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Tultex Corporation
P.O. Box 5191
Martinsville, VA
24115
703-632-2961
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Tultex Corporation to be held on Thursday, May 19, 1994 at 10:00 a.m. at our
Customer Service Center in Martinsville, Virginia. Your Board of Directors and
management look forward to greeting you personally and discussing the affairs
of our Company.
At the meeting we are asking that you (1) elect a Board of Directors, (2)
approve certain amendments to the 1990 Stock Option Plan described in the
accompanying proxy statement, and (3) ratify the appointment of Price
Waterhouse as auditors.
THE DIRECTORS BELIEVE THESE PROPOSALS ARE IN THE BEST INTEREST OF ALL OF THE
COMPANY'S STOCKHOLDERS AND UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR EACH OF
THEM.
Please send in your proxy card as soon as possible. Thank you for your
continued interest and support.
Sincerely,
John M. Franck
Chairman & Chief Executive Officer
April 19, 1994
PAGE 2
Tultex Corporation
P.O. Box 5191
Martinsville, VA
24115
703-632-2961
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Tultex
Corporation will be held at the Company's Customer Service Center, State Route
174, Martinsville, Virginia, on Thursday, May 19, 1994, at 10:00 a.m. for
the following purposes:
1. To elect a Board of Directors, consisting of 10 persons, to serve for the
ensuing year;
2. To approve, as one proposal, amendments to the 1990 Stock Option Plan: (1)
to authorize the issuance of an additional 500,000 shares of Common Stock
upon exercise of options granted under the Plan; (2) to provide that no
option may be granted under the Plan after October 27, 2003; and (3) to
provide that no Participant may be granted options in any calendar year for
more than 50,000 shares of Common Stock.
3. To ratify the Board of Directors' appointment of Price Waterhouse,
independent accountants, as auditors for the Company for fiscal 1994; and
4. To transact such other business as may properly come before the meeting.
Your attention is directed to the accompanying proxy statement for further
information with respect to the matters to be acted upon at the meeting.
Only holders of Common Stock and Cumulative Convertible Preferred Stock, $7.50
Series B, of record at the close of business on March 14, 1994, will be
entitled to notice of and to vote on matters to be acted on at the Annual
Meeting.
If you are present at the Annual Meeting, you may vote in person even though
you have previously delivered your proxy.
By Order of the Board of Directors
James M. Baker, Secretary
April 19, 1994
PAGE 1
Tultex Corporation
P.O. Box 5191
Martinsville, VA
24115
703-632-2961
PROXY STATEMENT DATED AND MAILED APRIL 19, 1994
GENERAL
Proxies in the form enclosed are solicited by the Board of Directors for the
1994 Annual Meeting of Stockholders to be held at 10:00 a.m. on Thursday,
May 19, 1994 at the Company's Customer Service Center, State Route 174,
Martinsville, Virginia. Any stockholder giving a proxy may revoke it at any
time before it is voted by written notice to the Company, P. O. Box 5191,
Martinsville, Virginia 24115, Attention: James M. Baker, Corporate Secretary,
by the execution of a proxy with a later date, or by voting in person the
shares represented by the proxy.
The cost of solicitation of proxies will be borne by the Company. In addition
to the use of the mails, proxies may be solicited personally or by telephone
by regular employees of the Company, but no special compensation will be paid
to any regular employees for personal solicitation of proxies. Banks,
brokerage houses and other institutions, nominees and fiduciaries will be
requested to forward the soliciting material to beneficial owners and to
obtain authorization for the execution of proxies. The Company will, upon
request, reimburse such parties for their reasonable expenses in forwarding
proxy material to their beneficial owners.
OWNERSHIP OF EQUITY SECURITIES
On March 14, 1994, the date for determining stockholders entitled to notice of
and to vote at the Annual Meeting (the "Record Date"), there were outstanding
and entitled to vote 29,794,698 shares of Common Stock and 150,000 shares of
Cumulative Convertible Preferred Stock, $7.50 Series B (the "Series B
Preferred Stock"). The Common Stock and the Series B Preferred Stock have one
vote per share on all matters, including those to be acted on at the Annual
Meeting.
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The table below presents certain information as of the Record Date regarding
beneficial ownership of shares of Common Stock by all directors and nominees
for director, by the Chief Executive Officer and the four next most highly
compensated executive officers, by all directors and executive officers as a
group and by owners of 5% or more of the Common Stock. The Series B Preferred
Stock is owned by Simon Trust Partnership No. 3 (25%), Herbert Simon Trust No.
3 (25%) and L. G. Sale Corporation, Inc., (50%), respectively.
<TABLE>
<CAPTION>
SOLE VOTING AND AGGREGATE
INVESTMENT PERCENTAGE
NAME POWER (1) OTHER (2) OWNED
<S> <C> <C> <C>
Charles W. Davies, Jr.................................................. 268,714 142 *
Lathan M. Ewers, Jr.................................................... 5,250 1,675 *
John M. Franck......................................................... 737,418 103,638 2.82
William F. Franck...................................................... 919,902 175,231 3.68
J. Burness Frith....................................................... 380,000 1,200 1.28
Irving M. Groves, Jr................................................... 43,998 44,386 *
H. Richard Hunnicutt, Jr............................................... 35,000 -- *
Bruce M. Jacobson (3).................................................. 2,000 -- *
Richard M. Simmons, Jr................................................. 176,121 615 *
John M. Tully.......................................................... 282,524 81,696 1.22
B. Alvin Ratliff....................................................... 60,196 4,071 *
John J. Smith.......................................................... 23,150 47 *
Don P. Shook........................................................... 60,977 18,200 *
Executive officers and directors as a group (17 persons
including those named above)......................................... 3,185,750 440,585 12.01
Sound Shore Management, Inc............................................ 1,772,600(4) -- 5.95(4)
8 Sound Shore Drive
Greenwich, Connecticut
</TABLE>
* Less than 1%
(1) Includes shares that may be acquired by certain of the Company's officers
within 60 days under the Company's stock option plans.
(2) Includes shares (a) owned by or with certain relatives; (b) held in
various fiduciary capacities; and (c) held by certain corporations.
(3) Mr. Jacobson is the designee of Simon Trust Partnership No. 3, Herbert
Simon Trust No. 3, and L. G. Sale Corporation, Inc., which own 37,500
shares, 37,500 shares and 75,000 shares, respectively, of the Series B
Preferred Stock which are convertible into an aggregate of 1,496,260
shares (4.90%) of Common Stock.
(4) As of December 31, 1993, as reported in Schedule 13G filed by Sound Shore
Management, Inc.
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Corporation's directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, file with the
Securities and Exchange Commission initial reports of ownership and reports of
change in ownership of Common Stock and other equity securities of the
Company. The same persons are also required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms that they file.
Based solely on its review of the forms required by Section 16(a) of the
Securities Exchange Act of 1934 that have been received by the Company or
written representations from certain reporting persons that no annual
statements on Form 5 were required, the Company believes that all filing
requirements applicable to its officers, directors and beneficial owners of
greater than 10% of its Common Stock have been complied with.
ELECTION OF DIRECTORS
Proxies will be voted for the election of the following 10 nominees as
directors to serve until the 1995 Annual Meeting of Stockholders. The election
of each nominee for director requires the affirmative vote of the holders of a
plurality of the shares cast in the election of directors. Votes that are
withheld and shares held in street name that are not voted in the election of
directors will not be included in determining the number of votes cast. All of
the nominees are presently members of the Board and were elected by
stockholders at last year's Annual Meeting. The Board of Directors has no
reason to believe that any of the nominees will be unavailable for service if
elected, but if any are unavailable, proxies will be voted for such substitute
as the Board may designate.
NAME AGE DIRECTOR SINCE
Charles W. Davies, Jr................................ 45 1990
Lathan M. Ewers, Jr.................................. 52 1993
John M. Franck....................................... 41 1984
William F. Franck.................................... 76 1950
J. Burness Frith..................................... 78 1978
Irving M. Groves, Jr................................. 65 1978
H. Richard Hunnicutt, Jr............................. 55 1981
Bruce M. Jacobson.................................... 44 1992
Richard M. Simmons, Jr............................... 67 1973
John M. Tully........................................ 69 1964
CHARLES W. DAVIES, JR. became President and Chief Operating Officer in January
1991, after serving as Executive Vice President since December 1989. From
February 1988 through November 1989, he was President and Chief Executive
Officer of Signal Apparel Company in Chattanooga, Tennessee. Mr. Davies was
President of Little Cotton Manufacturing Company in Wadesboro, North Carolina
from March 1986 to February 1988 and was Senior Vice President of
Fieldcrest-Cannon in Kannapolis, North Carolina from December 1984 through
February 1986.
LATHAN M. EWERS, JR. has been a partner in Hunton & Williams, Richmond,
Virginia, counsel to the Company, since 1976.
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JOHN M. FRANCK was Vice President of the Company from 1984 until November
1988, at which time he became President and Chief Operating Officer. Effective
January 1, 1991, he became Chairman of the Board of Directors and Chief
Executive Officer. He is the son of William F. Franck.
WILLIAM F. FRANCK, Chairman Emeritus, retired December 31, 1993. He was
Chairman of the Board of Directors of the Company from 1984 to November 1988,
and was its Chief Executive Officer from 1952 to November 1988. Mr. Franck is
a director of Henry County Plywood Corporation, Martinsville, Virginia, a
plywood manufacturer. He is the father of John M. Franck.
J. BURNESS FRITH was Chairman of the Board of Directors of Frith Construction
Company, Inc., Martinsville, Virginia, from 1984 to 1993 when he retired and
became "Honorary Chairman."
IRVING M. GROVES, JR. is President and Chairman of the Board of Piedmont
BankGroup Incorporated, the parent of Piedmont Trust Bank. Mr. Groves was
President of Piedmont Trust Bank, Martinsville, Virginia, from 1973 through
December 1993, when he retired from that position. Mr. Groves is a director of
Piedmont BankGroup Incorporated, Hooker Furniture Corporation, Martinsville,
Virginia, a furniture manufacturing firm, and Multitrade Group, Inc., a
generator of steam energy.
H. RICHARD HUNNICUTT, JR. was Chairman and Chief Executive Officer of the
Company from November 1988 through December 1990 when he retired. He was
President and Chief Operating Officer from 1984 to 1988.
BRUCE M. JACOBSON has been a partner in Katz, Sapper & Miller, Indianapolis,
Indiana, certified public accountants, since 1977. In connection with the
Company's acquisition of Logo 7, Inc. on January 31, 1992 and the issuance of
the Series B Preferred Stock, the Company agreed that so long as the previous
shareholders of Logo 7 and their affiliates hold at least 3% of the voting
securities of the Company (on a fully-diluted basis), the Company has agreed
to nominate a designee of such shareholders for election to the Board. Mr.
Jacobson is the designee.
RICHARD M. SIMMONS, JR. is the retired Chairman of the Board of Virginia
Carolina Freight Lines, Inc., Martinsville, Virginia, a trucking firm. He
served as Chairman from 1987 until 1992. He was a consultant to American
Furniture Company from 1987 to 1988, and was its President from 1961 to 1987
and its Chairman of the Board from 1974 to 1986. He is a director of Piedmont
BankGroup Incorporated and Dibrell Brothers, Inc., Danville, Virginia, tobacco
manufacturers.
JOHN M. TULLY was Treasurer of the Company from 1975 until he retired in 1985.
COMMITTEES OF THE BOARD
The only standing committees of the Board of Directors are the Audit
Committee, the Nominating Committee and the Executive Compensation Committee.
The AUDIT COMMITTEE reviews with management and the Company's auditors the
scope of the annual audit, the results of the audit and the Company's internal
accounting and control systems. The Audit Committee also recommends to the
full Board of Directors the auditors to be appointed by the Board (subject to
stockholder ratification) and reviews the auditors' services to the Company
and their fees. The NOMINATING COMMITTEE reviews the qualifications of
possible candidates recommended by stockholders, provided that stockholder
recommendations are submitted in
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writing addressed to the Secretary of the Company, are accompanied by
statements signed by the recommended candidates of their willingness to serve,
if elected, and are received not later than 120 days before the date that
proxy material is mailed to stockholders for the annual meeting of
stockholders at which the recommended candidates, if approved by the
Nominating Committee and the incumbent Board of Directors, would be nominated
by the Board for election by the stockholders. The EXECUTIVE COMPENSATION
COMMITTEE administers the Company's stock option plans and other incentive
programs, approves or recommends to the Board changes in compensation for the
Chief Executive Officer and Chief Operating Officer and approves all Company
employee benefit programs.
The members of Committees of the Board are:
AUDIT COMMITTEE -- Irving M. Groves, Jr., J. Burness Frith and John M. Tully
NOMINATING COMMITTEE -- H. Richard Hunnicutt, Jr., Lathan M. Ewers, Jr. and
John M. Franck
EXECUTIVE COMPENSATION COMMITTEE -- Bruce M. Jacobson and Richard M. Simmons,
Jr.
The Board of Directors held five meetings during the fiscal year ended January
1, 1994. The Audit Committee of the Board held two meetings during the year,
the Executive Compensation Committee held five fully attended meetings, and
the Nominating Committee held one fully attended meeting. During the fiscal
year ended January 1, 1994, each director attended more than 75% of the
meetings of the Board and of any committee on which he serves, except Mr.
Groves who attended three of the five Board meetings and one of the two Audit
Committee meetings held during the year.
COMPENSATION OF DIRECTORS
Directors of the Company who are not full-time employees are paid a fee of
$2,500 for each fiscal quarter. In addition to this they are paid $1,000 for
each Board meeting attended and $1,000 for each Committee meeting attended
which does not fall on a Board meeting day. They are paid $500 for each
Committee meeting attended that falls on the same day as a regularly scheduled
Board meeting.
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
JOHN M. FRANCK, Chairman of the Tultex Board, is a director of Piedmont Trust
Bank and serves on the Bank Board's Asset/Liability Management, Audit/Code of
Conduct, and Corporate Benefit and Compensation committees. IRVING M. GROVES,
JR., a director of Tultex, was President and a director of Piedmont Trust Bank
until retiring at the end of December 1993. Mr. Groves continues to serve as
President, CEO and Chairman of the Board of Piedmont BankGroup, Incorporated,
which is the parent of Piedmont Trust Bank.
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EXECUTIVE COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
This report by the Executive Compensation Committee is required by rules of
the Securities and Exchange Commission. It is not to be deemed incorporated by
reference by any general statement which incorporates by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, and it is not to be otherwise deemed filed under either
such Act.
Two outside directors comprise the Executive Compensation Committee of the
Board of Directors. Neither of these outside directors serves on the board of
the other committee member's company or organization and none of the executive
officers of Tultex serve on the board of any committee member's organization.
The Committee has access to outside consultants and counsel.
The Committee oversees three elements of executive compensation: base pay or
salary, annual performance bonus, and long-term compensation, which consists
of a stock option plan approved by shareholders. The Committee seeks to
provide a competitive compensation package that enables the Company to attract
and retain key executives, to integrate pay programs with the business
objectives of the Company, and to link individual executive compensation with
the Company's performance. The Committee surveys other comparable companies
and believes that Tultex's current executive compensation generally is in line
with comparable companies.
BASE PAY. The salary paid to the Company's executives is targeted to be
competitive with related industry companies of similar size, taking into
account the experience of individual officers. In general, the Committee
attempts to fix base salaries at lower levels to emphasize result-oriented
factors reflected in a bonus potential and the value of stock options. The
Committee reviews salaries and pay ranges for the named executives, and
salaries may be increased based on the Committee's assessment of an
individual's performance and contributions to Tultex's goals. All of the
Company's executive employees were eligible for 1993 base pay increases, but
the Committee recommended, and the Board agreed, not to increase the base pay
for four of the five named executives. Effective August 1, 1993, the annual
salary of Charles W. Davies, Jr. was raised from $240,000 to $275,000, but in
connection with a general salary freeze imposed by Mr. Davies as Chief
Operating Officer, two months later Mr. Davies reduced his salary to its prior
level, with the Committee's concurrence. The Committee and Board's decisions
for 1993 compensation were based on the Company's modest performance in 1992
and the decrease in the Company's stock price from 1992 to 1993 reflected on
the stock performance graph in this Proxy Statement.
BONUS. The Board has approved and the Committee administers an annual
incentive bonus plan by which the Company's senior executives may earn cash
bonus awards based on corporate financial performance. The threshold at which
bonus awards are made is annual per share earnings of $0.69 for a minimum
bonus and $1.13 per share for a full bonus. The bonus pool comprises 98
shares, with seven officers holding shares ranging from 10 shares (three
officers) to 24 shares (one officer). If the performance criterion for a full
bonus had been achieved, bonus awards totalling approximately $975,000 would
have been paid to the Company's five most senior executive officers in 1993.
Since the Company did not earn $0.69 per share in 1993, no payments were made
under the bonus plan.
LONG-TERM INCENTIVE. The Company's only method of awarding long-term
compensation is its incentive stock option plan, approved by shareholders.
Nine officers are eligible to receive grants under the stock option plan,
including the five named executive officers. Grants under the plan normally
extend for 10
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years, cannot be exercised until one year after the date of grant, are priced
at fair market value on the date of grant, and are intended to provide
incentive for future performance rather than reward past performance. Together
with base pay and bonuses, the Committee reviews material for comparable
companies in determining grants to be made to the named executive officers. In
1993, the Committee granted Mr. Davies, the Chief Operating Officer, an option
to purchase 150,000 shares (53.6% of options granted in 1993) in recognition
of his importance to the future performance of the Company and the need to
provide him incentives for carrying out his key role at Tultex.
1993 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER. John M. Franck is eligible
to participate in the same executive compensation plans as the other named
executives. The Committee's approach to setting Mr. Franck's target annual
compensation is to set a compensation level commensurate with his
responsibilities and the objectives of his position that will be competitive
with other textile and apparel companies of comparable size. In setting Mr.
Franck's base salary, the Committee has compared his salary to the salaries of
other chief executive officers in the Company's peer group, including those
included in the performance graph, and in 1993 determined not to increase his
salary. Mr. Franck did not receive a bonus in 1993, but was granted options to
purchase 15,000 shares, 5.4% of options awarded in 1993.
EXECUTIVE COMPENSATION COMMITTEE
Bruce M. Jacobson
Richard M. Simmons, Jr.
Dated: April 19, 1994
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EXECUTIVE COMPENSATION
The following table presents information relating to total compensation of the
Chief Executive Officer and the four next most highly compensated executive
officers of the Company during the fiscal year ended January 1, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
COMPENSATION
OTHER ANNUAL AWARDS
NAME AND COMPENSATION OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) (SHARES) COMPENSATION (2)
<S> <C> <C> <C> <C> <C> <C>
John M. Franck 1993 $ 240,000 -- $ -- 15,000 $ --
Chairman and Chief 1992 240,000 -- -- 0 --
Executive Officer 1991 240,000 -- 435 0 --
Charles W. Davies, Jr. 1993 245,834 -- -- 165,000 --
President and 1992 240,000 -- -- 15,000 --
Chief Operating Officer 1991 240,000 -- 435 15,000 --
B. Alvin Ratliff 1993 172,800 -- -- 23,000 --
Vice President of 1992 172,800 -- -- 15,000 --
Operations 1991 172,800 -- 1,580 0 --
John J. Smith 1993 146,400 -- 1,860 8,000 --
Vice President of 1992 146,400 -- 1,595 15,000 --
Customer Service 1991 146,400 -- 1,595 0 --
Don P. Shook 1993 144,000 -- -- 18,000 936
Vice President of 1992 144,000 -- -- 15,000 288
Finance 1991 144,000 -- 1,740 0 288
</TABLE>
(1) Country club dues and fees.
(2) Payment of excess life insurance premium.
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The following tables present information concerning stock options granted to
the Chief Executive Officer and the four next most highly compensated
executive officers of the Company and exercises of options by such persons.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL
OPTIONS RATES OF STOCK PRICE
OPTIONS GRANTED TO APPRECIATION
GRANTED EMPLOYEES IN EXERCISE OR EXPIRATION FOR OPTION TERM
NAME (SHARES) FISCAL YEAR BASE PRICE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
John M. Franck.............. 15,000 5.4% $ 6.88 12/08/98 $ 28,512 $ 63,005
Charles W. Davies, Jr....... 15,000} 58.9 9.13 01/28/98 37,837 83,609
150,000 (1) 8.63 07/22/03 814,104 2,063,100
B. Alvin Ratliff............ 8,000} 8.2 8.00 10/28/98 17,682 39,073
15,000} 6.88 12/08/98 28,512 63,005
John J. Smith............... 8,000 2.9 8.00 10/28/98 17,682 39,073
Don P. Shook................ 8,000} 6.4 8.00 10/28/98 17,682 39,073
10,000} 6.88 12/08/98 19,008 42,003
</TABLE>
(1) Options for 50,000 shares become exercisable commencing July 22, 1996,
1997 and 1998, respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FY-END (SHARES) IN-THE-MONEY OPTIONS AT
FY-END (2)
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
John M. Franck............... -- $ -- 15,000 -- $ 105,000 --
Charles W. Davies, Jr........ -- -- 80,000 150,000 -- --
B. Alvin Ratliff............. 15,000 18,500 33,000 5,000 105,000 --
John J. Smith................ 30,000 48,600 18,000 5,000 -- --
Don P. Shook................. 20,000 39,900 28,000 5,000 70,000 --
</TABLE>
(1) Calculated based on the difference between the exercise price and the
closing price of Company Common Stock on the New York Stock Exchange on
the exercise date.
(2) Calculated based on the difference between the exercise price and $7.00,
the closing price of Company Common Stock on the New York Stock Exchange
on December 31, 1993.
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RETIREMENT PLAN. The Company maintains for the benefit of its eligible
employees a defined benefit pension plan qualified under section 401(a) of the
Internal Revenue Code. The following table illustrates annual retirement
benefits payable under the plan at the indicated Final Average Compensation
and Credited Service levels, assuming retirement at age 65 in 1994:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFITS PAYABLE FOR CREDITED
SERVICE OF
FINAL AVERAGE EARNINGS 10 YEARS 20 YEARS 30 YEARS 40 YEARS
<S> <C> <C> <C> <C>
$100,000................................. $ 10,560 $ 21,120 $ 31,680 $ 36,680
150,000................................. 16,560 33,120 49,680 57,180
200,000................................. 22,560 45,120 67,680 77,680
250,000................................. 28,560 57,120 85,680 98,180
300,000................................. 34,560 69,120 103,680 118,680
</TABLE>
Benefits are paid to plan participants based on their final average
compensation (as limited according to federal tax laws), years of credited
service with the Company, and the amount of covered compensation (as
determined by Social Security). Benefits under the Retirement Plan are not
subject to any deduction for Social Security or other offset amounts. Under
current federal tax law, in 1994 compensation in excess of $150,000 may not be
taken into account for purposes of accruing benefits under the Retirement
Plan.
The number of credited years of service for each person named in the Summary
Compensation Table are as follows: John M. Franck -- 17 years, Charles W.
Davies, Jr. -- 17 years, B. Alvin Ratliff -- 26 years, John J. Smith -- 9
years, and Don P. Shook -- 19 years.
The Company maintains a supplemental benefit plan to provide key management
personnel who have satisfied the eligibility requirements with supplemental
retirement benefits, including a retirement benefit which, when aggregated
with the benefit available under the retirement plan, is equivalent to 50% of
their final average earnings for 30 years of service. The eligibility
requirements include being 100% vested under the retirement plan. The majority
of this benefit will be funded through the retirement plan, with the balance
being funded by the Company through a supplemental nonqualified program which
is funded through the purchase of life insurance policies on each covered
individual. Benefits under the supplemental benefit plan are fully vested
after five years of service. The estimated annual benefits under the
supplemental benefit plan for each officer named in the Summary Compensation
Table are as follows: John M. Franck -- $53,760, Charles W. Davies,
Jr. -- $48,384, B. Alvin Ratliff -- $38,707, John J. Smith -- $18,036 and Don
P. Shook -- $22,624.
EMPLOYMENT CONTRACTS AND EMPLOYMENT CONTINUITY AGREEMENTS
The Company has entered into employment continuity agreements with John M.
Franck, Charles W. Davies, Jr., B. Alvin Ratliff, John J. Smith, and Don P.
Shook, which provide for their continued employment in the event of a change
in control of the Company and the payment of compensation and benefits if
their employment is terminated following a change in control. The Board of
Directors believes that these agreements will enable key employees to conduct
the Company's business with less concern for personal economic risk when faced
with a possible change in control. The Board believes the agreements also
should enhance the Company's ability to attract new key executives as needed.
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The agreements define "change in control" as occurring when a person becomes
the owner of 20% or more of the Company's voting securities or when there is a
change in a majority of the members of the Board of Directors, direct or
indirect, as a result of a cash tender or exchange offer, a merger or other
business combination, a sale of assets, a contested election of directors or a
combination of such transactions. Upon a change in control, the Company agrees
to continue the employee's employment with responsibilities, compensation and
benefits identical to or greater than those prior to the change in control
until the earlier of the third anniversary following the change in control or
the employee's normal retirement date. If employment is terminated without
cause by the Company during this period, or if the employee voluntarily
terminates employment within six months after receiving lesser
responsibilities, compensation or benefits or after being relocated without
his consent, and the employee has made an offer to work that has been rejected
by the Company, the Company must pay the employee compensation as follows: (i)
three times the employee's annual base salary as of his termination date, (ii)
three times the employee's average incentive bonus payable for the two fiscal
years prior to the termination date, (iii) cash or property due as a result of
exercise of stock options, and (iv) amounts the employee is entitled to
receive under the Company's tax-qualified benefit plans and, at the employee's
expense, health care coverage under welfare plans. This compensation will be
reduced, if necessary, to assure that any payments would not be "excess
parachute payments" under the Internal Revenue Code, which imposes significant
penalties on payments under such severance agreements which equal or exceed
300% of an employee's average annual compensation during the five most recent
taxable years ending prior to a change in control. The Company must pay all
legal fees and expenses incurred by the employee in seeking to obtain these
benefits. All agreements continue in effect from year to year unless the
Company notifies the employee before an anniversary date that the agreement
will terminate. The Company has entered into similar agreements with other
members of management.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Frith Construction Company, Inc., of which J. Burness Frith, a director of the
Company, is Honorary Chairman, a director and a principal stockholder,
performed construction work for various manufacturing divisions of the Company
during fiscal 1993. The aggregate amount paid to Frith Construction Company,
Inc. by the Company for such construction work (at cost plus a fixed
percentage of cost) during fiscal 1993 was $427,263.
During fiscal 1993, Piedmont Trust Bank ("Piedmont") performed routine banking
services for the Company. John M. Franck and Richard M. Simmons, Jr. are two
of the 13 current members of the Board of Directors of Piedmont. Piedmont is a
subsidiary of Piedmont BankGroup Incorporated ("BankGroup"). Mr. Simmons and
Irving M. Groves, Jr. are two of the 12 current members of the Board of
Directors of BankGroup.
Multitrade Group, Inc., of which J. Burness Frith and Irving M. Groves, Jr.,
directors of the Company, are shareholders and of which Mr. Groves is a
director, provided the Company with steam energy in fiscal 1993 for which it
was paid $3,989,117.
The Company believes that the terms of the transactions described above are
comparable to terms available for similar transactions with entities
unaffiliated with its officers and directors.
Lathan M. Ewers, Jr. is a partner in the law firm of Hunton & Williams,
general counsel to the Company.
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PERFORMANCE OF COMPANY'S COMMON STOCK
The following graph compares the performance of the Company's Common Stock to
(1) the Standard & Poor 500 Index and (2) a Peer Group Index for the Company's
last five fiscal years. The Company's Peer Group consists of Oneita
Industries, Inc., Russell Corporation, Signal Apparel Co., Techknits, Inc. and
Tultex Corporation. The graph assumes that $100 was initially invested on
December 31, 1988 in the Company's Common Stock and in each index and that all
dividends were reinvested.
COMPARISON OF FIVE YEAR
CUMULATIVE SHAREHOLDER RETURN
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C>
Tultex $ 100.00 $ 125.37 $ 104.98 $ 92.38 $ 120.87 $ 100.35
Peer Group 100.00 154.29 135.54 199.57 186.00 157.98
S&P 500 100.00 131.69 127.60 166.47 179.15 197.21
</TABLE>
APPROVAL OF AMENDMENTS TO 1990 STOCK OPTION PLAN
The Company's 1990 Stock Option Plan (the "Plan") was approved by the
Company's shareholders at the Company's 1991 annual meeting. The Plan
authorized 700,000 shares of Common Stock to be issued pursuant to the
exercise of options and provided that no option may be granted under the Plan
after October 17, 2000.
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As discussed above in the Executive Compensation Committee's Report on
Executive Compensation, the Board of Directors, and the Executive Compensation
Committee thereof, believe that stock options are an important component of
compensation as a long-term incentive that aligns the interest of key
employees with the Company's shareholders. The Company has granted options to
purchase substantially all of the 700,000 shares of Common Stock authorized
under the Plan. Accordingly, the Board of Directors has approved three
amendments to the Plan: (1) to authorize the issuance of an additional 500,000
shares of Common Stock upon exercise of options granted under the Plan; (2) to
provide that no option may be granted under the Plan after October 27, 2003;
and (3) to provide that no Participant may be granted options in any calendar
year for more than 50,000 shares of Common Stock. The Board believes these
amendments to the Plan will benefit the Company by assisting it in recruiting
and retaining employees with ability and initiative, providing greater
incentive for employees of the Company, and associating the interests of
employees with those of the Company and its shareholders through opportunities
for increased stock ownership. The principal features of the Plan as currently
in effect are described below.
The Executive Compensation Committee of the Board of Directors (the
"Committee") administers the Plan. The Committee may delegate to an officer of
the Company the Committee's authority to administer the Plan. The Committee
may not delegate its authority with respect to employees who are subject to
the reporting requirements and other limitations of Section 16 of the
Securities Exchange Act of 1934, however. The Committee, or its delegate, will
select the employees who will be granted stock options ("Participants"). No
person may participate in the Plan while he is a member of the Committee.
Options granted under the Plan may be incentive stock options ("ISOs") or
nonqualified stock options. A stock option entitles the Participant to
purchase shares of Common Stock from the Company at the option price. The
option price will be fixed by the Committee at the time the option is granted,
but in the case of an ISO, the price cannot be less than the share's fair
market value on the date of grant. The option price may be paid in cash, or,
if permitted by the terms of the option agreement, with shares of Common Stock
or a combination of cash and Common Stock. In addition, if the agreement
permits, payment of the option price may be made in installments. In that
event, the Company may lend the Participant up to 90% of the option price,
payable within five years in annual installments at a minimum rate required to
avoid imputed interest or original issue discount under the Internal Revenue
Code. Shares purchased with the loan are pledged to the Company until the loan
is repaid.
All awards made under the Plan are evidenced by written agreements between the
Company and the Participant. The Committee will determine the amounts, times
and other terms of awards. No option shall be exercisable after the expiration
of 10 years from the date the option was granted. The Committee may, in its
discretion, accelerate the time at which any option may be exercised.
Currently, there is no limit on the number of options that may be granted to
any individual in a year.
Currently, a maximum of 700,000 shares of Common Stock may be issued upon the
exercise of options. The Board has approved an additional 500,000 shares for
issuance under the Plan. Options for 655,100 shares have been issued. The
maximum number of shares will be adjusted, as the Committee determines is
appropriate, in the event of a change in the number of outstanding shares of
Common Stock by reason of a stock dividend, stock split, combination,
reclassification, recapitalization, or other similar events. The terms of
outstanding awards also may be adjusted by the Committee to reflect such
changes.
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Currently, no option may be granted pursuant to the Plan after October 17,
2000. The Board of Directors may, without further action by the shareholders,
terminate or suspend the Plan in whole or in part. The Board of Directors also
may amend the Plan, except that no such amendment may become effective until
shareholder approval is obtained if the amendment increases the number of
shares of Common Stock that may be issued under the Plan or changes the class
of individuals who may be selected to participate in the Plan.
The Company has been advised by counsel regarding the federal income tax
consequences of the Plan. No income is recognized by a Participant at the time
an option is granted. If the option is an ISO, no income will be recognized
upon the Participant's exercise of the option (although the exercise of an ISO
may affect a Participant's alternative minimum tax liability). Income is
recognized by a Participant when he disposes of shares acquired under an ISO.
The exercise of a nonqualified stock option generally is a taxable event that
requires the Participant to recognize, as ordinary income, the difference
between the share's fair market value and the option price.
The employer (either the Company or a subsidiary) is entitled to claim a
federal income tax deduction on account of the exercise of a nonqualified
option. The amount of the deduction is equal to the ordinary income recognized
by the Participant. The employer will not be entitled to a federal income tax
deduction on account of the grant or the exercise of an ISO. The employer may
claim a federal income tax deduction on account of certain dispositions of ISO
stock.
The approval of the Plan amendments requires the affirmative vote of the
holders of a majority of the shares of Common Stock present or represented by
properly executed and delivered proxies at the Annual Meeting. Abstentions and
shares held in street name ("Broker Shares") voted as to any matter at the
Annual Meeting will be included in determining the number of votes present or
represented at the Annual Meeting. Broker Shares that are not voted on any
matter at the Annual Meeting will not be included in determining the number of
shares present or represented at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENTS TO THE PLAN DESCRIBED HEREIN.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Price Waterhouse, independent certified
public accountants, to examine the financial statements of the Company for the
fiscal year ending December 31, 1994. Shareholders will be asked to ratify
this appointment at the Annual Meeting. Price Waterhouse has been the
Company's independent accountants since 1971.
Representatives of Price Waterhouse are expected to be present at the meeting
and will be given an opportunity to make a statement if they desire to do so.
They are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF
PRICE WATERHOUSE AS AUDITORS.
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STOCKHOLDER PROPOSALS
Stockholders having proposals which they desire to present at next year's
annual meeting should, if they desire that such proposals be included in the
Board of Directors' proxy and proxy statement relating to such meeting, submit
such proposals in time to be received by the Company at its principal
executive offices in Martinsville, Virginia, not later than October 20, 1994.
To be so included, all such submissions must comply with the requirements of
Rule 14a-8 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934 and the Board of Directors directs the close attention of
interested stockholders to that Rule.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matter to come before the meeting other than those stated in the notice of the
meeting. As to other matters, if any, that may properly come before the
meeting, it is intended that proxies in the accompanying form will be voted in
accordance with the best judgment of the persons named therein.
We hope that you will be able to attend this meeting in person, but if you
cannot be present, please execute the enclosed proxy and return it in the
accompanying envelope (no postage required) as promptly as possible. Your
stock will be voted in accordance with the instructions you give on the proxy,
and in the absence of any such instructions will be voted FOR election of
directors, the amendments to the 1990 Stock Option Plan described herein, and
ratification of appointment of auditors, as described herein.
James M. Baker
Secretary
Martinsville, Virginia
April 19, 1994
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