SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (section mark)240.14a-11(c) or (section
mark)240.14a-12
Pluma, 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):
[ ] 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 in 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>
(PLUMA LOGO GOES HERE)
Pluma, Inc.
801 Fieldcrest Road
Eden, NC 27288
May __, 1999
Dear Share Owner:
You are cordially invited to attend the Annual Meeting of share owners which
will be held on Wednesday, June 23, 1999 at 10:00 a.m., local time at Piedmont
Arts Association, 215 Starling Avenue, Martinsville, Virginia.
The enclosed Notice and Proxy Statement contain details concerning the business
to come before the meeting. You will note that the Board of Directors of the
Company recommends a vote "FOR" the election of three Directors to serve until
the Annual Meeting of share owners to be held in the year 2002 and "FOR" the
ratification of Deloitte & Touche, LLP as independent auditors of the Company
for the 1999 fiscal year. Please sign and return your proxy card in the enclosed
envelope at your earliest convenience to assure that your shares will be
represented and voted at the meeting even if you cannot attend.
Sincerely,
/s/ George Walker Box /s/ Ronald A. Norelli
G. WALKER BOX RONALD A. NORELLI
CHAIRMAN CHIEF EXECUTIVE OFFICER
<PAGE>
(PLUMA LOGO GOES HERE)
NOTICE OF ANNUAL MEETING OF SHARE OWNERS
TO THE OWNERS OF COMMON STOCK
PLUMA, INC.
The Annual Meeting of share owners of PLUMA, INC. A North Carolina corporation
(the "Company"), will be held at Piedmont Arts Association, 215 Starling Avenue,
Martinsville, Virginia, on Wednesday, June 23, 1999 at 10:00 a.m., local time,
for the following purposes:
1. to elect three Directors to serve until the Annual Meeting of share
owners to be held in the year 2002;
2. to ratify the appointment of Deloitte & Touche, LLP as independent
auditors; and,
3. to transact such other business as may properly come before the
meeting and any adjournments or postponements thereof.
Share owners of record at the close of business on April 28, 1999 are entitled
to notice of and to vote at the meeting and any adjournments or postponements
thereof. A list of share owners of the Company as of the close of business on
April 28, 1999 will be available for inspection during normal business hours
from 8:00 a.m. through 5:00 p.m., at the offices of the Company and will also be
available at the meeting.
Attendance at the meeting will be limited to share owners of record or their
authorized representative by proxy. If your shares are held through an
intermediary, such as a bank or broker, you should request a ticket from the
intermediary, or present proof of your ownership of Pluma, Inc., shares at the
meeting. Proof of ownership could include a proxy from the intermediary or a
copy of your account statement, which confirms your beneficial ownership of
Pluma, Inc. shares.
By Order of the Board of Directors
/s/ George G. Wade
PRESIDENT, SECRETARY, COO & CHAIRMAN
EMERITUS
Eden, North Carolina
May ___, 1999
EACH SHARE OWNER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY. IN
THE EVENT A SHARE OWNER DECIDES TO ATTEND THE MEETING, HE OR SHE MAY, IF SO
DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ELECTION OF DIRECTORS................................................................................1
BOARD OF DIRECTORS ..................................................................................1
RECOMMENDATION OF THE BOARD OF DIRECTORS
CONCERNING THE ELECTION OF DIRECTORS.................................................................2
NOMINEES FOR ELECTION TERM EXPIRING 2002.............................................................2
INCUMBENT DIRECTORS -- TERM EXPIRING 2001............................................................2
INCUMBENT DIRECTORS -- TERM EXPIRING 2000............................................................2
COMMITTEES OF THE BOARD OF DIRECTORS, MEETINGS
AND COMPENSATION OF DIRECTORS........................................................................3
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION..........................................4
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS INVOLVING
DIRECTORS NOT ON THE COMPENSATION COMMITTEE..........................................................5
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..............................................6
OWNERSHIP OF EQUITY SECURITIES IN THE COMPANY........................................................7
PRINCIPAL SHARE OWNERS...............................................................................9
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.............................................10
OVERALL OBJECTIVES AND PROGRAMS.....................................................................10
COMPONENTS OF EXECUTIVE COMPENSATION................................................................10
BASE SALARY.........................................................................................11
SENIOR EXECUTIVE BONUS PLAN.........................................................................11
STOCK OPTION PLAN...................................................................................12
BENEFITS ...........................................................................................12
SALES INCENTIVE PLAN................................................................................13
1998 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER...................................................13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SUMMARY.............................................................................................13
EXECUTIVE COMPENSATION..............................................................................14
SUMMARY COMPENSATION TABLE..........................................................................15
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.........................................................16
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL
YEAR AND YEAR END OPTION VALUES.....................................................................16
OPTION GRANTS IN LAST FISCAL YEAR TO NAMED OFFICERS.................................................16
EMPLOYMENT AGREEMENTS, CHANGE OF CONTROL ARRANGEMENTS...............................................16
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.................................................19
RECOMMENDATION OF THE BOARD OF DIRECTORS............................................................19
PROXY PROCEDURE AND EXPENSES OF SOLICITATION........................................................19
SHARE OWNERS' PROPOSALS.............................................................................20
OTHER INFORMATION...................................................................................20
</TABLE>
ii
<PAGE>
PLUMA, INC.
Eden, North Carolina
May ___, 1999
PROXY STATEMENT
FOR ANNUAL MEETING OF SHARE OWNERS
TO BE HELD JUNE 23, 1999
This Proxy Statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors of Pluma, Inc. (The "Company") to be voted
at the Annual Meeting of share owners of the Company to be held at Piedmont Arts
Association, 215 Starling Avenue, Martinsville, Virginia, on June 23, 1999 at
10:00 a.m., local time, and at any adjournments or postponements thereof.
All proxies delivered pursuant to this solicitation are revocable at any time at
the option of the persons executing them by giving written notice to the
Secretary of the Company, by delivering a later dated proxy or by voting in
person at the Annual Meeting.
The mailing address of the principal executive offices of the Company is 801
Fieldcrest Road, Eden, North Carolina, 27288. The approximate date on which this
Proxy Statement, form of proxy, and Annual Report to share owners are first
being sent or given to share owners is May 11, 1999.
All properly executed proxies delivered pursuant to this solicitation and not
revoked will be voted at the Annual Meeting in accordance with the directions
given. Regarding the election of Directors to serve until the Annual Meeting of
share owners to be held in the year 2002, in voting by proxy, share owners may
vote in favor of all nominees or withhold their votes as to all nominees or
withhold their votes as to specific nominees. With respect to the ratification
of the appointment of Deloitte & Touche LLP as independent auditors, share
owners may vote in favor of the proposal, against the proposal or may abstain
from voting. Share owners should specify their choices on the enclosed form of
proxy. If no specific instructions are given with respect to the matters to be
acted upon, the shares represented by a signed proxy will be voted FOR the
election of all nominees and FOR the proposal to ratify the appointment of
Deloitte & Touche LLP. Directors will be elected by a plurality, and
ratification of the appointment of Deloitte & Touche LLP will require approval
by a majority of the votes cast by the holders of the shares of Common Stock of
the Company voting in person or by proxy at the Annual Meeting. Accordingly,
abstentions and broker non-votes will not be included in vote totals and will
have no effect on the outcome of the vote. Only owners of record of shares of
Common Stock of the Company at the close of business on April 28, 1999, are
entitled to vote at the meeting or adjournments or postponements thereof. Each
owner of record on the record date is entitled to one vote for each share of
Common Stock of the Company so held. On April 5, 1999, there were 8,109,152
shares of Common Stock of the Company issued and outstanding.
ELECTION OF DIRECTORS
(ITEM 1)
BOARD OF DIRECTORS
The Board of Directors currently consists of nine members. The Directors are
divided into three classes, each class serving for a period of three years,
which has been the practice of the Company since June of 1996.
Approximately one-third of the members of the Board of Directors are elected by
the share owners annually. The Directors, whose terms will expire at the 1999
Annual Meeting of share owners are C. Monroe Light, Kemp D. Box, John B. Adams
and Ronald A. Norelli. Messrs. Box, Adams and Norelli have been nominated to
stand for reelection as Directors at the 1999 Annual Meeting of share owners to
hold office until the Annual Meeting of share owners to be held in the year 2002
and until their successors are elected and qualified. Mr. Light will not stand
for reelection and the Board will consist of eight members after the June share
owners meeting.
<PAGE>
Should any one or more of these nominees become unable to serve for any reason,
or for good cause will not serve, which is not anticipated, the Board of
Directors may, unless the Board by resolution provides for a lesser number of
Directors, designate substitute nominees, in which event the persons named in
the enclosed proxy will vote proxies that would otherwise be voted for all named
nominees for the election of such substitute nominee or nominees.
RECOMMENDATION OF THE BOARD OF DIRECTORS
CONCERNING THE ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR KEMP D. BOX, JOHN B.
ADAMS AND RONALD A. NORELLI AS DIRECTORS TO HOLD OFFICE UNTIL THE ANNUAL MEETING
OF SHARE OWNERS TO BE HELD IN THE YEAR 2002 AND UNTIL THEIR SUCCESSORS ARE
ELECTED AND QUALIFIED. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHARE OWNERS SPECIFY IN THEIR PROXY A CONTRARY CHOICE.
NOMINEES FOR ELECTION TERM EXPIRING 2002
KEMP D. BOX, age 45, became a member of the Board of Directors in 1988 and is a
member of the Compensation Committee. He has been a private investor for the
five years prior to the date of this Proxy. Mr. Box is the brother of G. Walker
Box, who is a Director of the Company.
RONALD A. NORELLI, age 53, became acting Chief Executive Officer of Pluma, Inc.
in January 1999. He joined the Company's Board of Directors in April 1998 and is
now Vice Chairman of the Board and chairman of the Executive Committee. Mr.
Norelli is also President and CEO of Norelli & Company, a consulting firm,
providing services to companies in the areas of financial strategy, marketing,
organization and operations strategy, and other areas of corporation management.
Mr. Norelli has served in his present position at Norelli & Company for
seventeen years. He currently serves as chairman of the Board of CEM Corporation
and Director of Rowe Corporation.
JOHN B. ADAMS, JR., age 53, is President and CEO of the Bowman Companies, a
manufacturer and bottler of distilled spirits and has served in that capacity
since 1971. He also serves as a director of Dominion Resources of Richmond,
Virginia. Mr. Adams accepted a nomination by Pluma's Board of Directors to
serve as a Director beginning April 21, 1998. Mr. Adams is the Chairman of the
Governance Committee and a member of the Audit and Executive Committees.
INCUMBENT DIRECTORS -- TERM EXPIRING 2001
BARRY A. BOWLES, age 53, became a member of the Board of Directors in 1988 and
is the chairman of the Compensation Committee and a member of the Nominating
Committee. Mr. Bowles is Chairman of the Board of Directors of Stanley W. Bowles
Corporation, a general construction contractor at which he has been employed
since 1967.
R. STEPHENS PANNILL, age 52, became a member of the Board of Directors in 1988
and is the chairman of the Audit Committee and a member of the Nominating
Committee. Mr. Pannill has been a private investor for the five years prior to
the date of this Proxy.
INCUMBENT DIRECTORS -- TERM EXPIRING 2000
GEORGE G. WADE, age 65, a founder of the Company, was appointed President and
Chief Operating Officer in February 1999. He served as Executive Vice President
of the Company's logistics and materials management from December 1998. He
served as Chairman of the Company's Board of Directors until January 1996, when
he became Chairman Emeritus. Mr. Wade served as the Company's President and
Chief Executive Officer from January 1987, until he relinquished the titles of
Chief Executive Officer and President in September 1993 to become the Company's
Secretary. Mr. Wade was employed by Bassett-Walker, Inc. from 1956 to 1986.
2
<PAGE>
G. WALKER BOX, age 48, a founder of the Company, has served as a member of the
Board since 1987 and became Chairman of the Company's Board of Directors in
January 1996. He is a member of the Company's Governance and Executive
Committees. Mr. Box was employed by Bassett-Walker, Inc. from 1973 to 1986 when
he became the President of Box-Ferrell and Company, the Company's first
exclusive sales agent. Mr. Box served as President of Box & Company from 1991
until December 1995, which served as the Company's exclusive sales agent until
purchased by the Company on December 31, 1995. Mr. Box is also a member of the
Board of Directors of the North Carolina Textile Foundation. Mr. Box is the
brother of Kemp D. Box, a Director of the Company.
J. ROBERT PHILPOTT, JR., age 53, became a director in April 1996. Mr. Philpott
is President, Treasurer and a director of Philpott, Ball & Company ("Philpott,
Ball"), a private investment banking firm that he co-founded in 1991. Philpott,
Ball has served as a financial adviser to the Company since 1991, providing
corporate financial advisory services and valuations of Company stock from time
to time. Prior to founding Philpott, Ball, Mr. Philpott was a Senior Vice
President and Managing Director of Interstate/Johnson Lane, Capital Markets
Group. Mr. Philpott is a member of the Compensation, Governance and Executive
Committees.
COMMITTEES OF THE BOARD OF DIRECTORS, MEETINGS
AND COMPENSATION OF DIRECTORS
In accordance with the Bylaws of the Company, the Board of Directors has
established an Audit Committee, a Compensation Committee, a Governance Committee
and an Executive Committee. The members of these Committees are indicated below.
The Company's Board of Directors established an Audit Committee in March 1994.
The responsibilities of the Audit Committee include recommending to the Board of
Directors the independent public accountants to be selected to conduct the
annual audit of the Company's financial statements, reviewing the proposed scope
of such audit and approving the audit fees to be paid. This committee is also
responsible for reviewing the adequacy and effectiveness of the internal
auditing, accounting and financial controls of the Company with the independent
public accountants and the Company's financial and accounting staff. The Audit
Committee consists of independent directors, R. Stephens Pannill (chairman) and
John B. Adams who became a member of the Audit Committee in March 1999. Ronald
A. Norelli was a member of the Audit Committee until his appointment as the
Company's Chief Executive Officer in January 1999 and William K. Mileski was a
member of the Audit Committee until he resigned from the Company's Board of
Directors on November 17, 1998. The Audit Committee met one time during 1998.
The Company's Board of Directors established a Compensation Committee in April
1989. The Compensation Committee provides a general review of the Company's
compensation plans to ensure that they meet corporate objectives. The
responsibilities of the Compensation Committee also include administering the
Company's Senior Executive Bonus Plan, Sales Incentive Plan, Non-Qualified
Deferred Compensation Plan and 1995 Stock Option Plan, including selecting the
officers and salaried employees to whom bonuses and stock options will be
granted. The Compensation Committee consists exclusively of outside directors
who are Barry A. Bowles (chairman), Kemp D. Box and J. Robert Philpott, Jr. The
Compensation Committee met three times during 1998.
The Company's Board of Directors established a Governance Committee in September
1998 which replaced and broadened the scope of the Nominating Committee. The
Governance Committee is responsible for developing and conducting periodic
performance evaluations of the Company's CEO and Directors and making
recommendations to the Board of Directors concerning executive officer and
director appointments. The Governance Committee consists of John B. Adams
(chairman), J. Robert Philpott, Jr., G. Walker Box and R. Stephens Pannill. The
Governance Committee did not meet during 1998.
The Company's Board of Directors established an Executive Committee in September
1998. This Committee meets periodically between special meetings of the Board
and is responsible for overseeing the development and implementation of the
Company's business plan and strategies and making recommendations to the full
Board regarding policies and directional matters. The Executive Committee
consists of Ronald A. Norelli (chairman), John B. Adams, Jr., G. Walker Box, and
J. Robert Philpott, Jr.. R. Duke Ferrell, Jr. was a member of the Executive
Committee until his resignation from the Board of Directors on March 26, 1999.
The Executive Committee met five times during 1998.
3
<PAGE>
In 1998, the entire Board of Directors held seventeen meetings and committees of
the Board of Directors met a total of nine times. Overall attendance at such
meetings was 93% for Board and 99% for Committees. All the Directors attended
more than 95% of the aggregate of all meetings of the Board of Directors and the
Committees on which they served during 1998.
Officers of the Company who are also directors do not receive any fee or
remuneration for services as members of the Board of Directors or of any
Committee of the Board of Directors.
As of September 29, 1998, except for G. Walker Box, each non-employee director
of the Company receives $10,000 annually for serving as a director, $375 for
each board meeting attended which exceeds one hour in duration and $250 for each
meeting of any Committee of the Board attended, except that the Chairman of each
Committee is paid $375 for each meeting of his Committee which he attends. Prior
to September 29, 1998, each non-employee director of the Company received
$10,000 annually, $750 for each board meeting attended, $500 for each meeting of
any Committee of the Board attended, except that the Chairman of each Committee
was paid $750 for each meeting of his Committee which he attended. G. Walker Box
became a non-executive Chairman of the Board of Directors on February 23, 1999.
In such capacity, Mr. Box will receive an annual salary of $75,000. In addition,
directors may be compensated under the Company's 1995 Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On December 31, 1998, the Company's Compensation Committee consisted of Barry A.
Bowles (Chairman), Kemp D. Box and J. Robert Philpott, Jr.
North Bowles Partnership is a general partnership of which Barry A. Bowles, a
director of Pluma and a member of its Compensation Committee, owns a 33.0%
general partnership interest.
On June 10, 1989, the Company entered into a lease with North Bowles Partnership
for a building located in Martinsville, Virginia, to operate a distribution
center. On December 1, 1990, this lease was amended to add 67,500 square feet to
the building subject to the original lease. The building now contains 181,550
square feet. Rental expense for 1998 was $54,657 per month, or a total of
$655,884 annually. Rental payments increase with any annual increase in the
Consumer Price Index for Urban Wage Earners and Clerical Workers. The term of
this lease is 20 years. As additional rent, the Company is responsible for
paying 75.0% of the increase in taxes and insurance premium payments due on this
property. This lease grants the Company the option to purchase the distribution
center at the end of the fifth year, tenth year and fifteenth year of the lease
term, as well as at the end of the lease term in June 2009, at a price to be
agreed upon by the parties, or if no agreement can be reached, at a price
determined by appraisers.
On December 1, 1995, the Company entered into a lease with North Bowles
Partnership for a 83,200 square foot building that is being utilized by the
Company as a warehouse, packaging facility and management information systems
location. Seven hundred square feet of additional office space was recently
added to this facility. Rent is payable in monthly installments of $14,880
through March 31, 1999. This lease was amended on March 31, 1999 to reduce the
amount of space leased to 1,116 square feet at a monthly rental payment of $558,
or a total of $5,022 in 1999 and will house the Company's computer equipment
only.
On February 1, 1996, the Company entered into a lease with North Bowles
Partnership for a 200,000 square foot building that is being utilized by the
Company as a warehouse and distribution facility. Annual rental on this facility
is $630,000 payable in equal monthly installments of $52,500. This lease
terminates on July 31, 2003. As additional rent, the Company is responsible for
paying any increase in North Bowles Partnership's taxes and insurance premiums
related to the property in excess of 1995 levels.
For the year ended December 31, 1998, the Company paid Stanley Bowles
Corporation $ 2,774,992 for services rendered in connection with contract
building and repair work and contracted for additional services at a cost of
$43,791.29. which was due and owing at the end of 1998. This payment included
the cost of the equipment and labor and materials utilized for installation.
Stanley Bowles Corporation is a corporation of which Barry A. Bowles, a director
of Pluma and a member of its Compensation Committee, owns 20% of the voting
stock.
4
<PAGE>
For the year ended December 31, 1998, the Company paid Diversified Distribution,
Inc. $ 938,109 in fees related to contract services rendered to the Company for
packaging and preparing Company products for shipment. As of December 31, 1998,
the Company owned Diversified Distribution, Inc. $343,385 for similar services
rendered. These services were contracted for on a job-by-job basis as needed
during busy delivery times. The Company has no long-term contract for such
services. Barry A. Bowles owns 22.5% of the Common Stock of Diversified
Distribution, Inc.
J. Robert Philpott, Jr., a director of the Company, owns 50.0% of the
outstanding equity interests in Philpott, Ball. The Company paid Philpott, Ball
$121,395 of advisory fees plus out-of-pocket expenses during 1998 pursuant to a
contract for financial advisory services. As of December 31, 1998, the Company
owed Philpott, Ball $20,522. Philpott, Ball's advisory services performed under
this agreement included assisting the Company with strategic planning, executive
compensation, benefits, financial forecasting and acquisition inquiries.
Additionally, the Company paid Philpott, Ball Company $225,000 for advisory
services tendered to the Company in connection with the acquisition of Stardust
Corporation.
On January 21, 1999, Philpott, Ball executed an agreement with the Company to
act as its exclusive advisor to assist the Company in procuring equity and debt
financing (a "Financing"). This agreement is for a term of four months, however,
either party may cancel the agreement upon thirty (30) days notice. The Company
will pay to Philpott, Ball $6,000 per month for the term of the agreement,
however, in the event Philpott, Ball earns a Success Fee described below, these
monthly payments shall be applied towards the payment of the Success Fee. In the
event Philpott, Ball procures new debt or equity financing, the Company will pay
an additional fee to Philpott, Ball (the "Success Fee"). The Success Fee shall
equal (i) 1/2 of 1% of the amount of any senior debt obtained by the Company;
(ii) 3% of any subordinated debt obtained by the Company and (iii) 5% of any new
equity issued by Pluma as the result of Philpott, Ball's efforts under this
agreement. No Success Fee is due unless a Financing closes.
With reference to all the transactions described above, and the transactions
described in the next section hereof, the Company followed its policy set forth
in its Bylaws related to transactions with its directors ("Interested
Directors"). The Company's Bylaws require that with respect to any transaction
or series of transactions between the Company and an Interested Director in
which such Interested Director may receive either directly or indirectly
(through an entity with which the director is affiliated as a shareholder,
partner, director, officer, employee or agent) compensation or benefits of more
than $25,000 within a twelve-month period, the Company's Board of Directors
(without the involvement of the Interested Director and any of his family
members who may be directors) determine that the terms of such transaction(s)
are at least equal to, if not better than, terms which the Company could have
received from a party unaffiliated with the Company. Although transactions in
the ordinary course of the Company's business can be exempted from this
requirement, the transactions described above were not in the ordinary course of
business and were determined to be on terms at least equal to, if not better
than, the terms the Company could have received from a nonaffiliated party.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS INVOLVING DIRECTORS
NOT ON THE COMPENSATION COMMITTEE
For the year ended December 31, 1998, the Company paid $ 160,351 to Meritage LLC
for special contract dyeing services. In addition, in 1998, the Company had
sales of fleece activewear totaling $115,131 to Meritage LLC. As of December 31,
1998, Meritage LLC had a trade payable due the Company of $393,749 and the
largest amount at any one time during 1998 of Meritage LLC's trade receivable to
the Company was $465,185. Meritage LLC is a limited liability company
principally owned by William K. Mileski, who served as a director of Pluma and
was a member of the Company's Audit Committee until November 17, 1998.
For the year ended December 31, 1998, the Company paid $263,923 to Light
Electric Company in connection with the relocation and installation of
manufacturing equipment during the Company's reconfiguration of its
manufacturing facilities. Walter Light, brother of C. Monroe, Light, a Director,
owns 100% of the equity interest of Light Electric Company.
For the year ended December 31, 1998, the Company had sales of fleece and jersey
activewear totaling $133,201 to Skyline Corporation. As of April 9, 1999,
Skyline had a trade payable due the Company of $378,844. During 1998, the
largest amount at any one time of Skyline's trade payable to the Company was
$507,968. Skyline is a company owned 50% by Sue Anne Wade, the daughter of
George G. Wade, the President and COO of the Company.
5
<PAGE>
For the year ended December 31, 1998, the Company paid $184,898 to Norelli &
Company for providing consulting services to the Company in relation to the
Company's restructuring and development of it's financial strategy, business
plan for 1999 and 2000 and other areas of corporate management.. As of December
31, 1998, Pluma's account payable balance to Norelli & Co. was $9,636. Norelli &
Co. is a North Carolina corporation, 93% of which is owned by Ronald A. Norelli,
the Company's Chief Executive Officer since January 1999 and Director of the
Company since April 1998. He serves as Chairman of the Executive Committee and
is a member of the Audit Committee until he assumed the responsibilities of the
Company's Chief Executive Officer in January 1999.
On February 23, 1999, R. Duke Ferrell, Jr. resigned as the Company's Chief
Executive Officer, and the Company and Mr. Ferrell executed an agreement in
connection with this resignation. As a part of this agreement, the Company
agreed to pay to Mr. Ferrell $50,000 on March 3, 1999 and four consecutive
monthly installments of $14,060 beginning on April 1, 1999. The Company's
obligation to make these payments survive Mr. Ferrell's death. Furthermore, the
Company agreed to reimburse Mr. Ferrell for all travel expenses incurred by him
on behalf of the Company prior to the date of his resignation. In consideration
of the above, Mr. Ferrell agreed to serve as a special sales and marketing
consultant to the Company until July 31, 1999 and further agreed to waive all of
his rights to participate in the Company's deferred compensation plan. Mr.
Ferrell's account balance in this deferred compensation plan at the time of his
resignation was $85,863. The Company was obligated to pay Mr. Ferrell this
amount until he waived his right thereto.
On February 9, 1999, C. Monroe Light resigned (effective January 1, 1999) as the
Company's Executive Vice President. The Company and Mr. Light executed an
agreement in connection with this resignation. As a part of this agreement, the
Company agreed to pay to Mr. Light $61,000 on February 17, 1999, $40,000 on
September 30, 1999, $35,000 on June 30, 2000 and $40,000 on the date the last
monthly installment described below is paid. In addition, the Company agreed to
pay Mr. Light 24 consecutive monthly installments of $5,000 for the first six
months and $8,000 for the last eighteen months beginning on February 17, 1999.
The Company's obligation to make these payments survive Mr. Light's death. In
consideration of the above, Mr. Light agreed to waive all of his rights to
participate in the Company's deferred compensation plan. Mr. Light's account
balance in this deferred compensation plan at the time of his resignation was
$287,189. The Company was obligated to pay Mr. Light this amount until he waived
his right thereto.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Pluma's Directors
and executive officers and any persons who own beneficially more than 10% of the
outstanding shares of the Company's common stock to file with the Securities and
Exchange Commission and the New York Stock Exchange reports disclosing their
initial ownership of the Company's common stock, as well as subsequent reports
disclosing changes of such ownership. The Company became subject to the
reporting requirements of this Rule on March 11, 1997.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE>
OWNERSHIP OF EQUITY SECURITIES IN THE COMPANY
The following table sets forth information regarding beneficial ownership of the
Company's Common Stock as of April 5, 1999, by each Director, the Company's
five most highly compensated executive officers at year end and the Directors
and all executive officers of the Company as a group.
<TABLE>
<CAPTION>
AGGREGATE
NUMBER PERCENTAGE
OF SHARES OF
BENEFICIALLY OUTSTANDING
NAME OWNED SHARES(1)
<S> <C> <C>
G. Walker Box .................................................... 835,389(3)(8) 9.93%(3)
R. Duke Ferrell, Jr .............................................. 566,906(4)(8) 6.74%(4)
George G. Wade ................................................... 434,141(5) 5.16%(5)
Kemp D. Box ...................................................... 390,533(6)(7) 4.64%(7)
C. Monroe Light .................................................. 276,704(2)(9) 3.29%(9)
R. Stephens Pannill .............................................. 250,129(6)(10) 2.98%(6)(10)
Barry A. Bowles .................................................. 147,927(6)(11) 1.76%(6)(11)
Jeffrey N. Robinson .............................................. 14,000(6) 0.17%
J. Robert Philpott, Jr ........................................... 13,832(12) 0.16%
Ronald A. Norelli ................................................ 13,822 0.20%
John B. Adams, Jr ................................................ 0 0.00%
James E. Beale ................................................... 250 0.01%
John R. Beale .................................................... 0 0.00%
All directors and executive officers as a group (22 persons) 3,108,497 36.97%
</TABLE>
(1) As of March 29, 1999, the percentages calculated are based on 8,109,152
shares issued and outstanding plus 299,978 shares subject to presently
exercisable stock options issued under the Company's 1995 Stock Option Plan, a
total of 8,409,130 shares.
(2) Includes 26,496 shares issuable upon the exercise of options that have
vested (does not include 17,664 shares issuable upon the exercise of options
that have not yet vested).
(3) Includes (a) 23,552 shares owned by the George Walker Box Family Trust of
which G. Walker Box is the trustee and has sole voting and investment power; (b)
187,423 shares owned by Box, Ferrell & Co. of which Mr. Box shares voting power
and investment power equally with R. Duke Ferrell, Jr. -- these shares are
included in both Mr. Box's and Mr. Ferrell's beneficially owned shares; (c)
57,156 shares owned by Mr. Box as custodian for his minor children living in his
household; (d) 68,136 shares owned by the George Henry Box, Jr. Revocable Trust
dated April 27, 1992 of which Mr. Box as Co-trustee, shares voting and
investment power equally with Kemp D. Box -- these shares are included in both
Mr. Box's and Kemp D. Box's beneficially owned shares; and (e) 18,740 shares
owned by Mr. Box's wife. Mr. Box disclaims beneficial ownership of shares owned
by his wife.
(4) Includes (a) 187,423 shares owned by Box, Ferrell & Co. of which Mr. Ferrell
shares voting power and investment power equally with G. Walker Box -- these
shares are included in both Mr. Ferrell's and Mr. Box's beneficially owned
shares; (b) 26,776 shares held by Mr. Ferrell as custodian for his minor
children living in his household; (c) 4,740 shares held by Mr. Ferrell's
Individual
7
<PAGE>
Retirement Account; and (d) 20,020 shares owned of record by Mr. Ferrell's wife.
Mr. Ferrell disclaims beneficial ownership of shares owned by his wife.
(5) Includes (a) 44,160 shares issuable upon the exercise of options that are
currently exercisable; and (b) 84,156 shares owned by Mr. Wade's wife. Mr. Wade
disclaims beneficial ownership of the shares owned by his wife. Does not include
925 shares owned by Mr. Wade's adult children who do not reside in his
household.
(6) Includes 14,000 shares issuable upon the exercise of options that are
currently exercisable.
(7) Includes (a) 68,136 shares owned by the George Henry Box, Jr. Revocable
Trust dated April 27, 1992 of which Mr. Box as Co-trustee, shares voting and
investment power equally with G. Walker Box -- these shares are included in both
Mr. Box's and G. Walker Box's beneficially owned shares; (b) 23,552 shares owned
by the Kemp D. Box Family Trust, of which Mr. Box is the trustee and has sole
voting and investment power; (c) 4,465 shares owned by Mr. Box's wife; (d)
19,997 shares owned by Mr. Box's wife as trustee for trusts for her and Mr.
Box's minor children living in Mr. Box's household; and (e) 43,357 shares owned
by Mr. Box's wife as trustee for the Kemp D. Box Descendants' Trust. Mr. Box
disclaims beneficial ownership of all shares beneficially owned by his wife.
(8) Includes 44,160 shares issuable upon the exercise of options that have
vested.
(9) Includes 54,170 shares owned by Mr. Light's wife. Mr. Light disclaims
beneficial ownership of shares owned by his wife. Does not include 8,690 shares
owned by Mr. Light's adult children who do not reside in his household and 5,888
shares owned by Mr. Light's grandchildren who do not reside in his household.
(10) Includes (a) all of the 238,615 shares Mr. Pannill owns of record with his
wife as a joint tenant with right of survivorship; and (b) 2,682 shares owned by
Mr. Pannill's wife. Mr. Pannill disclaims beneficial ownership of shares owned
by his wife.
(11) Includes 1,472 shares held by Mr. Bowles' Individual Retirement Account.
Does not include 29 shares owned by Mr. Bowles' adult children who do not reside
in his household and does not include 11,482 shares owned by the Barry A. Bowles
Irrevocable Trust of which John L. Gregory, III is the trustee.
(12) Includes 8,832 shares issuable upon the exercise of options that have
vested (does not include 5,888 shares issuable upon the exercise of options that
have not vested).
8
<PAGE>
PRINCIPAL SHARE OWNERS
Set forth in the table below is information as of April 5, 1999 with respect to
persons known to the Company to be the beneficial owners of more than five
percent of the Company's issued and outstanding stock:
<TABLE>
<CAPTION>
NUMBER
OF SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS(1) OWNED OF CLASS
<S> <C> <C>
G. Walker Box(1) ........................................................... 835,389(5) 9.93%(5)
R. Duke Ferrell,Jr.(2) ..................................................... 566,906(6) 6.74%(6)
George G. Wade(3) .......................................................... 434,141(7) 5.16%(7)
Dimensional Fund Advisors, Inc.(4) ......................................... 493,000 6.08%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) G. Walker Box c/o Pluma, Inc., 1300 Kings Mountain Road, P.O. Box 4431,
Martinsville, VA 24115.
(2) R. Duke Ferrell, Jr., First Citizens Bank Bldg., 3rd Floor, 231 E. Church
Street, Martinsville, VA 24112.
(3) George G. Wade, c/o Pluma, Inc. 801 Fieldcrest Road, Eden, North Carolina
27288.
(4) Dimensional Fund Advisors, Inc., 1299 Ocean Avenue, 11th Floor, Santa
Monica, CA 90401
(5) Includes (a) 23,552 shares owned by the George Walker Box Family Trust of
which G. Walker Box is the trustee and has sole voting and investment power; (b)
187,423 shares owned by Box, Ferrell & Co. of which Mr. Box shares voting power
and investment power equally with R. Duke Ferrell, Jr. -- these shares are
included in both Mr. Box's and Mr. Ferrell's beneficially owned shares; (c)
57,156 shares owned by Mr. Box as custodian for his minor children living in his
household; (d) 68,136 shares owned by the George Henry Box, Jr. Revocable Trust
dated April 27, 1992 of which Mr. Box as Co-trustee, shares voting and
investment power equally with Kemp D. Box, (e) 26,496 shares issuable upon the
exercise of options that have vested and (f) 18,740 shares owned by Mr. Box's
wife. Mr. Box disclaims beneficial ownership of shares owned by his wife.
(6) Includes (a) 187,423 shares owned by Box, Ferrell & Co. of which Mr. Ferrell
shares voting power and investment power equally with G. Walker Box -- these
shares are included in both Mr. Ferrell's and Mr. Box's beneficially owned
shares; (b) 26,776 shares held by Mr. Ferrell as custodian for his minor
children living in his household; (c) 4,740 shares held by Mr. Ferrell's
Individual Retirement Account; (d) 44,160 shares issuable upon the exercise of
options that have vested and (e) 20,020 shares owned by Mr. Ferrell's wife. Mr.
Ferrell disclaims beneficial ownership of shares owned by his wife.
(7) Includes (a) 44,160 shares issuable upon the exercise of options that are
currently exercisable; and (b) 84,156 shares owned by Mr. Wade's wife. Mr. Wade
disclaims beneficial ownership of the shares owned by his wife. Does not include
425 shares owned by Mr. Wade's adult children who do not reside in his
household.
9
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of Pluma's filings
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, that might incorporate future filings by reference, including
this Proxy Statement, in whole or in part, the following Report of the
Compensation Committee shall not be incorporated by reference into any such
filings.
OVERALL OBJECTIVES AND PROGRAMS
The objective of the Company's executive compensation program is to provide
compensation that will attract and retain executives, to motivate each executive
toward the achievement of the Company's short and long-term financial and other
goals and to recognize individual contributions as well as overall business
results. In order to achieve this objective, the primary focus of the
Compensation Committee has been on the competitiveness of each of the key
elements of executive compensation -- base salary, bonus and periodic stock
option grants -- and the compensation package as a whole. In general, the
Committee believes that total compensation should be competitive with the
compensation paid by a peer group used for compensation comparisons (the
"Compensation Peer Group"). Compensation in excess of base compensation is
dependent upon the Company achieving targeted pre-tax income goals set each year
by the Compensation Committee.
Each year the Compensation Committee reviews a report prepared by Philpott Ball
& Company, the Company's consultant (50% of the outstanding stock of which is
owned by J. Robert Philpott, Jr., a director of the Company and member of the
Compensation Committee) assessing the competitiveness of the Company's
compensation program for the past year with the Compensation Peer Group to
determine whether there is a need to make prospective adjustments in the
compensation of executive officers. The Compensation Peer Group incudes all of
the companies listed ON PAGE 14, FOOTNOTE 2 to the Performance Graph, as well as
other companies reasonably comparable to Pluma.
The Compensation Committee has sought to relate executive bonus compensation
directly to the financial performance of the Company and to the part each
executive played in achieving that performance. This has resulted in a
compensation package in which bonus compensation is contingent upon the
achievement of specific targeted pretax income goals for the year. For 1998 the
Company paid no bonuses to its executives, except to Jim Beale and John
Beale pursuant to their employment agreements with the Company in the amount of
$50,000 each.
It has also been the Committee's objective that, in any year in which a budgeted
bonus pool is earned under the Senior Executive Bonus Plan and the Company's
performance compares favorably with the Compensation Peer Group, the total
direct compensation of Pluma's executive officers should be relatively
comparable to the executive compensation of other members of the Compensation
Peer Group whose performances compare to the Company's performance. The same
competitive peer group is used for all components of the compensation package.
The total executive compensation for each top executive in any year is based on
Pluma's financial performance relative to the financial performance of the
Compensation Peer Group (comparing, among other criteria, the company's net
margins, return on assets, total assets, net income and net revenue) and the
attainment of individual non-financial objectives during the preceding fiscal
year.
COMPONENTS OF EXECUTIVE COMPENSATION
The five primary components of executive compensation are:
o Base Salary
o Senior Executive Bonus Plan
10
<PAGE>
o Stock Option Plan
o Benefits
o Sales Incentive Plan (for salesmen only, only one of which was currently
an executive officer in 1998)
Each category is offered to key executives in various combinations, structured
in each case to meet varying business objectives, to cumulatively provide a
level of total compensation that is competitive with total compensation offered
by the Compensation Peer Group.
BASE SALARY
Executive officers' base salaries are determined by evaluating the
responsibilities of their positions and their performance, and by reference to
the levels of base salaries paid in the Compensation Peer Group. In the case of
operating executive officers, other factors considered are manufacturing
productivity; product quality and relationships with customers, suppliers and
employees; employee safety; environmental quality of operations; business
ethics; and leadership and management development. The Committee exercises its
judgment in determining the impact that these or any other relevant performance
criteria have on setting the executive officers' base salaries.
SENIOR EXECUTIVE BONUS PLAN
The Company's Compensation Committee administers Pluma's Senior Executive Bonus
Plan (the "Bonus Plan"), which is designed to create incentive for participants
in the Bonus Plan to increase Company profitability. Participants in the Bonus
Plan are stratified by the Compensation Committee into one of two tiers, based
upon the executive's responsibility, past performance with the Company, and
possible impact on Company profitability as a result of his or her executive
position with the Company. Ten executives were eligible to participate in the
Bonus Plan in 1998 (the "Participants"). R. Duke Ferrell, Jr., G. Walker Box,
George G. Wade and C. Monroe Light were eligible to participate in tier 1.
Milton A. Barber, IV, David S. Green, Walter E. Helton, Raymond L. Rea and Nancy
B. Barksdale, and Forrest Truitt were eligible to participate in tier 2.
The "Bonus Pool" available for distribution is determined in the early part of
each fiscal year by adding executive compensation to the Company's previous
fiscal year-end's pre-tax income (Pre-Tax Income Before Compensation). A
percentage of this adjusted Pre-Tax Income Before Compensation is the
"Compensation Pool" from which the "Bonus Pool" is determined. In any year, this
percentage could be increased or decreased, at the discretion of the
Compensation Committee, to adjust for increases or decreases in the number of
Participants, to allow for unforeseen factors which might affect Pluma's
performance and to adjust for changes in the performance of the Compensation
Peer Group. The "Bonus Pool" is equal to the amount of the "Compensation Pool"
less the sum of all base salaries paid to the Participants for the year in which
bonuses are calculated.
The Compensation Committee allocates the "Bonus Pool" between the two tiers
described above in a discretionary manner, with consideration given to the
number of Participants in each tier as determined at the sole discretion of the
Compensation Committee. In addition, the Compensation Committee and the Board
may grant to the tier 1 Participants an extraordinary bonus ("Bonus Percentage")
equal to a percentage (as determined by the Compensation Committee) of any
annual Pre-Tax Income Before Compensation earned in excess of a pre-determined
Pre-Tax Income Before Compensation level (the "Profit Target"). The Bonus
Percentage and the Profit Target are determined in the early part of each fiscal
year at the discretion of the Compensation Committee. The Compensation Committee
attempts to set the Profit Target at a level so that if Pluma attains the Profit
Target, the total compensation paid to the Company's executives will be
relatively similar in amount to the total compensation of executives of other
high performing companies within the Compensation Peer Group.
11
<PAGE>
Notwithstanding the formularization of the process used to determine bonuses
under the Bonus Plan, the Compensation Committee is allowed discretion to
consider or disregard extraordinary items, usually of a one-time nature, that
might either increase or decrease the amount of the "Compensation Pool." No
bonuses were paid in 1998 under the Company's Senior Executive Bonus Plan.
STOCK OPTION PLAN
In May 1995, the Company and its shareholders adopted the Pluma, Inc. 1995 Stock
Option Plan (the "1995 Stock Option Plan"), which provides for the issuance of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986 and non-qualified stock options to purchase an aggregate of
up to 515,200 shares of Common Stock. The 1995 Stock Option Plan permits the
grant of options to officers, employees, directors and independent contractors
of the Company and their employees.
The 1995 Stock Option Plan is administered by the Company's Compensation
Committee, of which all voting members are "disinterested persons" within the
meaning of Rule 16b-3 under the Securities and Exchange Act of 1934, as amended
(the "Committee"). Each option is evidenced by written agreement in a form
approved by the Committee. No options granted under the 1995 Stock Option Plan
are transferable by the optionee other than by will or by the laws of descent
and distribution, and each option is exercisable, during the lifetime of the
optionee, only by the optionee.
Under the 1995 Stock Option Plan, the exercise price of an incentive stock
option must be at least equal to 100.0% of the fair market value of the Common
Stock on the date of grant (110.0% of the fair market value in the case of
options granted to employees who hold more than ten percent of the voting power
of the Company's capital stock on the date of grant). The exercise price of a
non-qualified stock option is the same as for incentive stock options. The term
of an incentive or non-qualified stock option is not to exceed ten years (five
years in the case of an incentive stock option granted to a shareholder who owns
10% or more of Pluma's outstanding stock). The Committee has the discretion to
determine the vesting schedule and the period required for full exercisability
of stock options. Of the options granted in 1995 and 1996, 291,456 of the shares
granted under the Plan contained a 20.0% per year vesting schedule, except for
options granted to George G. Wade and to a former director, both of whom became
100% vested in all option shares granted to them under the 1995 Stock Option
Plan at the time of the grant. No options were granted in 1997. On December 15,
1998, the Committee granted options to purchase a total of 123,000 shares to
certain officers and management members, all of which vested upon the date of
the grant. Upon exercise of any option granted under the 1995 Stock Option Plan,
the exercise price may be paid in cash and/or such other form of payment as may
be permitted under the applicable option agreement, including, without
limitation, previously owned shares of the Company's Common Stock. The Company
has not granted stock options each year to its executive officers and directors,
but reserves the right to do so in the future if determined by the Company's
Board of Directors that such grants are necessary for the Company's compensation
structure to remain competitive with the Compensation Peer Group.
BENEFITS
In 1991, the Company adopted the Pluma, Inc. 401(k) Retirement Savings Plan (the
"401(k) Plan"), which is intended to be qualified under section 401(k) of the
Internal Revenue Code of 1986, as amended. To be eligible, an employee must have
been employed by the Company for at least one year. The 401(k) Plan permits
employees who have completed one year of service to defer up to 15.0% of their
annual compensation into the 401(k) Plan, provided, the total amount of
compensation deferred in any year does not exceed the maximum amount allowed
under law (which sum is adjusted annually). Additional annual contributions may
be made at the discretion of the Company, and matching contributions may be made
by the Company up to a maximum of 4.0% of a participating employee's annual
compensation. To date, Company matching contributions have equaled $0.40 for
every $1.00 contributed by the employee. Contributions made by the Company vest
after two years of employment.
Effective December 19, 1996, the Company adopted a Non-Qualified Deferred
Compensation Plan for certain selected key executives and for certain of its
Directors. This plan is designed to mirror the 401(k) Plan. Key executive
employees and directors chosen to participate in this plan are selected by the
Compensation Committee of the Company's Board of Directors. The purposes of this
plan
12
<PAGE>
is to provide certain directors and selected key executives of the Company
the opportunity to defer elements of their compensation which might not
otherwise be deferrable under other Company plans, including the 401(k) Plan; to
receive the benefit of additions to their deferral comparable to those
obtainable under the 401(k) Plan in the absence of certain restrictions and
limitations in the Internal Revenue Code; and to provide the directors with
benefits similar to the 401(k) Plan (absent certain restrictions and
limitations) were they eligible to participate in such 401(k) Plan. Pluma's
Non-Qualified Deferred Compensation Plan is not funded. The Company is obligated
to pay to a participant his account balance upon the occurrence of certain
events, including, but not limited to, his or her termination of employment or
death.
SALES INCENTIVE PLAN
The Company's Compensation Committee administers Pluma's Sales Incentive Plan
(the "Sales Incentive Plan") which is designed to create incentive for the
Company's sales staff to increase customer sales. Each year, the Company's
Compensation Committee establishes a base level of annual sales volume (the
"Sales Threshold") upon which the incentive sales bonus is calculated. At each
fiscal year end, the Company subtracts the Sales Threshold from the Company's
actual total net sales for such year. This difference (the "Bonus Base") is the
base amount upon which bonuses are determined for the Company's salespeople. In
the event the Company's actual net sales for a fiscal year exceed the Sales
Threshold, then each Company salesperson is entitled to the payment of a bonus
determined by multiplying his or her base annual salary by a fraction, the
numerator of which is the Bonus Base and the denominator of which is the Sales
Threshold. The Sales Threshold is determined annually by the Company's Board of
Directors after a recommendation from its Compensation Committee. Milton A.
Barber, IV, is currently the only executive officer entitled to participate in
the Company's Sales Incentive Plan. No bonuses were paid under the Company's
Sales Incentive Plan in 1998.
1998 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The Chief Executive Officer's compensation is determined pursuant to the same
basic factors as described above for other members of senior management. In
establishing a base salary and bonus for the Chief Executive Officer for 1998,
the Committee considered the base salary of the chief executive officers of the
Compensation Peer Group. No bonus was paid in 1998 to Pluma's Chief Executive
Officer.
SUMMARY
The Committee believes the executive compensation policies and programs
described in this Report serve the interests of the share owners and the
Company. Pay delivered to executives is intended to be linked to, and
commensurate with, Company performance and with share owner expectations. The
Committee cautions that the practice and the performance results of the
compensation philosophy described herein should be measured over a period
sufficiently long to determine whether strategy development and implementation
are in line with, and responsive to, share owner expectation.
Barry A. Bowles, Chairman
Kemp D. Box
J. Robert Philpott, Jr.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING PERFORMANCE
GRAPH SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
13
<PAGE>
PERFORMANCE GRAPH (1)
Comparisons of Total Cumulative Return Among
Pluma, Inc., S&P 500 Index and Industry Peer Group
TOTAL SHAREHOLDER RETURNS (2)
(Dividends Reinvested)
(PERFORMANCE GRAPH APPEARS HERE--SEE PLOT POINTS BELOW)
3/97 (1) 12/97 12/98
Pluma $100 $ 67.82 $10.93
S&P 500 100 121.20 153.56
Original Peer 100 98.20 89.42
Revised Peer 100 63.90 59.26
- ------------------
(1) The graph depicts the changes in the value over the time periods
indicated of a $100 investment in the Company common stock, the S&P 500 Index
and the Industry Peer Groups.
(2) Pluma, Inc., completed an initial public offering of its common shares
on March 11, 1997. Therefore, this graph reflects the performance of the common
stock of the Company, the Industry Peer Groups and the S&P 500 Index over a
limited period of time and should not be considered indicative of the future
performance of the Company's stock or the stock of the compared indices.
The graph reflects the performance of two industry peer groups. The
Original Peer Group, which was included in the Company's 1998 Proxy Statement,
is a self-constructed peer group consisting of Tultex Corporation; Fruit of the
Loom, Inc.; Russell Corporation; and VF Corporation. The Revised Peer Group is
a self-constructed peer group consisting of Tultex Corporation; Fruit of the
Loom, Inc.; and Russell Corporation. The Company has determined that the
Original Peer Group does not represent a meaningful comparison for purposes
of evaluating the Company's performance since it includes the performance of VF
Corporation, a company which manufactures and sells many products not
manufactured and sold by the Company. Accordingly, the Revised Peer Group does
not include VF Corporation and therefore presents a more comparable self-
constructed peer group.
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer and the four most highly compensated executive officers other than the
Chief Executive Officer (the "Named Officers"), for services rendered to the
Company during 1998, 1997, and 1996:
14
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION
----------------------- ------------
SECURITIES UNDERLYING ALL OTHER
SALARY (1) BONUS (2) OPTIONS (#) COMPENSATION (3)
---------- --------- ----------- ----------------
NAME AND POSITION YEAR
----------------- ----
<S> <C> <C> <C> <C> <C>
G. Walker Box 1998 $191,056 $ 0 $ 2,980
Chairman of the Board 1997 198,500 0 2,429
1996 196,500 229,667 44,160 1,278
R. Duke Ferrell, Jr 1998 191,056 $ 0 $ 2,925
President, Chief Executive 1997 198,500 0 4,786
Officer and Director 1996 196,500 229,667 44,160 2,200
George G. Wade 1998 183,963 $ 0 $ 2,770
Chairman Emeritus of the Board, 1997 191,130 0 4,855
Secretary and Director 1996 189,200 221,135 44,160 5,428
James E. Beale (4) 1998 164,322 $ 50,000 0 $ 1,477
Vice President of Wholesale Distribution 1997
President of Stardust Corporation 1996
Jeffery N. Robinson (4) 1998 192,000 $ 0 14,000 $ 0
President of Frank L. Robinson Co. 1997
1996
John R. Beale (4)
Executive Vice President of Stardust
Division of Pluma 1998 160,000 50,000 0 0
</TABLE>
(1) Certain of the Company's executive officers receive personal benefits in
addition to salary and cash bonuses, including car allowances. The aggregate
amount of such personal benefits, however, do not exceed the lesser of $50,000
or 10.0% of the total of the annual salary and bonus reported for the Named
Officer.
(2) Bonuses are reflected in the year in which they are earned and are paid in
the following year.
(3) These amounts represent the Company's contribution to the Company's 401(k)
plan and the payment of premiums on split-dollar life insurance policies owned
by the employee.
(4) The employment of Messrs. Beale, Beale and Robinson commenced January 1,
1998 pursuant to employment agreements entered into by each of them with the
Company upon the acquisition of Stardust Corp. and Frank L. Robinson Company in
December 1997.
15
<PAGE>
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table sets forth information with respect the exercise of options
during 1998 and exercisable and unexercisable options to acquire common stock of
the Company held at December 31, 1998 by the Named Officers.
These values have not been, and may never be, realized, as these options have
not been, and may never be, exercised. Actual gains, if any, upon exercise will
depend on the value of common stock on the date of any exercise of options.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST
FISCAL YEAR AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
SHARES VALUE OF UNEXERCISED
ACQUIRED VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON EXERCISE REALIZED AT FY-END(#) AT-FY-END (2)
(#)(1) (&) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
G. Walker Box 0 N/A 44,160 -- 0 $ 0
George G. Wade 0 N/A 44,160 -- 0 0
R. Duke Ferrell 0 N/A 44,160 -- 0 0
James E. Beale 0 N/A 0 0 0 0
Jeffrey N. Robinson 0 N/A 14,000 -- 0 0
John R. Beale 0 N/A 0 0 0 0
</TABLE>
(1) No options were exercised in 1998.
(2) Based on market price of $.56 per share (market price of the Company's
common stock on April 5, 1999, less the exercise price of $12.00 per share.
OPTION GRANTS IN LAST FISCAL YEAR TO NAMED OFFICERS
The Company granted options to purchase 14,000 shares of the Company's common
stock to Jeffrey N. Robinson on December 15, 1998 which became fully vested that
date.
EMPLOYMENT AGREEMENTS, CHANGE OF CONTROL ARRANGEMENTS
Pursuant to employment contracts (the "Employment Agreements"), Jeffrey N.
Robinson, John R. Beale, and James A. Beale (each an "employee") are employed by
the Company in their various executive or other capacities. Jeffrey N.
Robinson's and John R. Beale's Employment Agreements terminate in December,
2000, and James A. Beale's Employment Agreement terminates in December 2002, if
not sooner terminated (for reasons of death, disability, change of control or
"for cause"). Thereafter an employee's employment may continue until terminated
by the Company or the employee. Under the Employment Agreements, these
individuals are entitled to annual bonus payments pursuant to Pluma's Senior
Executive Bonus Plan or under other bonus plans or programs established from
time to time by the Company and all benefits made available to other senior
executives under any employee benefit plans including the Company's
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401(k) Plan, medical expense reimbursement plans, group life, health, accident,
medical, hospitalization and disability insurance plans. Currently, no senior
executive is the beneficiary of any such plans not made available to all Pluma
employees except for Pluma's Senior Executive Bonus Plan, Non-Qualified Deferred
Compensation Plan, Sales Incentive Plan (with respect to the Company's
salespeople) and the split-dollar insurance policies referenced in note (3) to
the Summary Compensation Table.
The Company or the employee may terminate his or her Employment Agreement upon a
"change of control" of the Company. A change of control shall mean the
occurrence of any one of the following events:
(1) if any "person," as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Act") (other than the
Company, any trustee, fiduciary or other person or entity holding
securities under any employee benefit plan of the Company), together
with all "affiliates" and "associates" (as such terms are defined in
Rule 12b-2 under the Act) of such person, shall become the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Act), directly
or indirectly, of securities of the Company representing 50.0% or more
of either (a) the combined voting power of the Company's then
outstanding securities having the right to vote in an election of the
Company's Board of Directors ("Voting Securities"), or (b) the then
outstanding shares of the Company (in either such case other than as a
result of acquisition of securities directly from the Company); or
(2) if the majority of those persons who, as of January 1, 1996,
constituted the Company's Board of Directors (the "Incumbent
Directors") cease for any reason, including, without limitation, as a
result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board of
Directors, provided that any person becoming a director of the Company
subsequent to January 1, 1996, whose election or nomination for
election was approved by a vote of at least a majority of the
Incumbent Directors or Directors chosen by the Incumbent Directors
shall be considered an Incumbent Director; or
(3) if the shareholders of the Company shall approve (a) any
consolidation or merger of the Company where the shareholders of the
Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as
such term is defined in Rule 13d-3 under the Act), directly or
indirectly, shares representing in the aggregate 50.0% of the voting
shares of the corporation issuing cash securities in the consolidation
or merger (or of its ultimate parent corporation, if any), (b) any
sale, lease, exchange or other conveyance, in a transaction or series
of transactions of all or substantially all of the assets of the
Company, or (c) any plan or proposal for the liquidation or
dissolution of the Company.
Upon termination of the Employment Agreements after a "change of control," if
the employee is eligible (as defined below), the Company shall:
(1) Within 30 days after termination, pay to the employee an amount,
in cash, equal to: (a) three times the employee's (i) average annual
salary for the 36-month period prior to such change of control and
(ii) any bonuses received during the 18 months preceding the effective
date of the change of control, less (b) 1/36 of the amount calculated
in (a) above for each month that the employee remains employed with
the Company following the effective date of the change of control; and
(2) Continue the medical, disability and life insurance benefits the
employee was receiving at the time of termination for a period of 36
months after termination of employment or, if earlier, until the
employee has commenced employment elsewhere and becomes eligible for
participation in the medical, disability and life insurance programs,
if any, of the successor employer. Coverage under the Company's
medical, disability and life insurance programs shall cease with
respect to each such program as the employee becomes eligible for the
medical, disability and life insurance programs, if any, of the
successor employer. During the first 18 months of such 36-month
period, the Company shall be responsible for the costs associated with
continued insurance coverage for the employee, but only to the extent
it would have been responsible for such costs if the employee was
still employed by the Company. The employee shall be responsible for
the remaining costs.
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If at the end of 18 months, the employee is still afforded medical,
disability and life insurance coverage under the Company's insurance
programs, the Company shall arrange to provide continued coverage
under said programs, but the employee will be responsible for the
total cost of all such continued coverage after the first 18-month
period.
The employee is eligible for the benefits provided above, unless the Company or
the Company's successor, after a change of control, offers the employee a bona
fide employment contract for a term that would expire no earlier than three
years after the effective date of the change of control under the terms of which
the employee would perform the same duties for the same or greater levels of
compensation as were afforded under the terms of the Employment Agreements, and
the employee rejects the offer.
The employee's employment will or may also be terminated under the Employment
Agreement in the event of death, "for cause" or, at the Company's election, in
the event of the employee's long-term disability. In the event of the death of
the employee during employment, the following payments shall be made to the
employee's designated beneficiary, or, in the absence of such designation, to
the estate or other legal representative of the employee: (i) base salary for
the month in which death occurs, and (ii) such bonuses (if any) as have been
earned and not paid at the time of death. Any rights and benefits the employee
or his/her estate or any other person may have under employee benefit plans and
programs of the Company generally applicable in the event of the employee's
death shall be determined in accordance with the terms of such plans and
programs. Except as provided in the Employment Agreement, neither the employee's
estate nor any other person shall have any rights or claims against the Company
in the event of the death of the employee during employment.
Upon termination for cause, the employee shall receive his or her base salary
only through the date of termination, and neither the employee nor any other
person shall be entitled to any further payments from the Company for salary,
unpaid bonuses or any other amounts. Any rights and benefits the employee may
have under employee benefit plans and programs of the Company generally
following a termination of the employee's employment for cause shall be
determined in accordance with the terms of such plans and programs.
In the event of the employee's disability during his or her employment under the
Employment Agreement, employment may be terminated by the Company. For the first
three months following termination of employment due to disability, the employee
shall be paid the base salary in effect at the time of the commencement of
disability. Thereafter, the employee shall be entitled to benefits in accordance
with and subject to the terms and provisions of the Company's long-term
disability plan for senior management employees, as in effect at the time of the
commencement of disability. If, during the three-month period following a
termination of employment because of disability in which salary continuation
payments are payable by the Company, the employee becomes re-employed (whether
as an employee, partner, consultant or otherwise), any salary or other
remuneration or benefits earned by him or her from such employment or engagement
shall not offset any payments due the employee from the Company as the result of
disability.
The contracts with Mr. Robinson and Messrs. Beale and Beale were executed in
connection with the acquisition by the Company of Stardust and Frank L. Robinson
Company. These contracts were executed in an attempt to retain key management of
Stardust and Frank L. Robinson Company deemed essential for the continuing
operations of these businesses. Furthermore, the Board of Directors believes
that these Employment Agreements will enable these key employees to conduct
Company business with less concern for personal economic risk when faced with a
possible change of control.
On February 9, 1999, the Company entered into an agreement with Ronald A.
Norelli to assume the responsibilities of the Chief Executive Officer of Pluma
during the period of its financial and operational restructuring. The agreement
is terminable by either party upon thirty days written notice. Mr. Norelli
agreed to expend no less than three, but no more than four days during each
calendar week performing his duties as the Company's Chief
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Executive Officer. As compensation for Mr. Norelli's services, the Company
agreed to pay Mr. Norelli $24,000 during any month in which he averages working
three full days per week on Company matters and $32,000 for any month in which
he averages working four full business days each month. During any month in
which Mr. Norelli averages between three working days and four working days
performing his obligations as the Company's Chief Executive Officer, the Company
is obligated to pay between $24,000 and $32,000 for each month, depending upon
the amount of time worked during such month. Additionally, the Company is
obligated to pay Mr. Norelli $32,000 in each of the first two calendar months
after this agreement with the Company is terminated. It is not anticipated that
Mr. Norelli will serve as a permanent Chief Executive Officer for the Company.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 2)
The Board of Directors of the Company, upon the recommendation of the Audit
Committee, has appointed the firm of Deloitte & Touche, LLP to serve as
independent auditors of the Company for the fiscal year ending December 31,
1999, subject to ratification of this appointment by the share owners of the
Company. Deloitte & Touche, LLP has served as independent auditors of the
Company since 1987 and is considered by management of the Company to be well
qualified. The Company has been advised by that firm that neither it nor any
member thereof has any financial interest, direct or indirect, in the Company or
any of its subsidiaries in any capacity.
One or more representatives of Deloitte & Touche, LLP will be present at this
year's Annual Meeting of share owners, will have an opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
Ratification of the appointment of the independent auditors requires the
affirmative vote of a majority of the votes cast by the holders of the shares of
Common Stock of the Company voting in person or by proxy at the Annual Meeting
of share owners. If the share owners should not ratify the appointment of
Deloitte & Touche LLP, the Board of Directors will reconsider the appointment.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE, LLP AS INDEPENDENT AUDITORS OF THE
COMPANY FOR THE 1999 FISCAL YEAR. PROXIES RECEIVED BY THE BOARD OF DIRECTORS
WILL BE SO VOTED UNLESS SHARE OWNERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
PROXY PROCEDURE AND EXPENSES OF SOLICITATION
The Company will hold the votes of all share owners in confidence from the
Company, its Directors, officers and employees except: (i) as necessary to meet
applicable legal requirements and to assert or defend claims for or against the
Company; (ii) in case of a contested proxy solicitation; (iii) in the event that
a share owner makes a written comment on the proxy card or otherwise
communicates his/her vote to management; or (iv) to allow the independent
inspectors of the election of directors to certify the results of the vote. The
Company will also retain an independent tabulator to receive and tabulate the
proxies and an independent inspector of election to certify the results.
All expenses incurred in connection with the solicitation of proxies will be
borne by the Company. The Company has engaged Corporate Communications, Inc.,
the Company's consultant for investor relations, to assist with the solicitation
of proxies. The Company will reimburse brokers, fiduciaries and custodians for
their costs in forwarding proxy materials to beneficial owners of Common Stock
held in their names.
Solicitation may be undertaken by mail, telephone and personal contact by
Directors, officers and employees of the Company without additional
compensation.
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Under North Carolina law, abstentions and broker nonvotes are counted to
determine whether a quorum is present at the Meeting. (Under New York Stock
Exchange rules, a broker may, if the broker does not have instruction from a
beneficial owner, vote shares on routine proposals. If a broker does not have
discretionary voting instructions regarding non-routine proposals from the
beneficial owner, the broker cannot vote on those proposals. This is referred to
as a broker nonvote).
SHARE OWNERS' PROPOSALS
Proposals of share owners intended to be presented at the year 2000 Annual
Meeting of share owners must be received by the Company on or before December
15, 1999, to be eligible for inclusion in the Company's Proxy Statement and
proxy relating to that meeting.
According to the Bylaws of the Company, a proposal for action to be presented by
any share owner at an annual or special meeting of share owners shall be out of
order unless specifically described in the Company's notice to all share owners
of the meeting and the matters to be acted upon there, or unless the proposal
shall have been submitted in writing to the Chairman of the Board of Directors
and received at the principal executive offices of the Company on that date
prior to such meeting specified in the proxy statement issued in connection with
the previous annual share owners' meeting held by the Company, and such proposal
is, under law, an appropriate subject for share owner action.
OTHER INFORMATION
Management does not know of any matters other than those referred to in the
accompanying Notice of Annual Meeting of share owners which may properly come
before the meeting or other matters incident to the conduct of the meeting. As
to any other matter or proposal that may properly come before the meeting,
including voting for the election of any person as a Director in place of a
nominee named herein who becomes unable to serve or for good cause will not
serve and voting on a proposal omitted from this Proxy Statement pursuant to the
rules of the Securities and Exchange Commission, it is intended that proxies
received will be voted in accordance with the discretion of the proxy holders.
The form of proxy and this Proxy Statement have been approved by the Board of
Directors and are being mailed and delivered to share owners by its authority.
/s/ George G. Wade
PRESIDENT, SECRETARY & CHIEF OPERATING
OFFICER
Eden, North Carolina
April ___, 1999
THE COMPANY'S FORM 10-K, WHICH HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND INCLUDES PLUMA'S FINANCIAL STATEMENTS, FOLLOWS THIS PROXY
STATEMENT. THE COMPANY'S 10-K HAS BEEN PREPARED TO COMPLY WITH THE FEDERAL
SECURITIES LAWS REGULATING ANNUAL REPORTS TO SHAREHOLDERS. THE COMPANY'S 10-K IS
BEING DELIVERED AS THE COMPANY'S ANNUAL REPORT IN AN EFFORT TO REDUCE COSTS. THE
10-K DOES NOT FORM ANY PART OF THE MATERIALS FOR THE SOLICITATION OF PROXIES.
THE COMPANY HAS NOT INCLUDED WITH ITS FORM 10-K THE EXHIBITS FILED THEREWITH
AND LISTED IN THE EXHIBIT INDEX SET FORTH IN ITEM 14 THEREOF. UPON REQUEST OF A
SHARE OWNER, THE COMPANY WILL FURNISH A COPY OF ANY FILED EXHIBIT UPON PAYMENT
BY THE SHARE OWNER OF THE REASONABLE COST OF COPYING AND FURNISHING SUCH EXHIBIT
TO THE SHARE OWNER. ANY REQUEST FOR AN EXHIBIT SHOULD BE MADE TO THE COMPANY'S
PRINCIPAL OFFICES AT 801 FIELDCREST ROAD, EDEN, NORTH CAROLINA, ATTENTION CHIEF
FINANCIAL OFFICER.
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APPENDIX
PLUMA, INC. - PROXY
Solicited by Board of Directors for Annual Meeting of Shareholders June 23,
1999.
The undersigned appoints Ronald A. Norelli and G. Walker Box, or any one of
them, attorneys and proxies with power of substitution to vote all of the Common
Shares of PLUMA, INC, standing in the name of the undersigned at the Annual
Meeting of Shareholders on June 23, 1999, and at all adjournments thereof, upon
the matters set forth in the Notice and Proxy Statement of said meeting, receipt
of which is acknowledged.
The shares represented by this proxy will be voted as directed by the
Shareholder. If you wish to vote in accordance with the recommendations of the
Board of Directors, you may sign below and mail in the envelope provided. If no
direction is given, shares will be voted FOR Proposals 1 and 2. Specific choices
may be made on the reverse side.
DATED: _________________________, 1999
------------------------------------
------------------------------------
SIGNATURE(S) OF SHAREHOLDER(S)
Please sign exactly as name
or names appear hereon.
Full title of one signing
in representative capacity
should be clearly
designated after signature.
Names of all joint holders
should be written even if
signed by only one.)
Please complete, date, sign and mail Proxy Card in the envelope provided.
Postage not necessary if mailed in the United States.
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<TABLE>
<CAPTION>
<S> <C>
The Board of Directors recommends a vote "FOR" Proposals 1 and 2
1. Election of Directors
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY TO
(except as marked to the contrary) vote for all nominees listed
Kemp D. Box Ronald A. Norelli John B. Adams
(To withhold authority to vote for any individual nominee, line through the
nominee's name above.)
2. Proposal to ratify Deloitte & Touche, LLP as the Company's independent
auditors for the 1999 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy will be voted FOR Proposals 1 and 2 unless instructions to the
contrary are indicated.
PLEASE TURN OVER AND SIGN ON THE REVERSE SIDE
</TABLE>
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