SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant (X) Filed by a Party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FORSTMANN & COMPANY, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(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>
FORSTMANN & COMPANY, INC.
1155 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 17, 1998
The Annual Meeting of Shareholders of Forstmann & Company,
Inc., a Georgia corporation (the "Company"), will be held on Friday, April 17,
1998, at 10:00 a.m. local time, at The Yale Club of New York City, 50 Vanderbilt
Avenue, Council Room, 18th Floor, New York, New York 10017, for the following
purposes:
1. To elect three directors, each to serve for a term of
one year;
2. To approve the adoption of the Company's 1997 Directors
Compensation Plan;
3. To consider and vote on an amendment to the Company's
Amended and Restated Articles of Incorporation (the "Articles") to increase the
number of authorized shares of Common Stock from 10,000,000 shares to 35,000,000
shares;
4. To consider and vote on an amendment to the Articles to
authorize a class of 1,000,000 shares of Preferred Stock and to authorize the
Company's Board of Directors to issue such Preferred Stock in one or more series
and to fix the rights, powers, preferences and other terms of such series;
5. To consider and vote on an amendment to the Articles to
reduce the minimum number of directors that the Company may have from five to
three;
6. To vote on the ratification of the selection of Deloitte &
Touche LLP as the Company's independent auditors for the 1998 fiscal year; and
7. To transact such other business as properly may come before
the meeting.
Only shareholders of record at the close of business on
February 20, 1998 are entitled to receive notice of, and to vote at, the Annual
Meeting or any adjournment thereof.
THE BOARD OF DIRECTORS HOPES THAT YOU WILL FIND IT CONVENIENT
TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY TO THE
COMPANY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY, IF YOU
PREFER, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
/s/ Rodney J. Peckham
----------------------
RODNEY J. PECKHAM
SECRETARY
March 6 , 1998
<PAGE>
FORSTMANN & COMPANY, INC.
1155 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
1998 ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of Forstmann & Company, Inc., a Georgia
corporation (the "Company"), of proxies to be voted at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held on Friday, April
17, 1998, at 10:00 a.m. local time, at The Yale Club of New York City, 50
Vanderbilt Avenue, Council Room, 18th Floor, New York, New York 10017 and any
adjournment thereof.
Only shareholders of record at the close of business on
February 20, 1998 will be entitled to notice of, and to vote at, the Annual
Meeting. Shares represented by duly executed proxies received by the Company
will be voted in accordance with the instructions contained therein. In the
absence of specific instructions, proxies will be voted FOR the election as
directors of the three persons nominated by the Board of Directors, FOR the
proposal to approve the adoption of the Company's 1997 Directors Compensation
Plan, FOR the proposals to amend the Company's Amended and Restated Articles of
Incorporation (the "Articles") to (i) increase the number of shares of the
Common Stock which the Company is authorized to issue, (ii) authorize the
Company to issue shares of "blank check" Preferred Stock and (iii) reduce the
minimum number of directors that the Company may have from five to three, FOR
the proposal to ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors for the 1998 fiscal year, and in accordance with the
judgment of the person or persons voting the proxies on any other matter that
may properly be brought before the Annual Meeting.
The execution of a proxy will in no way affect a shareholder's
right to attend the Annual Meeting and to vote in person. A proxy given by a
shareholder may nevertheless be revoked at any time before it is voted by
communicating such revocation in writing to the Secretary of the Company or by
executing and delivering a later-dated proxy. Further, any person who has
executed a proxy but is present at the Annual Meeting may vote in person instead
of by proxy, thereby revoking any proxy previously given, except as to any
matter on which, prior to such revocation, a vote has been cast at the Annual
Meeting. The mere presence at the Annual Meeting of a shareholder who has
appointed a proxy does not revoke the appointment.
While the election of the directors requires the affirmative
vote of a plurality of the votes cast, the three proposals to amend the Articles
require the affirmative vote of the holders of a majority of the outstanding
shares of the Common Stock of the Company. The proposals to approve the adoption
of the Company's 1997 Directors Compensation Plan and the ratification of the
selection of Deloitte & Touche LLP as the Company's independent auditors for the
1998 fiscal year require the affirmative vote of a majority of the votes cast on
such proposals at the Annual Meeting. For purposes of determining the number of
votes cast with respect to a particular matter, only those cast "for" or
"against" are included. Shares represented by proxies marked to withhold
authority to vote or to abstain, and shares represented by proxies that indicate
that a broker or nominee does not have discretionary authority to vote, will be
counted only to determine the existence of a quorum at the Annual Meeting.
<PAGE>
This Proxy Statement, the accompanying form of proxy and the
Company's Annual Report to Shareholders on Form 10-K for the fiscal year ended
November 2, 1997 (the "1997 Annual Report") are first being mailed to
shareholders of the Company on or about March 6 , 1998. The Company will bear
the cost of soliciting proxies on behalf of the Board of Directors. In addition
to the use of the mails, proxy solicitations may be made by telephone, fax and
personal interview by officers, directors and employees of the Company. The
Company will, on request, reimburse brokerage houses and persons holding shares
in their names or in the names of their nominees for their reasonable expenses
in sending soliciting material to their principals.
VOTING SECURITIES AND SECURITY OWNERSHIP
Only shareholders of record at the close of business on
February 20, 1998 (the "Record Date") will be entitled to vote at the Annual
Meeting and any adjournment thereof. At the close of business on the Record
Date, there were outstanding 4,385,770 shares of the Common Stock, par value
$0.01 per share, of the Company (the "Common Stock"). Each share is entitled to
one vote. There was no other class of voting securities outstanding at that
date.
To the knowledge of the Company, as of the Record Date, no
person owned beneficially (for purposes of Rule 13d-3 under the Securities Act
of 1934) more than 5% of the outstanding shares of the Common Stock except as
set forth in the following table. Except as noted below, each such person has
sole voting and investment power with respect to all shares.
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership 1 Class 1
- ------------------- ---------------------- -----------
Daystar L.L.C.2 1,374,688 31.3%
411 Theodore Fremd Avenue
Rye, NY 10580
Credit Suisse First Boston, Inc.3 1,006,345 22.9%
11 Madison Avenue
New York, NY 10010
BankAmerica Corporation4 759,130 17.3%
555 California Street
San Francisco, CA 94104
Grace Brothers, Ltd.5 412,124 9.4%
1560 Sherman Avenue
Suite 900
Evanston, Il 60201
- -------------------------------
1 On July 23, 1997, pursuant to a Plan of Reorganization, the Company
emerged from bankruptcy proceedings commenced by the Company in
September 1995 under Chapter 11 of the United States Bankruptcy Code.
Pursuant to such Plan of Reorganization, which had been approved by the
Company's shareholders and creditors and confirmed by the bankruptcy
court, all general unsecured claims of the Company were converted into
100% of the Common Stock, based on a ratio of 50 shares for each $1,000
of allowed unsecured claim. Holders of the Company's pre-bankruptcy
common stock and preferred stock were issued warrants to purchase an
aggregate of 87,756 shares of the Common Stock exercisable at a
purchase price of $23.00 per share during the period ending July 23,
1999, and their prior holdings were canceled.
<PAGE>
2 Based on Schedule 13D, dated February 13, 1998. Daystar L.L.C. serves
as General Partner of Daystar Special Situations Fund, L.P. (the
"Fund), a Delaware limited partnership, which owns 784,936 (17.9% of
the outstanding) shares of the Common Stock, and as such has full
discretionary authority to vote and dispose of such shares. Daystar
L.L.C. also acts, with full discretionary authority, as investment
advisor to clients who own in the aggregate 585,376 (13.4% of the
outstanding) shares of the Common Stock. The managing directors of
Daystar L.L.C., who are jointly responsible for managing the Fund and
such client advisory accounts, are Bruce W. Gregory, a director of the
Company, Warren J. Malone, Michael C. Murr and John C. Sites, Jr. Mr.
Gregory also holds 376 shares of the Common Stock awarded to him by the
Company pursuant to its 1997 Directors Compensation Plan (the
"Directors Plan"; see "Proposed Approval of 1997 Directors Compensation
Plan", below) and options to purchase 12,000 shares of the Common Stock
granted to him pursuant to the Directors Plan, of which options to
purchase 4,000 shares are currently exercisable and options to purchase
8,000 shares are not currently exercisable. He holds such shares and
stock options for the benefit of Daystar L.L.C., which is deemed to be
the beneficial owner of such shares and stock options.
3 Based on Schedule 13D, dated October 16, 1997, indicating indirect
ownership by Credit Suisse First Boston, Inc. of 435,178 shares owned
directly by Credit Suisse First Boston Management Corporation and
571,167 shares owned directly by Credit Suisse First Boston
Corporation.
4 Based on Schedule 13D, dated October 15, 1997 indicating that
BankAmerica Corporation may be deemed to beneficially own shares which
are owned directly by its subsidiary, BankAmerica Investment
Corporation.
5 Based on Schedule 13G, dated January 27, 1998.
-------------------------------
The following table sets forth information as of the Record
Date with respect to the beneficial ownership of the Common Stock by each
director and nominee for director, each of the executive officers named in the
Summary Compensation Table (see below) and all directors and executive officers
as a group. Except as noted below, each such person has sole voting and
investment power with respect to all shares.
Amount and Nature
Name and Address of of Beneficial Percent of
Beneficial Owner Ownership(1) Class(1)
------------------- ----------------- ----------
Robert N. Dangremond 0 (2) *
Bruce W. Gregory 1,374,688 (3) 31.3%
Margaret Bertelsen Hampton 4, 456 (4) *
James E. Kjorlien 21,296 (5) *
Brian A. Moorstein 4,875 (6) *
Rodney J. Peckham 4,875 (6) *
Gary E. Schafer 1,219 (6) *
All directors and executive 1,411,409 (7) 32.2%
officers as a group (7
persons)
- -------------------------------
*Less than 1%.
<PAGE>
1 See footnote 1 to the preceding table
2 Mr. Dangremond resigned as a director and President and Chief Executive
Officer of the Company on January 26, 1998. See footnote 8 to the
Summary Compensation Table, below, as to 30,000 shares of the Common
Stock held by J. Alix & Associates, a firm of which Mr. Dangremond is a
principal. Mr. Dangremond disclaims beneficial ownership of such
shares.
3 See footnote 2 to the preceding table. Includes 4,000 shares of Common
Stock subject to stock options granted to Mr. Gregory pursuant to the
Directors Plan, which are currently exercisable and does not include
8,000 shares subject to stock options granted under the Directors Plan
which are not currently exercisable.
4 Includes 4,000 shares of Common Stock subject to stock options granted
to Ms. Hampton pursuant to the Directors Plan, which are currently
exercisable and does not include 8,000 shares subject to stock options
granted under the Directors Plan which are not currently exercisable.
5 Includes 11,519 shares of the Common Stock owned by Edison Capital LLC,
a company controlled by Mr. Kjorlien. Includes 4,000 shares of Common
Stock subject to stock options granted to Mr. Kjorlien pursuant to the
Directors Plan, which are currently exercisable and does not include
8,000 shares subject to stock options granted under the Directors Plan
which are not currently exercisable.
6 Represents shares issuable on exercise of currently exercisable options
under the Company's Executive Stock Option Plan. Does not include
14,625 shares of the Common Stock subject to stock options granted to
each of Mr. Moorstein and Mr. Peckham and 3,656 shares subject to stock
options granted to Mr. Schafer pursuant to the Company's Executive
Stock Option Plan, none of which are currently exercisable.
7 Includes shares issuable on exercise of currently exercisable options
under the Company's Executive Stock Option Plan and the Directors Plan.
Does not include an aggregate of 24,000 shares of the Common Stock
subject to stock options granted to the Company's three directors
pursuant to the Directors Plan or an aggregate of 32,906 shares subject
to stock options granted to the Company's three executive officers
pursuant to the Executive Stock Option Plan, none of which are
currently exercisable.
For purposes of the preceding table, each of the directors and
executive officers is deemed to be the beneficial owner of shares which may be
acquired by him or her within 60 days through the exercise of options, if any,
and such shares are deemed to be outstanding for the purpose of computing the
percentage of the Common Stock beneficially owned by him or her and by the
directors and executive officers as a group. Such shares, however, are not
deemed to be outstanding for the purpose of computing the percentage of the
Common Stock beneficially owned by any other person.
<PAGE>
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
Unless otherwise instructed, shares represented by the
accompanying proxy will be voted FOR the election of Bruce W. Gregory, Margaret
Bertelsen Hampton and James E. Kjorlien who have been nominated by the Board of
Directors to serve until the Annual Meeting of Shareholders in 1999 or until
their successors are elected and qualified. Each of the nominees is now a
director of the Company and is not an officer or employee of the Company.
Directors are elected by a plurality of the votes cast, in person or by proxy,
at the Annual Meeting.
On July 23, 1997, pursuant to a Plan of Reorganization under
which the Company emerged from bankruptcy, the Board of Directors was
reconstituted, with Ms. Hampton, Mr. Kjorlien, Robert N. Dangremond and Jerome
H. Walthers appointed as the initial directors of the Company. In September
1997, Mr. Walthers resigned from the Board and Mr. Gregory was appointed to
replace him. On January 6, 1998, Mr. Dangremond was named acting Chief Financial
Officer of Zenith Electronics Corporation and, on January 26, 1998, Mr.
Dangremond resigned as a director, as well as Chief Executive Officer and
President of the Company. While the Articles and the Company's By-Laws provide
that the minimum number of directors the Company may have is five, the Board of
Directors has proposed that the minimum number of directors be reduced to three
(see "Proposed Amendment of the Articles to Reduce the Minimum Number of
Directors from Five to Three", below).
Bruce W. Gregory is a Managing Director of Daystar L.L.C., a
Rye, New York-based investment management firm that specializes in investments
in companies that are in the midst of restructurings. Before joining Daystar
L.L.C. in 1996, Mr. Gregory was employed by Progressive Partners, an investment
management firm, as an equity portfolio manager from 1990 to 1996. Previously,
Mr. Gregory was employed by Chase Manhattan Bank in the North American Corporate
Finance Group and Investment Management Group of US Private Banking. Mr. Gregory
serves on the Board of Trustees of Trinity Presbyterian Church and Here's Life
Inner City New York. Mr. Gregory is a Chartered Financial Analyst and a member
of the Association of Investment Management and Research and the New York
Society of Security Analysts. Mr. Gregory is 33 years old.
Margaret Bertelsen Hampton joined Grace Brothers, Ltd., an
investment management firm based in Evanston, Illinois, in March 1997. Prior to
joining Grace Brothers, Ltd., Ms. Hampton was a Managing Director of the
Distressed Investments Unit of First Chicago Capital Corporation, which she
joined in 1991. Previously, Ms. Hampton worked in the Financial Restructuring
Group of Bear Stearns & Co., Inc. Ms. Hampton is a director of several
privately-held companies, one of which is in the worsted wool manufacturing
business and may, from time to time, compete with the Company. She is a member
of the Board of Trustees of Northwestern University. Ms. Hampton is 39 years
old.
James E. Kjorlien is a Managing Member of Credit Research and
Trading LLC, a Greenwich, Connecticut-based broker-dealer. Mr. Kjorlien joined
Credit Research in June 1990. Mr. Kjorlien is 46 years old.
None of the directors has any family relationship with any
other director or with any executive officer of the Company. The Company has no
reason to believe that any nominees will be unable or unwilling to serve as a
director, if elected. If, however, a nominee should decline or be unable to act
as a director, the shares represented by the accompanying proxy will be voted
for such other person as may be nominated by the Board of Directors.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES NAMED
TO THE BOARD OF DIRECTORS.
COMMITTEES AND MEETINGS
The Board of Directors held 15 meetings during the 1997 fiscal
year. After their respective appointments each current director attended all of
the meetings of the Board of Directors and of all committees of the Board of
Directors on which he or she served.
The Board of Directors has standing Audit and Compensation
Committees. The Board of Directors does not have a Nominating Committee, and
nominations for directorships are made by vote of the full Board of Directors.
The members of each committee are appointed by the Board of Directors for a term
beginning after the first regular meeting of the Board of Directors following
the Annual Meeting of Shareholders and until their respective successors are
elected and qualified.
AUDIT COMMITTEE. The Audit Committee recommends to the Board
of Directors the auditing firm to be selected each year as the Company's
independent auditors. The Audit Committee also has responsibility for (i)
reviewing the proposed scope and results of the audit, (ii) reviewing the
Company's financial condition and results of operations, (iii) considering the
adequacy of the Company's internal accounting and control procedures and (iv)
reviewing any non-audit services and special engagements to be performed by the
independent auditors, and ensuring that the performance of such tasks will not
impair the auditors' independence. The Audit Committee also reviews, at least
annually, the terms of all material transactions and arrangements between the
Company and its affiliates. Members of the Audit Committee may not be employees
of the Company, and not more than one member may be affiliated with or represent
the interest of a shareholder of the Company beneficially owning 20% or more of
the outstanding Common Stock. The current members of the Audit Committee are
Messrs. Gregory and Kjorlien and Ms. Hampton, with Ms. Hampton serving as
Chairperson. During the Company's 1997 fiscal year, the Audit Committee held two
meetings.
COMPENSATION COMMITTEE. The Compensation Committee was
established in December 1997, after the end of the 1997 fiscal year. This
committee determines, subject to the approval of the Board of Directors, the
compensation paid to the Company's executive officers, the award of stock
options under the Company's Executive Stock Option Plan and the implementation
of management incentive compensation plans. The current members of the
Compensation Committee are Messrs. Gregory and Kjorlien and Ms.
Hampton, with Mr. Gregory serving as Chairman.
COMPENSATION OF DIRECTORS
Under the Company's 1997 Directors Compensation Plan, the
adoption of which shareholders are being asked to approve, each director who is
not also an officer or employee of the Company receives quarterly director's
fees in cash and shares of the Common Stock and stock options. See the
description of the 1997 Directors Compensation Plan below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors established the Compensation Committee
in December 1997, after the end of the 1997 fiscal year, to oversee all issues
of executive compensation. During the 1997 fiscal year, Robert N. Dangremond,
<PAGE>
former President and Chief Executive Officer of the Company, participated in
discussions of the Board of Directors concerning executive compensation.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Brian A. Moorstein 37 President
Rodney J. Peckham 42 Executive Vice President Finance,
Administration and Strategic Planning, Chief
Financial Officer, Secretary and Treasurer
Gary E. Schafer 46 Vice President and Corporate Controller
Brian A. Moorstein became President of the Company on January
26, 1998. Mr. Moorstein started his career at the Company in 1984 working in
styling and then moved into sales. In 1986, he founded the Company's Women's
Wear Worsted Department. During 1990, his responsibilities were expanded to
include Women's Wear Woolen, sportswear and coatings.
Rodney J. Peckham became Executive Vice President Finance,
Administration and Strategic Planning and Secretary on January 26, 1998. Mr.
Peckham also serves as Chief Financial Officer and Treasurer of the Company. He
became Chief Financial Officer of the Company in March 1996. From October 1995
until he became Chief Financial Officer, Mr. Peckham was employed as Director of
Financial Operations. Mr. Peckham was previously employed by the Company from
August 1986 through May 1995 during which time he served as Corporate Controller
from August 1986 until he became Treasurer in March 1992, and he also served as
Secretary from December 1992 to September 1993. From May 1995 through October
1995, Mr. Peckham was self-employed and provided various financial consulting
services to the Company.
Gary E. Schafer became Vice President and Corporate Controller
of the Company in March 1992. Mr. Schafer joined the Company in 1990 as Director
of Cost Accounting.
Executive officers are appointed by and serve at the
discretion of the Board of Directors for a term beginning after the first
regular meeting of the Board of Directors following the Annual Meeting of
Shareholders and until their respective successors are duly appointed and
qualified.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is
charged with the responsibility of, among other things, periodically reviewing
and determining the cash and non-cash compensation and benefits of the Company's
executive officers, as well as administering the Company's Executive Stock
Option Plan. This committee was, however, established only recently, in December
1997, and, while it has determined the compensation arrangements for the
Company's principal executive officers, it has not yet formulated Company-wide
compensation programs and policies.
<PAGE>
Nevertheless, it is expected that the Compensation Committee
will establish compensation programs designed to attract and retain qualified
executives who are capable of leading the Company and to motivate them to high
levels of performance in order to achieve the Company's business objectives,
both short-term and long-term. The Committee believes that one key to achieving
such goals will be to provide compensation that is competitive with compensation
packages provided by comparable companies and of which a significant proportion
is tied to performance in the form of annual incentive bonuses and long-term
stock incentives. In particular, the Committee believes that the award of stock
options under the Executive Stock Option Plan will be a principal method of
linking executive compensation to the creation of enhanced shareholder value.
Thus, in taking its first significant action in January 1998,
the Compensation Committee established compensation packages for Messrs.
Moorstein and Peckham that combined base salaries that are believed to be
commensurate with salaries paid by comparable companies with both stock and
bonus incentive packages (see below).
In the future, the Committee expects to review executive
salaries annually and to consider both individual and Company performance,
levels of responsibility, prior experience and competitive pay practices in
setting salaries for these executives and others at the Company. Annual bonus
compensation is anticipated to be a significant element in the total cash
compensation for executives and to be based on such factors as
individual and Company performance, including the achievement of
earnings and other performance targets.
In this regard, the Board of Directors adopted a Management
Incentive Plan in January 1997, under which the Company's executive officers,
certain other members of senior management and other key employees may be
entitled to annual bonuses based on the achievement of targeted levels of
performance. For the 1997 fiscal year, the principal performance target was the
Company's having earnings before interest, taxes, depreciation, amortization and
restructuring charges ("EBITDAR") of $21,000,000, in which case, and provided
that certain other performance targets were attained, 12 members of the
Company's senior management would have been entitled to receive bonuses equal to
24% of their base salaries and 87 other key employees would have been entitled
to receive bonuses equal to 12% of their base salaries. If EBITDAR had been
$24,000,000, these bonus percentages would have been increased to 40% and 20%,
respectively and if EBITDAR had been $27,000,000 the bonus percentages would
have been 52% and 26%, respectively. Employees entitled to receive a bonus could
elect to receive up to 30% of their bonuses in the form of shares of the Common
Stock. The Company achieved its minimum EBITDAR target for the 1997 fiscal year
and, accordingly, the Company paid bonuses in accordance with the Management
Incentive Plan for that fiscal year. The Compensation Committee intends to
establish target performance levels and related bonus compensation for the 1998
fiscal year in due course.
Submitted by:
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Bruce W. Gregory
Margaret Bertelsen Hampton
James E. Kjorlien
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning
compensation for services in all capacities awarded to, earned by or paid to the
four executive officers of the Company during the 1997, 1996 and 1995 fiscal
years of the Company.
<TABLE>
<CAPTION>
Other Annual Securities All Other
Fiscal Bonus Compensation Underlying Compensation
Year Salary ($) ($)1 ($)2 (#)3,4 ($)5,6,7,8
---- ---------- ----- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brian A. Moorstein 1997 193,000 53,446 8,479 19,501 50,000
President 1996 174,667 0 7,234 0 0
1995 171,000 0 7,354 12,500 0
Rodney J. Peckham6 1997 234,015 63,381 8,625 19,501 50,616
Chief Financial 1996 238,013 0 2,486 0 0
Officer 1995 93,312 0 3,787 12,500 97,155
Gary E. Schafer 1997 125,000 32,715 4,750 4,875 17,500
Vice President and 1996 119,708 0 4,322 0 578
Corporate Controller 1995 109,075 0 4,357 12,500 0
Robert N. Dangremond8 1997 -- -- -- -- 1,440,571
President and CEO 1996 -- -- -- -- 897,098
1995 -- -- -- -- 274,275
</TABLE>
- ------------------------
1 The amount of any bonus earned for a fiscal year, although included in
the fiscal year earned, is actually determined and paid after the end
of the fiscal year. The amount in the 1997 fiscal year reflects the
actual amount earned under the Company's Management Incentive Plan for
the 1997 fiscal year, of which 70% was paid in December 1997 with the
remaining amount deferred for payment after the end of fiscal year
1998.
2 Represents tax liability reimbursed by the Company arising from
contributions made by the executive officer and for investment earnings
thereon under a Company employee savings plan.
3 Pursuant to the Company's Plan of Reorganization, an aggregate of
487,528 shares of the Common Stock were reserved for issuance on
exercise of options granted or to be granted pursuant to the Company's
Executive Stock Option Plan and, as of the effective date of the Plan
of Reorganization (the "Effective Date"), 146,258 options were granted
to certain employees of the Company at an exercise price of $12.88 per
share. Amounts reflected for the 1997 fiscal year represent the options
granted under the Executive Stock Option Plan of which, 25% vested on
the Effective Date and an additional 25% will vest on each of the first
three anniversaries of the Effective Date.
4 Information for the 1995 fiscal year represents incentive stock options
granted under the Company's Common Stock Incentive Plan on January 6,
1995 to purchase shares of common stock at an exercise price of $8.50
per share, exercisable for 33-1/3% of such shares commencing on each of
January 6, 1996, January 6, 1997 and January 9, 1998. The options
granted on January 6, 1995 were granted at an amount greater than fair
market value. Pursuant to the Plan of Reorganization, all options
outstanding under the Company's Common Stock Incentive Plan were
canceled.
<PAGE>
5 Includes amounts paid for health club dues.
6 The amount shown for Mr. Peckham includes $89,800 for financial
consulting services paid to Mr. Peckham between June 1995 to October
1995. The remaining $7,355 represents reimbursement of Mr. Peckham's
relocation expenses.
7 Effective as of November 14, 1996, the court administering the
Company's bankruptcy approved the Company's Incentive Compensation and
Retention Program which provided certain eligible employees with a
predetermined confirmation bonus and provided for a discretionary bonus
to certain employees selected by the Company's Chief Executive Officer
in consultation with the Board of Directors. During the 1997 fiscal
year, Messrs. Moorstein and Peckham were paid $50,000 and Mr. Schafer
was paid $17,500 under this program.
8 Robert N. Dangremond served as President and Chief Executive Officer of
the Company during the 1997 fiscal year. On January 6, 1998, Mr.
Dangremond was named acting Chief Financial Officer of
Zenith Electronics Corporation and, on January 26, 1998, Mr. Dangremond
resigned as a director, as well as Chief Executive Officer and
President of the Company.
Mr. Dangremond provided services to the Company pursuant to a Letter
Agreement, dated July 31, 1995 (as amended), between the Company and J.
Alix & Associates ("J. Alix"), a consulting firm specializing in
corporate restructurings, of which Mr. Dangremond is a principal. The
amounts shown were paid to J. Alix on account of fees for the services
rendered by Mr. Dangremond and to reimburse J. Alix for travel and
lodging expenses incurred by Mr. Dangremond in the course of performing
his duties to the Company. The amount shown for the 1997 fiscal year
includes a $400,000 success fee which became payable following the
Company's emergence from bankruptcy, of which $200,000 has been paid
and $200,000 has been accrued and will be paid during the 1998 fiscal
year. The Company also issued 30,000 shares of the Common Stock to J.
Alix (which are not shown in the table) as an additional success fee,
which was the number of shares issuable under the Company's Plan of
Reorganization to the holder of an allowed unsecured claim against the
Company of $600,000.
COMPENSATION ARRANGEMENTS WITH MR. MOORSTEIN AND MR. PECKHAM
On January 26, 1998, Mr. Moorstein was appointed President of
the Company and Mr. Peckham was appointed Executive Vice President Finance,
Administration and Strategic Planning and Chief Financial Officer. Each of them
will receive an annual salary of $265,000 and will participate in the Management
Incentive Plan and the Executive Stock Option Plan.
STOCK OPTIONS GRANTED DURING THE 1997 FISCAL YEAR
The Company granted 146,258 stock options under the Company's
Executive Stock Option Plan during the 1997 fiscal year at an exercise price of
$12.88 per share.
<PAGE>
STOCK OPTIONS HELD AT THE END OF THE 1997 FISCAL YEAR
The following table sets forth the total number of exercisable
and unexercisable stock options granted under the Company's Executive Stock
Incentive Plan held by each executive officer named below on November 2, 1997.
No options to purchase shares of the Common Stock were exercised during the 1997
fiscal year. On February 17, 1998, the last sales price of the Common Stock in
the over-the-counter market was $14.125 per share.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options at
at Fiscal Year End Fiscal Year End
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Brian A. Moorstein 4,875 14,625 $0.00 $0.00
Rodney J. Peckham 4,875 14,625 0.00 0.00
Gary E. Schafer 1,219 3,656 0.00 0.00
</TABLE>
RETIREMENT PENSION PLAN
The Company maintains a Retirement Pension Plan (the "Pension
Plan") for its salaried employees. The Pension Plan is a defined benefit pension
plan providing a formula benefit, on vesting, for employees 21 years of age or
older who have completed one year of service with the Company. The Pension Plan
generally takes into account credited service and annual compensation earned
under the pension plan of a predecessor of the Company (the "Predecessor Plan"),
but the benefit payable from the Pension Plan, depending on the circumstances,
may be reduced by any benefit payable under the Predecessor Plan.
The following table shows the estimated annual benefits upon
retirement to participants in the Pension Plan in specified annual compensation
and years of credited service classifications. The amounts shown are subject to
the maximum benefit limitations set forth in Section 415 of the Internal Revenue
Code of 1986 (the "Code") and are subject to reduction for amounts payable under
the Predecessor Plan. The pension benefits shown are based upon retirement at
age 65 and the payment of a single-life annuity to the participants. The pension
benefits in the table reflect the limitation under Section 401(a)(17) of the
Code on the maximum amount of annual compensation ($150,000 effective February
1, 1994 and $160,00 effective February 1, 1997 (the "Code Limitation")), that
can be utilized for determining benefits under the Pension Plan.
<TABLE>
<CAPTION>
Years of Credited Service at Retirement
---------------------------------------
Highest Five
Year Average
Annual 5 10 15 20 25 30 35
Compensation* ------- ------- ------- ------- ------- ------- -------
- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 $ 6,722 $13,444 $20,165 $26,887 $33,609 $40,331 $47,053
110,000 7,472 14,944 22,415 29,887 37,359 44,831 52,303
120,000 8,222 16,444 24,665 32,887 41,109 49,331 57,553
130,000 8,972 17,944 26,915 35,887 44,859 53,831 62,803
140,000 9,722 19,444 29,165 38,887 48,609 58,331 68,053
150,000 10,472 20,944 31,415 41,887 52,359 62,831 73,303
160,000 10,622 21,244 31,865 42,487 53,109 63,731 74,353
</TABLE>
<PAGE>
- --------------
* Annual compensation is the amount reportable on a participant's Form
W-2 for federal income tax purposes, and consists of the amounts
reported in the table included under "Summary of Compensation in the
1997, 1996 and 1995 fiscal years as salary, bonus, other annual
compensation and all other compensation.
Credited years of service for benefit accruals under the
Pension Plan, as of December 31, 1997, for the following executive officers are:
Brian A. Moorstein 14 years
Rodney J. Peckham 12 years
Gary E. Schafer 8 years
A participant's annual pension payable as of his or her normal retirement date
at age 65 will be equal to 1% of that portion of the participant's "final
average compensation" (as defined in the Pension Plan) which is equal to the
"social security integration level" (as defined in the Pension Plan) in effect
for the year in which the participant retires, plus 1-1/2% of that portion of
the participant's final average compensation in excess of the social security
integration level, multiplied by the number of years of credited service not to
exceed 35 years. A reduced pension benefit is payable upon (i) early retirement
at or after age 55, (ii) death, under certain circumstances, and (iii)
disability if the participant has completed at least five years of vesting
service. A reduced pension benefit is also payable, at the election of a
participant who terminates employment after completing at least five years of
vesting service, at any time at or after age 55. Generally, the payment of
benefits will be in the form of a straight life annuity for participants who are
not married and a joint and survivor annuity for those who are married.
AGREEMENTS RELATING TO A CHANGE IN CONTROL
Under the Company's Incentive Compensation and Retention
Program (the "Program"), adopted in November 1996, an aggregate of $1,500,000 of
bonus compensation became payable to certain employees of the Company in part in
connection with the Company's emergence from bankruptcy and in part on a
discretionary basis during the 1997 fiscal year. One-half of this amount was
paid in August 1997 and the balance was paid in late January 1998. This program
also provides that certain key employees, including the Company's three
principal executive officers, will be entitled to receive termination awards if
terminated "without cause" (as defined in the Program) after a "change in
control" of the Company and within two years after the date of confirmation of
the Company's Plan of Reorganization (July 9, 1997). A termination award would
be equal to 150% of the affected employee's base salary at the time of the
termination. Since a "change in control" was defined under the Program to
include, among other things, the confirmation of the Company's Plan of
Reorganization, termination awards will be payable to such key employees if
their employment is terminated "without cause" at any time prior to July 9,
1999. (See also, the description of certain change in control provisions
relating to the acceleration of the exercisability of stock options granted or
to be granted pursuant to the Company's 1997 Directors Compensation Plan under
"Proposed Approval of 1997 Directors Compensation Plan".)
INDEMNITY AGREEMENTS
The Company is party to an indemnity agreement with each of
its directors and certain of its executive officers which provides that the
indemnitee will be entitled to receive indemnification, which may include
<PAGE>
advancement of expenses, to the full extent permitted by law for all expenses,
judgements, fines, penalties and settlement payments incurred by the indemnitee
in actions brought against the indemnitee in connection with any act taken in
the indemnitee's capacity, and within the indemnitee's scope of authority, as a
director or executive officer of the Company. These agreements provide for the
appointment of independent legal counsel to determine whether a director or
executive officer is entitled to indemnity after a change in control. It also
requires the Company to use reasonable efforts to maintain specified levels of
directors' and officers' liability insurance for so long as an indemnitee may be
subject to any possible, threatened or pending action, except that the Company
will not be obligated to pay annual premiums to do so in excess of 150% of the
annualized rate of premiums paid during the 1997 fiscal year.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors, executive officers and persons who own beneficially
more than 10% of the outstanding Common Stock to file with the Securities
Exchange Commission initial reports of beneficial ownership and reports of
changes in beneficial ownership of the Common Stock and other securities of the
Company on Forms 3, 4 and 5, and to furnish the Company with copies of all such
forms they file. Based on a review of copies of such reports furnished to it,
the Company believes that all of the Company's directors and officers timely
filed all reports required during the Company's 1997 fiscal year, except that
the Forms 3 for each of Ms. Hampton and Mr.
Kjorlien were filed late.
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires the Company to
present a chart comparing the cumulative total shareholder return on the Common
Stock with the cumulative total shareholder return of (i) a broad equity market
index and (ii) either a nationally-recognized industry standard or a peer group
selected by the Company. The Company has selected, for purposes of this
performance comparison, the following eight public companies believed to offer
products or services similar to those offered by the Company, and the provision
of which products or services represents a significant portion of their
respective businesses (the "Selected Peer Group"): Burlington Industries Equity,
Inc., Concord Fabrics, Inc., Delta Woodside Industries, Inc., Dixie Yarns, Inc.,
Galey & Lord, Inc., Johnston Industries, Inc., Spring Industries, Inc. and Texfi
Industries, Inc.
The chart assumes that $100 had been invested on July 23, 1997
(the date of the Company's emergence from bankruptcy) in each of the Common
Stock, The Nasdaq Stock Market Composite Index and the Selected Peer Group
(weighted on the basis of capitalization), and that all dividends were
reinvested (except as to the Company since it has paid no dividends during this
period) and is adjusted for stock splits and stock dividends. The chart would
normally be for a five-year period. However, the Common Stock has been publicly
traded in the over-the-counter market only since July 23, 1997. Accordingly, the
chart covers only the period from July 23, 1997 to November 2, 1997, the last
day of the Company's 1997 fiscal year. For the five-year period consisting of
the 1997, 1996, 1995, 1994 and 1993 fiscal years of the Company, the Company
realized a cumulative loss applicable to common shareholders of $41.8 million.
[Graph]
<PAGE>
<TABLE>
07/29/97 07/31/97 08/31/97 09/30/97 10/31/97 11/30/97 12/31/97
-------- -------- -------- -------- -------- -------- --------
REGISTRANT FULLY ADJUSTED SHARE PRICE
<S> <C> <C> <C> <C> <C> <C> <C>
Forstmann & Co. Inc. $10.50 $10.50 $12.88 $11.75 $12.25 $11.63 $12.38
Total Return for each - 22.6% -8.7% 4.3% -5.1% 6.5%
Period
Normalized Index $100 $100 $123 $112 $117 $111 $118
SELECTED PEER GROUP MARKET WEIGHTED RETURN
Peer Mkt Wtd Return -0.3% -1.2% 10.7% -3.4% 1.3% -1.9%
each PD
Normalized Index $100 $100 $98 $109 $105 $107 $105
BROAD MARKET FULLY ADJUSTED COMPOSITE INDEX
Nasdaq Composite 518.9 526.4 525.6 556.7 527.7 530.4 522.1
Index
Total Return for each 1.4% -0.2% 5.9% -5.2% 0.5% -1.6%
Period
Normalized Index $100 $101 $101 $107 $102 $102 $101
</TABLE>
--------------------------
PROPOSED APPROVAL OF 1997 DIRECTORS
COMPENSATION PLAN
(ITEM 2 ON PROXY CARD)
In October 1997, the Board of Directors of the Company adopted
the 1997 Directors Compensation Plan (the "Directors Plan"), which is being
submitted and recommended to the shareholders for approval. Approval of the
Directors Plan requires the affirmative vote of a majority of all votes cast at
the Annual Meeting. The following description of the principal features of the
Directors Plan is qualified in its entirety by reference to the full text of the
Directors Plan, which is set forth in Exhibit A.
PURPOSES. The purposes of the Directors Plan are to enable the
Company to attract, retain and motivate the best qualified directors and to
enhance a long-term mutuality of interest between the directors and the
shareholders by providing the directors with stock ownership and granting them
options to purchase shares of the Common Stock.
TERM. The Directors Plan became effective on December 19, 1997
and will terminate on December 31, 2007, unless earlier terminated by the
shareholders of the Company.
PARTICIPANTS. Directors of the Company who are not also
officers or employees of the Company or its subsidiaries are eligible to
participate in the Directors Plan (each a "Participant"). Currently, only the
three nominees for director are eligible to participate in the Directors Plan.
DIRECTORS FEES. Each Participant will receive for services as
a director a payment of $3,000 for each fiscal quarter during each fiscal year
of the Company from 1998 through 2007, subject to a prorated adjustment if the
<PAGE>
Participant was not a director at the time of each meeting of the Board of
Directors held during such fiscal quarter. Each Participant will also receive a
$1,000 fee for each meeting of the Board of Directors he or she attends in each
fiscal year from 1998 through 2007 in excess of six meetings during such fiscal
year. Each Participant who also serves as Chairperson of the Board of Directors
or of any committee thereof will also receive an additional fee of $375 for each
fiscal quarter of such fiscal years.
SHARES SUBJECT TO THE DIRECTORS PLAN. A total of 450,000
shares of the Common Stock will be available, and have been reserved, for
issuance under the Directors Plan pursuant to stock options granted or to be
granted, and share awards made or to be made, under the Directors Plan. The
Directors Plan provides for the automatic grant of a fixed number of stock
options and the automatic making of share awards having a fixed fair market
value to each Participant. If any stock option or share award made under the
Directors Plan is canceled or forfeited, the shares subject to the stock option
or share award will again be available for issuance under the Directors Plan.
STOCK OPTIONS. The Directors Plan authorizes the Company to
grant non-qualified stock options, but not incentive stock options (within the
meaning of Section 422 of the Code). On the date that an individual becomes a
Participant, he or she will automatically be granted an option to purchase
12,000 shares of the Common Stock (an "Initial Option"). On the third
anniversary of such initial grant and on each anniversary date thereafter,
provided that a Participant is still a director, he or she will automatically be
granted an option to purchase an additional 2,500 shares. Each option will
become exercisable as to one-third of the shares subject to such option on the
date of grant and on each of the first two anniversary dates of the date of
grant. Options will be exercisable for a term of 10 years or until earlier
terminated, as described below.
The exercise price of an option granted under the Directors
Plan will be the Fair Market Value of the Common Stock on the date of grant,
except that the exercise price of any Initial Option will in no event be less
than $12.88 per share. The exercise price of an option, together with any
required taxes, must be paid in full at the time of exercise in cash, by the
delivery of shares of the Common Stock (subject to certain conditions) or a
combination of cash and shares.
For these purposes (and for purposes of the share awards
discussed below), "Fair Market Value" is defined as the average daily Market
Price of the Common Stock for the 20-day period immediately preceding the date
as of which Fair Market Value is being determined. "Market Price" is defined as
the closing price of the Common Stock on the principal securities exchange on
which it is traded. If the Common Stock is not traded on a securities exchange,
but is reported by the National Association of Securities Dealers, Inc.
Automated Quotation System and market information is published on a regular
basis in THE NEW YORK TIMES or THE WALL STREET JOURNAL, then the Market Price
will be deemed to be the average of the published high and low sales price or
the published daily bid and asked prices of the Common Stock, as so published,
for the date as of which Market Price is being determined. If market information
is not so published on a regular basis, then Market Price will be deemed to be
the average of the high bid and low asked prices of the Common Stock in the
over-the-counter market for the date as of which the Market Price is being
determined, as reported by the National Association of Securities Dealers
Automated Quotation System, or, if not so reported, by a generally accepted
reporting service. If the Common Stock is not then publicly traded, the Market
Price will be the fair value thereof as determined in good faith by the Board of
Directors.
<PAGE>
ACCELERATION OF VESTING. If a Participant dies or becomes
permanently disabled, any stock option granted to such Participant will become
100% vested and may be exercised by the Participant or his or her designated
beneficiary at any time prior to the expiration of the term of the stock option
or within one year following the Participant's death or permanent disability,
whichever period is shorter. If a Participant ceases to be a director for any
reason other than death or permanent disability, any stock option granted to
such Participant which is then 100% vested may be exercised at any time prior to
the expiration of the term of the stock option or the 90th day following the
Participant's termination of employment, whichever period is shorter. All stock
options which are not vested as of the date a Participant ceases to be a
director for any reason other than death or permanent disability will be
forfeited.
In addition, in the event of a "change in control" any stock
option then held by a Participant will become 100% vested and may be exercised
by the Participant or his or her designated beneficiary at any time prior to the
expiration of the stock option or within 90 days after the change in control,
whichever period is shorter. For purposes of the Directors Plan, a change in
control will be deemed to have occurred if (i) any "person" or "group" (within
the meaning of Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934
and the rules thereunder), other than affiliates of the Company, becomes the
beneficial owner of securities of the Company representing 40% or more of the
combined voting power of the then outstanding securities of the Company, (ii) a
majority of the Board of Directors at any time ceases for any reason other than
death or disability to be composed of persons who were directors 24 months prior
to such time ("Incumbent Directors") or whose election to the Board of Directors
had been approved by Incumbent Directors or (iii) the shareholders approve a
definitive agreement for (A) the sale of all or substantially all of the assets
of the Company or (B) the merger or other business combination of the Company,
pursuant to which (1) the stock of the surviving company is not readily
tradeable in an established securities market, (2) a majority of the directors
of the surviving entity are persons who were not directors of the Company
immediately prior to the merger and are not nominees of the Company or (C) a
"person" or "group" (as defined above), other than the Company or an affiliate
of the Company becomes the beneficial owner of securities of the surviving
entity representing 40% or more of the combined voting power of the then
outstanding securities of the surviving entity.
SHARE AWARDS. Each Participant will receive for services as a
director, for each fiscal quarter during each fiscal year of the Company from
1998 through 2007, an award of that number of shares of the Common Stock
(rounded to the nearest whole number) as equals $3,000 divided by the Fair
Market Value of a share of the Common Stock as of the last business day of such
fiscal quarter, subject to a prorated adjustment if the Participant was not a
director at the time of each meeting of the Board of Directors held during such
fiscal quarter.
Pursuant to the Directors Plan, 239 shares of the Common Stock
were awarded to each of Ms. Hampton and Mr. Kjorlien and 159 shares were awarded
to Mr. Gregory in respect of their services as directors during the fiscal
quarter of the Company ended November 2, 1997, based on a Fair Market Value of
$12.56 per share. Ms . Hampton and Mr. Kjorlien were directors during all of
such fiscal quarter, while Mr. Gregory was appointed to the Board on September
15, 1997. Further, 217 shares of the Common Stock were awarded to each of the
directors for the fiscal quarter of the Company ended February 2, 1998 based on
a Fair Market Value of $ 13.83 per share.
<PAGE>
Pursuant to the Directors Plan, a Participant may elect, on or
before December 31 of any calendar year ending on or before December 31, 2006,
to defer receipt of all or any part of any share award payable in respect of the
calendar year following the year in which such election is made, and to have
such amounts credited to a stock account under the Directors Plan. In addition,
any person who becomes a Participant during any calendar year ending on or
before December 31, 2007 may elect, not later than the 30th day after he or she
becomes a Participant, to defer payment of all or any part of his or her share
award payable with regard to the portion of such calendar year following such
election. A deferral election will continue in effect unless and until a
Participant revokes or modifies such election by written notice to the Company.
Any such revocation or modification will become effective as of the end of the
calendar year in which such notice is given and only with respect to any share
award in subsequent calendar years. Further, a Participant who has revoked an
election may file a new election to defer share awards in the calendar year
following the year in which such new election is filed.
Any share award which is deferred by a Participant will be
deemed to be invested in a number of notional shares of the Common Stock
("Units") equal to the number of shares the Participant would have received
under the Plan had he or she not elected to defer the share award. Whenever a
dividend other than a dividend payable in the form of shares of the Common Stock
is declared with respect to the shares, the number of Units in the Participant's
stock account under the Director's Plan will be increased by the number of Units
determined by dividing (i) the product of (A) the number of Units in the
Participant's stock account on the related dividend record date, multiplied by
(B) the amount of any cash dividend declared by the Company on a share of the
Common Stock (or, in the case of any dividend distributable in property other
than Shares, the per share value of such dividend, as determined by the Company
for purposes of income tax reporting) by (ii) the Fair Market Value on the
related dividend payment date. In the case of any dividend declared on the
shares which is payable in shares, the Participant's stock account will be
increased by the number of Units equal to the product of (i) the number of Units
credited to the Participant's stock account on the related dividend record date,
multiplied by (ii) the number of shares (including any fraction thereof)
distributable as a dividend on a share. In the event of any change in the number
or kind of outstanding shares by reason of any recapitalization, reorganization,
merger, consolidation, stock split or any similar change affecting the shares,
other than a stock dividend as provided above, the Board of Directors will make
an appropriate adjustment in the number of Units credited to the Participant's
stock account. Fractional Units will be credited, but will be rounded to the
nearest hundredth percentile, with amounts equal to or greater than .005 rounded
up and amounts less than .005 rounded down.
A Participant may elect to receive distribution of the value
of his or her stock account under the Director's Plan on termination of his or
her service as a director or earlier, in cash , in shares or in a combination of
cash and shares. Distributions will begin immediately following the date a
Participant ceases to be a director or on the first business day of any calendar
year following the calendar year in which the Participant ceases to be a
director and will be in one lump-sum payment or in such number of annual
installments (not to exceed ten) as a Participant may designate. If a
Participant elects to receive distributions prior to his or her ceasing to be a
director, such election must be made on or before June 30 of the year prior to
the year in which the distribution is to occur.
TRANSFERABILITY. In general, stock options and share awards
granted under the Directors Plan are not assignable or transferable by a
Participant, except under the limited circumstances contemplated by the
Directors Plan.
<PAGE>
ADMINISTRATION. The Directors Plan provides that it will be
administered by the Board of Directors. Under the Directors Plan, the Board of
Directors has the sole authority, among other things, to grant awards, determine
terms, conditions and limitations applicable to awards, establish rules,
procedures, regulations and guidelines relating to the Directors Plan generally;
and to construe and interpret the Directors Plan. The Board of Directors may
not, however, have any discretion as to the selection of Participants or the
number of stock options or share awards that may be granted under the Directors
Plan. Further, the Directors Plan may not be amended in a manner that would
alter or impair any rights of any Participant or any obligations of the Company
under any stock option or share award theretofore granted in any manner adverse
to such Participant without the consent of such Participant.
The Directors Plan provides that, if the Board of Directors
determines that any stock dividend, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value or other similar event
affects the Common Stock such that an adjustment is required to preserve, or to
prevent enlargement of, the benefits or potential benefits made available under
the Directors Plan, the Board of Directors may make equitable adjustments in any
or all of (i) the number and kind of shares which thereafter may be awarded or
optioned and sold under the Directors Plan, (ii) the number and kinds of shares
subject to outstanding stock options and share awards and (iii) the grant,
exercise or conversion price with respect to any of the foregoing. Additionally,
the Board may make provisions for a cash payment to a Participant or a person
who has an outstanding stock option or share award.
FEDERAL INCOME TAX CONSEQUENCES. Under current federal income
tax laws and regulations and judicial interpretations thereof, which are subject
to change at any time, the grant of a stock option under the Directors Plan will
create no tax consequences for the participant or the Company. On exercise of a
non-qualified stock option, a Participant must recognize ordinary income in an
amount equal to the difference between the exercise price and the fair market
value of the stock on the exercise date. At such time, the Company will receive
a deduction for the same amount (assuming the applicable requirements of Section
162(m) of the Code have been met).
With respect to share awards, a Participant must recognize
ordinary income in an amount equal to the cash or the fair market value of the
shares of the Common Stock received, when received. The Company will receive a
deduction for the same amount, provided that, at the time the income is
recognized, a Participant either is not a covered employee or does not have
total compensation in excess of $1,000,000 for the year of recognition (other
than compensation that otherwise meets the requirements of Section 162(m) of the
Code). The tax treatment on disposition of shares acquired under the Directors
Plan will depend on how long the shares have been held.
------------------------
The Board of Directors believes that it is in the best
interests of the Company and its shareholders that the Directors Plan be
approved. The Board of Directors believes that the future success of the Company
will in large part depend on its ability to attract, retain and motivate
directors through, among other things, such incentive compensation programs.
Accordingly, the Board of Directors has adopted, and recommends that the
shareholders approve, the Directors Plan.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE ADOPTION OF THE DIRECTORS PLAN.
PROPOSED AMENDMENT OF THE ARTICLES
INCREASING THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK FROM 10,000,000 TO 35,000,000 SHARES
(ITEM 3 ON THE PROXY CARD)
The Board of Directors has proposed and recommends to the
shareholders that Article V of the Articles be amended to increase the number of
authorized shares of the Common Stock from 10,000,000 shares to 35,000,000
shares. Adoption of the proposed amendment requires the approval of the holders
of a majority of the outstanding shares of the Common Stock. A copy of Article
V, as proposed to be amended, is set forth in Exhibit B to this Proxy Statement.
Article V currently authorizes the Company to issue up to
10,000,000 shares of the Common Stock, of which 4,385,770 shares were issued and
outstanding as of the Record Date. In addition, 87,756 shares of the Common
Stock were reserved for issuance on exercise of outstanding warrants issued in
connection with the Plan of Reorganization, 487,528 shares were reserved for
issuance under the Company's Executive Stock Option Plan and 450,000 shares are
reserved for issuance under the Directors Plan. Thus, as of the Record Date,
there were 5,411,054 shares of the Common Stock outstanding or reserved for
issuance, leaving only 4,588,946 shares available for other corporate purposes.
Further, pursuant to the Company's Shareholders' Rights Plan,
adopted by the Board of Directors on October 9, 1997 (the "Rights Plan"),
shareholders of record on October 29, 1997 were granted rights (the "Rights") to
purchase one share of the Common Stock at an exercise price of $60 for each
share of the Common Stock held on that date. Under the Rights Plan, if certain
events relating to a potential change in control occur, such as the acquisition
of, or the announcement of a tender offer for, 25% or more of the then
outstanding shares of the Common Stock by a person or group, the Rights will
become exercisable at a price per share equal to 50% of the then current market
price per share of the Common Stock or the Board of Directors may elect to issue
one share of the Common Stock for each outstanding Right. The Rights expire on
October 28, 2007 if not earlier exercised or redeemed.
The Board of Directors believes that the proposed increase in
the number of authorized shares of the Common Stock is desirable because it
would provide the Company with greater flexibility of action to meet future
capital requirements through equity financings and to take advantage of
favorable market conditions and possible acquisition opportunities without the
delay and expense ordinarily attendant on obtaining further shareholder
approvals. Additional shares would also be available for stock splits or stock
dividends if the Board of Directors decides that it would be desirable to
broaden the public ownership of, or enhance the market for, the Common Stock,
and for other corporate purposes, including employee benefit plans. The Board of
Directors believes that the 10,000,000 shares of the Common Stock currently
authorized are inadequate to provide the desired degree of flexibility.
There are no present plans, understandings or agreements, and
the Company is not engaged in the negotiation of any transaction, which would
involve the issuance of the additional shares of the Common Stock proposed to be
authorized. If the proposed amendment is approved, however, the Board of
Directors will be empowered to authorize the issuance of up to an additional
<PAGE>
25,000,000 shares of the Common Stock, from time to time, for such purposes, to
such persons and for such consideration as it may deem desirable, without
further authorization by the shareholders, except as may be required by the
Georgia corporation law, other applicable laws or the rules of The Nasdaq Stock
Market or any stock exchange on which the shares of the Common Stock may
eventually be listed or traded. The timing of the actual issuance of additional
shares of the Common Stock will depend on, among other things, market conditions
and the specific purpose for which the shares are to be issued.
Shareholders will not have any preemptive rights to acquire
the shares of the Common Stock authorized by the proposed amendment. Any new
shares of the Common Stock, when issued, will have the same rights as the shares
of the Common Stock now outstanding. The proposed increase in the number of
authorized shares of the Common Stock will not change the number of shares of
the Common Stock currently outstanding or the rights of the holders of the
Common Stock. Depending on circumstances, however, issuance of the additional
shares of the Common Stock could affect existing shareholders by dilution of
their voting power as well as earnings and book value per share.
POSSIBLE ANTI-TAKEOVER EFFECT. Shareholders should also
consider the possible anti-takeover effects of the issuance of additional shares
of authorized Common Stock discussed below under "Possible Antitakeover Effects
of the Common Stock and Preferred Stock Proposals".
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO AMEND ARTICLE V OF THE ARTICLES TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK.
PROPOSED AMENDMENT OF THE ARTICLES
AUTHORIZING THE ISSUANCE OF SHARES
OF PREFERRED STOCK
(ITEM 4 ON THE PROXY CARD)
The Articles currently do not authorize the Company to issue
shares of the Preferred Stock and, in fact, Article V of the Articles prohibits
the issuance by the Company of any class of non-voting stock. The Board of
Directors has proposed and recommends to the shareholders that Article V of the
Articles be amended to authorize the issuance by the Company of up to 1,000,000
shares of a new class of undesignated or "blank check" Preferred Stock, par
value $0.01 per share (the "Preferred Stock"), which may be issued in one or
more series. The Board of Directors will be authorized to fix the designations,
rights, preferences, powers and limita tions of each series of the Preferred
Stock. Adoption of the proposed amendment requires the approval of the holders
of a majority of the outstanding shares of the Common Stock. A copy of Article
V, as proposed to be amended, is set forth in Exhibit B to this Proxy Statement.
The term "blank check" preferred stock refers to stock which
gives the board of directors of a corporation the flexibility to create one or
more series of preferred stock, from time to time, and to determine the relative
rights, preferences, powers and limitations of each series, including, without
limitation: (i) the number of shares in each series, (ii) whether a series will
bear dividends and whether dividends will be cumulative, (iii) the dividend rate
and the dates of dividend payments, (iv) liquidation preferences and prices, (v)
terms of redemption, including, timing, rates and prices, (vi) conversion
rights, (vii) any sinking fund requirements, (viii) any restrictions on the
issuance of additional shares of any class or series, (ix) any voting rights and
(x) any other relative, participating, optional or other special rights,
preferences, powers, qualifications, limitations or restrictions.
<PAGE>
Shares of the Preferred Stock may have priority over the
Common Stock with respect to dividends (which may be made cumulative with
respect to the Preferred Stock) and with respect to the assets of the Company
upon liquidation, and could reduce the amount of assets available for
distribution to the holders of the Common Stock on a liquidation of the Company.
Depending on the particular terms of any series of the Preferred Stock, holders
thereof may have significant voting rights and the right to representation on
the Company's Board of Directors. In addition, the approval of the holders of
shares of the Preferred Stock, voting as a class or as a series, may be required
for the taking of certain corporate actions, such as mergers.
The Board of Directors believes that the proposed
authorization of the issuance of shares of the Preferred Stock, like the
proposed increase in the Company's authorized Common Stock, is desirable because
it would provide the Company with increased flexibility of action to meet future
capital requirements through equity financings and to take advantage of
favorable market conditions and possible acquisition opportunities without the
delay and expense ordinarily attendant on obtaining further shareholder
approvals. The Board of Directors believes that the authorization of the
Preferred Stock would give the Board of Directors even greater flexibility than
will be obtained if the proposed increase in the number of authorized shares of
the Common Stock is approved, as various series of the Preferred Stock may be
customized to meet the needs of any particular transaction or market conditions.
There are no present plans, understandings or agreements, and
the Company is not engaged in the negotiation of any transaction, which would
involve the issuance of shares of the Preferred Stock. If the proposed amendment
is approved, however, the Board of Directors will be empowered to authorize the
issuance of up to 1,000,000 shares of the Preferred Stock, from time to time,
for such purposes, to such persons and for such consideration as it may deem
desirable, without further authorization by the shareholders, except as may be
required by the Georgia corporation law, other applicable laws or the rules of
The Nasdaq Stock Market or any stock exchange on which the shares of the Common
Stock or the Preferred Stock may eventually be listed or traded. The timing of
the actual issuance of shares of the Preferred Stock will depend on, among other
things, market conditions and the specific purpose for which the shares are to
be issued.
Shareholders will not have any preemptive rights to acquire
shares of the Preferred Stock authorized by the proposed amendment. The proposed
authorization of the issuance of shares of the Preferred Stock will not change
the number of shares of the Common Stock currently outstanding or the rights of
the holders of the Common Stock. Under certain circumstances, however, issuance
of shares of the Preferred Stock could affect existing shareholders by dilution
of their voting power as well as earnings and book value per share, especially
in the case of the Preferred Stock which is convertible into shares of the
Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
AMEND ARTICLE V OF THE ARTICLES TO AUTHORIZE THE ISSUANCE OF SHARES OF
"BLANK CHECK" PREFERRED STOCK.
----------------------------------
<PAGE>
POSSIBLE ANTI-TAKEOVER EFFECTS OF COMMON STOCK AND PREFERRED STOCK PROPOSALS
The primary purpose of the proposals to amend the Articles to
increase the number of shares of the Common Stock that the Company is authorized
to issue and to authorize the issuance of shares of the Preferred Stock in
various series is to provide the Company with flexibility of action to meet
future capital requirements through equity financings and to take advantage of
favorable market conditions and possible acquisition opportunities without the
delay and expense ordinarily attendant on obtaining further shareholder
approval.
Shareholders should recognize, however, that the issuance of
shares of the Common Stock or the Preferred Stock may have the effect of
discouraging or thwarting persons seeking to take control of the Company through
a tender offer, proxy fight or otherwise or seeking to bring about removal of
incumbent management or a corporate transaction such as a merger. For example,
the issuance of shares of the Common Stock in a public or private sale, merger,
in exchange for the Rights or in a similar transaction would increase the number
of the Company's outstanding shares, thereby diluting the interest of a party
seeking to take over the Company. Further, the Preferred Stock may be viewed as
having the effect of discouraging an attempt by another person or entity,
through the acquisition of a substantial number of shares of the Common Stock,
to acquire control of the Company, since the authorization of "blank check"
Preferred Stock could be used by the Board of Directors for adoption of a
shareholder rights plan or "poison pill".
The Common Stock and Preferred Stock proposals have not been
made in response to, and are not being presented to deter, any effort to obtain
control of the Company and are not being proposed as anti-takeover measures. It
should be noted that any action taken by the Company to discourage an attempt to
acquire control of the Company might result in shareholders not being able to
participate in any possible premiums which might be obtained in the absence of
anti-takeover provisions. Any transaction which may be so discouraged or avoided
could be a transaction that the Company's shareholders might consider to be in
their best interests. However, the Board of Directors has a fiduciary duty to
act in the best interests of the Company's shareholders at all times.
The possible anti-takeover effects of the Common Stock and
Preferred Stock proposals should be considered together with the Rights Plan
(see description on page 17, above) and certain provisions of the Company's
By-Laws which are designed to provide the Board of Directors with adequate time
to consider and prepare a response to proposals made by a potential acquiror,
but which may be viewed as having an anti-takeover effect. These provisions are:
SECTION 2.02, which provides in part that, if any shareholders
wish to call a special meeting of the shareholders, they may require
the Company to do so only by providing a written request to such effect
from shareholders holding not less than 66-2/3% of the shares of the
Common Stock then outstanding and entitled to vote at a meeting, which
request must also state the purposes for which the meeting is being
called;
SECTION 2.11, which provides that a shareholder may bring a
proposal before a meeting of the shareholders only if the shareholder
provides the Company with not less than 60 days' and not more than 90
days' notice prior to the meeting; provided that, if less than 70 days'
notice or public disclosure of the date of the meeting is given by the
Company, such notice by a shareholder will be timely if given not more
than 10 days after the Company's notice or public disclosure of the
<PAGE>
date of such meeting was mailed or made. (In this regard, it should be
noted that the federal securities laws generally contemplate that
shareholder proposals that a proponent wishes to be included in the
Company's proxy materials must be received not less than 120 days in
advance of the date of the proxy statement released in connection with
the previous year's annual meeting.) Further, the shareholder's notice
must contain specified information, including a statement of the names,
addresses and numbers of shares held by the persons making the proposal
and all persons acting in concert with them, a description of the
proposal and of any interest the persons making it may have in the
proposal and such other information as the Board of Directors may
reasonably prescribe from time to time as necessary or appropriate for
the shareholders and the Board of Directors to consider the proposal;
SECTION 2.12, which, among other things, provides that, in
order for an action to be taken by the shareholders by written consent
in lieu of a meeting, all written consents necessary to constitute the
required majority be dated within 60 days of each other and that the
there will be a record date for determining the shareholders entitled
to consent in writing to a proposed action to be fixed by the Board of
Directors on request of any shareholder seeking to have the
shareholders take such action by written consent. The Board of
Directors is required to set the record date within 10 days of the
request and the record date may be no earlier than the date it is fixed
by the Board and may not be later than 10 days after the date it is
fixed; and
SECTION 3.04, which provides that if shareholders wish to
nominate persons for election to the Board of Directors they must
follow notice procedures comparable to those set forth in Section 2.11
for shareholder proposals.
PROPOSED AMENDMENT OF THE ARTICLES
TO REDUCE THE MINIMUM NUMBER OF
DIRECTORS FROM FIVE TO THREE
(ITEM 5 ON THE PROXY CARD)
Article IX of the Articles currently provides that the
Corporation "shall have a minimum of five and a maximum of seven directors. The
Board of Directors of the corporation may, from time to time, within the minimum
and maximum, change the number of directors." Article III, Section 3.2, of the
Company's ByLaws contains a similar provision.
The Company's Board of Directors currently consists of the
three directors who have been nominated for re-election. While the Board may
consider the appointment or nomination of additional directors in the future, it
believes that, at the present time, three directors are sufficient to perform
the tasks of the Board of Directors and that a smaller number of directors makes
for efficiencies and cost-savings that would not necessarily be available with a
larger board.
Accordingly, in order to resolve any uncertainties that may
arise as to whether the current two vacancies in the Board must be filled and
the effect, if any, of their remaining vacant, the Board has proposed and
recommends to the shareholders that Article IX be amended to reduce the minimum
number of directors from five to three. As amended, Article IX would read as
follows:
<PAGE>
The Corporation shall have a minimum of three and a maximum
of seven directors. The Board of Directors of the Corporation may, from time
to time, within the minimum and maximum, change the number of directors.
If this proposal is adopted, the Board of Directors will make a conforming
change to Article III, Section 3.2, of the Company's By-Laws, pursuant to its
authority to amend the By-Laws pursuant to Article IX of the By-Laws.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
AMEND ARTICLE IX OF THE ARTICLES TO REDUCE THE MINIMUM NUMBER OF
DIRECTORS FROM FIVE TO THREE.
SELECTION OF INDEPENDENT AUDITORS
(ITEM 6 ON PROXY CARD)
The Board of Directors has selected, subject to ratification
by the shareholders, Deloitte & Touche LLP as the Company's independent auditors
and to audit the Company's financial statements for the fiscal year ending
November 1, 1998. Deloitte & Touche LLP has served as independent auditors for
the Company and its predecessor since 1985. Representatives of Deloitte & Touche
LLP are expected to be present at the Annual Meeting, will have the opportunity
to make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF
THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT
AUDITORS.
SUBMISSION OF SHAREHOLDER PROPOSALS
In order for a shareholder proposal to be eligible for
inclusion in the Company's proxy material for the 1999 Annual Meeting of
Shareholders, it must be submitted in writing and received by the Secretary of
the Company at the Company's principal executive offices on or before November
1, 1998. The proposal must also meet other requirements of the Securities and
Exchange Commission relating to shareholder proposals.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors
knows of no matter other than those described in this Proxy Statement which will
be presented for consideration at the Annual Meeting. If other matters properly
come before the Annual Meeting, the persons named in the accompanying form of
proxy intend to vote on such matters in accordance with their best judgment.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for Fiscal
1997, as filed with the Securities Exchange Commission, accompanies this Proxy
Statement and contains certified financial statements of the Company for the
fiscal year ended November 2, 1997. Additional copies of the Annual Report may
be obtained by any person who was a shareholder of the Company as of the Record
Date, without charge, on written request to the Company at 1155 Avenue of the
Americas, New York, New York 10036, Attention: Investor Services.
By Order of the Board of Directors
Rodney J. Peckham
Secretary
March 6, 1998
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AT YOUR
EARLIEST CONVENIENCE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR
MAILING IN THE UNITED STATES.
<PAGE>
EXHIBIT A
FORSTMANN & COMPANY, INC.
1997 DIRECTORS COMPENSATION PLAN
1. PURPOSES
The purposes of the Plan are to enable the Company to attract, retain and
motivate the best qualified directors and to enhance a long-term mutuality of
interest between the directors and stockholders of the Company by providing them
with stock ownership and granting them options to purchase the Company's Common
Stock.
2. DEFINITIONS
Unless the context requires otherwise, the following words as used in the Plan
shall have the meanings ascribed to each below, it being understood that
masculine, feminine and neuter pronouns are used interchangeably, and that each
comprehends the others.
(a) "Award" means any Option, Share or Unit awarded under the Plan.
(b) "Affiliate" means any "subsidiary corporation" or "parent
corporation" as such terms are defined in Section 424 of the Code.
(c) "Agreement" means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of an Option granted to such Participant.
(d) "Board" means the Board of Directors of the Company.
(e) "Cash Fees" means the amount of any fees that are payable by the
Company in cash to a Participant, pursuant to Section 5 of the Plan, for
services performed by the Participant as a director.
(f) "Change in Control" means the occurrence of any of the following
events:
(i) a majority of the members of the Board at any time cease
for any reason other than due to death or disability to be persons who
were members of the Board twenty-four months prior to such time (the
"Incumbent Directors"); provided that any director whose election, or
nomination for election by the Company's stockholders, was approved by
a vote of at least a majority of the members of the Board then still in
office who are Incumbent Directors shall be treated as an Incumbent
Director; or
(ii) any "person," including a "group" (as such terms are used
in Sections 13(d) and 14(d) (2) of the Exchange Act, but excluding the
Company, its Affiliates, any employee benefit plan of the Company or
any Affiliate, employees of the Company or any Affiliate or any group
of which any of the foregoing is a member) is or becomes the
"beneficial owner" (as defined in Rule 13(d) (3) under the Exchange
<PAGE>
Act), directly or indirectly, including without limitation, by means of
a tender or exchange offer, of securities of the Company representing
40% or more of the combined voting power of the Company's then
outstanding securities; or
(iii) the stockholders of the Company shall approve a
definitive agreement (x) for the merger or other business combination
of the Company with or into another corporation immediately following
which merger or combination (A) the stock of the surviving entity is
not readily tradeable on an established securities market, (B) a
majority of the directors of the surviving entity are persons
who (1) were not directors of the Company immediately prior to the
merger and (2) are not nominees or representatives of the Company or
(C) any "person," including a "group" (as such terms are used in
Sections 13(d) and 14(d) (2) of the Exchange Act, but excluding the
Company, its Affiliates, any employee benefit plan of the Company or
any Affiliate, employees of the Company or any Affiliate or any group
of which any of the foregoing is a member) is or becomes the
"beneficial owner" (as defined in Rule 13(d) (3) under the Exchange
Act), directly or indirectly, of 40% or more of the securities of the
surviving entity or (y) for the direct or indirect sale or other
disposition of all or substantially all of the assets of the Company,
or
(iv) any other event or transaction that is declared by
resolution of the Board to constitute a Change in Control for purposes
of the Plan.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
occur in the event the Company files for bankruptcy, liquidation or
reorganization under the United States Bankruptcy Code.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Common Stock" means the common stock, $.01 par value, of the
Company.
(i) "Company" means Forstmann & Company, Inc.
(j) "Disability" means the inability of the Participant to perform his
duties for a period of at least six months due to a medical or physical
infirmity.
(k) "Distribution Election" has the meaning ascribed thereto in
Section 8(d).
(l) "Effective Date" means December 19, 1997.
(m) "Fair Market Value" means, on any given date, the average daily
Market Price of the Common Stock for the 20-day period immediately preceding the
date as of which Fair Market Value is being determined.
(n) "Grant Date" means, with respect to any Option, the date on which
such Option is granted pursuant to the Plan.
(o) "Initial Option" has the meaning ascribed thereto in Section 5(a).
<PAGE>
(p) "Market Price" means, on any given date, the closing price of the
Common Stock on the principal securities exchange on which the Common Stock is
traded. If the Common Stock is not traded on a securities exchange, but is
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System and market information is published on a regular basis in THE
NEW YORK TIMES or THE WALL STREET JOURNAL, then Market Price shall be deemed to
be the average of the published high and low sales price or the published daily
bid and asked prices of the Common Stock, as so published, for the date as of
which Market Price is being determined. If market information is not so
published on a regular basis, then Market Price shall be deemed to be the
average of the high bid and low asked prices of the Common Stock in the
over-the-counter market for the date as of which Market Price is being
determined, as reported by the National Association of Securities Dealers
Automated Quotation System, or, if not so reported, by a generally accepted
reporting service. If the Common Stock is not publicly traded, Market Price
shall be the fair value thereof as determined in good faith by the Board. In no
case shall the Market Price be less than the par value of a share of Common
Stock.
(q) "Option" means an Initial Option and a Term Option that entitles
the holder to purchase from the Company a stated number of shares of Common
Stock at the price set forth in an Agreement. Options shall not be incentive
stock options within the meaning of Section 422 of the Code.
(r) "Participant" means a director of the Company who is neither an
officer nor employee of the Company or any of its Affiliates.
(s) "Plan" means the Forstmann & Company, Inc. 1997 Directors
Compensation Plan.
(t) "Share" means a share of Common Stock.
(u) "Stock Account" means a memorandum account established to record
the deferral of certain compensation otherwise payable to a Participant which
shall be deemed invested in Units.
(v) "Term Option" has the meaning ascribed thereto in Section 5(b).
(w) "Units" has the meaning ascribed thereto in Section 8(c).
3. ADMINISTRATION
(a) POWERS OF THE BOARD. Except as provided in this Section 3, the Plan
shall be administered by the Board. The Board shall have authority to grant
Options upon such terms (not inconsistent with the provisions of the Plan) as
the Board may consider appropriate. Such terms may include conditions (in
addition to those contained in the Plan) on the exercisability of all or any
part of an Option. The Board shall have complete authority to interpret all
provisions of the Plan; to prescribe the form of any agreement; to adopt, amend,
and rescind rules and regulations pertaining to the administration of the Plan
with or without notice; and to make all other determinations necessary or
advisable for the administration of the Plan. The express grant in the Plan of
any specific power to the Board shall not be construed as limiting any power or
authority of the Board. Any decision made, or action taken, by the Board in
connection with the administration of the Plan shall be final and conclusive. No
member of the Board shall be liable for any act done in good faith with respect
to the Plan or any Agreement or any Option. All expenses of administering the
Plan shall be borne by the Company. All of the powers, duties and
responsibilities of the Board specified in the Plan may, to the full extent
<PAGE>
permitted by applicable law, be exercised and performed by any duly constituted
committee of the Board, in any such case, to the extent authorized by the Board
to exercise and perform such powers, duties and responsibilities.
(b) DISINTERESTED STATUS. Notwithstanding the foregoing, neither the
Board, any committee thereof nor any person designated pursuant to subsection
3(c) below may take any action which would cause any Participant to cease to be
a "Non-Employee Director" for purposes of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, as then in effect, or any successor
provisions, with regard to this Plan or any other stock option or other equity
plan of the Company. In particular, neither the Board nor any committee thereof
shall have any discretion as to
(i) the selection of Participants as eligible to receive
awards pursuant to the Plan;
(ii) the number of Shares subject to Options awarded pursuant
to Section 5; or
(iii) the number of Shares that may be awarded pursuant to
Section 7.
(c) DELEGATION. The Board may designate the Chief Financial Officer of
the Company, other officers or employees at the Company or competent
professional advisors to assist the Board in the administration of the Plan, and
may grant authority to such persons to execute agreements or other documents on
its behalf.
4. SHARES; ADJUSTMENT UPON CERTAIN EVENTS
(a) SHARES AVAILABLE. The maximum number of shares of Stock in respect
of which Awards may be made under the Plan shall be a total of 450,000 shares of
Common Stock. Without limiting the generality of the foregoing, whenever shares
are received by the Company in connection with the exercise of or payment for
any Award granted under the Plan only the net number of shares actually issued
shall be counted against the foregoing limit. Shares to be issued under this
Plan shall be made available, at the discretion of the Board, either from
authorized but unissued Shares or from issued Shares reacquired by the Company.
In the event that any Award is payable solely in cash, no shares shall be
deducted from the number of shares available for issuance under this Section
4(a) by reason of such Award. In addition, if any Award in respect of shares is
canceled or forfeited for any reason without delivery of shares of Common Stock,
the shares subject to such Award shall thereafter again be available for award
pursuant to the Plan.
(b) ADJUSTMENT FOR CORPORATE TRANSACTIONS. In the event that the Board
shall determine that any stock dividend, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value, or other similar event
affects the Common Stock such that an adjustment is required to preserve, or to
prevent enlargement of, the benefits or potential benefits made available under
this Plan, then the Board may, in such manner as the Board may deem equitable,
adjust any or all of (i) the number and kind of shares which thereafter may be
awarded or optioned and sold under the Plan, (ii) the number and kinds of shares
subject to outstanding Options and other Awards and (iii) the grant, exercise or
conversion price with respect to any of the foregoing. Additionally, the Board
may make provisions for a cash payment to a Participant or a person who has an
<PAGE>
outstanding Option or other Award. However, the number of shares subject to any
Option or other Award shall always be a whole number.
(c) NO LIMIT ON CORPORATE ACTION. The existence of this Plan and the
Shares awarded hereunder shall not affect in any way the right or power of the
Board or the shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference shares ahead of or affecting
common shares, the dissolution or liquidation of the Company or any sale or
transfer of all or part of its assets or business, or any other corporate act or
proceeding.
5. OPTION AWARDS
(a) INITIAL OPTIONS. On the date an individual becomes a Participant in
the Plan, he shall automatically be granted an Initial Option to purchase 12,000
Shares.
(b) TERM OPTIONS. On the date on which a Participant's Initial Option
becomes 100% vested in accordance with Section 5(f) below and on each
anniversary date thereafter, such Participant shall receive a Term Option to
purchase 2,500 Shares.
(c) OPTION AGREEMENT. Options shall be evidenced by a written Option
Agreement embodying the terms of this Section 5 and such other terms consistent
with the Plan as the Board shall determine.
(d) OPTION TERM. If not previously exercised, each Option will expire
on the earlier of the tenth (10th) anniversary of the Grant Date thereof or on
the last day on which such Option is exercisable under Section 5(h) below.
(e) EXERCISE PRICE. The exercise price per share of any Initial Option
shall be the greater of Fair Market Value on the Grant Date thereof or $12.88.
The exercise price per Share of any Term Option Award shall be Fair Market Value
on the Grant Date thereof.
(f) EXERCISABILITY. Each Option granted under the Plan shall become
exercisable on a cumulative basis in three equal installments commencing on the
Grant Date, subject to the acceleration provisions of Sections 5(h) 5(i) below.
(g) PROCEDURE FOR EXERCISE. A Participant electing to exercise one or
more Options shall give written notice to the Chief Financial Officer of the
Company of such election and the number of Shares he or she has elected to
purchase. Shares purchased pursuant to the exercise of Options shall be paid for
at the time of exercise in cash or by delivery to the Company of unencumbered
Shares owned by the Participant for at least six months (or such longer period
as is required by applicable accounting standards to avoid a charge to earnings)
or a combination thereof. Upon receipt of payment, the Company shall deliver to
the Participant as soon as practicable a certificate or certificates for the
Shares then purchased.
(h) TERMINATION OF DIRECTOR STATUS.
(i) TERMINATION DUE TO DEATH OR DISABILITY. In the event a
Participant dies or becomes Disabled, any Options granted to such
Participant shall become 100% vested and may be exercised by the
Participant or his designated beneficiary at any time prior to the
expiration of the term of the Options or within one year following the
Participant's termination of employment, whichever period is shorter.
<PAGE>
(ii) TERMINATION FOR ANY OTHER REASON. In the event a
Participant ceases to be a Director for any reason other than death or
Disability, any Options granted to such Participant which are then
exercisable may be exercised at any time prior to the expiration of the
term of the Options or the 90th day following the Participant's
termination of employment, whichever period is shorter. All Options
which are not vested as of the date the Participant ceases to be a
Director for any reason other than death or Disability shall be
forfeited on such date.
(i) CHANGE IN CONTROL. In the event of a Change in Control, any Options
held by a Participant shall become 100% vested and may be exercised by the
Participant or his designated beneficiary at any time prior to the expiration of
the term of the Options or within 90 days following the Change in Control,
whichever period is shorter.
6. CASH FEES
(a) RETAINER FEES. On the last business day of each fiscal quarter of
the Company occurring in each of 1998 through 2007, each Participant who has
performed services as a director of the Company since the last day of the
immediately preceding fiscal quarter shall receive a retainer fee equal to
$3,000. Each Participant who served as a non-employee director of the Company
for a portion of the time since the last day of the immediately preceding fiscal
quarter shall receive a retainer fee equal to the product of $3,000 multiplied
by a fraction, the numerator of which is the number of regular meetings of the
Board occurring since the last day of the immediately preceding fiscal quarter
and while the Participant was a non-employee director of the Company and the
denominator of which is the total number of regular meetings of the Board
occurring since the last day of the immediately preceding fiscal quarter.
(b) MEETING FEES. On the last business day of each fiscal quarter of
the Company occurring in each of 1998 through 2007, each Participant shall
receive a meeting fee equal to $1,000 for each meeting of the Board or any
committee thereof attended while a Participant during such fiscal quarter,
commencing with the seventh such meeting such Participant attends during the
applicable fiscal year. All meetings of the Board or any committee thereof that
occur on the same day shall be counted as one meeting for purposes of the
foregoing.
(c) ADDITIONAL FEES. On the last business day of each fiscal quarter of
the Company occurring in each of 1998 through 2007, each Participant who is a
chairperson of the Board or any committee thereof shall receive an additional
fee equal to $375. Each Participant who served as a chairperson of the Board or
any committee thereof for a portion of the time since the last day of the
immediately preceding fiscal quarter shall receive an additional fee equal to
the product of $375 multiplied by a fraction, the numerator of which is the
number of regular meetings of the Board or such committee occurring since the
last day of the immedi ately preceding fiscal quarter and while the Participant
was both a non-employee director of the Company and chairperson of the Board or
such committee and the denominator of which is the total number of regular
meetings of the Board or such committee occurring since the last day of the
immediately preceding fiscal quarter.
<PAGE>
7. SHARE AWARDS
(a) Except to the extent that a Participant shall have elected pursuant
to Section 8 to defer receipt of the award of Shares instead of receiving an
award under this Section 7, on the last business day of each fiscal quarter of
the Company occurring in each of 1998 through 2007, each Participant who has
performed services as a director of the Company since the last day of the
immediately preceding fiscal quarter shall receive an award of that number of
Shares (rounded to the nearest whole number) equal to $3,000 divided by the Fair
Market Value as of the date of such award, provided that a Participant who
served as a non-employee director of the Company for only a portion of the time
since the last day of the immediately preceding fiscal quarter shall receive an
award of that number of Shares (rounded to the nearest whole number) equal to
the product of (A) the quotient of (I) $3,000, divided by (II) the Fair Market
Value as of the date of such award, multiplied by (B) a fraction, the numerator
of which is the number of regular meetings of the Board occurring since the last
day of the immediately preceding fiscal quarter and while the Participant was a
non-employee director of the Company and the denominator of which is the total
number of regular meetings of the Board occurring since the last day of the
immediately preceding fiscal quarter.
(b) Except to the extent that a Participant shall have elected pursuant
to Section 8 to defer receipt of the award of Shares instead of receiving an
award under this Section 7, on the 30th day following the Effective Date, each
Participant who was a non-employee director of the Company on November 3, 1997
shall receive an additional award of that number of Shares (rounded to the
nearest whole number) equal to $3,000 divided by the Fair Market Value on
November 3, 1997, provided that such a Participant who served as a non-employee
director of the Company for only a portion of the fiscal quarter ending November
3, 1997 shall receive an award of that number of Shares equal to the product of
(a) the quotient of (i) $3,000, divided by (ii) the Fair Market Value on
November 3, 1997, multiplied by (b) a fraction, the numerator of which is the
number of regular meetings of the Board occurring since August 4, 1997 and while
the Participant was a non-employee director of the Company and the denominator
of which is the total number of regular meetings of the Board occurring since
August 4, 1997.
8. DEFERRED COMPENSATION PROGRAM
(a) DEFERRAL ELECTION. On or before December 31 of any calendar year
ending on or before December 31, 2006, a Participant may elect to defer receipt
of all or any part of the award of Shares payable in respect of the calendar
year following the year in which such election is made, and to have such amounts
credited to a Stock Account, provided, however, that a person who becomes a
Participant during any calendar year ending on or before December 31, 2007 may
elect, not later than the 30th day after he or she becomes a Participant, to
defer payment of all or any part of his or her award of Shares payable with
regard to the portion of such calendar year following such election.
(b) FORM AND DURATION OF DEFERRAL ELECTION. A deferral election shall
be made by written notice filed with the Chief Financial Officer of the Company.
Such election shall continue in effect (including with respect to the award of
Shares payable for subsequent calendar years) unless and until the Participant
revokes or modifies such election by written notice filed with the Chief
Financial Officer of the Company. Any such revocation or modification of a
deferral election shall become effective as of the end of the calendar year in
which such notice is given and only with respect to any award of Shares related
to Share grants to be made in subsequent calendar years; provided that if the
<PAGE>
effect of such revocation or modification of a deferral election is to change
the amount of deferred compensation that would otherwise have been credited to
the Stock Account it shall in no event become effective earlier than six months
after it is received by the Chief Financial Officer. Amounts credited to the
Participant's Account prior to the effective date of any such revocation or
modification of a deferral election shall not be affected by such revocation or
modification and shall be distributed only in accordance with the otherwise
applicable terms of the Plan. A Participant who has revoked an election may file
a new election to defer the award of Shares with respect to Shares to be granted
no sooner than in the calendar year following the year in which such election is
filed.
(c) STOCK ACCOUNT. Any award of Shares deferred shall be deemed to be
invested in a number of notional Shares of the Company (the "UNITS") equal to
the number of Shares the Participant would have received under Section 7 of the
Plan had he or she not elected to defer award of Shares. Whenever a dividend
other than a dividend payable in the form of Shares is declared with respect to
the Shares, the number of Units in the Participant's Stock Account shall be
increased by the number of Units determined by dividing (I) the product of (A)
the number of Units in the Participant's Stock Account on the related dividend
record date, multiplied by (B) the amount of any cash dividend declared by the
Company on a Share (or, in the case of any dividend distributable in property
other than Shares, the per share value of such dividend, as determined by the
Company for purposes of income tax reporting) by (II) the Fair Market Value on
the related dividend payment date. In the case of any dividend declared on
Shares which is payable in Shares, the Participant's Stock Account shall be
increased by the number of Units equal to the product of (I) the number of Units
credited to the Participant's Stock Account on the related dividend record date,
multiplied by (II) the number of Shares (including any fraction thereof)
distributable as a dividend on a Share. In the event of any change in the number
or kind of outstanding Shares by reason of any recapitalization, reorganization,
merger, consolidation, stock split or any similar change affecting the Shares,
other than a stock dividend as provided above, the Board shall make an
appropriate adjustment in the number of Units credited to the Participant's
Stock Account. Fractional Units shall be credited, but shall be rounded to the
nearest hundredth percentile, with amounts equal to or greater than .005 rounded
up and amounts less than .005 rounded down.
(d) DISTRIBUTION FROM ACCOUNTS UPON TERMINATION OF SERVICE AS A
DIRECTOR. At the time a Participant makes a deferral election pursuant to
Section 8(a), the Participant shall also file with the Chief Financial Officer
of the Company a written election (a "DISTRIBUTION ELECTION") with respect to
whether (I) the value of any Units to be credited to the Stock Account shall be
distributed wholly in cash, in the greatest number of whole Shares (with any
fractional interest payable in cash) or a combination of cash and whole Shares,
(II) such distribution shall commence immediately following the date the
Participant ceases to be a director or on the first business day of any calendar
year following the calendar year in which the Participant ceases to be a
director and (III) such distribution shall be in one lump-sum payment or in such
number of annual installments (not to exceed ten) as the Participant may
designate. A Participant may at any time, and from time to time, change any
Distribution Election applicable to his or her Stock Account, provided that no
election to change the timing of any terminal distribution shall be effective
unless it is made in writing and received by the Chief Financial Officer of the
Company at least one full calendar year prior to the time at which the
Participant ceases to be a director.
<PAGE>
(e) DISTRIBUTION FROM STOCK ACCOUNT PRIOR TO TERMINATION OF SERVICE AS
A DIRECTOR. Any Participant may, by filing a written election with the Chief
Financial Officer of the Company, elect to receive a distribution of all or any
portion of the Units credited to the Participant's Stock Account provided such
election is made on or before June 30 of the year prior to the year in which the
distribution is to occur; and provided further that any Participant who elects
to receive a distribution pursuant to this first sentence of this Section 8(e)
shall cease to be eligible to make any additional deferrals under this Section 8
with respect to compensation payable in the two calendar years immediately
following the year in which such election is filed with the Chief Financial
Officer.
(f) PAYMENT OF PLAN DISTRIBUTIONS. Any distribution to be made
hereunder, whether in the form of a lump-sum payment or installments, following
the termination of an Participant's service as a director of the Company shall
commence in accordance with the Distribution Election made by the Participant
pursuant to Section 8(d). If a Participant fails to specify a form of payment or
a commencement date for a distribution in accordance with Section 8(d), such
distribution shall be made in cash and commence on the first business day of the
calendar year immediately following the year in which the Participant ceases to
be a director. If a Participant fails to specify in accordance with Section 8(d)
that a distribution shall be made in a lump-sum payment or a number of
installments, such distribution shall be made in a lump-sum payment.
In the case of any distribution being made in annual installments, each
installment after the first installment shall be paid on the first business day
of each subsequent calendar year until the entire amount subject to such
installment Distribution Election shall have been paid.
9. TRANSFERABILITY OF AWARDS
No award of Options or Units shall be transferable by the Participant otherwise
than by will or under the applicable laws of descent and distribution. In
addition, no award of Options or Units shall be assigned, negotiated, pledged or
hypothecated in any way (whether by operation of law or otherwise) and no award
of Options or Units shall be subject to execution, attachment or similar
process. Upon any attempt to transfer, assign, negotiate, pledge or hypothecate
any award of Options or Units, or in the event of any levy upon any award of
Options or Units by reason of any attachment or similar process, in either case
contrary to the provisions hereof, such award of Options or Units shall
immediately become null and void.
10. DETERMINATIONS
Each determination, interpretation or other action made or taken pursuant to the
provisions of this Plan by the Board shall be final and binding for all purposes
and upon all persons, including, without limitation, the Company, the directors,
officers and other employees of the Company, the Participants and their
respective heirs, executors, administrators, personal representatives and other
successors in interest.
11. TERMINATION, AMENDMENT AND MODIFICATION
(a) TERMINATION AND AMENDMENT. This Plan shall terminate at the close
of business on December 31, 2007, unless sooner terminated by action of the
shareholders of the Company, and no Awards shall be granted under this Plan
thereafter. The Board at any time or from time to time may amend this Plan to
effect (I) amendments necessary or desirable in order that this Plan and the
Awards shall conform to all applicable laws and regulations and (II) any other
<PAGE>
amendments deemed appropriate. Notwithstanding the foregoing, the Board may not
effect any amendment that would require the approval of the shareholders of the
Company under any applicable laws or the listing requirements of the National
Association of Securities Dealers Automated Quotation/National Market System or
any stock exchange (if applicable to the Company at the time such amendment is
adopted or will be effective) unless such approval is obtained.
(b) NO EFFECT ON EXISTING RIGHTS. Except as otherwise required by law,
no termination, amendment or modification of this Plan may, without the consent
of a Participant or the permitted transferee of an Award, alter or impair the
rights and obligations arising under any then outstanding Award held by such
Participant or permitted transferee.
12. NON-EXCLUSIVITY
The adoption of this Plan by the Board shall not be construed as creating any
limitations on the power of the Board to adopt such other compensatory
arrangements as it may deem desirable, including, without limitation, payments
of cash amounts related to the tax liabilities arising directly or indirectly
from the issuance of Awards to a Participant hereunder.
13. GENERAL PROVISIONS
(a) NO RIGHT TO SERVE AS A DIRECTOR. This Plan shall not impose any
obligations on the Company to retain any Participant as a director nor shall it
impose any obligation on the part of any Participant to remain as a director of
the Company.
(b) NO RIGHT TO PARTICULAR ASSETS. Nothing contained in this Plan and
no action taken pursuant to this Plan shall create or be construed to create a
trust of any kind or any fiduciary relationship between the Company and any
Participant, the executor, administrator or other personal representative or
designated beneficiary of such Participant, or any other persons. Any reserves
that may be established by the Company in connection with this Plan shall
continue to be part of the general funds of the Company, and no individual or
entity other than the Company shall have any interest in such funds until paid
to a Participant. To the extent that any Participant or his executor,
administrator, or other personal representative, as the case may be, acquires a
right to receive any payment from the Company pursuant to this Plan, such right
shall be no greater than the right of an unsecured general creditor of the
Company.
(c) BENEFICIARY DESIGNATION. Each Participant under the Plan may from
time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his or her
death. Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and will be effective
only when filed by the Participant in writing with the Company during his or her
lifetime. In the absence of any such designation, benefits remaining unpaid at
the Participant's death shall be paid to or exercised by the Participant's
surviving spouse, if any, or otherwise to or by his or her estate.
(d) LISTING OF SHARES AND RELATED MATTERS. The Plan, the granting and
exercising of Awards thereunder, and the other obligations of the Company under
the Plan, shall be subject to all applicable federal and state laws, rules, and
regulations, and to such approvals by any regulatory or governmental agency as
may be required. If at any time the Board shall determine in its discretion that
<PAGE>
the listing, registration or qualification of the Shares covered by this Plan
upon any national securities exchange or under any United States or non-United
States federal, state or other law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the delivery of Shares under this Plan, no Shares will be
delivered unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Board. The Company, in its discretion,
may require a Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Common Stock in compliance with applicable laws, rules, and
regulations. The Company shall not be obligated by virtue of any provision of
the Plan to recognize the exercise of any Award or to otherwise sell or issue
Common Stock in violation of any such laws, rules, or regulations; and any
postpone ment of the exercise or settlement of any Award under this provision
shall not extend the term of such Awards, and neither the Company nor its
directors or officers shall have any obligation or liability to any person with
respect to any Award (or Shares issuable thereunder) that shall lapse because of
such postponement.
(e) ISSUANCE OF STOCK CERTIFICATES; LEGENDS. Upon the issuance of
Shares pursuant to this Plan, a certificate or certificates for the Shares shall
be issued by the Company in the name of the person or persons receiving such
Shares and shall be delivered to or upon the order of such person or persons.
Certificates for Shares issued hereunder shall bear such legend or legends as
the Board, in its discretion, determines to be necessary or appropriate to
prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act of 1933, as amended, or to implement the
provisions of any agreements between the Company and the Participant with
respect to such Shares.
(f) WITHHOLDING TAXES. The Company shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any obligations it
may have to withhold federal, state or local income or other taxes incurred by
reason of the issuance of Options or Shares or the payment of Cash Fees under
the Plan, including requiring an Participant to reimburse the Company for any
taxes required to be withheld or otherwise deducted and paid by the Company in
respect of the issuance of Options or Shares.
(g) NOTICES. Each Participant shall be responsible for furnishing the
Board with the current and proper address for the mailing of notices and
delivery of Agreements and Shares. Any notices required or permitted to be given
shall be deemed given if directed to the person to whom addressed at such
address and mailed by regular United States mail, first-class and prepaid. If
any item mailed to such address is returned as undeliverable to the addressee,
mailing will be suspended until the Participant furnishes the proper address.
(h) SEVERABILITY OF PROVISIONS. If any provision of this Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be construed and
enforced as if such provision had not been included.
(i) INCAPACITY. Any benefit payable to or for the benefit of a minor,
an incompetent person or other person incapable of receipting therefor shall be
deemed paid when paid to such person's guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge the Board, the Company and other parties with respect
thereto.
<PAGE>
(j) HEADINGS AND CAPTIONS. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of
this Plan, and shall not be employed in the construction of this Plan.
(k) GOVERNING LAW. This Plan shall be construed and enforced
according to the laws of the State of New York.
(l) EFFECTIVENESS. This Plan shall be effective as of the Effective
Date.
<PAGE>
EXHIBIT B
ARTICLE V OF
THE ARTICLES OF INCORPORATION
OF FORSTMANN & COMPANY, INC.
AS PROPOSED TO BE AMENDED
V. The Corporation shall have authority to issue a total of
Thirty-Six Million (36,000,000) shares of stock, of which Thirty-Five Million
(35,000,000) shares shall be Common Stock having a par value of one cent ($.01)
per share and One Million (1,000,000) shares shall be Preferred Stock having a
par value of one cent ($.01) per share.
PREFERRED STOCK
Shares of the Preferred Stock may be issued from time to time
in series, and the Board of Directors of the Corporation is authorized, subject
to the limitations provided by law, to establish and designate one or more
series of the Preferred Stock, to fix the number of shares constituting each
series, and to fix the designations, powers, preferences and relative,
participating, optional or other special rights, qualifications, limitations and
restrictions thereof, if any, of each series, and the variations and relative
rights, preferences, limitations and restrictions as between series, and to
increase and decrease the number of shares constituting each series. The
authority of the Board of Directors of the Corporation with respect to each
series shall include, but shall not be limited to, the authority to determine
the following:
(a) the designation of such series, if any;
(b) the number of shares initially constituting any such
series and any increase or decrease (to a number not less than the number of
outstanding shares of such series) of the number of shares constituting such
series theretofore fixed;
(c) the rate or rates of, and the conditions on and the times
at which, dividends on the shares of such series shall be paid, the preference
or relation which such dividends shall bear to the dividends payable on any
other class or series of stock of the Corporation, and whether or not such
dividends shall be cumulative and, if so, the date or dates from and after which
they shall accumulate;
(d) whether or not the shares of such series shall be
redeemable, and, if so, the terms and conditions of such redemption, including,
without limitation, the date or dates on or after which such shares shall be
redeemable and the amount per share which shall be payable on such redemption,
which amount may vary under different conditions and at different redemption
dates;
<PAGE>
(e) the rights to which the holders of the shares of any such
series shall be entitled on the voluntary or involuntary liquidation,
dissolution or winding up, or on any distribution of the assets, of the
Corporation, which rights may be different in the case of a voluntary
liquidation, dissolution or winding up than in the case of such an involuntary
event;
(f) whether or not the shares of any such series shall have
voting rights in addition to the voting rights provided by law and, if so, the
terms and conditions thereof, including, without limitation, the right of the
holders of such shares to vote an a separate class, either alone or with the
holders of shares of one or more other series of the Preferred Stock and the
right to have more than one vote per share;
(g) whether or not a sinking fund or a purchase fund shall be
provided for the redemption or purchase of the shares of such series and, if so,
the terms and conditions thereof;
(h) whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of any other class or series of
the same or any other class of stock of the Corporation and, if so, the terms
and conditions of conversion or exchange, including, without limitation, any
provision for the adjustment of the conversion or exchange rate or the
conversion or exchange price; and
(i) any other relative rights, preferences and limitations.
COMMON STOCK
(a) Subject to the preferential dividend rights of the
Preferred Stock, as determined by the Board of Directors of the Corporation
pursuant to the foregoing provisions of this Article V, the holders of shares of
the Common Stock shall be entitled to receive such dividends as may be declared
by the Board of Directors of the Corporation.
(b) Subject to the preferential liquidation rights of the
Preferred Stock (including dividends and distributions upon the dissolution of
the corporation) and except as determined by the Board of Directors of the
Corporation pursuant to the foregoing provisions of this Article V, in the event
of any vol untary or involuntary liquidation, dissolution or winding up of, or
any distribution of the assets of, the Corporation, the holders of shares of the
Common Stock shall be entitled to receive all of the net assets of the
Corporation available for distribution to its shareholders ratably in proportion
to the number of shares of the Common Stock held by them.
(c) Except as otherwise required by law or by the provisions
of these Articles of Incorporation, the holders of shares of the Common Stock
shall be entitled to vote on all matters at all meetings of the shareholders of
the Corporation, and shall be entitled to one vote for each share of the Common
Stock entitled to vote at such meeting, voting together as one class with the
holders of the Preferred Stock who are entitled to vote.
<PAGE>
FORSTMANN & COMPANY, INC.
PROXY--ANNUAL MEETING OF SHAREHOLDERS--APRIL 17, 1998
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, a shareholder of FORSTMANN & COMPANY, INC., a Georgia
corporation (the "Company"), does hereby appoint James E. Kjorlien and Rodney J.
Peckham, and each of them, the true and lawful attorneys and proxies, with full
power of substitution, for and in the name, place and stead of the undersigned,
to vote, as designated below, all of the shares of stock of the Company which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders of the Company to be held at The Yale Club of New York
City, 50 Vanderbilt Avenue, Council Room, 18th Floor, New York, New York 10017,
on Friday, April 17, 1998, at 10:00 a.m. local time, and at any adjournment
thereof.
(X) Please mark UNLESS OTHERWISE DIRECTED, THIS PROXY WILL
votes as in BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS
this example OF THE BOARD OF DIRECTORS.
1. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES.
NOMINEES: Bruce W. Gregory, Margaret Bertelsen Hampton, James E. Kjorlien
FOR ALL ( ) WITHHELD ( )
NOMINEES FROM ALL
NOMINEES
FOR, except vote withheld from the following nominee(s):
( )
---------------------------------------
2. APPROVAL OF THE ADOPTION OF THE 1997 DIRECTORS COMPENSATION PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL.
FOR ( ) AGAINST ( ) ABSTAIN ( )
3. Approval of Amendment to Amended and Restated Articles of Incorporation
to Increase the Number of Authorized Shares of Common Stock
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL.
FOR ( ) AGAINST ( ) ABSTAIN ( )
4. APPROVAL OF AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO AUTHORIZE A CLASS OF PREFERRED STOCK AND TO AUTHORIZE THE BOARD OF
DIRECTORS TO ISSUE PREFERRED STOCK IN ONE OR MORE Series and to Fix the
RIGHTS, POWERS, PREFERENCES AND OTHER TERMS OF SUCH SERIES
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL.
FOR ( ) AGAINST ( ) ABSTAIN ( )
5. APPROVAL OF AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF
INCORPORATION TO REDUCE THE MINIMUM NUMBER OF DIRECTORS THAT THE
COMPANY MAY HAVE FROM FIVE TO THREE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL.
FOR ( ) AGAINST ( ) ABSTAIN ( )
6. RATIFICATION OF SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL.
FOR ( ) AGAINST ( ) ABSTAIN ( )
7. TO VOTE WITH DISCRETIONARY AUTHORITY WITH RESPECT TO ALL OTHER MATTERS
WHICH MAY COME BEFORE THE MEETING.
The undersigned revokes any proxy heretofore given and ratifies and confirms all
that the proxies appointed hereby, or either one of them, or their substitutes,
may lawfully do or cause to be done by virtue hereof. Both of said proxies or
their substitutes who shall be present and act at the meeting, or if only one is
present and acts, then that one, shall have and may exercise all of the powers
hereby granted to such proxies. The undersigned acknowledges receipt of a copy
of the Notice of Annual Meeting and Proxy Statement, both dated March 6, 1998.
( ) MARK HERE FOR ADDRESS CHANGE AND INDICATE CHANGE:
Signature: Date
Signature: Date
NOTE: Your signature should appear the same as your name appears hereon. In
signing as attorney, executor, administrator, trustee or guardian,
please indicate the capacity in which signing. When signing as joint
tenants, all parties in the joint tenancy must sign. When a proxy is
given by a corporation, it should be signed by an authorized officer
and the corporate seal affixed. No postage is required if returned in
the enclosed envelope and mailed in the United States.
