<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 LOGO
---------------------
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 the Metropolitan Club, One East 60th
Street, Third Floor, Morgan Room, New York, New York at 10:00 A.M. (New York
City time) on Wednesday, May 24, 2000, for the following purposes:
- to elect two members of the Board of Directors of the Company (Proposal
1);
- to approve amendments to the Company's 1992 Stock Incentive Plan
(Proposal 2); 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 31, 2000 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
Secretary
April 24, 2000
<PAGE> 3
WORLDTEX, INC.
---------------------
PROXY STATEMENT
---------------------
This proxy statement is furnished to the stockholders of Worldtex, Inc.
(hereinafter referred to as the "Company" or "Worldtex") in connection with the
solicitation of proxies for the Annual Meeting of Stockholders to be held on May
24, 2000. 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 26, 2000.
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 31, 2000. Each share
is entitled to one vote. Only holders of Common Stock of record at the close of
business on March 31, 2000 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 the dates
indicated below (based on Schedule 13D and 13G filings with the Securities and
Exchange Commission ("SEC")):
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
------------------------------------ ----------- --------
<S> <C> <C>
William Ehrman, Frederic Greenberg, Julia Oliver and Jonas
Gerstl.................................................... 4,878,495(1) 34.20%
350 Park Avenue, 11th Floor
New York, NY 10022
Dimensional Fund Advisors, Inc.............................. 1,120,527(2) 7.85
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
- ---------------
(1) Form 13D/A filed with the SEC indicates ownership as of March 27, 2000. See
"Acquisition by Investment Managers of 34% of the Common Stock" below.
Reported that these individuals are the members of EGS Management, L.L.C.
("EGS Management") and EGS Partners, L.L.C. ("EGS Partners"); that EGS
Management is the beneficial owner of 1,767,877 shares, comprised of
1,083,430 shares (7.6% of the outstanding shares) beneficially owned by EGS
Associates, L.P. and additional shares beneficially owned by FK Investments
L.P., BEV Partners, L.P. and Jonas Partners, L.P., which are private
investment partnerships; that EGS Partners is the beneficial owner of
3,110,618 shares (21.8% of the outstanding shares) purchased for
discretionary accounts managed by it; that such individuals, by virtue of
their status as members of EGS Management and EGS Partners, were the
beneficial owners of such shares; and that such beneficial ownership
consisted of shared power to dispose of and to vote such shares.
(Footnotes continued on the next page.)
<PAGE> 4
(2) Form 13G filed with the SEC indicates ownership as of December 31, 1999.
Reported that Dimensional Fund Advisors Inc. ("Dimensional"), an investment
advisor registered under Section 203 of the Investment Advisers 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 commingled group trusts and separate accounts (collectively,
the "Funds"). Reported sole voting and dispositive power over the securities
that are owned by the Funds and disclaimed beneficial ownership of all such
shares.
ACQUISITION BY INVESTMENT MANAGERS OF 34% OF THE COMMON STOCK
On February 28, 2000, a Schedule 13D report was filed with the SEC stating
that certain investment managers were the beneficial owners of approximately
34.1% of the outstanding shares of Worldtex common stock. According to the
Schedule 13D filing, William Ehrman, Frederic Greenberg, Jonas Gerstl, William
Lautman and Julia Oliver (collectively the "EGS Persons"), the principals of the
firm EGS Partners, L.L.C., were the beneficial owners of such shares, which were
held by certain investment partnerships or in discretionary accounts over which
they have investment authority. The filing states that the Worldtex shares were
acquired for investment. On March 31, 2000, an amendment to such Schedule 13D
report was filed increasing the number of shares beneficially owned to
approximately 34.2% of the outstanding shares and reporting that William Lautman
had ceased to be a member of EGS Management and EGS Partners and, accordingly,
was no longer the beneficial owner of shares included in such report.
As a consequence of the filing of such report, the "poison pill"
shareholder rights attached to the outstanding Worldtex common stock were
required to trade separately from such stock and become exercisable after 10
days, unless otherwise provided by the Worldtex Board of Directors. If the
rights had become exercisable, each right holder (other than the EGS Persons)
would have been entitled to pay $30 per right and receive Worldtex common stock
(or a common stock equivalent) with a value of $60 (determined pursuant to the
agreement governing the rights). In addition, the Board of Directors of Worldtex
had the option to exchange each right (other than rights held by the EGS
Persons) for one share of Worldtex common stock. The Board of Directors
subsequently extended the initial 10-day period on several occasions in order to
permit discussions with the EGS Persons.
On March 27, 2000, Worldtex entered into a Standstill Agreement (the
"Standstill Agreement") with the EGS Persons and certain related entities
(collectively, the "EGS Parties"). Pursuant to the Standstill Agreement,
Worldtex amended its "poison pill" shareholder rights plan to prevent the rights
from trading separately or becoming exercisable as a result of the announced
beneficial ownership by the EGS Parties, unless the Board of Directors of
Worldtex determines that there has been a breach by an EGS Party of the
Standstill Agreement.
Under the Standstill Agreement, the EGS Parties agreed, among other things,
not to (i) acquire additional shares of Worldtex common stock, (ii) encourage
other persons to acquire Worldtex common stock, (iii) submit or encourage a
proposal for the acquisition of Worldtex, (iv) make any solicitation of proxies
for Worldtex common stock, (v) sell any Worldtex common stock, except sales of
not more than 5% of the outstanding shares in any 90 day period so long as the
buyer is not and will not thereby become the beneficial owner of 5% or more of
the Worldtex common stock or (vi) submit any shareholder proposal. In addition,
each EGS Party agreed to vote the Worldtex common stock beneficially owned by
it, at its option, (i) in the manner recommended by the Worldtex Board of
Directors or (ii) in the same proportion as the votes of other holders of
Worldtex common stock. The EGS Parties also agreed to make payments to Worldtex
aggregating $800,000, in reimbursement of certain expenses. The term of the
Standstill Agreement is ten years.
Also as a result of such acquisition of Worldtex common stock by the EGS
Persons, all outstanding stock options granted under the 1992 Stock Incentive
Plan of Worldtex, representing the right to purchase approximately 1,760,000
shares of Worldtex common stock at exercise prices from $2.81 to $6.75 per
share, and tandem limited stock appreciation rights became vested and
exercisable. The 60-day period for exercising the limited stock appreciation
rights expired without any exercises. In addition, Barry D. Setzer, Chairman of
2
<PAGE> 5
the Board, President and Chief Executive Officer of Worldtex, and Marty R.
Kittrell, Senior Vice President and Chief Financial Officer of Worldtex, each
asserted that, under the terms of his employment agreement with Worldtex, he was
entitled to terminate his employment and receive payment of 2.99 times his "base
amount" (as defined). If both officers were entitled to exercise such right,
Worldtex would be obligated to make severance payments of approximately $2.1
million. The Worldtex Board of Directors took the position that such officers
were not entitled to exercise such right. In order to settle the matter and
retain the services of Mr. Setzer, Worldtex and Mr. Setzer entered into a new
employment contract and terminated his existing contract, as described below
under "Executive Compensation -- Employment and Severance Agreements." Worldtex
was unable to reach a settlement with Mr. Kittrell, and he resigned on March 31,
2000 and claimed the right to a severance benefit of approximately $670,000.
Worldtex expects that Mr. Kittrell will commence arbitration proceedings seeking
such payment.
SECURITY OWNERSHIP OF MANAGEMENT
As of March 1, 2000, 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.............................................. 17,000(4) *
Edward W. Gleadall.......................................... 65,000(5) *
Salim Ibrahim............................................... 38,000(6) *
Marty R. Kittrell........................................... 130,000(7) *
Kenneth W. O'Neill.......................................... 94,176(8) *
Willi Roelli................................................ 30,000(9) *
Barry D. Setzer............................................. 670,900(10) 4.53
Mitchell R. Setzer.......................................... 70,397(11) *
Michael B. Wilson........................................... 24,184(12) *
John K. Ziegler............................................. 295,508(13) 2.07
All Directors and Executive Officers as a Group............. 1,540,165(14) 10.10
</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. "Shares Owned" includes shares owned
directly and indirectly as of March 1, 2000, plus the number of shares that
a particular owner (or group of owners) has a right to acquire within 60
days of such date.
(2) Percentages are calculated by dividing (x) shares in the "Shares Owned"
column by (y) the number of shares outstanding as of March 1, 2000, 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 4,000 shares issuable upon the exercise of stock options that are
currently exercisable.
(5) Includes 65,000 shares issuable upon the exercise of stock options that are
currently exercisable.
(6) Includes 10,000 shares issuable upon the exercise of stock options that are
currently exercisable.
(7) Includes 100,000 shares issuable upon the exercise of stock options that
were exercisable as of March 1, 2000. Mr. Kittrell terminated his employment
with the Company effective March 31, 2000, and such options were
simultaneously terminated.
(8) Includes 70,000 shares issuable upon the exercise of stock options that are
currently exercisable and 12,831 shares held at December 31, 1999 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 10,000 shares issuable upon the exercise of stock options that are
currently exercisable and 1,000 shares owned by Mr. Roelli's wife.
(Footnotes continued on the next page.)
3
<PAGE> 6
(10) Includes 550,000 shares issuable upon the exercise of stock options that
are currently exercisable and 21,826 shares held at December 31, 1999 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 52,000 shares issuable upon the exercise of stock options that are
currently exercisable and 11,813 shares held at December 31, 1999 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 10,000 shares issuable upon the exercise of stock options that are
currently exercisable.
(13) Includes 10,000 shares issuable upon the exercise of stock options that are
currently exercisable, 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, and 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.
(14) Includes 981,000 shares issuable upon the exercise of stock options that
are currently exercisable, 46,470 shares held at December 31, 1999 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, and
15,100 shares indirectly owned, as indicated above.
ELECTION OF DIRECTORS
(PROPOSAL 1)
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).
The Board currently consists of seven directors.
At this year's Annual Meeting, two Class II directors are to be elected to
serve for three year terms expiring at the 2003 Annual Meeting. The two nominees
are Salim M. Ibrahim and Barry D. Setzer. Mr. Ibrahim and Mr. Setzer were
previously elected to the Board by the stockholders. The remaining five
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 2002 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.
4
<PAGE> 7
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>
Salim M. Ibrahim,........... 67 2003 1996 Vice President and General Manager, E.I.
Director Class II DuPont de Nemours (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,............ 57 2003 1992 Chairman of the Board of the Company
Director; Chairman of Class II (January 1999 to present); President and
the Board, President Chief Executive Officer of the Company
and Chief Executive (May 1994 to present); executive officer of
Officer the Company, or of a subsidiary or
predecessor of the Company since 1972.
</TABLE>
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 PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS;
WITH COMPANY AGE AND CLASS DIRECTOR SINCE OTHER DIRECTORSHIPS
- --------------------- --- --------- -------------- ---------------------------------------------
<S> <C> <C> <C> <C>
John B. Fraser,............. 65 2002 1992 Consultant (January 1999 to present);
Director Class I President, Geneva Financial 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,............... 66 2002 1996 President and Director, Diethelm Holding
Director Class I (USA) Ltd. (a holding company) (1988 to
present); Director, Alex C. Fergusson, Inc.
(specialty chemicals); Director, d-SCAN
Inc. (furniture).
Michael B. Wilson,.......... 63 2002 1992 Consultant (1997 to present); Vice President
Director Class I Sales, Inbrand, Inc. (hygiene products) (1995
to 1997); President and Chief Executive
Officer, Innova Pure Water, Inc. (filtered
water) (1993 to 1995); Director, Catalina
Marketing Corporation (advertising).
Claude D. Egler,............ 65 2001 1994 Retired since January 1997; Vice President of
Director Class III the Company (August 1992 to December 1996);
President and Managing Director of Filix,
s.a. (formerly Filix Lastex, s.a.), a
subsidiary of the Company (1990 to December
1996).
John K. Ziegler,............ 63 2001 1992 Chief Executive Officer of Willcox & Gibbs,
Director; Consultant Class III Inc. (distributor of parts and supplies
to the Company for the apparel industry) (July 1994 to
present); Consultant to the Company
(November 1994 to present).
</TABLE>
5
<PAGE> 8
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held seven meetings during 1999. 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 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. The committee did
not meet in 1999.
Audit Committee. The Audit Committee is composed entirely of
non-management directors. 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. Fraser
(Chairman), Roelli and Wilson. It held two meetings in 1999.
Nominating Committee. The Nominating Committee is authorized, among other
things, to recommend changes in the size and membership of the Board and to
identify and nominate qualified candidates for Board membership. 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. It held one meeting in 1999.
Compensation Committee. The Compensation 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. Ziegler (Chairman), Ibrahim and Wilson. It held two meetings
in 1999.
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.
The Company's 1992 Stock Incentive Plan currently provides for a one-time
grant of a stock option to purchase 10,000 shares of Common Stock to each
"Outside Director" of the Company (defined as a director who is 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). The option was granted at the close of
the 1994 Annual Meeting of Stockholders to each person who was then an Outside
Director, and on the date of election to the Board to each subsequently elected
Outside Director. 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. Upon retirement, the
optionee will have the right to exercise the option for a period of three months
from the date of retirement. 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. See "Amendment to
6
<PAGE> 9
the 1992 Stock Incentive Plan (Proposal 2)" for information about a proposed
amendment to increase the number of shares available under the Stock Incentive
Plan and to authorize periodic grants of stock options to Outside Directors.
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.
LEGAL PROCEEDINGS
Mr. Ziegler has been the Chief Executive Officer of Willcox & Gibbs, Inc.
since July 1994. On April 20, 1999, Willcox & Gibbs, Inc. and its subsidiaries
filed petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code. On April 3, 2000, the plan of reorganization of Willcox & Gibbs
was confirmed by the Bankruptcy Court.
EXECUTIVE OFFICERS
The following table sets forth information with respect to the Company's
current executive officers:
<TABLE>
<CAPTION>
NAME OF OFFICER AGE OFFICE AND PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- --------------- --- -------------------------------------------------------
<S> <C> <C>
Barry D. Setzer........................ 57 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, or a subsidiary or predecessor of the Company
since 1972.
Mitchell R. Setzer..................... 50 Treasurer and Secretary of the Company (August 1992 to
present); executive officer of a subsidiary of the
Company since 1989.
Edward W. Gleadall..................... 59 Vice President of the Company (January 1999 to present);
President of Elastic Corporation of America, Inc., a
subsidiary of the Company (December 1997 to present);
President of Elastic Corporation of America, a division
of NFA, Inc. (producer of narrow elastic fabrics) (1991
to December 1997).
Kenneth W. O'Neill..................... 55 Vice President of the Company (August 1992 to present);
President of Regal Manufacturing Company, Inc., a
subsidiary of the Company (August 1988 to present).
Donald W. Pruitt....................... 51 Controller of the Company (December 1995 to present);
Controller of Carolina Freight Corporation (trucking)
(1993 to October 1995).
</TABLE>
There is no family relationship between any of the executive officers.
7
<PAGE> 10
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 1999, 1998 and 1997 fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------- OPTIONS/ ALL OTHER
SALARY BONUS SARS COMPENSATION
NAME AND CURRENT PRINCIPAL POSITIONS YEAR ($) ($) (#) ($)
- ------------------------------------ ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Barry D. Setzer........................ 1999 $350,000 $143,672 100,000 $167,732(1)
Chairman of the Board, President 1998 350,000 231,458 None 108,578
and Chief Executive Officer 1997 350,000 207,062 None 85,640
Edward W. Gleadall..................... 1999 200,000 50 15,000 4,275(3)
Vice President; President of Elastic 1998 200,000 50 50,000 21,103
Corporation of America, Inc.(2)
Marty R. Kittrell...................... 1999 180,000 89,165 None 0
Former Senior Vice President and 1998 0 0 100,000 0
Chief Financial Officer(4)
Kenneth W. O'Neill..................... 1999 139,583 5,865 None 1,816(5)
Vice President; President of Regal 1998 125,000 8,965 42,500 10,288
Manufacturing, Inc. 1997 125,000 12,261 None 2,445
Mitchell R. Setzer..................... 1999 120,000 13,378 10,000 1,976(6)
Secretary and Treasurer 1998 100,000 40,000 32,000 6,174
1997 100,000 41,096 10,000 1,842
</TABLE>
- ---------------
(1) Includes $3,160 in matching 401(k) contributions under the Company's Profit
Sharing and Retirement Savings Plan, $116,600 in premiums on life insurance
policies and $47,972 representing the imputed annual interest attributable
to the Company's interest-free loan to Mr. Setzer which becomes due August
2002.
(2) Mr. Gleadall became an executive officer of the Company in January 1999.
(3) Includes $3,333 in matching 401(k) contributions under the Company's Profit
Sharing and Retirement Savings Plan and $942 in premiums on life insurance
policies.
(4) Mr. Kittrell entered into an employment agreement with the Company and
became an executive officer on December 22, 1998. Mr. Kittrell terminated
his employment with the Company effective March 31, 2000.
(5) Includes $1,816 in matching 401(k) contributions under the Company's Profit
Sharing and Retirement Savings Plan.
(6) Includes $1,976 in matching 401(k) contributions under the Company's Profit
Sharing and Retirement Savings Plan.
8
<PAGE> 11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS/SARS APPRECIATION FOR
OPTIONS/SARS GRANTED TO EXERCISE OPTION TERM(3)
GRANTED EMPLOYEES IN OR BASE PRICE EXPIRATION ---------------------
NAME (#)(1) FISCAL YEAR ($/SHARE) DATE(2) 5% ($) 10% ($)
- ---- ------------- ------------ ------------- ----------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Barry D. Setzer...... 100,000 30.86% $2.810 May 20, 2009 $176,700 $447,800
Edward W. Gleadall... 15,000 4.63 3.375 February 16, 2009 31,838 80,681
Mitchell R. Setzer... 10,000 3.09 3.375 February 16, 2009 21,225 53,787
</TABLE>
- ---------------
(1) The options were initially exercisable in installments such that 20% of each
option would become exercisable on each anniversary of the date of grant.
However, on August 12, 1999, the options became fully vested and exercisable
pursuant to their terms when the EGS Persons became the beneficial owners of
25% of the Company's Common Stock. See "Acquisition by Investment Managers
of 34% of the Common Stock" above. Each option was granted in tandem with a
limited stock appreciation right which is exercisable only during the 60-day
period following a change of control, and which entitles the optionee to
receive, in lieu of exercising the option, the option spread based on the
highest price paid for a share of Common Stock in the 90 days preceding the
change of control. See "Change of Control Provisions" below. None of the
limited SARs were exercised during 1999.
(2) The options/SARs 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 $2.810, the market price of the Company's Common
Stock on the date of the option grant to Mr. B. Setzer, the 5% and 10%
annual rates of appreciation would result in per share prices of $4.577 and
$7.288, respectively, at the end of the 10 year option term. Using $3.375,
the market price of the Company's Common Stock on the date of the options
grant to Messrs. Gleadall and M. Setzer, the 5% and 10% annual rates of
appreciation would result in per share prices of $5.498 and $8.754,
respectively, at the end of the 10 year option term. This presentation is
not a prediction of possible future prices of the Company's Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR-END(1) AT FISCAL YEAR-END(1)
SHARES VALUE --------------------------- ---------------------------
ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME ON EXERCISE ($) (#) (#) ($) ($)
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Barry D. Setzer................ -- $ -- 550,000 -- $ -- $ --
Edward W. Gleadall............. -- -- 65,000 -- -- --
Marty R. Kittrell.............. -- -- 100,000 -- -- --
Kenneth W. O'Neill............. -- -- 70,000 -- -- --
Mitchell R. Setzer............. -- -- 52,000 -- -- --
</TABLE>
- ---------------
(1) Due to the acquisition of beneficial ownership of 25% of the Company's
Common Stock by the EGS Persons, all options are fully vested and
exercisable. See "Acquisition by Investment Managers of 34% of the Common
Stock" above.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Mr. B. Setzer and the Company were parties to an employment contract, dated
as of November 15, 1993, pursuant to which the Company employed 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
this employment contract, Mr. Setzer was entitled to receive a base salary of no
less than $275,000 per annum and
9
<PAGE> 12
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 tangible net worth of the Company for the current and immediately
preceding fiscal years, reduced by any awards earned under Regal Manufacturing's
incentive bonus plan for the particular year. Mr. Setzer was also 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 would become fully vested in this benefit on attaining age
65. Mr. Setzer's contract contained provisions for termination and severance
payments in case of a Change in Control Event, as described below under "Change
of Control Provisions." The Company was also 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.
As discussed under "Acquisition by Investment Managers of 34% of the Common
Stock", Mr. B. Setzer asserted that, as a result of the acquisition of
beneficial ownership of 20% of the Company Common Stock by the EGS Persons, he
had the right to terminate his employment contract and receive the severance
benefit payable in case of a Change in Control Event, which totalled
approximately $1,400,000. The Company took the position that he did not, but in
order to settle the matter and retain Mr. Setzer's services as Chief Executive
Officer of the Company, on April 20, 2000, Mr. Setzer and the Company entered
into a new employment agreement and terminated the existing agreement. Under the
new employment agreement, in order to settle Mr. Setzer's claims, the Company
paid to Mr. Setzer $350,000 and granted to Mr. Setzer options to purchase
325,000 shares of Company Common Stock at an exercise price of $1.50 per share.
Such options vest in equal annual installments over three years and expire after
five years. The other terms of the new employment agreement are substantially
the same as Mr. Setzer's existing agreement, except: (a) Mr. Setzer's annual
base salary was increased to $400,000; (b) the requirement of three years'
notice of termination was deleted and replaced with a right of termination by
the Company for any reason other than death, disability or cause (as defined) on
at least 30 days' notice, subject to payment of a severance benefit of three
times Mr. Setzer's then current salary; (c) certain of the provisions relating
to Mr. Setzer's rights upon a "change of control" were revised, as described
under "Change of Control Provisions" below and (d) the Company agreed to pay
premiums on certain life insurance policies owned by Mr. Setzer, rather than
maintain policies owned by the Company that were transferable to Mr. Setzer. In
addition, the Company had originally agreed to grant to Mr. Setzer options for
an additional 100,000 shares to settle such claims, but Mr. Setzer instead
requested that he be given the authority to grant options for that number of
shares to other employees on the same terms that were otherwise applicable to
his new options. The Company agreed to grant this authority to Mr. Setzer
immediately after this year's annual meeting of stockholders (or, if Proposal 2
described herein is not approved by stockholders, with respect to 75,000 rather
than 100,000 shares).
Prior to his termination of employment on March 31, 2000, Mr. Kittrell and
the Company were parties to an employment contract pursuant to which the Company
agreed to employ Mr. Kittrell in a senior executive capacity for an indefinite
period, subject to termination by either the Company or Mr. Kittrell upon not
less than thirty days' notice. Under his employment contract, Mr. Kittrell was
entitled to receive a base salary of no less than $180,000 per annum and a bonus
for each fiscal year in an amount equal to 0.5% of annual net income (before
taxes and after certain interest charges) in excess of 12% of the average of the
tangible net worth of the Company and its subsidiaries for the current and
immediately preceding fiscal years. As provided in his employment contract, in
no event would Mr. Kittrell receive less than a $50,000 bonus for 1999. Mr.
Kittrell was also granted options to purchase 100,000 shares of the Company's
common stock at an exercise price of $3.38 per share. Mr. Kittrell's contract
contained provisions for termination and severance payments in case of a Change
in Control Event, as described below under "Change of Control Provisions." The
Company was also obligated to provide Mr. Kittrell a car allowance of not less
than $9,000 per annum. In connection with his termination of employment, Mr.
Kittrell has claimed the right to the payment of a substantial severance
benefit. See "Acquisition by Investment Managers of 34% of Common Stock".
Mr. Gleadall and the Elastic Corporation of America, Inc. ("ECA"), a
subsidiary of the Company, are parties to an employment contract pursuant to
which ECA employs Mr. Gleadall in an executive capacity for a period expiring on
December 31, 2000, subject to termination by either ECA or Mr. Gleadall on not
less
10
<PAGE> 13
than nine months' notice. The contract automatically renews for successive three
year terms upon the achievement of certain financial performance targets of ECA.
Under his employment contract, Mr. Gleadall is entitled to receive a base salary
of no less than $200,000 per annum and a bonus for each fiscal year contingent
upon ECA meeting certain financial performance targets. Mr. Gleadall 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 during the 36
months prior to his 65th birthday. In the event of Mr. Gleadall'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 during the 36 months prior to the date of his death or disability.
EMPLOYEE LOAN
On August 18, 1995, the Company extended a $600,000 interest-free loan to
Mr. B. Setzer, the Company's Chairman of the Board and Chief Executive Officer,
due August 18, 2000. On May 20, 1999, the Company amended the loan to extend the
maturity date to August 18, 2002. The largest amount outstanding during 1999
with respect to such loan, and the balance thereof as of March 1, 2000, was
$600,000.
CHANGE OF CONTROL PROVISIONS
The employment agreements of Messrs. B. Setzer and Kittrell as in effect
during 1999 provided that 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 employment contracts of Mr. Setzer and Mr. Kittrell
would 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 respective
executive 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
executive as described in clause (ii), the executive would be entitled to a
severance benefit of 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), reduced by the amount of other payments which would constitute "parachute
payments" for purposes of Section 280G. The executive would also be entitled to
this severance benefit if the Company terminated the executive'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. If Messrs. Setzer and Kittrell were entitled to severance
benefits as a result of the acquisition by the EGS Persons of beneficial
ownership of 20% of the Company's Common Stock during March 1999, their
respective base amount compensation as of such date would have entitled them to
severance payments of $1,430,828 and $671,060, respectively. See "Acquisition by
Investment Managers of 34% of the Common Stock" above.
The new employment contract between Mr. Setzer and the Company entered into
in April 2000 retains the Change of Control provisions as described above,
except that the level of beneficial ownership of the Company's voting securities
required to trigger a Change of Control Event was increased from 20% to more
than 50% and the right of Mr. Setzer to terminate employment for any reason and
receive the severance benefit was deleted.
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. Limited
stock appreciation rights may be exercised only within the 60-day period
following a Change of
11
<PAGE> 14
Control. 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, and include tandem limited stock appreciation
rights.
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:
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. 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. B. Setzer, Gleadall and Kittrell 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.
Compensation of Chief Executive Officer. Under Mr. Setzer's employment
contract as in effect during 1999 and at the direction of the Board of
Directors, Mr. Setzer was paid a base salary of $350,000. Of Mr. Setzer's bonus
for 1999, $127,296 was awarded in accordance with the formula specified in that
contract. In addition, Mr. Setzer was awarded $16,376 in accordance with the
Company's holiday bonus formula applicable to all employees. During 1999, Mr.
Setzer was granted 100,000 stock options based on the general factors stated
above and in light of the fact that he had not been granted any stock options
during 1997 and 1998. As a result of the acquisition by the EGS Persons of
beneficial ownership of approximately 34.2% of the outstanding shares of the
Company's Common Stock, Mr. Setzer asserted that a Change in Control Event had
occurred which entitled him to terminate his employment with the Company and
receive a severance payment aggregating approximately $1,400,000. The Company
took the position that Mr. Setzer was not entitled to such severance payment. In
order to settle the matter and induce Mr. Setzer to remain with the Company, in
April 2000 the Company negotiated a new employment contract with Mr. Setzer
under which Mr. Setzer received a cash payment of $350,000 and options to
purchase 325,000 shares of the Company's common stock at an exercise price per
share equal to $1.50. In addition, Mr. Setzer's base salary was increased to
$400,000 and certain other changes were made in his employment agreement. Mr.
Setzer is also entitled to
12
<PAGE> 15
a bonus according to the same formula provided in his previous employment
contract. See "Employment and Severance Agreements" 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 grants stock options under the Stock Incentive Plan in a manner that
qualifies 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 K. Ziegler, 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.
13
<PAGE> 16
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, 1999, based on information
provided by Media General. In each case the graph assumes an investment of $100
on December 31, 1994 and that all dividends were reinvested.
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
WORLDTEX, INC. INDUSTRY INDEX S&P 500 INDEX
-------------- -------------- -------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 158.61 96.93 137.58
1996 244.82 124.54 169.18
1997 218.96 127.56 225.61
1998 96.55 121.77 290.09
1999 43.00 78.70 351.13
</TABLE>
AMENDMENT TO THE 1992 STOCK INCENTIVE PLAN
(PROPOSAL 2)
The Company's 1992 Stock Incentive Plan (the "Plan") was adopted in 1992,
and has been amended from time to time, most recently in 1998, at which time the
Plan as so amended was approved by stockholders. The purposes of the Plan are to
enable the Company to attract and retain employees who contribute to the
Company's success by their ability, ingenuity and industry, to enable the
Company to pay part of the compensation of its Outside Directors in the form of
stock options and to enable such employees and Outside Directors to participate
in the long-term growth of the Company by giving them an equity interest in the
Company.
The Board of Directors believes that the Plan is accomplishing its
purposes. Since only 77,000 shares are available of the 2,100,000 previously
authorized by the stockholders, the Board believes that additional shares should
be authorized for grant under the Plan. In addition, because a majority of the
Outside Directors have not received an option grant since 1994, the Board of
Directors believes that the Plan should be amended to authorize additional
option grants to Outside Directors.
Accordingly, at its April 20, 2000 meeting, the Board of Directors took
action to amend the Plan, subject to stockholder approval at the 2000 Annual
Meeting, to (i) increase the number of shares authorized for awards under the
Plan by 300,000, providing for an aggregate of 2,400,000 shares, available since
the inception of the Plan and (ii) authorize the grant to each Outside Director
of options to purchase 12,000 shares of the
14
<PAGE> 17
Company's Common Stock on each date that he is elected or reelected to a
three-year term on the Board, and the grant, on the date of the 2000 Annual
Meeting, of options to purchase 4,000 or 8,000 shares of the Company's Common
Stock to Outside Directors whose terms will continue to 2001 or 2002,
respectively.
PRINCIPAL PROVISIONS OF THE PLAN
The following summary of the Plan, as amended (subject to stockholder
approval) effective as of May 24, 2000, is qualified in its entirety by
reference to the full text of the Plan which is available by written request to
the Secretary of the Company at 915 Tate Blvd, SE, Suite 106, Hickory, North
Carolina 28602, or by oral request at (828) 322-2242.
Shares. The total number of shares of the Company's Common Stock available
for issuance under the Plan is 2,400,000.
Shares awarded under the Plan may be authorized or unissued shares or
treasury shares. If shares subject to an option under the Plan cease to be
subject to such option, or shares awarded under the Plan are forfeited, or an
award under the Plan otherwise terminates without a payment being made to the
participant in the form of Common Stock, such shares will again be available for
future distribution under the Plan. In addition, shares surrendered to the
Company or withheld by the Company to satisfy the option exercise price or to
satisfy the optionee's tax liability with respect to an award will become
available for issuance under the Plan.
Administration. The Plan is administered by the Compensation Committee or
such other committee ("Committee") of not less than two directors as may be
appointed by the Board of Directors. The Committee is authorized to, among other
things, grant and set the amount and terms of awards to employees (including
officers) under the Plan, amend such awards, waive compliance with the terms of
such awards and interpret the Plan and awards. The terms of an award under the
Plan may vary from participant to participant. With respect to awards to Outside
Directors, the Committee has authority to interpret the Plan and awards, adopt
administrative regulations and administer the Plan, but not to determine the
amount or terms of awards. The Board of Directors has the power to determine the
terms (but not the amount) of grants of stock options to Outside Directors and
to amend such awards. The number of options to be granted to Outside Directors
is fixed in the Plan.
Participation. The Committee may make awards under the Plan to employees
(including officers) of the Company or of an entity in which the Company owns at
least a 20% interest. The employee participants in the Plan are selected from
those eligible in the sole discretion of the Committee. No employee may be
granted awards under the Plan with respect to more than 500,000 shares of Common
Stock in any fiscal year. The Plan also provides for the periodic grants of
options to purchase shares of Common Stock to each Outside Director of the
Company as described below, the terms of such options to be determined by the
Board. Outside Directors are not eligible for awards other than stock options.
Awards to Outside Directors. Each person who was an Outside Director at
the close of the 1994 Annual Meeting was granted an option to purchase 10,000
shares of the Company's Common Stock as of such date, and each person who became
an Outside Director after such date and before May 24, 2000 was granted an
option to purchase 10,000 shares of the Company's Common Stock on the date of
his election to the Board. Each person who is elected or reelected as an Outside
Director on or after May 24, 2000 shall be granted, as of the date of such
election or reelection, an option to purchase 12,000 shares of the Company's
Common Stock (or a proportionately reduced option if the election is for a term
of less than three years). In addition, each Outside Director whose current term
on the Board will continue after the 2000 Annual Meeting shall be granted, as of
the date of such meeting, an option to purchase 4,000 shares of Common Stock if
his term will expire in 2001, and an option to purchase 8,000 shares of Common
Stock if his term will expire in 2002. The terms of the stock options are
determined by the Board of Directors, subject to the same restrictions as set
forth below with respect to awards of stock options to employees. All stock
options granted to Outside Directors are non-qualified stock options under the
Internal Revenue Code.
Awards to Employees. The Plan authorizes the Committee to grant awards to
employees (including officers) in the form of stock options, stock appreciation
rights, restricted stock, deferred stock, loans, and tax
15
<PAGE> 18
offset payments. Awards may be granted alone or in tandem with other types of
awards under the Plan. A summary of these awards is set forth below:
1. Stock Options. Incentive stock options ("ISOs") and non-qualified
stock options may be granted for such number of shares of Common Stock as
the Committee determines. A stock option will be exercisable at such times,
over such term and subject to such terms and conditions as the Committee
determines, at an exercise price determined by the Committee. (ISOs are
subject to restrictions as to exercise period and price as required by the
Internal Revenue Code.) Payment of the exercise price may be made in such
manner as the Committee may provide, including cash, delivery of shares of
Common Stock already owned or subject to award under the Plan, or any other
manner determined by the Committee. The Committee may provide that the
stock options will be transferable.
Upon an optionee's termination of employment, the option will be
exercisable to the extent determined by the Committee, either in the
initial grant or an amendment thereto. The Committee may provide that an
option which is outstanding on the date of an optionee's death will remain
outstanding for an additional period after the date of such death,
notwithstanding that such option would have expired earlier under its
terms.
2. Stock Appreciation Rights ("SARs"). Upon the exercise of a SAR,
the Company will pay to the employee in cash, Common Stock or a combination
thereof (the method of payment to be at the discretion of the Committee),
an amount equal to the excess of the fair market value of the Common Stock
on the exercise date over the amount determined by the Committee
(generally, the exercise price of options granted in tandem with SARs),
multiplied by the number of SARs being exercised.
The Committee may also grant limited SARs that will be exercisable
only in the event of a "Change of Control" of the Company (as defined in
the Plan). In awarding SARs or limited SARs, the Committee may provide that
in the event of a Change of Control, SARs or limited SARSs may be paid on
the basis of the "Change of Control Price" (as defined in the Plan.) See
"Executive Compensation -- Change of Control Provisions" for a summary of
these terms.
3. Restricted Stock. In making an award of restricted stock, the
Committee will determine the periods, if any, during which the stock is
subject to forfeiture, and the purchase price, if any, for the stock. The
vesting of restricted stock may be unconditional or may be conditioned upon
the completion of a specified period of service with the Company or a
subsidiary, the attainment of specific performance goals or such other
criteria as the Committee may determine.
During the restricted period, the employee may not sell, transfer,
pledge, or assign the restricted stock, except as may be permitted by the
Committee. The certificate evidencing the restricted stock will be
registered in the employee's name, although the Committee may direct that
it remain in the possession of the Company until the restrictions have
lapsed. Except as may otherwise be provided by the Committee, upon the
termination of the employee's employment for any reason during the period
before all restricted stock has vested, or in the event the conditions to
vesting are not satisfied, all restricted stock that has not vested will be
subject to forfeiture and the Committee may provide that any purchase price
paid by the employee, or an amount equal to the restricted stock's fair
market value on the date of forfeiture, if lower, shall be paid to the
employee. During the restricted period, the employee will have the right to
vote the restricted stock and to receive any cash dividends, if so provided
by the Committee. Stock dividends will be treated as additional shares of
restricted stock and will be subject to the same terms and conditions as
the initial grant, unless otherwise provided by the Committee.
4. Deferred Stock. Deferred stock may be conditioned upon the
attainment of specific performance goals or such other criteria as the
Committee may determine. In making an award of deferred stock, the
Committee will determine the periods, if any, during which the award is
subject to forfeiture, and may provide for the issuance of stock pursuant
to the award without payment therefor. Upon vesting, the award will be
settled in shares of Common Stock, cash equal to the fair market value of
such stock, or a combination thereof, as provided by the Committee. During
the deferral period set by the Committee, the employee may not sell,
transfer, pledge, or assign the deferred stock award. In the event of
termination of
16
<PAGE> 19
employment before the expiration of the deferral period, the deferred stock
award will be forfeited, except as may be provided by the Committee.
Deferred stock will carry no voting rights until such time as the Common
Stock is actually issued.
5. Loans. The Committee may provide that the Company will make, or
arrange for, a loan to any employee with respect to the exercise of any
stock option granted under the Plan, with respect to the payment of the
purchase price, if any, of any restricted stock awarded under the Plan,
with respect to any taxes arising from an award under the Plan, or any
combination thereof, provided that the Company will not loan to any
employee more than (i) the excess of the purchase or exercise price of an
award over the par value of any shares of Common Stock awarded, plus (ii)
the amount of any taxes arising from such award. The Committee will
determine the terms of any such loan.
6. Tax Offset Payments. The Committee may provide for a tax offset
payment to any employee in cash, not in excess of the amount necessary to
pay the federal, state, local, and other taxes payable with respect to any
award and the receipt of the tax offset payment, assuming the employee is
taxed at the maximum tax rate applicable to such income.
Deferral of Awards. The Committee may permit an employee to elect to defer
receipt of any award for a specified period or until a specified event.
Change of Control Provisions. If there is a Change of Control of the
Company, unless otherwise determined by the Board or Committee at the time of
the grant, all stock options and SARs which are not then exercisable will become
fully exercisable and vested, and the restrictions and deferral limitations
applicable to restricted stock and deferred stock will lapse and such shares and
awards will be deemed fully vested. Unless the Board or Committee provides
otherwise, to the extent the cash payment of any award is based on the fair
market value of Common Stock such fair market value shall be the Change of
Control Price.
Amendment. The Plan may be discontinued or amended by the Board of
Directors, except that no amendment or discontinuation may adversely affect any
outstanding award without the holder's written consent. Amendments may be made
without stockholder approval except as required to satisfy stock exchange or
regulatory requirements.
Adjustment. In the case of certain changes in the Company's structure
affecting the Common Stock, appropriate adjustments may be made by the
Committee, in its sole discretion, in the number of shares reserved under the
Plan, in the number of shares as to which awards can be granted to any
individual in any fiscal year, in the number of shares covered by options and
other awards then outstanding under the Plan and, where applicable, in the
amount to be paid by the award holders or the Company pursuant to awards under
the Plan. No such adjustments may increase the aggregate value of any
outstanding award. If the Committee makes any adjustment under this provision to
outstanding stock options, a similar adjustment will be made to the number and
terms of stock options granted to Outside Directors under the Plan.
Certain Federal Income Tax Consequences. The following is a summary of
certain federal income tax aspects of stock options which may be awarded under
the Plan based upon the laws in effect on the date hereof.
1. Incentive Stock Options. Generally, no taxable income is
recognized by the participant upon the grant of an ISO or upon the exercise
of an ISO during the period of his employment with the Company or one of
its subsidiaries or within three months (12 months in the event of
permanent or total disability, or the term of the option in the event of
death) after termination. However, the exercise of an ISO may result in
alternative minimum tax liability to the participant. If the participant
continues to hold the shares acquired upon exercise of an ISO for at least
two years from the date of the grant and one year from the date of
exercise, then upon the sale of the shares any amount realized in excess of
the option price will be taxed as capital gain.
If Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of the one-year and two-year holding periods
described above, then generally the participant will recognize ordinary
income in the amount equal to the excess, if any, of the fair market value
of the shares on the
17
<PAGE> 20
date of exercise (or, if less, the amount realized on the disposition of
the shares) over the option price. Any further gain recognized by the
participant on such disposition will be treated as capital gain.
2. Non-Qualified Stock Options. No income is recognized by the
participant at the time the option is granted. Upon exercise of the option,
the participant recognizes ordinary income in an amount equal to the excess
of the fair market value of the shares on the date of exercise over the
option price. At disposition, any appreciation after the date of exercise
is treated as capital gain.
3. Company Deductions. As a general rule, the Company or one of its
subsidiaries will be entitled to a deduction for federal income tax
purposes at the same time and in the same amount that an employee or
Outside Director recognizes ordinary income from awards under the Plan, to
the extent such income is considered reasonable compensation under the
Internal Revenue Code. The Company will not, however, be entitled to a
deduction with respect to payments which are contingent upon a change of
control if such payments are deemed to constitute "excess parachute
payments" pursuant to Section 280G of the Code and do not qualify as
reasonable compensation pursuant to that Section; such payments will
subject the recipients to a 20% excise tax. In addition, the Company will
not be entitled to a deduction to the extent compensation in excess of $1
million is paid to an executive officer named in the proxy statement who
was employed by the Company at year-end, unless the compensation qualifies
as "performance based" under Section 162(m) of the Code.
BENEFITS UNDER THE PLAN
If the stockholders approve the amendment of the Plan, it is anticipated
that the Committee will make grants under the Plan to employees (including
officers) from time to time. The size of future awards and the identity of
recipients cannot be determined at this time. It is expected that approximately
50 to 75 employees will be selected to receive awards under the Plan.
In addition, each of the Outside Directors who will continue to serve on
the Board after the 2000 Annual Meeting, and each subsequently elected or
reelected Outside Director, will be granted an option to purchase the number of
shares of Common Stock described above. The Company currently has six Outside
Directors, who, as of the date of the 2000 Annual Meeting, will be granted
options to purchase a total of 44,000 shares of Common Stock if shareholders
approve the proposed amendment to the Plan.
With respect to the options to be granted to Outside Directors as of the
date of the 2000 Annual Meeting, the Board of Directors currently intends that
all of such options will be granted with an exercise price equal to the fair
market value of the Common Stock on such date. In addition, the Board currently
intends that the 4,000 options to be granted to the Outside Directors whose
terms expire in 2001 will all vest on the day preceding the date of the 2001
Annual Meeting, the 8,000 options to be granted to the Outside Directors whose
terms expire in 2002 will vest 50% on the day preceding the date of the 2001
Annual Meeting and 50% on the day preceding the date of the 2002 Annual Meeting,
and the 12,000 options to be granted to the Outside Directors who are reelected
at the 2000 Annual Meeting will vest in three equal installments on the day
preceding the date of each of the 2001, 2002, and 2003 Annual Meetings. These
options will be exercisable after an Outside Director leaves the Board under the
same provisions as described in "Election of Directors -- Director Compensation"
above. The Board currently intends to grant each of these stock options with a
tandem limited stock appreciation right.
MISCELLANEOUS
The closing price of the Common Stock on the New York Stock Exchange
Composite Tape on April 20, 2000 was $.75.
Approval of the amendment to the 1992 Stock Incentive Plan requires the
affirmative vote of a majority of the Common Stock represented in person or by
proxy at the Annual Meeting and voting either for or against, or abstaining from
voting on, such matter. Accordingly, abstentions will have the effect of a vote
against. Broker "non-votes" (shares not voted on a matter because the nominee
holding shares for a beneficial
18
<PAGE> 21
owner neither receives voting instructions from such beneficial owner nor has
discretionary voting power with respect thereto) will not have an effect on the
vote at the Annual Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE APPROVAL OF THE AMENDMENT TO THE 1992 STOCK INCENTIVE PLAN.
INDEPENDENT ACCOUNTANTS
The Company has retained Deloitte & Touche LLP as its independent
accountants to audit the Company's financial statements for the year ended
December 31, 2000. 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
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors and officers and beneficial owners of more than 10% of its
Common Stock file reports of ownership and changes of ownership of the Company's
equity securities 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 1999, except that Mr. Gleadall filed a late Form 5 reporting
one transaction. EGS has not filed any reports under Section 16(a) with respect
to its acquisitions of the Company's Common Stock.
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 23, 2000 for
the Annual Meeting expected to be held in May, 2001). 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 be 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
19
<PAGE> 22
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.
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 2001 Annual
Meeting of Stockholders, that proposal must be received at the Company's
principal offices on or before December 29, 2000 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 24, 2000
20
<PAGE> 23
WORLDTEX, INC.
Solicited by the Board of Directors for use at the Annual Meeting of
Stockholders of Worldtex, Inc. to be held on May 24, 2000, at 10:00 a.m., at
the Metropolitan Club, One East 60th Street, Third Floor, Morgan Room, New
York, New York.
The undersigned hereby appoints 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
- -----------------------------------------------------------------------------
-FOLD AND DETACH HERE-
<PAGE> 24
Please mark your vote as indicated in this example [X]
The Board of Directors Recommends a vote "FOR all nominees" in Proposal 1.
Proposal 1. Election of Messrs. Ibrahim and Setzer as Class II Directors.
FOR all Withheld for all
Nominees Nominees
[ ] [ ]
Withheld for the following only: (Write the name of nominee(s) in the space
below)
____________________________________________________________________________
The Board of Directors Recommends a vote "FOR" Approval of Proposal 2.
Proposal 2. Approve the amendments to the Company's 1992 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, the proxies are authorized to vote upon other business as
may properly come before the 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 Proposal 1 and "FOR" approval
of Proposal 2.
WILL ATTEND MEETING [ ]
Signature Signature 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.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
