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 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Galey & Lord, Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
-----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies: N/A
-----------------------------------------------------------------------------
(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): N/A
-----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: N/A
-----------------------------------------------------------------------------
(5) Total fee paid: $0
-----------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials: N/A
-----------------------------------------------------------------------------
[ ] 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>
GALEY & LORD, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 9, 1999
TO THE STOCKHOLDERS OF
GALEY & LORD, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Galey & Lord, Inc., a Delaware corporation (the "Company"), will
be held at the Company's executive offices, 980 Avenue of the Americas, New
York, New York 10018, on Tuesday, February 9, 1999 at 10:30 A.M., Local Time,
to consider and act upon the following:
1. To elect nine directors of the Company to serve as the Board of
Directors until the next annual meeting of stockholders and until their
successors have been duly elected and qualified;
2. To consider and vote upon the adoption of the proposed 1999 Stock
Option Plan for officers, directors, consultants and employees of the
Company and its subsidiaries;
3. To ratify the selection of Ernst & Young LLP as independent auditors
of the Company for the 1999 fiscal year; and
4. To consider and act upon such other matters as may properly come
before the Meeting or any adjournment thereof.
Only stockholders of record of the Company's Common Stock at the close of
business on December 21, 1998 shall be entitled to receive notice of, and to
vote at, the Meeting, and at any adjournment or adjournments thereof. A list of
the stockholders of the Company as of the close of business on December 21,
1998 will be available for inspection during business hours for ten days prior
to the Meeting at the Company's principal executive offices located at 980
Avenue of the Americas, New York, New York 10018. A Proxy and a Proxy Statement
for the Meeting are enclosed herewith.
All stockholders are cordially invited to attend the Meeting. Whether or
not you plan to attend the Meeting, please complete, date and sign the enclosed
Proxy, which is solicited by the Board of Directors of the Company, and mail it
promptly in the enclosed envelope to make sure that your shares are represented
at the Meeting. In the event you decide to attend the Meeting in person, you
may, if you desire, revoke your Proxy and vote your shares in person.
By Order of the Board of Directors
/s/ Michael R. Harmon
----------------------
MICHAEL R. HARMON
SECRETARY
Dated: January 6, 1999
IMPORTANT
---------
THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE
UNITED STATES.
<PAGE>
<PAGE>
GALEY & LORD, INC.
980 Avenue of the Americas
New York, New York 10018
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 9, 1999
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Galey & Lord, Inc., a Delaware corporation
(the "Company"), to be voted at the Annual Meeting of Stockholders (the
"Meeting") of the Company which will be held at the Company's executive
offices, 980 Avenue of the Americas, New York, New York 10018, on Tuesday,
February 9, 1999 at 10:30 A.M., Local Time, and any adjournment or adjournments
thereof for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders and in this Proxy Statement.
The principal executive offices of the Company are located at 980 Avenue
of the Americas, New York, New York 10018. The approximate date on which this
Proxy Statement and accompanying Proxy will first be sent or given to
stockholders is January 6, 1999.
A Proxy, in the accompanying form, which is properly executed, duly
returned to the Company and not revoked, will be voted in accordance with the
instructions contained therein and, in the absence of specific instructions,
will be voted (i) FOR the election as directors of persons who have been
nominated by the Board of Directors, (ii) FOR the adoption of the proposed 1999
Stock Option Plan for officers, directors, consultants and employees of the
Company and its subsidiaries, (iii) FOR the ratification of the selection of
Ernst & Young LLP as independent auditors to audit and report upon the
consolidated financial statements of the Company for the 1999 fiscal year, and
(iv) in accordance with the judgment of the person or persons voting the
proxies on any other matter that may be properly brought before the Meeting.
Each such Proxy granted may be revoked at any time thereafter by writing to the
Secretary of the Company prior to the Meeting, or by execution and delivery of
a subsequent Proxy or by attendance and voting in person at the Meeting, except
as to any matter or matters upon which, prior to such revocation, a vote shall
have been cast pursuant to the authority conferred by such Proxy.
VOTING SECURITIES
Stockholders of record as of the close of business on December 21, 1998
(the "Record Date") will be entitled to notice of, and to vote at, the Meeting
or any adjournments thereof. On the Record Date there were outstanding
11,850,187 shares of the Company's Common Stock, $.01 par value (the "Common
Stock"), which figure does not include an additional 389,204 treasury shares
held by the Company. There was no other class of voting securities outstanding
at the Record Date. Each holder of Common Stock is entitled to one vote for
each share held by such holder. The presence, in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum at the Meeting.
1
<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
At the Meeting, nine directors are to be elected to serve until the next
annual meeting of stockholders and until their successors shall be duly elected
and shall qualify. Unless otherwise specified, all proxies received will be
voted in favor of the election of the nine nominees of the Board of Directors
named below as directors of the Company. All of the nine nominees are presently
directors of the Company. The term of the current directors expires at the
Meeting. Should any of the nominees not remain a candidate for election at the
date of the Meeting (which contingency is not now contemplated or foreseen by
the Board of Directors), proxies solicited thereunder will be voted in favor of
those nominees who do remain candidates and may be voted for substitute
nominees selected by the Board of Directors.
Assuming a quorum is present, a vote of a majority of the votes cast at
the Meeting, in person or by proxy, is required to elect each of the nominees
as a director. Abstentions and broker non-votes are not counted as votes cast.
The following table sets forth the names of the nominees, their ages, and
their current positions with the Company:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ----------------------- ----- -----------------------
<S> <C> <C>
Arthur C. Wiener 61 Chairman of the Board,
President and Chief
Executive Officer
Lee Abraham 71 Director
Michael T. Bradley 32 Director
Paul G. Gillease 66 Director
William deR. Holt 70 Director
Howard S. Jacobs 55 Director
William M.R. Mapel 67 Director
Stephen C. Sherrill 45 Director
David F. Thomas 49 Director
</TABLE>
Mr. Wiener has been Chairman of the Board of the Company since February
1992 and President and Chief Executive Officer of the Company since February
1988. He was Group Vice President of Burlington Industries, Inc.
("Burlington"), a manufacturer of textile products, and President of
Burlington's Blended Division, the Company's predecessor, from October 1984 to
February 1988. Mr. Wiener was President of the Apparel Fabrics Marketing
Division of Dan River Inc., a textile manufacturer, from 1975 to October 1984.
He was employed by the Menswear Division of Burlington in various capacities
from 1966 to October 1975, including as President from 1973 to October 1975.
Mr. Abraham has been a director of the Company since February 1993. Mr.
Abraham served as Chairman and Chief Executive Officer of Associated
Merchandising Corporation, a retail merchandising and sourcing company, from
1977 until his retirement in January 1993. Mr. Abraham is a director of Salomon
Smith Barney Income & Equity Funds, a registered investment company; R.G. Barry
Corporation, a manufacturer of comfort footwear; and Signet Group, plc, an
owner and operator of retail jewelry stores in the United States and the United
Kingdom. He was formerly a director of Liz Claiborne, Inc., a sportswear
apparel company.
Mr. Bradley has been a director of the Company since November 1998. Mr.
Bradley has been employed by Citicorp Venture Capital, Ltd. ("CVC"), a venture
capital and leveraged buyout company, which is a subsidiary of Citibank, N.A.,
a wholly-owned subsidiary of Citicorp, which is a wholly-owned subsidiary of
Citigroup Inc., since April 1996, and has served as a Vice President since
1998. Mr. Bradley received an MBA from Columbia Business School in 1996 and a
JD from the University of Virginia Law School in 1991. Between 1989 and 1991,
he was an analyst at Select Equity Group, Inc. in New York, an equity research
firm. From August 1988 to September 1989, Mr. Bradley was an assistant
financial consultant at Merrill Lynch in Paris, France.
Mr. Gillease has been a director of the Company since November 1993. Mr.
Gillease was employed by E.I. Du Pont de Nemours & Company Incorporated in
various executive capacities from 1961 to his retirement in October 1993,
including most recently as Vice President and General Manager responsible for
textile fiber operations from October 1990 to October 1993. Mr. Gillease is a
director of Pillowtex, Inc., a home furnishings manufacturer; Guilford Mills,
Inc., a manufacturer of knitted textiles; and Optimer, Inc., a privately held
textile and fiber research and development company.
Mr. Holt has been a director of the Company since April 1988. He was
employed for 37 years by Burlington in various capacities, including most
recently as a Group Vice President until his retirement in March 1988.
2
<PAGE>
Mr. Jacobs has been a director of the Company since February 1989. He has
been a member of the law firm of Rosenman & Colin LLP, New York, New York,
counsel to the Company, since March 1994. For more than five years prior to
March 1994, Mr. Jacobs was a member of two other law firms located in New York
City, each of which was former counsel to the Company.
Mr. Mapel has been a director of the Company since February 1989. Mr.
Mapel was employed by Citibank, N.A. in various executive capacities from 1969
to his retirement in October 1988, including most recently as a Senior Vice
President and Chairman of the Policy Committee of the North American Finance
Group from 1986 to September 1988. Mr. Mapel is a director of NSC Corporation,
an environmental service company; Brundage, Story & Rose Investment Trust, a
registered investment company; and Churchill Capital Partners, a registered
investment company.
Mr. Sherrill has been a director of the Company since May 1993. Mr.
Sherrill was formerly a director of the Company from February 1988 to February
1992. Mr. Sherrill has been a principal of Bruckman, Rosser, Sherrill & Co.,
Inc., a private equity investment firm, since February 1995. For more than five
years prior to February 1995, Mr. Sherrill was a Managing Director or Vice
President of CVC. Mr. Sherrill is a director of Jitney Jungle Stores of America
Inc., a regional chain of grocery stores; Doane Pet Care Enterprises, a
manufacturer and distributor of pet food products; B&G Foods Inc., a
manufacturer, marketer and distributor of food products; and Mediq, Inc., a
hospital equipment rental company.
Mr. Thomas has been a director of the Company since March 1996. Mr. Thomas
has been a Managing Director of CVC for more than five years and has been the
President of 399 Venture Partners, Inc., a venture capital and leveraged buyout
company, which is a subsidiary of Citibank N.A. and an affiliate of CVC, since
December 1994. Mr. Thomas is a director of Lifestyle Furnishings International
Ltd., Anvil Knitwear, Inc., Davco Restaurants Inc., Stage Stores, Inc. and a
number of private companies.
There were six meetings of the Board of Directors of the Company during
the last fiscal year. All directors attended 75% or more of the aggregate of
the total number of meetings of the Board and the total number of meetings of
all committees of the Board on which he served, except for Messrs. Sherrill and
Thomas. The Board of Directors has designated from among its members an Audit
Committee, which consists of Messrs. Jacobs, Mapel and Thomas. The Audit
Committee, which reviews the Company's financial and accounting practices and
controls, held two meetings during the 1998 fiscal year. The Company has a
Compensation Committee of the Board of Directors, which reviews the
compensation of the Company's executive officers. The Compensation Committee
consists of Messrs. Abraham, Gillease and Holt. The Compensation Committee held
five meetings during the 1998 fiscal year. The Company does not have a standing
nominating committee. There are no family relationships between any of the
directors or executive officers of the Company.
In May 1992, the Company, CVC and Mr. Wiener entered into an agreement,
under which, if requested by CVC, the Company will use its best efforts to
cause one designee of CVC to be nominated as a director of the Company. Mr.
Wiener has agreed to vote all shares owned by him in favor of CVC's designee.
Such agreement will terminate on the earlier of its tenth anniversary or the
date on which CVC beneficially owns fewer than 20% of the outstanding shares of
Common Stock and nonvoting common stock of the Company. Pursuant to the
agreement, CVC also has the right to appoint an observer who will be permitted
to attend all meetings of the Board of Directors and its committees. Although
such agreement provides for one designee of CVC to be nominated as a director
of the Company, both Mr. Thomas and Mr. Bradley are serving as designees of CVC
and Mr. Wiener has agreed to vote all shares of Common Stock owned by him for
the election of each of Mr. Thomas and Mr. Bradley as a director of the
Company.
3
<PAGE>
EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive officers
and certain other officers of the Company:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
- -------------------- ----- ----------------------------------------------------------------------------------
<S> <C> <C>
Arthur C. Wiener 61 Chairman of the Board, President and Chief Executive Officer
Robert McCormack 49 Executive Vice President and President -- Woven Division, Apparel Marketing Group
Charles A. Blalock 51 Executive Vice President of Manufacturing
Michael R. Harmon 51 Executive Vice President, Chief Financial Officer, Treasurer and Secretary
John J. Heldrich 46 Executive Vice President and President -- Swift Denim Group
Giuseppe Rodino 59 President -- Klopman Group
</TABLE>
Officers serve at the discretion of the Board of Directors.
Information regarding Mr. Wiener is included herein in the section
entitled "PROPOSAL 1 -- ELECTION OF DIRECTORS."
Mr. McCormack has been Executive Vice President of the Company since May
1992 and President of the Apparel Marketing Group of the Company's Woven
Division since April 1994. Mr. McCormack was Executive Vice President of the
Apparel Marketing Group of the Company's Woven Division from February 1988 to
April 1994. He was employed by Burlington as a merchandise manager from April
1986 to February 1988 and as a sales manager for finished goods from January
1985 to April 1986.
Mr. Blalock has been Executive Vice President of Manufacturing of the
Company since March 1990. He was Plant Manager of the Company's dyeing and
finishing plant located in Society Hill, South Carolina from February 1988 to
March 1990. Mr. Blalock was employed by Burlington in various line and staff
positions from September 1972 to February 1988, including most recently as
Plant Manager of the dyeing and finishing plant located in Society Hill from
February 1987 to February 1988.
Mr. Harmon has been Executive Vice President and Chief Financial Officer
of the Company since March 1991 and Secretary and Treasurer of the Company
since February 1988. He was Vice President of Finance of the Company from
February 1988 to March 1991. Mr. Harmon was employed by Burlington in various
accounting and financial capacities from May 1970 to February 1988, most
recently as Administrative Vice President and Controller from November 1987 to
February 1988.
Mr. Heldrich has been Executive Vice President of the Company since
February 1998 and President of the Company's Swift Denim Group since the
Company's acquisition of the divisions and subsidiaries comprising the Swift
Denim Group on January 29, 1998. Prior to the Company's acquisition of Swift
Denim, Mr. Heldrich had been President of Swift Denim since August 1994. He was
President of Swift Marketing Worldwide from July 1991 to August 1994. Mr.
Heldrich was President of the Fashion Apparel Division of Milliken & Company
Inc. in New York from 1987 through 1991. From 1974 to 1987, Mr. Heldrich held
various marketing and manufacturing positions at Milliken & Company Inc. in New
York, South Carolina, and the United Kingdom.
Mr. Rodino has been President of the Company's Klopman Group since the
Company's acquisition of the divisions and subsidiaries comprising the Klopman
Group on January 29, 1998. Mr. Rodino was President of Klopman from January
1993 to the Company's acquisition of Klopman. From April 1991 to January 1993,
Mr. Rodino was General Manager of C.D.I. for Ring Denim Fabrics and M.C.M. for
cotton fabrics for Leisurewear at the Imatessile Group. From June 1989 to April
1991, Mr. Rodino was Managing Director of Faema S.p.A. Between 1966 and 1989,
Mr. Rodino held various sales and managerial positions at Klopman Mills and
Klopman in New York, Rome and London.
4
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information as of December 21, 1998
regarding the ownership of Common Stock of the Company by (i) each person who
is known to the management of the Company to have been the beneficial owner of
more than 5% of the outstanding shares of the Company's Common Stock, (ii) each
director and nominee for director, (iii) each executive officer named in the
Summary Compensation Table contained herein, and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF POSITION WITH AMOUNT AND NATURE OF % OF
BENEFICIAL OWNER THE COMPANY BENEFICIAL OWNERSHIP CLASS
- --------------------------------------- --------------------------- ---------------------- ----------
<S> <C> <C> <C>
Citicorp Venture Capital, Ltd. None 4,629,502(1) 39.1%
399 Park Avenue
New York, New York 10043
Dimensional Fund Advisors, Inc. None 662,600(2) 5.6%
1099 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Arthur C. Wiener Chairman of the Board, 1,149,700(3) 9.3%
980 Avenue of the Americas President and Chief
New York, New York 10018 Executive Officer
Lee Abraham Director 11,100(4) *
Michael T. Bradley Director -- --
Paul G. Gillease Director 13,292(5) *
William deR. Holt Director 22,400(6) *
Howard S. Jacobs Director 23,600(7) *
William M. R. Mapel Director 24,000(8) *
Stephen C. Sherrill Director 125,947(9) 1.1%
David F. Thomas Director 56,708(10) *
Charles A. Blalock Executive Vice President 86,325(11) *
of Manufacturing
Michael R. Harmon Executive Vice President, 136,830(12) 1.1%
Chief Financial Officer,
Treasurer and Secretary
John J. Heldrich Executive Vice President 23,000(13) *
and President -- Swift
Denim Group
Robert McCormack Executive Vice President 95,000(14) *
and President -- Woven
Division, Apparel
Marketing Group
All directors and executive officers 1,767,902(15) 14.0%
as a group (13 persons)
</TABLE>
- ---------
* Less than one percent (1%).
(1) Based upon information contained in a Schedule 13G, as amended and filed
with the Securities and Exchange Commission (the "SEC") on March 13, 1998
(the "Schedule 13G") by Citicorp. CVC is a wholly-owned subsidiary of
Citibank, N.A.; Citibank, N.A. is a wholly-owned subsidiary of Citicorp
which is a wholly- owned subsidiary of Citigroup Inc. The Schedule 13G
indicates that neither Citicorp nor Citibank, N.A. have any dispositive
power or voting power with respect to any of the shares except through
CVC. Excludes shares of Common Stock owned by employees of CVC, as to
which CVC disclaims beneficial ownership.
(2) Based upon information contained in a Schedule 13G filed with the SEC on
February 10, 1998 (the "Schedule 13G") by Dimensional Fund Advisors Inc.
("Dimensional"). The Schedule 13G indicates that Dimensional has sole
dispositive power with respect to all of the shares, sole voting authority
with respect to 441,800 of the shares, and no voting
5
<PAGE>
authority with respect to 220,800 of the shares. All securities reported on
the Schedule 13G are owned by advisory clients of Dimensional, no one of
which to the knowledge of Dimensional beneficially owns more than 5% of the
outstanding shares of the Company's Common Stock. Dimensional disclaims
beneficial ownership of all such securities.
(3) Includes (i) 8,000 shares held by the Wiener Foundation, a not-for-profit
corporation controlled by Mr. Wiener and his immediate family members, and
(ii) 531,700 shares subject to currently exercisable stock options.
(4) Includes (i) 6,000 shares subject to currently exercisable stock options,
and (ii) 3,600 shares issued under and subject to the Company's 1996
Restricted Stock Plan (the "Restricted Stock Plan").
(5) Includes (i) 6,000 shares subject to currently exercisable stock options,
(ii) 5,435 shares issued under and subject to the Restricted Stock Plan,
and (iii) 500 shares held by Mr. Gillease's wife.
(6) Includes (i) 20,000 shares subject to currently exercisable stock options,
and (ii) 2,400 shares issued under and subject to the Restricted Stock
Plan.
(7) Includes (i) 20,000 shares subject to currently exercisable stock options,
and (ii) 3,600 shares issued under and subject to the Restricted Stock
Plan.
(8) Includes (i) 8,000 shares subject to currently exercisable stock options,
and (ii) 3,600 shares issued under and subject to the Restricted Stock
Plan.
(9) Includes (i) 11,000 shares subject to currently exercisable stock options,
and (ii) 5,435 shares issued under and subject to the Restricted Stock
Plan.
(10) Includes 13,500 shares subject to currently exercisable stock options.
(11) Includes (i) 53,100 shares subject to currently exercisable stock options,
and (ii) 23,225 shares held by Mr. Blalock's wife.
(12) Includes (i) 70,500 shares subject to currently exercisable stock options,
(ii) 17,000 shares held in a self-directed individual retirement account,
and (iii) 11,919 shares held by Mr. Harmon's wife.
(13) Includes 18,000 shares subject to currently exercisable stock options.
(14) Includes 62,000 shares subject to currently exercisable stock options.
Excludes 5,400 shares subject to currently exercisable stock options held
by Mr. McCormack's wife, as to which Mr. McCormack disclaims beneficial
ownership.
(15) Includes (i) 819,800 shares subject to currently exercisable stock
options, and (ii) 24,070 shares issued under and subject to the Restricted
Stock Plan. Excludes 5,400 shares subject to currently exercisable stock
options held by Mr. McCormack's wife, as to which Mr. McCormack disclaims
beneficial ownership.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who beneficially own
greater than 10% of a registered class of the Company's equity securities to
file certain reports ("Section 16 Reports") with the Securities and Exchange
Commission with respect to ownership and changes in ownership of the Common
Stock and other equity securities of the Company. Based solely on the Company's
review of the Section 16 Reports furnished to the Company and written
representations from certain reporting persons, all Section 16(a) requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with, except that (i) Mr. McCormack failed to report a grant of
stock options to purchase 2,500 shares to his wife in November 1996, but such
transaction was reported on a Form 4 for May 1998, and (ii) Mr. Mapel failed to
report a disposition of 130 shares by gift on March 4, 1997, but such
transaction was reported in an amended Form 5 for fiscal 1997.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes compensation paid by the Company during
fiscal 1996, 1997 and 1998 to the Company's Chairman of the Board, President
and Chief Executive Officer and its four other most highly compensated
executive officers (together, the "Named Executive Officers") for services
rendered in all capacities to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
OTHER ANNUAL
FISCAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2)
- ----------------------------- -------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
Arthur C. Wiener 1998 $600,000 $320,000 $ 96,000
Chairman of the 1997 550,000 377,000 113,100
Board, President and 1996 500,000 233,789 70,137
Chief Executive
Officer
Robert McCormack 1998 $267,919 $ 90,000 $ 27,000
Executive Vice President 1997 245,004 90,060 27,018
and President -- Woven 1996 232,502 63,480 19,044
Division, Apparel
Marketing Group
Charles A. Blalock 1998 $222,500 $ 90,000 $ 27,000
Executive Vice President 1997 193,340 90,060 27,018
of Manufacturing 1996 181,671 63,480 19,044
Michael R. Harmon 1998 $222,500 $ 90,000 $ 27,000
Executive Vice President, 1997 193,340 90,060 27,018
Chief Financial Officer, 1996 181,671 63,480 19,044
Treasurer and Secretary
John J. Heldrich (5) 1998 $275,228 $ 25,000 --
Executive Vice President,
President -- Swift Denim
Group
<CAPTION>
AWARDS PAYOUTS
----------------------------- ---------
RESTRICTED SECURITIES
STOCK UNDERLYING LTIP ALL OTHER
AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION ($) SARS(#) ($) ($)(3)
- ----------------------------- ------------ ---------------- --------- -------------
<S> <C> <C> <C> <C>
Arthur C. Wiener -- -- -- $ 3,602
Chairman of the -- -- -- 3,654
Board, President and -- 250,000(4) -- 2,977
Chief Executive
Officer
Robert McCormack -- -- -- $ 3,397
Executive Vice President -- -- -- 3,414
and President -- Woven -- 75,000(4) -- 3,529
Division, Apparel
Marketing Group
Charles A. Blalock -- -- -- $ 3,325
Executive Vice President -- -- -- 2,208
of Manufacturing -- 75,000(4) -- 2,325
Michael R. Harmon -- -- -- $ 3,325
Executive Vice President, -- -- -- 3,333
Chief Financial Officer, -- 75,000(4) -- 3,450
Treasurer and Secretary
John J. Heldrich (5) -- 30,000(6) -- $ 2,171
Executive Vice President,
President -- Swift Denim
Group
</TABLE>
- ---------
(1) Reflects cash bonuses accrued under the Company's Incentive Bonus Plan.
(2) Reflects deferred compensation incentive awards granted under the Company's
Deferred Compensation Program, a non-qualified, unfunded plan established
in fiscal 1994 by the Company under which certain executives are awarded
deferred compensation. The plan participants will only be vested in the
current year award upon the completion of five years of service after the
date of the award, upon normal retirement, upon involuntary termination
for reasons other than violations of Company policies, theft or
misappropriation of the Company's assets or performance of any act which
harms the Company, or upon permanent and total disability or death,
whichever occurs first. In the event of retirement, involuntary
termination for reasons other than as described above, or disability, any
unpaid deferred awards will be vested and paid upon the completion of five
years after the date of the award. Upon the death of a participant, the
Company has the option to either immediately pay the award to the
participant's estate or pay the award upon the completion of five years
after the date of the award.
(3) Includes the Company's contributions to its Savings and Profit Sharing
Plan, a qualified defined contribution plan which covers all full time
employees who have completed a certain minimum amount of service, and life
insurance premiums paid by the Company with respect to term life insurance
on the life of the named persons. Contributions to the Savings and Profit
Sharing Plan (i) for fiscal 1998 were as follows: Mr. Wiener -- $2,978;
Mr. McCormack -- $2,978; Mr. Blalock -- $2,978; and Mr. Harmon -- $2,978;
(ii) for fiscal 1997 were as follows: Mr. Wiener -- $3,030; Mr. McCormack
-- $3,030; Mr. Blalock -- $1,905; and Mr. Harmon -- $3,030; and (iii) for
fiscal 1996, such contributions were as follows: Mr. Wiener -- $2,353;
Mr. McCormack -- $3,165; Mr. Blalock -- $2,040; and Mr. Harmon -- $3,165.
Life insurance premiums paid by the Company with respect to term life
insurance on the life of the named persons (a) for fiscal 1998 were as
follows: Mr. Wiener -- $624; Mr. McCormack -- $419; Mr. Blalock -- $347;
and Mr. Harmon -- $347; (b) for fiscal 1997 were as follows: Mr. Wiener --
$624; Mr. McCormack -- $384; Mr. Blalock -- $303; and Mr. Harmon --
7
<PAGE>
$303; and (c) for fiscal 1996 such premiums were as follows: Mr. Wiener --
$624; Mr. McCormack -- $364; Mr. Blalock -- $285; and Mr. Harmon -- $285.
The premium paid by the Company with respect to split-dollar life insurance
on the life of Mr. Heldrich for fiscal 1998 was $507. In addition, the
premium paid by the Company with respect to term life insurance on the life
of Mr. Heldrich for fiscal 1998 was $1,664.
(4) Reflects options to purchase shares of Common Stock granted to such persons
under the Company's Amended and Restated 1989 Stock Option Plan (the "1989
Stock Option Plan") in July 1996 at an exercise price of $10.375 per
share. Such options vested at the rate of 20% of such options when the
market price per share of the Common Stock equaled or exceeded $15.00,
$17.50, $20.00, $22.50 and $25.00.
(5) Mr. Heldrich has been employed by the Company since the acquisition by the
Company of Swift Denim on January 29, 1998, and all amounts listed reflect
compensation paid to, or earned by, Mr. Heldrich since such date.
(6) Reflects options to purchase shares of Common Stock granted to Mr. Heldrich
under the 1989 Stock Option Plan in February 1998 at an exercise price of
$15.688 per share. Such options vest at the rate of 20% of such options
when the market price per share of the Common Stock equals or exceeds
$20.00, $22.50, $25.00, $27.50 and $30.00.
The following table sets forth information for each of the Named Executive
Officers with respect to stock options granted to such executive officers
during the fiscal year ended October 3, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------
NUMBER PERCENT OF
OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION GRANT DATE
NAME (#) YEAR ($/SH) DATE VALUE ($)
- ---------------------- --------------- ----------- ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
Arthur C. Wiener -- -- -- -- --
Robert McCormack -- -- -- -- --
Charles A. Blalock -- -- -- -- --
Michael R. Harmon -- -- -- -- --
John J. Heldrich 30,000(1) 38.7% $ 15.688 (2) $ 102,780(3)
</TABLE>
- ---------
(1) Reflects options to purchase shares of Common Stock granted to such persons
under the 1989 Stock Option Plan.
(2) Such options expire on February 9, 2008; provided that, to the extent any
portion of such option is not vested on February 9, 2003, such non-vested
portion expires on February 9, 2003.
(3) The grant date value was estimated using a modified Black-Scholes
option-pricing model, which in addition to the traditional inputs, takes
into consideration the target stock price (or barrier) which must be
attained. The following assumptions were incorporated into the model:
weighted average risk-free interest rate of 5.43%; expected dividend yield
of 0%; expected lives ranging from 1.42 to 3.17 years; and volatility of
34%.
The following table sets forth information for each of the Named Executive
Officers with respect to the aggregate stock options exercised during the
fiscal year ended October 3, 1998, and stock options held as of October 3,
1998.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END($)(1)
SHARES --------------- --------------
ACQUIRED
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ---------------------- ------------ ------------- --------------- --------------
<S> <C> <C> <C> <C>
Arthur C. Wiener -- -- 531,700/0 $1,464,194/0
Robert McCormack 20,000 $285,894 62,000/0 89,000/0
Charles A. Blalock 50,100 686,165 53,100/0 75,094/0
Michael R. Harmon 23,500 413,027 82,500/0 234,371/0
John J. Heldrich -- -- 18,000/12,000 0/0
</TABLE>
(1) Based upon the closing price of the Common Stock of $11.9375 on October 2,
1998, less the exercise price.
RETIREMENT PLAN
The Company's Retirement Plan (the "Retirement Plan") covers all full-time
domestic employees (excluding employees of Swift Denim) who have completed at
least 1,000 hours of service during a period of 12 consecutive months beginning
on such employees' employment commencement date (or the anniversary thereof).
The Retirement Plan recognizes credited service with Burlington for membership
eligibility and vesting purposes only. Under the terms of the Retirement Plan
(prior to its amendment effective April 1, 1992), employees contributed at the
rate of 1.5% of the first $6,600 of compensation in a plan year and 3% of
compensation in excess of $6,600, up to a compensation limit which was adjusted
annually. The Company's contributions, if any, were determined annually on an
actuarial basis. An employee's annual pension benefit payable at normal
retirement date (the first day of the month following the month in which the
employee's 65th birthday occurs) was equal to one-half of the employee's total
contribution while a member of the Retirement Plan. Such benefit is payable in
equal monthly installments for the life of the employee.
A reduced pension benefit is payable upon (i) early retirement at or after
age 55, (ii) death, (iii) disability, (iv) termination of employment after
completing five years of vesting service, or (v) termination due to lack of
work. Employees are always vested in their contributions. The normal form of
benefit payment is a straight life annuity for unmarried employees and a
(reduced) joint and survivor annuity for those who are married. Benefits may
also be received at the employee's election in the form of a lump sum payment
which is the present value of the employee's accrued benefit.
Effective as of April 1, 1992, the Retirement Plan was amended to provide
that employee contributions are neither required nor permitted. Under the
revised plan, the amount of a participant's annual retirement benefits (to be
paid in monthly installments) equals the sum of (i) the accrued benefit
determined under the formula described above as of March 31, 1992, and (ii) (a)
1% of a participant's average annual compensation paid on and after April 1,
1992, plus (b) 0.5% of a participant's average annual compensation in excess of
his or her Social Security covered compensation, multiplied by his or her years
of service completed after March 31, 1992 (not in excess of 35 years). The
compensation described in (ii) above was limited to $160,000 in fiscal 1998.
The estimated annual benefits payable upon retirement at normal retirement
age (assuming no increase in present salary levels) to the Named Executive
Officers are as follows: Arthur C. Wiener -- $40,198; Robert McCormack --
$55,384; Charles A. Blalock -- $47,948; Michael R. Harmon -- $47,191. During
fiscal 1998 John J. Heldrich was covered under Swift Denim's Defined Benefit
Pension Plan. This plan is a step rate plan and the maximum covered
compensation used to calculate his benefits in calendar year 1998 under this
plan, as permitted by law, was $160,000. As a result of the Company's
acquisition of Swift Denim on January 29, 1998, the Company assumed the
obligations under such plan. The estimated annual amount payable to Mr.
Heldrich upon retirement at normal retirement age (assuming no increase in
present salary levels) under such plan is $17,856. Effective January 1, 1999,
Swift Denim's Defined Benefit Pension Plan will be amended to include all
domestic employees of the Company, except for hourly employees of Swift Denim,
who are covered under separate plans.
9
<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective for fiscal 1994, the Company established a non-qualified,
unfunded supplementary retirement plan under which the Company will pay
supplemental pension benefits to key executives. The plan is intended to
supplement retirement benefits received under the Retirement Plan and from
Social Security. The amounts set forth in the table below represent total
annual pension benefits received under the Supplemental Executive Retirement
Plan, the Retirement Plan and Social Security which are payable monthly upon
retirement at age 65 or older for the participant's lifetime. The pension
benefits payable under the Supplemental Executive Retirement Plan are based on
a straight life annuity and are reduced for both Social Security benefits and
the annual benefit payable from the Retirement Plan. A discount of five percent
per year is applied for retirement before age 65.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE OF FINAL FIVE CONSECUTIVE ----------------------------------------------------------------------------
YEARS OF COMPENSATION 5 10 15 20 25 30
- ---------------------------------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
$200,000 $17,500 $ 35,000 $ 52,500 $ 70,000 $ 87,500 $105,000
250,000 21,875 43,750 65,625 87,500 109,375 131,250
300,000 26,250 52,500 78,750 105,000 131,250 157,500
350,000 30,625 61,250 91,875 122,500 153,125 183,750
400,000 35,000 70,000 105,000 140,000 175,000 210,000
450,000 39,375 78,750 118,125 157,500 196,875 236,250
500,000 43,750 87,500 131,250 175,000 218,750 262,500
550,000 48,125 96,250 144,375 192,500 240,625 288,750
600,000 52,500 105,000 157,500 210,000 262,500 315,000
650,000 56,875 113,750 170,625 227,500 284,375 341,250
700,000 61,250 122,500 183,750 245,000 306,250 367,500
750,000 65,625 131,250 196,875 262,500 328,125 393,750
800,000 70,000 140,000 210,000 280,000 350,000 420,000
850,000 74,375 148,750 223,125 297,500 371,875 446,250
900,000 78,750 157,500 236,250 315,000 393,750 472,500
950,000 83,125 166,250 249,375 332,500 415,625 498,750
</TABLE>
The average of the final five consecutive years of compensation includes
the participant's salary and bonus. The Named Executive Officers have each been
credited with approximately ten years of service, except Mr. Heldrich, who has
been credited with approximately seven years of service. The net pension cost
for fiscal 1998 was $307,240 for approximately 20 employees participating in
the Supplemental Executive Retirement Plan.
SEVERANCE PLAN
Under the Company's Severance Plan, the Company makes payroll severance
payments and vacation severance payments to eligible full-time salaried
employees who are involuntarily terminated from the Company. The right to
receive payroll severance benefits does not vest until termination of
employment, as determined by eligibility and benefit schedules in effect on the
date of termination, which may be changed by the Company at any time. Vacation
severance payments are based upon a person's length of continuous employment
with the Company, less vacation taken during the calendar year. If a Company
facility is sold as an ongoing business, an employee of such facility remaining
employed by the Company until the effective date of such sale is eligible for
severance benefits if such employee (i) is not offered employment by the
purchaser or successor employer or (ii) refuses an offer of employment in a
less than comparable position or for less than a substantially equivalent base
salary. Employees who continue to be employed by the successor entity are not
eligible for severance benefits.
As of October 3, 1998, the Named Executive Officers were eligible to
receive the following amounts in the event of involuntary termination: Arthur
C. Wiener -- $250,000; Robert McCormack -- $100,000; Charles A. Blalock --
$160,000; and Michael R. Harmon -- $160,000. Mr. Heldrich is not currently
eligible to receive a severance payment under such plan in the event of his
involuntary termination.
10
<PAGE>
SEVERANCE AGREEMENT
In connection with the Company's acquisition of Swift Denim in January
1998, the Company assumed certain obligations to John Heldrich as a result of
certain change of control provisions of a severance agreement, dated April 29,
1996, between Dominion Textile Inc. ("Dominion"), Swift Denim's parent prior to
the acquisition, and Mr. Heldrich.
Pursuant to the terms of the agreement, as assumed by the Company, if,
prior to December 19, 1999, Mr. Heldrich's employment with the Company is
terminated (i) by the Company for reasons other than his death, his retirement,
his disability, or for "cause" (as defined in the agreement), (ii) by Mr.
Heldrich for "good reason" (as defined below), or (iii) by mutual consent of
Mr. Heldrich and the Company, Mr. Heldrich generally will be entitled to
receive from the Company, (a) an amount equal to the base salary that he was
receiving prior to the date that he is given notice of such termination to the
extent not yet paid to the date of his termination plus any annual benefits or
awards, pro-rated to the date of his termination to the extent that any targets
necessary to obtain such awards have been achieved, (b) a severance payment, in
cash, in an amount equal to two times the aggregate of his base salary plus the
then current cash value of the non-cash benefit plans that Mr. Heldrich was
participating in prior to the change of control (the "Change of Control") of
Dominion on December 19, 1997 plus the average of the annual bonus that Mr.
Heldrich received in the two years immediately preceding the date of his
termination, and (c) any amounts owing to him under Dominion's Executive
Retirement Income Plan ("ERIP"), Supplemental Executive Retirement Plan
("SERP"), or other accrued benefits under any benefit plan of Dominion (the
"Dominion Benefit Plans") that was in effect prior to the Change of Control
(other than Dominion's registered pension plans) that have not been fully paid
or funded in accordance with their respective terms to an irrevocable trust
over which the Company retains no discretion. In such a case, any pension
benefits that have accrued (or that would have accrued by December 19, 1999)
for the benefit of Mr. Heldrich under the SERP or ERIP will be fully vested
without regard to age or service qualification. In addition, any amounts owed
by Mr. Heldrich to the Company pursuant to any loan made by Dominion to Mr.
Heldrich will generally not become due or payable for five years after the date
of his termination. Mr. Heldrich's current annual base salary is $450,000 and
he received annual bonuses of $60,000 and $60,000 in fiscal 1998 and 1997,
respectively. In addition, Mr. Heldrich is not owed any amounts under the ERIP
and is currently owed an aggregate of $284,813 under the SERP.
For purposes of the agreement, "good reason" means (i) a reduction by the
Company of Mr. Heldrich's base salary or the percentage opportunity for cash
and non-cash incentive compensation as in effect immediately prior to the
Change of Control, (ii) an adverse change in Mr. Heldrich's status, position,
salary group or scope of responsibility, (iii) the failure by the Company to
continue in effect any Dominion Benefit Plan in which Mr. Heldrich was
participating prior to the Change of Control or the taking of any action (or
failure to act) by the Company which would adversely affect his continued
participation in any such benefit plan on at least as favorable a basis to him
as was the case immediately prior to the Change of Control or which would
materially reduce his benefits in the future under any such benefit plan or
deprive him of any material employment related benefit enjoyed by him
immediately prior to the Change of Control, (iv) the Company requiring Mr.
Heldrich to regularly report for employment at an office located anywhere in
excess of 30 kilometers from where his office was located immediately prior to
the Change of Control, (v) the failure by the Company to provide and credit Mr.
Heldrich with the number of paid vacation days to which he is entitled and at
the times at which he is entitled to them in accordance with Dominion's normal
policies in effect immediately prior to the Change of Control, (vi) the failure
by the Company to pay or cause to be paid to Mr. Heldrich any amounts due to
him under the terms of any of the Dominion Benefit Plans or the failure of the
Company to fund Dominion's SERP after a decision of the Company's Board of
Directors that it is in the Company's best interests to do so, (vii) any
refusal by the Company to continue to allow Mr. Heldrich to attend to matters
or engage in activities not directly related to the business of Dominion which,
prior to the Change of Control, he was permitted by Dominion's Board of
Directors or Chief Executive Officer to attend to or engage in, or (viii) the
failure by the Company to obtain the assent to the severance agreement by any
successor of the Company.
Pursuant to the agreement, if Mr. Heldrich's employment with the Company
is terminated by the Company for "cause", the Company will pay to Mr. Heldrich
his base salary through the date of his termination plus any benefits or awards
(including the cash value of any benefit plan) which will have been earned by
or payable to him, but which will not yet have been paid to him.
COMPENSATION OF DIRECTORS
Pursuant to the Company's Restricted Stock Plan and 1989 Stock Option Plan
as in effect in fiscal 1998, each of the Company's directors who is not an
employee of the Company makes an irrevocable election (i) to receive annually
and at the time such person becomes a director either (a) options to purchase
up to 2,000 shares of Common Stock granted under the Company's 1989 Stock
Option Plan or (b) 1,200 shares of Common Stock issued pursuant to the
Company's Restricted Stock
11
<PAGE>
Plan, and (ii) on or prior to December 1 of each calendar year (with respect to
each succeeding calendar year) or at the time such person becomes a director,
to receive all of his or her annual director's fee for the applicable calendar
year, (a) in cash in the amount of $20,000, or (b) in the form of a grant of
stock options to purchase up to 2,500 shares of Common Stock under the
Company's 1989 Stock Option Plan, or (c) in the form of a combination of
$10,000 in cash plus an amount of shares of Common Stock issued under the
Restricted Stock Plan having an aggregate fair market value on the date of
issuance equal to $15,000; PROVIDED, HOWEVER, that in the event any person
makes such election at the time he or she becomes a director, such non-employee
director shall receive a PRO RATA portion of his or her annual director's fee
(whether in cash, stock options granted under the Stock Option Plan or a
combination of cash and shares of Common Stock issued under the Restricted
Stock Plan) based upon the remaining portion of the calendar year in which such
person becomes a director. In addition, each non-employee director receives
$1,000 for each Board committee meeting attended (other than for a Board
committee meeting held on the same date as a meeting of the Board of
Directors). During fiscal 1998, each of Messrs. Abraham, Gillease, Jacobs,
Mapel and Sherrill were issued 1,200 shares of Common Stock under the
Restricted Stock Plan. In addition, the Company paid to each of Messrs.
Abraham, Gillease, Holt, Jacobs, Mapel and Sherrill $8,790.24 in payment of a
portion of their income tax liability as a result of receiving such shares
under the Restricted Stock Plan. In February 1998, each of Messrs. Thomas and
Holt was granted options under the 1989 Stock Option Plan to purchase 2,000
shares of Common Stock at an exercise price of $18.313 per share. Messrs.
Abraham, Holt, Jacobs and Mapel each received an annual director's fee of
$20,000 and, in lieu of such annual cash director's fee, (i) Mr. Thomas was
granted options in January 1998 to purchase up to 2,500 shares of Common Stock
under the Company's 1989 Stock Option Plan and (ii) Messrs. Gillease and
Sherrill each received, in January 1998, a combination of $10,000 in cash and
843 shares of Common Stock issued under the Restricted Stock Plan.
The Company has adopted, subject to stockholder approval, the 1999 Stock
Option Plan whereby each non-employee director of the Company makes an
irrevocable election (i) to receive annually and at the time such person
becomes a director either (a) options to purchase up to 2,000 shares of Common
Stock or (b) an amount of shares of Common Stock issued pursuant to the
Company's Restricted Stock Plan having an aggregate fair market value on the
date of issuance equal to $18,000, and (ii) on or prior to December 1 of each
calendar year or at the time such person becomes a director, to receive all of
his or her annual director's fee, beginning for the 1999 calendar year, (a) in
cash in the amount of $20,000, or (b) in the form of a grant of stock options
to purchase 2,500 shares of Common Stock, or (c) in the form of a combination
of $10,000 in cash plus an amount of shares of Common Stock issued under the
Restricted Stock Plan having an aggregate fair market value on the date of
issuance equal to $15,000; PROVIDED, HOWEVER, that in the event any person
makes such election at the time he or she becomes a director, such non-employee
director shall receive a PRO RATA portion of his or her annual director's fee
(whether in cash, stock options or a combination of cash and shares of Common
Stock issued under the Restricted Stock Plan) based upon the remaining portion
of the calendar year in which such person becomes a director.
Additional information regarding the proposed 1999 Stock Option Plan is
included herein in the section entitled "PROPOSAL 2 -- APPROVAL OF 1999 STOCK
OPTION PLAN."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three non-employee directors and has general oversight, review and
approval responsibilities with respect to the compensation of the Company's
executive officers. The Committee has on occasion engaged an independent
consultant to assist it in carrying out its duties, particularly as such duties
relate to the structure and competitive positioning of the Company's
compensation program.
The Company's executive compensation program is designed to attract and
retain qualified executives with competitive levels of compensation that are
related to performance goals and which recognize individual initiative and
accomplishments. The principal components of the Company's executive
compensation program are fixed compensation in the form of base salary,
variable compensation in the form of annual cash incentive bonuses, stock
options and awards under the Company's Deferred Compensation Program. The
Company does not have employment agreements with any of its executive officers,
except for a severance agreement with John J. Heldrich, which agreement was
assumed by the Company as a result of the acquisition by the Company of Swift
Denim in January 1998.
The Company is subject to Section 162(m) of the Internal Revenue Code of
1986, as amended, which limits the deductibility of certain compensation
payments to its executive officers. The Company does not have a policy
requiring the Compensation Committee to qualify all compensation for
deductibility under this provision. The Compensation Committee, however,
considers the net cost to the Company in making all compensation decisions and
will continue to evaluate the impact of this provision on its compensation
programs.
12
<PAGE>
BASE SALARY. Mr. Wiener, the Company's Chairman of the Board, President
and Chief Executive Officer, makes recommendations to the Committee regarding
the base salaries of all executive officers. Following the Committee's
discussion, review and, if necessary, modification of such recommendations, the
base salaries of all executive officers are approved by the Committee. The
Committee considers various factors in its review, including the executive
officer's job responsibilities and performance, experience and years of service
with the Company, the business outlook for the Company and a comparison of base
salaries for comparable positions at other textile manufacturing and general
industrial companies of approximately the same size based on revenues. The
Committee believes that base salaries of executive officers are competitive
with respect to such group of companies. Salary adjustments are based on an
annual evaluation of the performance of the Company and each executive officer,
and take into account any new responsibilities of the executive.
ANNUAL INCENTIVE BONUS. The Company has an Incentive Bonus Plan (the
"Incentive Plan"), pursuant to which incentive cash bonuses are payable
annually to executive officers and certain other key employees based upon the
amount by which the Company's earnings before interest, taxes, depreciation and
amortization ("EBITDA") for each fiscal year exceed established targets and, in
some cases, certain specific performance criteria for individual participants.
The performance criteria are based upon the Company achieving measurable
performance goals in a participant's principal area of responsibility, such as
marketing and manufacturing. Under the Incentive Plan, a significant portion of
each participant's total compensation is at risk and is dependent upon the
Company's overall financial performance and such participant's individual
accomplishments.
The Incentive Plan is reviewed annually by the Committee and is thereafter
presented, with the Committee's recommendations, to the Company's Board of
Directors for its approval. The initial recommendation of targeted EBITDA
levels is made at the beginning of each fiscal year by the Chairman of the
Board, President and Chief Executive Officer of the Company and, following
discussion, review and, at times, modification, is approved by the Committee
and the Board of Directors. In addition, the aggregate amount available to be
paid under the Incentive Plan is approved by the Committee and the Board of
Directors and is increased by specified percentages as the amount the Company's
actual EBITDA exceeds the established target level up to a certain prescribed
maximum. The Chairman of the Board, President and Chief Executive Officer
designates, at the beginning of each fiscal year, the maximum percentage (the
"incentive percentage") of the bonus that each participant may receive if the
Company's EBITDA equals or exceeds the established target level. In addition,
with respect to certain participants, their right to receive a portion of such
incentive percentage is dependent upon achieving the performance criteria
established for such participants, as described above. Such incentive
percentages are reviewed and approved by the Committee. In the event the
Company does not achieve the threshold level of EBITDA for the fiscal year, the
executive officers of the Company and the other participants in the Incentive
Plan, with the exception of the Chairman of the Board, President and Chief
Executive Officer, may be awarded a cash amount based on specific performance
criteria, as recommended by the Chairman of the Board, President and Chief
Executive Officer and approved by the Committee.
In addition, the Company has a Deferred Compensation Program (the
"Deferred Plan"), a non-qualified, unfunded plan under which executive officers
and other key executives receive annually a deferred compensation award. Under
the Deferred Plan, which was approved by the Company's Board of Directors upon
the Committee's recommendations, an aggregate amount available to be awarded
annually under the Deferred Plan was established (the "deferred pool"). Each
executive is entitled to receive an annual deferred compensation award in an
amount equal to 30% of the amount of such executive's incentive cash bonus
award under the Incentive Plan for such year. In the event that the aggregate
amount of all deferred compensation awards as calculated in accordance with
such formula exceeds the amount of the deferred pool, the amount of each
executive's deferred compensation award will be reduced pro rata so that the
total of all such awards do not exceed the amount of the deferred pool.
Participants in the Deferred Plan will only be vested in the current year award
upon the completion of five years of service after the date of the award, upon
normal retirement, upon involuntary termination for reasons other than
violations of Company policies, theft or misappropriation of the Company's
assets or performance of any act which harms the Company, or upon permanent and
total disability or death, whichever occurs first. In the event of retirement,
involuntary termination for reasons other than as described above, or
disability, any unpaid deferred awards will be vested and paid upon the
completion of five years after the date of the award. Upon the death of a
participant, the Company has the option to either immediately pay the award to
the participant's estate or pay the award upon the completion of five years
after the date of the award.
13
<PAGE>
STOCK OPTIONS. The Committee believes that the significant equity
interests in the Company held by the Company's executive officers have served
to link the interests of the executives with those of the stockholders. Under
the Company's 1989 Stock Option Plan and under the Company's proposed 1999
Stock Option Plan, options to purchase shares of Common Stock were, and may be,
granted to the executive officers of the Company. The Committee believes that
the grant of stock options will continue as an important component of the
Company's executive compensation program.
In July 1996, the Committee approved a new stock option program designed
to focus the efforts of the Company's management team and other key employees
towards enhancing stockholder value. The intent of this special program is to
signal to the Company's executive officers, other members of the management
team and other key employees that, while they had performed exceptionally well
in the past, the benefits to be derived from the receipt of stock options in
the future should be tied to the market price of the Company's Common Stock in
order to promote the creation of stockholder value. As a result, the decision
was made to grant stock options to the executive officers and other members of
the Company's management team and its key employees which would vest upon the
market price per share of the Company's Common Stock achieving certain levels;
the Company's option grants in the past provided for vesting over time. During
fiscal 1998, no stock options were granted to any of the Named Executive
Officers except for John J. Heldrich. In connection with Mr. Heldrich becoming
an executive officer of the Company upon the consummation of the acquisition by
the Company of Swift Denim, Mr. Heldrich was granted options in February 1998
under the 1989 Stock Option Plan to purchase 30,000 shares of Common Stock at
an exercise price of $15.688 per share. Such options vest at the rate of 20% of
such options when the market price per share of Common Stock equals or exceeds
$20.00, $22.50, $25.00, $27.50 and $30.00. All such options expire on February
9, 2008; provided that, to the extent any portion of such options is not vested
on February 9, 2003, such non-vested portion expires on such date.
CHIEF EXECUTIVE OFFICER COMPENSATION. Compensation for Mr. Wiener, the
Company's Chairman of the Board, President and Chief Executive Officer, is
generally established in accordance with the principles described above. The
Committee reviews Mr. Wiener's performance and establishes his base salary
considering the various factors described above for executive officers. The
amount of Mr. Wiener's annual incentive cash bonus under the Incentive Plan is
based upon whether the Company's overall performance meets or exceeds targets
established in the Company's business plan which is approved by the Board of
Directors at the beginning of each fiscal year. Mr. Wiener's base salary
increased by $50,000 for fiscal 1998 as compared to fiscal 1997, and increased
by $50,000 for fiscal 1997 as compared to fiscal 1996. The amount of his annual
incentive cash bonus has fluctuated depending upon the EBITDA levels achieved
by the Company.
The Compensation Committee of the Board
of Directors
Lee Abraham
Paul G. Gillease
William deR. Holt
14
<PAGE>
PERFORMANCE COMPARISON
The following graph compares, from October 1, 1993 (the last trading day
before the commencement of the Company's fifth fiscal year preceding fiscal
1998), the cumulative total stockholder return on the Common Stock with the
cumulative total returns of the S&P 500 Index and a peer group. The graph
assumes that the value of the investment in the Common Stock and each index was
$100 on October 1, 1993 and that all dividends were reinvested.
The peer group is comprised of the following domestic textile
manufacturers: Burlington Industries, Inc.; Cone Mills Corporation, Inc.; Delta
Woodside Industries, Inc.; Dyersburg Corporation; Forstmann & Company, Inc.;
Guilford Mills, Inc.; Lida Inc. (which is included in the peer group until
August 31, 1995, the date the securities of Lida Inc. ceased trading); Springs
Industries, Inc.; and Texfi Industries, Inc. The return of each Company in the
peer group has been weighted according to its respective stock market
capitalization. Data for the graph were provided by Standard & Poor's Compustat
Services, Inc.
Plot points appear below for chart:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
----------------------------------------------
COMPARISON OF CUMULATIVE TOTAL RETURN
GALEY & LORD, INC., S&P 500 & PEER GROUP
----------------------------------------------
[PERFORMANCE GRAPH]
---------------------------------------------------------------------------------------------------------------
BASE PERIOD
SEPT. 1993 SEPT. 1994 SEPT. 1995 SEPT. 1996 SEPT. 1997 SEPT. 1998
<S> <C> <C> <C> <C> <C> <C>
GALEY & LORD $100.00 $184.27 $123.60 $115.73 $169.66 $107.31
S & P 500 $100.00 $103.69 $134.53 $161.88 $227.36 $247.92
PEER GROUP $100.00 $89.71 $94.73 $85.40 $116.72 $73.40
---------------------------------------------------------------------------------------------------------------
</TABLE>
RELATED TRANSACTIONS
The law firm of Rosenman & Colin LLP, New York, New York, of which Howard
S. Jacobs, a director of the Company, is a member, has acted as counsel to the
Company since March 1994. Legal fees for services rendered by Rosenman & Colin
LLP to the Company during the fiscal year ended October 3, 1998 did not exceed
5% of the revenues of such firm for its most recent fiscal year.
15
<PAGE>
PROPOSAL 2 -- APPROVAL OF 1999 STOCK OPTION PLAN
In December 1998, the Board of Directors of the Company adopted, subject
to the approval of the stockholders of the Company, the 1999 Stock Option Plan
of Galey & Lord, Inc. (the "1999 Stock Option Plan") under which options to
purchase a total of 500,000 shares of Common Stock will be reserved for
issuance to officers, directors, consultants and certain employees of the
Company and its subsidiaries.
The purpose of the 1999 Stock Option Plan is to secure for the Company and
its stockholders the benefits arising from stock ownership by officers,
directors, consultants and certain employees of the Company and its
subsidiaries who are expected to contribute to the Company's future growth and
success, to attract new individuals to enter into service or employment with
the Company and its subsidiaries and to encourage such individuals to secure or
increase on reasonable terms their stock ownership in the Company. The Board of
Directors of the Company believes that the granting of options under the 1999
Stock Option Plan will promote continuity of management and increase incentive
and personal interest in the welfare of the Company by those who are or may
become primarily responsible for shaping and carrying out the long range plans
of the Company and its subsidiaries and securing the Company's continued growth
and financial success. In addition, the Company's 1989 Stock Option Plan
expires in 1999.
The stockholders are required to vote on and approve the adoption of the
1999 Stock Option Plan. The Board of Directors believes that it is in the best
interest of the Company and its stockholders to approve the adoption of the
1999 Stock Option Plan. Assuming a quorum is present, a vote of a majority of
the votes cast at the Meeting, in person or by proxy, is required to approve
the adoption of the 1999 Stock Option Plan. Abstentions and broker non-votes
are not counted as votes cast.
The following summary of certain features of the 1999 Stock Option Plan is
qualified in its entirety by reference to the full text of the 1999 Stock
Option Plan, which is attached to this Proxy Statement as Exhibit A.
DESCRIPTION OF THE 1999 STOCK OPTION PLAN
The 1999 Stock Option Plan provides for the grant of stock options,
covering up to an aggregate of 500,000 shares of Common Stock.
The 1999 Stock Option Plan will be administered by members of the
Company's Board of Directors who are intended to be "non-employee directors"
within the meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of
1934, as amended, and "outside directors" within the contemplation of Section
162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as amended (the "Code").
Under the 1999 Stock Option Plan, options to purchase shares of Common Stock
may be granted to officers, directors, consultants and certain employees of the
Company and its subsidiaries at the discretion of such members of the Board of
Directors. In addition, subject to certain limitations, such members of the
Board of Directors will determine the number of options to be granted to such
persons, the exercise price applicable to each such option, the times when such
options shall become exercisable and the duration of the exercise periods. Such
members of the Board of Directors will also have the authority to generally
interpret the 1999 Stock Option Plan. Under the 1999 Stock Option Plan, such
members of the Board of Directors may delegate authority to the Chief Executive
Officer of the Company to act on its behalf and administer the 1999 Stock
Option Plan with respect to certain employees of the Company who are not
officers of the Company, provided that (i) the Chief Executive Officer may not
grant options to purchase more than an aggregate of 100,000 shares of Common
Stock in any one calendar year and (ii) unless otherwise determined by such
members of the Board of Directors, no single employee may be granted options to
purchase more than 5,000 shares of Common Stock in any one calendar year. The
1999 Stock Option Plan provides for the grant of (i) options that are intended
to qualify as incentive stock options ("Incentive Stock Options") within the
meaning of Section 422 of the Code to certain employees (including officers and
directors who are employees) and (ii) options not intended to so qualify
("Non-Qualified Stock Options") to the Company's employees, officers, directors
and consultants.
The 1999 Stock Option Plan provides that each non-employee director of the
Company make, on or prior to December 1 for the subsequent year, an irrevocable
election in writing to receive annually and at the time such person first
becomes a director either (i) options (subject to availability) to purchase up
to 2,000 shares of Common Stock, or (ii) an amount of shares of Common Stock
issued pursuant to the Company's Restricted Stock Plan (subject to
availability) having a fair market value (as defined in the 1999 Stock Option
Plan) on the date of issuance equal to $18,000. Such options would become
exercisable one year after the date of the grant at an exercise price per share
equal to the fair market value of a share of Common Stock on the date of the
grant and remain outstanding, unless exercised, for ten years from the date of
the grant. Generally, the fair market value of a share of Common Stock will be
the last reported sale price for the Common Stock on the New York Stock
Exchange.
16
<PAGE>
In addition, the 1999 Stock Option Plan provides that each non-employee
director of the Company make, on or prior to December 1 for the subsequent
calendar year or at the time such person becomes a director, an irrevocable
election in writing to receive all of his or her annual director's fee for such
calendar year (i) in cash in the amount of $20,000, or (ii) in the form of a
grant under the 1999 Stock Option Plan (subject to availability) of stock
options to purchase 2,500 shares of Common Stock, or (iii) in the form of a
combination of $10,000 in cash plus the issuance of an amount of shares of
Common Stock under the Restricted Stock Plan (subject to availability) having a
fair market value on the date of issuance equal to $15,000; PROVIDED, HOWEVER,
that in the event that any person makes such election at the time he or she
becomes a director, such non-employee director shall receive a PRO RATA portion
of his or her annual director's fee (whether in cash, stock options granted
under the 1999 Stock Option Plan or a combination of cash and shares of Common
Stock issued under the Restricted Stock Plan) based upon the remaining portion
of the calendar year in which such person becomes a director. All such options
would become exercisable one year after the date of the grant at an exercise
price per share equal to the fair market value of a share of Common Stock on
the date of the grant and, to the extent not exercised, remain outstanding for
ten years.
Options granted under the 1999 Stock Option Plan are nontransferable other
than by will or the laws of descent and distribution, and may be exercised
during the optionholder's lifetime only by such optionholder while an employee,
a consultant or a director, subject to certain rights of exercise after
termination or discharge. Each option granted will have a term specified in the
option agreement, but all options will expire no later than ten years from the
date of grant (five years in the case of Incentive Stock Options granted to an
employee who is a greater than 10% beneficial owner of the Company's shares).
Options are exercisable (other than options automatically granted to
non-employee directors) at such time or times or in such installments on a
cumulative basis and upon such conditions as the non-employee members and
outside members of the Company's Board of Directors determine at the time of
the grant. The number of options that may be granted to an executive officer
during any three-year period may not exceed options to purchase an aggregate of
400,000 shares of Common Stock.
In the case of Incentive Stock Options, the exercise price must be at
least equal to the fair market value of the Common Stock on the date the option
is granted (110% of fair market value in the case of any employee who is a
greater than 10% beneficial owner of the Company's shares). The exercise price
of a Non-Qualified Stock Option may not be less than the fair market value of
the Common Stock on the date the option is granted. Upon exercise of any
option, the purchase price must be paid in full in cash. The aggregate fair
market value (determined at the time the options are granted) of the shares
covered by Incentive Stock Options granted to any employee under the 1999 Stock
Option Plan (and any other Incentive Stock Option plans of the Company) which
may become exercisable for the first time in any one calendar year may not
exceed $100,000.
The 1999 Stock Option Plan expires in February 2009, unless terminated
earlier by the Board of Directors; PROVIDED, HOWEVER, that any such termination
will not affect any options then outstanding under the 1999 Stock Option Plan.
The 1999 Stock Option Plan may be amended or suspended from time to time by the
Board of Directors of the Company, except that (i) the Board of Directors may
not, without the approval of the stockholders, increase the total number of
shares covered by the 1999 Stock Option Plan, and (ii) no such amendment or
termination may be made which will affect any options already granted without
the approval of all optionholders whose options would be affected by such
amendment or termination.
The Stock Option Plan provides for adjustment to the shares available for
issuance thereunder upon the occurrence of certain events, including stock
dividends, stock splits, reorganizations, recaptializations or similar changes
or transactions of or by the Company.
Under the 1999 Stock Option Plan, in the event of (i) a merger or
consolidation of the Corporation with or into another entity and if the merger
or consolidation agreement does not provide for the substitution of new options
for each option granted under the 1999 Stock Option Plan or for the assumption
of such options, or (ii) the dissolution, liquidation or sale of substantially
all the assets of the Company, all outstanding options under the 1999 Stock
Option Plan will become exercisable and to the extent not exercised immediately
prior to the completion of such transaction, all such options will terminate.
In addition, in the event of a sale of substantially all of the Company's
assets or Common Stock or a merger, consolidation or any other corporate
transaction in which the Company would not be the surviving entity or surviving
parent entity, the Company shall have a right to terminate all outstanding
options granted under the 1999 Stock Option Plan upon 30 days prior notice;
provided that, until the date of cancellation, all such options will become
immediately exercisable and may be exercised by the optionholders at any time
prior to the date of cancellation of such options.
17
<PAGE>
All employees of the Company and its subsidiaries (including the five
Named Executive Officers and eight non-employee directors of the Company) would
be eligible to receive options under the 1999 Stock Option Plan during the 1999
fiscal year. To date, no options to purchase shares of Common Stock have been
granted under the 1999 Stock Option Plan.
On December 30, 1998, the closing price of a share of Common Stock on the
New York Stock Exchange was $8.50.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the United States federal income tax
consequences of the granting and exercise of options under the 1999 Stock
Option Plan, and the sale of shares of Common Stock acquired as a result
thereof, is based on an analysis of the Code, as currently in effect, existing
laws, judicial decisions and administrative rulings and regulations, all of
which are subject to change. The following discussion applies only to an
optionholder who is a United States person (hereinunder referred to as a
"United States Optionholder"). For purposes of this discussion, a "United
States person" means a citizen or resident alien of the United States.
Non-United States persons who are participants in the 1999 Stock Option Plan
are advised to consult their own tax advisors regarding the tax consequences
(including in their country of residence) of the granting and exercise of
options under the 1999 Stock Option Plan, and the sale of shares of the Common
Stock acquired as a result of such exercise. In addition to being subject to
the United States federal income tax consequences described below, a Untied
States Optionholder may also be subject to state, local and/or foreign income
tax consequences in the jurisdiction in which he works and/or resides.
There are no federal income tax consequences to a United States
Optionholder by reason of the grant of Incentive Stock Options or Non-Qualified
Stock Options under the 1999 Stock Option Plan. The exercise of Incentive Stock
Options is not a taxable event for regular federal income tax purposes.
However, such exercise may give rise to an alternate minimum tax liability.
Except in the case of a disqualifying disposition (see below), the subsequent
sale of shares of Common Stock following the exercise of an Incentive Stock
Option will generally result in capital gain or loss. Upon the exercise of a
Non-Qualified Stock Option, a United States Optionholder will generally
recognize ordinary income in an amount equal to the excess of the fair market
value of the shares of Common Stock at the time of exercise over the amount
paid as the exercise price. The ordinary income in connection with the
exercise, by a United States Optionholder who is an employee, of a Non-Qualified
Stock Option will be subject to both wage and employment tax withholding.
A United States Optionholder's tax basis in the shares of Common Stock
acquired pursuant to the exercise of a Non-Qualified Stock Option will be the
amount paid upon exercise plus the amount of ordinary income recognized by the
United States Optionholder as a result of the exercise of the Non-Qualified
Stock Option. Any gain or loss on a subsequent sale of the Common Stock will
generally be either capital gain or loss.
A disqualifying disposition occurs if the United States Optionholder
disposes of shares of Common Stock acquired upon exercise of an Incentive Stock
Option (other than in certain tax-free transactions) within two years from the
date on which the option is granted or within one year after the transfer of
the shares to the Untied States Optionholder upon his or her exercise. At the
time of disposition, the United States Optionholder will generally recognize
ordinary income equal to the excess of such shares' fair market value either on
the date of exercise or the date of disposition, whichever is lower, over the
United States Optionholder's adjusted basis in such shares, with additional
gain, if any, taxed as capital gain.
There are no federal income tax consequences to the Company by reason of
the grant of Incentive Stock Options or Non-Qualified Stock Options or the
exercise of Incentive Stock Options.
Subject to the usual rules as to reasonableness of compensation, and
provided that the Company complies with the applicable reporting requirements,
at the time the Untied States Optionholder recognizes ordinary income from the
exercise of a Non-Qualified Stock Option, the Company will be entitled to a
federal income tax deduction in the amount of the ordinary income so
recognized. To the extent the United States Optionholder recognizes ordinary
income by reason of a disqualifying disposition of the Common Stock acquired
upon exercise of Incentive Stock Options, the Company will be entitled to a
corresponding deduction in the year in which the disposition occurs.
The Company will be required to report to the Internal Revenue Service any
ordinary income recognized by a United States Optionholder by reason of the
exercise of a Non-Qualified Stock Option or a disqualifying disposition of
Common Stock acquired upon exercise of an Incentive Stock Option, if, in the
case of a disqualifying disposition, such information is available to the
Company. The Company, in the case of Non-Qualified Stock Options granted to
employees who are United
18
<PAGE>
States Optionholders, will be required to withhold income and employment taxes
(and pay the employer's shares of employment taxes) with respect to such
ordinary income. On the ordinary income realized on a disqualifying disposition
of Common Stock acquired upon exercise of an Incentive Stock Option,
withholding of income and payroll taxes by the Company will not be required.
The foregoing does not discuss all tax consequences that may be applicable
to a United States Optionholder under the 1999 Stock Option Plan or to the
Company (including, for example, the effects under state, local and/or foreign
income tax laws). Accordingly, United States Optionholders are urged to consult
their own tax advisors concerning the tax consequences to them of their
participation in the 1999 Stock Option Plan.
PROPOSAL 3 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee,
has selected Ernst & Young LLP as independent auditors to audit and report upon
the consolidated financial statements of the Company for the 1999 fiscal year
and is submitting this matter to the stockholders for their ratification. Ernst
& Young LLP served as the Company's independent auditors in fiscal 1998 and in
prior years. Assuming a quorum is present, a vote of a majority of the votes
cast at the Meeting, in person or by proxy, is required for the ratification of
the selection of Ernst & Young LLP. Abstentions and broker non-votes are not
counted as votes cast. If stockholders do not ratify the selection of Ernst &
Young LLP, the Board of Directors will consider other independent auditors.
Representatives of the firm of Ernst & Young LLP will be present at the Meeting
to make a statement if they desire to do so and to be available to respond to
appropriate questions that may be asked by stockholders.
ANNUAL REPORT
All stockholders of record as of December 21, 1998 are concurrently being
sent a copy of the Company's Annual Report for the fiscal year ended October 3,
1998 which contains audited financial statements of the Company for the fiscal
years ended September 28, 1996, September 27, 1997, and October 3, 1998.
STOCKHOLDER PROPOSALS
Stockholder proposals must be received by the Company at its principal
executive office no later than September 8, 1999 in order to be considered for
inclusion in proxy materials distributed in connection with the next annual
meeting of stockholders.
The proxy or proxies designated by the Company will have discretionary
authority to vote on any matter properly presented by a stockholder for
consideration at the next annual meeting of stockholders but not submitted for
inclusion in the proxy materials for such meeting unless notice of the matter
is received by the Company at its principal executive office not later than
November 22, 1999 and certain other conditions of the applicable rules of the
Securities and Exchange Commission are satisfied.
MISCELLANEOUS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any other matter to be brought before the Meeting.
However, if any other matters not mentioned in the Proxy Statement are brought
before the Meeting or any adjournments thereof, the persons named in the
enclosed Proxy or their substitutes will have discretionary authority to vote
proxies given in said form or otherwise act, in respect of such matters, in
accordance with their best judgment.
All of the costs and expenses in connection with the solicitation of
proxies with respect to the matters described herein will be borne by the
Company. In addition to solicitation of proxies by use of the mails, directors,
officers and employees (who will receive no compensation therefor in addition
to their regular remuneration) of the Company may solicit the return of proxies
by telephone, telegram or personal interview. The Company will request banks,
brokerage houses and other custodians, nominees and fiduciaries to forward
copies of the proxy materials to their principals and to request instructions
for voting the proxies. The Company may reimburse such banks, brokerage houses
and other custodians, nominees and fiduciaries for their expenses in connection
therewith.
19
<PAGE>
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH BENEFICIAL OWNER OF COMMON
STOCK ON THE RECORD DATE, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER 3,
1998 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH REQUEST
SHOULD BE MADE IN WRITING TO MICHAEL R. HARMON, SECRETARY, GALEY & LORD, INC.,
P.O. BOX 35528, GREENSBORO, NORTH CAROLINA 27425.
It is important that proxies be returned promptly. Stockholders are,
therefore, urged to fill in, date, sign and return the Proxy immediately. No
postage need be affixed if mailed in the enclosed envelope in the United
States.
By order of the Board of Directors
/s/ Michael R. Harmon
--------------------------------
MICHAEL R. HARMON
SECRETARY
January 6, 1999
20
<PAGE>
EXHIBIT A
1999 STOCK OPTION PLAN OF
GALEY & LORD, INC.
1. DEFINITIONS.
"Board of Directors" shall mean, solely for the purposes of the Plan,
those members of the Board of Directors of the Corporation who are intended to
be "non-employee directors" within the meaning of Rule 16b-3(b)(3) promulgated
under the Exchange Act and "outside directors" within the contemplation of
Section 162(m)(4)(C)(i) of the Code.
"Cancellation Notice" shall mean the notice given by the Corporation to an
Optionee pursuant to Section 11(c) hereof notifying him of the cancellation of
his Option.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean shares of common stock of the Corporation, par
value $.0l per share.
"Corporation" shall mean Galey & Lord, Inc., a Delaware corporation.
"Director Participant" shall have the meaning set forth in Section 6(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Exercise Price per Share" with respect to an Option shall mean the price,
as set forth in the Optionee's Option Agreement and as determined by the Board
of Directors, at which the Optionee may exercise such Option; PROVIDED,
HOWEVER, that the Exercise Price per Share shall not be less than 100% of the
Fair Market Value Per Share at the time such Option is granted (110% of Fair
Market Value per Share in the case of an Incentive Stock Option described in
Section 15(b) hereof).
"Fair Market Value per Share" of the Corporation's Common Stock on a
Trading Day shall mean the last reported sale price for Common Stock (regular
way) or, in case no such reported sale takes place on such Trading Day, the
average of the closing bid and asked prices (regular way) for the Common Stock
for such Trading Day, in either case on the principal national securities
exchange on which the Common Stock is listed or admitted to trading or the
Nasdaq National Market, or if the Common Stock is not listed or admitted to
trading on any national securities exchange or the Nasdaq National Market, but
is traded on the Nasdaq Smallcap Market, the OTC Electronic Bulletin Board or
otherwise in the over-the-counter market, the closing sale price of the Common
Stock or, if no sale is publicly reported, the average of the closing bid and
asked quotations for the Common Stock, as reported by the Nasdaq Smallcap
Market, the OTC Electronic Bulletin Board or any comparable system or, if the
Common Stock is not listed on the Nasdaq Smallcap Market, the OTC Electronic
Bulletin Board or a comparable system, the closing sale price of the Common
Stock or, if no sale is publicly reported, the average of the closing bid and
asked prices, as furnished by two members of the National Association of
Securities Dealers, Inc. who make a market in the Common Stock selected from
time to time by the Corporation for that purpose. In addition, for purposes of
this definition, a "Trading Day" shall mean, if the Common Stock is listed on
any national securities exchange, a business day during which such exchange was
open for trading and at least one trade of Common Stock was effected on such
exchange on such business day, or, if the Common Stock is not listed on any
national securities exchange, or the Nasdaq National Market or the Nasdaq
Smallcap Market but is traded on the OTC Electronic Bulletin Board or otherwise
in the over-the-counter market, a business day during which the OTC Electronic
Bulletin Board or over-the-counter market was open for trading and at least one
"eligible dealer" quoted both a bid and asked price for the Common Stock. An
"eligible dealer" for any day shall include any broker-dealer who quoted both a
bid and asked price for such day, but shall not include any broker-dealer who
quoted only a bid or only an asked price for such day.
"Incentive Stock Option" shall mean an Option which is intended to qualify
as an "incentive stock option" within the meaning of Section 422(b) of the Code
or any applicable successor provision of the Code.
"Option" shall mean a stock option granted to an Optionee pursuant to the
Plan. An Option may be either an Incentive Stock Option or one which does not
qualify as an Incentive Stock Option.
"Option Agreement" shall mean the agreement or certificate between the
Corporation and an Optionee evidencing the award of an Option pursuant to the
Plan and setting forth the terms and conditions of the Option.
"Optionee" shall mean a person to whom an Option is granted pursuant to
the Plan. Unless otherwise provided herein, the term "Optionee" shall include
Director Participants as defined in Section 6(a) of the Plan.
"Plan" shall mean this 1999 Stock Option Plan of the Corporation,
effective as of February 9, 1999.
"Shares" shall mean the shares of Common Stock which may be issued
pursuant to the Plan.
"Subsidiary" shall mean a subsidiary of the Corporation within the meaning
of Section 424(f) of the Code.
A-1
<PAGE>
2. PURPOSE OF THE PLAN.
The purpose of the Plan is to secure for the Corporation and its
stockholders the benefits arising from capital stock ownership by officers,
directors, consultants and certain other employees of the Corporation and its
Subsidiaries who are expected to contribute to the Corporation's future growth
and success, to attract new individuals to enter into service or employment
with the Corporation and its Subsidiaries and to encourage such individuals to
secure or increase on reasonable terms their stock ownership in the
Corporation. The Board of Directors believes that the granting of Options under
the Plan will promote continuity of management and increase incentive and
personal interest in the welfare of the Corporation by those who are or may
become primarily responsible for shaping and carrying out the long range plans
of the Corporation and its Subsidiaries and securing the Corporation's
continued growth and financial success.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors. Subject to
the express provisions of the Plan, the Board of Directors shall have the
authority, in its discretion, to determine the individuals to whom, the time or
times at which, Options shall be granted, the number of shares to be subject to
each Option and the type and terms and conditions of each Option. In making
such determinations, the Board of Directors may take into account the nature of
the services rendered by the respective individuals, their present and
potential contributions to the Corporation's success and such other factors as
the Board of Directors, in its discretion, shall deem relevant. Subject to the
express provisions of the Plan, the Board of Directors shall also have the
authority, in its sole discretion, to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it, to determine the terms and
provisions of the respective Option Agreements (which need not be identical)
and to make all other determinations necessary or advisable for the
administration of the Plan. Any dispute or disagreement which may arise under
or as a result of or with respect to any Option shall be determined by the
Board of Directors, in its sole discretion, and any interpretations by the
Board of Directors of the terms of any Option shall be final, binding and
conclusive.
(b) The Board of Directors may delegate authority to the Chief Executive
Officer of the Corporation to administer the Plan with respect to employees of
the Corporation or a Subsidiary (i) who are not officers of the Corporation
subject to the provisions of Section 16 of the Exchange Act and (ii) whose
compensation is not subject to the provisions of Section 162(m) of the Code,
subject to such conditions, restrictions and limitations as may be imposed by
the Board of Directors, including but not limited to: (A) Options in the
aggregate to purchase not more than 100,000 shares of the Common Stock may be
granted in any one calendar year by the Chief Executive Officer to all such
employees of the Corporation and its Subsidiaries and (B) the Board of
Directors shall establish a maximum number of shares that may be subject to
Options granted under the Plan in any one calendar year to any single employee
by the Chief Executive Officer. Unless and until the Board of Directors shall
take further action, the maximum number of Shares that may be subject to
Options granted under the Plan in any one calendar year by the Chief Executive
Officer to any single employee shall be 5,000. Any actions duly taken by the
Chief Executive Officer with respect to the grant of Options to employees shall
be deemed to have been taken by the Board of Directors for purposes of the
Plan.
4. NUMBER OF SHARES.
The aggregate number of Shares in respect to which Options may be granted
under the Plan is 500,000 Shares, subject to adjustment in accordance with
Section 11 hereof. Shares covered by the unexercised portions of any terminated
or cancelled Options shall be available to become subject to Options granted
thereafter. Upon any exercise of an Option, the number of Shares with respect
to which the Option may thereafter be exercised by the Optionee shall no longer
include the sum of the Shares purchased upon exercise.
5. GRANT OF OPTIONS TO OFFICERS, CONSULTANTS AND EMPLOYEES.
The Board of Directors may, at any time grant Options to such officers,
consultants and employees of the Corporation and its Subsidiaries as the Board
of Directors may select. Such Options shall cover such number of Shares as the
Board of Directors shall designate, subject to the other provisions of the
Plan. No Optionee who is an executive officer of the Corporation shall, during
any period of three fiscal years of the Corporation, be granted Options to
purchase more than an aggregate of 400,000 shares.
6. GRANTS OF OPTIONS TO DIRECTORS.
(A) GENERAL PROVISIONS.
(i) On or prior to each December 1 and at the time each Director
Participant (as defined below) first becomes a director of the
Corporation, each person who is serving as a director of the
Corporation on such date and is not a common law employee of the
Corporation (hereinafter referred to as a "Director Participant") shall
make an irrevocable
A-2
<PAGE>
election in writing (at such time and in such manner as may be prescribed
by the Corporation) to receive, annually on the third Trading Day (as
defined in Section 1 under the definition of "Fair Market Value per
Share") after the date of the Annual Meeting of Stockholders of the
Corporation and on the third Trading Day after the date on which each
Director Participant first becomes a director (if such date is a date
other than the date of the Annual Meeting of Stockholders of the
Corporation), either (A) Options to purchase up to 2,000 Shares, or (B) a
number of shares of Common Stock issued under the Corporation's 1996
Restricted Stock Plan as amended from time to time (the "Restricted Stock
Plan") derived by dividing 18,000 by the Fair Market Value per Share of
the Common Stock on the date of grant (rounded to the next highest share),
subject to availability under the Restricted Stock Plan, and each Director
Participant who elects pursuant to this Section 6(a)(i)(A) to receive
Options, shall automatically be granted Options to purchase up to 2,000
Shares on the third Trading Day after the date of the Annual Meeting of
Stockholders of the Corporation and on the third Trading Day after the
Date on which each Director Participant becomes a director (if such date
is a date other than the date of the Annual Meeting of Stockholders of the
Corporation).
(ii) On or prior to each December 1 and at the time each Director
Participant first becomes a director of the Corporation, each Director
Participant shall make an irrevocable election in writing (at such time
and in such manner as may be prescribed by the Corporation) to receive all
of his or her annual director's fees for the subsequent calendar year (or
for the remainder of the current calendar year, in the case of a Director
Participant who first becomes a director during such calendar year) in the
form of (A) cash in the amount of $20,000, (B) Options to purchase 2,500
Shares, or (C) a combination of $10,000 of cash and (subject to
availability under the Restricted Stock Plan) a number of shares of Common
Stock issued under the Restricted Stock Plan derived by dividing 15,000 by
the Fair Market Value per Share of the Common Stock on the third Trading
Day after January 1 of such calendar year (or the Third Trading Day after
the date on which such Director Participant first becomes a director, as
the case may be), rounded to the next highest share, and each Director
Participant who elects pursuant to this Section 6(a)(ii) to receive
Options, shall automatically be granted Options to purchase up to 2,500
Shares on the third Trading Day after January 1 of such subsequent
calendar year (or on the Third Trading Day after the date on which such
Director Participant first becomes a director, as the case may be).
Notwithstanding the foregoing provisions of this Section 6(a)(ii), the
amount of the annual director's fee to be paid (whether in the form of
cash, Options or a combination of cash and shares of Common Stock issued
under the Restricted Stock Plan) with respect to a calendar year to a
Director Participant who first becomes a director during such calendar
year shall be reduced to an amount calculated by multiplying the amount to
which a Director Participant otherwise would be payable pursuant to the
foregoing provisions of this Section 6(a)(ii) (whether in the form of
cash, Options or a combination of cash and shares of Common Stock issued
under the Restricted Stock Plan) by a fraction, the numerator of which is
the number of calendar days remaining in such calendar year measured from
the date on which such Director Participant first becomes a director and
the denominator of which is three hundred sixty-five (365).
(iii) The Options granted pursuant to this Section shall not be Incentive
Stock Options. The Exercise Price per Share with respect to Options
granted pursuant to this Section 6 shall be the Fair Market Value per
Share on the date of the grant.
(b) EXERCISABILITY OF OPTIONS. Each Option granted under this Section 6 by
its terms shall be exercisable for ten years from the date of the grant. An
Option granted pursuant to this Section shall become exercisable with respect
to one hundred percent (100%) of the shares covered one year after the date of
grant.
7. OPTION AGREEMENTS.
Each award of an Option pursuant to the Plan shall be evidenced by an
Option Agreement between the Optionee and the Corporation. Each Option
Agreement shall specify the number of Shares covered by such Option and the
Exercise Price per Share and shall contain such terms and conditions not
inconsistent with the Plan as the Board of Directors in its sole discretion
shall deem appropriate (which terms and conditions need not be the same in each
Option Agreement and may be changed from time to time). Each Option Agreement
may require as conditions of exercise that the Optionee provide such investment
representations with respect to, and enter into such agreements concerning the
sale and transfer of, the Shares receivable by the Optionee upon exercise, as
the Board of Directors shall deem appropriate. A condition to the exercise of
any Option which is not an Incentive Stock Option shall be the withholding of
income taxes and employment taxes that the Corporation determines it is
required to withhold upon the exercise of an Option. In the event of the death
of an Optionee, a condition of exercising any Option shall be the delivery to
the Corporation of such tax waivers and other documents as the Board of
Directors shall determine.
A-3
<PAGE>
8. EXERCISE AND TERM OF OPTION.
(a) Each Option Agreement shall specify the date or dates on which the
Option granted thereunder may be exercised. Except as provided in Section 6(b)
hereof with respect to Options granted to Director Participants, each Option
Agreement may provide for exercise of the Option in installments on such terms
and conditions as the Board of Directors may determine. The term of each Option
shall be fixed by the Board of Directors but shall in no case exceed ten years
from the date of grant of such Option. Subject to the provisions of the Option
Agreement, an Option may be exercised either in whole or in part at any time or
from time to time.
(b) An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specific number of shares of Common
Stock and payment to the Corporation of the amount of the option price for the
number of shares of Common Stock so specified; PROVIDED, HOWEVER, that, subject
to the requirements of Regulation T (as in effect from time to time)
promulgated under the Securities Exchange Act of 1934, as amended, the Board of
Directors may implement procedures to allow a broker chosen by an Optionee to
make payment of all or any portion of the option price payable upon the
exercise of an Option and receive, on behalf of such Optionee, all or any
portion of the shares of the Common Stock issuable upon such exercise.
9. NON-TRANSFERABILITY OF OPTION RIGHTS.
Options which are Incentive Stock Options shall not be transferable except
by will or the laws of descent and distribution, and, except as otherwise
determined by the Board of Directors, Options which are not Incentive Stock
Options shall not be transferable except by will or the laws of descent and
distribution. During the lifetime of an Optionee, such Optionee's Option shall
be exercisable only by the Optionee.
10. EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE.
Upon the termination of employment or service with the Corporation and its
Subsidiaries of any Optionee, all rights under any Option held by such Optionee
shall be governed by such conditions as may be provided by the Board of
Directors at the time of the grant of such Option.
11. STOCK DIVIDEND, MERGER, CONSOLIDATION, ETC.
(a) In the event there is any change in the Common Stock of the
Corporation by reason of any reorganization, recapitalization, stock split,
stock dividend or otherwise, there shall be substituted for or added to each
share of Common Stock theretofore appropriated or thereafter subject, or which
may become subject to any option, the number and kind of shares of stock or
other securities into which each outstanding share of Common Stock shall be so
changed or for which each such share shall be exchanged, or to which each such
share shall be entitled, as the case may be, and the per share price thereof
also shall be appropriately adjusted. Notwithstanding the foregoing, (i) each
such adjustment with respect to an Incentive Stock Option shall comply with the
rules of Section 424(a) of the Code, and (ii) in no event shall any adjustment
be made which would render any Incentive Stock Option granted hereunder other
than an "incentive stock option" for purposes of Section 422 of the Code or any
applicable successor provision of the Code.
(b) Upon (i) the merger or consolidation of the Corporation with or into
another corporation, if the agreement of merger or consolidation does not
provide for (A) the continuance of the Options granted hereunder, or (B) the
substitution of new Options, or for the assumption of such Options, by the
surviving corporation, or (ii) the dissolution, liquidation, or sale of
substantially all the assets, of the Corporation, the holder of any such
Option(s) theretofore granted and still outstanding (and not otherwise expired)
shall have the right immediately prior to the effective date of such merger,
consolidation, dissolution, liquidation or sale of assets to exercise such
Option(s) in whole or in part without regard to any installment provision that
may have been made part of the terms and conditions of such Option(s). The
Corporation, to the extent practicable, shall give advance notice to affected
Optionees of such merger, consolidation, dissolution, liquidation or sale of
assets. All such Options which are not so exercised shall be forfeited as of
the effective time of such merger, consolidation, dissolution, liquidation or
sale of assets.
(c) Unless otherwise provided in an Optionee's Option Agreement, the
Corporation shall have the right to terminate the rights of any Optionee to
exercise any Options, effective 30 days after receipt by the Optionee of a
Cancellation Notice from the Corporation. The Corporation may issue a
Cancellation Notice only in connection with (i) the sale of substantially all
of the Corporation's assets or Common Stock, or (ii) a merger, consolidation or
other corporate transaction in which the Corporation would not be the surviving
entity or surviving parent entity. The Cancellation Notice shall afford the
Optionee the right to exercise all Options held by such Optionee with respect
to all Shares covered thereby (even if they would not otherwise have become
exercisable with respect to all such Shares at that time) during the period
prior to the effective date of the termination.
A-4
<PAGE>
12. RIGHTS AS A STOCKHOLDER.
An Optionee shall have no rights as a stockholder with respect to any
Shares covered by an Option until such Optionee shall have become the holder of
record of any such Shares.
13. DETERMINATIONS.
Each determination, interpretation or other action made or taken pursuant
to the provisions of the Plan by the Board of Directors, and each determination
of Fair Market Value per Share shall be final and conclusive for all purposes
and shall be binding upon all persons, including, without limitation, the
Corporation and all Optionees, and their respective successors and assigns.
14. AMENDMENT, TERMINATION AND MODIFICATION OF THE PLAN AND AGREEMENTS.
The Board of Directors may at any time or from time to time terminate,
suspend or amend the Plan in whole or in part (including amendments deemed
necessary or desirable to conform to any change in the law or regulations
applicable hereto); PROVIDED, HOWEVER, that without approval of the
stockholders of the Corporation, no such action may increase the number of
Shares with respect to which Options may be granted; PROVIDED, FURTHER, that no
such amendment or termination shall affect any Options theretofore granted
without the consent of the Optionee of such Option.
15. INCENTIVE STOCK OPTIONS.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be specifically designated as Incentive Stock Options and shall
be subject to the following additional terms and conditions:
(a) DOLLAR LIMITATION. The aggregate fair market value (determined as of
the date of the option grant and consistent with Section 422(c)(7) of the Code
or any applicable successor provision of the Code) of the Common Stock with
respect to which Incentive Stock Options granted under the Plan (and under any
other incentive stock option plans of the Corporation) are exercisable for the
first time by any employee in any one calendar year shall not exceed $100,000.
(b) 10% STOCKHOLDER. If any Optionee to whom an Incentive Stock Option is
to be granted under the Plan is at the time of the grant of such Option the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Corporation, then the following special provisions
shall be applicable to the Incentive Stock Option granted to such Optionee:
(i) The Exercise Price per Share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the Fair Market
Value per Share at the time of grant; and
(ii) The Option exercise period shall not exceed five years from the date
of grant.
Except as modified by the preceding provisions of this Section 15, all the
provisions of the Plan shall be applicable to Incentive Stock Options granted
hereunder.
16. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any Option granted under the Plan
shall confer upon any Optionee any right with respect to the continuation of
such Optionee's employment by the Corporation or any Subsidiary or interfere in
any way with the right of the Corporation or any Subsidiary, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Optionee from the rate in existence at the time of the grant of such Option.
17. EFFECTIVE DATE.
The Plan shall become effective when adopted by a vote of the entire board
of directors of the Corporation, subject to approval by the Corporation's
stockholders. If such stockholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, any Incentive Stock Options
previously granted under the Plan shall terminate, and no further Incentive
Stock Options shall be granted. Subject to this limitation, Options may be
granted under the Plan at any time after the effective date and before the date
fixed for termination of the Plan.
18. EXPIRATION AND TERMINATION OF THE PLAN.
The Plan shall terminate on February 8, 2009 or at such earlier time as
the Board of Directors may determine. Options may be granted under the Plan at
any time and from time to time prior to its termination. Any Option outstanding
under the Plan at the time of the termination of the Plan shall remain in
effect until such Option shall have been exercised or shall have expired in
accordance with its terms.
A-5
<PAGE>
<PAGE>
********************************APPENDIX*********************************
GALEY & LORD, INC.
P
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FEBRUARY 9, 1999
R
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O
The undersigned hereby constitutes and appoints Arthur C. Wiener and
X Michael R. Harmon, or either of them acting singly in the absence
of the other, with the power of substitution in either of them, the proxies
Y of the undersigned to vote with the same force and effect as the undersigned
all shares of Common Stock of Galey & Lord, Inc. (the "Company") held of
record by the undersigned on December 21, 1998, at the Annual Meeting of
Stockholders to be held at the Company's executive offices, 980 Avenue of the
Americas, New York, New York 10018, on February 9, 1999, at 10:30 A.M., Local
Time, and at any adjournment or adjournments thereof, hereby revoking any
proxy or proxies heretofore given and ratifying and confirming all that said
proxies may do or cause to be done by virtue thereof with respect to the
following matters:
1. The election of nine directors nominated by the Board of Directors:
[ ] FOR all nominees listed below (except as indicated below)[ ] WITHHOLD
AUTHORITY to vote for the nominees listed below
ARTHUR C. WIENER, LEE ABRAHAM, MICHAEL T. BRADLEY, PAUL G. GILLEASE,
WILLIAM deR. HOLT, HOWARD S. JACOBS, WILLIAM M.R. MAPEL, STEPHEN C.
SHERRILL and DAVID F. THOMAS
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE OR
NOMINEES WRITE SUCH NOMINEE'S OR NOMINEES' NAMES IN THE SPACE PROVIDED
BELOW.)
-----------------------------------------------------------------------------
2. The adoption of the Company's proposed 1999 Stock Option Plan for
officers, directors, consultants and employees of the Company and its
subsidiaries.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The ratification of the selection of Ernst & Young LLP as independent
auditors of the Company for the 1999 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Upon such other business as may properly come before the Meeting or any
adjournment thereof.
<PAGE>
This proxy, when properly executed, will be voted as directed. If no
direction is indicated, the proxy will be voted (i) FOR the election of the
nine named individuals as directors, (ii) FOR the adoption of the Company's
proposed 1999 Stock Option Plan, (iii) FOR the ratification of the selection of
Ernst & Young LLP as independent auditors of the Company for the 1999 fiscal
year, and (iv) in accordance with the judgment of the person or persons voting
the proxies on any other matter that may be properly brought before the
Meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders to be held on February 9, 1999 and the Proxy Statement,
dated January 6, 1999, prior to the signing of this proxy.
Dated: -----------------------, 1999
------------------------------- (L.S.)
------------------------------- (L.S.)
------------------------------- (L.S.)
Please sign your name exactly as it
appears hereon. When signing as
attorney, executor, administrator,
trustee or guardian, please give your
full title as it appears hereon. 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.
PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY IN THE ENCLOSED ENVELOPE.
