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
GUILFORD MILLS, 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>
GUILFORD MILLS, INC.
4925 WEST MARKET STREET
GREENSBORO, NORTH CAROLINA 27407
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 5, 1998
The Annual Meeting of Stockholders of Guilford Mills, Inc., a Delaware
corporation (the "Company"), will be held at the Joseph S. Koury Convention
Center, 3121 High Point Road, Greensboro, North Carolina, on Thursday, February
5, 1998 at 10:00 A.M. for the following purposes:
1. To elect five directors for three-year terms;
2. To ratify the selection of Arthur Andersen LLP as independent
auditors for the fiscal year ending September 27, 1998; and
3. To transact such other business as properly may come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on December 19,
1997 as the record date for the determination of stockholders entitled to notice
of and to vote at the meeting and at any adjournment or adjournments thereof.
Whether or not you plan to attend the meeting, please sign, date and
return the enclosed proxy which is being solicited by and on behalf of the Board
of Directors.
By Order of the Board of Directors
/s/ Sherry R. Jacobs
Sherry R. Jacobs
SECRETARY
Greensboro, North Carolina
December 24, 1997
<PAGE>
GUILFORD MILLS, INC.
------------------------
PROXY STATEMENT
-------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 5, 1998
This Proxy Statement is furnished to the stockholders of Guilford
Mills, Inc. (the "Company") in connection with the solicitation of proxies by
the Board of Directors (the "Board") of the Company to be voted at the Annual
Meeting of Stockholders of the Company to be held at the Joseph S. Koury
Convention Center, 3121 High Point Road, Greensboro, North Carolina, on
Thursday, February 5, 1998 at 10:00 a.m. (the "Annual Meeting"). Stockholders of
record at the close of business on December 19, 1997 will be entitled to notice
of and to vote at the Annual Meeting and at all adjournments thereof.
The entire cost of soliciting proxies for the Annual Meeting will be
borne by the Company. In addition to solicitation by mail, proxies may be
solicited through personal calls upon, or telephone or facsimile communications
with, stockholders or their representatives by officers and other employees of
the Company, who will receive no additional compensation therefor.
Any stockholder giving a proxy has the power to revoke it at any time
before it is voted by giving written notice of such revocation to the Secretary
of the Company, by attending the Annual Meeting and voting in person or by
submitting a subsequently dated proxy. When a proxy is received, properly
executed, prior to the Annual Meeting, the shares represented thereby will be
voted at the Annual Meeting. If the accompanying form of proxy is signed but no
specification is made thereon, the shares represented thereby will be voted for
the nominees for director designated by the Board and the ratification of the
selection of Arthur Andersen LLP as independent auditors for the fiscal year
ending September 27, 1998. If a specification has been made on the form of
proxy, the shares will be voted in accordance with the specification. Other than
the election of directors, which requires a plurality of the votes cast, each
matter to be submitted to the stockholders requires the affirmative vote of a
majority of the shares present at the Annual Meeting in person or by proxy and
entitled to be cast. Abstentions and broker non-votes are not included in the
tabulation of the voting results on the election of directors. For issues
requiring approval of a majority of the shares present and entitled to be cast,
abstentions have the effect of votes in opposition and broker non-votes are not
included in the tabulation of the voting results. A broker non-vote typically
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received instructions from the beneficial
owner. Shares as to which a stockholder abstains or broker non-votes are
included for purposes of determining whether a quorum of shares is present at
the Annual Meeting.
The complete mailing address of the Company's principal executive
offices is P. O. Box 26969, Greensboro, North Carolina 27419-6969. The
approximate date on which this Proxy Statement and the form of proxy were first
sent or given to the stockholders of the Company was December 24, 1997. The
Annual Report of the Company for the fiscal year ended September 28, 1997,
including audited financial statements, has been sent to each stockholder.
VOTING SECURITIES
On December 19, 1997, there were outstanding and entitled to vote 25,726,474
shares of the Company's common stock, par value $.02 per share (the "Common
Stock"), which constitutes the only class of capital stock outstanding.
Stockholders are entitled to one vote, exercisable in person or by proxy, for
each share of Common Stock owned on the record date of December 19, 1997. The
holders of a majority of the outstanding shares of the Common Stock represented
at the Annual Meeting will constitute a quorum.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Under the proxy rules, a beneficial owner of a security includes any person
who directly or indirectly has or shares voting power and/or investment power
with respect to such security or has the right to obtain such voting power
and/or investment power within 60 days. Except as otherwise noted, each
designated beneficial owner in this Proxy Statement has sole voting power and
investment power with respect to the shares beneficially owned by such person.
The following table sets forth information as of December 19, 1997 with
respect to each person who is known by the management of the Company to be the
beneficial owner of more than 5% of the Common Stock:
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Ownership Percent of Class
------------------- -------------------------- -----------------
Victor Posner 2,980,912 (1) 11.59
6917 Collins Avenue
Miami Beach, FL 33141
Charles A. Hayes 1,526,496 (2)(3) 5.93
c/o Guilford Mills, Inc.
4925 West Market Street
Greensboro, NC 27407
- - --------
(1) Such information is based upon a copy of the report on Schedule 13D,
dated January 10, 1994, filed with the Securities and Exchange Commission
("SEC") and furnished to the Company by the beneficial owner.
(2) Mr. Hayes, Maurice Fishman, a director of the Company, and George
Greenberg, a director of the Company, have entered into certain agreements
relating to the disposition of their shares of Common Stock. See "Stockholders'
Agreements" below.
(3) Includes (i) 16,875 shares of Common Stock subject to options granted
to Mr. Hayes under the formula provision of the Company's 1991 Stock Option
Plan, as amended (the "Option Plan"), (ii) 85,864 shares of restricted Common
Stock awarded to Mr. Hayes under the Company's 1989 Restricted Stock Plan (the
"Restricted Plan"), as to which Mr. Hayes has sole voting power and (iii)
104,697 shares in a grantor retained annuity trust, as to which Mr. Hayes has
shared dispositive power. See "Executive Compensation- Summary Compensation
Table" below.
The following table sets forth certain information, as of December 19, 1997,
with respect to Common Stock beneficially owned by each director of the Company,
each person nominated or chosen to become a director, each of the executive
officers named in the Summary Compensation Table under the heading "Executive
Compensation" below and all directors and executive officers as a group:
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership of Class
--------------------------- --------------------- ----------
Directors and Director Nominees
(1)(2)
Charles A. Hayes ...... 1,526,496 (3) 5.93
George Greenberg........ 778,313 (3)(4) 3.02
Bruno Hofmann........... 603,150 (5) 2.34
Maurice Fishman ........ 590,505 (3)(6) 2.29
John A. Emrich.......... 132,628 (14)
Terrence E. Geremski.... 88,147 (14)
Tomokazu Adachi......... 34,125 (14)
Sherry R. Jacobs........ 31,500 (14)
Dr. Jacobo Zaidenweber.. 27,450 (14)
Stephen C. Hassenfelt... 25,954 (7) (14)
Donald B. Dixon......... 25,425 (14)
Paul G. Gillease........ 24,000 (8) (14)
Stig A. Kry............. 15,000 (14)
Grant M. Wilson......... 0 (14)
Non-Director Executive Officer (9)(10)
---------------------------------------
Byron McCutchen........................... 16,524
Phillip D. McCartney....................... 55,453
All directors, director nominees
and executive officers as a group
(consisting of 22 persons)................. 3,983,905 (11)(12)(13) 15.37
2
<PAGE>
- - ----------------
(1) The amount of shares beneficially owned by Ms. Jacobs and Messrs.
Greenberg, Fishman, Dixon, Adachi and Hassenfelt includes 20,625 shares of
Common Stock, the amount of shares beneficially owned by Mr. Geremski includes
11,250 shares of Common Stock, the amount of shares beneficially owned by Dr.
Zaidenweber includes 3,750 shares of Common Stock, and the amount of shares
beneficially owned by Messrs. Kry and Gillease includes 15,000 shares of Common
Stock, subject to options granted to each such director under the Option Plan's
formula provision. See "Election of Directors - Additional Information" below.
The amount of shares beneficially owned by Mr. Emrich includes 2,000 shares of
Common Stock subject to options granted pursuant to discretionary provisions of
the Option Plan.
(2) Includes 90,000 and 36,000 shares of restricted Common Stock awarded to
Messrs. Emrich and Geremski, respectively, under the Restricted Plan. Such
persons have sole voting power with respect to such shares. See "Executive
Compensation - Summary Compensation Table" below.
(3) See Footnotes 2 and 3 to previous table.
(4) Does not include 62,650 shares held by Mr. Greenberg's wife, as to
which beneficial ownership is disclaimed.
(5) Includes 300,000 shares of restricted Common Stock paid to Mr. Hofmann
in connection with the sale of the capital stock of Hofmann Laces, Ltd., Raschel
Fashion Interknitting, Ltd. and Curtains and Fabrics, Inc. (collectively, the
"Hofmann Companies") to the Company. See "Certain Transactions" below. Mr.
Hofmann has sole voting power with respect to such shares.
(6) Does not include 68,398 shares held by Mr. Fishman's wife, as to which
beneficial ownership is disclaimed.
(7) Does not include 637 shares held by Mr. Hassenfelt's wife, as to which
beneficial ownership is disclaimed.
(8) Does not include 646 shares held by Mr. Gillease's wife, as to which
beneficial ownership is disclaimed.
(9) The amount of shares beneficially owned by each of Messrs. McCutchen
and McCartney includes 2,000 shares of Common Stock, subject to options granted
to such persons pursuant to the Option Plan.
(10) Includes 12,000 shares of restricted Common Stock awarded to Mr.
McCutchen under the Restricted Plan. Mr. McCutchen has sole voting power with
respect to such shares.
(11) Includes 194,957 shares of Common Stock subject to options granted
pursuant to the Option Plan.
(12) Excludes 133,111 shares owned by relatives of officers and directors of
the Company, as to which beneficial ownership is disclaimed by such officers and
directors.
(13) Includes 223,864 shares of restricted Common Stock awarded to officers
under the Restricted Plan. Such persons have sole voting power with respect to
such shares.
(14) Less than one percent.
STOCKHOLDERS' AGREEMENTS
Messrs. Fishman, Greenberg and Hayes have entered into a Stockholders'
Agreement dated as of June 22, 1990, as amended, relating to the disposition of
their shares of Common Stock (the "1990 Stockholders' Agreement"). Until June
22, 1999 (or its earlier termination as otherwise provided therein), none of
Messrs. Fishman, Greenberg and Hayes may transfer or otherwise dispose of,
except by gift, any or all of the shares of Common Stock beneficially owned by
any such stockholder, until such shares are offered first to the Company at the
same price and upon the same terms and conditions as those offered by a bona
fide purchaser or purchasers. The terms and provisions of the 1990 Stockholders'
Agreement apply to any shares of Common Stock owned by the stockholders on the
date of the 1990 Stockholders' Agreement or acquired thereafter and are binding
upon the heirs, successors and assigns of the stockholders.
3
<PAGE>
Messrs. Fishman and Hayes have entered into a Stockholders' Agreement with
the Company dated as of April 30, 1991, as amended, relating to the acquisition
by the Company of certain of their shares of Common Stock. Until June 22, 1999
(or the earlier termination of the 1991 Stockholders' Agreement as provided
therein), the Company will, upon the death of either Mr. Fishman or Mr. Hayes,
purchase such number of shares of Common Stock beneficially owned by each such
person as equal $4,000,000 and $5,000,000, respectively. The purchase price for
each share of Common Stock will equal the average of the closing price for such
shares on the New York Stock Exchange for the 20 trading days preceding the date
of death.
ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES
The Board is divided into three classes, with the term of office of one
class expiring each year. At the last annual meeting of stockholders held on
February 6, 1997, Ms. Jacobs and Messrs. Adachi, Emrich, Hofmann and Kry were
elected as directors of the Company, each to serve for a three-year term until
the first annual meeting of stockholders held following the end of the Company's
1999 fiscal year and until her or his successor is elected and qualified. Under
the terms of the Stock Purchase Agreement, dated January 12, 1996, between the
Company and Mr. Hofmann, pursuant to which the Company acquired 100% of the
outstanding capital stock of the Hofmann Companies from Mr. Hofmann, the Company
agreed to nominate Mr. Hofmann for election as a director in such class. At the
annual meeting of stockholders held on February 1, 1996, Messrs. Fishman,
Gillease, Hassenfelt and Hayes were elected as directors of the Company, each to
serve for a three-year term until the first annual meeting of stockholders held
following the end of the Company's 1998 fiscal year and until his successor is
elected and qualified. At the annual meeting of stockholders held on February 2,
1995, Messrs. Dixon, Geremski, Greenberg and Zaidenweber were elected as
directors of the Company, each to serve for a three-year term until the first
annual meeting of stockholders held following the end of the Company's 1997
fiscal year and until his successor is elected and qualified. At its February 6,
1997 meeting, the Board elected Grant M. Wilson as a director of the Company, to
serve in such class.
The Board has nominated Messrs. Dixon, Geremski, Greenberg, Zaidenweber and
Wilson for election as directors of the Company, each to serve for a three-year
term until the first annual meeting of stockholders held following the end of
the Company's 2000 fiscal year and until his successor is elected and qualified.
Unless a contrary specification is indicated, it is intended that the
accompanying form of proxy will be voted for the election of Messrs. Dixon,
Geremski, Greenberg, Zaidenweber and Wilson. The Board does not contemplate that
any of such persons will be unable, or will decline, to serve; however, if any
of such persons is unable or declines to serve, the persons named in the
accompanying proxy may vote for another person, or persons, in their discretion.
The following table sets forth certain information with respect to each
director and each person nominated or chosen to become a director. Except as
otherwise indicated, each such person has held his or her present principal
occupation for the past five years and references to executive offices held are
with the Company:
<TABLE>
<CAPTION>
Name Age (1) Principal Occupation or Occupations Director Since
- - ---- ---- ----------------------------------- --------------
<S> <C> <C> <C>
DIRECTOR NOMINEES
Nominees for a Three-Year Term
Expiring at Annual Meeting
After 2000 Fiscal Year
- - --------------------------------
Donald B. Dixon 69 Retired since 1984; for more than five years 1987
prior thereto, a partner at Arthur Andersen
LLP
Terrence E. Geremski 50 Executive Vice President and Chief Financial 1993
Officer (since 1997); Senior Vice President,
Chief Financial Officer and Treasurer (from
1996 to 1997); Vice President, Chief
Financial Officer and Treasurer (from 1992
to 1996); Vice President and Controller of
Varity Corporation (from 1989 to 1991); for
more than five years prior thereto, the
holder of various executive and administrative
positions with Dayton Walther Corp.
- - --------
(1) As of December 19, 1997.
4
<PAGE>
George Greenberg (2) 75 Vice Chairman of the Board (since 1989); 1968
retired since 1989; for more than five years
prior thereto, the President and Chief
Operating Officer
Dr. Jacobo Zaidenweber 68 Chairman of the Board of Grupo Ambar, S.A. 1995
de C.V. (since 1965), a subsidiary of the
Company; Chairman of the Board of Encajes
Mexicano, S.A. de C.V. (since 1992), a
textile manufacturer
Grant M. Wilson 56 Chairman of Cohasset Capital Corporation 1997
(since 1983), a financial and managerial
services firm
CONTINUING DIRECTORS
Class of Directors Whose Term
Expires at Annual Meeting
After 1999 Fiscal Year
- - --------------------------------
Sherry R. Jacobs 54 Secretary and acting General Counsel (since 1983
1994); Managing Director, Pencil,
Inc., an educational foundation
(from 1995 to 1997); Principal,
Jonal, couturier (from 1989 to
1994)
Tomokazu Adachi 56 President of Japan Tech, Inc., an importer 1990
of textile machinery and equipment
John A. Emrich 53 President and Chief Operating Officer (since 1995
1995); Senior Vice President and
President/Automotive Business Unit (from
1993 to 1995); Vice President/Planning and
Vice President/Operations for the Apparel
and Home Fashions Business Unit (from 1991
to 1993); Director of Operations with FAB
Industries (from 1990 to 1991)
Bruno Hofmann 58 President and Chief Executive Officer of the 1997
Hofmann Companies and predecessor companies
(since 1976)
Stig A. Kry (3) 68 Chairman Emeritus, Kurt Salmon Associates, 1993
Inc., a management consulting firm
Class of Directors Whose Term
Expires at Annual Meeting
After 1998 Fiscal Year
- - --------------------------------
Maurice Fishman 74 Vice Chairman of the Board (since 1976); 1963
retired since 1989; for more than five years
prior thereto, a Senior Vice President
Paul G. Gillease (4) 65 Consultant to the Company (from 1993 to 1993
1996); Vice President and General Manager,
DuPont Nylon, a division of E. I. du Pont de
Nemours and Company, Inc. (from 1992 to
1993); for more than five years prior
thereto, Vice President and General Manager
of DuPont Textiles, a division of E. I. du
Pont Nemours and Company, Inc.
Stephen C. Hassenfelt 47 Chairman and Chief Executive Officer of 1989
North Carolina Trust Company
Charles A. Hayes 63 Chairman of the Board and Chief Executive 1963
Officer (since 1976); President and Chief
Operating Officer (from 1991 to 1995)
</TABLE>
- - --------
(2) Mr. Greenberg is a director of Nautica Enterprises, Inc., which has a class
of securities registered pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
(3) Mr. Kry is a director of Oshkosh B' Gosh, Inc. and Dominion Textiles, Inc.,
each of which has a class of securities registered pursuant to Section 12 of
the Exchange Act .
(4) Mr. Gillease is a director of Pillowtex Corp. and Galey & Lord, Inc.,
each of which has a class of securities registered pursuant to Section 12 of the
Exchange Act.
5
<PAGE>
ADDITIONAL INFORMATION
During the last fiscal year, the Board's Audit Committee, which consists of
Messrs. Dixon, Hassenfelt and Fishman, held two meetings. The Audit Committee's
responsibilities include reviewing the Company's financial statements and the
accounting principles utilized by the Company, evaluating the services of the
Company's independent auditors and making recommendations with respect to the
retention of independent auditors, evaluating the adequacy of the Company's
system of internal controls and confirming the Company's full cooperation with
the independent auditors' annual examination of the Company's financial
statements.
In addition, during the last fiscal year, the Board's Compensation
Committee, which consists of Ms. Jacobs and Messrs. Hassenfelt and Wilson, held
four meetings. The functions of the Compensation Committee include making
recommendations to the Board regarding compensation for certain executive
officers of the Company and administering certain of the Company's benefit
plans. See "Executive Compensation - Report of the Compensation Committee of the
Board of Directors" below.
The Board's Nominating Committee, which is comprised of Messrs. Dixon,
Hayes, Adachi and Gillease, held one meeting during the last fiscal year. The
duties of the Nominating Committee include identifying and interviewing
candidates to serve on the Board, making recommendations to the entire Board
regarding whether a candidate should be nominated to the Board and making
recommendations to the entire Board concerning compensation and other benefits
to be paid to directors. The Company's By-Laws, as amended (the "By-Laws"), set
forth procedures regarding the nomination of persons for election to the Board.
See "Miscellaneous - Stockholder Proposals" below.
Non-employee directors receive a quarterly retainer of $6,250 and $1,000 for
each Board meeting attended (other than telephonic Board meetings). A
non-employee chairman and each other non-employee member of a committee are paid
$3,000 and $2,000, respectively, for each committee meeting attended. During the
last fiscal year, the Board had a total of ten meetings, five of which were held
in person and five of which were held by means of a telephonic conference call.
All directors then in office attended at least 75% of the total number of
meetings of the Board and the committees on which they served during the last
fiscal year, except Messrs. Wilson and Hassenfelt.
Ms. Jacobs is serving as Secretary and acting General Counsel of the
Company on an interim basis. Ms. Jacobs earned $19,915 during the 1997 fiscal
year for such service. Mr. Hofmann has entered into a consulting agreement with
the Company pursuant to which he will provide certain consulting and advisory
services to the Company during a period ending on December 31, 2000. The Company
pays Mr. Hofmann an annual consulting fee of $100,000 for such services. Mr.
Hofmann is also a party to an employment agreement with the Hofmann Companies.
See "Certain Transactions" below.
The Company affords each director the opportunity to defer his or her
quarterly retainer. Pursuant to such arrangement, the quarterly retainer a
director would otherwise receive is credited to a separate account which accrues
interest. Upon his or her termination of service on the Board, the director will
be entitled to receive the amounts credited to his or her deferred compensation
account, together with interest accrued thereon. Currently, Mr. Dixon is the
only director who participates in the retainer deferral arrangement.
The Option Plan provides for the automatic grant of options not meeting the
requirements of incentive stock options ("Non-Qualified Options"), within the
meaning of Section 422 of the Internal Revenue Code of 1986 (the "Code"), to
directors who have served as such for a designated period of time. Specifically,
each person who has served as a non-employee director of the Company for two or
more consecutive years on the date of grant will automatically be granted (i)
upon the first date of grant after the completion of two consecutive years of
service as a director, an option to purchase 11,250 shares of Common Stock and
(ii) upon each of the dates of grant after the completion of such service prior
to the expiration of the Option Plan on August 28, 2001, an option to purchase
5,625 shares of Common Stock. (Pursuant to an Option Plan amendment, approved by
stockholders at their last annual meeting, employee directors are no longer
eligible to receive Non-Qualified Option grants pursuant to the formula
provision.) For each year, the date of grant will be the third trading date
following the later of (i) the date of the annual stockholders' meeting or (ii)
the date on which the Company's earnings for the fiscal quarter just prior to
such meeting date are released to the public. The purchase price of the shares
of Common Stock covered by the options granted to directors under the formula
provision will be the fair market value of the shares as of the date of grant.
Options granted to directors under the formula provision, which have a five year
term, will be exercisable with respect to 33-1/3% of the aggregate number of
shares initially subject to the option during each of the first, second and
third years of the option. Any exercisable portion of
6
<PAGE>
an option that is not exercised will be carried forward through the term of
the grant. Notwithstanding the foregoing, in the event of a "change in control"
of the Company, as such term is defined in the Option Plan, all then outstanding
options will immediately become exercisable. In addition to the automatic grant
of options to non-employee directors according to the above formula, the Option
Plan also provides for the award, in the discretion of the Compensation
Committee, of options, and stock appreciation rights, to salaried key employees,
including employee directors, of the Company.
There are no family relationships among any of the directors and officers of
the Company.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board administers the Company's
compensation program for executive officers. Specifically, the Committee serves
as the administrator of the Restricted Plan and the Option Plan. In addition,
the Committee makes recommendations to the entire Board regarding the
compensation package for each of the Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer ("CEO", "COO" and "CFO", respectively). The
Committee is also responsible for periodically reviewing, for adequacy and
continued appropriateness, the entire compensation package of other executive
officers and recommending to the Board any changes to such package. Further, the
Committee's approval is required for any proposed employment, severance,
consulting or retirement agreement with any executive officer.
In performing its duties, the Committee seeks to insure that the Company's
compensation program for executive officers attracts and retains qualified,
talented and highly motivated personnel, links executive compensation to
corporate performance and is administered in an equitable fashion. The Company's
executive officer compensation program consists of two major elements: (i) a
short-term component, consisting of base salary and a potential annual cash
bonus, intended to reward executives for current and past performance and (ii) a
long-term component, consisting of restricted stock and stock options, designed
to align further the interests of executives with those of stockholders in
general. In addition, in order to offer a competitive compensation program, the
Company maintains certain retirement plans such as a Qualified Profit-Sharing
Plan (the "Profit-Sharing Plan") and an Employee Stock Ownership Plan (the
"ESOP") and offers other benefits such as a split-dollar insurance program.
The Committee has considered the impact of Section 162(m) of the Code on the
Company's executive compensation program. Section 162(m) denies a public company
a deduction, except in limited circumstances, for compensation paid to "covered
employees", i.e., those employees named in the "Summary Compensation Table"
below, to the extent such compensation exceeds $1,000,000. The deduction
limitation contained in Section 162(m) does not apply to certain
performance-based compensation. The Committee does not currently intend to
recommend changes to the Company's benefit plans in order to qualify
compensation paid to covered employees for such exception.
SHORT-TERM COMPONENT - BASE SALARY AND ANNUAL BONUS. The Committee evaluates
the base salary of each of the CEO, COO and CFO on a biennial basis, or more
frequently if appropriate, and recommends to the entire Board any changes in
such base salary levels. In making such evaluations and recommendations, the
Committee considers the historical pay practices of the Company, the officer's
leadership and advancement of the Company's long-term strategic plans and
objectives, and the salary levels of executives holding similar positions in
certain other textile companies. The Committee generally recommends salaries for
the Company's CEO, COO and CFO at levels exceeding the average salary level of
executives holding the same positions in such other companies. The textile
companies which the Company considers for comparative compensation purposes are
identical to the companies (collectively, the "Peer Group Companies") included
in the peer group index described in the "Performance Graph" below. Mr. Hayes'
annual salary as CEO for the 1997 fiscal year remained unchanged from his annual
salary for the 1996 fiscal year.
The Company maintains for its executive officers and other key employees a
Short-Term Incentive Compensation Plan ("STIP"), which allows participants to
earn annual cash bonuses. Prior to the 1997 fiscal year, bonuses under the STIP
were contingent upon the Company's achievement of an earnings per share target,
established by the Board at the beginning of each fiscal year. During the 1997
fiscal year, the Committee, with the assistance of an independent compensation
consulting firm, evaluated the STIP and concluded that it was appropriate to
introduce additional
7
<PAGE>
performance measures to such plan. As a result, the Company adopted during
the 1997 fiscal year substantial amendments to the STIP. While preserving an
emphasis on earnings per share results, the amended STIP also conditions the
amount of cash bonuses, for all participants other than the CEO, on other
performance measures which are designed to take into account balance sheet
management and the different operating results among the Company's business
units. Specifically, the payment of annual cash bonuses under the amended STIP
is determined according to a formula based upon a percentage of an individual's
base salary and, depending on the participant, one or more of the following
performance measures: earnings per share, a matrix based upon corporate sales
and net income performance, a matrix based upon business unit sales and
operating income performance and other performance measures specific to a
participant's responsibilities. The matrix component of a participant's bonus,
if any, under the amended STIP is also subject to adjustment, plus or minus 20%,
based upon the Company's return on net assets. The bonus payable to the CEO,
given the breadth of his responsibilities, is based solely upon a percentage of
his annual base salary and the Company's earnings per share results.
LONG-TERM COMPONENT - RESTRICTED STOCK AND STOCK OPTIONS. In addition to the
short-term elements of the Company's executive compensation program described
above, the Company maintains certain equity based plans described below, the
benefits of which are linked to the Company's long-term performance. The
Committee believes that compensation in the form of Common Stock serves to align
further the interests of executives with the interests of stockholders.
Moreover, compensation which is "at risk," in that its amount, or the timing of
its receipt, is dependent upon the Company's performance, provides a strong
incentive for individuals to achieve superior performance. Finally, long-term
compensation helps balance the Company's overall executive compensation program
by encouraging executives to focus on the Company's long term objectives and
goals as well as the Company's quarter to quarter results.
In its capacity as the administrator of the Restricted Plan, the Committee
determines, among other things, which key employees will participate in the
Restricted Plan, any individual or corporate performance goals applicable to a
participant, the date on which awards will be made, the number of shares to be
awarded and the restrictions to be applicable to such shares. As the
administrator of the Option Plan, the Committee determines, among other things,
the employees who are to receive options, the date of grant of options, and
(subject to the terms of the Option Plan) the purchase price of each share
subject to such options.
The Committee retained an independent compensation consulting firm during
the last fiscal year in order to assist it in evaluating the amount and nature
of individual awards to be made under each of the Restricted Plan and the Option
Plan. In determining the amount of awards under such plans, the Committee
considered subjective factors such as an executive's level of responsibility and
past performance. The Committee also compared the amount of stock based awards
made to senior executives in the Peer Group Companies. Given that the Company's
recent financial performance (based on a variety of key financial indicators)
exceeded the Peer Group Companies' median performance and in certain instances
equaled or exceeded the Peer Group third quartile performance, the Committee
approved grants under the Restricted Plan and Option Plan at levels generally at
or above the levels of awards made to executives holding similar positions in
the Peer Group Companies. Finally, the Committee also took into account that the
last discretionary option grant to executive officers was made in 1994 and the
last grant of restricted stock to any executive officer (other than the grant to
Mr. Emrich in connection with his promotion to COO) was made in 1993. The awards
made in fiscal year 1997 to the named executive officers under the Restricted
Plan were designed to provide such persons with an immediate and meaningful
ownership stake in the Company. The restricted stock awards, with an extended
seven year vesting period, also serve the Committee's objective of helping to
retain the Company's key executive talent. As a further incentive to senior
management to achieve continued increases in the price of the Common Stock, the
Committee approved grants of "premium price" options. Specifically, the
Committee awarded to four of the five named executive officers Non-Qualified
Options, 25% of which have an exercise price equal to 110% of the fair market
value of Common Stock on the grant date and 25% of which have an exercise price
equal to 120% of the fair market value of Common Stock on the grant date. These
awards directly link the Company's executive compensation to the creation of
stockholder value.
RETIREMENT PLANS AND OTHER BENEFITS. In addition to the foregoing components
of the executive compensation program, the Company maintains certain other plans
in which executives participate, including the Profit-Sharing Plan, the ESOP and
an excess benefit plan (which is designed to supplement certain of the Company's
other benefit plans). For the 1997 fiscal year, the Company contributed to the
Profit-Sharing Plan 6% of the aggregate compensation of all participants in such
plan. Contributions to the ESOP are made in the form of Common Stock or cash
used to purchase Common Stock and the amount of such contributions is dependent
upon the Company meeting the same earnings per
8
<PAGE>
share target established under the amended STIP. Beginning with the 1997
fiscal year ESOP contribution, each participant has the right to receive up to
one-half of his contribution directly from the Company in the form of cash. If
the Company's actual earnings per share fall within a range of the target
earnings per share (either more or less), then the Company will adjust its ESOP
contribution, upward or downward, accordingly. For the 1997 fiscal year, the
Company made a contribution to the ESOP in the amount of 4.1% of the
compensation of the eligible employees for such period, subject to each
participant's right to receive one-half of such contribution in the form of
cash. The Company also maintains for executives a split-dollar insurance program
and a supplemental executive retirement plan, which are described, respectively,
in Footnote 5 to the "Summary Compensation Table" and in "Other Benefit Plans"
below. The Company also offers to its executives a plan pursuant to which they
may be reimbursed, up to a designated amount, for personal tax and financial
planning expenses.
Stephen C. Hassenfelt (Chairman)
Sherry R. Jacobs
Grant M. Wilson
PERFORMANCE GRAPH
Set forth below is a line graph comparing the five-year cumulative total
stockholder return on the Common Stock with the cumulative return of the
Standard & Poor's 500 Stock Index and with an index comprised of the Peer Group
Companies, assuming the reinvestment of dividends. The peer group index
represents the cumulative total return on the common stock of the following
textile companies: Burlington Industries, Inc., Collins & Aikman Corp., Concord
Fabrics Inc., Cone Mills Corp., Crown Crafts, Inc., Culp, Inc., Delta Woodside
Industries, Inc., Dixie Yarns, Inc., Dyersburg Corp., Fab Industries, Inc.,
Fieldcrest Cannon, Inc., Foamex International Inc., Galey & Lord, Inc., Johnston
Industries, Inc., Pillowtex Corp., Quaker Fabric Corp., Springs Industries,
Inc., Texfi Industries, Inc., Thomaston Mills, Inc., Unifi, Inc., Wellman, Inc.
and WestPoint Stevens Inc. The return of each company included in the peer group
index has been weighted according to its respective stock market capitalization.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
9/30/92 9/30/93 9/30/94 9/30/95 9/30/96 9/30/97
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GUILFORD MILLS $100.0 $103.8 $108.0 $125.8 $119.8 $212.2
- - --------------------------------------------------------------------------------------------------------------------
S&P 500 $100.0 $112.9 $117.1 $151.9 $182.6 $256.4
- - --------------------------------------------------------------------------------------------------------------------
PEER GROUP $100.0 $ 98.5 $106.8 $103.2 $102.1 $145.9
- - --------------------------------------------------------------------------------------------------------------------
NOTE: ASSUMES AN INITIAL INVESTMENT OF $100 ON SEPTEMBER 30, 1992. TOTAL RETURN INCLUDES REINVESTMENT OF
DIVIDENDS.
</TABLE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows for the fiscal years ended September 28, 1997,
September 29, 1996 and October 1, 1995, the cash compensation paid by the
Company, as well as certain other compensation paid or accrued for those
9
<PAGE>
periods, to the Company's CEO and to the Company's four most highly compensated
executive officers (other than the CEO).
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
------------------------
All
Other
Long-Term Compen-
Annual Compensation Compensation sation
------------------------------- -------------- ---------
Restricted
Name and Other Annual Stock
Principal Fiscal Salary Bonus Compensation Awards Options
Position Year ($) ($) ($) ($)(3) (#) ($)(4)
-------- ----- --- --- --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Hayes, 1997 625,000 656,250 -- 2,294,178 105,000 104,549
Chairman 1996 625,000 308,188(2) -- 0 5,625 234,489
and Chief Executive 1995 720,000(1) 384,750 -- 0 5,625 234,326
Officer
John A. Emrich, 1997 450,000 489,375 191,758(5) 1,788,750 99,000 64,395
President and 1996 450,000 67,500 -- 0 61,362
Chief Operating Officer 1995 306,251 162,907 -- 437,500 2,000 51,386
0
Terrence E. Geremski, 1997 275,000 239,250 -- 894,375 75,000 42,533
Executive Vice 1996 256,256 58,000 -- 0 11,250 34,277
President and Chief 1995 250,008 112,503 -- 0 0 32,936
Financial Officer
Byron McCutchen, 1997 260,000 193,050 -- 298,125 18,000 51,094
Senior Vice 1996 250,000 26,702 -- 0 0 31,649
President, 1995 225,002 84,038 -- 0 2,000 25,120
President/
Fibers Business Unit
Phillip D. McCartney, 1997 210,000 112,875 -- 0 4,150 37,162
Vice 1996 210,000 26,250 -- 0 0 32,603
President/Technical 1995 222,500 100,125 -- 0 2,000 31,595
Operations
- - --------
</TABLE>
(1) Mr. Hayes' salary for the 1995 fiscal year includes a special
supplement of $150,000 for assuming interim responsibilities as President and
COO. (Mr. Emrich succeeded Mr. Hayes as President and COO effective October 1,
1995.) Mr. Hayes' bonus award for such periods was based solely on his salary as
Chairman and CEO.
(2) Mr. Hayes has been granted certain appreciation rights. Such rights
entitle Mr. Hayes to a cash payment equal to the excess, if any, of the market
value of Common Stock on each of January 2, 1995, 1996 and 1997 (each such date,
a "Measurement Date") over $13.93 (the average closing price of Common Stock
during the last ten trading days of the Company's 1994 fiscal year, as adjusted
for the Company's May, 1997 3-for-2 stock split), multiplied in each instance by
42,000 (one-third of the aggregate 126,000 right grant). Mr. Hayes will vest in,
and be entitled to receive, such cash payments 30 days after the date (the
"Vesting Date") he is no longer a "covered employee" within the meaning of
Section 162(m) of the Code. The rights, together with certain dividend
equivalents, will earn interest from their respective Measurement Date to the
Vesting Date.
Mr. Hayes' bonus award for the 1996 fiscal year includes $191,000,
representing the value of those rights based on the market value of Common Stock
on January 2, 1997 and the interest accrued thereon (and on the related dividend
equivalents) through the end of the 1997 fiscal year. The market value of the
Common Stock on January 2, 1996 (adjusted for the above stock split) was less
than $13.93 per share and, therefore, Mr. Hayes will not receive any payment
with respect to the rights valued on such date.
(3) The amounts shown in this column reflect the market value of the
restricted stock granted, under the terms of the Restricted Plan, to Messrs.
Hayes, Emrich, Geremski and McCutchen. (The market value is given as of the date
of grant of the restricted stock.)
The restricted stock awarded to an executive officer is held by an escrow
agent, appointed by the Company, until such officer vests in his award.
Similarly, the dividends paid on each share of restricted stock (which are paid
to the same extent as dividends on the Common Stock generally) are held by the
escrow agent until the executive vests in his restricted stock, at which time he
will also be entitled to receive the interest credited by the Company on such
dividends. Each executive officer who received a restricted stock award during
the 1997 fiscal year (the "1997 Restricted Award") vested in 20% of such award
on the date of grant. The balance of each executive's 1997 Restricted
10
<PAGE>
Award will vest (subject generally to the executive's continued employment
with the Company) in four annual installments, commencing on the fourth
anniversary of the date of grant. With respect to the restricted stock granted
to him during the 1996 fiscal year, Mr. Emrich has vested in 12,000 shares and
will vest in the balance of such award (subject generally to his continued
employment with the Company) in equal 6,000 share increments on October 1 of
each of 1998, 1999 and 2000. Notwithstanding the foregoing, upon a "change in
control" of the Company, as such term is defined in the Restricted Plan, the
restrictions applicable to an outstanding restricted stock award will lapse and
the executive will immediately vest in such award and in any dividends paid on
such award and then held in escrow, together with interest thereon. The
Restricted Plan also permits the Compensation Committee, in its discretion, to
remove restrictions on outstanding awards. As of the last day of the 1997 fiscal
year, Messrs. Hayes, Emrich, Geremski and McCutchen held 85,864, 96,000, 36,000
and 12,000 shares of restricted stock, respectively, at an aggregate market
value of $2,210,998, $2,472,000, $927,000 and $309,000, respectively (based upon
a price of $25.75 per share - the closing price of the Common Stock on the last
business day of the 1997 fiscal year).
(4) The components of the amounts shown in this column for the 1997 fiscal
year consist of the following:
(i) Contributions of $9,000 each to the accounts of Messrs. Hayes,
Emrich, Geremski, McCutchen and McCartney, pursuant to the Profit-Sharing Plan.
(ii) An aggregate contribution having a value of $6,150 to each of
Messrs. Hayes, Emrich, Geremski, McCutchen and McCartney, pursuant to the ESOP
and the cash election feature of such plan.
(iii) Contributions of $47,671, $37,117, $18,483, $13,806 and $8,711 to
the accounts of Messrs. Hayes, Emrich, Geremski, McCutchen and McCartney,
respectively, pursuant to the Company's excess benefit plan which is designed to
supplement the Profit-Sharing Plan and the ESOP.
(iv) With respect to Messrs. Emrich, Geremski, McCutchen and McCartney,
the value of benefits under the Company's Senior Managers' Life Insurance Plan,
a split dollar plan, and with respect to Mr. Hayes, the value of benefits under
a separate split dollar arrangement with the Company. During the 1997 fiscal
year, each of Messrs. Emrich, Geremski, McCutchen and McCartney paid the amount
of the premium associated with the term life component of his split dollar life
insurance coverage. With respect to Mr. Hayes, the Company paid, during the 1997
fiscal year, $17,200 in premiums for the term portion of his coverage, and paid
the remainder of the premium associated with the whole life component of the
coverage. For each named executive officer, the Company expects to recover the
premiums it pays. The following amounts reflect the benefits related to the
non-term portion of the premiums to be paid by the Company under the insurance
policies purchased on the lives of the named executives, in each case with the
non-term portion of the premium being treated as the present value of an
interest-free loan to age 65: Mr. Hayes - $18,561; Mr. Emrich - $10,686; Mr.
Geremski - $8,900; Mr. McCutchen - $22,138; and Mr. McCartney - $13,301. The
Company believes that the foregoing method of calculating the value to the
executives of the non-term portion of the premiums paid by the Company more
accurately reflects the true value of such benefits, as compared to calculating
the present value of the cash surrender value of the policies, the methodology
previously used by the Company in its proxy statement disclosures.
(v) For the 1997 fiscal year, that portion of interest earned (that the
SEC considers to be at above market rates) on the deferred compensation accounts
of Mr. Hayes in the amount of $5,967.
(vi) For the 1997 fiscal year, imputed interest income to Mr. Emrich of
$1,442, in connection with an interest free loan made by the Company to such
officer. See "Certain Transactions" below.
(5) This amount includes, among other items, (i) a payment of $100,000 for
certain moving related costs and expenses (including costs related to the sale
of a former residence) incurred in connection with Mr. Emrich's relocation from
the Company's New York City office to the Company's Kenansville, North Carolina
office and (ii) a tax reimbursement of $62,630 related to the preceding payment.
STOCK OPTION GRANTS
The table below provides information regarding stock options granted during
the Company's 1997 fiscal year to the five most highly compensated executive
officers.
11
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------------------------------------
Percent of
Total
Number of Options
Securities Granted to
Underlying Employees in Exercise or
Options Fiscal Base Expiration Grant Date Present
Name Granted (#) Year (%) Price ($)(1) Date (2) Value ($)(3)
---- ----------- -------- --------- --------- -----------------
Year (%)
<S> <C> <C> <C> <C> <C>
Charles A. Hayes 52,500 6.29 19.75 5/27/07 216,090
26,250 3.15 21.725 5/27/07 94,448
26,250 3.15 23.70 5/27/07 82,504
John A. Emrich 49,500 5.93 19.75 5/27/07 203,742
24,750 2.97 21.725 5/27/07 89,051
24,750 2.97 23.70 5/27/07 77,789
Terrence E. Geremski 37,500 4.50 19.75 5/27/07 154,350
18,750 2.25 21.725 5/27/07 67,463
18,750 2.25 23.70 5/27/07 58,931
Byron McCutchen 9,000 1.08 19.75 5/27/07 37,044
4,500 .54 21.725 5/27/07 16,191
4,500 .54 23.70 5/27/07 14,144
Phillip D. McCartney 4,150 .50 19.75 5/27/07 17,081
- - --------
</TABLE>
(1) The grant of options to the named executive officers, other than Mr.
McCartney, represents multiple tranches of a single grant, with 50% of the
executive's total grant having an exercise price equal to the fair market value
of Common Stock on the grant date, 25% of the executive's total grant having an
exercise price equal to 110% of the fair market value of Common Stock on the
grant date and 25% of the executive's total grant having an exercise price equal
to 120% of the fair market value of Common Stock on the grant date.
(2) The options granted to the named executive officers will be exercisable
with respect to 33 1/3% of the aggregate number of shares initially subject to
the option during each of the third, fourth and fifth years of the option. Any
exercisable portion of an option that is not exercised will be carried forward
through the ten year term of the grant. Notwithstanding the foregoing, upon a
"change in control" of the Company, as such term is defined in the Option Plan,
all then outstanding options will immediately become exercisable. Pursuant to
the terms of the Option Plan, the Compensation Committee also generally has the
authority to accelerate the right to exercise any outstanding options.
(3) The values in this column represent the grant date present value of the
options based upon application of the Black-Scholes option pricing model. The
material assumptions and adjustments used in estimating the present value
pursuant to such model are: (i) a volatility factor of 20%; (ii) a dividend
yield of 2.20%; (iii) a risk-free rate of return of 6.74%; (iv) a reduction of
30% to reflect the possibility of forfeiture prior to the expiration of the
option; and (v) an expected seven year option life. The actual value an
executive officer receives from a stock option is dependent on future market
conditions, and there can be no assurance that the value ultimately realized
by the executive will not be more or less than the amount reflected in the
"Grant Date Present Value" column.
STOCK OPTION EXERCISES
The table below shows option exercises by the five most highly compensated
executive officers during the 1997 fiscal year as well as the value of the
options held by such persons at the end of the 1997 fiscal year.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
-----------------------------------
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Acquired on Value Realized Options at Fiscal Fiscal Year-End ($) (2)
Name Exercise (#) ($) (1) Year-End (#)
---- --------------- -------------- ----------------------- ----------------------
Exercisable/Unexercisable Exercisable/Unexercisable
-------------------------- ------------------------
<S> <C> <C> <C> <C>
Charles A. Hayes 16,875 96,277 15,000/106,875 176,981/494,868
John A. Emrich 3,000 10,500 1,000/101,000 11,880/471,116
Terrence E. Geremski -- -- 7,500/78,750 81,600/379,706
Byron McCutchen -- -- 1,000/20,000 11,880/105,097
Phillip D. McCartney 1,500 5,250 1,000/6,150 11,880/48,660
</TABLE>
12
<PAGE>
- - --------
(1) The values in this column represent the product of the number of options
exercised and the excess of the market value of the underlying Common Stock on
the date of exercise over the option exercise price.
(2) The values in this column represent the product of the number of options
and the excess, if any, of $25.75, the market value of the underlying Common
Stock on September 26, 1997 (the last business day of the 1997 fiscal year),
over the option exercise price.
OTHER BENEFIT PLANS
SUPPLEMENTAL RETIREMENT PLAN. In 1992, the Company adopted the Senior
Managers' Supplemental Retirement Plan ("SERP") which provides for retirement
and death benefits to a select group of senior managers. The SERP provides that
upon retirement from the Company after attaining age 65, and after at least 60
months of service with the Company, participants will be entitled to receive a
specified dollar amount for a period of ten years following retirement ("Ten
Year Payments"). If the officer dies prior to the termination of his or her
employment or during the period while the Ten Year Payments are being made, the
full amount of the Ten Year Payments or the unpaid portion thereof, as the case
may be, will be paid according to the installment schedule to the officer's
designated beneficiary.
The SERP also provides that if the officer's employment with the Company is
terminated for any reason other than his or her death or disability (prior to
the officer attaining age 65) and the officer has been employed by the Company
for at least 60 months, the officer will be entitled to a reduced retirement
benefit commencing at age 65. Such reduced benefit will be based upon the
officer's total months of employment with the Company as compared with the total
months of employment the officer would have had with the Company if he or she
had remained in the employ of the Company until age 65. If, at the time of his
or her termination of employment with the Company for any reason other than
death or disability, the officer has been employed by the Company for less than
60 months following the effective date of the agreement, he or she will not be
entitled to any retirement benefits and his or her beneficiaries will not be
entitled to any death benefits. If an officer becomes disabled prior to
attaining age 65 and such disability continues until age 65, the officer will be
entitled to receive the full amount of the Ten Year Payments commencing at age
65, regardless of whether he or she has completed 60 months of service with the
Company.
The Company has purchased life insurance policies on the lives of all
executive officers participating in the SERP in amounts which are designed to
enable the Company ultimately to recover all sums paid pursuant to the SERP.
Such life insurance policies are held in trust for the benefit of such officers.
The following table sets forth the Ten Year Payments for each of the
executive officers named in the "Summary Compensation Table" above.
Name of Individual Ten Year Payments (Per Annum)
------------------- -------------------------------
Charles A. Hayes $345,000
John A. Emrich 125,000
Terrence E. Geremski 125,000
Byron McCutchen 125,000
Phillip D. McCartney 125,000
SEVERANCE AGREEMENTS. The Company has entered into severance agreements
with each of the executive officers named in the "Summary Compensation Table"
above. The severance agreements, which expire on August 31, 1999 (unless
extended by the Board), provide for the payment of specified compensation and
benefits to such employees upon certain terminations of their employment within
two years after a change in control of the Company. These severance agreements
are intended to assure that management will continue to act in the interest of
the stockholders rather than be affected by personal uncertainties during any
attempts to effect a change in control of the Company, and to enhance the
Company's ability to attract and to retain executives.
The compensation and benefits which may be awarded under the severance
agreements include, among other specified items of compensation and other
benefits, a lump sum payment equal to three times an employee's highest annual
salary during the year preceding the change in control (including any bonuses
and contributions made on the employee's behalf to the Profit-Sharing Plan, ESOP
and excess benefit plan), and also include continuation of participation in the
Company's life, health, accident and disability and insurance plans for a period
of three years (or until the employee commences full-time substantially
equivalent employment with a new employer). If the total payments made to any
particular employee under a severance agreement would not be tax deductible by
the Company or would cause an "excess parachute payment" to exist within the
meaning of Section 280G of the Code, such payments will be reduced until no
portion of such payments would fail to be deductible by reason of being an
excess parachute payment. The severance agreements further provide that in order
for an employee to receive the benefits contemplated
13
<PAGE>
by the severance agreement, if any person or organization takes steps
designed to effect a change in control of the Company, the employee will not
voluntarily terminate his or her employment and will continue to perform his or
her regular duties, until such person or organization has abandoned or
terminated such effort to effect a change in control.
Had a "change in control" taken place during the fiscal year ended
September 28, 1997, Messrs. Hayes, Emrich, Geremski, McCutchen and McCartney
would have received, had their employment ceased on that date, lump sum payments
in the approximate amounts of $4,066,407, $2,973,375, $1,642,650, $1,445,160 and
$1,039,500, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ms. Jacobs, a member of the Company's Compensation Committee, served as
Vice President/Administration and General Counsel of the Company from 1986 to
1989 and as Secretary of the Company from 1987 to 1989. From time to time since
1989 and, more recently, since the third quarter of the 1994 fiscal year, Ms.
Jacobs has served as Secretary and acting General Counsel of the Company on an
interim basis. See "Election of Directors" above.
Mr. Hassenfelt, Chairman of the Company's Compensation Committee, serves as
Chairman and Chief Executive Officer of North Carolina Trust Company. Mr. Hayes
is a member of the Board of Directors of North Carolina Trust Company, but does
not serve on the Compensation Committee of such Board.
CERTAIN TRANSACTIONS
During the 1997 fiscal year, the Company paid $150,000 in consulting fees
to Japan Tech, Inc., of which Mr. Adachi, a director of the Company, is the
President and controlling stockholder. In addition, in the ordinary course of
its business and through a series of arm's-length transactions, the Company
purchased machinery and equipment from Japan Tech, Inc. during the 1997 fiscal
year totaling $173,674.
In the ordinary course of business and through a series of arm's-length
transactions, during the 1997 fiscal year, the Company paid $1,596,819 for
forklifts and forklift repairs to Western Carolina Forklift, Inc., which is
controlled by David Hayes, the son of Charles A. Hayes, the Chairman and CEO of
the Company. Charles A. Hayes, together with George Greenberg, a director of the
Company, serve on the Board of Directors of Western Carolina Forklift, Inc.
During the 1997 calendar year, the Company paid $1,000,000 in settlement of
an action brought against Mr. Greenberg. Such settlement payment was made
pursuant to the indemnification obligations under the By-Laws. Mr. Greenberg,
who vigorously denied all liability in this action and elected to settle this
matter in order to avoid the expense and inconvenience of further litigation,
has agreed to partially reimburse the Company in the amount of $100,000 for the
payments made by the Company in this action.
During the 1997 fiscal year, the Company acquired an additional 20% of the
capital stock of Grupo Ambar, S.A. de C.V. ("Grupo Ambar"), thereby increasing
the Company's ownership in Grupo Ambar to 95%. The selling stockholders included
Dr. Zaidenweber (a director of the Company) and the estate of his late brother.
Dr. Zaidenweber and the estate of his late brother received $4,359,776 and
$981,569, respectively, in connection with such transaction. Dr. Zaidenweber
remains the Chairman of the Board, and a stockholder, of Grupo Ambar. Dr.
Zaidenweber receives an annual salary of approximately $315,000 for his service
as Chairman of the Board of Grupo Ambar.
In fiscal year 1993, in connection with its request that Mr. Emrich, then
Senior Vice President of the Company and President of the Automotive Business
Unit and currently the President and COO of the Company, relocate to
Kenansville, North Carolina, the Company loaned Mr. Emrich $100,000 on an
interest free basis to purchase a residence. The loan, which was secured by a
Deed of Trust on such residence, was fully satisfied during the 1997 fiscal
year.
During the 1997 calendar year, the Company exercised, on two separate
occasions, its right of first refusal under the 1990 Stockholders' Agreement and
purchased, based upon the prevailing market price, an aggregate of 100,000
shares of Common Stock from Maurice Fishman, a director of the Company. The
aggregate purchase price for such shares was $2,590,625.
14
<PAGE>
The Company has a currently proposed transaction pursuant to which it would
enter into an option agreement with Tucci Associates, Inc. (the "Optionor").
Under the proposed transaction, the Optionor would grant the Company the
exclusive right to acquire certain proprietary technology, including rights
under a pending patent application. Nathan Dry, the Company's Vice President of
Research and Development, owns 24.5% of the capital stock, and is the President,
of the Optionor. In consideration for the grant of the option, the Company would
pay the Optionor $225,000, which will be credited against the option's exercise
price if the Company elects to exercise the option and which may be refunded in
part if the Company does not exercise the option. If it elects to exercise the
option before a patent has issued relating to the proprietary technology, the
Company would pay the Optionor $2,975,000 and, if a patent issues or if the
Company elects to abandon the patent application, an additional $2,000,000. If
it elects to exercise the option after a patent has issued relating to the
proprietary technology, the Company would pay the Optionor $4,975,000.
During the 1996 fiscal year, the Company acquired 100% of the issued and
outstanding capital stock of the Hofmann Companies from Bruno Hofmann, a
director of the Company. The Company made a payment during fiscal year 1997 in
the amount of $1,256,852, representing taxes payable by two of the Hofmann
Companies as a result of the Company's decision to file an election under
Section 338(h)(10) of the Code with respect to the acquisition of the Hofmann
Companies. In connection with such acquisition, the Company also agreed to pay
Mr. Hofmann additional consideration in accordance with a formula based on the
Company's price-earnings' multiple and the Hofmann Companies' performance
through the end of calendar year 2000. Mr. Hofmann has entered into an
employment agreement with the Hofmann Companies pursuant to which he will serve
as President and Chief Executive Officer of the Hofmann Companies for a period
ending on December 31, 2000. The Hofmann Companies, as a group, pay Mr. Hofmann
an annual base salary of $305,000 in consideration for such services. Mr.
Hofmann is also eligible to receive a cash bonus of up to one-half of his annual
base salary based upon the Hofmann Companies' financial performance.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and any persons holding more than 10% of the Company's
equity securities, to file with the SEC and the New York Stock Exchange reports
disclosing their initial ownership of the Company's equity securities, as well
as subsequent reports disclosing changes in such ownership. To the Company's
knowledge, based solely on a review of such reports furnished to it and written
representations by certain reporting persons that no other reports were
required, during the 1997 fiscal year, the Company's directors, executive
officers and greater than 10% beneficial owners complied with all Section 16(a)
filing requirements, except that (i) Mr. Gillease, a director of the Company,
failed to report the sale of 1,500 shares of Common Stock and (ii) Dr.
Zaidenweber, a director of the Company, failed to report a purchase of 3,450
shares of Common Stock. Such omissions have been corrected by the reporting
persons.
RATIFICATION OF THE SELECTION OF
INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING SEPTEMBER 27, 1998
The Board has selected Arthur Andersen LLP to serve as independent auditors
to audit the financial statements of the Company for the fiscal year ending
September 27, 1998 and recommends that stockholders vote to ratify such
selection. Representatives of Arthur Andersen LLP are expected to attend the
Annual Meeting and will be afforded an opportunity to make a statement and to
respond to appropriate questions.
MISCELLANEOUS
STOCKHOLDER PROPOSALS
Any stockholder who wishes to present a proposal for action at the next
annual meeting and who wishes to have it set forth in the Proxy Statement and
identified in the form of proxy prepared by the Company must notify the Company
in such manner so that such notice is received by the Company by August 27, 1998
and in such form as is required under the rules and regulations promulgated by
the SEC.
15
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In addition, under the By-Laws, in order for business to be properly
brought before the next annual meeting, notice of such business must be received
by the Secretary of the Company not less than 60 days and not more than 90 days
prior to such meeting (provided that if less than 70 days notice or prior public
disclosure of the date of the meeting is given to stockholders, notice of such
business must be received by the Secretary of the Company no later than ten days
following the day on which notice of the date of the meeting was mailed or such
public disclosure was made, whichever occurs first). Such notice must contain
(i) a brief description of the business and the reasons for conducting it at the
meeting, (ii) the name and address of the stockholder proposing such business,
(iii) a representation that the proposing stockholder is a holder of record and
the number of shares of the Company that are beneficially owned by such
stockholder and (iv) a description of any material interest of such stockholder
in such business. The chairman of the meeting may disregard any business that he
or she determines was not properly brought before the meeting in accordance with
the By-Laws.
The By-Laws also provide that if a stockholder of the Company intends to
nominate at a meeting one or more persons for election to the Board, notice of
such nomination must be received by the Secretary of the Company not less than
60 days and not more than 90 days prior to such meeting (provided that if less
than 70 days notice or prior public disclosure of the date of the meeting is
given to stockholders, such nomination must be received by the Secretary of the
Company no later than ten days following the day on which notice of the date of
the meeting was mailed or such public disclosure was made, whichever occurs
first). Such notice must contain (a) as to each proposed nominee, (i) the name,
age and business and residence address of such nominee, (ii) the principal
occupation of such nominee, (iii) the number of shares, if any, of the Company
that are beneficially owned by such nominee and (iv) any other information that
must be disclosed pursuant to the proxy rules of the SEC if such person had been
nominated by the Board and (b) as to the proposing stockholder, (i) the name and
address of such stockholder, (ii) a representation that the proposing
stockholder is a holder of record of shares of the Company entitled to vote at
the meeting and the number of shares of the Company that are beneficially owned
by such stockholder, (iii) a representation that the proposing stockholder
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice and (iv) a description of all arrangements and
understandings between the stockholder and each nominee pursuant to which the
nominations are to be made by the stockholder. The chairman of the meeting may
disregard any nomination that he or she determines was not made in accordance
with the foregoing procedures.
ANNUAL REPORT ON FORM 10-K
Any stockholder of record on December 19, 1997 who desires a copy of the
Company's 1997 Annual Report on Form 10-K, as filed with the SEC, may obtain a
copy (excluding exhibits) without charge by addressing a request to the
Secretary, Guilford Mills, Inc., P. O. Box 26969, Greensboro, North Carolina
27419-6969. A charge equal to the reproduction cost will be made if the exhibits
are requested.
OTHER MATTERS
The Board is not aware of any matters to be presented for action at the
Annual Meeting other than those described herein and does not intend to bring
any other matters before the Annual Meeting. However, if other matters shall
come before the Annual Meeting, it is intended that the holders of proxies
solicited hereby will vote thereon in their discretion.
By Order of the Board of Directors
/s/ Sherry R. Jacobs
Sherry R. Jacobs
SECRETARY
Dated: December 24, 1997
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A P P E N D I X
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GUILFORD MILLS, INC.
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 5, 1998
Proxy Solicited by the Board of Directors
The undersigned hereby appoints CHARLES A. HAYES and TERRENCE E. GEREMSKI, or
either of them, with full power of substitution in each, proxies (and if the
undersigned is a proxy, substitute proxies) to vote all Common Stock of the
undersigned in Guilford Mills, Inc. at the Annual Meeting of Stockholders of
such Company to be held on February 5, 1998, and at any and all adjournments
thereof, with authority to vote such stock on the matters set forth on the
reverse side hereof and upon such matters as may properly come before the
meeting.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
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HAS YOUR ADDRESS CHANGED?
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- - ----------------------------------------------------------------------------------------------------------------
GUILFORD MILLS, INC.
- - -----------------------------------------------------------------------------------------------------------------------
This proxy is solicited by the Board of Directors. If no specification is made,
this Proxy will be voted FOR Proposals 1 and 2.
For All With- For All
Nominees hold Except
1. Election of Directors.
Donald B. Dixon Dr. Jacobo Zaidenweber
Terrence E. Geremski Grant M. Wilson [ ] [ ] [ ]
George Greenberg
NOTE: If you do not want your shares voted "FOR" a particular nominee, mark
the "For All Except" box and strike a line through the name(s) of the
nominee(s). Your shares will be voted for the remaining nominee(s).
For Against Abstain
2. Proposal to approve the appointment of [ ] [ ] [ ]
Arthur Andersen LLP as independent
auditors of the Company.
Discretion will be used with respect to such other matters as may properly come
before the meeting or at any adjournments thereof.
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
Stockholder sign here Co-owner sign here
Mark box at right if an address change has been noted on the reverse side of [ ]
this card.
Please sign name as it appears on stock certificate. Only one of several joint
owners need sign. Fiduciaries should give full title.
</TABLE>
DETACH CARD DETACH CARD
GUILFORD MILLS, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the Company that require your immediate
attention and approval. These are discussed in detail in the enclosed proxy
materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders to be
held on February 5, 1998.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
GUILFORD MILLS, INC.
