
Registrant's report on Form 10-K for the year ended
December 29,1996.
*10.14.1 Form of Nonqualified Stock Option Agreement under 1992
Amended and Restated Stock Plan, filed as Exhibit 10.8(b)
to the Registrant's report on Form 10-K for the year ended
December 29, 1996.
*10.15 Form of Restricted Stock Award Agreement under 1992
Amended and Restated Stock Plan, filed as Exhibit 10.8(c)
to the Registrant's report on Form 10-K for the year ended
December 28, 1997.
<PAGE>
Exhibit
No. Description
------- -----------
*10.16 1994 Stock Option Plan for Non-Employee Directors of
Registrant, filed as Exhibit 10.9 to Registrant's report
on Form 10-K for the year ended January 2,1994.
*10.17 Form of Non-Qualified Stock Option Agreement under 1994
Stock Option Plan for Non-Employee Directors of
Registrant, filed as Exhibit 10.10 to Registrant's report
on Form 10-K for the year ended January 2, 1994.
*10.18 Management Incentive Plan of the Registrant, filed as
Exhibit 10.11(b) to Registrant's report on Form 10-K for
the year ended January 3, 1993.
*10.19 1997 Senior Management Incentive Compensation Plan, filed
as Exhibit 10.2 to Registrant's report on Form 10-Q for
the quarter ended March 31, 1996.
*10.20 1997 Senior Management Discretionary Bonus Plan, filed as
Exhibit 10.13 to the Registrant's report on Form 10-K for
the year ended December 29, 1996.
*10.21 2000 Stock Compensation Plan for Non-Employee Directors of
Registrant dated as of May 9, 2000, filed as Exhibit 10.18
to Registrant's report on Form 10-Q for the quarter ended
April 7, 2000.
*10.22 Form of Agreement between the Registrant and Levi Strauss
dated as of March 30, 1992, filed as Exhibit 10.14 to the
Registrant's Registration Statement on Form S-1 (File No.
33-46907).
*10.23 First Amendment to Supply Agreement dated as of April 15,
1992, between the Registrant and Levi Strauss dated as of
March 30, 1992, filed as Exhibit 10.15 to Registrant's
Registration Statement on Form S-1 (No. 33-469007).
*10.24 Agreement dated January 1, 1999, between the Registrant
and Parkdale Mills, Inc., filed as Exhibit 10.17 to
Registrant's report on Form 10-K for the year ended
January 2, 2000.
<PAGE>
Exhibit
No. Description
------- -----------
*10.25 Tenth Amendment to Master Lease dated as of January 28,
2000, between Atlantic Financial Group, Ltd. and the
Registrant, together with all exhibits thereto, filed as
Exhibit 10 to Registrant's report on Form 8-K dated
February 11, 2000.
10.25.1 Eleventh Amendment to Master Lease dated as of July 14,
2000 between Atlantic Financial Group, Ltd. and the
Registrant.
**10.26 Agreement by and between the Registrant and Dougherty &
Company LLC.
12.1 Computation of Ratio of Earnings to Fixed Charges.
*21 Subsidiaries of the Registrant, filed as Exhibit 21 to
Registrant's report on Form 10-K for the year ended
January 2, 2000.
23.1 Consent of McGladrey & Pullen, LLP.
**23.2 Consent of Neil W. Koonce, Esq. is contained in his
opinion filed as Exhibit 5.1.
24.1 Power of Attorney (included in the signature pages
hereto).
**25.1 Form T-1, Statement of Eligibility of Trustee.
*27 Financial Data Schedule, filed as Exhibit 27 to
Registrant's report on Form 10-K for the year ended
January 2, 2000.
**99.1 Form of Consent and Letter of Transmittal.
**99.2 Form of Notice of Guaranteed Delivery.
**99.3 Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
**99.4 Form of Letter to Clients.
<PAGE>
Exhibit
No. Description
------- -----------
**99.5 Form of Exchange Agent Agreement.
------------------------------------------
* Incorporated by reference to the statement or report indicated.
** To be filed by amendment.
<PAGE>
(b) Financial Statement Schedules
All financial statement schedules have been omitted because they are
not applicable, not required or the required information is included in the
financial statements and notes thereto.
Item 22. Undertakings.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
<PAGE>
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415 will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Greensboro, North Carolina on July 31, 2000.
CONE MILLS CORPORATION
By: /s/ John L. Bakane
--------------------
John L. Bakane
President and Chief
Executive Officer
POWER OF ATTORNEY
Each officer or director whose signature appears below hereby appoints
John L. Bakane and Neil W. Koonce, or either of them, his true and lawful
attorney-in-fact to sign on his behalf as an individual and in the capacity
stated below, any amendment or post-effective amendment to this Registration
Statement which said attorney-in-fact may deem appropriate or necessary.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the following
capacities:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Dewey L. Trogdon Chairman of the Board July 31, 2000
--------------------
(Dewey L. Trogdon)
/s/ John L. Bakane Director, Presidient and July 31, 2000
-------------------- Chief Executive Officer
(John L. Bakane) (Principal Executive Officer)
/s/ Gary L. Smith Executive Vice President July 31, 2000
-------------------- and Chief Financial Officer
(Gary L. Smith) (Principal Financial Officer)
/s/ Doris R. Bray Director July 31, 2000
--------------------
(Doris R. Bray)
/s/ Haynes G. Griffin Director July 31, 2000
--------------------
(Haynes G. Griffin)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Bruce H. Hendry Director July 31, 2000
-------------------------
(Bruce H. Hendry)
/s/ Jeanette C. Kimmel Director July 31, 2000
-------------------------
(Jeanette C. Kimmel)
/s/ David T. Kollat Director July 31, 2000
-------------------------
(David T. Kollat)
/s/ Marc H. Kozberg Director July 31, 2000
-------------------------
(Marc H. Kozberg)
/s/ Charles M. Reid Director July 31, 2000
-------------------------
(Charles M. Reid)
/s/ John W. Rosenblum Director July 31, 2000
-------------------------
(John W. Rosenblum)
Director July 31, 2000
-------------------------
(Cyrus C. Wilson)
/s/ Christopher F. Conlon Controller (Principal July 31, 2000
------------------------- Accounting Officer)
(Christopher F. Conlon)
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
*2.1 Receivables Purchase and Servicing Agreement dated as of
September 1, 1999, by and among Cone Receivables II LLC,
as Seller, Redwood Receivables Corporation, as Purchaser,
the Registrant, as Servicer, and General Electric Capital
Corporation, as Operating Agent and Collateral Agent,
filed as Exhibit 2.1(h) to Registrant's report on Form
10-Q for the quarter ended October 3, 1999.
*2.2 Receivables Transfer Agreement dated as of September 1,
1999, by and among the Registrant, any other Originator
Party thereto, and Cone Receivables II LLC, filed as
Exhibit 2.1(i) to Registrant's report on Form 10-Q for the
quarter ended October 3, 1999.
*2.3.1 First Amendment and Waiver to Securitization Agreements
dated as of November 16, 1999, by and between Cone
Receivables II LLC, the Registrant, Redwood Receivables
Corporation and General Electric Capital Corporation,
together with all exhibits thereto, filed as Exhibit
2.1(c) to Registrant's report on Form 10-K for the fiscal
year ending January 2, 2000.
*2.3.2 Second Amendment to Securitization Agreements dated as of
January 28, 2000, by and between Cone Receivables II LLC,
the Registrant, Redwood Receivables Corporation, and
General Electric Capital Corporation, together with all
exhibits thereto, filed as Exhibit 2.1(d) to Registrant's
report on Form 10-K for the fiscal year ending January 2,
2000.
*2.3.3 Third Amendment to Securitization Agreements dated as of
March 31, 2000, by and between Cone Receivables II LLC,
the Registrant, Redwood Receivables Corporation, and
General Electric Capital Corporation, together with all
exhibits thereto, filed as Exhibit 2.1(e) to Registrant's
report on Form 10-Q for the quarter ended April 2, 2000.
*2.3.4 Fourth Amendment to Securitization Agreements dated as of
April 24, 2000 by and between Cone Receivables II LLC, the
Registrant, Redwood Receivables Corporation, and General
Electric Capital Corporation, together with all exhibits
thereto, filed as Exhibit 2.1(f) to Registrant's report on
Form 10-Q for the quarter ended April 2, 2000.
<PAGE>
Exhibit
No. Description
------- -----------
2.3.5 Fifth Amendment to Securitization Agreements dated as of
June 30, 2000 by and between Cone Receivables II LLC, the
Registrant, Redwood Receivables Corporation, and General
Electric Capital Corporation.
*2.4 Investment Agreement dated as of June 18, 1993, among
Compania Industrial de Parras, S.A. de C.V., Sr. Rodolfo
Garcia Muriel, and the Registrant, filed as Exhibit 2.2(a)
to Registrant's report on Form 10-Q for the quarter ended
July 4, 1993.
*2.5 Commercial Agreement dated as of July 1, 1999, among
Compania Industrial de Parras, S.A. de C.V., the
Registrant and Parras Cone de Mexico, S.A., filed as
Exhibit 2.2(b) to Registrant's report on Form 10-K for the
fiscal year ending January 2, 2000.
*2.6 Guaranty Agreement dated as of June 25, 1993, between the
Registrant and Compania Industrial de Parras, S.A. de
C.V., filed as Exhibit 2.2(c) to Registrant's report on
Form 10-Q for the quarter ended July 4, 1993.
*2.7 Joint Venture Agreement dated as of June 25, 1993, between
Compania Industrial de Parras, S.A. de C.V., and Cone
Mills (Mexico), S.A. de C.V., filed as Exhibit 2.2(d) to
Registrant's report on Form 10-Q for the quarter ended
July 4, 1993.
*2.7.1 First Amendment to Joint Venture Agreement dated as of
June 14, 1995, between Compania Industrial de Parras, S.A.
de C.V., and Cone Mills (Mexico), S.A. de C.V., filed as
Exhibit 2.2(e) to the Registrant's report on Form 10-Q for
the quarter ended July 2, 1995.
*2.8 Joint Venture Registration Rights Agreement dated as of
June 25, 1993, among Parras Cone de Mexico, S.A., Compania
Industrial de Parras, S.A. de C.V. and Cone Mills
(Mexico), S.A. de C.V., filed as Exhibit 2.2(e) to
Registrant's report on Form 10-Q for the quarter ended
July 4, 1993.
<PAGE>
Exhibit
No. Description
------- -----------
*2.9 Parras Registration Rights Agreement dated as of June 25,
1993, between Compania Industrial de Parras, S.A. de C.V.
and the Registrant, filed as Exhibit 2.2(f) to the
Registrant's report on Form 10-Q for the quarter ended
July 4, 1993.
*2.10 Support Agreement dated as of June 25, 1993, among the
Registrant, Sr. Rodolfo L. Garcia, Sr. Rodolfo Garcia
Muriel and certain other persons listed therein ("private
stockholders"), filed as Exhibit 2.2(g) to Registrant's
report on Form 10-Q for the quarter ended July 4, 1993.
*3.1 Restated Articles of Incorporation of the Registrant
effective August 25, 1993, filed as Exhibit 4.1 to
Registrant's report on Form 10-Q for the quarter ended
October 3, 1993.
*3.1.1 Articles of Amendment of the Articles of Incorporation of
the Registrant effective October 22, 1999, to fix the
designation, preferences, limitations, and relative rights
of a series of its Class B Preferred Stock, filed as
Exhibit 4.1(a) to Registrant's report on Form 10-Q for the
quarter ended October 3, 1999.
*3.2 Amended and Restated Bylaws of Registrant, effective June
18, 1992, filed as Exhibit 3.5 to the Registrant's
Registration Statement on Form S-1 (File No. 33-46907).
*4.1 Rights Agreement dated as of October 14, 1999, between the
Registrant and First Union National Bank, as Rights Agent,
with Form of Articles of Amendment with respect to the
Class B Preferred Stock (Series A), the Form of Rights
Certificate, and Summary of Rights attached, filed as
Exhibit 1 to the Registrant's report on Form 8-A dated
October 29, 1999.
*4.2 Note Agreement dated as of August 13, 1992, between the
Registrant and The Prudential Insurance Company of
America, with form of 8% promissory note attached, filed
as Exhibit 4.01 to the Registrant's report on Form 8-K
dated August 13, 1992.
<PAGE>
Exhibit
No. Description
------- -----------
*4.2.1 Letter Agreement dated September 11, 1992, amending the
Note Agreement dated August 13, 1992, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.2 to the Registrant's report
on Form 8-K dated March 1, 1995.
*4.2.2 Letter Agreement dated July 19, 1993, amending the Note
Agreement dated August 13, 1992, between the Registrant
and The Prudential Insurance Company of America, filed as
Exhibit 4.3 to the Registrant's report on Form 8-K dated
March 1, 1995.
*4.2.3 Letter Agreement dated June 30, 1994, amending the Note
Agreement dated August 13, 1992, between the Registrant
and The Prudential Insurance Company of America, filed as
Exhibit 4.4 to the Registrant's report on Form 8-K dated
March 1, 1995.
*4.2.4 Letter Agreement dated November 14, 1994, amending the
Note Agreement dated August 13, 1992, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.5 to the Registrant's report
on Form 8-K dated March 1, 1995.
*4.2.5 Letter Agreement dated as of June 30, 1995, amending the
Note Agreement dated August 13, 1992, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.3(e) to the Registrant's
report on Form 10-Q for the quarter ended July 2, 1995.
*4.2.6 Letter Agreement dated as of June 30, 1995, between the
Registrant and The Prudential Insurance Company of America
superseding Letter Agreement, filed as Exhibit 4.3(e) to
the Registrant's report on Form 10-Q for the quarter ended
July 2, 1995.
*4.2.7 Letter Agreement dated as of March 30, 1996, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.3(g) to the Registrant's
report on Form 10-Q for the quarter ended March 31, 1996.
<PAGE>
Exhibit
No. Description
------- -----------
*4.2.8 Letter Agreement dated as of January 31, 1997, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.3(h) to the Registrant's
report on Form 10-K for the year ended December 29, 1996.
*4.2.9 Letter Agreement dated as of July 31, 1997, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.3(i) to the Registrant's
report on Form 10-Q for the quarter ended September 28,
1997.
*4.2.10 Modification to Note Agreement dated as of February 14,
1998, between the Registrant and The Prudential Insurance
Company of America, filed as Exhibit 4.3(j) to
Registrant's report on Form 10-Q for the quarter ended
March 29, 1998.
*4.2.11 Letter Agreement dated as of September 1, 1999, amending
the Note Agreement dated August 13, 1992, between the
Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.3(i) on Form 10-Q for the
quarter ended October 3, 1999.
*4.2.12 Amendment of 1992 Note Agreement dated as of January 28,
2000, by and among the Registrant and The Prudential
Insurance Company of America, together with all exhibits
thereto, filed as Exhibit 9 to the Registrant's report on
Form 8-K dated February 11, 2000.
4.2.13 Waiver under Note Agreement dated as of July 3, 2000, by
and among the Registrant and The Prudential Insurance
Company of America.
4.2.14 Amendment of 1992 Note Agreement dated as of July 14,
2000, by and among the Registrant and The Prudential
Insurance Company of America.
*4.3 Credit Agreement dated as of January 28, 2000, by and
among the Registrant, as Borrower, Bank of America, N.A.,
as Agent and as Lender and the Lenders party thereto from
time to time, together with all exhibits thereto, filed as
Exhibit 1 to the Registrant's report on Form 8-K dated
February 11, 2000.
<PAGE>
Exhibit
No. Description
------- -----------
4.3.1 Amendment No. 1 to Credit Agreement dated as of July 14,
2000, by and among the Registrant, as Borrower, Cone
Global Finance Corp., CIPCO S.C. Inc. and Cone Foreign
Trading LLC, as Guarantors, Bank of America, N.A., as
Agent and as Lender, and the Lenders party thereto from
time to time.
*4.4 Guaranty Agreement dated as of January 28, 2000, made by
Cone Global Finance Corporation, CIPCO S.C., Inc. and Cone
Foreign Trading LLC in favor of Bank of America, N.A. as
Revolving Credit Agent for the Lenders, The Prudential
Insurance Company of America, SunTrust Bank, Morgan
Guaranty Trust Company of New York, Wilmington Trust
Company, as General Collateral Agent, Bank of America,
N.A., as Priority Collateral Agent, and Atlantic Financial
Group, Ltd., together with all exhibits thereto, filed as
Exhibit 2 to the Registrant's report on Form 8-K dated
February 11, 2000.
*4.5 Priority Security Agreement dated as of January 28, 2000,
by the Registrant and certain of its subsidiaries, as
Grantors, and Bank of America, N.A., as Priority
Collateral Agent, together with all exhibits thereto,
filed as Exhibit 3 to the Registrant's report on Form 8-K
dated February 11, 2000.
*4.6 General Security Agreement dated as of January 28,2000, by
the Registrant and certain of its subsidiaries, as
Grantors, and Wilmington Trust Company, as General
Collateral Agent, together with all exhibits thereto,
filed as Exhibit 4 to the Registrant's report on Form 8-K
dated February 11, 2000.
*4.7 Securities Pledge Agreement dated as of January 28, 2000,
by the Registrant in favor of Wilmington Trust Company, as
General Collateral Agent, together with all exhibits
thereto, filed as Exhibit 5 to the Registrant's report on
Form 8-K dated February 11, 2000.
*4.8 CMM Pledge Agreement dated as of January 28, 2000, by the
Registrant in favor of Wilmington Trust Company, as
General Collateral Agent, together with all exhibits
thereto, filed as Exhibit 6 to the Registrant's report on
Form 8-K dated February 11, 2000.
<PAGE>
Exhibit
No. Description
------- -----------
*4.9 Deed of Trust, Security Agreement, Fixture Filing,
Assignment of Leases and Rents and Financing Statement
dated as of January 28, 2000, between the Registrant, as
Grantor, TIM, Inc., as Trustee, Wilmington Trust Company,
as General Collateral Agent, and Bank of America, N.A., as
Designated Collateral Subagent, together with all exhibits
thereto, filed as Exhibit 7 to the Registrant's report on
Form 8-K dated February 11, 2000.
*4.10 Deed of Trust, Security Agreement, Fixture Filing,
Assignment of Leases and Rents and Financing Statement
dated as of January 28, 2000, between the Registrant, as
Grantor, TIM, Inc., as Trustee, and Bank of America, N.A.,
as Priority Collateral Agent, together with all exhibits
thereto, filed as Exhibit 8 to the Registrant's report on
Form 8-K dated February 11, 2000.
*4.11 Termination Agreement dated as of January 28, 2000,
between the Registrant and Morgan Guaranty Trust Company
of New York, as Agent for various banks terminating the
Credit Agent dated August 7, 1997, filed as Exhibit 4.4(h)
to Registrant's report on Form 10-K for the fiscal year
ending January 2, 2000.
*4.12 Specimen Class A Preferred Stock Certificate, filed as
Exhibit 4.5 to the Registrant's Registration Statement on
Form S-1(File No. 33-46907).
*4.13 Specimen Common Stock Certificate, effective June 18,
1992, filed as Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1 (File No. 33-46907).
*4.14 Cone Mills Corporation 1983 ESOP as amended and restated
effective December 1, 1994, filed as Exhibit 4.9 to the
Registrant's report on Form 10-K for year ended January 1,
1995.
*4.14.1 First Amendment to the Cone Mills Corporation 1983 ESOP
dated May 9, 1995, filed as Exhibit 4.9(a) to the
Registrant's report on Form 10-K for year ended December
31, 1995.
<PAGE>
Exhibit
No. Description
------- -----------
*4.14.2 Second Amendment to the Cone Mills Corporation 1983 ESOP
dated December 5, 1995, filed as Exhibit 4.9(b) to the
Registrant's report on Form 10-K for year ended December
31,1995.
*4.14.3 Third Amendment to the Cone Mills Corporation 1983 ESOP
dated August 7, 1997, filed as Exhibit 4.8(c) to the
Registrant's report on Form 10-Q for the quarter ended
September 28,1997.
*4.14.4 Fourth Amendment to the Cone Mills Corporation 1983 ESOP
dated December 4, 1997, filed as Exhibit 4.8(d) to the
Registrant's report on Form 10-K for the year ended
December 28,1997.
*4.15 Indenture dated as of February 14, 1995, between the
Registrant and Wachovia Bank of North Carolina, N.A. as
Trustee (The Bank of New York is successor Trustee), filed
as Exhibit 4.1 to Registrant's Registration Statement on
Form S-3 (File No. 33-57713).
4.15.1 Form of First Supplemental Indenture to the Indenture
dated as of February 14, 1995, between the Registrant and
Wachovia Bank of North Carolina, N.A. as Trustee (The Bank
of New York is successor Trustee), with respect to the
8-1/8% Debentures Due March 15, 2005.
4.16 Form of Indenture between the Registrant and The Bank of
New York, as Trustee, with respect to the 11% Secured
Subordinated Debentures Due March 15, 2005 being
registered.
**5.1 Opinion of Neil W. Koonce, Esq. re legality.
<PAGE>
Exhibit
No. Description
------- -----------
*10.1 Employees' Retirement Plan of Cone Mills Corporation as
amended and restated effective December 1, 1994, filed as
Exhibit 10.1 to the Registrant's report on Form 10-K for
the year ended January 1, 1995.
*10.1.1 First Amendment to the Employees' Retirement Plan of Cone
Mills Corporation dated May 9,1995, filed as Exhibit
10.1(a) to the Registrant's report on Form 10-K for the
year ended December 31, 1995.
*10.1.2 Second Amendment to the Employees' Retirement Plan of Cone
Mills Corporation dated December 5, 1995, filed as Exhibit
10.1(b) to the Registrant's report on Form 10-K for the
year ended December 31, 1995.
*10.1.3 Third Amendment to the Employees' Retirement Plan of Cone
Mills Corporation dated August 16, 1996, filed as Exhibit
10.1(c) to the Registrant's report on Form 10-K for the
year ended December 29, 1996
*10.1.4 Fourth Amendment to the Employees' Retirement Plan of Cone
Mills Corporation, filed as Exhibit 10 to the Registrant's
report on Form 10-Q for the quarter ended September 28,
1997.
*10.1.5 Fifth Amendment to Employees' Retirement Plan of Cone
Mills Corporation dated December 4, 1997, filed as Exhibit
10.1(e) to the Registrant's report on Form 10-K or the
year ended December 28, 1997.
*10.7 Cone Mills Corporation SERP as amended and restated as of
December 5, 1995, filed as Exhibit 10.2 to the
Registrant's report on Form 10-K for the year ended
December 31, 1995.
*10.8 Excess Benefit Plan of Cone Mills Corporation as amended
and restated as of December 5, 1995, filed as Exhibit 10.3
to the Registrant's report on Form 10-K for the year ended
December 31, 1995.
<PAGE>
Exhibit
No. Description
------- -----------
*10.9 1984 Stock Option Plan of Registrant filed as Exhibit 10.7
to the Registrant's Registration Statement on Form S-1
(File No. 33-28040).
*10.10 Form of Nonqualified Stock Option Agreement under 1984
Stock Option Plan of Registrant, filed as Exhibit 10.8 to
the Registrant's Registration Statement on Form S-1 (File
No. 33-28040).
*10.11 Form of Incentive Stock Option Agreement under 1984 Stock
Option Plan of Registrant, filed as Exhibit 10.9 to the
Registrant's Registration Statement on Form S-1 (File No.
33-28040).
*10.12 1992 Stock Option Plan of Registrant, filed as Exhibit
10.9 to the Registrant's report on Form 10-K for the year
ended December 29, 1991.
*10.12.1 Amended and Restated 1992 Stock Plan, filed as Exhibit
10.1 to Registrant's report on Form 10-Q for the quarter
ended March 31, 1996.
*10.13 Form of Incentive Stock Option Agreement under 1992 Stock
Option Plan, filed as Exhibit 10.10 to the Registrant's
report on Form 10-K for the year ended January 3, 1993.
*10.14 Form of Nonqualified Stock Option Agreement under 1992
Stock Option Plan, filed as Exhibit 10.8(a) to the
Registrant's report on Form 10-K for the year ended
December 29,1996.
*10.14.1 Form of Nonqualified Stock Option Agreement under 1992
Amended and Restated Stock Plan, filed as Exhibit 10.8(b)
to the Registrant's report on Form 10-K for the year ended
December 29, 1996.
*10.15 Form of Restricted Stock Award Agreement under 1992
Amended and Restated Stock Plan, filed as Exhibit 10.8(c)
to the Registrant's report on Form 10-K for the year ended
December 28, 1997.
<PAGE>
Exhibit
No. Description
------- -----------
*10.16 1994 Stock Option Plan for Non-Employee Directors of
Registrant, filed as Exhibit 10.9 to Registrant's report
on Form 10-K for the year ended January 2,1994.
*10.17 Form of Non-Qualified Stock Option Agreement under 1994
Stock Option Plan for Non-Employee Directors of
Registrant, filed as Exhibit 10.10 to Registrant's report
on Form 10-K for the year ended January 2, 1994.
*10.18 Management Incentive Plan of the Registrant, filed as
Exhibit 10.11(b) to Registrant's report on Form 10-K for
the year ended January 3, 1993.
*10.19 1997 Senior Management Incentive Compensation Plan, filed
as Exhibit 10.2 to Registrant's report on Form 10-Q for
the quarter ended March 31, 1996.
*10.20 1997 Senior Management Discretionary Bonus Plan, filed as
Exhibit 10.13 to the Registrant's report on Form 10-K for
the year ended December 29, 1996.
*10.21 2000 Stock Compensation Plan for Non-Employee Directors of
Registrant dated as of May 9, 2000, filed as Exhibit 10.18
to Registrant's report on Form 10-Q for the quarter ended
April 7, 2000.
*10.22 Form of Agreement between the Registrant and Levi Strauss
dated as of March 30, 1992, filed as Exhibit 10.14 to the
Registrant's Registration Statement on Form S-1 (File No.
33-46907).
*10.23 First Amendment to Supply Agreement dated as of April 15,
1992, between the Registrant and Levi Strauss dated as of
March 30, 1992, filed as Exhibit 10.15 to Registrant's
Registration Statement on Form S-1 (No. 33-469007).
*10.24 Agreement dated January 1, 1999, between the Registrant
and Parkdale Mills, Inc., filed as Exhibit 10.17 to
Registrant's report on Form 10-K for the year ended
January 2, 2000.
<PAGE>
Exhibit
No. Description
------- -----------
*10.25 Tenth Amendment to Master Lease dated as of January 28,
2000, between Atlantic Financial Group, Ltd. and the
Registrant, together with all exhibits thereto, filed as
Exhibit 10 to Registrant's report on Form 8-K dated
February 11, 2000.
10.25.1 Eleventh Amendment to Master Lease dated as of July 14,
2000 between Atlantic Financial Group, Ltd. and the
Registrant.
**10.26 Agreement by and between the Registrant and Dougherty &
Company LLC.
12.1 Computation of Ratio of Earnings to Fixed Charges.
*21 Subsidiaries of the Registrant, filed as Exhibit 21 to
Registrant's report on Form 10-K for the year ended
January 2, 2000.
23.1 Consent of McGladrey & Pullen, LLP.
**23.2 Consent of Neil W. Koonce, Esq. is contained in his
opinion filed as Exhibit 5.1.
24.1 Power of Attorney (included in the signature pages
hereto).
**25.1 Form T-1, Statement of Eligibility of Trustee.
*27 Financial Data Schedule, filed as Exhibit 27 to
Registrant's report on Form 10-K for the year ended
January 2, 2000.
**99.1 Form of Consent and Letter of Transmittal.
**99.2 Form of Notice of Guaranteed Delivery.
**99.3 Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
**99.4 Form of Letter to Clients.
<PAGE>
Exhibit
No. Description
------- -----------
**99.5 Form of Exchange Agent Agreement.
------------------------------------------
* Incorporated by reference to the statement or report indicated.
** To be filed by amendment.
