SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Worldtex, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
The Board of Directors Recommends a X Please mark your
vote "FOR all Nominees" in Item 1. --- votes as this
#### ########## _____________________
COMMON
Item 1. Election of Messrs. Ibrahim and Setzer as Class II Directors.
FOR all Withheld for all Withheld for the following only:
(Write the name of nominee(s) in
------ ------ the space below)
-----------------------------------
In their discretion, the proxies are
authorized to vote upon other business
as may properly come before the meeting.
WILL
ATTEND
------
The shares represented by this
proxy will be voted as directed by
the stockholder. If no direction is
given when the duly executed proxy
is returned such shares will be
voted "FOR all Nominees" in Item 1.
Signature(s)________________________________ Date______________________________
Note: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WORLDTEX, INC.
Solicited by the Board of Directors for use at the Annual Meeting of
Stockholders of Worldtex, Inc. - May 7, 1997, at 11:00 a.m., Bank of America
Plaza, 335 Madison Avenue, Fifth Floor, Room 5A, New York, New York.
The undersigned hereby appoints Richard J. Mackey and Barry D. Setzer, and
any one of them, attorneys and proxies, with full power of substitution and
revocation in each, for and on behalf of the undersigned, and with all the
powers the undersigned would possess if personally present, to vote at the above
Annual Meeting and any adjournment thereof all shares of stock that the
undersigned would be entitled to vote at such meeting.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
<PAGE>
WORLDTEX, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Worldtex,
Inc. (the "Company") will be held at Bank of America Plaza, 335 Madison Avenue,
Fifth Floor, Room 5A, New York, New York at 11:00 A.M. (New York City time) on
Wednesday, May 7, 1997, for the following purposes:
-to elect two members of the Board of Directors of the Company; and
-to transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
The close of business on March 21, 1997 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting.
If you will be unable to attend the meeting, you are respectfully requested
to sign and return the accompanying proxy in the enclosed envelope.
By Order of the Board of Directors,
MITCHELL R. SETZER
April 7, 1997 Secretary
---------------------------------------------
<PAGE>
WORLDTEX, INC.
PROXY STATEMENT
This proxy statement is furnished to the stockholders of Worldtex, Inc.
(hereinafter referred to as the "Company") in connection with the solicitation
of proxies for the Annual Meeting of Stockholders to be held on May 7, 1997. The
address of the Company's principal executive office and the Company's mailing
address is 212-12th Avenue, N.E., Hickory, North Carolina 28601 and the
telephone number of its principal executive office is (704) 328-5381. This proxy
statement and the enclosed proxy are being sent to stockholders commencing on or
about April 7, 1997.
The enclosed proxy is solicited by the Board of Directors of the Company.
Execution of the proxy will not affect a stockholder's right to attend the
Annual Meeting and to vote in person or to revoke the proxy. A proxy may be
revoked at any time before it is exercised by written notice of revocation
delivered to the Secretary of the Company.
The Company will bear the cost of the solicitation of proxies, including
the charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of stock. In addition to the use of
mails, proxies may be solicited by personal interview, telephone or telecopy.
VOTING SECURITIES OUTSTANDING
Prior to November 12, 1992, the Company was a wholly-owned subsidiary of
Willcox & Gibbs, Inc., a New York corporation, which subsequently changed its
name to Rexel, Inc. ("Rexel"). On that date, Rexel declared a dividend of one
share of Common Stock of the Company for each share of Rexel Common Stock
outstanding on November 23, 1992 (the "Distribution").
The only outstanding class of voting securities of the Company is its
Common Stock, of which there were 14,403,271 shares outstanding at February 5,
1997. Each share is entitled to one vote.
Only holders of Common Stock of record at the close of business on March
21, 1997, will be entitled to vote at the Annual Meeting of Stockholders.
<PAGE>
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
The following persons were known by the Company to be the beneficial owners
of more than five percent of the outstanding Common Stock as of December 31,
1996 (based on Schedule 13G and 13D Securities and Exchange Commission ("SEC")
filings):
<TABLE>
<CAPTION>
Shares Percent
Names and Address of Beneficial Owner Owned of Class
- ------------------------------------- ----- --------
<S> <C> <C>
Pioneering Management Corporation 1,444,700 10.03%
60 State Street
Boston, MA 2109-1820
FMR Corp. 1,444,600 (1) 10.03%
82 Devonshire Street
Boston, MA 02109-3614
EGS Associates, L.P. 825,699 (1) 5.73%
300 Park Avenue
New York, New York 10022
Dimensional Fund Advisors, Inc. 794,171 (2) 5.51%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
- ----------------------------------
<FN>
(1) Reported shared power to dispose of and to vote these shares.
(2) Reported that Dimensional Fund Advisors, Inc. ("Dimensional"), a
registered investment advisor, is deemed to have beneficial ownership of 794,171
shares of Worldtex, Inc. stock as of December 31, 1996, all of which shares are
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, for all of
which Dimensional Fund Advisors, Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
</FN>
</TABLE>
<PAGE>
Security Ownership of Management
- --------------------------------
As of February 5, 1997, shares of Common Stock were beneficially owned by
directors and nominees for director, by the executive officers required to be
listed in the Summary Compensation Table below (see "Executive Compensation"),
and by all directors and executive officers as a group as follows:
<TABLE>
<CAPTION>
Shares Percent
Name Owned ( 1) of Class (2)
- ---- ---------- ------------
<S> <C> <C>
Sidney B. Becker.........................................................81,741( 3)..................*
Claude D. Egler..........................................................75,000( 4)..................*
John B. Fraser...........................................................11,000( 5)..................*
Salim Ibrahim..............................................................3,000 ..................*
Austin List................................................................6,369( 6)..................*
Richard J. Mackey.......................................................554,687( 7)...............3.79
A. Orrin Maldoff.........................................................19,000( 8)..................*
Kenneth W. O'Neill.......................................................65,851( 9)..................*
Willi Roelli..............................................................11,000(10)..................*
Barry D. Setzer.........................................................392,782(11)...............2.68
Mitchell R. Setzer........................................................28,048(12)..................*
Michael B. Wilson.........................................................8,184( 5)..................*
John K. Ziegler ........................................................237,008(13)...............1.65
All Directors and Executive Officers as a Group........................1,495,670(14)...............9.92
- ----------------------------------
<FN>
* Less than one percent
(1) The persons included in the table had sole voting and investment power with
respect to shares reported as beneficially owned, except as otherwise
indicated in the following notes.
(2) Percentages are calculated by dividing (x) shares in the "Shares Owned"
column by (y) the number of shares outstanding as of February 5, 1997 and
the number of shares that a particular owner (or group of owners) has a
right to acquire within 60 days of such date.
(3) Excludes 79,405 shares owned by Mr. Becker's wife, as to which he disclaims
beneficial ownership and includes 4,000 shares issuable upon the exercise of
stock options that are currently exercisable.
(4) Includes 70,000 shares issuable upon the exercise of stock options that are
currently exercisable.
(5) Includes 4,000 shares issuable upon the exercise of stock options that are
currently exercisable.
(6) Excludes 25,000 shares owned by Mr. List's wife, as to which he disclaims
beneficial ownership and includes 4,000 shares issuable upon the exercise of
stock options that are currently exercisable.
(7) Includes 230,000 shares issuable upon the exercise of stock options that are
currently exercisable and 36,297 shares as to which Mr. Mackey shares voting
power with the Trustee under the Company's Employee Stock Ownership Plan.
(8) Includes 16,000 shares issuable upon the exercise of stock options that are
currently exercisable and 3,000 shares owned indirectly through Fodlam
Holdings, of which Mr. Maldoff is President.
(9) Includes 45,000 shares issuable upon the exercise of stock options that are
currently exercisable and 9,506 shares as to which Mr. O'Neill shares voting
power with the Trustee under the Company's Employee Stock Ownership Plan.
(10)Includes 2,000 shares issuable upon the exercise of stock options that are
currently exercisable and 1,000 shares owned by Mr. Roelli's wife.
(11)Includes 280,000 shares issuable upon the exercise of stock options that
are currently exercisable and 13,708 shares as to which Mr. Setzer shares
voting power with the Trustee under the Company's Employee Stock Ownership
Plan.
(12)Includes 12,600 shares issuable upon the exercise of stock options that are
currently exercisable and 8,864 shares as to which voting power is shared
with the Trustee under the Company's Employee Stock Ownership Plan.
(13)Includes 590 shares held by Mr. Ziegler as Co-trustee for the benefit of
his children, as to which Mr. Ziegler shares voting and investment power,
13,510 shares held by Mr. Ziegler as trustee for the benefit of his wife, as
to which Mr. Ziegler has sole voting and investment power and 4,000 shares
issuable upon the exercise of stock options that are currently exercisable.
(14)Includes 677,600 shares issuable upon the exercise of stock options that
are currently exercisable and 68,375 shares as to which voting power is
shared with the Trustee under the Company's Employee Stock Ownership Plan.
</FN>
</TABLE>
<PAGE>
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the classification
of the Board of Directors into three classes (Class I, Class II and Class III).
At the time of this year's Annual Meeting of Stockholders, the Board will
consist of ten directors.
At this year's Annual Meeting, two Class II directors are to be elected to
serve for three year terms expiring at the 2000 Annual Meeting. The two nominees
are Barry D. Setzer and Salim Ibrahim. Mr. Setzer was previously elected to the
Board by the stockholders. In December 1996, the Board of Directors approved an
increase in the number of directors from nine to ten and elected Mr. Ibrahim as
a Class II director to fill the newly created position. In accordance with the
directors' retirement policy, Mr. Sidney Becker and Mr. Austin List will retire
from the Board during the 1997 Annual Meeting and, upon such retirement, the
size of the Board will be reduced to eight directors. The remaining six
directors in Classes I and III were previously elected by stockholders and will
continue to serve their terms of office, which will expire at the Annual
Meetings to be held in 1999 and 1998, respectively.
If any nominee becomes unavailable for any reason or if a vacancy should
occur before the election (which events are not anticipated), the shares
represented by the accompanying proxy may be voted for such other person as may
be determined by the holders of such proxies.
Directors are elected by a plurality vote. Under the Company's Certificate
of Incorporation and By-Laws and under Delaware law, abstentions and broker
non-votes will not have the effect of votes in opposition to a nominee. The
Board of Directors of the Company recommends that stockholders vote FOR each
nominee listed below.
The following table sets forth information with respect to each nominee for
election as a director of the Company:
<TABLE>
<CAPTION>
Name of Nominee;
Positions and Year Term
Offices with Would Expire Director Principal Occupations During Last Five Years;
Company Age and Class Since Other Directorships
- ---------------- --- ------------ -------- ---------------------------------------------
<S> <C> <C> <C> <C>
Salim M. Ibrahim 64 2000 1996 Vice-President and General Manager, E.I. DuPont de Nemours,
Director Class II 1992-1996; President, Worldwide Textile Institute,
1992-1995; Director, Courtaulds Textiles, U.K.; Director,
International Wool Secretariat; Chairman, Supervisory Board,
Dupont, Netherlands.
Barry D. Setzer 54 2000 1992 President and Chief Executive Officer of the Company (May
Director; President Class II 1994 to present); President and Chief Operating Officer of
and Chief Executive the Company (August 1992 to May 1994); President of Rexel's
Officer Covered Yarn Division (September 1988 to November 1992);
Vice President of Rexel (November 1987 to November 1992).
</TABLE>
The following table sets forth information with respect to those incumbent
directors whose terms will continue after the Annual Meeting:
<PAGE>
<TABLE>
<CAPTION>
Name of Nominee;
Positions and Year Term
Offices with Would Expire Director Principal Occupations During Last Five Years;
Company Age and Class Since Other Directorships
- ---------------- --- ------------ -------- ---------------------------------------------
<S> <C> <C> <C> <C>
Claude D. Egler 62 1998 1994 Vice President of the Company (August 1992 to December
Director Class III 1996); President and Managing Director of Fili Lastex
(prior to 1987 to December 1996).
John B. Fraser 62 1999 1992 President, Geneva Financial Corp. (investment banking)
Director Class I (July 1994 to present); Managing Director, Citibank N.A.
(June 1987 to July 1994); Director of Rexel.
Richard J. Mackey 65 1998 1992 Chairman of the Board and Chief Financial Officer of the
Director; Chairman Class III Company (August 1992 to present); Chief Executive Officer
of the Board and of the Company (August 1992 to May 1994); President
Chief Financial of Rexel (May 1987 to November 1992); Director, Willcox &
Officer Gibbs, Inc.
Willi Roelli 63 1999 1996 President and Director, Diethelm Holding (USA) Ltd (a
Director Class I holding company) (1988 to present); Vice-President and
Director, Swiss Benevolent Society (charitable organization)
(1985 to present); Director, Celestron International
(telescopes); Director, Zyliss (USA) Corp. (housewares);
Director, Alex C. Fergusson, Inc. (specialty chemicals);
Director, d-SCAN Inc. (furniture); Chairman of the Board
of Managers of the Coffee, Sugar & Cocoa Exchange, Inc.
(1983 to 1985); President, Volkart Brothers, Inc. (commodity
trading company) (1972 to 1987).
Michael B. Wilson 60 1999 1992 Vice President Sales, Inbrand, Inc. (hygiene
Director Class I products) (1995 to present); President and Chief
Executive Officer, Innova Pure Water, Inc. (filtered
water) (1993 to 1995); Vice President of Sales, Consumer and
Commercial Paper Products of Georgia Pacific (1984 to 1992);
Director, Catalina Marketing Corporation.
John K. Ziegler 60 1998 1992 Chief Executive Officer of Willcox & Gibbs, Inc.
Director Class III (distributor of parts and supplies for the apparel industry)
(July 1994 to present); Consultant to the Company (November
1994 to present); Chairman of the Board and Chief Executive
Officer of Rexel (May 1987 to March 1994); President of
Rexel (1977 to May 1987 and November 1992 to March 1994)
<FN>
* All references to "Rexel" include the company under its pre-May 1995 name of
"Willcox & Gibbs, Inc." All references to "Willcox & Gibbs, Inc." refer to
the company originally known as "WG, Inc." which changed its name to
"Willcox & Gibbs, Inc." in December 1995.
</FN>
</TABLE>
<PAGE>
Committees and Meetings
- -----------------------
The Company has standing Executive, Audit, Nominating and Compensation
Committees of the Board of Directors. The Executive Committee, which is composed
of Messrs. B.Setzer, Mackey and Ziegler, may exercise the powers of the Board of
Directors (with certain statutory exceptions) between meetings of the Board. The
Audit Committee, whose members are Messrs. Fraser, List, Roelli, and Wilson,
reviews accounting matters with Company management and discusses accounting
matters with the Company's independent accountants in connection with the annual
audit. The Nominating Committee, whose members are Messrs. Becker, Mackey, B.
Setzer and Ziegler, considers and recommends nominees for election to the
Company's Board of Directors. The Nominating Committee considers nominees
recommended by security holders. See "Stockholder Proposals". Messrs. Fraser,
List and Wilson are members of the Compensation Committee, which reviews
compensation matters, including adoption and implementation of benefit plans,
and takes action or makes recommendations with respect thereto. During the 1996
fiscal year, the Executive Committee held one meeting, the Compensation
Committee held one meeting, the Audit Committee held one meeting, the Nominating
Committee held one meeting and the Company's Board of Directors held six
meetings.
Director Compensation
- ---------------------
Non-Management directors are paid a fee at an annual rate of $12,000 per
year and an additional $900 for each meeting attended.
The Company's 1992 Stock Incentive Plan, as amended, provides for the grant
of a stock option to each director of the Company other than one who is an
officer or employee of the Company or of an entity in which the Company owns at
least a 20% interest (an "Outside Director"). Each person who was an Outside
Director at the close of the 1994 Annual Meeting of Stockholders was granted, as
of the date of such meeting, a non-qualified stock option to purchase 10,000
shares of Common Stock, and each person who subsequently becomes an Outside
Director will be granted a similar option as of the date of such a person's
election to the Board of Directors. The option price is equal to the fair market
value of the Common Stock on the date of the option grant, and may be paid in
cash or shares of Common Stock which have been owned by the optionee for at
least six months (with such shares valued based on the fair market value of the
Common Stock on the date of option exercise). The option will become
exercisable, in whole or in part, in 20% increments on each of the first five
anniversaries of the date following the date of grant, provided the optionee is
a director of the Company on such date. The option will expire ten years from
the date of grant, subject to earlier termination upon termination of the
optionee's service as a director. If the optionee dies during his or her period
of service as a director, the optionee's legal representative will have the
right to exercise the option for a period of twelve months after the optionee's
death, even if such option would otherwise have expired earlier. An option
exercised after termination of service can only be exercised to the extent it
was exercisable at the time of such termination of service. Stock options
granted to Outside Directors are not transferable except by will or by the laws
of descent and distribution.
Mr. Ziegler has been retained as a consultant to the Company and is paid
$100,000 per year for his services in such capacity.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation of the
Chief Executive Officer of the Company and each of the Company's four other most
highly compensated executive officers for services in all capacities to the
Company and its subsidiaries during the Company's 1996, 1995 and 1994 fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Options/ Other
Year Salary Bonus SARS Compensation
Name and Principal Position ($) ($) (#) ($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Barry D. Setzer, 1996 $ 275,000 $ 283,660 100,000 $ 99,837(1)
President and Chief Executive Officer 1995 275,000 162,108 None 64,587
1994 271,843 112,140 150,000 55,708
Richard J. Mackey, 1996 $ 200,000 $ 281,820 50,000 $ 1,239(2)
Chairman of the Board and Chief Financial 1995 200,000 160,042 None 2,879
Officer; Chief Executive Officer 1994 256,250 112,140 50,000 2,849
until May 1994
Kenneth W. O'Neill 1996 $ 110,000 $ 5,297 None $ 1,622(3)
Vice President; President of the Company's Regal 1995 110,000 10,900 None 2,991
Manufacturing Company, Inc. subsidiary ("Regal 1994 110,000 7,668 27,500 6,054
Manufacturing")
A. Orrin Maldoff, 1996 $ 109,665 $ 7,215 None $ 2,870(4)
Vice President; President of the Company's 1995 111,765 7,353 None 2,870
Rubyco 1987), Inc. subsidiary ("Rubyco") 1994 106,935 7,129 10,000 2,900
Mitchell R. Setzer, 1996 $ 75,000 $ 37,751 None $ 1,461(5)
Secretary/Treasurer; Vice-President and 1995 75,000 26,325 15,000 2,803
Treasurer of Regal Manufacturing 1994 75,000 20,000 10,000 3,523
<FN>
(1) Includes $1,405 in contributions under defined contribution plans and
$48,804 in premiums on life insurance policies required to be transferred
to Mr. Setzer if he terminates employment with the Company. Also includes
$49,628 representing the imputed interest attributable to the Company's
interest-free loan to Mr. Setzer.
(2) Includes $1,000 in contributions under defined contribution plans and $239
in premiums on life insurance policies
(3) Includes $1,334 in contributions under defined contribution plans and $288
in premiums on life insurance policies
(4) Includes $2,575 in contributions under defined contribution plans and $295
in premiums on life insurance policies.
(5) Includes $1,287 in contribution under defined contribution plans and $174
in premiums on life insurance policies.
</FN>
</TABLE>
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
<TABLE>
Number of Securities
Underlying Value of Unexercised
Unexercised Options/SAR's In-the-Money Options/SAR's
at Fiscal Year-End at Fiscal Year-End
-----------------------------------------------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
(#) ($) (#) (#) ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Barry D. Setzer -0- -0- 260,000 190,000 856,100 834,150
Richard J. Mackey -0- -0- 220,000 80,000 518,700 346,800
Kenneth W. O'Neill -0- -0- 45,000 25,000 123,785 95.365
A. Orrin Maldoff -0- -0- 16,000 9,000 44,240 34,485
Mitchell R. Setzer -0- -0- 12,600 29,400 44,695 78,105
</TABLE>
Employment Contracts
- --------------------
Mr. Mackey and the Company are parties to an employment contract pursuant
to which the Company employs Mr. Mackey in a senior executive capacity for an
indefinite period, subject to termination by either the Company or Mr. Mackey
upon not less than three years' notice. Under the employment contract, Mr.
Mackey is entitled to receive a base salary of no less than $200,000 per annum
and a bonus for each fiscal year in an amount equal to 2% of annual net income
before taxes and after certain interest charges of the Company and its
subsidiaries for such fiscal year in excess of 12% of the average of the net
assets employed therein, reduced by any awards earned under Regal
Manufacturing's incentive bonus plan for the particular year. Mr. Mackey will
also be entitled to receive a supplemental retirement benefit, payable in
monthly installments over a ten year period following his retirement, in the
aggregate amount equal to 400% of Mr. Mackey's highest annual compensation in
effect at any time during his employment at the Company. Mr. Mackey's contract
contains provisions for termination and severance payments in case of a Change
in Control Event, as described below under "Change of Control Provisions."
Mr. Setzer and the Company are parties to an employment contract pursuant
to which the Company employs Mr. Setzer in a senior executive capacity for an
indefinite period, subject to termination by either the Company or Mr. Setzer
upon not less than three years' notice. Under the employment contract, Mr.
Setzer is entitled to receive a base salary of $275,000 per annum and a bonus
for each fiscal year in an amount equal to 2% of annual net income before taxes
and after certain interest charges of the Company and its subsidiaries for such
fiscal year in excess of 12% of the average of the net assets employed therein,
reduced by any awards earned under Regal Manufacturing's incentive bonus plan
for the particular year. Mr. Setzer will also be entitled to receive a
supplemental retirement benefit, payable in monthly installments over a ten year
period following his retirement, in an aggregate amount equal to 400% of his
highest annual compensation in effect at any time during his employment with the
Company. In the event of Mr. Setzer's death or retirement due to disability
prior to his 65th birthday, the payments shall be made in an aggregate amount
equal to 400% of his highest annual compensation in effect at any time prior to
his death or disability. Mr. Setzer's contract contains provisions for
termination and severance payments in case of a Change in Control Event, as
described below under "Change of Control Provisions." The Company also is
obligated to maintain in effect certain insurance policies on Mr. Setzer's life
and to transfer the ownership of such policies to Mr. Setzer in the event notice
is given of the termination of his employment contract.
<PAGE>
Change of Control Provisions
- ----------------------------
Upon a Change in Control Event (defined to mean the date a person or group
other than the Company or an affiliate becomes a 20% beneficial owner of Company
voting securities, the date on which one-third or more of the Board of Directors
consists of persons other than Current Directors (as defined), or the date
stockholders approve certain agreements providing for merger, consolidation or
disposition of all or substantially all assets of the Company), the existing
contracts of Messrs. Mackey and Setzer shall each continue for a three year
term, subject to earlier termination (i) by the Company upon death, disability,
or cause (as defined) or (ii) by the individual if he determines in good faith
that the Company has taken any of certain specified actions which are
inconsistent with his executive status or employment arrangement or if, for any
reason, he gives notice of termination during the 30-day period commencing on
the 181st day following the Change in Control Event. Upon termination by the
Company other than for one of the reasons specified in clause (i) of the
preceding sentence, or upon termination by the individual as described in clause
(ii), the individual will be entitled as a severance benefit to a lump sum cash
amount equal to 2.99 times his "base amount" compensation (as defined in section
280G(b)(3) of the Internal Revenue Code). If the Company terminates the
individual's employment (other than for one of the reasons specified in clause
(i)) prior to a Change in Control Event but after the Company enters into an
arrangement or any person announces an intention to take or consider taking
actions which would result in a Change in Control Event, and if a Change in
Control Event occurs within three years, the individual will be entitled to
receive an amount equal to such severance benefit.
If Messrs. Mackey and Setzer were to be entitled to severance benefits as
of February 5, 1997, their base amount compensation would entitle them to
payments in the following amounts: Mr. Mackey - $1,201,435 and Mr. Setzer -
$1,137,922.
The Company's 1992 Stock Incentive Plan provides that, if there is a Change
of Control of the Company (as defined below), unless otherwise determined by the
Compensation Committee at the time of grant, all stock options and SARs granted
under the Plan which are not then exercisable will become fully exercisable and
vested and the restrictions and deferral limitations applicable to restricted
stock and deferred stock granted under the Plan will lapse and such shares and
awards will be deemed fully vested. To the extent the cash payment of any award
is based on the fair market value of Company Common Stock, such fair market
value shall be the Change of Control Price, as defined below. The Company's
outstanding stock options are subject to these provisions.
A Change of Control under the Plan occurs on the date a person or group
other than the Company or certain of its affiliates becomes a beneficial owner
of 25% or more of the voting securities of the Company, the date on which
one-third or more of the Board of Directors consists of persons other than
Current Directors (as defined) or the date of approval by stockholders of
certain agreements providing for merger, consolidation or disposition of all or
substantially all assets. The Change of Control Price is the highest price per
share of Company Common Stock paid in any open market transaction, or paid or
offered to be paid relating to a Change of Control of the Company, at any time
during the 90-day period ending with the Change of Control.
Board Compensation Committee Report on Executive Compensation
- -------------------------------------------------------------
The Company's executive compensation program consists of the following key
elements: base salary, annual bonuses and periodic grants of stock options. Each
element of the overall compensation program of executive officers has a
different purpose, as described below:
<PAGE>
Base Salary. Base pay levels are largely determined through comparisons
with companies of similar businesses of comparable size. Actual salaries are
based on individual performance contributions within a competitive salary range.
Bonuses. Each of the Company's subsidiaries has an incentive bonus plan
that provides for the grant of annual bonuses for management and supervisory
employees based on corporate and individual performance. These plans provide for
an aggregate yearly bonus pool for each subsidiary determined by reference to
achieving and exceeding certain targeted profit levels for such year set by the
Executive Committee of the Company's Board of Directors for such subsidiary.
Bonuses are allocated from this pool to eligible employees based on their
relative base salary and an evaluation of their individual performance. In
addition, the employment contracts between the Company and Messrs. Mackey and
Setzer provide for incentive payments pursuant to a specified formula. See
"Employment Contracts" above.
Stock Awards. Stock option grants are intended to provide incentives for
superior long-term future performance. Such grants are intended to create and
maintain in the Company the entrepreneurial environment and spirit of a small
company as well as to broaden the understanding of the effect that the
day-to-day achievements of these employees will have on the long-term value of
the Company's stock. The number of stock options awarded to a particular
employee is intended to provide a significant portion of such employee's
compensation in the form of options and is based on the Committee's subjective
judgement of the appropriate value of the employee's entire compensation to be
represented by stock options. In general, the Committee expects to grant the
largest awards to the Company's Chief Executive Officer due to his substantial
influence on the Company's performance.
Compensation of Chief Executive Officer. Mr. Setzer's employment contract
entitles him to a base salary of $275,000. Mr. Setzer's bonus for 1996 of
$283,660 was determined in accordance with the formula specified in his
employment contract. In determining the stock options granted to Mr. Setzer, the
Committee considered the factors discussed above.
Policy With Respect to Section 162(m). Section 162(m) of the Internal
Revenue Code limits to $1 million for each person the tax deduction that the
Company or its subsidiaries can take with respect to the compensation of certain
executive officers, unless the compensation is "performance-based." The
Committee feels that it should not use only mechanical formulas in carrying out
its responsibilities for compensating the Company's management. Therefore, the
Committee currently intends to continue to make cash bonus payments and stock
awards that are based on the achievement of subjective, non-quantifiable goals,
and that may therefore not qualify as performance-based compensation. The
Committee believes that these goals, while not properly measurable by the kind
of quantifiable targets that are required to qualify compensation as
performance-based, are important to the long-term financial success of the
Company and to its stockholders.
COMPENSATION COMMITTEE
Austin List, Chair
John B. Fraser
Michael B. Wilson
The information above under the caption "Board Compensation Committee
Report on Executive Compensation" and under the caption "Performance Graph"
below shall not be deemed to be incorporated by reference into any filing by the
Company under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Company expressly states
in any such filing that the information under either or both such captions is
incorporated by reference therein.
<PAGE>
Performance Graph
- -----------------
The following graph shows the total shareholder return of (1) the Company's
Common Stock, (2) an index of knitting mills published by Media General
Financial Services, Inc. ("Media General") and (3) the Standard & Poor's 500
Index over the period in which the Company's Common Stock has been publicly
traded, based on information provided by Media General. The starting reference
date is November 17, 1992, the first day on which there was a trading market for
the Company's Common Stock. In each case the Graph assumes an investment of $100
on the starting reference date and that all dividends were reinvested.
Cumulative Total Return
<TABLE>
<CAPTION>
- -------------------------- ----------- ------------- -------------- -------------- ------------- ----------------
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended Ended Ended
11/17/92 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- -------------------------- ----------- ------------- -------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Worldtex, Inc. $100 112.50 75.00 51.79 82.14 126.79
Index of Knitting Mills $100 102.46 85.71 89.02 83.38 114.28
Standard & Poor's 500 $100 101.23 111.44 112.91 155.34 191.01
Index
- -------------------------- ----------- ------------- -------------- -------------- ------------- ----------------
</TABLE>
[The above information has been converted from graphic to tabular form pursuant
to Rule 304 of Regulation S-T. A paper copy of the above information in graphic
form has been submitted to the Branch Chief in the Division of Corporation
Finance pursuant to Rule 304(d) of Regulation S-T.]
<PAGE>
AGREEMENTS RELATING TO THE DISTRIBUTION
Tax Sharing Agreement
- ---------------------
In connection with the Distribution, Rexel and the Company entered into a
Tax Sharing Agreement, which reflects each party's rights and obligations with
respect to payments and refunds, if any, of consolidated federal income and
Florida state franchise taxes imposed upon Rexel and its subsidiaries prior to
the Distribution. In general, the Company is responsible for consolidated
federal income and Florida franchise taxes attributable to the Company and its
subsidiaries through the date of the Distribution, and Rexel is responsible for
the taxes attributable to Rexel and its subsidiaries other than the Company.
The Tax Sharing Agreement also requires the Company to indemnify Rexel for
any taxes incurred by Rexel by reason of the Distribution if and to the extent
such taxes result from any transaction occurring after the date of the
Distribution which involves the stock, assets or business of the Company or any
of its subsidiaries and causes the Distribution to fail to qualify under Section
355 of the Internal Revenue Code of 1986, as amended. The Tax Sharing Agreement
does not provide for any indemnification to Rexel stockholders if the receipt by
them of Company Common Stock pursuant to the Distribution is taxable.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP ("KPMG") served as independent accountants in the
audit of the books and accounts of the Company for the 1996 fiscal year. A
representative of KPMG is expected to be present at the Annual Meeting of
Stockholders with the opportunity to make a statement if so desired. Such
representative is expected to be available to respond to appropriate questions.
The Audit Committee of the Board of Directors has not yet selected the
independent accountants for the 1997 fiscal year audit.
REPORTS OF CERTAIN STOCK TRANSACTIONS
The Securities Exchange Act of 1934 requires that the Company's directors
and officers file reports of ownership and changes of ownership with the SEC and
the New York Stock Exchange. The Company believes that all directors and
officers filed on a timely basis all such reports required of them with respect
to stock ownership and changes in ownership during 1996.
STOCKHOLDER PROPOSALS
Pursuant to the By-Laws of the Company, nominations for the election of
directors may be made by the Board of Directors, the Nominating Committee or any
stockholder entitled to vote for the election of directors, provided such
stockholder has delivered written notice of his intention to make such
nomination in accordance with the By-Laws. Such notice must be delivered to or
mailed, postage prepaid, and received by the Secretary of the Company at
212-12th Avenue, N.E., Hickory, North Carolina 28601, in the case of an annual
meeting, not later than 90 days prior to the anniversary date of the immediately
preceding Annual Meeting. However, if the Annual Meeting is to be held more than
30 days before or after the anniversary date of the immediately preceding Annual
Meeting, and in the case of any special meeting, such notice must be delivered
or received not later than the close of business on the 10th day following the
first public disclosure by the Company of the date of such meeting. Each such
notice must state: (1) the name and address of the stockholder who intends to
make the nomination and of the person(s) to be nominated; (ii) a representation
that the stockholder is a holder of record of stock entitled to vote at such
meeting (or if the record date for such meeting is subsequent to the date
required for notice, a representation that the stockholder is a holder of record
<PAGE>
at the time of such notice and intends to be a holder of record on the
record date for such meeting), specifying the number and class of shares so
held, and that the stockholder intends to appear in person or by proxy at the
meeting to nominate the person(s) specified in the notice; (iii) a description
of all arrangements or understandings between the stockholder and each nominee
and any other person(s) (naming such person(s)) pursuant to which the
nomination(s) are to me made; (iv) such other information regarding each nominee
as would have been required to be included in a proxy statement filed pursuant
to the proxy rules of the SEC had each nominee been nominated, or intended to be
nominated, by the Board of Directors; and (v) the consent of each nominee to
serve as a director of the Company if so elected.
The By-Laws of the Company also provide that no business may be brought
before an Annual Meeting except such business as shall be specified in the
notice of the meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, other business brought before the meeting by or at
the direction of the Board of Directors or the Chairman of the Board or business
brought before the meeting by a stockholder entitled to vote thereon, provided
such stockholder has given written notice of such stockholder's intention to
bring such business before the Annual Meeting in accordance with the By-Laws.
Such notice must be delivered to, or mailed, postage prepaid, and received by,
the Secretary of the Company at the address specified above within the time
period described above. Each such notice must state: (i) a brief description of
the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting; (ii) the name and address of the
stockholder who intends to propose such business; (iii) a representation that
the stockholder is a holder of record of stock of the Company entitled to vote
at such meeting (or if the record date for such meeting is subsequent to the
date required for such stockholder notice, a representation that the stockholder
is a holder of record at the time of such notice and intends to be a holder of
record on the record date for such meeting), and that the stockholder intends to
appear in person or by proxy at such meeting to propose such business; and (iv)
any material interest of the stockholder in such business.
A copy of the By-Laws of the Company is available by written request to the
Secretary of the Company at the above address or by oral request at (704)
328-5381.
In the event that any stockholder desires to present a proposal to be
reflected in the Company's form of proxy and proxy statement for the 1998 Annual
Meeting of Stockholders, that proposal must be received at the Company's
principal offices on or before December 20, 1997. Timely receipt of a
stockholder proposal satisfies only one of the various requirements for
inclusion of such a proposal in the Company's proxy materials.
DISCRETIONARY AUTHORITY
Management has no knowledge of any matters to be presented for action by
the stockholders other than as set forth above. The accompanying form of proxy
gives discretionary authority, however, in the event that any additional matters
should be presented.
By Order of the Board of Directors,
MITCHELL R. SETZER
Secretary
April 7, 1997
