<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[X] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Carlyle Industries, Inc.
--------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedules or Registration Statement No.:
(3) Filing party:
(4) Date filed:
- ----------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
CARLYLE INDUSTRIES, INC.
1430 BROADWAY
NEW YORK, NEW YORK 10018
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1997
----------
TO THE STOCKHOLDERS OF CARLYLE INDUSTRIES, INC.
NOTICE is hereby given that the Annual Meeting (the "Meeting") of
Stockholders of CARLYLE INDUSTRIES, INC. (the "Company"), a Delaware
corporation, will be held at the Company's executive offices, 1430 Broadway,
12th Floor, New York, New York, on April 22, 1997, at 10:00 A.M. for the
following purposes:
1. To elect four directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected.
2. To ratify the selection of Arthur Andersen LLP as the independent
auditors of the Company for the fiscal year ending December 31,
1997.
3. To vote on the approval of certain amendments to the Company's
1994 Incentive Program.
4. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
All of the above matters are more fully described in the accompanying Proxy
Statement.
The Board of Directors has fixed the close of business on March 25, 1997 as
the date for the determination of Stockholders entitled to notice of, and to
vote at, the Meeting. A list of Stockholders entitled to vote at the Meeting
will be open to examination by Stockholders during ordinary business hours for a
period of ten (10) days prior to the Meeting at the executive offices of the
Company, 1430 Broadway, New York, New York 10018. The list will also be
available at the Meeting.
By order of the Board of Directors,
EDWARD F. COOKE
Secretary
New York, New York
March 28, 1997
- --------------------------------------------------------------------------------
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE
MEETING, YOU MAY REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
- --------------------------------------------------------------------------------
<PAGE> 3
CARLYLE INDUSTRIES, INC.
1430 BROADWAY
NEW YORK, NEW YORK 10018
------------
ANNUAL MEETING OF STOCKHOLDERS
------------
PROXY STATEMENT
APPROXIMATE DATE OF MAILING: MARCH 28, 1997
The enclosed Proxy (the "Proxy") is solicited on behalf of the Board of
Directors (the "Board") of Carlyle Industries, Inc. (f/k/a Belding Heminway
Company, Inc.) (the "Company") for use at the Annual Meeting of Stockholders to
be held at the time and place set forth in the foregoing notice and at any
adjournments thereof (the "Meeting"). Proxies in the accompanying form, which
are properly executed and duly returned to the Company and not revoked prior to
exercise, will be voted in accordance with the instructions contained therein.
If a proxy is executed and returned without instructions as to how it is to be
voted, such proxy will be voted in favor of all proposals contained in this
Proxy Statement. Each proxy granted pursuant to this solicitation is revocable
and may be revoked at any time prior to its exercise provided written notice of
revocation is received by the Secretary of the Company prior to the Meeting. A
Stockholder who attends the Meeting in person may, if he or she wishes, vote by
ballot at the Meeting, thereby canceling any proxy previously given by such
Stockholder.
The Company has two classes of outstanding voting securities entitled to be
voted at the Meeting: common stock, $0.01 par value per share (the "Common
Stock") and Series B Preferred Stock, $0.01 par value per share (the "Preferred
Stock"). The Common Stock and the Preferred Stock are referred to herein
together as the "Capital Stock" of the Company. Each outstanding share of
Capital Stock (i.e., Preferred Stock and Common Stock) is entitled to one vote.
Unless otherwise stated, the Common Stock and the Preferred Stock will vote
together as a single class on all matters submitted for a Stockholders' vote at
the Meeting.
March 25, 1997 has been fixed by the Board as the record date for the
determination of Stockholders entitled to notice of, and to vote at, the
Meeting. At the close of business on March 1, 1997, there were outstanding and
entitled to vote 7,388,282 shares of Common Stock and 20,805,060 shares of
Preferred Stock.
The holders of a majority of the shares of Capital Stock issued and
outstanding and entitled to vote at the Meeting, present in person or
represented by proxy, shall constitute a quorum at the Meeting. Any Stockholder
present in person or by proxy at the Meeting who abstains from voting on any
particular matter described herein will nonetheless be counted for purposes of
determining a quorum. For purposes of voting on the matters described herein,
the affirmative vote of (i) a plurality of the shares of Capital Stock present
or represented by proxy at the Meeting and entitled to vote is required to elect
management's four nominees for election to the Board; (ii) a majority of the
shares of Capital Stock present or represented by proxy at the Meeting and
entitled to vote is required to ratify the selection by the Board of Arthur
Andersen LLP as independent auditors of the Company for the fiscal year ending
December 31, 1997; and (iii) a majority of the shares of Capital Stock present
or represented by proxy at the Meeting and entitled to vote is required to
approve the proposed amendments to the Company's 1994 Incentive Program (the
"Incentive Program").
<PAGE> 4
With respect to the election of directors, only shares that are voted in
favor of a particular nominee will be counted towards such nominee's achievement
of a plurality. Shares present at the Meeting that are not voted for a
particular nominee, shares present by proxy where the Stockholder properly
withholds authority to vote for such nominee and broker non-votes will not be
counted towards such nominee's achievement of a plurality. With respect to any
of the other matters to be voted upon, if the Stockholder abstains from voting
or directs his proxy to abstain from voting, the shares are considered present
at the Meeting for such matter but, since they are not affirmative votes for the
matter, they will have the same effect as votes against the matter. With respect
to broker non-votes on any such matter, the shares are not considered present at
the Meeting for such matter and they are, therefore, not counted in respect of
such matter. Such broker non-votes do have the practical effect of reducing the
number of affirmative votes required to achieve a majority for such matter by
reducing the total number of shares from which the majority is calculated.
EXECUTIVE OFFICERS
The executive officers of the Company are identified in the table below.
Each executive officer of the Company serves at the pleasure of the Board.
<TABLE>
<CAPTION>
Year Became an
Name Age Executive Officer Positions
- ---- --- ----------------- ---------
<S> <C> <C> <C>
Karen Brenner 41 1996 Chairman of the Board, President and
Chief Executive Officer
Edward F. Cooke 43 1994 Vice President, Chief Financial Officer
and Secretary
</TABLE>
ELECTION OF DIRECTORS
(PURPOSE 1)
At the Meeting, four directors are to be elected to serve until their
successors are elected and qualify. The Board has designated the individuals
named below as nominees. Proxies received from Stockholders of the Company will
be voted, unless authority to so vote is withheld, for the election of the
Board's nominees. Authority to vote for any or all of the nominees may be
withheld in the manner indicated on the enclosed proxy. If for any reason any of
the nominees for election to the Board becomes unavailable for election, the
proxies solicited will be voted for such other nominees as are selected by the
Board. The Board has no reason to believe that any of the nominees will not be
available or will not serve if elected. All of the nominees for election at this
Meeting were previously elected by the Company's Stockholders as directors of
the Company.
The number of directors currently constituting the full Board of Directors
of the Company is seven. As of the date of the Meeting, there will be three
vacancies on the Board, for which management is not submitting any nominees. The
Board intends, immediately following the Meeting, to reduce the number of
directors constituting the whole Board to four, in order to eliminate the
vacancies. If, following the Meeting, the Board selects one or more additional
persons to serve as directors, the Board will increase the number of directors
constituting the whole Board in order to create the necessary vacancies to be
filled by such persons. No such persons have been selected and, accordingly,
there is no current plan to increase the number of directors constituting the
full Board to more than four.
2
<PAGE> 5
NOMINEES FOR DIRECTORS
<TABLE>
<CAPTION>
Year First
Name Age Became a Director
- ---- --- -----------------
<S> <C> <C>
Karen Brenner 41 1996
Robert A. Levinson 71 1993
Samuel F. Pryor, IV 41 1993
Joseph S. DiMartino 53 1995
</TABLE>
The Board recommends a vote FOR each of the nominees for election as
directors.
BIOGRAPHICAL INFORMATION
Certain information about the executive officers and the nominees for
election as directors is set forth below. This information has been furnished to
the Company by the individuals named.
Ms. Brenner was elected President and Chief Executive Officer of the
Company effective as of October 9, 1996, and was appointed Chairman of the Board
of the Company in May 1996. Ms. Brenner served as Vice Chairman of the Company
from February 1996 until she was appointed Chairman and was engaged as a
consultant to the Company in February 1996. Ms. Brenner is currently a Managing
Director and has been affiliated with the Noel Group, Inc., a publicly held
leveraged buy-out company ("Noel"), in various executive capacities since 1989.
She has been responsible for making investment decisions for Noel and for the
oversight of its portfolio companies. From 1992 until 1994, Ms. Brenner served
as Chairman of the Board and a consultant to The Forschner Group, Inc.
Ms. Brenner is Chairman of the Board and Chief Executive Officer of Lincoln
Snacks Company; a director of On Assignment, Inc.; a member of the Board of
Trustees of Prep for Prep; and a trustee of the City Parks Foundation of New
York.
Mr. Levinson is a consultant to Andrex Industries Corp., a company engaged
in textile manufacturing and processing, where he served as Chairman and Chief
Executive Officer from April 1979 to May 1995. Since June 1989, he has served as
Chairman of the Board of Levcor International Inc., a public company engaged in
textile converting and oil and gas production.
Mr. Pryor is currently a Managing Director of Noel, the President of the
Prospect Group, Inc., a leveraged buy-out company ("Prospect'), and the
President of Brazil Rail Partners, LLC, a private consulting company. He has
been affiliated with Noel in various executive capacities since October 1990 and
has been affiliated with Prospect in various executive capacities since 1986.
Mr. Pryor is a director of Prospect, HealthPlan Services Corporation and
Illinois Central Corporation.
Mr. DiMartino is the Chairman of the Board of Noel. He has served in that
capacity since March 1995. Since January 1995, Mr. DiMartino has been Chairman
of the Board, a director, a trustee or the Managing General Partner of various
funds in the Dreyfus Family of Funds. For more than five years prior thereto, he
was President, a director, and until December 1994, Chief Operating Officer, of
the Dreyfus Corporation (the "Fund Manager"), and Executive Vice President and
a director of Dreyfus Service Corporation, a wholly-owned subsidiary of the
Fund Manager and, until August 1994, the Fund's distributor. From August 1994
to December 1994, he was a director of Mellon Bank Corporation. He is a
trustee of
3
<PAGE> 6
Bucknell University, and a director of the Muscular Dystrophy Association and
HealthPlan Services Corporation.
Mr. Cooke was elected Chief Financial Officer of the Company in February
1997, was elected Secretary and Vice President of the Company in April 1996 and
May 1996, respectively, and currently serves in such capacities. Mr. Cooke
served as Controller of the Company from April 1994 until May 1996 and served as
Chief Accounting Officer of the Company from March 1995 until February 1997.
From December 1993 to March 1994, he was a consultant to the Company and advised
the Company in connection with its accounting and financial operations. In
October and November of 1993, Mr. Cooke worked as an independent consultant.
From 1988 until September 1993, Mr. Cooke was the Director of Finance and
Administration at McNamee Consulting Company, Inc. in New York City. In that
capacity, he was responsible for the day to day oversight of financial and
administrative affairs of that firm.
No family relationship exists among the officers and directors of the
Company.
Messrs. DiMartino and Pryor and Ms. Brenner, all of whom are directors of
the Company and nominees for election to the Board at this Meeting, are
affiliated in various capacities with Noel. By virtue of its ownership of Common
Stock and Preferred Stock of the Company, Noel holds voting control of the
Company. See "Principal Stockholders" and "Changes in Control."
COMMITTEES
COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1996 ("fiscal 1996"), the Board
had three standing committees: a Compensation Committee, an Audit Committee and
an Executive Committee, as well as certain special purpose committees.
The Compensation Committee is currently composed of Messrs. Gilbert H.
Lamphere, Joseph S. DiMartino, and Samuel F. Pryor, IV. Each of the
aforementioned persons is not and never was an officer or employee of the
Company or its subsidiaries. However, each of them is or was affiliated in one
capacity or the other with Noel, the controlling stockholder of the Company. See
"Biographical Information". Mr. Lamphere is not standing for re-election to the
Board at the Meeting. The Compensation Committee works closely with the Board in
establishing and implementing the Company's compensation policies and practices.
See "Report of Compensation Committee." Additionally, it administers the
Incentive Program under which employees, officers, directors, key executives,
consultants and advisors of the Company are eligible to receive stock options,
restricted stock and other benefits. See "Executive Compensation - Compensation
of Directors" and "Approval of Amendments to 1994 Incentive Program."
The Audit Committee is currently composed of Messrs. Robert A. Levinson,
William L. Bennett, Samuel F. Pryor, IV and Alan E. Woltz. Messrs. Bennett and
Woltz are not standing for re-election to the Board at the Meeting. The
functions of the Audit Committee are to review the adequacy of systems and
procedures for preparing the financial statements of the Company as well as the
suitability of internal financial controls, and to review and approve the scope
and performance of the independent auditors' work.
The Executive Committee is currently composed of Messrs. Robert A. Levinson
and Joseph S. DiMartino and Ms. Karen Brenner. Mr. Gregory Cheskin, formerly a
member of the Board of Directors and the President and Chief Executive Officer
of the Company, also
4
<PAGE> 7
served as a member of the Executive Committee during portions of fiscal 1996.
He resigned as a member of the Executive Committee effective in October 1996.
The Executive Committee has all the powers and authority granted to the full
Board of Directors and functions as such between meetings of the full Board and
when the full Board is otherwise unable to meet.
The Company does not have a nominating committee.
MEETINGS OF THE BOARD
During fiscal 1996, the Board of Directors held fifteen meetings, the
Compensation Committee held two meetings, the Audit Committee held one meeting
and the Executive Committee held one meeting. Each member of the Board attended
over 75% of the meetings of the Board held in 1996, except for Samuel F. Pryor,
IV, who attended eleven of the fifteen meetings of the Board held in 1996. In
addition, each member of the Compensation Committee, the Audit Committee and the
Executive Committee attended all meetings held of the respective Committees
during fiscal 1996. The Company's directors discharge their responsibilities
throughout the year, not only at Board and committee meetings, but also through
personal meetings and other communications, including telephone contacts with
the Chairman and Chief Executive Officer and others regarding matters of
interest and concern to the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None
PRINCIPAL STOCKHOLDERS
The following table sets forth each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock and/or
Preferred Stock of the Company as of March 1, 1997. Beneficial ownership has
been determined for purposes herein in accordance with Rule 13d-3 of the
Exchange Act, under which a person is deemed to be the beneficial owner of
securities if such person has or shares voting power or investment power in
respect of such securities or has the right to acquire beneficial ownership
within 60 days. On March 1, 1997, there were outstanding 7,388,282 shares of
Common Stock and 20,805,060 shares of Preferred Stock of the Company.
5
<PAGE> 8
<TABLE>
<CAPTION>
COMMON STOCK SERIES B PREFERRED STOCK
------------ ------------------------
Percent of
Amount of Amount of Aggregate
Shares Shares Percent Voting Power
Name and Address of Beneficially Beneficially of of Capital
Beneficial Owner Owned Percent of Class Owned Class Stock
- ------------------- ----- ---------------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
The Noel Group, Inc. (1) 2,205,814 29.81% 19,312,837.5 92.83% 76.3%
667 Madison Avenue
New York, NY 10021
GAMCO Investors, Inc. (2) 507,951 6.88% -- -- 1.8%
c/o Gabelli Funds, Inc.
One Corporate Center
Rye, New York 10580
</TABLE>
(1) Noel acquired the entire equity interest in the Company in October 1993. In
February 1994, Noel made an irrevocable distribution to its common
stockholders of 3,542,404 shares of the Company's Common Stock. In a series
of other transactions, Noel sold, or caused the Company to issue, shares of
the Company's Common Stock and/or Preferred Stock to various affiliates of
Noel and certain members of the Company's management group. As Noel does
not have or share voting or investment power over the securities
transferred to its affiliates or members of the Company's management group,
the shares reported in this table reflect Noel's remaining equity interest
in the Company as of March 1, 1997. Messrs. Joseph S. DiMartino and Samuel
F. Pryor, IV and Ms. Karen Brenner, all of whom are Board nominees for
election at the Meeting, are affiliated in various capacities with Noel.
See "Biographical Information." Each of these directors also beneficially
owns shares of common stock, par value $.01 per share, of Noel ("Noel
Common Stock"), as more particularly set forth in the footnotes to the
table entitled "Equity Securities Beneficially Owned by the Directors and
Named Executive Officers."
(2) Represents shares held by GAMCO Investors, Inc. and various other entities
which are directly or indirectly controlled by Mario J. Gabelli and for
which he acts as chief investment officer, including registered investment
companies and pension plans. This information is based solely upon the
contents of a filing on Schedule 13D dated January 8, 1997 made by Mario J.
Gabelli and related entities with the Securities and Exchange Commission.
6
<PAGE> 9
CHANGES IN CONTROL
As of March 1, 1997, Noel owned beneficially 2,205,814 shares of Common
Stock and 19,312,837.5 shares of Preferred Stock (representing 76.3% of the
issued and outstanding Capital Stock and voting power of the Company). By virtue
of its ownership of the Common Stock and the Preferred Stock, Noel holds voting
control of the Company. Under the terms of the Company's charter, the Preferred
Stock is required to be redeemed by the Company, to the extent of legally
available funds, in installments on or prior to March 1999, subject to the
approval of the Company's banks. In addition, the Company has agreed to notify
the Pension Benefit Guaranty Corporation ("PBGC") thirty days prior to taking
certain actions, including any redemption of the Preferred Stock. To date, the
Company has not made any of the scheduled redemptions, as the Company's lenders
have declined to approve the redemption payments.
The Company intends to fulfill its obligation to redeem the Preferred Stock
as required by the Company's charter to the extent that the Company has cash
resources in excess of those required to operate its business. As the Company
does not currently expect to have such excess resources, its ability to redeem
the Preferred Stock in the future will depend on the Company's future cash flow,
the timing of the settlement of the liabilities recorded in the financial
statements of the Company, and the ability of the Company to obtain financing,
which it has not yet determined to seek. In addition, as the Company has agreed
to notify the PBGC prior to making any redemption payments, as described above,
the Company's decision to make any such payments will depend on the successful
resolution of any issues which may arise with the PBGC relating to the Company's
unfunded liability to its defined benefit plan.
As of March 26, 1997, the Company discharged the last of its credit
facilities. Consequently, if the Company does not give effect to the prior
scheduled redemptions, the Company will be in default of its obligations to the
holders of its Preferred Stock under the terms of its charter documents. The
Company expects to enter into discussions with Noel, with a view to satisfying
its obligations to the Preferred Stockholders in accordance with the terms of
its charter to the extent consistent with the Company's resources. The Company
may also enter into negotiations to modify the terms of the Preferred Stock,
although the Company has not yet determined to do so. If such negotiations are
commenced, they may result in an acceleration of the redemption of the Preferred
Stock or other modifications to the terms of the Preferred Stock, provided the
Company determines that such modifications are in its interest. In the event the
Company redeems the Preferred Stock, at the regularly scheduled redemption dates
in accordance with its charter, or pursuant to an accelerated payment schedule
negotiated with Noel and the other Preferred Stockholders, or otherwise, voting
control of the Company will at that time shift to the holders of the Company's
Common Stock.
EQUITY SECURITIES BENEFICIALLY OWNED BY THE DIRECTORS
AND NAMED EXECUTIVE OFFICERS
According to information furnished to the Company, as of March 1, 1997, the
nominees for election to the Board of Directors of the Company, the Company's
current "named executive officers" (the "Named Executive Officers") within the
meaning of Item 402(a)(3) of Regulation S-K of the Securities Act of 1933, as
amended (the "Act"), and all director nominees and executive officers as a
group, beneficially owned shares of Capital Stock of the Company as set forth
below. Beneficial ownership has been determined for purposes herein in
accordance with Rule 13d-3 of the Exchange Act under which a person is deemed to
be the beneficial owner of securities if such person has or shares voting power
or investment power in respect of such securities or has the right to acquire
beneficial ownership within 60 days.
7
<PAGE> 10
<TABLE>
<CAPTION>
COMMON STOCK SERIES B PREFERRED STOCK
------------ ------------------------
Percent of
Amount of Amount of Aggregate
Shares Shares Percent Voting Power
Name and Address of Beneficially Beneficially of of Capital
Beneficial Owner Owned Percent of Class Owned Class Stock
- ------------------- ----- ---------------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Karen Brenner 254,200(1) 3.35% -- -- (2)
c/o Carlyle Industries,
Inc.
1430 Broadway
New York, New York 10018
Edward F. Cooke 10,000(3) (4) -- -- (2)
c/o Carlyle Industries,
Inc.
1430 Broadway
New York, New York 10018
Samuel F. Pryor, IV 134,066(5) 1.81% 245,028.5(6) 1.18% 1.34%
645 Madison Avenue
Suite 2200
New York, New York 10021
Robert A. Levinson 140,170(7) 1.90% 610,120 2.93% 2.66%
c/o Andrex Industries
Corp.
1071 Avenue of the
Americas
New York, New York 10019
Joseph S. DiMartino 2,230,892(8) 30.18% 19,508,860.5(9) 93.77% 77.11%
c/o Noel Group, Inc.
667 Madison Avenue
New York, New York 10021
All directors and 2,769,328(11)(12) 36.37% 20,364,009(13) 97.88% 81.4%
executive officers as a
group(5 persons)(10)(11)(14)
</TABLE>
- ----------
(1) Consists of: (i) 50,000 shares held by the Noel Group, Inc. Retirement Plan
FBO K. Brenner, and (ii) 204,200 shares which Ms. Brenner could acquire
upon the exercise of stock options.
(2) Represents less than 1% of the aggregate votes entitled to be cast.
8
<PAGE> 11
(3) Includes: (i) 5,000 shares held of record by Mr. Cooke, of which 2,000 are
subject to employment vesting restrictions; and (ii) 5,000 shares which Mr.
Cooke could acquire upon the exercise of stock options.
(4) Represents less than 1% of the outstanding shares.
(5) Consists of: (i) 48,102 shares held of record by Mr. Pryor; (ii) 56,809
shares held by an irrevocable trust for the benefit of Mr. Pryor's minor
children, as to all of which shares Mr. Pryor disclaims beneficial
ownership; (iii) 23,102 shares held by The Prospect Group, Inc. Capital
Accumulation IRC and Profit Sharing Plan for the benefit of Mr. Pryor; (iv)
453 shares held by Mr. Pryor's wife; and (v) 5,600 shares which Mr. Pryor
could acquire upon the exercise of director's stock options. Mr. Pryor also
beneficially owns the following shares of Noel Common Stock which are not
reflected in the table set forth above: 301,665 shares (1.5%) of Noel
Common Stock including 2,583 shares held by Mr. Pryor's wife, 5,748 shares
of Noel Common Stock held by certain trusts for the benefit of Mr. Pryor's
minor children as to all of which shares Mr. Pryor disclaims beneficial
ownership; and 293,334 shares of Noel Common Stock issuable upon exercise
of Noel stock options.
(6) Consists of: (i) 73,508.5 shares of Preferred Stock held of record by Mr.
Pryor; (ii) 98,011.5 shares of Preferred Stock held by an irrevocable trust
for the benefit of Mr. Pryor's minor children, as to all of which shares
Mr. Pryor disclaims beneficial ownership; and (iii) 73,508.5 shares held by
The Prospect Group, Inc. Capital Accumulation IRC and Profit Sharing Plan
for the benefit of Mr. Pryor.
(7) Consists of: (i) 59,570 shares held of record by Mr. Levinson; (ii) 75,000
shares held by three trusts for the benefit of Mr. Levinson's children, as
to all of which trusts Mr. Levinson serves as co-trustee; and (iii) 5,600
shares of Common Stock which could be acquired by Mr. Levinson upon the
exercise of director's stock options.
(8) Consists of: (i) 4,600 shares which could be acquired upon exercise of
director's stock options; (ii) 20,478 shares held by Mr. DiMartino as
trustee under two Rabbi Trusts (the "Rabbi Trusts") established by the
Company for the benefit of former executives under the Company's deferred
compensation program; and (iii) 2,205,814 shares held by Noel, of which Mr.
DiMartino is a director, as to all of which shares Mr. DiMartino disclaims
beneficial ownership. Mr. DiMartino also beneficially owns 808,334 shares
(3.8%) of Noel Common Stock which consists solely of shares issuable upon
exercise of stock options and warrants.
(9) Consists of: (i) 196,023 shares held by Mr. DiMartino as trustee under the
Rabbi Trusts and (ii) 19,312,837.5 shares held by Noel, of which Mr.
DiMartino is a director, as to all of which shares Mr. DiMartino disclaims
beneficial ownership.
(10) For purposes of computing the aggregate number of shares beneficially owned
by directors and Executive Officers of the Company as a group, the same
shares are not counted more than once.
(11) Includes 225,000 shares subject to stock options issued under the Incentive
Program which were exercisable on or within 60 days after March 1, 1997.
(12) Includes 2,205,814 shares held by Noel, as referred to in footnote (8)
above.
(13) Includes 19,312,837.5 shares held by Noel, as referred to in footnote (9)
above.
9
<PAGE> 12
(14) Information relating to the beneficial ownership of securities by Messrs.
Cheskin, Tolles and Silverman, all of whom are deemed to be "named
executive officers" of the Company in respect of fiscal 1996, is not
included in the above table as each of them resigned as an executive
officer of the Company prior to March 1, 1997. Additionally, no information
has been provided as to the current directors of the Company who are not
standing for re-election at the Meeting.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth certain
information concerning the compensation of the Named Executive Officers for the
fiscal years ending as of December 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Restricted
Stock Other Annual All Other
Name and Principal Salary Options Awards Compensation Compensation
Position Year ($) Bonus($) (#)(1) ($)(2) $(3) ($)
-------- ---- --- -------- ------- ------ --------- ---------
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Karen Brenner Fiscal 1996 0 150,000 211,000 0 (3) 210,355(5)
President and
Chief Executive
Officer(4)
- -------------------------------------------------------------------------------------------------------------------------
Edward F. Cooke, Fiscal 1994 67,500 26,000 5,000 0 0
Vice President, Fiscal 1995 94,500 10,000 5,000 0 (3) 1,772(6)
Chief Financial Fiscal 1996 111,750 85,000 0 0 2,804(6)
Officer and
Secretary (7)
- -------------------------------------------------------------------------------------------------------------------------
Gregory H. Cheskin Fiscal 1994 296,667 160,000 40,000 0 75,000(8)
Former Officer(9) Fiscal 1995 335,000 0 0 0 (3) 80,426(6)(8)
Fiscal 1996 327,003 0 0 0 63,079(6)
- -------------------------------------------------------------------------------------------------------------------------
Winton J. Tolles Fiscal 1994 208,333 100,000 20,000 0 55,500(8)
Former Officer(10) Fiscal 1995 230,000 0 0 0 (3) 60,399(6)(8)
Fiscal 1996 202,084 0 0 0 19,135(6)
- -------------------------------------------------------------------------------------------------------------------------
Gary P. Silverman Fiscal 1994 125,000 60,000 5,000 0 0
Former Officer(11) Fiscal 1995 130,000 0 0 0 (3) 3,251(6)
Fiscal 1996 130,000 25,000 0 0 4,063(6)
</TABLE>
(1) Stock options reported under this column were granted under the terms
and provisions of the Incentive Program. For a description of the
stock options granted in fiscal 1996, see "Option Grants in Last
Fiscal Year".
(2) As of July 1, 1993, Messrs. Cheskin, Tolles, Silverman and Cooke were
issued 319,885, 150,000, 12,500 and 0 shares of restricted Common
Stock, respectively; and as of March 1, 1994, Messrs. Cheskin, Tolles,
Silverman and Cooke were issued 9,000, 4,500, 375 and 5,000 shares of
restricted Common Stock, respectively. On those dates there existed no
independent trading market for the Company's Common Stock. The shares
were acquired by the Named Executive Officers at a price of $.20 per
share, which was the then fair market value of the Common Stock as
determined by the Board of Directors. Accordingly, no value has been
attributed to the awards of restricted stock in the Summary
Compensation Table. The restricted shares vest in five equal annual
installments of 20% commencing on the date of grant. Additionally,
they vest immediately upon a "change in control" of the Company. All
of the shares reported in the table below will vest in full on or
prior to March 1998. If
10
<PAGE> 13
the recipient's employment by the Company terminates prior to
vesting, the Company has the right to reacquire any unvested shares
at the lesser of the then fair market value and $.20 per share. The
Company has agreed to waive this right, subject to certain
limitations, in respect of Messrs. Cheskin, Tolles and Silverman. See
"Employment Agreements/Separation Agreements". As of the date of
grant, the recipients are entitled to full voting and dividend rights
on a pro rata basis with the other holders of the Company's
Common Stock.
Based upon the latest information available to the Company, the number
and value of the aggregate restricted stock holdings of Messrs.
Cheskin, Tolles, Silverman and Cooke on December 31, 1996 are set
forth below. Values were calculated by multiplying the closing price
of the Common Stock (as reported on the NYSE on December 31, 1996) by
the respective number of shares and subtracting therefrom the
aggregate consideration paid by the recipients.
<TABLE>
<CAPTION>
Shares Value
Named Executive Officer # ($)
----------------------- ------ ---
<S> <C> <C>
Gregory H. Cheskin 328,885 715,325
Winton J. Tolles 174,385 379,287
Gary P. Silverman 12,875 28,003
Edward F. Cooke 5,000 10,875
</TABLE>
(3) The named executive officer receives certain perquisites; such
perquisites, however, do not exceed the lesser of $50,000 or 10% of
such officer's salary and bonus.
(4) Ms. Brenner was elected to serve as President and Chief Executive
Officer of the Company effective in October 1996.
(5) The amount reflected in this column consists of $188,440 of consulting
fees paid to Ms. Brenner under her Consulting Agreement with the
Company, see "Employment Agreements/Separation Agreements," and
$21,915 of director fees paid to Ms. Brenner for her service on the
Board, see "Director Compensation."
(6) The amounts reported in this column include the matching Company
contributions to the Company's Deferred Compensation 401(k) Plan and
the Non-Qualified Deferred Compensation Program on behalf of the named
executive officers for fiscal years 1995 and 1996 (no contributions
were made in 1994), as set forth below.
<TABLE>
<CAPTION>
Name Qualified Plan ($) Non-Qualified Plan($)
---- ------------------ ---------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gregory H. Cheskin 4,070 4,070 1,357 2,759
Winton J. Tolles 3,675 3,508 1,225 1,752
Gary P. Silverman 2,438 2,438 813 1,625
Edward F. Cooke 1,772 2,023 0 781
</TABLE>
11
<PAGE> 14
(7) Mr. Cooke was elected Chief Financial Officer of the Company in
February 1997, was elected Secretary of the Company effective in April
1996, and was elected Vice President of the Company in May 1996. From
April 1994 until May 1996, Mr. Cooke served as Controller of the
Company, and from March 1995 until February 1997, he served as Chief
Accounting Officer of the Company.
(8) The amounts reported in this column include sums deferred by Messrs.
Cheskin ($75,000 per annum) and Tolles ($55,500 per annum) pursuant to
the Company's "Deferred Compensation Program," see "Employment
Agreements/Separation Agreements," through the dates of their
respective resignations as officers of the Company. No further amounts
have been contributed for them to the "Deferred Compensation Program"
since those dates.
(9) Mr. Cheskin resigned as President, Chief Executive Officer and a
director of the Company effective in October 1996. He will remain an
employee of the Company until October 8, 1997, pursuant to the terms
of his Separation Agreement with the Company. See "Employment
Agreements/Separation Agreements."
(10) Mr. Tolles resigned as Vice President, Chief Financial Officer,
Secretary and a director of the Company effective in May 1996. He will
remain an employee of the Company until May 17, 1997, pursuant to the
terms of his Separation Agreement with the Company. See "Employment
Agreements/Separation Agreements."
(11) Mr. Silverman resigned as Vice President-Human Resources of the
Company effective in January 1997. He will remain an employee of the
Company until July 31, 1997, pursuant to the terms of his Separation
Agreement with the Company. See "Employment Agreements/Separation
Agreements."
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain summary information
concerning individual grants of stock options to purchase shares of Common Stock
made to Named Executive Officers during fiscal 1996. Except as set forth in the
table on the following page, during fiscal 1996 the Company did not grant any
stock options to any of the Named Executive Officers.
12
<PAGE> 15
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Rates of
Stock Price Appreciation
INDIVIDUAL GRANTS for Option Term(2)
- -----------------------------------------------------------------------------------------------------------------------
Percent of Total
Number of Options
Shares Granted to
Underlying Employees in Exercise
Grant Fiscal Year Price Expiration 5% 10%
Name (1)(#) % ($) Date ($) ($)
----- --------- ----------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Karen Brenner 210,000 (3) 2.00 2/9/06 264,600 669,900
1,000 (3) 2.125 5/9/06 1,335 3,385
Edward F. Cooke 0 0 -- -- -- --
Gregory H. Cheskin 0 0 -- -- -- --
Winton J. Tolles 0 0 -- -- -- --
Gary P. Silverman 0 0 -- -- -- --
</TABLE>
(1) In February 1996, Ms. Brenner received stock options under the
Incentive Program to purchase 200,000 shares of the Company's Common
Stock at the market price of the Common Stock on the date of grant
($2.00) in connection with her engagement as a consultant to the
Company. See "Employment Agreements/Separation Agreements." Such stock
options terminate ten years after the date of grant and vested as
follows: (i) 50,000 of the underlying shares vested on the date of
grant and (ii) the remaining 150,000 of the underlying shares vested
at the rate of 12,500 per month beginning February 29, 1996. In
addition, prior to becoming an Executive Officer of the Company in
October 1996, Ms. Brenner received Director Options to purchase, in
the aggregate, 11,000 shares of Common Stock. For a description of the
Director Options, see "Compensation of Directors."
(2) Amounts represent hypothetical gains that could be achieved from the
exercise of the respective stock options and the subsequent sale of
the Common Stock underlying such options if the options were exercised
at the end of the option terms. The gains are based upon assumed rates
of stock price appreciation of 5% and 10% compounded annually from the
date the respective options were granted. The rates of appreciation
are mandated by the rules of the Securities and Exchange Commission
and do not represent the Company's estimate or projection of the
future Common Stock price.
(3) Ms. Karen Brenner was the sole recipient of stock options under the
Incentive Program in fiscal 1996 (other than Outside Directors
pursuant to the Formula Plan).
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table provides certain summary information concerning stock
option exercises during fiscal 1996 by the Named Executive Officers and the
value of unexercised stock options held by the Named Executive Officers as of
December 31, 1996.
13
<PAGE> 16
<TABLE>
<CAPTION>
Value of Unexercised
# of Shares Number of Unexercised "In the Money"
Acquired on Value Annualized Year Options at Fiscal Options at
Name Exercise(1) Realized(1) Gain (1) End(2) Fiscal Year End(3)
- ---- ----------- ----------- -------- ---------------- --------------------
Exer- Unex- Exer- Unex-
cisable ercisable cisable ercisable
<S> <C> <C> <C> <C> <C> <C> <C>
Karen Brenner -- -- -- 177,200 33,800 66,425 12,575
Edward F. Cooke -- -- -- 5,000 5,000 -- --
Gregory H. Cheskin -- -- -- 24,000 16,000 -- --
Winton J. Tolles -- -- -- 12,000 8,000 -- --
Gary P. Silverman -- -- -- 3,000 2,000 -- --
</TABLE>
(1) None of the Named Executive Officers exercised any stock options
during fiscal 1996.
(2) Represents the aggregate number of stock options held as of December
31, 1996 which could and could not be exercised on that date pursuant
to the terms and provisions of the stock options and the Incentive
Program.
(3) All of the unexercised stock options held by Named Executive Officers
at the 1996 fiscal year end were "out of the money" (i.e., the
exercise price of the options exceeded the fair market value of the
Common Stock), except for the unexercised stock options held by Ms.
Karen Brenner which were "in the money" at the 1996 fiscal year end.
COMPENSATION OF DIRECTORS
During fiscal 1996, each director who was not an officer or an employee of
the Company (an "Outside Director") received a director's fee of $10,000
(prorated where applicable) plus a $3,000 chairman fee for each committee of
which he or she was the chairman plus $1,000 for attendance at each meeting of
the Board, $250 for attendance at each Executive Committee, Audit Committee or
Compensation Committee meeting and $750 for attendance at each special purpose
committee meeting. Additionally, the Incentive Program, as adopted by the Stock
holders of the Company as of December 6, 1994, and amended as of June 20, 1995,
provides for the automatic grant of stock options (the "Director Options") to
Outside Directors pursuant to a Formula Plan. Pursuant to the terms of the
Formula Plan, in fiscal 1996, each Outside Director received, on the date of
the last annual meeting, a Director Option to purchase 1,000 shares of Common
Stock, and Ms. Karen Brenner received a Director Option to purchase 10,000
shares of Common Stock on the date that she joined the Board. Director Options
are exercisable at the fair market value of the Common Stock on the date of
grant and become exercisable over four years from the date of grant with
installments of 20% of the total number of underlying shares vesting on the
grant date and on each of the first four anniversaries of the date of grant;
provided, however, that Director Options which have not otherwise vested become
exercisable in full immediately upon the death of the grantee, the grantee's
retirement from the Board because of a permanent disability or a "change of
control" of the Company. Director Options terminate ten years after the date
of grant or, if sooner, two years after the grantee's termination as a director
of the Company for any reason (except that if the grantee is removed from the
Board for cause, all Director Options granted to him terminate immediately upon
such removal). The Incentive Program permits awards of Director Options for
up to
14
<PAGE> 17
100,000 shares in the aggregate to all Outside Directors (subject to
certain anti-dilution provisions).
The Board of Directors adopted an amendment to the Incentive
Program, subject to Stockholder approval at this Meeting, which would eliminate
the automatic grant of Director Options to Outside Directors under the Formula
Plan and instead permit Outside Directors to participate, on a discretionary
basis, in the Incentive Program on the same basis as the other participants in
the Incentive Program. Stockholders will be asked to approve the amendment
elsewhere in this Proxy Statement. See "Approval of Amendments to 1994 Incentive
Program."
EMPLOYMENT AGREEMENTS/SEPARATION AGREEMENTS
On October 8, 1996, the Company and Mr. Cheskin entered into a Separation
Agreement (the "Cheskin Separation Agreement") pursuant to which Mr. Cheskin
resigned as President and Chief Executive Officer of the Company, and as a
member of the Board of Directors of the Company and its affiliates, effective as
of October 8, 1996. Pursuant to the terms of the Cheskin Separation Agreement,
Mr. Cheskin will continue to serve as an employee of the Company until October
8, 1997, at a compensation rate of $300,000 per annum. In addition, Mr. Cheskin
is entitled to receive from the Company certain perquisites and coverage under
the Company's benefit plans through October 7, 1997. In connection with the
Cheskin Separation Agreement, the Company paid Mr. Cheskin's accrued vacation
pay through his resignation date, and made available to him the services of the
Company's Key Executive Outplacement Program. Under the terms of the Cheskin
Separation Agreement, Mr. Cheskin's shares of restricted stock and stock options
will not be forfeited upon the termination of his employment with the Company,
but instead will continue to vest at the dates set forth in the applicable
instruments of grant in the same manner as if there had been no termination of
employment, subject to divestiture only in the event of conduct by Mr. Cheskin
which is injurious to the Company's best interests. Under the original
employment agreement between Mr. Cheskin and the Company, the Company funded a
"deferred compensation program," i.e., a "Rabbi Trust," for Mr. Cheskin's
benefit. Under the terms of the Cheskin Separation Agreement, the Company is not
required to make any further contributions to the Rabbi Trust (although the
Rabbi Trust will remain in effect with respect to monies contributed prior to
his resignation as an officer in accordance with its terms).
On March 25, 1996, Ms. Brenner and the Company entered into a consulting
agreement (the "Consulting Agreement") of unspecified duration, which provided
for Ms. Brenner to receive an annual consulting fee of $100,000. In addition,
pursuant to the Consulting Agreement, Ms. Brenner was granted a non-qualified
stock option under the Incentive Program to purchase 200,000 shares of the
Company's Common Stock at an exercise price of $2.00 per share (the closing
price of the Company's stock on February 9, 1996). For a description of this
option, see "Option Grants in Last Fiscal Year." In May 1996, Ms. Brenner was
elected the Chairman of the Board of the Company. Subsequently, she was also
elected to serve as the President and Chief Executive Officer of the Company.
Ms. Brenner currently devotes substantial business time to the Company. In
conjunction with Ms. Brenner's ascension as Chairman of the Board, the
Compensation Committee increased Ms. Brenner's annual consulting fee under the
Consulting Agreement to $250,000 in recognition of her expanded
responsibilities. At that time, the Committee also decided to award Ms. Brenner
a special, one-time bonus of $250,000 upon a successful sale of the Company.
Subsequently, in February 1997, the Committee determined to make the bonus
payable in the event of a sale of the Company's Thread Division, consistent with
the Board's contemporaneous determination that a sale of the Thread Division was
in the best interests of the Stockholders. Ms. Brenner has since earned that
bonus, as the Company completed the sale of its Thread Division to a subsidiary
of Hicking Pentecost PLC, effective March 26, 1997.
15
<PAGE> 18
On June 20, 1996, the Company and Mr. Tolles entered into a Separation
Agreement (the "Tolles Separation Agreement") pursuant to which Mr. Tolles
resigned as Vice President, Chief Financial Officer and Secretary of the
Company, and as a member of the Board of Directors of the Company and its
affiliates, effective as of May 17, 1996. Pursuant to the terms of the Tolles
Separation Agreement, Mr. Tolles will continue to serve as an employee of the
Company until May 17, 1997, at a compensation rate of $185,000 per annum.
Effective as of May 18, 1997, Mr. Tolles will be paid a monthly severance
benefit of $19,166.66 through December 31, 1997, subject to Mr. Tolles
refraining from engaging in any conduct which is injurious to the Company's
best interests, as determined by the Board of Directors. In addition, Mr.
Tolles is entitled to receive from the Company certain perquisites and coverage
under the Company's benefit plans through May 17, 1997. In connection with the
Tolles Separation Agreement, the Company made available to Mr. Tolles the
services of the Company's Key Executive Outplacement Program. Under the terms
of the Tolles Separation Agreement, Mr. Tolles' shares of restricted stock and
stock options will not be forfeited upon the termination of his employment with
the Company, but instead will continue to vest at the dates set forth in the
applicable instruments of grant in the same manner as if there had been no
termination of employment, subject to divestiture only in the event of conduct
by Mr. Tolles which is injurious to the Company's best interests. Under the
original employment arrangement between Mr. Tolles and the Company, the Company
funded a "deferred compensation program," i.e., a "Rabbi Trust," for Mr.
Tolles' benefit. Under the terms of the Tolles Separation Agreement, the
Company is not required to make any further contributions to the Rabbi Trust
(although the Rabbi Trust will remain in effect with respect to monies
contributed prior to his resignation as an officer in accordance with its
terms).
On January 31, 1997, the Company and Mr. Silverman entered into a
Separation Agreement (the "Silverman Separation Agreement") pursuant to which
Mr. Silverman resigned as Vice President - Human Resources of the Company,
effective as of January 31, 1997. Pursuant to the terms of the Silverman
Separation Agreement, Mr. Silverman will continue to serve as an employee of the
Company until July 31, 1997, at a compensation rate of $130,000 per annum. In
addition, Mr. Silverman is entitled to receive from the Company certain
perquisites and coverage under the Company's benefit plans through July 31,
1997. In connection with the Silverman Separation Agreement, the Company paid
Mr. Silverman's accrued vacation pay through his resignation date and made
available to him the services of the Company's Key Executive Outplacement
Program. Additionally, the Compensation Committee awarded Mr. Silverman a bonus
of $25,000 in recognition of his services rendered in fiscal 1996. Under the
terms of the Silverman Separation Agreement, Mr. Silverman's shares of
restricted stock will not be forfeited upon his termination of employment with
the Company, but instead will continue to vest at the dates set forth in the
applicable instruments of grant in the same manner as if there had been no
termination of employment, subject to divestiture only in the event of conduct
by Mr. Silverman which is injurious to the Company's best interests.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of the Common Stock of
the Company to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the exchange on which the Common Stock is
listed for trading. Executive officers, directors and more than ten percent
stockholders are required by regulations promulgated under the Exchange Act to
furnish the Company with copies of all Section 16(a) reports filed. Based solely
on the Company's review of copies of the Section 16(a) reports filed for the
fiscal year ended December 31, 1996, the Company believes that all reporting
requirements applicable to its executive officers, directors, and more than ten
percent stockholders were complied with for the fiscal year 1996, except that
Mr. William L. Bennett
16
<PAGE> 19
failed to timely file a report in respect of three sales of shares of Common
Stock aggregating 10,000 shares during December 1996.
STOCK PERFORMANCE GRAPH
The quarterly changes in cumulative shareholder return for the period
commencing on December 16, 1994, when the Company's stock was unstapled from the
common stock of Noel, and ending on December 31, 1996, are shown on the
following graph. The assumption is that $100 was invested in shares of the
stock of each of the Company, a peer group comprised of Cone Mills, Springs
Industries and Dixie Yarns (with the amount pro-rated by market capitalization
as of the beginning of the period) and the Russell 2000 Index (and that all
dividends were reinvested). The total cumulative dollar returns shown in the
graph represent the value such investments would have had on December 31, 1996.
The comparisons in the graph are required by the Securities and Exchange
Commission and are not intended to forecast or be indicative of possible
future performance of the Company's Common Stock.
<TABLE>
RUSSELL PEER
DATE BHY 2000 INDEX GROUP INDEX
- ---- --- ---------- -----------
<S> <C> <C> <C>
12/16/94 100 100 100
3/31/95 106.6667 108.2033 105.1028
6/30/95 76.66667 117.6888 103.4691
9/30/95 63.33333 128.7884 109.5425
12/31/95 41.66667 131.1079 118.8981
3/31/96 33.33333 137.249 132.4929
6/30/96 25 143.8216 146.7259
9/30/96 26.66667 143.3693 131.9732
12/31/96 31.66667 149.0332 127.0969
</TABLE>
17
<PAGE> 20
REPORT OF COMPENSATION COMMITTEE
OVERALL POLICY
The Company's executive compensation program is designed to be closely
linked to corporate performance and the total return to Stockholders over the
long-term. The overall objectives of this strategy are to attract and retain the
best possible executive talent, to motivate these executives to achieve the
goals inherent in the Company's business strategy, to link executive and
Stockholder interests and finally to reward individual contributions as well as
overall business results.
The Compensation Committee works closely with the full Board in
establishing and implementing the Company's compensation policies and
principles. The key elements of the Company's executive compensation during the
last fiscal year consisted of base salary (or consulting fees, in the case of
Ms. Brenner), an annual bonus and the grant of stock options under the Incentive
Program.
SALARIES
The Compensation Committee approves the salaries of the Chief
Executive Officer and Chief Financial Officer of the Company and exercises
oversight over the compensation of the other executive officers of the Company.
All final determinations are subjective. In establishing salary levels (or
consulting fees, in the case of Ms. Brenner) for fiscal 1996, the Committee
placed the most emphasis on management's efforts in restructuring the Company's
businesses and promoting greater cost-efficiencies and on the success of the
Company's strategic divestiture strategy. The Committee also afforded
substantial weight to the Company's long-term prospects and performance. The
factors of lesser significance which the Committee considered were experience of
the executive officers and the Committee's subjective understanding of salary
levels of executive management personnel of other similarly situated companies.
BONUSES
Bonuses are determined in accordance with the Company's bonus plan. Under
the bonus plan, bonuses are awarded to executive officers based upon the
attainment by the Company of certain predetermined ROTC levels (i.e., return on
total capital) and the achievement by the executive officers of individual
performance objectives. The target levels and objectives are approved by the
Committee at the beginning of the fiscal year. Notwithstanding the satisfaction
of target levels and objectives, all final determinations of bonuses require the
approval of the Committee. All persons serving as executive officers at fiscal
year end were awarded bonuses in fiscal 1996 (see "Summary Compensation
Table"). In fiscal 1996, the Committee also determined to award Ms. Brenner and
Mr. Cooke special, one-time bonuses of $250,000 and $50,000, respectively, in
recognition of their extraordinary efforts in carrying out the Company's
strategic divestiture program, such bonuses being contingent upon the closing
of the sale of the Company's Thread Division. These bonuses have now been
earned by Ms. Brenner and Mr. Cooke, as the Company completed the sale of its
Thread Division to Hicking Pentecost PLC, effective March 26, 1997.
STOCK OPTIONS
Under the Incentive Program, which was adopted by the Company in 1994, the
Company's employees and executive officers are eligible to receive stock
options, stock appreciation rights, restricted stock and other stock based
awards. The Committee is responsible for determining the recipients and the
size of the awards. In selecting the size and
18
<PAGE> 21
type of awards under the Incentive Program, the Committee
considers the nature of the position held as well as the other factors used to
determine salaries and its subjective expectation of the potential for
appreciation in the market value of the Common Stock. All final determinations
are subjective.
Stock options awarded under the Incentive Program generally vest over a
period of several years from the date of grant. This approach is designed to
align the interests of the executive officers with those of the Stockholders
over the long-term since the full benefits of the compensation package cannot be
realized unless stock price appreciation occurs over a number of years.
COMPENSATION OF CHIEF EXECUTIVE OFFICEr
Mr. Gregory H. Cheskin, formerly the Chief Executive Officer and President
of the Company, resigned from those positions, effective as of October 8, 1996.
In connection with his resignation, the Company and Mr. Cheskin entered into the
Cheskin Separation Agreement, described in "Employment Agreements/Separation
Agreements" above, pursuant to which Mr. Cheskin has agreed to remain in the
employ of the Company until October 8, 1997.
Prior to his resignation as the Company's Chief Executive Officer, Mr.
Cheskin was entitled to receive a minimum annual salary, subject to periodic
increases as determined by the Board, acting with the input and approval of the
Committee, and a bonus determined in accordance with the Company's annual bonus
plan, as described above. Additionally, he was eligible for the receipt of
benefits under the Incentive Program and participated in a "Deferred
Compensation Program," described in "Employment Agreements/Separation
Agreements."
Mr. Cheskin's 1996 base salary was established consistent with the
considerations applicable to all other executive officers of the Company. The
Committee did not apply objective Company performance criteria, but relied more
generally on its continued subjective determination of Mr. Cheskin's ability. No
compensation was awarded to Mr. Cheskin on account of fiscal 1996, other than
base salary and compensation paid pursuant to the Cheskin Separation Agreement.
Ms. Karen Brenner, the current Chairman of the Board, Chief Executive
Officer and President of the Company, is paid a consulting fee for her services
under her Consulting Agreement, described in "Employment Agreements/Separation
Agreements" above. Originally, when Ms. Brenner was retained as a consultant to
the Company in February 1996, her consulting fee was set by the Committee at
$100,000 per annum. Subsequently, at the time she was appointed Chairman of the
Board of the Company, the Committee approved an increase in her consulting fee
to $250,000 per annum, in recognition of her expanded responsibilities.
Ms. Brenner is also eligible for participation in the Company's annual
bonus plan, as described above. The Committee awarded Ms. Brenner a $150,000
bonus under the Company's bonus plan on account of fiscal 1996, in recognition
of her efforts in bringing about substantial reductions in the Company's
overhead and other significant improvements in the Company's operations and of
her leadership role in effectuating the successful refinancing of the Company's
credit facilities. As previously described, the Committee also awarded Ms.
Brenner a special one-time bonus in view of her efforts in connection with the
sale of the Company's Thread Division, which she earned in March 1997.
In order to induce Ms. Brenner to apply substantial business energies to
the affairs of the Company, and to incentivize her to achieve superior
performance, when the Company originally retained Ms. Brenner in February 1996,
the Committee awarded her a non-qualified stock option under the Incentive
Program to purchase 200,000 shares of the
19
<PAGE> 22
Company's Common Stock at an exercise price of $2.00 per share (the fair
market value of the Common Stock on the date of grant). For a description of
that option, see "Option Grants in Last Fiscal Year." In addition, prior to
becoming an executive officer of the Company, Ms. Brenner received Director
Options to purchase, in the aggregate, 11,000 shares of Common Stock under the
Formula Plan on the same basis as the other Outside Directors.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION PLANS
It is the policy of the Compensation Committee to have the
executive compensation plans of the Company treated as fully tax deductible
under Section 162(m) of the Internal Revenue Code, as amended (the "Code")
whenever, in the judgment of the Committee, to do so would be consistent with
the business objectives of those plans. All compensation paid during fiscal year
1996 was, in fact, fully tax deductible. The Compensation Committee, however,
reserves the right to grant future compensation awards in such amounts as it may
deem appropriate in the exercise of its business judgment, notwithstanding
whether those awards are fully tax deductible.
Compensation Committee
GILBERT H. LAMPHERE
JOSEPH S. DIMARTINO
SAMUEL F. PRYOR, IV
INDEPENDENT AUDITORS
(PURPOSE 2)
Arthur Andersen LLP ("Arthur Andersen"), certified public accountants, have
been appointed by the Board of Directors, upon recommendation of the Audit
Committee of the Board, as independent auditors for the Company to examine and
report on its financial statements for the fiscal year ending December 31, 1997,
which appointment is being submitted to the Stockholders for ratification at the
Meeting. Representatives of Arthur Andersen are expected to be present at the
Meeting, with the opportunity to make a statement if they desire to do so, and
to be available to respond to appropriate questions. The appointment of the
independent auditors will be ratified if it receives the affirmative vote of the
holders of a majority of shares of the Capital Stock of the Company present at
the Meeting, in person or by proxy, and entitled to vote thereon. Submission of
the appointment of Arthur Andersen to the Stockholders for ratification will not
limit the authority of the Board of Directors to appoint another accounting firm
to serve as independent auditors if the auditors resign or their engagement is
otherwise terminated.
The Board recommends a vote FOR the appointment of Arthur Andersen LLP as
independent auditors of the Company.
20
<PAGE> 23
APPROVAL OF AMENDMENTS TO 1994 INCENTIVE PROGRAM
(PURPOSE 3)
The Board adopted certain amendments to the Company's 1994 Incentive
Program, as amended as of June 20, 1995 (the "Program" or the "Incentive
Program"), subject to the approval by the Company's Stockholders at the Meeting.
The complete text of the Program, as amended, is attached as Exhibit A to this
Proxy Statement and the amendments for which Stockholder approval is being
sought are described below. The following summary of the Program and these
amendments are qualified by reference to the text of the Program.
PROPOSED AMENDMENTS
The following is a summary of the material amendments to the Program for
which Stockholder approval is being sought.
Increase in Number of Shares
The Board has amended the Program to increase the number of shares that may
be issued pursuant to benefit awards under the Program by 500,000 shares of
Common Stock.
The increase in the number of shares that may be issued under the Program
was adopted in order to enable the Company to continue to use the Program as an
incentive for its key employees and directors in order to promote the long-term
success of its business.
Limitation on Grants
The Board has amended the Program to provide that the maximum number of
shares for which stock options may be granted under the Program to any
individual during any calendar year is 400,000.
In order for non-qualified stock options granted at current fair market
value to qualify for the performance-based exception to the $1 million
limitation on executive compensation deductions imposed by the Code, the Program
must set forth the maximum number of shares with respect to which options may be
granted to any individual during a specified period of time. For this reason,
the Board of Directors has amended the Program, subject to Stockholder approval,
to provide such a limitation.
Expansion of Class of Eligible Grantees
The Board has amended the Program (i) to eliminate automatic grants of
non-qualified stock options, i.e., "Director Options", to directors of the
Company who are neither employees nor officers of the Company ("Outside
Directors") at specified times in accordance with a pre-established formula (the
"Formula Plan"), and (ii) to expand the class of persons eligible to receive
discretionary benefits under the Program to include Outside Directors. See
"Committees of the Board of Directors" and "Compensation of Directors."
The Company maintained the Formula Plan for Outside Directors in order to
enable the Incentive Program administrators (all of whom are Outside Directors)
to administer the Program without violation of the "disinterested
administration" requirement promulgated under Rule 16b-3 of the Exchange Act.
Rule 16b-3 of the Exchange Act provides a safe-harbor for insiders to
participate in stock-based employee benefit plans without violation of the
short-swing profit provisions. Previously, plan administrators were generally
prohibited under the
21
<PAGE> 24
Rule from participation in stock-based employee benefit plans, except under
limited circumstances, such as pursuant to a "Formula Plan". However, Rule
16b-3 was recently changed to permit plan administrators to receive
discretionary benefit grants under the plans which they administer on the same
basis as the other participants in the programs. In general terms, the Rule now
provides that all discretionary benefit grants, even to plan administrators,
will qualify for the safe-harbor of Rule 16b-3 so long as they are either
approved by the stockholders, the full board of directors or a committee of
"disinterested directors" within the meaning of the Rule, or if they are
subject to certain specified restrictions on transferability. Hence, the Board
of Directors discontinued the Formula Plan and amended the Program to provide
for participation by Outside Directors on a discretionary basis. The purpose of
these changes is to simplify and streamline the administration of the Company's
stock-based employee benefit plans and eliminate the redundancies between the
Formula Plan and the discretionary portion of the Program. As a result, if
these amendments are approved by the Stockholders at the Meeting, Outside
Directors will thereafter be eligible to receive discretionary grants of
non-qualified stock options under the Incentive Program on the same basis as
the other participants in the Program.
Restriction on Exercise Price of Grants
The Board of Directors has also amended the Program to provide
that the exercise price of all stock options granted under the Program must not
be less than the fair market value of the Common Stock on the date of grant.
This restriction on the exercise price of stock options granted under the
Program is designed to incentivize the creation of stockholder value over the
long-term since the option recipients will not realize the full benefits of
their compensation packages unless stock price appreciation occurs.
Limitations on Transferability
The Board of Directors has further amended the Program to eliminate the
restrictions on the transferability of rights granted under the Program. Rule
16b-3 of the Exchange Act previously required that stock-based award grants to
insiders be subject to certain specified restrictions on transferability.
Principally as a result of that Rule, the Program previously contained a general
transferability restriction. However, the recent amendments to Rule 16b-3 of the
Exchange Act have also eliminated the requirement that every stock-based grant
to insiders be subject to transferability restrictions to qualify for the
safe-harbor of that Rule. Instead, the Rule now provides for several options
which the issuer may choose from in order to so qualify its insider grants (one
such option, but not the exclusive option, is to subject the grant to certain
transfer restrictions as described above). Therefore, the Program was amended by
the Board to remove the transfer restrictions all together and give the
administrators of the Program greater discretion in determining, on a
case-by-case basis, what transfer restrictions, if any, are the most appropriate
under the circumstances. The Program will, however, retain the transfer
restrictions applicable specifically to incentive stock options, consistent with
the applicable law now in effect governing such options.
SUMMARY OF PROGRAM
1. PURPOSE
The purpose of the Program is to attract, retain, motivate, and reward
officers, directors and key employees of the Company and its direct and indirect
subsidiaries who contribute to the management, growth and profitability of the
business of the Company, and to strengthen the mutuality of interests between
such individuals and the Company's Stockholders by offering them equity or
equity-based incentives. If the amendments to the Program being
22
<PAGE> 25
submitted for Stockholder approval are approved at the Meeting, an additional
500,000 shares of Common Stock will be available for issuance under the
Program, which would result in a maximum of 1,000,000 shares (including those
shares already issued) being available for issuance pursuant to Program
awards.
As of March 1, 1997, there were two executive officers, six Outside
Directors and an indeterminate number of other key executives and employees
eligible to participate in the Program.
2. SUMMARY OF BENEFITS
The Program may be administered either by the full Board or by one or more
committees of the Board appointed by the full Board of Directors of the Company
(referred to herein as the "Plan Administrator"). Under the Program, the Plan
Administrator may grant incentive stock options, non-qualified stock options,
restored options, stock appreciation rights in tandem with stock options or
freestanding, restricted stock grants and other stock based awards (the
"Benefits") to eligible grantees. Outside Directors are eligible to receive only
non-qualified stock options under the Program. A summary of the principal
characteristics of various types of Benefits that may be granted under the
Program is set forth below.
Stock Options
Two types of stock options may be granted under the Program: stock options
intended to qualify for special tax treatment (referred to herein as "Incentive
Stock Options" or "ISOs") under Section 422 of the Code and options not intended
to so qualify (referred to herein as "Non-Qualified Stock Options" or "NQOs").
The option price, term and other conditions of Stock Options awarded under the
Program are determined by the Plan Administrator, subject to the terms of the
Program and, in the case of Stock Options intended to qualify as "Incentive
Stock Options", subject to the requirements of Section 422 of the Code.
Additionally, the option price of Stock Options granted under the Program may in
no event be less than the fair market value of the Common Stock on the date of
grant. Outside Directors may only be granted NQOs pursuant to the Incentive
Program. Incentive Stock Options may only be granted to employees of the Company
or any subsidiary or parent of the Company. The maximum number of shares for
which Stock Options may be granted under the Program to any individual during
any calendar year is 400,000.
Restored Options
The Program permits the grant of "Restored Options." This feature enables a
participant who exercises an option by exchanging (either actually or
constructively) previously-acquired shares of Common Stock to receive a new
option, exercisable at the then fair market value, for the same number of shares
as were exchanged in payment. Restored Options are generally exercisable in full
beginning immediately on the date of grant. Except for the exercise price and
the provision for immediate vesting, Restored Options have terms substantially
similar to the terms of the original option (including having a term equal to
the remaining term of the original option). As of this date, no Restored Options
have been awarded under the Program.
Stock Appreciation Rights
A Stock Appreciation Right is the right to receive an amount equal to the
appreciation, if any, in the fair market value of one share of Common Stock
fromthe time the Stock Appreciation Right is granted until the time the
grantee elects to receive payment from the Company. Participants who elect to
receive payment of Stock Appreciation Rights shall receive payment in cash, in
Common Stock or in any combination of cash and Common Stock, as
23
<PAGE> 26
determined by the Plan
Administrator. When Stock Appreciation Rights are granted in tandem with an
Incentive Stock Option, the Stock Appreciation Rights must contain such terms
and conditions as are necessary for the related option to qualify as an
Incentive Stock Option. In addition, if Stock Appreciation Rights are granted in
tandem with a stock option, the exercise of the option shall cause a correlative
reduction in the Stock Appreciation Rights standing to the participant's credit
that were granted in tandem with the option; and the payment of Stock
Appreciation Rights shall cause a correlative reduction of the shares under the
option. Unless waived in whole or in part by the Company, Stock Appreciation
Rights may be exercised only while the grantee is employed by the Company,
provided that Stock Appreciation Rights may be exercised for a period of 90 days
following the death of the grantee or termination of employment by reason of
total and permanent disability or upon a "change in control" (as defined in the
Program) of the Company.
Restricted Stock
Restricted Stock is Common Stock that is subject to forfeiture until a
period of time has elapsed or certain conditions have been fulfilled, as
determined by the Plan Administrator and set forth in the instrument of grant.
Unless waived in whole or in part by the Plan Administrator, if employment of a
holder of Restricted Stock terminates prior to vesting, all shares of Restricted
Stock held by him or her and still subject to restriction will be forfeited and
reacquired by the Company. All restrictions imposed upon any award of Restricted
Stock will lapse immediately upon the death of the grantee or termination of
employment by reason of total and permanent disability or upon a "change in
control" (as defined in the Program) of the Company. Certificates representing
shares of Restricted Stock shall bear a legend referring to the Program, noting
the risk of forfeiture of the shares and stating that such shares are
non-transferable until all restrictions have been satisfied and the legend has
been removed. As of the date Restricted Stock is granted, the grantee shall be
entitled to full voting and dividend rights with respect to all shares of such
stock. However, the Plan Administrator may, in its sole discretion, require that
the stock certificates representing such shares of Restricted Stock be placed
into escrow with the Company until vesting.
AMENDMENT AND TERMINATION
The Board may amend the Program at any time, except that the Board may not
amend the Program if such amendment (i) would increase the maximum number of
shares in the aggregate which may be sold pursuant to options intended to
qualify as Incentive Stock Options, (ii) would change the manner of determining
the minimum option price of Incentive Stock Options, other than to change the
manner of determining the fair market value of any shares underlying the options
to conform to any applicable provisions of the Code or regulations thereunder,
(iii) would increase the periods during which Incentive Stock Options may be
granted or exercised under the Program, (iv) would change the employees or class
of employees eligible to receive Incentive Stock Options under the Program, (v)
would cause the Program to fail to meet the requirements of Rule 16b-3 of the
Exchange Act, or (vi) would violate applicable law. In any event, no
termination, suspension, modification or amendment of the Program may adversely
affect the rights of any grantee without his consent. The Program will terminate
on the tenth anniversary of its effective date unless terminated earlier by the
Board or unless extended by the Board. The amendment or termination of the
Program will not adversely affect any Benefit granted prior to such amendment or
termination.
24
<PAGE> 27
FEDERAL INCOME TAX CONSEQUENCES UNDER THE PROGRAM
The following is a summary of the Federal income tax consequences of the
issuance and exercise of Stock Options under the Incentive Program, based upon
current income tax laws, regulations and rulings.
Incentive Stock Options. Subject to the effect of the Alternative Minimum
Tax, discussed below, an optionee does not recognize income on the grant of an
Incentive Stock Option. If an optionee exercises an Incentive Stock Option in
accordance with the terms of the option and does not dispose of the shares
acquired within two years from the date of the grant of the option nor within
one year from the date of exercise, the optionee will not realize any income by
reason of the exercise, and the Company will be allowed no deduction by reason
of the grant or exercise. The optionee's basis in the shares acquired upon
exercise will be the amount paid upon exercise. Provided the optionee holds the
shares as a capital asset at the time of sale or other disposition of the
shares, his gain or loss, if any, recognized on the sale or other disposition
will be capital gain or loss. The amount of his gain or loss will be the
difference between the amount realized on the disposition of the shares and his
basis in the shares.
If an optionee disposes of the shares within two years from the date of
grant of the option or within one year from the date of exercise ("Early
Disposition"), the optionee will realize ordinary income at the time of such
Early Disposition, which will equal the excess, if any, of the lesser of (i) the
amount realized on the Early Disposition, or (ii) the fair market value of the
shares on the date of exercise, over the optionee's basis in the shares. The
Company will be entitled to a deduction in an amount equal to such income in the
same year that the income is recognized. The excess, if any, of the amount
realized on the Early Disposition of such shares over the fair market value of
the shares on the date of exercise will be long-term or short-term capital gain,
depending upon the holding period of the shares, provided the optionee holds the
shares as a capital asset at the time of Early Disposition. If an optionee
disposes of such shares for less than his basis in the shares, the difference
between the amount realized and his basis will be a long-term or short-term
capital loss, depending upon the holding period of the shares, provided the
optionee holds the shares as a capital asset at the time of disposition. The
excess of the fair market value of the shares at the time the Incentive Stock
Option is exercised over the exercise price for the shares is an item of tax
preference ("Stock Option Preference").
Non-Qualified Stock Options. Non-Qualified Stock Options do not qualify for
the special tax treatment accorded to Incentive Stock Options under the Code.
Although an optionee does not recognize income at the time of the grant of the
option, he recognizes ordinary income upon the exercise of a Non-Qualified Stock
Option in an amount equal to the difference between the fair market value of the
stock on the date of exercise of the option and the amount of cash paid for the
stock. As a result of the optionee's exercise of a Non-Qualified Stock Option,
the Company will be entitled to deduct as compensation an amount equal to the
amount included in the optionee's gross income. The Company's deduction will be
taken in the Company's taxable year in which the option is exercised.
The excess of the fair market value of the stock on the date of exercise of
a Non-Qualified Stock Option over the exercise price is not a Stock Option
Preference.
Taxation of Preference Items. Section 55 of the Code imposes an Alternative
Minimum Tax equal to the excess, if any, of (i) 26% of the optionee's
"alternative minimum taxable income" up to $175,000 ($87,500 in the case of
married taxpayers filing separately) and 28% of "alternative minimum taxable
income" over $175,000 ($87,500 in the case of married taxpayers filing
separately) over (ii) his "regular" federal income tax. Alternative minimum
taxable income is determined by adding the optionee's Stock Option Preference
and any other
25
<PAGE> 28
items of tax preference to the optionee's adjusted gross income and then
subtracting certain allowable deductions and an exemption amount. The exemption
amount is $33,750 for single taxpayers, $45,000 for married taxpayers filing
jointly and $22,500 for married taxpayers filing separately. However, these
exemption amounts are phased out beginning at certain levels of alternative
minimum taxable income.
The foregoing statement is only a general summary of the principal federal
income tax consequences of the exercise and issuance of Stock Options under the
Incentive Program and is based on the Company's understanding of present federal
tax laws and regulations. Since tax regulations may change or interpretations
may differ, each optionee should consult his or her own tax advisor regarding
the tax consequences related to participation in the Program.
MARKET VALUE
The shares of Common Stock issuable under the Program may be either
authorized or unissued shares or treasury shares. The market value of the
Company's Common Stock was $2.25 per share at the close of business on March 21,
1997.
STOCKHOLDERS' PROPOSALS
Any proposal by stockholders of the Company intended to be presented at the
1998 Annual Meeting of Stockholders must be received by the Company at its
principal executive office not later than October 31, 1997 for inclusion in the
Company's proxy statement and form of proxy relating to that meeting. Any such
proposal must also comply with the other requirements of the proxy solicitation
rules of the Securities and Exchange Commission.
ANNUAL REPORT
Concurrently with the mailing of these Proxy Materials, the Company is
mailing a copy of its Annual Report to Stockholders for the fiscal year ended
December 31, 1996. Such Annual Report is not to be regarded as proxy
solicitation material.
UPON WRITTEN REQUEST BY A STOCKHOLDER ENTITLED TO VOTE AT THE 1997 ANNUAL
MEETING, THE COMPANY WILL FURNISH THAT PERSON WITHOUT CHARGE WITH A COPY OF THE
FORM 10-K ANNUAL REPORT FOR 1996 WHICH IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO. If the
person requesting the report was not a Stockholder of record on March 25, 1997,
the request must contain a good faith representation that the person making the
request was a beneficial owner of the Common Stock of the Company at the close
of business on such date. Requests mailed prior to May 1, 1997, should be
addressed to Carlyle Industries, Inc., 1430 Broadway, New York, New York 10018
(Attn: Edward F. Cooke). Requests mailed on or after May 1, 1997, should be
addressed to Carlyle Industries, Inc., One Palmer Terrace, Carlstadt, New Jersey
07072 (Attn: Edward F. Cooke).
26
<PAGE> 29
OTHER BUSINESS
(PURPOSE 4)
Management does not know of any other matters to be presented at the
Meeting for action by the Stockholders. If any other matters requiring a vote of
the Stockholders arise at the Meeting or any adjournment thereof, it is intended
that votes will be cast pursuant to the proxies with respect to such matters in
accordance with the best judgment of the persons acting under the proxies.
SOLICITATION AND EXPENSES OF SOLICITATION
Officers and employees of the Company may solicit proxies by personal
interview, mail, telegraph and telephone. No compensation will be paid by the
Company to any person in connection with the solicitation of proxies. Brokers,
bankers and other nominees will be reimbursed for out-of-pocket and other
reasonable clerical expenses incurred in obtaining instructions from beneficial
owners of the Company's stock. The cost of preparing this Proxy Statement and
all other costs in connection with solicitation of proxies for the Annual
Meeting of Stockholders are being borne by the Company.
Even if you plan to attend the Meeting in person, please sign, date and
return the enclosed proxy promptly. If you attend the Meeting, your proxy will
be voided at your request and you can vote in person. A postage-paid
return-addressed envelope is enclosed for your convenience. Your cooperation in
giving this matter your immediate attention and in returning your proxies will
be appreciated.
By order of the Board of Directors,
EDWARD F. COOKE
Secretary
March 28, 1997
27
<PAGE> 30
EXHIBIT A
CARLYLE INDUSTRIES, INC.
1994 INCENTIVE PROGRAM
AS AMENDED FEBRUARY 27, 1997
The 1994 Incentive Program, as amended (the "Program"), of Carlyle
Industries, Inc. (the "Company") provides for the grant to officers, directors,
key executives, employees, consultants and advisors of the Company and its
direct or indirect subsidiaries of certain rights to acquire shares of the
Company's common stock (the "Common Stock"). The Company believes that this
Program will cause those persons to contribute materially to the growth of the
Company, thereby benefiting its stockholders.
1. ADMINISTRATION.
The Program shall be administered and interpreted either by the full Board
of Directors of the Company or by a Committee or Committees consisting of not
less than two persons appointed by the Board of Directors of the Company from
among its members (the Committee(s) or the full Board of Directors, as the case
may be, the "Plan Administrator"). The Board of Directors of the Company may
appoint different Committees to handle different administrative duties under the
Program. The Plan Administrator shall determine the fair market value of the
Common Stock as at any date for purposes of the Program in accordance with the
provisions of Section 9(i) hereof. The Plan Administrator's decisions shall be
final and conclusive with respect to the interpretation and administration of
the Program and any grant made under it.
2. GRANTS.
Grants under the Program shall consist of incentive stock options,
non-qualified stock options, stock appreciation rights in tandem with stock
options or freestanding, restricted stock grants, and Restored Options (any of
the foregoing, in any combination, collectively, "Grants"). All Grants shall be
subject to the terms and conditions set forth herein and to such other terms and
conditions consistent with this Program as the Plan Administrator deems
appropriate. The Plan Administrator shall approve the form and provisions of
each Grant. Grants under a particular section of the Program need not be
uniform, and Grants under two or more sections may be combined in one
instrument.
3. ELIGIBILITY FOR GRANTS.
Grants may be made to any employee, officer, key executive, director,
professional or administrative employee, consultant or advisor of the Company or
any of its subsidiaries ("Eligible Participant"). Subject to the terms hereof,
the Plan Administrator shall select the persons to receive Grants ("Grantees")
from among the Eligible Participants and determine the number of shares subject
to any particular Grant. The foregoing notwithstanding, directors of the Company
who are neither officers nor employees of the Company or any of its subsidiaries
will be eligible to receive only NQOs (defined below) pursuant to the Program.
<PAGE> 31
4. SHARES AVAILABLE FOR GRANT.
(a) Shares Subject to Issuance or Transfer. Subject to adjustment as
provided in Section 4(b), the aggregate number of shares of Common Stock (the
"Shares") that may be issued or transferred under the Program is 1,000,000
shares. The Shares may be authorized but unissued Shares or treasury Shares. The
number of Shares available for Grants at any given time shall be reduced by the
aggregate of all Shares previously issued or transferred plus the aggregate of
all Shares which may become subject to issuance or transfer under
then-outstanding and then-currently exercisable Grants. The maximum number of
shares for which stock options may be granted under the Program to any
individual during any calendar year is 400,000.
(b) Recapitalization Adjustment. If any subdivision or combination of
shares of Common Stock or any stock dividend, capital reorganization,
recapitalization, consolidation, or merger in which the Company is the surviving
corporation occurs after the adoption of the Program, the Plan Administrator
shall make such proportional adjustments as it determines appropriate in the
number of shares of Common Stock that may be issued or transferred thereafter
under Section 4(a). The Plan Administrator shall similarly adjust the number of
Shares subject to such stock option and option price in all outstanding Grants
made before the event within 60 days of the event.
5. STOCK OPTIONS.
The Plan Administrator may grant options qualifying as incentive stock
options ("ISOs") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), non-qualified stock options ("NQOs") not entitled to
special tax treatment under the Code or Restored Options (collectively, "Stock
Options"). The following provisions are applicable to Stock Options.
(a) Exercise of Option. A Grantee may exercise a Stock Option by delivering
a notice of exercise to the Company, either with or without accompanying payment
of the option price. The notice of exercise, once delivered, shall be
irrevocable.
(b) Satisfaction of Option Price. The Grantee shall pay the option price
(the "Option Price") in cash, or with the Plan Administrator's permission, by
delivering shares of Common Stock already owned by the Grantee and having a fair
market value on the date of exercise equal to the Option Price, or a combination
of cash and Shares. The Grantee shall pay the Option Price not later than thirty
(30) days after the date of a statement from the Company following exercise
setting forth the Option Price, fair market value of Common Stock on the
exercise date, the number of shares of Common Stock that may be delivered in
payment of the Option Price, and the amount of withholding tax due, if any. If
the Grantee fails to pay the Option Price within the thirty (30) day period, the
Plan Administrator shall have the right to take whatever action it deems
appropriate, including voiding the option exercise. The Company shall not issue
or transfer shares of Common Stock upon exercise of a Stock Option until the
Option Price is fully paid.
(c) Price; Term and Conditions. The exercise price per share, term and
other provisions of Stock Options granted hereunder shall be specified by the
Plan Administrator, in its discretion, in the Grant, as limited, or in the case
of ISOs, by the provisions of Section 5(d) hereof; provided, however, that the
exercise price of all Stock Options granted
2
<PAGE> 32
under the Program shall be not less than the fair market value of the Common
Stock on the date of grant.
(d) Limits on the ISOs. ISOs may only be granted to employees of the
Company or any subsidiary or parent of the Company. ISOs by their terms shall
not be transferable by the Grantee otherwise than by the laws of descent and
distribution, and shall be exercisable, during the lifetime of Grantee, only by
the Grantee. The aggregate fair market value of the stock covered by ISOs
granted under the Program or any other stock option plan of the Company or any
subsidiary or parent of the Company that becomes exercisable for the first time
by any Grantee in any calendar year shall not exceed $100,000. The aggregate
fair market value will be determined at the time of grant. The price at which
Common Stock may be purchased by the Grantee under an Incentive Stock Option
shall be not less than the fair market value (or 110% of the fair market value
if the Grantee is a 10% stockholder) of Common Stock on the date of the grant.
ISOs shall become exercisable on the dates specified by the instrument of grant,
provided that ISOs shall become exercisable in full immediately upon (i) the
death of Grantee or termination of employment by reason of disability (within
the meaning of Section 22(e)(3) of the Code) or (ii) a change in control of the
Company, as such term is defined in Section 9(j) hereof. All rights of a Grantee
in an ISO granted pursuant to the Program, to the extent that they have not been
exercised, shall terminate upon the expiration of ten (10) years from the date
of grant (or five (5) years if the Grantee is also a 10% stockholder) or, if
sooner, three (3) months after Grantee's termination as an employee of the
Company for any reason, including death. Notwithstanding the foregoing, in the
event that Grantee's employment by the Company is terminated by reason of
disability (within the meaning of Section 22(e)(3) of the Code), the three (3)
month period referenced in the preceding sentence shall be one (1) year and, in
the event that Grantee's employment is terminated by reason of removal for
cause, all of the Grantee's ISOs then outstanding shall terminate immediately
upon the date of such termination.
(e) Restored Options. Stock Options granted under the Program may, with the
Plan Administrator's permission, include the right to acquire a restored option
(a "Restored Option"). If a Stock Option grant contains a Restored Option and if
a Grantee pays all or part of the Option Price of the Stock Option with shares
of Common Stock held by the Grantee, then upon exercise of the Stock Option the
Grantee shall be granted a Restored Option t o purchase, at the fair market
value as of the date of the grant of the Restored Option, the number of shares
of Common Stock of the Company equal to the sum of the number of whole shares
used by the Grantee in payment of the Option Price and the number of whole
shares, if any, withheld by the Company as payment for withholding taxes. A
Restored Option may be exercised between the date of grant and the date of
expiration, which will be the same as the date of expiration of the Stock Option
to which a Restored Option is related.
6. STOCK APPRECIATION RIGHT.
The Plan Administrator may grant a Stock Appreciation Right ("SAR") either
independently or in conjunction with any Stock Option granted under the Program
either at the time of grant of the option or thereafter. The following
provisions are applicable to each SAR:
(a) Options to Which Right Relates. Each SAR which is issued in conjunction
with a Stock Option shall specify the Stock Option to which the SAR is related,
together with the Option Price and number of option shares subject to the SAR at
the time of its grant.
3
<PAGE> 33
(b) Requirement of Employment. Each SAR may be exercised only while the
Grantee is in the employment of the Company, provided that the Plan
Administrator may provide for partial or complete exceptions to this requirement
as it deems equitable, and, provided further, that each SAR may be exercised for
a period of 90 days following (i) the death of the Grantee or termination of
employment because of total and permanent disability or (ii) upon a Change in
Control of the Company as such term is defined in Section 9(j) hereof.
(c) Exercise. A Grantee may exercise each SAR in whole or in part by
delivering a notice of exercise to the Company, except that the Plan
Administrator may provide for partial or complete exceptions to this requirement
as it deems equitable.
(d) Payment and Form of Settlement. If a Grantee exercises any SAR which is
issued in conjunction with a Stock Option, the grantee shall receive the
aggregate of the excess of the fair market value of each share of Common Stock
with respect to which the SAR is being exercised over the Option Price of each
such share. Payment, in any event, may be made in cash, Common Stock or a
combination of the two, in the discretion of the Plan Administrator. Fair market
value shall be determined as of the date of exercise.
(e) Expiration and Termination. Each SAR shall expire on a date determined
by the Plan Administrator at the time of grant. If a Stock Option is exercised
in whole or in part, any SAR related to the Shares purchased in connection with
such exercise shall terminate immediately.
7. RESTRICTED STOCK GRANTS.
The Plan Administrator may issue or transfer shares of Common Stock to a
Grantee under a Restricted Stock Grant. Upon the issuance or transfer, the
Grantee shall be entitled to vote the shares and to receive any dividends paid.
The following provisions are applicable to Restricted Stock Grants:
(a)Requirement of Employment. Subject to the provisions of Section 7(c)
below, if the Grantee's employment terminates during the period designated in
the Grant as the "Restriction Period," the Restricted Stock Grant terminates and
the shares of Common Stock must be returned immediately to the Company. However,
the Plan Administrator may provide for partial or complete exceptions to this
requirement as it deems equitable.
(b) Restrictions of Transfer and Legend on Stock Certificate. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge, or
otherwise dispose of the shares of Common Stock except to a Successor Grantee
under Section 9(a). Each certificate for shares issued or transferred under a
Restricted Stock Grant shall contain a legend giving appropriate notice of the
restrictions applicable to the Grant.
(c) Lapse of Restrictions. All restrictions imposed under the Restricted
Stock Grant shall lapse upon the expiration of the Restriction Period provided
that all of the conditions stated in Sections 7(a) and (b) have been met, as of
the date of such lapse. Additionally, all restrictions imposed under the
Restricted Stock Grant shall lapse upon (i) the death of the Grantee or
termination or employment because of total and permanent disability or (ii) a
Change in Control of the Company, as such term is defined in Section 9(j)
hereof, provided that all of the conditions stated in Section 7(b) have been met
as of the date of such lapse. The Grantee shall then be entitled to have the
legend removed from the certificate.
4
<PAGE> 34
8. AMENDMENT AND TERMINATION OF THE PROGRAM.
(a) Amendment. The Board of Directors may amend the Program except that it
may not, with respect to ISOs granted hereunder, (i) increase the maximum number
of Shares in the aggregate which may be sold pursuant to such options granted
hereunder; (ii) change the manner of determining the minimum option prices,
other than to change the manner of determining the fair market value of any
Shares underlying the option to conform to any then applicable provisions of the
Code or regulations thereunder; (iii) increase the periods during which such
options may be granted or exercised or (iv) change the employees or class of
employees eligible to receive such options hereunder. In any event, no
termination, suspension, modification or amendment of the Program may adversely
affect the rights of any Grantee without his consent.
(b) Termination of the Program. The Program shall terminate on the tenth
anniversary of its effective date unless terminated earlier by the Board or
unless extended by the Board.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Program that occurs after a Grant is made shall not result in
the termination or amendment of the Grant unless the Grantee consents or unless
the Plan Administrator acts under Section 9(e). The termination of the Program
shall not impair the power and authority of the Plan Administrator with respect
to outstanding Grants. Whether or not the Program has terminated, an outstanding
Grant may be terminated or amended under Section 9(e) or may be amended by
agreement of the Company and the Grantee consistent with the Program.
9. GENERAL PROVISIONS.
(a) Prohibitions Against Transfer. Except as otherwise expressly provided
herein or in the instrument of grant, when a Grantee dies, the personal
representative or other person entitled under a prior Stock Option or a Grant
under the Program to succeed to the rights of the Grantee ("Successor Grantee")
may exercise the rights. A Successor Grantee must furnish proof satisfactory to
the Company of his or her right to receive the Grant under the Grantee's will or
under the applicable laws of descent and distribution.
(b) Substitute Grants. The Plan Administrator may make a Grant (a
"Substitute Grant") to an employee of another corporation who becomes an
Eligible Participant by reason of a corporate merger, consolidation, acquisition
of stock or property, reorganization or liquidation involving the Company in
substitution for a stock option, stock appreciation right, performance award, or
restricted stock grant granted by such corporation ("Substituted Stock
Incentive"). The terms and conditions of the Substitute Grant may vary from the
terms and conditions required by the Program and from those of the Substituted
Stock Incentive. The Plan Administrator shall prescribe the exact provisions of
the Substitute Grant, preserving where possible the provisions of the Substitute
Stock Incentive. The Plan Administrator shall also determine the number of
shares of Common Stock to be taken into account under Section 4.
(c) Subsidiaries. The term "subsidiary" means an affiliated corporation
controlled by the Company directly or indirectly through one or more
intermediaries.
5
<PAGE> 35
(d) Fractional Shares. Fractional shares shall not be issued or transferred
under a Grant, but the Plan Administrator may pay cash in lieu of a fraction or
round the fraction.
(e) Compliance with Law. The Program, the exercise of Grants, and the
obligations of the Company to issue or transfer shares of Common Stock under
Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. The Plan Administrator may
revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory government regulation. The Plan
Administrator may also adopt rules regarding the withholding of taxes on payment
to Grantees.
(f) Ownership of Stock. A Grantee or Successor Grantee shall have no rights
as a stockholder of the Company with respect to any Shares covered by a Grant
until the Shares are issued or transferred to the Grantee or Successor Grantee
on the Company's books.
(g) No Right to Employment. The Program and the Grants under it shall not
confer upon any Grantee the right to continue in the employment of the Company
or affect in any way the right of the Company to terminate the employment of a
Grantee at any time.
(h) Effective Date of the Program. The Program shall become effective upon
its approval by the Company' stockholders entitled to vote thereon.
(i) Fair Market Value. For the purposes of the Program, the term "fair
market value" means, as of any date, the closing price of a share of Common
Stock of the Company on such date. The closing price shall be (i) if the common
stock is then listed or admitted for trading on any national securities exchange
or, if not so listed or admitted for trading, is listed or admitted for trading
on the National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ") Small Capitalization Market or National Market System, the
last sale price of the Common Stock, regular way, or the mean of the bid and
asked prices thereof for any trading day on which no such sale occurred, in each
case as officially reported on the principal securities exchange on which the
Common Stock is listed or admitted for trading on the Small Capitalization
Market or the NASDAQ National Market System, as the case may be, or (ii) if not
so listed or admitted for trading on a national securities exchange or the
NASDAQ Small Capitalization Market or National Market System, the mean between
the closing high bid and low asked quotations for the Common Stock in the
over-the-counter market as reported by NASDAQ, or any similar system for the
automated dissemination of securities prices then in common use, if so quoted,
as reported by any member firm of the New York Stock Exchange selected by the
Company; provided, however, that if, by reason of extended or continuous trading
hours on any exchange or in any market or for any other reason, the time, with
respect to any trading day, of the close of trading for the purpose of
determining the "last sale price" or the "closing" bid and asked prices is not
objectively determinable, the time on such trading day used for the purpose of
reporting any compilation of the last sale prices or closing bid and asked
prices in The Wall Street Journal shall be the time on such trading day as of
which the "last sale price" or "closing" bid and asked prices are determined for
purposes of this definition. If the Common Stock is quoted on a national
securities or central market system in lieu of a market or quotation system
described above, the closing price shall be determined in the manner set forth
in clause (i) of the preceding sentence if actual transactions are reported, and
in the manner set forth in clause (ii) of the preceding sentence if bid and
asked quotations are reported but actual transactions are not. If on the date in
question, there is no exchange or
6
<PAGE> 36
over-the-counter market for the Common Stock, the "fair market value" of such
Common Stock shall be determined by the Plan Administrator of the Company acting
in good faith.
(j) Change in Control. For purposes of the Program, the term "Change of
Control" means: the acquisition, without the approval of the Board, by any
person or entity, other than the Company or The Noel Group, Inc. and its
affiliates, of more than 20% of the outstanding shares of Common Stock through a
tender offer, exchange offer, or otherwise; the liquidation or dissolution of
the Company following a sale or other disposition of all or substantially all of
its assets; a merger or consolidation involving the Company that results in the
Company not being the surviving parent corporation; or a change in the majority
of the members of the Board during any two-year period that is not approved by
at least two-thirds of the members of the Board who were members at the
beginning of the two year period.
(k) Withholding. The Plan Administrator may, in its discretion and subject
to such rules as it may adopt, permit or require a Grantee to satisfy, in whole
or in part, any withholding tax obligation which may arise in connection with
the distribution to him or her of Shares of Common Stock or cash pursuant to the
Program by authorizing the Company to withhold from such distribution cash or
Shares having a fair market value equal to the amount of the withholding tax.
Notwithstanding the foregoing, the Plan Administrator shall require, as a
condition to the distribution of any cash or Shares of Common Stock to any
Grantee, that the Company withhold from such distribution cash or Shares having
an aggregate fair market value equal to the amount of the Grantee's liability
for any and all taxes required by law to be withheld.
(l) Program Controls. In the case of any conflict between the terms of this
Program and the terms of any instrument of Grant, the terms of this Program will
control.
7
<PAGE> 37
- --------------------------------------------------------------------------------
CARLYLE INDUSTRIES, INC.
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF CARLYLE INDUSTRIES, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON APRIL 22, 1997
The undersigned appoints Edward F. Cooke and Karen Brenner, and each of
them, with full power of substitution in each, the proxies of the undersigned,
to represent the undersigned and vote all shares of Carlyle Industries, Inc.
Common Stock which the undersigned may be entitled to vote at the Annual Meeting
of Stockholders to be held on April 22, 1997, and at any adjournment or
postponement thereof, as indicated on the reverse side.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3.
(Continued, and to be signed and dated on reverse side.)
CARLYLE INDUSTRIES, INC.
P.O. BOX 11045
NEW YORK, N.Y. 10203-0045
- --------------------------------------------------------------------------------
<PAGE> 38
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[ ]
1. Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote
listed below. [ ] for all nominees listed below. [ ] EXCEPTIONS [ ]
Nominees: Karen Brenner, Joseph S. DiMartino, Robert A. Levinson and Samuel F. Pryor, IV
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that nominee's
name in the space provided below.)
Exceptions _______________________________________________________________________________________________________________
2. To ratify the selection of Arthur Andersen LLP as the independent 3. To vote on the approval of certain amendments
auditors of the Company for the fiscal year ending December 31, 1997. to the Company's 1994 Incentive Program.
FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To transact such other business as may properly come before the Meeting Change of Address or
or any adjournments thereof. Comments Mark Here [ ]
Please sign exactly as name appears
hereon. When shares are held by
joint tenants, both should sign.
When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. If a corporation,
please sign in full corporate
name by an authorized officer.
If a partnership, please sign in
partnership name by any
authorized person.
Date:________________________, 1997
___________________________________
Signature
___________________________________
Signature if held jointly
Votes must be indicated
(x) black or Blue ink. [ ]
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING ENCLOSED ENVELOPE.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
