SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ALBA-WALDENSIAN, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) 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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
ALBA-WALDENSIAN, INC.
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NOTICE OF SUBSTITUTE ANNUAL MEETING OF STOCKHOLDERS
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NOTICE IS HEREBY GIVEN that the Substitute Annual Meeting of
Stockholders of Alba-Waldensian, Inc. (the Company) will be held at the offices
of the Company, 201 St. Germain Avenue, S.W., Valdese, North Carolina 28690, on
Wednesday, July 22, 1998, at 9:00 a.m., Local Time, for the purpose of
considering and acting upon the following:
1. The election of three Directors for a term of three
years pursuant to the Certificate of Incorporation
and the Bylaws of the Company.
2. Approval of the Company's 1997 Nonqualified Stock
Option Plan for Directors.
3. Any and all other matters that may properly come
before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 15, 1998
are entitled to notice of and to vote at the meeting or any adjournment thereof.
If you do not expect to be present at the meeting, please date and sign
the accompanying proxy and return it promptly in the enclosed envelope. The
proxy may be revoked at any time before it is exercised and will not be
exercised if you attend the meeting and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS.
GLENN J. KENNEDY
SECRETARY
Valdese, North Carolina
June 29, 1998
<PAGE>
ALBA-WALDENSIAN, INC.
Post Office Box 100
201 St. Germain Avenue, SW
Valdese, North Carolina 28690
PROXY STATEMENT FOR 1998 SUBSTITUTE
ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION
The accompanying proxy is being solicited on behalf of the Board of
Directors of Alba-Waldensian, Inc., a Delaware corporation (the "Company"), for
use at the Substitute Annual Meeting of Stockholders to be held at the offices
of the Company, 201 St. Germain Avenue, SW, Valdese, North Carolina 28690, on
Wednesday, July 22, 1998, at 9:00 a.m., Local Time, and at any adjournment
thereof.
The Company held its 1998 Annual Meeting of Stockholders on May 13,
1998. However, a quorum of stockholders as required under the Company's By-Laws
was not present at the meeting or the two postponements thereof, and accordingly
the meeting was adjourned without transacting any business. Since May 15, 1998,
the Company is no longer a subsidiary of Sunstates Corporation (see VOTING
SECURITIES, PRINICIPAL STOCKHOLDERS AND HOLDINGS OF MANAGEMENT) and the Board of
Directors has increased the number of Directors from eight to nine. Accordingly,
there will be three Directors elected at this Substitute Annual Meeting of
Stockholders.
Solicitation other than by mail may be made personally and by telephone
by regularly employed officers and employees of the Company who will not be
additionally compensated therefor. In addition, arrangements will be made with
brokerage houses, banks, voting trustees and their nominees to send proxy
material to any beneficial owner of shares of the Company's Common Stock held of
record by them. This proxy material will be first mailed on or about June 29,
1998. The Company has engaged its Transfer Agent, First Union National Bank
("First Union") to deliver proxy materials and solicit proxies. First Union will
be reimbursed for its printing costs, postage and freight charges and other
expenses and will be paid a reasonable fee for its services. All expenses in
connection with the solicitation will be borne by the Company.
<PAGE>
Each proxy submitted will be voted as directed. If no direction is
given, the proxy will be voted for the action proposed. The only matters to be
considered at the meeting, so far as known to the Board of Directors, are the
matters set forth in the Notice of Annual Meeting of Stockholders and routine
matters incidental to the conduct of the meeting. If any other matters do
properly come before the meeting, however, the persons named as attorneys and
proxies will vote on such matters in accordance with their best judgment. Each
stockholder giving a proxy has the power to revoke it at any time before it is
exercised by filing an instrument revoking it, by filing a duly executed proxy
bearing a later date with the Secretary of the Company or by attending the
meeting and voting in person.
VOTING SECURITIES, PRINCIPAL STOCKHOLDERS
AND HOLDINGS OF MANAGEMENT
The record date for determination of stockholders entitled to notice of
and to vote at the meeting is the close of business on June 15, 1998. On such
date, 1,572,403 shares of the Company's Common Stock, par value $2.50 per share
(the "Common Stock"), were issued and outstanding. Each share of Common Stock is
entitled to one vote on each matter to be voted on at the meeting. Voting on the
election of Directors at the meeting shall be by ballot. Voting on all other
matters shall be by voice vote or by show of hands.
On May 15, 1998, investors, including the Company and Mr. Clyde Wm. Engle,
the Company's Chairman and beneficial holder (through Sunstates Corporation) of
a majority of the Company's common stock, purchased from a major bank 938,700
shares of the Company's common stock formerly held by Sunstates Corporation,
pursuant to a private sale of collateral held under a defaulted loan which the
Company's affiliates had with the bank. The Company purchased 295,000 of the
shares at a cost of $2,212,500 plus other estimated transaction costs totaling
$150,000. The Company utilized its existing cash plus funds obtained from its
new $21,000,000 financing facility to purchase the stock. The Company intends to
hold the 295,000 shares as treasury stock and currently has no plans for future
utilization of those shares.
As a result of these transactions, the Company is no longer a subsidiary of
Sunstates Corporation.
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<PAGE>
The following table sets forth, as of June 15, 1998, certain information
regarding each person known to the Company to be the beneficial owner of more
than 5% of its outstanding Common Stock:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- --------------------------------------- ------------------------------ -----------------
<S> <C> <C>
Clyde Wm. Engle 566,800(1) 36.0%
GSC Enterprises, Inc.
4433 West Touhy Avenue
Lincolnwood, Illinois 60646
Nathan H Dardick 295,300(2) 18.8%
303 East Wacker Drive
Suite 1000
Chicago, Illinois 60601
Dimensional Fund Advisors, Inc. 94,300(3) 6.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
(1) According to information contained in a amendment to Schedule 13D dated
June 15, 1998 and information provided to the Company by Mr. Engle,
70,000 shares are owned by GSC Enterprises, Inc., 6,300 shares are
owned by Sunstates Equities, Inc. and 488,500 shares are owned directly
by Mr. Engle. Mr. Engle, a Director and Chairman of the Board of the
Company, is the Chairman and Chief Executive Officer of GSC
Enterprises, Inc. and is President and Director of Sunstates Equities,
Inc. Mr. Engle and all of such corporations have sole voting and
dispositive power with respect to these 564,800 shares of Common Stock.
Also includes 2,000 shares subject to options held by Mr. Engle that
are presently exercisable or exercisable within 60 days.
(2) Based on information contained in an amendment to Schedule 13G dated
June 8, 1998 and information provided to the Company by Mr. Dardick.
(3) According to information contained in an amendment to Schedule 13G
dated February 5, 1997 and information provided to the Company by
Dimensional Fund Advisors, Inc.
3
<PAGE>
("DFA"), a registered investment advisor, DFA is deemed to have
beneficial ownership of 94,300 shares of Common Stock, all of which
shares are held in portfolios of DFA Investment Dimensions Group Inc.,
the "Fund"), a registered open-end investment company, or in series of
the DFA Investment Trust Company (the "Trust"), a Delaware business
trust or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, all of which
DFA serves as investment manager. DFA has sole voting power with
respect to 68,000 shares of Common Stock. Certain officers of DFA also
serve as officers of the Fund and the Trust and as such officers have
sole voting power with respect to 21,000 shares of Common Stock owned
by the Fund and 5,300 shares of Common Stock owned by the Trust. DFA
has sole dispositive power over all 94,300 shares. DFA disclaims
beneficial ownership of all 94,300 shares.
The following table sets forth, as of June 15, 1998, certain information with
respect to the beneficial ownership of the Common Stock by all Directors,
nominees for Director and Executive Officers of the Company as a group and
certain named Executive Officers. The named Executive Officers listed below are
the Company's three current executive officers, other than the Chief Executive
Officer and Chief Financial Officer, whose total annual salary and bonus for the
fiscal year ended December 31, 1997, exceeded $100,000. Information with respect
to the beneficial ownership of the Common Stock by the Chief Executive Officer
and Chief Financial Officer, each of the Directors and the nominees is contained
in the table under "Information About Directors and Nominees for Director."
<TABLE>
<CAPTION>
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1) of Class
- -------------------------------- ----------------------------- -------------------
<S> <C> <C>
Donald R. Denne 7,250(2) *
Dixon R. Johnston 4,688(3) *
Ronald J. Harrison 3,125(4) *
All Directors, nominees 923,763(5) 56.7%
and Executive Officers
as a group (14 persons)
</TABLE>
4
<PAGE>
* Less than 1%.
(1) Except as indicated in the table under the heading "Voting Securities,
Principal Stockholders and Holdings of Management" above, each
Director, nominee and executive officer possesses the sole power to
vote and dispose of the shares beneficially owned by him.
(2) Includes 6,750 shares subject to options that are presently exercisable
or exercisable within 60 days.
(3) Includes 4,688 shares subject to options that are presently exercisable
or exercisable within 60 days.
(4) Includes 3,125 shares subject to options that are presently exercisable
or exercisable within 60 days.
(5) Includes 57,813 shares subject to options that are presently
exercisable or exercisable within 60 days.
INFORMATION ABOUT DIRECTORS AND NOMINEES FOR DIRECTOR
The Company's Bylaws provide that the number of Directors shall be not
less than five nor more than 15, the exact number to be determined from time to
time by resolution of the Board of Directors. By resolution adopted June 15,
1998, the Board set the number of Directors at nine. The Bylaws also provide for
three classes of Directors having staggered terms of office, with each Director
serving a three-year term expiring upon the election and qualification of his
successor.
Two Directors, Messrs. Clyde Wm. Engle and Joseph C. Minio, are
currently serving terms that expire at the 1998 Annual Meeting of Stockholders.
Mr. Engle was first elected to the Board of Directors in 1980 and Mr. Minio was
first elected to the Board of Directors in 1983. Mr. Nathan H Dardick has not
previously served as a
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<PAGE>
director of the Company. The six Directors whose terms expire in 1999 and 2000
were elected by the Company's stockholders at prior annual meetings to serve
until the annual meeting to be held in the year set forth in the table below and
until their successors are elected and qualified.
On June 15, 1998, the Directors nominated Messrs. Engle and Minio to
serve new three-year terms and nominated Mr. Nathan H Dardick to fill the newly
created vacancy on the Board. The accompanying proxy will be voted FOR the
election of these three nominees unless authority to do so is withheld.
Directors shall be elected by a plurality of the votes cast by the
holders of the shares present in person or represented by proxy at a meeting at
which a quorum is present and which are entitled to vote on the election of
directors. Abstentions and shares not voted are not taken into account in
determining a plurality in the election of directors. Although the Board of
Directors does not expect that any of the nominees will be unavailable for
election, if a vacancy in the slate of nominees unexpectedly occurs, proxies
will be voted in favor of those nominees who remain as candidates and may be
voted for a substitute nominee designated by the Board of Directors.
The following table sets forth certain information about the three
nominees for Director and the remaining Directors whose terms continue beyond
the 1998 Annual Meeting of Stockholders, including information about their
beneficial ownership of Common Stock as of June 15, 1998. A description of each
person's business activities during the past five years, including his position,
if any, with the Company and other pertinent information follow the table.
<TABLE>
<CAPTION>
Beneficial Ownership
of Common Stock
Year First
Nominees For Became No. of Shares(1)
Terms Expiring 2001 Age Director % of Class
<S> <C> <C> <C> <C>
Clyde Wm. Engle 55 1980 551,100(2)(3) 35.0%
Joseph C. Minio 55 1983 2,000(3) *
Nathan H Dardick 48 -- 295,300 18.8%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership
of Common Stock
Year First
Directors With Became No. of Shares(1)
Terms Expiring 2000 Age Director % of Class
<S> <C> <C> <C> <C>
Paul H. Albritton, Jr. 54 1991 2,600(3) *
William M. Cousins, Jr. 73 1991 2,000(3) *
Glenn J. Kennedy 46 1991 2,000(3) *
</TABLE>
<TABLE>
<CAPTION>
Beneficial Ownership
of Common Stock
Year First
Directors With Became No. of Shares(1)
Terms Expiring 1999 Age Director % of Class
<S> <C> <C> <C> <C>
James M. Fawcett, Jr. 61 1992 2,000(3) *
C. Alan Forbes 64 1974 2,050(3) *
Lee N. Mortenson 62 1984 6,200(3) *
</TABLE>
* Less than 1% of the outstanding shares of Common Stock of the Company.
(1) Except as otherwise noted, each Director or nominee possesses the sole power
to vote and dispose of the shares beneficially owned by him.
(2) See Note 1 in the table under the heading "Voting Securities, Principal
Stockholders and Holdings of Management" above regarding the holdings of
Clyde Wm. Engle.
(3) Includes 2,000 shares subject to options that are presently exercisable or
exercisable within 60 days.
PAUL H. ALBRITTON, JR. Mr. Albritton is Vice President and Chief
Financial Officer (since May 1994) of C-Phone Corporation (formerly Target
Technologies, Inc.), a publicly traded company engaged in video communication
equipment manufacturing.
7
<PAGE>
From September 1992 to May 1994, Mr. Albritton, an attorney and certified public
accountant, was a self-employed financial consultant and private investor. Mr.
Albritton was a Director and Executive Vice President (May 1988 to August 1992)
of Acton Corporation (now Sunstates Corporation), a publicly traded company
primarily engaged in real estate development and manufacturing.
WILLIAM M. COUSINS, JR. Mr. Cousins has been President of William M.
Cousins Jr., Inc., a management-consulting firm, since 1974. Mr. Cousins
received his MBA from Harvard University. Mr. Cousins is also a Director of
Wellco Enterprises, Inc. and BioSepra, Inc.
NATHAN H DARDICK. Mr. Dardick is an attorney, independent business
consultant and private investor. From June 1974 until May 1996, Mr. Dardick was
engaged primarily in the practice of law in Chicago, Illinois. He was a partner
in Dardick & Denlow (and its predecessor firms) from June 1977 through August
1993, and a partner in Sachnoff & Weaver from September 1993 through May 1996,
when Mr. Dardick retired from the active practice of law in order to focus
primarily upon making investments in public and private companies. Mr. Dardick
is also President of Captiva Investment Company, which was founded by him in
April 1996 as a vehicle to make loans to small private businesses. Mr. Dardick
received his A.B. degree from Washington University in St. Louis and his law
degree from The University of Chicago Law School.
CLYDE WM. ENGLE. Mr. Engle has served as Chairman of the Board of the
Company since May 1991. He also holds positions with various businesses
headquartered in Chicago, Illinois, including RDIS Corporation (formerly Libco
Corporation) (Chairman of the Board and President), which is the sole
shareholder of Telco Capital Corporation; Telco Capital Corporation (Chairman of
the Board and Chief Executive Officer), which is the majority shareholder of
Hickory Furniture Company; Hickory Furniture Company (Chairman of the Board),
which is the majority shareholder of Sunstates Corporation; GSC Enterprises,
Inc. (Chairman of the Board, President and Chief Executive Officer), a one bank
holding company, and Bank of Lincolnwood (Chairman of the Board and President).
Mr. Engle is also Chairman of the Board and Chief Executive Officer of Sunstates
Corporation (formerly Acton Corporation), a Delaware corporation, which is a
publicly traded company primarily engaged in real estate and manufacturing. The
following information is provided voluntarily by Mr.
8
<PAGE>
Engle although it is not deemed material information as that term is used in
Item 401 of Regulation S-K. Mr. Engle is the subject of a Cease and Desist Order
dated October 7, 1993, issued by the Securities and Exchange Commission
requiring Mr. Engle and certain of his affiliated companies to permanently cease
and desist from committing any further violations of Section 16(a) of the
Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder, which requires monthly and other periodic reports of transactions in
certain securities. According to information provided to the Company by Mr.
Engle, the information required to be reported pursuant to Section 16(a) was
otherwise reported in a timely manner in other publicly available reports.
JAMES M. FAWCETT, JR. Mr. Fawcett has been a Registered Representative
and Agent for the Equitable Financial Companies since 1990. He served as
President and Owner of The Fawcett Group, a financial consulting and investment
banking firm, from 1973 to 1990.
C. ALAN FORBES. Mr. Forbes is a management consultant in Charlotte,
North Carolina and is President of C.A. Forbes & Assoc., Inc. From 1985 through
1988 he was President of Delta Square, Inc., of Atlanta, Georgia, which is a
manufacturer of electronic productivity measuring systems.
GLENN J. KENNEDY. Mr. Kennedy has served as Vice President, Treasurer,
Secretary and Chief Financial Officer of the Company since June 1997. Mr.
Kennedy has been a director of Alba-Waldensian since 1991 and was elected Vice
President, Treasurer, Secretary and Chief Financial Officer in June 1997. He
also currently serves as Vice President (since July 1988), Treasurer and Chief
Financial Officer (since May 1988) of Sunstates Corporation (formerly Acton
Corporation), a publicly traded company primarily engaged in real estate and
manufacturing. Mr. Kennedy was formerly Chief Financial Officer and Treasurer of
Sunstates Corporation, a publicly traded company which was primarily engaged in
specialized automobile insurance underwriting and real estate development, which
was merged into Acton Corporation in May of 1988. Mr. Kennedy has served as
Chief Financial Officer of Simms Investment Company and was a Senior Audit
Manager with Price Waterhouse & Co. Mr. Kennedy is a Certified Public Accountant
and has a Bachelors Degree in Accounting from North Carolina State University
9
<PAGE>
JOSEPH C. MINIO. Mr. Minio has been President, Chief Executive Officer
and Director of Belle Haven Management Ltd. since 1986. Belle Haven Management
Ltd. is engaged in the business of acquiring controlling positions in small and
medium-sized under-performing companies, and provides top level general
management services, including strategic planning, restructuring, financing and
acquisition search, analysis and negotiation. He has also served as President
and Chief Executive Officer of Intelligent Business Communications Corporation.
Intelligent Business Communications Corporation was engaged in the design,
development, manufacture, and marketing of advanced state of the art satellite
data control equipment as well as vertical circuit switches and T-1 multiplexers
for both data and voice communications. Mr. Minio also serves as a Director of
Faulding, Inc.
LEE N. MORTENSON. Mr. Mortenson has served as President and Chief
Executive Officer of the Company since February 1997. He has also served as
President, Chief Operating Officer and a Director of Telco Capital Corporation
of Chicago, Illinois since January 1984. Telco Capital Corporation is
principally engaged in the manufacturing and real estate businesses. He was
President, Chief Executive Officer and a Director of Sunstates Corporation
(formerly Acton Corporation) to December 1990 and he has been President, Chief
Operating Officer and a Director of Sunstates Corporation (formerly Acton
Corporation) since December 1990. Sunstates Corporation, a Delaware corporation,
is a publicly traded company primarily engaged in real estate and manufacturing.
Mr. Mortenson also serves as a Director of Rocky Mountain Chocolate Factory,
Inc. On December 24, 1996, an agreed order of liquidation with a finding of
insolvency was entered against the principal subsidiary of Sunstates
Corporation, Coronet Insurance Company ("Coronet"), under the Illinois Insurance
Code, pursuant to which, among other things, all of the assets of Coronet were
transferred to the Office of the Special Deputy for the purpose of winding up
the affairs of Coronet. Mr. Mortenson was a Director of Coronet and served as
its President during the period 1994 to 1996. On January 24, 1997, Hickory White
Company, a furniture-manufacturing subsidiary of Sunstates Corporation, filed a
voluntary petition under Chapter 11 of the Federal Bankruptcy Code. All of the
assets of Hickory White Company were sold to an unrelated party on March 17,
1997. Mr. Mortenson was Vice President and a Director of Hickory White Company.
Mr. Mortenson previously served as Group Vice President of Gould, Inc. from 1980
to 1982. Prior to this, he was a Group Vice President with Becton Dickinson and
Company. Mr. Mortenson holds a BS Degree and Masters Degree in Engineering from
UCLA.
10
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Audit Committee is currently comprised of Messrs. Albritton,
Cousins, and Fawcett. Mr. Albritton serves as Chairman. The principal duties of
the Audit Committee are to review with the independent auditors (i) the purpose
and scope of services to be performed by them, (ii) the financial statements and
related opinions of the auditors, (iii) the observations and recommendations of
the auditors relating to accounting principles or practices, internal controls,
financial reporting and operations and (iv) other pertinent matters necessary to
assist the Board of Directors in fulfilling its responsibilities for public
financial reporting. In addition, the Audit Committee communicates with members
of the Company's management staff with respect to auditing matters, supervises
and reviews the Company's internal audit procedures and activities and
recommends to the Board of Directors nomination of an independent auditing firm
for the Company. The Audit Committee met six times during 1997.
The Stock Option and Executive Compensation Committee is currently
comprised of Messrs. Fawcett, Forbes and Minio. Mr. Forbes serves as Chairman.
The principal duties of the Stock Option and Executive Compensation Committee
are to review and recommend changes with respect to the Company's stock option
plans, to recommend options to be granted under the plans, to review salaries
and other compensation paid to management of the Company and to assist the Chief
Executive Officer with respect to the Company's executive compensation policies.
The Stock Option and Executive Compensation Committee met twenty-nine times
during 1997. A majority of the meetings of this committee were held via
telephone in connection with the severance of the Company's former Chief
Executive Officer in early 1997.
The Company does not have a nominating committee. The entire Board of
Directors considers and nominates individuals for election to serve on the Board
of Directors.
The Board of Directors met six times during 1997. All Directors
attended at least 75% of the meetings of the Board and all committees of which
they were a member
11
<PAGE>
except for Mr. Fawcett who attended only two-thirds of the Board of Director
meetings due to illness.
COMPENSATION OF DIRECTORS
Directors receive an annual retainer of $1,300 ($2,000 for each
committee member) and $1,000 for each regular meeting of the Board attended
($500 for each telephonic Board meeting). Directors who serve on the Audit
Committee, the Executive Committee or the Stock Option and Executive
Compensation Committee receive an additional $500 for each Committee meeting
attended ($250 for each telephonic Committee meeting). Directors who serve on
the MIS Committee and the Strategic Planning Committee receive $1,000 for each
such Committee meeting attended.
STOCK OPTION AND EXECUTIVE
COMPENSATION COMMITTEE REPORT
The Stock Option and Executive Compensation Committee of the Board of
Directors of the Company (the "Committee") provides overall guidance with
respect to the Company's executive compensation programs. The Committee is
composed of three members (all outside directors) and it meets at least once a
year to review the Company's compensation programs, including executive salary
administration, stock and incentive compensation plans. The Committee considers
and makes final decisions regarding the compensation of the Chief Executive
Officer and the other executive officers of the Company.
GENERAL EXECUTIVE COMPENSATION POLICIES
The Company's executive compensation policies are designed to attract
and retain top quality executive officers and to reward executive officers for
performance measured by review of financial performance criteria and achievement
of strategic corporate objectives.
The Company's executive officers are eligible to receive three
principal types of compensation: base salary, annual incentive compensation and
stock options and related bonus plan payments, each of which is more fully
described below. In addition,
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<PAGE>
executive officers participate in the Company's various other employee benefit
plans, including the Company's Employee Savings and Profit Sharing Plan.
1. BASE SALARY. The Company has historically established the base
salary of its executive officers on the basis of each executive officer's
experience, scope of responsibility and accountability within the Company and
salary and benefits at comparable public companies.
2. ANNUAL INCENTIVE COMPENSATION. To incentivize the compensation of
executive officers, a component of an executive officer's total compensation
arrangement derives from participation in the Company's 1989 Management
Incentive Plan (the "MI Plan"). Under the MI Plan, the named Executive Officers
can earn a designated percentage of annual salary based upon two out of three
criteria: actual performance against established personal objectives ("MBOs"),
Company profit performance against the established budget, and/or divisional
profit performance against the established budget. Under the MI Plan, Messrs.
Denne, Johnston and Harrison may be awarded up to 36%, 36% and 34%,
respectively, of their base salary in bonuses.
One-half of each named Executive Officer's bonus for 1997 was tied to
the achievement of established financial and budget objectives. These budget
objectives are approved annually by the Board of Directors. Falling below 85% of
the budget objective results in no bonus award with respect to the budget
objective component of the bonus. The other half of each named Executive
Officer's bonus depends on his achievement of MBOs and other strategic goals of
the Company which are determined and approved for each fiscal year by the
Committee. The ability of the named Executive Officer to receive an award of the
full amount for a particular year depends on whether or not the established
objective, which may be subjectively adjusted by the Committee for unusual
circumstances, is met.
3. STOCK OPTION COMPENSATION AND RELATED BONUS PAYMENTS. The Committee
believes that stock ownership is another way to align the interests of the
executive officers with those of the Company's shareholders. The Committee
generally awards stock options to an executive officer based on his position
with the Company. The Committee believes that stock options give the executive
officer a proprietary interest in the Company and allow executive officers to
realize economic gain upon increases in shareholder value over time. To that
end, the Committee may award executive officers
13
<PAGE>
with stock options under the Company's 1993 Long Term Performance Plan (the
"1993 Plan"). During the fiscal year ended December 31, 1997, the Committee
granted stock options to the Company's Executive Officers with respect to a
total of 115,500 shares of Common Stock as follows:
Donald R. Denne 15,500 shares
Ronald J. Harrison 12,500 shares
Dixon R. Johnston 12,500 shares
Glenn J. Kennedy 12,500 shares
Lee N. Mortenson 50,000 shares
Warren R. Nesbit 12,500 shares
All of the options issued to Messrs. Mortenson, Harrison, Kennedy and 6,250 of
the shares issued to Mr. Johnston were issued in connection with their initial
employment by the Company. Of the options issued to Mr. Denne and Nesbit, 5,000
and 2,000, respectively, were replacing options that had expired during the
year. The remaining options reported above as being issued during the year
actually represent the modification of previously outstanding options as
discussed in the following paragraph.
On October 21, 1997, the Committee authorized the modification of
38,250 options that were outstanding under the 1993 Incentive Stock Option Plan
to reset the exercise price to $5.00 per share. These modified options will no
longer be subject to the bonus provisions discussed in the following paragraph.
No other terms of the outstanding options were modified.
In addition, a bonus will be paid to holders of options, granted prior
to October 21, 1997, in the event that on the date the option expires, the book
value of the stock has increased during the option's term more rapidly than the
market value of the stock. In such event, the option holder is paid a bonus
equal to the amount by which the growth in the book value per share exceeds the
growth in the market price of the Company's Common Stock. If the growth in the
stock price exceeds the growth in book value per share, no bonus will be paid.
The Committee discontinued this bonus program for any options issued after
October 20, 1997.
1997 COMPENSATION FOR MR. SCHUSTER
14
<PAGE>
The general policies described above for the compensation of executive
officers also applied to Thomas F. Schuster, who served as the Company's
President and Chief Executive Officer until February 1997. In determining Mr.
Schuster's base salary, the Committee took into account comparable salary and
benefits at other publicly traded companies in the textile industry as well as
the performance of the Company in 1996. Mr. Schuster's annual salary for 1997 of
$231,756 was not increased from its 1996 level.
Due to Mr. Schuster's severance from the Company in February 1997, no
incentive compensation was paid to Mr. Schuster with respect to 1997. See
"Termination of Employment and Change of Control Arrangement" for information on
Mr. Schuster's severance payments.
1997 COMPENSATION FOR MR. MORTENSON
The general policies described above for the compensation of executive
officers also applied to Lee N. Mortenson, who became the Company's President
and Chief Executive Officer in February 1997. In determining Mr. Mortenson's
base salary, the Committee took into account comparable salary and benefits at
other publicly traded companies in the textile industry as well as the
performance of the Company in 1996. Mr. Mortenson's 1997 annual salary was
established to be $195,000.
Mr. Mortenson's annual incentive compensation, however, was earned on
the basis of a different formula from that of the other named Executive
Officers. In contrast to the other named Executive Officers, a greater
percentage of Mr. Mortenson's bonus was dependent upon the achievement by the
Company of certain profit objectives. Mr. Mortenson could have been awarded up
to a maximum of 37.5% of his base salary in bonus depending upon his achievement
of MBOs. In addition, Mr. Mortenson could have been awarded a bonus equal to
12.5% of his base salary in the event the Company achieved 85% of the
pre-established financial and budget objectives (0% below 85% performance). For
every percentage point by which the Company exceeded 85% of the established
financial and budget objectives, which may be subjectively adjusted by the
Committee for unusual circumstances, the percentage of the applicable portion of
his base salary subject to the bonus could have been increased by 2.23
percentage points, which could have resulted in a bonus for the achievement of
financial and budget objectives in excess of 37.5% of his base salary. Mr.
Mortenson's total incentive compensation in 1997 was $125,813 or 75% of his base
salary.
15
<PAGE>
During 1997, Mr. Mortenson received temporary living expense
reimbursements totaling $16,969, including transportation costs for himself and
his family. In December 1997, the Company provided Mr. Mortenson with a $90,000
loan to assist him in the acquisition of his new residence in North Carolina.
The loan bears interest at prime plus 1% is due at the earlier of the date of
sale of his Chicago residence or one year and is secured by a second deed of
trust on his North Carolina residence.
The Stock Option and Executive Compensation Committee Report is
presented by the members of the Committee:
James M. Fawcett, Jr.
Joseph C. Minio
C. Alan Forbes, Chairman
16
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total stockholder return on the Company's Common Stock (AWS)
against the cumulative total return of the S&P 500 Composite Index and the
Company's Peer Group for the period covering the Company's five fiscal years
ended December 31, 1993, 1994, 1995, 1996 and 1997. The Peer Group consists of
the following publicly-held companies in the textile industry: Hartmarx Corp.,
Hampshire Group Ltd., Danskin Inc., Nantucket Industries, Inc., Warnaco Group
Inc. Class A Common Stock, Fruit of the Loom Inc. Class A Common Stock, Sara Lee
Corp. and Premiumwear Inc. Tecnol Medical Product, which was a member of the
Peer Group in prior years, is no longer a publicly traded company and is
therefore no longer included.
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
ALBA-WALDENSIAN, S&P 500, PEER GROUP
(Performance results through 12/31/97)
(The Performance Graph appears here. See the table below for the plot points.)
1992 1993 1994 1995 1996 1997
Alba-Waldensian $100.00 $131.75 $141.27 $ 96.83 $ 74.60 $ 58.73
S&P 500 $100.00 $109.99 $111.45 $153.25 $188.87 $251.91
Peer Group $100.00 $ 78.39 $ 81.94 $102.03 $124.99 $173.85
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in AWS common stock, S&P 500,
and Peer Group.
*Cumulative total return assumes reinvestment of dividends
Source: Frank Russell Company
Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.
17
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information about the Company's executive
officers:
<TABLE>
<CAPTION>
Name Position with the Company
<S> <C> <C>
Lee N. Mortenson 62 President and Chief Executive
Officer
Donald R. Denne, Sr. 61 Senior Vice President and
President of the Health Products
Division
Dixon R. Johnston 56 Vice President and President of
the Consumer Products Division
Glenn J. Kennedy 46 Vice President, Treasurer,
Secretary and Chief Financial Officer
Ronald J. Harrison 51 Vice President - Operations
Warren R. Nesbit, II 45 Vice President - Human
Resources
James Douglas Dickson 41 Assistant Secretary
</TABLE>
The following paragraphs set forth information concerning each executive
officer's business experience:
18
<PAGE>
Mr. Lee N. Mortenson - see information under "INFORMATION ON DIRECTORS
AND NOMINEES FOR DIRECTORS.
Mr. Donald R. Denne, Sr. joined the Company in 1987 as a Corporate Vice
President and President of the Health Products Division. Prior to joining the
Company, Mr. Denne served as Vice President of Marketing for General Medical
Corporation, Vice President of Health Products for Work Wear Corporation and
Vice President for Business Planning for American Hospital Supply. Mr. Denne has
a B.A. degree from Duke University.
Mr. Dixon R. Johnston was elected Vice President of the Company and
President of the Consumer Products Division on February 22, 1996. Prior to
joining the Company, Mr. Johnston served as Executive Vice President of
Gem-Dandy, Inc. from 1995 - 1996. Mr. Johnston served as Director of Motorsports
& New Ventures for Sky Box International from 1993 to 1995. He served as
Executive Vice President of Trone Advertising from 1989 - 1993. Mr. Johnston was
president and part owner of Milpak Graphics from 1986 to 1989. From 1982 to 1986
he was President of No-nonsense Fashions, Inc., a division of Kayser-Roth
Hosiery. Mr. Johnston has a degree in economics from Northwestern University and
an MBA from the University of California, Berkeley.
Mr. Glenn J. Kennedy - see information under "INFORMATION ON DIRECTORS
AND NOMINEES FOR DIRECTORS".
Mr. Ronald J. Harrison joined the Company in February 1997 as Vice
President of Operations. Prior to joining the Company, Mr. Harrison has 29 years
of experience in the apparel business holding various positions including
industrial engineer, plant manager and vice president of manufacturing (Champion
Inc.) and president of two smaller apparel companies (C & L Apparel
Manufacturing and Hartin Industries). Prior to joining the Company, Mr. Harrison
was chief operating officer for Jelyn Associates (d/b/a Old Glory), a
Pennsylvania sweater company from 1995 to February 1997. Offshore experience
includes Mexico, all of Central America and the Caribbean Basin. Mr. Harrison
has a bachelor's degree from Louisiana Tech University and an MBA from Memphis
State University.
Mr. Warren Nesbit, II joined the Company in December 1985 as Director
of
19
<PAGE>
Human Resources. He was named Vice President of Human Resources in 1990 and
elected to serve as a Corporate Vice President in 1993. Mr. Nesbit served as
Vice President of Industrial Relations with Marion Manufacturing, in Marion,
North Carolina prior to joining the Company. He held various manufacturing and
human resource responsibilities with Burlington Industries from 1978 to 1984.
Mr. Nesbit is a graduate of the University of North Carolina.
Mr. James Douglas Dickson joined the Company in 1994 as Corporate
Controller. He was elected Assistant Secretary on December 15, 1994. Prior to
joining the Company, Mr. Dickson served as Controller of Hickorycraft, Inc., a
division of Masco Corporation, from 1987 to 1994 and as Division Controller of
Sealed Air Corporation from 1982 to 1987. Mr. Dickson holds a B.B.A. from the
University of Georgia and is a Certified Management Accountant.
The Company's officers are elected for a one-year term at the annual
meeting of the Board of Directors.
20
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The table below shows the compensation paid or accrued by the Company
for the three fiscal years ended December 31, 1997, 1996 and 1995, to or for the
account of each of the Chief Executive Officers and the Company's three other
executive officers whose total annual salary and bonus for 1997 exceeded
$100,000 (collectively, the named Executive Officers).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
---------------------------------- --------------------
Other Stock
Annual Option LTIP All
Name and Fiscal Salary Compensation Awards Payouts Other
Principal Position Year ($) Bonus($) ($) (#Sh) ($) Compensation
- --------------------- ----------------------------- ---------- --------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas F. Schuster 1997 231,756(12) 121,630(11) (2) 0 28,750(4) 618(3)
(1) 1996 231,756 69,527(12) (2) 0 0 2,479(3)
President and Chief 1995 225,000 18,270 (2) 0 0 2,400(3)
Executive Officer
Lee N. Mortenson (1) 1997 176,500(9) 125,813 47,541(10) 52,000(8) 0 2,684(3)
President and Chief
Executive Officer
Donald R. Denne 1997 150,000 10,800 (2) 5,000 5,100(4) 2,691(3)
Senior Vice 1996 143,004 18,218 (2) 2,500 4,200(4) 2,519(3)
President 1995 131,508 17,070 (2) 2,500 0 2,400(3)
of Company and
President of Health
Products Division
Dixon R. Johnston 1997 150,000 41,797 20,000(6) 6,250 0 2,800(3)
(5) 1996 121,654 25,000 25,000(6) 6,250 0 1,136(3)
Vice President and
President of the
Consumer Products
Division
Ronald J. Harrison 1997 112,500 37,676 (2) 12,500 0 1,080(3)
(7)
Vice President of
Operations
</TABLE>
21
<PAGE>
(1) The Board of Directors elected Mr. Lee N. Mortenson, a Director of the
Company, on February 20, 1997 as President and Chief Executive Officer of
the Company replacing Mr. Thomas F.
Schuster.
(2) Except for Messr. Mortenson and Johnston, no named Executive Officer has
received personal benefits during such years in excess of 10% of his annual
salary and bonus.
(3) Represents matching contributions by the Company under its Employee Savings
and Profit Sharing Plan.
(4) These payments were made pursuant to the Company's 1991 Management Bonus
Plan in connection with the expiration of stock options. See footnote 1 to
the Option Grants Table below.
(5) The Board of Directors elected Mr. Dixon R. Johnston in February 1996 as a
Vice President of the Company and President of the Consumer Products
Division.
(6) Includes a $20,000 moving allowance ($15,000 in 1996) paid to or on behalf
of Mr. Johnston and a $10,000 signing bonus paid in 1996.
(7) Mr. Ronald J. Harrison joined the Company in February 1997 as Vice
President of Operations.
(8) Includes 2,000 options issued in connection with the Company's 1997
Nonqualified Stock Option Plan for Directors.
(9) Includes $8,750 of fees for serving on the Board of Directors and various
Board Committees.
(10) Includes country club dues ($3,249), automobiles ($5,292), temporary living
expenses ($10,845), travel for spouse ($6,124) and reimbursements for
payment of income taxes ($9,016).
(11) Represents payment of previously deferred compensation under the Company's
1989 Non-Qualified Deferred Compensation Plan.
(12) Mr. Schuster resigned from the Company effective February 20, 1997. Mr. Lee
N. Mortenson, a Director of the Company, was elected by the Board of
Directors on February 20, 1997, as President and Chief Executive Officer of
the Company, replacing Mr. Schuster.
22
<PAGE>
See "Termination of Employment and Change of Control Arrangements" below
for additional information regarding the calculation of this amount.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company has entered into termination of employment and change of
control arrangements with respect to the Chief Executive Officer and the named
Executive Officers of the Company, Messrs. Denne, Johnston and Harrison.
Mr. Mortenson has been provided with a severance package requiring,
that in the event of termination without cause, the payment of 100% of his base
pay plus benefits for a period equal to the lesser of twelve months or the
number of months Mr. Mortenson remains unemployed. Should Mr. Mortenson be
terminated under certain circumstances prior to February 20, 1999, the Company
will relocate Mr. Mortenson to Chicago and pay all associated relocation
expenses.
With respect to Mr. Denne, his severance arrangement provides that in
the event that he is terminated without cause he shall be entitled to receive a
payment equal to 100% of his base pay and benefits for a period of six months.
In addition, following the six-month period, Mr. Denne is entitled to receive a
contingent payment equal to 100% of his base pay and benefits for the lesser of
(a) six months or (b) the number of months that he remains unemployed.
Mr. Johnston's severance arrangement provides that in the event his
employment with the Company is involuntarily terminated or he is asked to
resign, in either case without cause, then he shall be entitled to receive a
payment equal to 100% of his base pay and benefits for a period of nine months.
In addition, following the nine-month period, Mr. Johnston is entitled to
receive a contingent payment equal to 100% of his base pay and benefits for the
lesser of (a) nine months or (b) the number of months that he remains
unemployed.
Mr. Harrison's severance arrangement provides that in the event that he
is terminated without cause he shall be entitled to receive a payment equal to
100% of his base pay and benefits for a period of six months. In addition,
following the six-month
23
<PAGE>
period, Mr. Harrison is entitled to receive a contingent payment equal to 100%
of his base pay and benefits for the lesser of (a) six months or (b) the number
of months that he remains unemployed.
On February 20, 1997, Thomas F. Schuster resigned as President and
Chief Executive Officer of the Company. Pursuant to his severance agreement with
the Company, Mr. Schuster will be paid a severance amount (the "Severance
Amount") equal to 18 months of his base salary at February 20, 1997, payable in
18 equal monthly installments. Mr. Schuster's base salary at February 20, 1997,
was $231,756. In addition, Mr. Schuster was paid $69,527, which amount
represents 80% of his maximum (37.5%) MBO portion of his 1996 incentive
compensation: no other incentive compensation was paid to Mr. Schuster. The
Company also paid Mr. Schuster $28,750, which amount represents the difference
between the book value of the Company's Common Stock at December 31, 1996,
multiplied by the number of shares of Common Stock subject to options held by
Mr. Schuster at his resignation. The Company has also agreed to continue Mr.
Schuster's medical, dental and life insurance and to continuing paying his
country club membership dues during the 18 month severance period.
24
<PAGE>
The table below shows the individual grants of stock options to the
named Executive Officers during the fiscal year ended December 31, 1997. No
stock appreciation rights (SARs) were granted during the year.
OPTION GRANTS IN 1997 FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Rates of
Stock Price
Appreciation for
Individual Grants Option Term*
--------------------
--------------------------------------------------------
% of Total Options
Options Granted to Exercise or
Granted Employees Base Price Expiration
Name (Shs) in Fiscal Year ($/Sh) Date 5% 10%
- ------------------ ----------- ------------------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas F. Schuster 0 0 - - - -
Lee N. Mortenson 50,000(1) 29.4% $4.875 6/19/02 $67,344 $148,812
Lee N. Mortenson 2,000(2) 1.2% $5.000 12/17/02 $2,763 $6,105
Donald R. Denne 3,000(1)(3) 1.8% $5.000 12/14/98 $4,144 $9,156
Donald R. Denne 2,500(1)(3) 1.5% $5.000 12/15/99 $3,450 $7,625
Donald R. Denne 2,500(1)(3) 1.5% $5.000 12/12/00 $3,450 $7,625
Donald R. Denne 2,500(1)(3) 1.5% $5.000 12/18/01 $3.450 $7,625
Donald R. Denne 5,000(1) 2.9% $5.375 11/04/02 $7,425 $16,407
Dixon R. Johnston 6,250(1) 3.7% $5.000 5/14/02 $8,634 $19,078
Dixon R. Johnston 6,250(1)(3) 3.7% $5.000 2/21/01 $8,634 $19,078
Ronald J. Harrison 12,500(1) 7.4% $5.000 5/14/02 $17,268 $38,157
</TABLE>
* These amounts represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the future performance of the Common Stock
and overall stock market conditions.
(1) Qualified stock option granted by the Board of Directors under the 1993
Long Term Performance Plan. The option becomes exercisable as to
one-fourth of the shares each year beginning one year after the date of
grant. The option price equals the average of the high and low price of
the Common Stock on the American Stock Exchange on the date of grant.
Special provisions govern the exercise of the option in the event of
termination of employment, retirement, disability or death. In
connection with the grant of stock options issued prior to October 21,
1997, each named Executive Officer is entitled to a payment in the
event the stock option expires unexercised and the book
25
<PAGE>
value of the stock has increased more rapidly than the market value of
the stock. In such event, the option holder will be paid a bonus equal
to the amount by which the growth in the book value exceeds the growth
in the market price of the Common Stock of the Company.
(2) Includes 2,000 options granted under the Company's 1997 Nonqualifed
Stock Option Plan for Directors. The option becomes exercisable on the
date of grant. The option price equals the average of the high and low
price of the Common Stock on the American Stock Exchange on the date of
grant. Special provisions govern the exercise of the option in the
event of termination of directorship, retirement, disability or death.
(3) Represents the October 21, 1997, modification of previously outstanding
options under the 1993 Plan to change the exercise price to $5.00 per
share. No other terms of the outstanding options were modified.
26
<PAGE>
The table below shows, on an aggregated basis, each exercise of stock
options during the fiscal year ended December 31, 1997 by each of the named
Executive Officers and the 1997 fiscal year-end value of unexercised options. No
SARs were granted or exercised during the year and no SARs are currently
outstanding.
AGGREGATE OPTION EXERCISES IN THE 1997 FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Options at In-the-Money
FY-End (#Sh) Options at FY-End
($)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#Sh) Realized ($) Unexerciseable Unexerciseable
- ------------------- --------------- -------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Thomas F. Schuster 0 0 0/0 -
Lee N. Mortenson 0 0 2,000/50,000 $0/$0
Donald R. Denne 0 0 3,750/8,750 $0/$0
Dixon R. Johnston 0 0 4,688/7,812 $0/$0
Ronald J. Harrison 0 0 3,125/9,375 $0/$0
</TABLE>
See No. 3 under "General Executive Compensation Policies" in the Stock Option
and Executive Compensation Committee Report regarding expiring stock options
with option prices higher than market prices.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during the fiscal year ended December 31, 1997 and
Forms 5 and amendments thereto furnished to the Company with respect to the
fiscal year ended December 31, 1997, and any written representations from a
reporting person that no Form 5 is required, to the best of the Company's
knowledge, no person who was a director, officer or beneficial owner of more
than ten percent of any class of equity securities of the Company (a reporting
person) failed to file on a timely basis, as
27
<PAGE>
disclosed in the above Forms, reports required by Section 16(a) of the
Securities Exchange Act of 1934 (the "Exchange Act") during the most recent
fiscal year.
APPROVAL OF 1997 NONQUALIFIED STOCK OPTION PLAN
Effective December 17, 1997, the Board of Directors adopted the 1997
Nonqualified Stock Option Plan for Directors (the 1997 Plan), subject to
approval by the stockholders at the 1998 Annual Meeting. The 1997 Plan is
intended to replace the 1992 Nonqualified Stock Option Plan for Non-Employee
Directors, which expired on December 17, 1997. The 1997 Plan is intended to
provide Directors with a sense of proprietorship and personal involvement in the
development and financial success of the Company, to encourage Directors to
remain with and to devote their best efforts to the Company, and to compensate
fairly such Directors for their services to the Company.
The Board of Directors has reserved 40,000 shares of the Company's
Common Stock (approximately 2.5% of the shares of Common Stock outstanding) for
issuance upon exercise of options granted under the 1997 Plan. This number, as
well as the number of shares issuable upon exercise of an option, is subject to
adjustment in the event of stock dividends and splits, recapitalizations and
similar transactions.
The Board of Directors administers the 1997 Plan.
The only persons eligible to receive options under the 1997 Plan are
Directors of the Company. On December 17, 1997, each Director eligible to
receive options under the 1997 Plan was granted an option to purchase 2,000
shares of Common Stock at an exercise price of $5.00 per share, the fair market
value of the Common Stock at such date, subject to stockholder approval of the
1997 Plan. Each new Director added to the Board during the life of this Plan
will immediately receive an Option to purchase 2,000 shares of Common Stock.
Additional options for the purchase of 500 shares will be issued to each
Director on each of December 17, 1998, 1999, 2000 and 2001 at an exercise price
based upon the fair market value of the Common Stock on the date of grant. The
1997 Plan will expire on December 17, 2002, and accordingly, the maximum number
of options issuable under the 1997 Plan is 4,000 per Director. Based upon the
closing sale price of the Common Stock as reported on the American Stock
Exchange on December 17, 1997, the shares subject to options granted under the
1997 Plan on
28
<PAGE>
December 17, 1997, had a fair market value of $5.00 per share, or an aggregate
of $80,000 ($10,000 for each Director receiving options).
All options granted under the 1997 Plan will be immediately
exercisable, if the stockholders approve the 1997 Plan at the 1998 Annual
Meeting. Upon the exercise of an option or portion thereof the exercise price
must be paid in full in cash or equivalent.
Options granted under the 1997 Plan are transferable. An optionee's
rights under all outstanding options will terminate 90 days after his
termination as a Director. Options granted under the 1997 Plan will expire five
years after the date of grant.
The Board of Directors may terminate, suspend or amend the 1997 Plan at
any time except no termination, suspension or amendment can adversely affect the
rights of an optionee as to any outstanding option(s) without the optionee's
consent unless the amendment is necessary to preserve or provide exemptions from
the applicability of Section 16(b) of the Exchange Act to the grant, lapse,
disposition, cancellation or exercise of options. In addition, no amendment
regarding the determination of the optionees, the date of grant and the number
of options granted to an optionee may be made more than once every six months
unless the amendment is necessary to comply with changes in the Code or the
rules thereunder.
For federal income tax purposes, the optionee will realize no taxable
income when the option is granted. Upon the exercise of an option granted under
the 1997 Director Plan, the amount by which the fair market value of the shares
purchased pursuant to such exercise exceeds the option price will be treated as
compensation income received by the option holder. Upon the subsequent
disposition of shares received upon the exercise of an option, generally any
amount realized in excess of the option holder's basis (usually the fair market
value at the time of exercise) will be taxed as a capital gain and any amount
realized which is less than the option holder's basis will be treated as a
capital loss.
No options granted under the 1997 Plan may be exercised unless and
until the 1997 Plan is approved by the holders of a majority of the outstanding
shares present or represented and entitled to vote at the Annual Meeting of
Stockholders, and if such approval is not obtained the 1997 Plan and all options
granted thereunder shall be void. Abstentions will have the effect of a negative
vote on the 1997 Plan. Broker non-votes
29
<PAGE>
will not be counted in determining the number of shares represented and entitled
to vote at the 1998 Annual Meeting. The Board of Directors recommends a vote FOR
approval of the 1997 Plan and proxies solicited by the Board of Directors will
be so voted unless stockholders specify otherwise.
The Company intends to register the shares of Common Stock issuable
pursuant to the 1997 Plan under the Securities Act of 1933.
INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors
selected BDO Seidman, LLP to serve as the Company's independent accountants for
the fiscal year ended December 31, 1997. BDO Seidman, LLP served as the
Company's independent accountants for the fiscal years ended December 31, 1994,
1995 and 1996.
The Board of Directors has not yet made a determination as to the
appointment of auditors to serve for the fiscal year ending December 31, 1998.
The Board of Directors will select independent public accountants for 1998 at a
later date.
Representatives of BDO Seidman are expected to be present at the Annual
Meeting of Stockholders with an opportunity to make a statement if they desire
to do so, and they are expected to be available to respond to appropriate
questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company for inclusion in the
Company's proxy statement and form of proxy relating to such meeting on or
before December 12, 1998. The 1999 Annual Meeting of Stockholders is currently
contemplated to be held on May 12, 1999. However, if the date of the 1999 Annual
Meeting is changed by more than 30 days from such date, proposals of
stockholders must be received by the Company a reasonable time prior to the date
the Company's proxy statement and form of proxy relating to such meeting are
first sent to the stockholders.
30
<PAGE>
APPENDIX A
ALBA-WALDENSIAN, INC.
1997 NONQUALIFIED STOCK OPTION PLAN
FOR DIRECTORS
1. Purpose. This Plan is intended to provide Directors of the Company
a sense of proprietorship and personal involvement in the development and
financial success of the Company and to encourage Directors to remain with and
to devote their best efforts to the Company.
2. Definitions. Whenever used in the Plan, unless the context clearly
indicates otherwise, the following terms shall have the following meanings:
(a) "Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Board" or "Board of Directors" means the Board of
Directors of the Company.
(c) "Common Stock" means the Common Stock, $2.50 par value, of
the Company and any other stock or securities resulting from the
adjustment thereof or substitution therefor as described in Paragraph 8
below.
(d) "Company" means Alba-Waldensian, Inc., a Delaware
corporation, and any corporation succeeding to the Company's rights and
obligations hereunder.
(e) "Director" means a member of the Board of Directors of the
Company.
(f) "Fair Market Value", with respect to a share of the Common
Stock on a particular date, shall be (i) if such Common Stock
31
<PAGE>
is listed on a national securities exchange or a foreign securities
exchange or traded on the National Market System, the closing sale
price of the Common Stock on said date on the national securities
exchange, the foreign securities exchange or the National Market System
on which the Common Stock is principally traded, or, if no sales occur
on said date, then on the next preceding date on which there were such
sales of Common Stock, or (ii) if the Common Stock shall not be listed
on a national securities exchange or a foreign securities exchange or
traded on the National Market System, the mean between the closing bid
and asked prices last reported by the National Association of
Securities Dealers, Inc. for the over-the-counter market on said date
or, if no bid and asked prices are reported on said date, then on the
next preceding date on which there were such quotations, or (iii) if at
any time quotations for the Common Stock shall not be reported by the
National Association of Securities Dealers, Inc. for the
over-the-counter market and the Common Stock shall not be listed on any
national securities exchange or any foreign securities exchange or
traded on the National Market System, the fair market value based on
quotations for the Common Stock by market makers or other securities
dealers as determined by the Board of Directors in such manner as the
Board may deem reasonable.
(g) "Grant Date" means December 17, 1997.
(h) "Option" means a stock option granted pursuant to this
Plan.
(i) "Optionee" means the person to whom an Option is granted.
(j) "Option Price" is defined in Section 6.
(k) "Plan" means this 1997 Nonqualified Stock Option Plan for
Directors, as in effect from time to time.
(l) "Stock Option Agreement" means the written agreement
between an Optionee and the Company evidencing the grant of an
32
<PAGE>
Option under the Plan and setting forth or incorporating the terms and
conditions thereof.
3. Administration. The Plan shall be administered by the Board of
Directors. The Board shall have all of the powers necessary to enable it
properly to carry out its duties under the Plan, including but not limited to
the power and duty to construe and interpret the Plan and to determine all
questions that shall arise under the Plan, which interpretations and
determinations shall be conclusive and binding upon all persons. Subject to the
express provisions of the Plan, the Board may establish from time to time such
regulations, provisions and procedures which in its opinion may be advisable in
the administration of the Plan.
4. Eligibility; Option Grants. Each Director at the Grant Date shall
automatically be granted Options on the Grant Date to purchase 2,000 shares
(subject to adjustment or substitution pursuant to Paragraph 8 hereof) of the
Common Stock. In addition, each Director, upon his or her initial appointment to
the Board of Directors, will automatically be granted an Option to purchase
2,000 shares (subject to adjustment or substitution pursuant to Paragraph 8
hereof) of the Common Stock. Each Director shall automatically be granted
Options on each of December 17, 1998, December 17, 1999, December 17, 2000, and
December 17, 2001 to purchase 500 shares (subject to adjustment or substitution
pursuant to Paragraph 8 hereof) of Common Stock. Provided, however, that such
automatic grants shall be made pro rata to all Directors if on the date of a
grant there shall not be a number of shares sufficient to make all such grants.
5. Shares Available for Option. The Board of Directors shall reserve
for the purposes of the Plan, and by adoption of the Plan does hereby reserve,
out of the authorized but unissued Common Stock, 40,000 shares of Common Stock
of the Company (subject to adjustment or substitution pursuant to Paragraph 8
hereof). In the event that an Option granted under the Plan to any Director
expires or is terminated unexercised as to any shares covered thereby, such
shares shall not thereafter be available for the granting of Options under the
Plan and the reserve for such shares shall be terminated.
6. Option Price. The price at which each share of Common Stock
(subject to adjustment pursuant to Section 8 hereof) may be purchased upon the
exercise of an Option (the "Option Price") shall be the Fair Market Value of the
shares of Common Stock subject to the Option at the Grant Date.
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7. Exercise of Options.
(a) An Optionee shall be entitled to exercise all of such
Optionee's Options (not theretofore exercised) at any time and from
time to time on or after the Grant Date and prior to the Expiration
Date.
(b) For purposes of this Plan, the "Expiration Date" as to an
Optionee means the earliest of:
(i) the fifth anniversary of the date of grant; or
(ii) if the Optionee ceases to be a Director, ninety (90)
days after the date the Optionee so ceases.
(c) Each Option granted under the Plan by its terms may be
transferable by the Optionee, and such Option shall be exercisable
during such Optionee's lifetime only by such Optionee. In the event of
the death of an Optionee, then such Optionee's Options shall be
exercisable to the extent herein provided by the executor or personal
representative of the Optionee's estate or by any person who acquired
the right to exercise such Option by bequest under the Optionee's will
or by inheritance.
(d) Each Option shall be confirmed by a Stock Option Agreement
executed by the Company and by the Optionee to whom such Option is
granted.
(e) The Option Price for each share of Common Stock purchased
pursuant to the exercise of each Option shall, at the time of the
exercise of the Option, be paid in full in cash or equivalent. An
Option shall be deemed exercised only when written notice of such
exercise, together with payment of the Option Price, is received from
the Optionee by the Company at its principal office. No Optionee shall
have any rights as a shareholder of the Company with respect to Common
Stock issuable pursuant to such Optionee's Option until such Option is
duly exercised.
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(f) To the extent that an Option is not exercised within the
period of time prescribed therefor as set forth in the Plan, the Option
shall lapse and all rights of the Optionee thereunder shall terminate.
8. Adjustment of Number of Shares. In the event that a dividend shall
be declared upon the Common Stock payable in shares of Common Stock, the number
of shares of Common Stock then subject to any Option and the number of shares
reserved for issuance pursuant to the Plan shall be adjusted by adding to each
such share the number of shares which would be distributable thereon if such
share had been outstanding on the date fixed for determining the shareholders
entitled to receive such stock dividend. In the event that the outstanding
shares of Common Stock generally shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation, or changed into or exchanged for cash or property or
the right to receive cash or property (but not including any dividend payable in
cash or property other than a liquidating distribution), whether through
reorganization, recapitalization, stock split-up, combination of shares, merger
or consolidation, then there shall be substituted for each share of Common Stock
subject to any Option, and for each share of Common Stock reserved for issuance
pursuant to the Plan, the number and kind of shares of stock or other securities
or cash or property or right to receive cash or property into which each
outstanding share of Common Stock shall be so changed or for which each such
share shall be exchanged. In the case of any such substitution or adjustment as
provided for in this Paragraph 8, the Option Price for each share covered
thereby prior to such substitution or adjustment shall be the Option Price for
all shares of stock or other securities or cash or property or right to receive
cash or property which shall have been substituted for such share or to which
such share shall have been adjusted pursuant to this Paragraph 8. No adjustment
or substitution provided for in this Paragraph 8 shall require the Company in
any Stock Option Agreement to issue a fractional share and the total
substitution or adjustment with respect to each Stock Option Agreement shall be
limited accordingly.
9. Amendment of Plan. The Board of Directors shall have the right to
amend, suspend or terminate the Plan at any time; provided that, except as and
to the extent authorized and permitted by Paragraph 8 above, (a) no amendment,
suspension or termination shall adversely affect the rights of any Optionee as
to any outstanding Option without the consent of such Optionee, subject to any
limitation on such rights set forth in the Plan or such Optionee's Stock Option
Agreement and except for any amendment the Board deems necessary to preserve or
provide exemptions from the applicability of Section
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16(b) of the Act to the grant, lapse, disposition, cancellation or exercise of
Options; and (b) no amendment relating to the determination of the Optionees or
of the Grant Date or of the number of Options granted to any Optionee shall be
made more than once every six months, other than to comport with changes in the
Internal Revenue Code of 1986 or the rules thereunder.
10. Resales of Shares. The Company may impose such restrictions on the
sale or other disposition of shares issued pursuant to the exercise of Options
as the Board deems necessary to comply with applicable securities laws.
Certificates for shares issued upon the exercise of Options may bear such
legends as the Company deems necessary to give notice of such restrictions.
11. Compliance with Law and Other Conditions. No shares shall be issued
pursuant to the exercise of any Option granted under the Plan prior to
compliance by the Company, to the satisfaction of its counsel, with any
applicable laws. The Company shall not be obligated to (but may in its
discretion) take any action under applicable federal or state securities laws
(including registration or qualification of the Plan, the Options or the Common
Stock) necessary for compliance therewith in order to permit the issuance of
shares upon the exercise of Options or the immediate resale thereof by
Optionees, except for actions (other than registration or qualification) that
may be taken by the Company without unreasonable effort or expense and without
the incurrence of any material exposure to liability.
12. Nonqualified Options. Options granted under the Plan will not be
treated as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986.
13. Effective Date. The effective date of the Plan shall be December
17, 1997, subject to approval of the Plan by the holders of a majority of the
outstanding shares of the Common Stock at or before the 1998 Annual Meeting of
Stockholders. Until such approval shall be obtained, no Options shall be
exercised and if such approval shall not be obtained prior to the earlier of the
completion of the 1998 Annual Meeting of Shareholders or the first anniversary
of the Grant Date, this Plan and all Options granted hereunder shall be void.
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14. Duration of Plan. This Plan shall terminate upon the earlier of
December 17, 2002 and the date upon which all shares reserved for issuance
pursuant to the Plan have been issued or are subject to outstanding Options.
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APPENDIX B
ALBA-WALDENSIAN, INC.
(logo)
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SUBSTITUTE ANNUAL MEETING TO
BE HELD JULY 22, 1998
The undersigned hereby appoints Paul H. Albritton, Jr., William M. Cousins, Jr.
and C. Alan Forbes and each or any of them, proxies, with full power of
substitution, with the powers the undersigned would possess if personally
present, to vote, as designated below, all shares of the $2.50 par value Common
Stock of the undersigned in Alba-Waldensian, Inc. at the Substitute Annual
Meeting of Stockholders to be held on July 22, 1998, and at any adjournment
thereof. THIS PROXY WILL BE VOTED AS SPECIFIED HEREIN AND, UNLESS OTHERWISE
DIRECTED, WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AS DIRECTORS. The Board
of Directors recommends voting FOR on each item.
1. ELECTION OF DIRECTORS: Nominees are Nathan H Dardick, Clyde Wm. Engle and
Joseph C. Minio
[ ] FOR all listed nominees (except do not vote for the nominee(s) whose
name(s) I have written below)
- ----------------------------------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for the listed nominees.
2. APPROVAL OF 1997 NONQUALIFIED STOCK OPTION PLAN FOR DIRECTORS
[ ] FOR APPROVAL [ ] AGAINST [ ] ABSTAIN
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(Continued from other side)
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Receipt of Notice of Substitute Annual Meeting of Stockholders and accompanying
Proxy Statement is hereby acknowledged.
PLEASE DATE AND SIGN EXACTLY AS PRINTED BELOW AND RETURN PROMPTLY IN THE
ENCLOSED POSTAGE PAID ENVELOPE.
Dated:_________________________, 1998.
______________________________________
_______________________________________
(When signing as attorney, executor, administrator, trustee, guardian, etc.,
give title as such. If joint account, each joint owner should sign.)
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