<PAGE>
SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE DEF 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-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):
4) Proposed maximum aggregate value of transaction: N/A
-----
5) Total fee paid: N/A
-----
<PAGE>
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
-----
2) Form, Schedule, or Registration Statement No.: N/A
-----
3) Filing Party: N/A
-----
4) Date Filed: N/A
-----
<PAGE>
GALEY & LORD, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 13, 2001
To The Stockholders Of
Galey & Lord, Inc.:
Notice is Hereby Given that the Annual Meeting of Stockholders (the
"Meeting") of Galey & Lord, Inc., (the "Company") will be held at Club 101,
101 Park Avenue, New York, New York 10178, on Tuesday, February 13, 2001 at
10:30 A.M., local time, to consider and act upon the following:
1. To elect seven 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 approve proposed amendments to the Company's 1999 Stock Option Plan
for officers, directors, consultants and employees of the Company and
its subsidiaries;
3. To approve a proposed amendment to the Company's 1996 Restricted Stock
Plan for non-employee directors to increase the number of shares of the
Company's Common Stock available under such plan by an aggregate of
50,000 shares;
4. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for the 2001 fiscal year; and
5. 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 22, 2000 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 22,
2000 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 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 5, 2001
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>
GALEY & LORD, INC.
980 Avenue of the Americas
New York, New York 10018
PROXY STATEMENT
Annual Meeting of Stockholders
February 13, 2001
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Galey & Lord, Inc. (the "Company") to be
voted at the Annual Meeting of Stockholders (the "Meeting") of the Company
which will be held at Club 101, 101 Park Avenue, New York, New York 10178, on
Tuesday, February 13, 2001 at 10:30 A.M., local time, and at 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 5, 2001.
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 approval of the proposed
amendments to the Company's 1999 Stock Option Plan (the "Stock Option Plan"),
(iii) FOR the approval of the proposed amendment to the Company's 1996
Restricted Stock Plan (the "Restricted Stock Plan"), (iv) 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 2001
fiscal year, and (v) 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 22, 2000
(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
11,960,754 shares of the Company's common stock, $0.01 par value (the "Common
Stock"), which figure does not include an additional 389,206 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.
<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
At the Meeting, seven directors are to be elected to serve on the Board of
Directors of the Company 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 seven nominees of the Board of Directors named below as
directors of the Company. All of the nominees, except for Mr. Valdez, are
presently directors of the Company. The term of the current directors expires
at the Meeting except for William deR. Holt, who is retiring as a director,
effective as of January 8, 2001. 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.
Nominees for Director
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 63 Chairman of the Board,
President and Chief
Executive Officer
Michael T. Bradley 34 Director
Paul G. Gillease 68 Director
Howard S. Jacobs 57 Director
William M.R. Mapel 69 Director
Stephen C. Sherrill 47 Director
Jose de Jesus Valdez 47 Director Nominee
</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. 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; and Guilford
Mills, Inc., a manufacturer of knitted textiles.
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 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; Mediq, Inc., a
hospital equipment rental company; and Alliance Laundry Systems LLC, a
manufacturer of commercial laundry equipment.
Mr. Valdez has been employed by Alpek, S.A. de C.V. ("Alpek"), a leading
petrochemical company in Mexico which also produces fibers and primary
materials for fibers, since 1987 and is currently serving as President of
Alpek. Alpek is a wholly-owned subsidiary of Alfa S.A. de C.V., a supplier of
raw materials in nylon and polyester, synthetic fibers, plastics and
chemicals. From 1991 to 1993, Mr. Valdez served as President of the Asociacion
Nacional de la Industria Quimica (ANIQ) (the Mexican equivalent to the
Chemical Manufacturers Association in the United States). Mr. Valdez was also
an active participant during the NAFTA negotiations, representing the
interests of the chemical and textile industries in Mexico. Mr. Valdez
received an MBA from Instituto Tecnologico y de Estudios Superiores de
Monterrey in 1978 and a Master of Science degree in Industrial Engineering
from Stanford University in 1977.
William deR. Holt, age 71, a director of the Company during the past fiscal
year, is retiring as a director of the Company, effective as of January 8,
2001 and he is not a candidate for reelection. 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.
During the last fiscal year, there were three meetings of the Board of
Directors of the Company and action was taken by the directors by unanimous
written consent in lieu of a meeting on one occasion. 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. The Board of Directors has designated from among its members an Audit
Committee, which currently consists of Messrs. Gillease, Jacobs and Mapel. The
Audit Committee, which reviews the Company's financial and accounting
practices and controls, held five meetings during the 2000 fiscal year. In
August 2000, the Audit Committee recommended, and the Board adopted, the Audit
Committee Charter, a copy of which is attached hereto as Appendix A. The Board
of Directors has designated from among its members a Compensation Committee,
which during the 2000 fiscal year consisted of Messrs. Gillease and Holt. As a
result of Mr. Holt's retirement as a director, Mr. Bradley will serve on the
Compensation Committee, effective January 8, 2001. The Compensation Committee
of the Board of Directors reviews the compensation of the Company's executive
officers. The Compensation Committee held five meetings during the 2000 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
3
<PAGE>
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. Mr. Bradley is serving
as a designee of CVC and Mr. Wiener has agreed to vote all shares of Common
Stock owned by him for the election of Mr. Bradley as a director of the
Company at the Meeting.
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
---- --- ----------------
<C> <C> <S>
Arthur C. Wiener 63 Chairman of the Board, President and Chief Executive
Officer
John J. Heldrich 48 Executive Vice President, and Chief Executive Officer
and President -- Swift Denim Group
Robert McCormack 51 Executive Vice President and President -- Woven
Division, Apparel Marketing Group
Charles A. Blalock 53 Executive Vice President of Manufacturing
Michael R. Harmon 53 Executive Vice President, Chief Financial Officer,
Treasurer and Secretary
Giuseppe Rodino 61 President--Klopman International Group
</TABLE>
Officers serve at the discretion of the Board of Directors and, effective
as of October 1, 2000, Messrs. Wiener, McCormack, Blalock and Heldrich are
employed pursuant to employment agreements described herein. See "Executive
Compensation- Employment Agreements".
Information regarding Mr. Wiener is included herein in the section entitled
"Proposal 1 -- Election of Directors."
Mr. Heldrich has been Executive Vice President of the Company since
February 1998 and Chief Executive Officer 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. 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.
4
<PAGE>
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. Rodino has been President of the Company's Klopman International 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
International from January 1993 to the Company's acquisition of Klopman
International. 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 International in New
York, Rome and London.
5
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information as of December 22, 2000
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 None 5,616,102(1) 47.0%
Capital, Ltd.
399 Park Avenue
New York, New York 10043
Dimensional Fund None 1,043,500(2) 8.7%
Advisors, Inc.
1099 Ocean Avenue, 11th
Floor
Santa Monica, California
90401
Arthur C. Wiener Chairman of the Board, 1,169,700(3)(4) 9.4%
980 Avenue of the President and Chief
Americas Executive Officer
New York, New York 10018
Michael T. Bradley Director 11,350(5) *
Paul G. Gillease Director 35,270(6) *
William deR. Holt Director 34,871(7) *
Howard S. Jacobs Director 36,071(8) *
William M. R. Mapel Director 36,471(9) *
Stephen C. Sherrill Director 147,925(10) 1.2%
Jose de Jesus Valdez Director Nominee 0 *
John J. Heldrich Executive Vice President, and 44,700(11)(4) *
Chief Executive Officer and
President -- Swift Denim
Group
Robert McCormack Executive Vice President and 115,000(12)(4) 1.0%
President -- Woven Division,
Apparel Marketing Group
Charles A. Blalock Executive Vice President 128,025(13)(4) 1.1%
of Manufacturing
Michael R. Harmon Executive Vice President, 150,830(14)(4) 1.3%
Chief Financial Officer,
Treasurer and Secretary
All directors and 1,910,213(15)(4) 15.0%
executive officers
as a group (11 persons)
</TABLE>
--------
* Less than one percent (1%).
(1) Based upon information contained in a Quarterly Report of Equity
Holdings by Institutional Investment Managers on Form 13F-HR (the "Form
13F") filed by Citigroup Inc. with the Securities and Exchange
Commission (the "SEC") on November 13, 2000. 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
6
<PAGE>
Inc. 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, 2000 (the "Schedule 13G") by Dimensional Fund Advisors
Inc. ("Dimensional"), an investment advisor registered under the
Investment Advisers Act of 1940. Dimensional furnishes investment
advice to four investment companies registered under the Investment
Company Act of 1940 and serves as investment manager to certain other
investment vehicles, including commingled trust groups. (such
investments companies and investment vehicles are collectively referred
to herein as the "Portfolios"). Dimensional possesses both voting and
investment power over the shares that are owned by the Portfolios. All
the shares are owned by the Portfolios and Dimensional disclaims
beneficial ownership of the shares.
(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) Does not include such officer's participation in the Option
Cancellation Program (as defined herein) and the New Options (as
defined herein) granted in connection with such program, which are both
subject to the approval of the stockholders of an increase in the
number of shares of Common Stock available under the Company's Stock
Option Plan. See "Compensation Committee Report on Executive
Compensation- Report on Repricing of Options" and "Proposal 2- Approval
of Amendments to the 1999 Stock Option Plan."
(5) Includes 11,350 shares subject to currently exercisable stock options.
(6) Includes (i) 6,000 shares subject to currently exercisable stock
options, (ii) 27,413 shares issued under and subject to the Restricted
Stock Plan, and (iii) 500 shares held by Mr. Gillease's wife.
(7) Includes (i) 10,000 shares subject to currently exercisable stock
options, and (ii) 14,871 shares issued under and subject to the
Restricted Stock Plan.
(8) Includes (i) 8,000 shares subject to currently exercisable stock
options, and (ii) 16,071 shares issued under and subject to the
Restricted Stock Plan.
(9) Includes (i) 8,000 shares subject to currently exercisable stock
options, and (ii) 16,071 shares issued under and subject to the
Restricted Stock Plan.
(10) Includes (i) 11,000 shares subject to currently exercisable stock
options, and (ii) 27,413 shares issued under and subject to the
Restricted Stock Plan.
(11) Includes 18,000 shares subject to currently exercisable stock options.
(12) Includes (i) 62,000 shares subject to currently exercisable stock
options, and (ii) 4,000 shares held by Mr. McCormack's children.
Excludes 6,000 shares subject to currently exercisable stock options
held by Mr. McCormack's wife, as to which Mr. McCormack disclaims
beneficial ownership.
(13) Includes (i) 53,100 shares subject to currently exercisable stock
options, (ii) 6,000 shares held in a revocable trust, (iii) 20,000
shares held in a self-directed individual retirement account, and (iv)
23,225 shares held by Mr. Blalock's wife.
(14) Includes (i) 70,500 shares subject to currently exercisable stock
options, (ii) 18,000 shares held in a self-directed individual
retirement account, and (iii) 14,919 shares held by Mr. Harmon's wife.
(15) Includes (i) 789,650 shares subject to currently exercisable stock
options, and (ii) 101,839 shares issued under and subject to the
Restricted Stock Plan. Excludes 6,000 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, (the
"Exchange Act") 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.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes compensation paid by the Company during
fiscal years 1998, 1999 and 2000 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>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------
<CAPTION>
Annual Compensation Awards Payouts
----------------------------------------------- -------------------------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Fiscal Compensation Award(s) Options/ Payouts Compensation
Name And Principal Position Year Salary($) Bonus($)(1) ($)(2) ($) SARs(#)(3) ($) ($)(4)
--------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arthur C. Wiener 2000 $625,002 $525,006 $157,502 -- 465,000 -- $ 5,823
Chairman of the Board, 1999 600,000 -- -- -- -- -- 4,333
President and Chief 1998 600,000 320,000 96,000 -- -- -- 3,602
Executive Officer
John J. Heldrich(5) 2000 $450,000 $337,500 $101,250 -- 55,000(6) -- $12,594
Executive Vice 1999 443,751 -- -- -- -- -- 7,191
President, and Chief 1998 275,228 25,000 -- -- 30,000 -- 5,703
Executive Officer and
President -- Swift
Denim Group
Robert McCormack 2000 $362,505 $300,006 $ 90,002 -- 87,000(6) -- $ 6,185
Executive Vice 1999 345,837 -- -- -- -- -- 4,618
President and 1998 267,919 90,000 27,000 -- -- -- 3,397
President -- Woven
Division, Apparel
Marketing Group
Charles A. Blalock 2000 $247,506 $140,630 $ 42,189 -- 63,100(6) -- $ 5,817
Executive Vice 1999 240,000 -- -- -- -- -- 4,301
President of 1998 222,500 90,000 27,000 -- -- -- 3,325
Manufacturing
Michael R. Harmon 2000 $247,506 $140,630 $ 42,189 -- 80,500(6) -- $ 5,817
Executive Vice 1999 240,000 -- -- -- -- -- 4,301
President, Chief 1998 222,500 90,000 27,000 -- -- -- 3,325
Financial Officer,
Treasurer and
Secretary
</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 year 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) Reflects such officer's participation in the Option Cancellation Program
and the New Options granted in connection with such program, which are
both subject to the approval of the stockholders of an increase in the
number of shares of Common Stock available under the Company's Stock
Option Plan. See "Compensation Committee Report on Executive Compensation
-- Report on Repricing of Options" and "Proposal 2 -- Approval of
Amendments to the 1999 Stock Option Plan."
(4) 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 year 2000 were as follows: Mr. Wiener --
$5,025; Mr. McCormack -- $5,025; Mr. Blalock -- $5,025; Mr. Harmon --
$5,025; and
8
<PAGE>
Mr. Heldrich -- $5,100; (ii) for fiscal year 1999 were as follows: Mr.
Wiener -- $3,564; Mr. McCormack-- $3,600; Mr. Blalock -- $3,600; Mr.
Harmon -- $3,600; and Mr. Heldrich -- $4,800; and (iii) for fiscal year
1998 were as follows: Mr. Wiener -- $2,978; Mr. McCormack -- $2,978;
Mr. Blalock -- $2,978; and Mr. Harmon -- $2,978. Life insurance premiums
paid by the Company with respect to term life insurance on the life of the
named persons (a) for fiscal year 2000 were as follows: Mr. Wiener --
$798; Mr. McCormack -- $1,160; Mr. Blalock -- $792; Mr. Harmon -- $792;
and Mr. Heldrich -- $1,436; (b) for fiscal year 1999 were as follows: Mr.
Wiener -- $769; Mr. McCormack -- $1,018; Mr. Blalock -- $701; Mr. Harmon
-- $701 and Mr. Heldrich-- $1,139; and (c) for fiscal year 1998 were as
follows: Mr. Wiener-- $624; Mr. McCormack -- $419; Mr. Blalock -- $347;
Mr. Harmon-- $347 and Mr. Heldrich -- $1,664. The premium paid by the
Company with respect to split-dollar life insurance on the life of Mr.
Heldrich for (x) fiscal year 2000 was $6,058; (y) fiscal year 1999 was
$1,139; and (z) fiscal year 1998 was $4,039.
(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) Includes options to purchase shares of Common Stock granted under the
Company's Stock Option Plan in April 2000 at an exercise price of $2.00
per share. Such options vest at the rate of 33 1/3% of such options when
the market price per share of the Common Stock equals or exceeds $6.00,
$8.00 and $10.00.
The following table sets forth information for each of the Named Executive
Officers with respect to stock options granted to such executive officer
during fiscal year 2000 and each Named Executive Officer's participation in
the Option Cancellation Program and the New Options granted in connection with
such program, which are both subject to stockholder approval of an increase in
the number of shares of Common Stock available under the Company's Stock
Option Plan. See "Compensation Committee Report on Executive Compensation --
Report on Repricing of Options" and "Proposal 2 -- Approval of Amendments to
the 1999 Stock Option Plan."
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------
Number of Percent of Total
Securities Options Granted
Underlying Options to Employees in Exercise Price Expiration Grant Date Present
Name Granted (#) Fiscal Year ($/sh.) Date Value (1)($)
---- ------------------ ---------------- -------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Arthur C. Wiener 465,000 52.8% $4.1875 9/6/10 $1,372,680
John J. Heldrich 25,000(2) 2.8 $ 2.00 (3) 29,750
30,000 3.4 $4.1875 9/6/10 88,560
Robert McCormack 25,000(2) 2.8 $ 2.00 (3) 29,750
62,000 7.0 $4.1875 9/6/10 183,024
Charles A. Blalock 10,000(2) 1.1 $ 2.00 (3) 11,900
53,100 6.0 $4.1875 9/6/10 156,751
Michael R. Harmon 10,000(2) 1.1 $ 2.00 (3) 11,900
70,500 8.0 $4.1875 9/6/10 208,116
</TABLE>
--------
(1) 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 6.21%; expected dividend yield of 0%;
expected lives ranging from 2 to 3 years; and expected volatility ranging
from 108% to 125.4%.
(2) Reflects options to purchase shares of Common Stock granted to such
persons under the Company's Stock Option Plan in April 2000. Such options
vest at the rate of 33 1/3% of such options when the market price per
share of the Common Stock equals or exceeds $6.00, $8.00 and $10.00.
(3) Such options expire on April 4, 2010; provided that, to the extent any
portion of such option is not vested on April 4, 2005, such non-vested
portion expires on such date.
9
<PAGE>
The following table sets forth information for each of the Named Executive
Officers with respect to the aggregate stock options exercised during the
fiscal year ended September 30, 2000, and stock options held as of September
30, 2000. In addition, the table reflects each Named Executive Officer's
participation in the Option Cancellation Program and the New Options granted
in connection with such program, which are both subject to stockholder
approval of an increase in the number of shares of Common Stock available
under the Company's Stock Option Plan. See "Compensation Committee Report on
Executive Compensation -- Report on Repricing of Options" and "Proposal 2 --
Approval of Amendments to the 1999 Stock Option Plan."
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number Of
Securities Value Of
Underlying Unexercised
Unexercised In-The-Money
Options At FY- Options At
End (#) FY-End($)(1)
---------------- -------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
---- ----------- ----------- ---------------- -------------
<S> <C> <C> <C> <C>
Arthur C. Wiener -- -- 66,700 / 465,000 $150,075 / --
John J. Heldrich -- -- -- / 55,000 -- / --
Robert McCormack -- -- -- / 87,000 -- / --
Charles A. Blalock -- -- -- / 63,100 -- / --
Michael R. Harmon -- -- -- / 80,500 -- / --
</TABLE>
--------
(1) Based upon the closing price of the Common Stock of $4.00 per share on
September 29, 2000, less the exercise price.
Retirement Plans
The Retirement Plan of Galey & Lord (the "Retirement Plan") covers all
full-time domestic employees (excluding hourly paid employees of Swift Denim
who are covered under separate plans). 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.
Effective as of April 1, 1992, the Retirement Plan was amended to provide
that employee contributions are neither required nor permitted. Under the 1992
Amendment (the "1992 Amendment"), 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
10
<PAGE>
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 $170,000 in fiscal year 2000.
Effective as of January 1, 1999, the Retirement Plan and Swift Denim's
Defined Benefit Retirement Plan merged and the merged plan was amended to
provide that a participant's lump sum retirement benefit is equal to the
participant's average annual compensation for the highest five consecutive
calendar years multiplied by the participant's accumulated pension equity
credits. Total pension equity credits are equal to the sum of (i) initial
pension equity credits based on the actuarial present value of the benefit
accrued as of December 31, 1998 under the plan prior to the amendment, and,
(ii) pension equity credits earned for each year of service subsequent to
January 1, 1999. At retirement, termination of employment, disability, or
death, the participant can elect to receive benefits in a single lump sum or
as an annuity (payable monthly).
The estimated lump sum benefits payable at normal retirement age (assuming
no increase in present salary levels) to the Named Executive Officers are as
follows: Arthur C. Wiener -- $447,261; Robert McCormack --$343,043; Charles A.
Blalock -- $317,050; Michael R. Harmon -- $322,915; and John J. Heldrich --
$306,255. Actuarially equivalent annual annuity benefits will be determined at
normal retirement age based on the actuarial factors in effect at that time as
prescribed in the plan document and the Internal Revenue Code. The maximum
compensation used to calculate benefits under the plan, as permitted by law,
is $170,000 in 2000 and will be $170,000 in 2001.
11
<PAGE>
Supplemental Executive Retirement Plan
Effective beginning for fiscal year 1994 and for all years thereafter, 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
1,000,000 87,500 175,000 262,500 350,000 437,500 525,000
1,050,000 91,875 183,750 275,625 367,500 459,375 551,250
1,100,000 96,250 192,500 288,750 385,000 481,250 577,500
1,150,000 100,625 201,250 301,875 402,500 503,125 603,750
1,200,000 105,000 210,000 315,000 420,000 525,000 630,000
</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 twelve years of service, except Mr. Heldrich,
who has been credited with approximately two years of service. The net pension
cost for fiscal year 2000 was $489,798 for approximately 33 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.
Under the Company's Severance Plan, as currently in
12
<PAGE>
effect, 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 September 30, 2000, the Named Executive Officers were eligible to
receive the following amounts in the event of involuntary termination: Arthur
C. Wiener -- $350,004; Robert McCormack -- $200,004; Charles A. Blalock --
$166,672; Michael R. Harmon -- $187,506; and John J. Heldrich -- $187,500.
Effective as of October 1, 2000, any future severance payments to which
Messrs. Wiener, McCormack, Heldrich and Blalock may be entitled to receive
will be in accordance with their respective employment agreements entered into
between the Company and each of such executive officer. See "Executive
Compensation -- Employment Agreements" below.
Employment Agreements
Effective as of October 1, 2000, the Company entered into a three-year
employment agreement with each of Messrs. Wiener, Heldrich and McCormack, and
a two-year employment agreement with Mr. Blalock (collectively, the "Executive
Employment Agreements"). Each Executive Employment Agreement provides that
Messrs. Wiener, Heldrich, McCormack and Blalock will be employed at an initial
annual base salary of $700,000, $450,000, $400,000 and $250,000, respectively,
subject to review and increase at the discretion of the Board of Directors.
Each Executive Employment Agreement is automatically extended for an
additional one-year period on each October 1 unless either the Company or the
Executive notifies the other no later than 30 days prior to each October 1 of
its or his desire not to extend the term. Each Executive Employment Agreement
also contains a confidentiality provision, a noncompetition provision which
prohibits the Executive from competing with the Company during the term of the
agreement without first obtaining the Company's consent, a nonsolicitation
provision which prohibits the Executive from soliciting any employees of the
Company, and a nondisparagement provision. Additionally, each Executive
Employment Agreement provides that, in the event the Company terminates the
Executive without Cause (as defined in the agreement) or the Executive
terminates his employment for Good Reason (as defined in the agreement) prior
to the expiration of the agreement, the Company is obligated to pay to such
Executive (i) the accrued value for the Executive under the Supplemental
Executive Retirement Plan through the end of the term of such Executive
Employment Agreement and (ii) severance in an amount equal to the greater of
(a) the benefit provided under the Company's Severance Policy or (b)
continuation of salary and bonus through the end of the term of such Executive
Employment Agreement. In addition, all unvested options held by such Executive
will immediately vest and be exercisable in accordance with such option
agreement or plan, as the case may be, and the Company will provide the
Executive with subsidized benefits (under the Company's welfare and benefits
plan) for the remaining term of the agreement or until the Executive commences
new employment and receives substantially similar benefits.
Furthermore, each Executive Employment Agreement provides that Messrs.
Wiener, Heldrich, McCormack and Blalock are entitled to participate in the
Company's Incentive Bonus Plan and Stock Option Plan. In addition, each
Executive will participate in the Company's Supplemental Executive Retirement
Plan and the Company will provide each Executive with deferred compensation
through its unfunded Deferred Compensation Plan.
Compensation of Directors
Pursuant to the Company's Restricted Stock Plan and Stock Option Plan, each
director of the Company 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 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
13
<PAGE>
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. 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 year 2000, each of Messrs. Gillease, Holt,
Jacobs, Mapel and Sherrill were issued 8,471 shares of Common Stock under the
Restricted Stock Plan. In addition, the Company paid to each of Messrs.
Gillease, Holt, Jacobs, Mapel and Sherrill $7,116 in payment of a portion of
their income tax liability as a result of receiving such shares under the
Restricted Stock Plan. In February 2000, Mr. Bradley was granted options to
purchase 2,000 shares of Common Stock at an exercise price of $2.125 per
share. Messrs. 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. Bradley
was granted options in January 2000 to purchase up to 2,500 shares of Common
Stock at an exercise price of $1.9375 per share and (ii) Messrs. Gillease and
Sherrill each received, in January 2000, a combination of $10,000 in cash and
7,742 shares of Common Stock issued under the Restricted Stock Plan.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
currently composed of two 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. Although
historically the Company's executive officers and other employees have not
been employed pursuant to employment agreements, the Company recently has
entered into employment agreements with certain of its executive officers and
certain other officers, effective October 1, 2000. See "Executive
Compensation -- Employment Agreements".
The Company is subject to Section 162(m) of the Internal Revenue Code of
1986, as amended, (the "Code") which limits the deductibility of certain
compensation payments to its executive officers. The Company does not have a
policy requiring the Committee to qualify all compensation for deductibility
under this provision. The 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.
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. Effective as of October 1, 2000
14
<PAGE>
(for fiscal year 2001), the minimum base salary for each of Messrs. Wiener,
Heldrich, McCormack and Blalock will be based on the Executive Employment
Agreements between the Company and each executive officer. The Executive
Employment Agreements provide that the base salary may, but is not guaranteed,
to be increased during the terms thereof. The Committee intends to continue to
follow the procedures set forth above when considering any base salary
increases for the Company's executive officers.
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 amount
(the "incentive amount") 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 amount is dependent upon achieving the performance criteria
established for such participants, as described above. Such incentive amounts
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 may 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, if any, 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.
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.
15
<PAGE>
Under the Company's Stock Option Plan, options to purchase shares of Common
Stock 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.
The Company grants stock options to the executive officers and other
members of the Company's management team and its key employees which would
vest upon the Company's Common Stock attaining a certain market price per
share. During fiscal year 2000, each of Messrs. Heldrich, McCormack, Blalock
and Harmon were granted an amount of stock options under the Company's Stock
Option Plan as provided in the table set forth herein entitled "Option Grants
in Last Fiscal Year." Such options were granted in April 2000 at an exercise
price of $2.00 per share. Such options vest at the rate of 33 1/3% of such
options when the price per share of the Company's Common Stock equals or
exceeds $6.00, $8.00 and $10.00. All such options expire on April 4, 2010;
provided that, to the extent any portion of such options is not vested on
April 4, 2005, such non-vested portion expires on such date.
Chief Executive Officer Compensation. The Company entered into an Executive
Employment Agreement with Mr. Wiener, effective as of October 1, 2000, and Mr.
Wiener's base salary will initially be set for fiscal year 2001 pursuant to
such Executive Employment Agreement. Compensation for Mr. Wiener, the
Company's Chairman of the Board, President and Chief Executive Officer,
historically has been, and will continue to be 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 for fiscal year 2000 was increased by
$25,002 (the pro rata portion of an annual increase of $100,000) as compared
to fiscal year 1999, and remained the same for fiscal years 1999 and 1998. The
amount of his annual incentive cash bonus has fluctuated depending upon the
EBITDA levels achieved by the Company. In May 2000, the Board of Directors,
based on a recommendation from the Committee, agreed to extend the expiration
date of Mr. Wiener's options to purchase 66,700 shares of Common Stock at an
exercise price of $1.75 per share to July 2, 2005 from an original expiration
date of July 2, 2000.
Report on Repricing of Options. In the past several years the price of the
Company's Common Stock has declined due to both industry factors and factors
more specifically related to the Company and, as a result, the Committee
determined that the purpose of the Company's grant of stock options as an
important component of the compensation package of key employees (including
executive officers) of the Company is not being achieved since most options
previously granted to such employees have exercise prices that far exceed the
stock price of the Company's Common Stock. As a result of the foregoing, in
September 2000, the Board of Directors, based on a recommendation from the
Committee, approved offering all employees (including executive officers)
holding outstanding options with an exercise price equal to or in excess of
$10.00 per share, the opportunity to cancel all such options (the "Option
Cancellation Program") in exchange for a new grant of options in an amount
equal to the same number of options cancelled (the "New Options") with an
exercise price of $4.1875 per share (the market value of the Company's Common
Stock on the date of such grants). The New Options will vest and become
exercisable when the Company's Common Stock equals or exceeds $12 per share
for a 90 consecutive trading day period and will expire on September 6, 2010
(unless terminated earlier pursuant to the terms of the option agreements and
the Stock Option Plan). As a result of the cancellation of options pursuant to
the Option Cancellation Program (a significant number of which were granted
pursuant to the Company's 1989 Stock Option Plan which plan is no longer in
effect) and the grant of the New Options under the Stock Option Plan, there
are an insufficient number of shares of Common Stock currently available under
the Stock Option Plan for the grant of the New Options. Therefore the Option
Cancellation Program and the New Options are both subject to the stockholder's
approval of an increase in the number of shares available under the Stock
Option Plan. See "Proposal 2- Approval of Amendments to the 1999 Stock Option
Plan." In the event the amendment to increase the number of shares of Common
Stock available thereunder is not approved by the stockholders, all options to
be cancelled pursuant to the Option Cancellation Program will remain valid and
16
<PAGE>
outstanding and the New Options will be null and void and of no force and
effect. A total of 27 employees (including executive officers) were eligible
and elected to participate in the Option Cancellation Program and receive New
Options to purchase an aggregate of 785,649 shares of Common Stock.
The following table sets forth certain information, since April 30, 1992
(the date on which the Common Stock was registered under the Exchange Act),
concerning the repricing of options, replacement grants of options or
cancellation of options in connection with the grant of new options for the
Named Executive Officers:
<TABLE>
<CAPTION>
Option Repricings
---------------------------------------------------
Length of
Number of Original
Securities Market Price Exercise Option
Underlying of Stock at Price at Term Remaining
Date of Options Time of Time of New at Date of
Name and Principal Repricing or Repriced or Repricing or Repricing or Exercise Repricing or
Position Amendment Amended Amendment Amendment Price Amendment
------------------ ------------ ----------- ------------ ------------ -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Arthur C. Wiener 9/7/00 15,000 $4.1875 $ 11.50 $4.1875 3 yrs, 3 mos.
Chairman of the Board, 9/7/00 200,000 4.1875 10.00 4.1875 1 yr., 5 mos.
President and Chief Executive 9/7/00 250,000 4.1875 10.375 4.1875 5 yrs, 10 mos.
Officer 7/10/96(1) 15,000 10.375 15.00 10.375 8 yrs, 3 mos.
John J. Heldrich 9/7/00 30,000 4.1875 15.688 4.1875 (2)
Executive Vice
President, and
Chief Executive
Officer and
President -- Swift
Denim Group
Robert McCormack 9/7/00 7,000 4.1875 11.50 4.1875 3 yrs, 3 mos.
Executive Vice 9/7/00 55,000 4.1875 10.375 4.1875 5 yrs, 10 mos.
President and 7/10/96(1) 8,500 10.375 15.00 10.375 8 yrs, 3 mos.
President -- Woven
Division, Apparel Marketing
Group
Charles A. Blalock 9/7/00 7,000 4.1875 11.50 4.1875 3 yrs, 3 mos.
Executive Vice 9/7/00 46,100 4.1875 10.375 4.1875 5 yrs, 10 mos.
President of 7/10/96(1) 7,000 10.375 15.00 10.375 8 yrs, 3 mos.
Manufacturing
Michael R. Harmon 9/7/00 7,000 4.1875 11.50 4.1875 3 yrs, 3 mos.
Executive Vice 9/7/00 63,500 4.1875 10.375 4.1875 5 yrs, 10 mos.
President, Chief 7/10/96(1) 7,000 10.375 15.00 10.375 8 yrs, 3 mos.
Financial Officer,
Treasurer and
Secretary
</TABLE>
--------
(1) During fiscal year 1996, the Named Executive Officers were granted new
options to purchase the following amount of shares of the Company's
Common Stock with an exercise price of $10.375 per share: Mr. Wiener-
250,000 shares; Mr. McCormack- 75,000 shares; Mr. Blalock- 75,000 shares;
and Mr. Harmon- 75,000 shares. Such options were to vest at the rate of
20% of such options when the market price per share of the Common Stock
equaled or exceeded $15.00, $17.00, $20.00, $22.50 and $25.00.
Simultaneously with the grant of these options, the original options that
were granted in November 1994 were cancelled and terminated.
(2) Indicates that, as of September 30, 2000, the remaining option term on
the currently exercisable options to purchase 18,000 shares of Common
Stock was 7 yrs, 5 mos. and the remaining option term on the unvested
options to purchase 12,000 shares of Common Stock was 2 yrs, 5 mos.
The Compensation Committee of
the Board of Directors
Paul G. Gillease
William deR. Holt
17
<PAGE>
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee")
oversees the Company's financial reporting process on behalf of the Board of
Directors. Management has the primary responsibility for the financial
statements and the reporting process including the systems of internal
controls. In fulfilling its oversight responsibilities, the Audit Committee
reviewed and discussed the audited financial statements in the Annual Report
for fiscal year 2000 with management.
The Audit Committee also reviewed with Ernst & Young LLP, the Company's
independent auditors, who are responsible for expressing an opinion on the
conformity of those audited financial statements with generally accepted
accounting principles, their judgments as to the quality, not just the
acceptability, of the Company's accounting principles and such other matters
as are required to be discussed with the Audit Committee under generally
accepted auditing standards (including Statement on Auditing Standards No.
61). In addition, the Audit Committee has discussed with the independent
auditors the auditors' independence from management and the Company, including
the matters in the written disclosures required by the Independence Standards
Board Standard No.1.
The Audit Committee discussed with the Company's independent auditors the
overall scope and plans for their audit. The Audit Committee met with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
Audit Committee held five meetings during fiscal year 2000.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended September 30, 2000 for filing with the Securities and
Exchange Commission. The Audit Committee and the Board have also recommended,
subject to shareholder approval, the selection of Ernst & Young LLP as the
Company's independent auditors for fiscal year 2001.
The Audit Committee of
the Board of Directors
Paul G. Gillease
Howard S. Jacobs
William M. R. Mapel
18
<PAGE>
PERFORMANCE COMPARISON
The following graph compares, from September 30, 1995 (the last trading day
before the commencement of the Company's fifth fiscal year preceding fiscal
year 2000), 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 September 30, 1995 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. (which is included in the peer group until August 2000, the date the
securities of Forstmann & Company, Inc. stopped trading); Guilford Mills,
Inc.; 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.
[Performance Graph appears here with the following plot points]
<TABLE>
<CAPTION>
Base Period
Sept. 1995 Sept. 1996 Sept. 1997 Sept. 1998 Sept. 1999 Sept. 2000
<S> <C> <C> <C> <C> <C> <C>
Galey & Lord $100.00 $93.64 $137.27 $86.82 $19.09 $29.09
S & P 500 $100.00 $120.33 $169.00 $184.29 $235.53 $266.82
Peer Group $100.00 $90.15 $125.82 $79.13 $55.80 $36.98
</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 September 30, 2000 did not
exceed 5% of the revenues of such firm for its most recent fiscal year.
19
<PAGE>
PROPOSAL 2 -- APPROVAL OF AMENDMENTS TO THE 1999 STOCK OPTION PLAN
Amendments
The Board of Directors adopted, subject to the approval of the
stockholders, the following amendments to the Company's Stock Option Plan:
(a) An increase in the number of shares of Common Stock available under the
Stock Option Plan by an aggregate of 800,000 shares; and
(b) An increase in the limitation on the number of options that may be
granted to an executive officer of the Company, during any three year
period, to options to purchase 600,000 shares of Common Stock from
400,000 shares of Common Stock in order to comply with certain
provisions of the Internal Revenue Code of 1986, as amended (the
"Code").
The Stock Option Plan provides for the grant of stock options and currently
covers up to an aggregate of 500,000 shares of Common Stock. As of December
22, 2000, options to purchase 94,500 shares of Common Stock were outstanding
under the Stock Option Plan. Under the Stock Option Plan as currently in
effect, there are 405,500 shares of Common Stock available for future grants
of stock options. As a result of the Option Cancellation Program, employees
have elected to cancel options to purchase an aggregate of 785,649 shares of
Common Stock (which were originally granted pursuant to the Company' 1989
Stock Option Plan which plan is no longer in effect) with an exercise price
equal to or in excess of $10.00 per share in exchange for a new grant under
the Stock Option Plan of options to purchase an aggregate of 785,649 shares of
Common Stock with an exercise price of $4.1875 per share (the market value of
the Company's Common Stock on the date of such grants). See "Compensation
Committee Report -- Report of Repricing of Options." Because there are an
insufficient number of shares of Common Stock available for grants under the
Stock Option Plan to effect the Option Cancellation Program and the grant of
the New Options for employees who are eligible and elected to participate in
such program, such program and grant were made subject to stockholder approval
of the amendment to the Stock Option Plan increasing the number of shares of
Common Stock available thereunder. As of December 22, 2000, 6 people
participated in the Stock Option Plan. See "Compensation Committee Report--
Report of Repricing of Options."
The principal purpose of the proposed amendments to the Stock Option Plan
is to enable the Company to continue to attract and retain the services of
directors, officers, key employees and consultants for the benefit of the
Company, thereby providing increased incentive for such directors, officers,
key employees and consultants to render services to the Company in the future
and to exert maximum effort for the success of the Company. Under the Stock
Option Plan as currently in effect, there are an insufficient number of shares
of Common Stock available for the grant of the New Options in connection with
the Option Cancellation Program as well as for future grants of stock options.
In addition, as a result of the grant of the New Options in connection with
the Option Cancellation Program, the grant of New Options to Arthur C. Wiener,
the Company's Chairman of the Board, President and Chief Executive Officer,
would exceed the current limitation on the number of options that may be
granted to an executive officer of the Company during any three year period. A
limitation on the number of options that can be granted to an executive
officer under a stock option plan is required by Section 162(m) of the Code in
order for the Company to preserve the deductibility of payments under the
Stock Option Plan in the event an executive officer's total compensation at
some time in the future exceeds $1,000,000 per annum.
The stockholders are required to vote on and approve each of the proposed
amendments to the Stock Option Plan separately. The adoption of the proposed
amendment set forth in (b) above is subject to and contingent upon the
approval and adoption of the proposed amendment to increase the number of
shares of Common Stock available under the Stock Option Plan set forth in (a)
above. In the event that the proposed amendment to the Stock Option Plan set
forth in (a) above is not approved by the stockholders, the proposed amendment
to the Stock Option Plan set forth in (b) above will not be adopted by the
Company.
20
<PAGE>
The Board of Directors believes that it is in the best interest of the
Company and its stockholders to approve each of the proposed amendments to the
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 each
of the proposed amendments to the Stock Option Plan. Abstentions and broker
non-votes are not counted as votes cast.
The following summary of certain features of the Stock Option Plan is
qualified in its entirety by reference to the full text of the Stock Option
Plan, a copy of which is available to any stockholder upon request.
Description of the Stock Option Plan
In December 1998, the Board of Directors adopted the Stock Option Plan,
which was approved by the Company's stockholders in February 1999. The Stock
Option Plan provides for the grant of stock options, currently covering up to
an aggregate of 500,000 shares of Common Stock. The Stock Option Plan is
administered by members of the Company's Board of Directors who are "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 Code. Under the 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 Stock Option Plan. Under the 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 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 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 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 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.
In addition, the 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 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
21
<PAGE>
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. 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 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. Under the Stock Option Plan as currently in effect, 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 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 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 Stock Option Plan. The 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 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 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 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 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 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.
22
<PAGE>
Approximately 30 employees (including the five Named Executive Officers in
the Summary Compensation Table) and five non-employee directors are currently
eligible to receive options under the Stock Option Plan. During the 2000
fiscal year (i) options to purchase an aggregate of 70,000 shares of Common
Stock were granted, under the Stock Option Plan (excluding the New Options
granted in connection with the Option Cancellation Program) to the Company's
Named Executive Officers in the amounts as set forth in the table herein
entitled "Option Grants in Last Fiscal Year," (ii) options to purchase an
aggregate of 680,600 shares of Common Stock were granted to the five Named
Executive Officers in connection with their participation in the Option
Cancellation Program and the New Options granted with respect to such program
(see "Compensation Committee Report on Executive Compensation- Report on
Repricing of Options"), (iii) Mr. Bradley was granted options under the Stock
Option Plan to purchase 2,000 shares of Common Stock at an exercise price of
$2.125 per share, (iv) Mr. Bradley was granted options under the Stock Option
Plan to purchase 2,500 shares of Common Stock at an exercise price of $1.9375
per share, (v) options to purchase an aggregate of 20,000 shares of Common
Stock at an average exercise price of $2.00 per share were granted, under the
Stock Option Plan (excluding the New Options granted in connection with the
Option Cancellation Program) to all employees as a group (other than the Named
Executive Officers), and (vi) options to purchase an aggregate of 105,049
shares of Common Stock were granted to 23 employees (other than the Named
Executive Officers) in connection with their participation in the Option
Cancellation Program and the New Options granted with respect to such program
(see "Compensation Committee Report on Executive Compensation- Report on
Repricing of Options"). On December 22, 2000, the closing price of a share of
Common Stock on the New York Stock Exchange was $2.50.
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 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 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 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 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.
23
<PAGE>
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 United 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 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 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 for their
participation in the Stock Option Plan.
PROPOSAL 3 -- APPROVAL OF AMENDMENT TO THE 1996 RESTRICTED STOCK PLAN
Amendment
In November 2000, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Company's 1996 Restricted Stock Plan for non-
employee directors (the "Restricted Stock Plan") to increase the maximum
number of shares of Common Stock available for issuance under the Restricted
Stock Plan by 50,000 shares.
The Restricted Stock Plan provides for the issuance of Common Stock to non-
employee directors and currently covers up to an aggregate of 150,000 shares
of Common Stock. Under the Restricted Stock Plan, as currently in effect,
there are only 40,561 shares of Common Stock available for future issuance to
non-employee directors and, as of December 22, 2000, the Company estimates
that its non-employee directors (excluding Mr. Valdez, a director nominee)
have elected to receive an aggregate of 40,800 shares of Common Stock (based
on the closing price of the Common Stock on December 22, 2000) under the
Restricted Stock Plan for fiscal year 2001. See "Description of the Restricted
Stock Plan" below. As of December 22, 2000, five persons participated in the
Restricted Stock Plan.
24
<PAGE>
The principal purposes of the proposed amendment to the Restricted Stock
Plan is to have a sufficient number of shares of Common Stock available under
the Restricted Stock Plan for future issuance to the Company's non-employee
directors in order to induce such persons to serve or continue to serve as
directors of the Company, to encourage ownership of shares in the Company by
non-employee directors and to provide additional incentives for non-employee
directors to promote the success of the Company's business by aligning their
interests with those of the stockholders. The Board of Directors of the
Company believes that the granting of restricted stock under the Restricted
Stock 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 securing the Company's continued growth and financial success.
The stockholders are required to vote on and approve the amendment to the
Restricted Stock Plan. The Board of Directors believes that it is in the best
interest of the Company and its stockholders to approve the amendment to the
Restricted Stock 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 amendment to the Restricted Stock Plan. Abstentions and broker non-votes
are not counted as votes cast.
The following summary of certain features of the Restricted Stock Plan is
qualified in its entirety by reference to the full text of the Restricted
Stock Plan, a copy of which is available to any stockholder upon request.
Description of the Restricted Stock Plan
In November 1996, the Board of Directors adopted the Restricted Stock Plan,
which was approved by the Company's stockholders in February 1997. The
Restricted Stock Plan currently provides for the issuance of 150,000 shares of
Common Stock. The number of shares so reserved for issuance under the
Restricted Stock Plan may from time to time be reduced to the extent that a
corresponding number of issued and outstanding shares of Common Stock are
purchased by the Company and set aside for issuance under the Restricted Stock
Plan. In addition, if any shares of Common Stock issued under the Restricted
Stock Plan are reacquired by the Company, such shares shall again be available
for issuance under the Restricted Stock Plan.
The Restricted Stock Plan is administered by a committee (the "Committee")
of the Board of Directors of the Company consisting of two or more members of
the Board of Directors. The Chief Executive Officer of the Company is also a
member of the Committee. The Committee is appointed annually by the Board of
Directors, which may at any time remove any members of the Committee, with or
without cause, appoint additional members to the Committee and fill vacancies,
however caused, in the Committee. In the event that no Committee is appointed,
the Board of Directors shall act as the Committee. The Committee has the
authority to interpret the Restricted Stock Plan and to prescribe, amend and
rescind rules and regulations relating to the Restricted Stock Plan.
The Restricted Stock 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 granted under the Stock Option
Plan, or (ii) an amount of shares of Common Stock issued pursuant to the
Restricted Stock Plan (subject to availability) having a fair market value (as
defined in the Restricted Stock Plan) on the date of issuance equal to
$18,000. 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.
In addition, the Restricted Stock 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 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
25
<PAGE>
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 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.
Each non-employee director of the Company who is allocated shares of Common
Stock under the Restricted Stock Plan (the "Restricted Shares"), shall
purchase such Restricted Shares from the Company for a purchase price of $0.01
per share. Upon issuance of the certificate or certificates for Restricted
Shares to a participant, such participant shall thereupon be a stockholder of
the Company and shall have the rights of a stockholder with respect to such
Restricted Shares, including the right to vote and to receive all dividends
and other distributions paid with respect to such Restricted Shares.
A non-employee director who has been issued Restricted Shares will realize
taxable income at the time of such issuance in an amount equal to the fair
market value of the shares at that time, less the amount paid for such shares.
The Company generally will be entitled to a deduction for Federal income tax
purposes in an amount equal to the amount included in income by the
participant.
Each participant receiving Restricted Shares shall enter into a restricted
stock agreement pursuant to which, among other things, such participant shall
(i) agree that such Restricted Shares shall be subject to, and shall be held
by, such participant in accordance with the Restricted Stock Plan (for at
least three years, as discussed below), (ii) represent and warrant to the
Company that such participant is acquiring such Restricted Shares for
investment purposes for his or her own account (unless there is then current a
prospectus relating to the Restricted Shares under Section 10(a) of the
Securities Act of 1933, as amended (the "Securities Act") and, in any event,
that such participant will not sell or otherwise dispose of such Restricted
Shares except in compliance with the Securities Act, and (iii) agree that the
Company will place on the certificates representing Restricted Shares such
legend or legends as the Company may deem appropriate and that the Company may
place a stop transfer order with respect to such Restricted Shares with the
Company's transfer agent for the Common Stock.
Restricted Shares allocated to a non-employee director of the Company under
the Restricted Stock Plan may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of for a period of three years from the
date of the restricted stock agreement entered into with respect thereto. In
addition, if the participant to whom Restricted Shares have been allocated
leaves the service of the Company by reason of such participant's discharge
for cause (as defined in the Restricted Stock Plan) prior to the end of such
three-year period, such participant shall be obligated to redeliver such
Restricted Shares to the Company immediately and the Company shall pay to such
participant, in redemption of such Restricted Shares, an amount equal to the
price paid by the participant for such Restricted Shares. If such participant
leaves the service of the Company for any reason other than such participant's
discharge for cause prior to the termination of such three-year period, such
participant (or, in the event of such participant's death, the executors or
administrators of his or her estate) shall retain the Restricted Shares and
all of his or her rights with respect thereto. The Committee may, in its
discretion, cause any of the foregoing restrictions with respect to Restricted
Shares to terminate, in whole or in part, prior to the time when they would
otherwise terminate.
The Restricted Stock Plan provides for adjustment to the Restricted Shares
then subject to any restricted stock agreement and the number of shares of
Common Stock reserved for issuance, but not yet issued, under the Restricted
Stock Plan upon the occurrence of certain events, including stock dividends,
stock splits, reorganizations, recapitalizations, combinations, sale of
assets, merger or consolidation or similar changes or transactions of or by
the Company. No such adjustment shall require the Company to deliver a
fractional share under the Restricted Stock Plan.
26
<PAGE>
The Restricted Stock Plan expires on November 11, 2006, unless terminated
earlier by the Board of Directors; provided, however, that any such
termination shall not, without the consent of the participants to whom any
Restricted Shares shall have been allocated, adversely affect the rights or
obligations of such participants with respect to such Restricted Shares. The
Restricted Stock Plan may be amended from time to time by the Board of
Directors, except that no amendment of the Restricted Stock Plan may, without
the consent of the participants to whom any Restricted Shares shall have been
allocated, adversely affect the rights or obligations of such participants
with respect to such Restricted Shares.
On December 22, 2000, the closing price of a share of Common Stock on the
New York Stock Exchange was $2.50.
PROPOSAL 4 -- 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 2001 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 year
2000 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 22, 2000 are concurrently being
sent a copy of the Company's Annual Report for the fiscal year ended September
30, 2000 which contains audited financial statements of the Company for the
fiscal years ended October 3, 1998, October 2, 1999 and September 30, 2000.
STOCKHOLDER PROPOSALS
Stockholder proposals must be received by the Company at its principal
executive office no later than September 7, 2001 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 21, 2001 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.
27
<PAGE>
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.
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 SEPTEMBER
30, 2000 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 5, 2001
28
<PAGE>
Appendix A
GALEY & LORD, INC.
AUDIT COMMITTEE CHARTER
Organization
This charter governs the operations of the audit committee of the Board of
Directors of Galey & Lord, Inc. (the "Company"). The committee shall review
and reassess the charter at least annually and obtain the approval of the
board of directors of the initial charter and any substantive changes to it
thereafter. The committee shall be appointed by the board of directors and
shall comprise at least three directors, each of whom are independent of
management and the Company. Members of the committee shall be considered
independent if they have no relationship that may interfere with the exercise
of their independence from management and the Company. All committee members
shall be financially literate, or shall become financially literate within a
reasonable period of time after appointment to the committee, and at least one
member shall have accounting or related financial management expertise.
Statement of Policy
The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the legal
compliance and ethics programs as established by management and the board. In
so doing, it is the responsibility of the committee to maintain free and open
communication between the committee, independent auditors, the internal
auditors and management of the Company. In discharging its oversight role, the
committee is empowered to investigate any matter brought to its attention with
full access to all books, records, facilities, and personnel of the Company
and the power to retain outside counsel, or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the audit committee is to oversee the
Company's financial reporting process on behalf of the board and report the
results of their activities to the board. Management is responsible for
preparing the Company's financial statements, and the independent auditors are
responsible for auditing those financial statements. The committee in carrying
out its responsibilities believes its policies and procedures should remain
flexible, in order to best react to changing conditions and circumstances. The
committee should take the appropriate actions to set the overall corporate
"tone" for quality financial reporting, sound business risk practices, and
ethical behavior.
The following shall be the principal recurring processes of the audit
committee in carrying out its oversight responsibilities. The processes are
set forth as a guide with the understanding that the committee may supplement
them as appropriate.
. The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the board and the audit committee, as representatives of the
Company's shareholders. The committee shall have the authority and
responsibility to evaluate and, where appropriate, replace the independent
auditors after discussing same with the Board of Directors. The committee
shall discuss with the auditors their independence from management and the
Company and the matters included in the written disclosures required by the
Independence Standards Board. Annually, the committee shall review and
recommend to the board the selection of the Company's independent auditors,
subject to shareholders' approval.
<PAGE>
. The committee shall discuss with the internal auditors and the independent
auditors the overall scope and plans for their respective audits including
the adequacy of staffing and the auditor's fee. Also, the committee shall
discuss with management, the internal auditors, and the independent
auditors the adequacy and effectiveness of the accounting and financial
controls, including the Company' system to monitor and manage business
risk, and legal and ethical compliance programs. Further, the committee
shall meet separately with the internal auditors and the independent
auditors, with and without management present, to discuss the results of
their examinations.
. The committee shall review the interim financial statements with management
and the independent auditors prior to the filing of the Company's Quarterly
Report on Form 10-Q. Also, the committee shall discuss the results of the
quarterly review and any other matters required to be communicated to the
committee by the independent auditors under generally accepted auditing
standards. The chair of the committee may represent the entire committee
for the purposes of the review.
. The committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form
10-K (or the annual report to shareholders if distributed prior to the
filing of Form 10-K), including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements.
Also, the committee shall discuss the results of the annual audit and any
other matters required to be communicated to the committee by the
independent auditors under generally accepted auditing standards.
2
<PAGE>
(This Space Left Blank Intentionally)
--------------------------------------------------------------------------------
P R O X Y GALEY & LORD, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FEBRUARY 13, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Arthur C. Wiener and 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 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 22, 2000, at the Annual Meeting of Stockholders to be held at Club
101, 101 Park Avenue, New York, New York 10178, on February 13, 2001, 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 seven 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, Michael T. Bradley, Paul G. Gillease, Howard S. Jacobs,
William M.R. Mapel, Stephen C. Sherrill and Jose de Jesus Valdez
(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 approval of the following proposed amendments to the Company's 1999
Stock Option Plan (the "Stock Option Plan"):
(a) To increase the number of shares of Common Stock available under the
Stock Option Plan by an aggregate of 800,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
(b) To increase the limitation on the number of options that may be granted
to an executive officer of the Company, during any three year period, to
options to purchase 600,000 shares of Common Stock from 400,000 shares of
Common Stock.
[_] FOR [_] AGAINST [_] ABSTAIN
3. The approval of the proposed amendment to the Company's 1996 Restricted
Stock Plan (the "Restricted Stock Plan") to increase the number of shares of
Common Stock available under the Restricted Stock Plan by an aggregate of
50,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
4. The ratification of the selection of Ernst & Young LLP as independent
auditors of the Company for the 2001 fiscal year.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
(This Space Left Blank Intentionally)
--------------------------------------------------------------------------------
5.Upon such other business as may properly come before the Meeting or any
adjournment thereof.
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 seven named
individuals as directors, (ii) FOR the approval of each of the two proposed
amendments to the Company's Stock Option Plan, (iii) FOR the approval of the
proposed amendment to the Company's Restricted Stock Plan, (iv) FOR the ratifi-
cation of the selection of Ernst & Young LLP as independent auditors of the
Company for the 2001 fiscal year, and (v) in accordance with the judgment of
the person or persons voting the proxies on any other matter that may be prop-
erly brought before the Meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders to be held on February 13, 2001 and the Proxy Statement, dated
January 5, 2001, prior to the signing of this proxy.
Dated: , 2001
__________________________(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.
<PAGE>
Appendix 2
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).
1
<PAGE>
"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
2
<PAGE>
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 in the
meaning of Section 424(f) of the Code.
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,
3
<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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 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
6
<PAGE>
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 ten thousand dollars ($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
7
<PAGE>
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
8
<PAGE>
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.
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
9
<PAGE>
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
10
<PAGE>
changed or for which each such share shall be exchanged, or to which each such
share 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.
11
<PAGE>
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.
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.
12
<PAGE>
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
13
<PAGE>
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.
14
<PAGE>
Appendix 3
GALEY & LORD, INC.
1996 RESTRICTED STOCK PLAN
(As Currently in Effect)
1. Purpose. The purpose of the Galey & Lord, Inc., 1996
Restricted Stock Plan (the "Plan") is to induce certain non-employee directors
to continue to serve as directors of Galey & Lord, Inc. (the "Corporation"), to
encourage ownership of shares in the Corporation by such non-employee directors
and to provide additional incentive for such directors to promote the success of
the Corporation's business.
2. Effective Date of the Plan. The Plan became effective on
November 12, 1996, by action of the Board of Directors (the "Board") subject to
approval by the stockholders of the Corporation.
3. Stock Subject to Plan. 150,000 of the authorized but
unissued shares of the common stock, $.01 par value, of the Corporation (the
"Common Stock") are hereby reserved for issuance under the Plan; provided,
however, that the number of shares so reserved may from time to time be reduced
to the extent that a corresponding number of issued and outstanding shares of
the Common Stock are purchased by the Corporation and set aside for issuance
under the Plan. If any shares of the Common Stock issued under the Plan
("Restricted Shares") are reacquired by the Corporation as provided in Section
9, such shares shall again be available for the purposes of the Plan.
4. Committee. The committee (the "Committee") shall consist of
two or more members of the Board. The Chief Executive Officer of the Corporation
shall also be a member of the Committee, ex-officio, whether or not he or she is
otherwise a member of the Committee. The Committee shall be appointed annually
by the Board, which may at any time and from time to time remove any members of
the Committee, with or without cause, appoint additional members to the
1
<PAGE>
Committee and fill vacancies, however caused, in the Committee. In the event
that no Committee shall have been appointed, the Board shall act as the
Committee. A majority of the members of the Committee shall constitute a quorum.
All determinations of the Committee shall be made by a majority of its members
present at a meeting duly called and held. Any decision or determination of the
Committee reduced to writing and signed by all of the members of the Committee
shall be fully effective as if it had been made at a meeting duly called and
held.
5. Administration. Subject to the provisions of the Plan, the
Committee shall have authority to interpret the Plan and to prescribe, amend and
rescind rules and regulations relating to it. Any determination by the Committee
in carrying out, administering or construing the Plan shall be final and binding
for all purposes and upon all interested persons and their heirs, successors and
personal representatives.
6. Eligibility. An allocation of Restricted Shares may only be
made to persons who are directors of the Corporation and who are not common law
employees of the Corporation.
7. Grants of Restricted Shares. A. Annually on the third
Trading Day after the date of the Annual Meeting of stockholders of the
Corporation, through and including the Annual Meeting of stockholders of the
Corporation held in 2005, and on the third Trading Day after the date on which
each person described below first becomes a director (if such date is a date
other than the Annual Meeting of Stockholders of the Corporation), each person
who (a) is
2
<PAGE>
serving as a director of the Corporation on the date of grant, (b) is
not a common law employee of the Corporation and (c) has filed an election with
the Corporation (at such time and in such manner as may be prescribed by the
Corporation) to receive an allocation of Restricted Shares for the current year
in lieu of an option under the Amended and Restated 1989 Stock Option Plan of
Galey & Lord, Inc. (or any other stock option plan subsequently adopted by the
Corporation), shall automatically be allocated a number Restricted Shares
derived by dividing eighteen thousand (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 Plan.
B. On the third Trading Day after each January 1, through and
including January 1, 2006, and at the time each person described below first
becomes a director, each person who (a) is serving as a director of the
Corporation on such date, (b) is not a common law employee of the Corporation on
such date and (c) filed an election with the Corporation on or prior to the
preceding December 1, or at the time a person first became a director (at such
time and in such manner as may be prescribed by the Corporation) to receive all
of his or her annual director's fee for the subsequent calendar year (or, for
the remainder of the current calendar year, in the case of a person who first
becomes a director during such calendar year) in the form of a combination of
cash and Restricted Shares in lieu of (i) cash or (ii) a grant of options under
the Amended and Restated 1989 Stock Option Plan of Galey & Lord, Inc. (or any
other stock option plan subsequently adopted by the Corporation), shall be paid
for such subsequent calendar year (or, for the remainder of the current calendar
year, in the case of a person who first becomes a director during such calendar
year) in the form of a combination of ten thousand dollars ($10,000) of cash and
an allocation, subject to availability under the Plan, of the number of
Restricted Shares derived by dividing fifteen thousand (15,000) by the Fair
Market Value per
3
<PAGE>
Share of the Common Stock on the third Trading Day after January 1 of such
subsequent calendar year (or the third Trading Day after the date on which such
person first becomes a director, as the case may be), rounded to the next
highest share. Notwithstanding the foregoing provisions of this Section 7B, the
amount of the annual directors' fee to be paid (whether in the form of cash,
stock options or a combination of cash and Restricted Shares) with respect to a
calendar year to a director who first becomes a director during such calendar
year shall be reduced to an amount calculated by multiplying the amount to which
a director otherwise would be payable pursuant to the foregoing provisions of
this Section 7B (whether in the form of cash, stock options or a combination of
cash and Restricted Shares) 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 person first becomes a director and the denominator of which is three
hundred sixty-five (365).
8. Purchase Price. Each person who shall be allocated
Restricted Shares hereunder shall purchase the same from the Corporation at and
for a purchase price of $.01 a share. Failure by a Participant to purchase and
pay for all of the Restricted Shares allocated to him or her within thirty days
after he or she shall have been given written notice of such allocation shall
result in a cancellation of such allocation and he or she shall no longer have
the right to purchase the same hereunder.
9. Restricted Shares. A. Except as otherwise provided in this
Section, the Restricted Shares allocated to a Participant may not be sold,
assigned, transferred or otherwise disposed of, and may not be pledged or
hypothecated. The Stock Restrictions shall terminate on the third
4
<PAGE>
anniversary of the date of his or her Restricted Stock Agreement (as such term
is defined in paragraph E. of this Section 9).
B. In addition, if the Participant to whom Restricted Shares
have been allocated as of any Allocation Date leaves the service of the
Corporation and its subsidiaries by reason of his or her Discharge for Cause
prior to the termination of the Stock Restrictions with respect to the
Restricted Shares allocated to such Participant as of such Allocation Date, he
or she shall be obligated to redeliver such Restricted Shares to the Corporation
immediately and the Corporation shall pay to him or her, in redemption of such
shares, an amount equal to the price paid by the Participant for such Restricted
Shares.
C. If the Participant to whom Restricted Shares have been
allocated as of any Allocation Date leaves the service of the Corporation and
its subsidiaries for any reason other than his or her Discharge for Cause prior
to the termination of the Stock Restrictions with respect to the Restricted
Shares allocated to such Participant as of such Allocation Date, such
Participant (or, in the event of his or her death, the executors or
administrators of his or her estate) shall retain all of his or her rights with
respect to such Restricted Shares; provided, however, that such Restricted
Shares shall remain subject to the terms of the Plan and of such Participant's
Restricted Stock Agreement.
D. Upon issuance of the certificate or certificates for the
Restricted Shares in the name of a Participant, the Participant shall thereupon
be a stockholder with respect to all the Restricted Shares represented by such
certificate or certificates and shall have the rights of a stockholder with
respect to such Restricted Shares, including the right to vote such Restricted
5
<PAGE>
Shares and to receive all dividends and other distributions paid with respect to
such Restricted Shares.
E. Each Participant receiving Restricted Shares shall (a)
agree that such Restricted Shares shall be subject to, and shall be held by him
or her in accordance with all of the applicable terms and provisions of, the
Plan, (b) represent and warrant to the Corporation that he or she is acquiring
such Restricted Shares for investment for his or her own account (unless there
is then current a prospectus relating to the Restricted Shares under Section
10(a) of the Securities Act of 1933, as amended) and, in any event, that he or
she will not sell or otherwise dispose of said shares except in compliance with
the Securities Act of 1933, as amended, and (c) agree that the Corporation may
place on the certificates representing the Restricted Shares or new or
additional or different shares or securities distributed with respect to the
Restricted Shares such legend or legends as the Corporation may deem appropriate
and that the Corporation may place a stop transfer order with respect to such
Restricted Shares with the Transfer Agent(s) for the Common Stock. The foregoing
agreement, representation and warranty shall be contained in an agreement in
writing ("Restricted Stock Agreement") which shall be delivered by the
Participant to the Corporation. The Committee shall adopt, from time to time,
such rules with respect to the return of executed Restricted Stock Agreements as
it deems appropriate and failure by a Participant to comply with such rules
shall terminate the allocation of such Restricted Shares to such Participant.
10. Adjustment of Number of Shares. A. In the event that a
dividend shall be declared upon the Common Stock payable in shares of the Common
Stock, the number of shares of the Common Stock then subject to any Restricted
Stock Agreement and the number of shares
6
<PAGE>
of the Common Stock reserved for issuance in accordance with the provisions of
the Plan but not yet issued shall be adjusted by adding to each such share the
number of shares which would be distributable thereon if such shares had been
outstanding on the date fixed for determining the stockholders entitled to
receive such stock dividend. In the event that the outstanding shares of the
Common Stock shall be changed into or exchanged for a different number or kind
of shares of stock or other securities of the Corporation or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, sale of assets, merger or consolidation in which the
Corporation is the surviving corporation, then, there shall be substituted for
each share of the Common Stock then subject to a Restricted Stock Agreement and
for each share of the Common Stock reserved for issuance in accordance with the
provisions of the Plan but not yet issued, the number and kind of shares of
stock or other securities into which each outstanding share of the Common Stock
shall be so changed or for which each such share shall be exchanged.
B. In the event that there shall be any change, other than as
specified in this Section 10, in the number or kind of outstanding shares of the
Common Stock, or of any stock or other securities into which the Common Stock
shall have been changed, or for which it shall have been exchanged, then, if the
Committee shall, in its sole discretion, determine that such change equitably
requires an adjustment in the number or kind of shares then subject to a
Restricted Stock Agreement and the number or kind of shares reserved for
issuance in accordance with the provisions of the Plan but not yet issued, such
adjustment shall be made by the Committee and shall be effective and binding for
all purposes of the Plan and of each Restricted Stock Agreement entered into in
accordance with the provisions of the Plan.
7
<PAGE>
C. No adjustment or substitution provided for in this Section
10 shall require the Corporation to deliver a fractional share under the Plan or
any Restricted Stock Agreement.
11. Withholding and Waivers. In the event of the death of a
Participant, an additional condition to the Corporation's obligation to release
Restricted Shares to the executors or administrators of such Participant's
estate and to release the Stock Restrictions provided hereunder on any
Restricted Shares owned by such Participant as provided in Section 9 shall be
the delivery to the Corporation of such tax waivers, letters testamentary and
other documents as the Committee may reasonably determine.
12. Definitions. For the purposes hereof:
A. The term "Allocation Date" shall mean the date as of which
a Participant shall have received a grant of Restricted Shares.
B. The term "Discharge for Cause" shall mean the termination
of a Participant's service as a director of the Corporation by reason of (i) the
commission by such Participant of any act or omission that would constitute a
crime under federal, state or equivalent foreign law, (ii) the commission by
such Participant of any act of moral turpitude, (iii) fraud, dishonesty or other
acts or omissions that result in a breach of any fiduciary or other material
duty to the Corporation or (iv) continued alcohol or other substance abuse that
renders such Participant incapable of performing his or her material duties to
the satisfaction of the Corporation.
C. The term "Fair Market Value per Share " shall mean the last
reported sale price for Common Stock (regular way) or, in case no such reported
sale takes
8
<PAGE>
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 if the Common Stock is not listed or admitted to trading
on any national securities exchange, but is traded 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 National Association of Securities Dealers Automated
Quotation System ("Nasdaq") or any comparable system or, if the Common Stock is
not listed on Nasdaq 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 and as otherwise used in the Plan, "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 but is traded in the
over-the-counter market, a business day during which the 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
9
<PAGE>
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.
D. The term "Stock Restrictions" shall mean the restrictions
on the ability of a Participant to transfer Restricted Shares issued to such
Participant hereunder referred to in Section 9 and embodied in a Restricted
Stock Agreement between the Corporation and such Participant.
13. Expenses of Administration. All costs and expenses
incurred in the operation and administration of the Plan shall be borne by the
Corporation.
14. No Employment Right. Neither the existence of the Plan nor
the grant of any Restricted Shares hereunder shall require the Corporation or
any subsidiary to continue any Participant as a director of the Corporation or
any subsidiary.
15. Amendment of Plan. The Board may, at any time and from
time to time, by a resolution appropriately adopted, make such modifications of
the Plan as it shall deem advisable. No amendment of the Plan may, without the
consent of the Participants to whom any Restricted Shares shall theretofore have
been allocated, adversely affect the rights or obligations of such Participants
with respect to such Restricted Shares. The Committee may, in its discretion,
cause the restrictions imposed in accordance with the provisions of Section 9
hereof with respect to any Restricted Shares to terminate, in whole or in part,
prior to the time when they would otherwise terminate.
10
<PAGE>
16. Expiration and Termination of the Plan. The Plan shall
terminate on November 11, 2006 or at such earlier time as the Board may
determine; provided, however, that such termination shall not, without the
consent of the Participants to whom any Restricted Shares shall theretofore have
been allocated, adversely affect the rights or obligations of such Participants
with respect to such Restricted Shares.
17. Governing Law. The Plan shall be governed by the laws of
the State of New York.
11
