<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
WORLDTEX, 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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
WORLDTEX
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 Thursday, May 20, 1999, for the following purposes:
-- to elect three 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 26, 1999 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,
/s/ MITCHELL R. SETZER
MITCHELL R. SETZER
April 20, 1999 Secretary
<PAGE> 3
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 20, 1999. The address of the Company's principal executive office and the
Company's mailing address is 915 Tate Blvd, SE, Suite 106, Hickory, North
Carolina 28602 and the telephone number of its principal executive office is
(828) 322-2242. This proxy statement and the enclosed proxy are being sent to
stockholders commencing on or about April 20, 1999.
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
the mail, proxies may be solicited by personal interview, telephone or
telecopy.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The Company is authorized to issue up to 40,000,000 shares of common
stock, $.01 par value, and 10,000,000 shares of preferred stock, $.01 par
value. The only outstanding class of voting securities of the Company is its
Common Stock, of which there were 14,271,171 shares outstanding at March 26,
1999. Each share is entitled to one vote. Only holders of Common Stock of
record at the close of business on March 26, 1999, will be entitled to vote at
the Annual Meeting of Stockholders.
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, 1998 (based on Schedule 13G and 13D filings with the Securities and
Exchange Commission ("SEC")):
SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
- ------------------------------------ ------ --------
EGS Associates, L.P.
300 Park Avenue 2,472,949 (1) 17.34%
New York, New York 10022
Pioneering Management Corporation
60 State Street 1,112,900 (2) 7.80%
Boston, MA 02109-1820
FMR Corp.
82 Devonshire Street 1,010,000 (1) 7.08%
Boston, MA 02109-3614
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor 1,107,771 (3) 7.76%
Santa Monica, CA 90401
Wellington Management Company, LLP
75 State Street 886,200 (1) 6.21%
Boston, MA 12109
- --------------------------------------------------------------------------------
(1) Reported shared power to dispose of and to vote these shares.
(2) Reported sole power to dispose of and to vote these shares. Reported
that no shares were beneficially owned as of March 31, 1999.
(3) Reported that Dimensional Fund Advisors, Inc. ("Dimensional"), an
investment advisor registered under Section 203 of the Investment
Advisors Act of 1940, 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 group trusts. (These investment companies and
investment vehicles are the "Portfolios"). In its role as investment
advisor and investment manager, Dimensional possesses both voting and
investment power over the securities of the issuer described in this
schedule that are owned by the Portfolios. All securities reported in
this schedule are owned by the Portfolios, and Dimensional disclaims
beneficial ownership of all such shares.
1
<PAGE> 4
SECURITY OWNERSHIP OF MANAGEMENT
As of February 8, 1999, shares of Common Stock were beneficially owned
by directors, 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>
Claude D. Egler.......................................................75,000 (3) *
John B. Fraser........................................................15,000 (4) *
Salim Ibrahim..........................................................7,000 (5) *
Richard J. Mackey....................................................584,764 (6) 4.10
A. Orrin Maldoff......................................................26,000 (7) *
Kenneth W. O'Neill....................................................43,978 (8) *
Willi Roelli..........................................................14,000 (9) *
Barry D. Setzer......................................................474,490 (10) 3.33
Mitchell R. Setzer....................................................24,329 (11) *
Michael B. Wilson.....................................................12,184 (12) *
John K. Ziegler......................................................254,508 (13) 1.78
All Directors and Executive Officers as a Group....................1,533,253 (14) 10.74
</TABLE>
* 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
8, 1999 plus the number of shares that a particular owner (or group of
owners) has a right to acquire within 60 days of such date.
(3) Includes 70,000 shares issuable upon the exercise of stock options
that are currently exercisable.
(4) Includes 2,000 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) Includes 260,000 shares issuable upon the exercise of stock options
that are currently exercisable and 36,374 shares held in Mr. Mackey's
account under the Company's defined contribution plan ("Profit Sharing
and Retirement Savings Plan") as to which he directs the voting by the
Plan's Trustee. Mr. Mackey retired from the Company on February 10,
1999. See "Executive Compensation - Employment and Severance
Agreements".
(7) Includes 23,000 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.
(8) Includes 22,000 shares issuable upon the exercise of stock options
that are currently exercisable and 10,633 shares held in Mr. O'Neill's
account under the Company's Profit Sharing and Retirement Savings Plan
as to which he directs the voting by the Plan's Trustee.
(9) Includes 4,000 shares issuable upon the exercise of stock options that
are currently exercisable and 1,000 shares owned by Mr. Roelli's wife.
(10) Includes 360,000 shares issuable upon the exercise of stock options
that are currently exercisable and 15,416 shares held in Mr. Setzer's
account under the Company's Profit Sharing and Retirement Savings Plan
as to which he directs the voting by the Plan's Trustee.
(11) Includes 8,000 shares issuable upon the exercise of stock options that
are currently exercisable and 9,745 shares held in Mr. Setzer's
account under the Company's Profit Sharing and Retirement Savings Plan
as to which he directs the voting by the Plan's Trustee.
(12) Includes 8,000 shares issuable upon the exercise of stock options that
are currently exercisable.
(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 8,000 shares issuable upon the exercise of stock options
that are currently exercisable.
(14) Includes 769,000 shares issuable upon the exercise of stock options
that are currently exercisable and 72,168 shares held in the holders'
accounts under the Company's Profit Sharing and Retirement Savings
Plan as to which the holders direct the voting by the Plan's Trustee.
2
<PAGE> 5
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 seven directors.
At this year's Annual Meeting, three Class I directors are to be
elected to serve for three year terms expiring at the 2002 Annual Meeting. The
three nominees are John B. Fraser, Willi Roelli, and Michael B. Wilson. Mr.
Fraser, Mr. Roelli, and Mr. Wilson were all previously elected to the Board by
the stockholders. Richard J. Mackey, who was a Class III director, retired on
February 10, 1999. The remaining four directors in Classes II 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 2000 and 2001,
respectively. The Board of Directors adopted a policy in July 1995 which
established a maximum age for election of the directors of the Company. The
policy states that no person shall be nominated by the Nominating Committee for
election as a director of the Company or elected by the Board to fill a vacancy
in the Board if such person has attained, or during the term of his or her
election as a director would attain, the age of 75.
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; YEAR TERM
POSITIONS AND OFFICES WOULD EXPIRE DIRECTOR PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS;
WITH COMPANY AGE AND CLASS SINCE OTHER DIRECTORSHIPS
- --------------------- --- ------------ -------- ---------------------------------------------
<S> <C> <C> <C> <C>
John B. Fraser 64 2002 1992 Consultant (January 1999 to present); President, Geneva Financial
Director Class I Corp. (investment banking) (July 1994 to January 1999); Managing
Director, Citibank, N.A. (June 1987 to July 1994); Director,
BiznessOnline.com, Inc. (internet service provider).
Willi Roelli 65 2002 1996 President and Director, Diethelm Holding (USA) Ltd (a holding company)
Director Class I (1988 to present); Director, Zyliss (USA) Corp. (housewares);
Director, Alex C. Fergusson, Inc. (specialty chemicals); Director,
d-SCAN Inc. (furniture).
Michael B. Wilson 62 2002 1992 Consultant (1997 to present); Vice President Sales, Inbrand, Inc.
Director Class I (hygiene products)(1995 to 1997); President and Chief Executive
Officer, Innova Pure Water, Inc. (filtered water)(1993 to 1995);
Director, Catalina Marketing Corporation (advertising).
</TABLE>
3
<PAGE> 6
The following table sets forth information with respect to those incumbent
directors whose terms will continue after the Annual Meeting:
<TABLE>
<CAPTION>
NAME OF DIRECTOR; YEAR TERM
POSITIONS AND OFFICES EXPIRES DIRECTOR PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS;
WITH COMPANY AGE AND CLASS SINCE OTHER DIRECTORSHIPS
- --------------------- --- ------------ -------- ---------------------------------------------
<S> <C> <C> <C> <C>
Salim M. Ibrahim 66 2000 1996 Vice-President and General Manager, E.I. DuPont de Nemours
Director Class II (textiles) (1987 to 1996); President, Worldwide Textile Institute
(1992 to 1995); Director, Courtaulds Textiles, U.K. (textiles);
Director, The Woolmark Co., Australia (textiles); Chairman,
Supervisory Board, DuPont, Netherlands; Director, Chargeurs,
France (textiles).
Barry D. Setzer, 56 2000 1992 Chairman of the Board of the Company (January 1999 to present);
Director; Chairman of Class II President and Chief Executive Officer of the Company (May 1994 to
the Board, President present); executive officer of the Company, subsidiary or
and Chief Executive predecessor of the Company since 1972.
Officer
Claude D. Egler 64 2001 1994 Vice President of the Company (August 1992 to December 1996);
Director Class III President and Managing Director of Filix Lastex, a subsidiary of
the Company (1990 to December 1996).
John K. Ziegler 62 2001 1992 Chief Executive Officer of Willcox & Gibbs, Inc. (distributor of
Director; Consultant to Class III parts and supplies for the apparel industry) (July 1994 to
the Company present); Consultant to the Company (November 1994 to present).
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS.
The Board of Directors held seven meetings during 1998. All directors
attended at least 75% of the meetings of the Board of Directors and of
committees of which they were members with the exception of Mr. Ibrahim, who
attended 50% of the meetings.
COMMITTEES OF THE BOARD OF DIRECTORS.
Executive Committee. The Executive Committee held two meetings in
1998. The Committee is authorized to act on behalf of the Board in the event of
matters which require action between meetings of the Board. The Committee may
perform all duties and exercise all authority of the Board, except for those
duties and authorities which are exclusively reserved to the Board by statute.
The Executive Committee is composed of Messrs. B. Setzer (Chairman), Fraser and
Ziegler.
Audit Committee. The Audit Committee held two meetings in 1998. The
Committee is composed entirely of non-management directors and its principal
responsibilities are to review procedures and activities with respect to
auditing, internal accounting controls and financial reporting. The Audit
Committee is composed of Messrs. Ziegler (Chairman), Egler, Roelli, and Wilson.
Nominating Committee. The Nominating Committee held one meeting in
1998. The Committee is authorized, among other things, to recommend the number
of directors to be elected to the Board, to recommend any changes in Board
membership, and to recommend director prospects. The Company's By-Laws include
provisions setting forth specific conditions under which persons may be
nominated as directors at an annual meeting of stockholders. See "Stockholder
Proposals". The Nominating Committee is composed of Messrs. B. Setzer
(Chairman), Fraser and Ziegler.
Compensation Committee. The Compensation Committee held one meeting in
1998. The Committee reviews compensation matters, including adoption and
implementation of benefit plans, and takes action or makes recommendations when
appropriate. The Compensation Committee is composed of Messrs. Fraser
(Chairman), Ibrahim, and Wilson.
DIRECTOR COMPENSATION
Directors who are not also officers are paid an annual fee of $12,000
per year. In addition, directors are paid $900 for each Board or committee
meeting attended.
4
<PAGE> 7
The Company's 1992 Stock Incentive Plan provides for the grant of
one-time stock options to purchase 10,000 shares of Common Stock 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"). Such person is granted, as of the date of such person's
election to the Board, a non-qualified stock option . While the Board has
authority to determine the terms of such option, all options granted to Outside
Directors to date have had the following terms: The option price is equal to
the fair market value of the Common Stock on the date of the option grant (or,
in some cases, the date the individual agreed to become a director) and the
exercise price 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 becomes exercisable 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 since
November 1994, primarily to advise and assist in the evaluation and
implementation of mergers, acquisitions, joint ventures and new business
opportunities available to the Company. He is paid $100,000 per year less any
fees received as a director of the Company for his services in such capacity.
EXECUTIVE OFFICERS
The following table sets forth information with respect to the
Executive Officers of the Company.
<TABLE>
<CAPTION>
NAME OF OFFICE AND PRINCIPAL OCCUPATIONS
OFFICER AGE DURING LAST FIVE YEARS
- ------- --- ------------------------------------------------------------------------
<S> <C> <C>
Barry D. Setzer 56 Chairman of the Board of the Company (January 1999 to present);
President and Chief Executive Officer of the Company (May 1994 to
present); executive officer of the Company, subsidiary or predecessor
of the Company since 1972.
Marty R. Kittrell 42 Senior Vice President and Chief Financial Officer of the Company
(January 1999 to present); Executive Vice President and Chief
Financial Officer of Enfinity Corporation (indoor environmental
systems) (March 1998 to November 1998); Vice President and Chief
Financial Officer of Exide Electronics Group, Inc. (power protection
systems) (1989 to 1997).
Mitchell R. Setzer 49 Treasurer and Secretary of the Company (August 1992 to present); Vice
President - Administration of Regal Manufacturing, a subsidiary of the
Company (January 1990 to present); Treasurer of Regal Manufacturing
(January 1989 to present).
Edward H. Gleadall 58 Vice President of the Company (January 1999 to present); President of
Elastic Corporation of America, a subsidiary of the Company (December
1997 to present); President of the Elastic Corporation of America, a
division of NFA, Inc.(producer of narrow elastic fabrics)
(1991-December 1997).
A. Orrin Maldoff 65 Vice President of the Company (August 1992 to present); President of
Rubyco, a subsidiary of the Company (October 1990 to present).
Kenneth W. O'Neill 54 Vice President of the Company (August 1992 to present); President of
Regal Manufacturing, a subsidiary of the Company (August 1988 to
present).
Donald W. Pruitt 50 Controller of the Company (December 1995 to present); Controller of
Carolina Freight Corporation (trucking) (1993 to October 1995).
</TABLE>
5
<PAGE> 8
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 1998, 1997 and 1996
fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- ------------
OPTIONS/ OTHER
SALARY BONUS SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- --------------------------- ---- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Barry D. Setzer, 1998 $ 350,000 $ 231,458 None $ 108,578 (1)
President and Chief Executive Officer (6) 1997 350,000 207,062 None 85,640
1996 275,000 283,660 100,000 99,837
Richard J. Mackey, 1998 $ 225,000 $ 231,458 None $ 9,731 (2)
Chairman of the Board and Chief 1997 225,000 203,387 None 239
Financial Officer (7) 1996 200,000 281,820 50,000 1,239
Kenneth W. O'Neill 1998 $ 125,000 $ 8,965 42,500 $ 10,288 (3)
Vice President; President of Regal 1997 125,000 12,261 None 2,445
Manufacturing 1996 110,000 5,297 None 1,622
A. Orrin Maldoff, 1998 $ 100,000 None None $ 2,625 (4)
Vice President; President of Rubyco 1997 104,880 None None 2,740
1996 109,665 7,215 None 2,870
Mitchell R. Setzer, 1998 $ 100,000 $ 40,000 32,000 $ 6,174 (5)
Secretary/Treasurer; Vice-President and 1997 100,000 41,096 10,000 1,842
Treasurer of Regal Manufacturing 1996 75,000 37,751 None 1,461
</TABLE>
(1) Includes $9,492 in contributions under the Company's Profit Sharing
and Retirement Savings Plan and $48,966 in premiums on life insurance
policies required to be transferred to Mr. Setzer if he terminates
employment with the Company. Also includes $50,120 representing the
imputed annual interest attributable to the Company's interest-free
loan to Mr. Setzer, which becomes due August 2000.
(2) Includes $9,492 in contributions under the Company's Profit Sharing
and Retirement Savings Plan and $239 in premiums on life insurance
policies.
(3) Includes $10,000 in contributions under the Company's Profit Sharing
and Retirement Savings Plan and $288 in premiums on life insurance
policies.
(4) Includes $2,345 in contributions under the Company's Profit Sharing
and Retirement Savings Plan and $280 in premiums on life insurance
policies.
(5) Includes $6,000 in contributions under the Company's Profit Sharing
and Retirement Savings Plan and $174 in premiums on life insurance
policies.
(6) Mr. Setzer was also appointed Chairman of the Board in January 1999.
(7) Mr. Mackey served as Chairman of the Board until January 1999 and
retired from his remaining positions with the Company on February 10,
1999.
6
<PAGE> 9
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM (3)
-------------------------------------------- -------------------------------------
NUMBER OF % OF TOTAL EXERCISE
SECURITIES OPTIONS/SARS OR
UNDERLYING GRANTED TO BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR ($/SHARE) DATE (2) 5% ($) 10% ($)
- ---- -------------- ------------ --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kenneth W. O'Neill 42,500 9.57% 3.375 December 14, $ 90,206 $ 228,602
2008
Mitchell R.Setzer 32,000 7.21% 3.375 December 14, $ 67,920 $ 172,124
2008
</TABLE>
(1) The options are exercisable in installments such that 20% of the grant
becomes exercisable on each anniversary of December 14, 1998, and were
granted in tandem with a limited SAR applicable in the event of a
"Change of Control" of the Company. See: " - Change of Control
Provisions" below.
(2) The options are subject to termination prior to their expiration date
in the event of a termination of employment.
(3) This information is provided pursuant to the rules of the Securities
and Exchange Commission. Using $3.375, the market price of the
Company's Common Stock on the date of the option grant, the 5% and 10%
annual rates of appreciation would result in per share prices of
$5.498 and $8.754, respectively, at the end of the 10 year option
term. This presentation is not a prediction of possible future prices
of the Company's Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FISCAL YEAR-END AT FISCAL YEAR-END
------------------------------ ------------------------------
SHARES VALUE
ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME ON EXERCISE ($) (#) (#) ($) ($)
- ------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Barry D. Setzer -0- -0- 360,000 90,000 -0- -0-
Richard J. Mackey -0- -0- 260,000 40,000 -0- -0-
Kenneth W. O'Neill (1) -0- -0- 64,500 48,000 -0- 5,313
A. Orrin Maldoff -0- -0- 23,000 2,000 -0- -0-
Mitchell R. Setzer (2) -0- -0- 26,000 48,000 -0- 4,000
</TABLE>
(1) The table includes 42,500 exercisable options, which were surrendered
by Mr. O'Neill in February 1999. See "Stock Option Repricing" in
Compensation Committee Report.
(2) The table includes 18,000 exercisable options and 14,000 unexercisable
options, which were surrendered by Mr. Setzer in February 1999. See
"Stock Option Repricing" in Compensation Committee Report.
EMPLOYMENT AND SEVERANCE AGREEMENTS
During 1998 Mr. Mackey and the Company were parties to an employment
contract which provided for the Company's employment of 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. The
employment contract provided that Mr. Mackey would 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 income before taxes and certain interest charges for such
fiscal year in excess of 12% of the average of the tangible net assets employed
therein, reduced by any awards earned under Regal Manufacturing's incentive
bonus plan for the particular year. The contract also provided that Mr. Mackey
will be entitled to receive a supplemental retirement benefit, for which he
became fully vested at age 65, payable in monthly installments over a ten year
period following his retirement, in the aggregate amount equal to 400% of his
highest annual compensation in effect at any time during his employment at the
Company. Mr. Mackey's contract contained provisions for termination and
severance payments in case of a Change in Control Event, similar to those
contained in Mr. Setzer's contract described below under "Change of Control
Provisions."
7
<PAGE> 10
On February 10, 1999, the Company and Mr. Mackey entered into a
severance agreement which terminated Mr. Mackey's rights and obligations under
his employment contract with the Company, effective February 10, 1999. Pursuant
to the severance agreement, Mr. Mackey resigned as an officer and director of
the Company and its subsidiaries. The Company paid Mr. Mackey a lump sum
payment of $675,000 and agreed to pay the bonus for 1998 determined under his
employment contract, which was $231,458. In addition, the Company will pay Mr.
Mackey the supplemental retirement benefit prescribed under his employment
contract in the amount of $18,567 per month for 120 consecutive months. The
severance agreement also provided that the Company transfer to Mr. Mackey
ownership of his company automobile, provide certain medical coverage for three
years and permit Mr. Mackey's existing options to continue to vest and be
exercisable for three years. The Company and Mr. Mackey also entered into a
consulting agreement pursuant to which Mr. Mackey will provide consulting
services to the Company for a three-year term for a monthly payment of $4,767.
Mr. B. 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 no less than $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 in excess of 12% of the
average of the net tangible 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. He
will become fully vested in this benefit on attaining age 65. 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.
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
the Company's 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 employment contract of Mr. Setzer shall continue for a
three year term, subject to earlier termination (i) by the Company upon death,
disability, or cause (as defined) or (ii) by Mr. Setzer 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 Mr. Setzer as described in clause
(ii), Mr. Setzer 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 Mr.
Setzer's employment (other than for one of the reasons specified in clause (i)
above) 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, Mr. Setzer will be entitled to receive
an amount equal to such severance benefit. Mr. Mackey's employment contract
contained similar provisions prior to its termination in February, 1999.
If Mr. Setzer were to be entitled to severance benefits as of February
8, 1999, his base amount compensation would entitle him to payments of
$1,738,559
The Company's 1992 Stock Incentive Plan ("the Plan") provides that if
there is a Change of Control of the Company (as defined below), unless
otherwise determined by the Compensation Committee or the Board 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.
8
<PAGE> 11
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:
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 for such subsidiary by the Executive Committee of the Company's Board
of Directors. 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 B. Setzer provide for incentive payments pursuant to a
specified formula. See "Employment and Severance Agreements" above.
Stock Option 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 judgment 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.
Stock Option Repricing. In December 1998 the Committee determined that
a number of the options which had been previously granted to employees were
exercisable at prices significantly above current market value and no longer
provided the desired incentive. Accordingly, on December 14, 1998, the
Committee granted 344,100 additional stock options to eighteen employees,
including three executive officers (but not including Messrs. Mackey and B.
Setzer), having an exercise price equal to the fair market value of the Common
Stock on such date. These options will vest in equal annual installments over a
five-year period from the date of grant. In making these grants the Committee
considered the fact that the past year has presented a very difficult economic
environment for the textile industry, including the Company. The Committee
believes that the Company's employees have been making every effort within
their control to achieve the Company's goals and improve shareholder value, and
that this grant was necessary to enable the Company to retain these employees
and to provide meaningful incentives for them to continue their efforts on
behalf of the Company.
These grants were not conditioned upon surrender of an equal number of
options having a higher exercise price, but it was the Committee's expectation
that employees receiving the new grants would surrender an equal number of
their previously granted options in order to help replenish shares available
for award under the Company's Stock Incentive Plan and to induce the Committee
to consider them for future grants. The Committee's expectation has been borne
out, and all employees who received lower priced options in December have
surrendered an equal number of higher priced options.
These December 14, 1998 grants of stock options are treated as
"repricings" under the rules of the Securities and Exchange Commission because
the grants were made with the expectation that the recipients of the grant
would surrender previously granted options for cancellation. The following
table sets forth certain additional information about the effects of
"repricing" of options (and tandem limited SARs) held by executive officers,
the only repricing since the Company became a publicly traded company in 1992.
9
<PAGE> 12
OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE
UNDERLYING OF STOCK AT EXERCISE PRICE LENGTH OF ORIGINAL
OPTIONS/SARS TIME OF AT TIME OF OPTION TERM
REPRICED OR REPRICING OR REPRICING OR NEW EXERCISE REMAINING AT DATE
AMENDED AMENDMENT AMENDMENT PRICE OF REPRICING OR
NAME DATE (#) ($) ($) ($) AMENDMENT
- --------------- ------------ ------------ ------------ -------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth W. O'Neill Dec. 14 1998 42,500 3.375 6.75 3.375 3 years, 11 months
Donald W. Pruitt Dec. 14 1998 10,000 3.375 4.75 3.375 7 years, 2 months
Dec. 14 1998 5,000 3.375 4.75 3.375 8 years, 1 month
Dec. 14 1998 5,000 3.375 9.44 3.375 8 years, 1 month
Mitchell R. Setzer Dec. 14 1998 7,000 3.375 6.75 3.375 3 years, 11 months
Dec. 14 1998 15,000 3.375 6.44 3.375 6 years, 5 months
Dec. 14 1998 5,000 3.375 4.75 3.375 8 years, 1 month
Dec. 14 1998 5,000 3.375 9.44 3.375 8 years, 1 month
</TABLE>
Compensation of Chief Executive Officer. Under Mr. Setzer's employment
contract and at the direction of the Board of Directors, Mr. Setzer is paid a
base salary of $350,000. Mr. Setzer's bonus for 1998 of $231,458 was determined
in accordance with the formula specified in his employment contract. During
1998 no options were granted Mr. Setzer because the committee felt that
previously granted stock options already comprised a significant portion of his
total compensation.
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 intends to grant future stock options under the Stock Incentive Plan
in a manner that will qualify as performance-based. However, with respect to
cash bonus plans, the Committee feels that it should not use only mechanical
formulas in carrying out its responsibilities for compensating the Company's
management, and that it is also appropriate to reward the achievement of
subjective, non-quantifiable goals. 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. Therefore,
the Committee currently intends to continue to make cash bonus payments that do
not qualify as performance-based compensation. Moreover, the Committee believes
that the current levels of salary and bonuses are sufficiently below the $1
million threshold as to make it unlikely that this threshold would be exceeded
in most cases.
COMPENSATION COMMITTEE
John B. Fraser, Chairman
Salim M. Ibrahim
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 one or more of
such captions is incorporated by reference therein.
10
<PAGE> 13
PERFORMANCE GRAPH
The following graph shows the total shareholder return of (1) the
Company's Common Stock, (2) an index of textile manufacturers published by
Media General Financial Services, Inc. ("Media General") and (3) the Standard &
Poor's 500 Index over the five year period ended December 31, 1998, based on
information provided by Media General. In each case the Graph assumes an
investment of $100 on December 31, 1993 and that all dividends were reinvested.
In 1998, Media General reorganized the industrial groupings used by it for such
comparisons and, in doing so, eliminated the industry group titled 'knitting
mills' (previously used by the Company for industry comparison) in favor of the
broader 'textile manufacturers' being used this year. For purposes of
comparison, as required by rules of the Securities and Exchange Commission, the
graph also shows the total shareholder return of the companies formerly in the
Media General "knitting mills" industry group (based on information provided by
Carl Thompson Associates).
CUMULATIVE TOTAL RETURN
- ------------------------------FISCAL YEAR ENDING--------------------------------
1993 1994 1995 1996 1997 1998
WORLDTEX, INC 100 69.05 109.52 169.05 151.19 66.67
CURRENT INDUSTRY INDEX 100 98.46 95.44 122.62 125.60 119.89
S&P 500 INDEX 100 101.32 139.40 171.41 228.59 293.92
PRIOR INDUSTRY INDEX 100 103.87 97.29 133.35 126.29 84.35
[PERFORMANCE GRAPH]
11
<PAGE> 14
INDEPENDENT ACCOUNTANTS
On October 22, 1998, the Company dismissed KPMG Peat Marwick LLP
("KPMG") as its independent accountants. KPMG's report on the financial
statements for each of the years ended December 31, 1997 and December 31, 1996
contained no adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles. During 1996
and 1997 and subsequent interim periods preceding such dismissal, there were no
disagreements with KPMG on any matter of accounting principle or practices,
financial statement disclosure, or auditing scope and procedure. On October 22,
1998, the Company engaged Deloitte & Touche LLP as its independent accountants
to audit the Company's financial statements for the year ended December 31,
1998. The decision to change independent accountants was approved by the Audit
Committee of the Board of Directors of the Company. A representative of
Deloitte & Touche is expected to be present at the Annual Meeting of
Stockholders with the opportunity to respond to appropriate questions and make
a statement if so desired.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1998.
Edward Gleadall, who became an executive officer of the Company in January,
1999 filed his Form 3, initial report of stock ownership, 14 days late.
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 915
Tate Blvd, S.E., Suite 106, Hickory, North Carolina 28602, in the case of an
annual meeting, not later than 90 days prior to the anniversary date of the
immediately preceding Annual Meeting, (i.e. not later than February 20, 2000
for the Annual Meeting expected to be held in May, 2000). 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: (i) 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 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 calling the
Secretary at (828) 322-2242.
12
<PAGE> 15
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 2000
Annual Meeting of Stockholders, that proposal must be received at the Company's
principal offices on or before December 22, 1999 unless a different deadline is
announced in one of the Company's quarterly reports on Form 10-Q filed with the
SEC. 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,
/s/ Mitchell R. Setzer
MITCHELL R. SETZER
Secretary
April 20, 1999
13
<PAGE> 16
The Board of Directors Recommends a vote "FOR all nominees" in Item 1
############## ____________________________
COMMON Please mark
[X] your votes
as this
Item 1. Election of Messrs. Fraser, Roelli and Wilson as Class I Directors.
FOR all Withheld for all Withheld for the following only:
Nominees Nominees (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
MEETING
[ ]
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. to be held on May 20, 1999, at 11:00 a.m., Bank
of America Plaza, 335 Madison Avenue, Fifth Floor, Room 5A, New York, New York.
The undersigned hereby appoints Marty R. Kittrell, Mitchell R. Setzer
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
