<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Polymer Group, 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)(4) 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:
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Notes:
<PAGE>
LOGO
Notice of
1998 Annual Meeting of Stockholders
and
Proxy Statement
<PAGE>
LOGO
4838 JENKINS AVENUE
NORTH CHARLESTON, SOUTH CAROLINA 29405
May 1, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
which will be held on Friday, May 29, 1998, at 11:00 a.m., local time, at the
Sheraton Charleston Hotel, 170 Lockwood Drive, Charleston, South Carolina
29403.
The Notice of Meeting, Proxy Statement and Proxy are included with this
letter. The matters listed in the Notice of Meeting are more fully described
in the Proxy Statement.
It is important that your shares are represented and voted at the Annual
Meeting, regardless of the size of your holdings. Accordingly, please mark,
sign and date the enclosed Proxy and return it promptly in the envelope
provided. If you attend the Annual Meeting, you may, of course, withdraw your
Proxy should you wish to vote in person.
Sincerely,
/s/ Jerry Zucker
Jerry Zucker
Chairman, President and Chief
Executive Officer
<PAGE>
POLYMER GROUP, INC.
4838 JENKINS AVENUE
NORTH CHARLESTON, SOUTH CAROLINA 29405
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
The 1998 annual meeting (the "Annual Meeting") of stockholders of Polymer
Group, Inc. (the "Corporation") will be held on Friday, May 29, 1998, at 11:00
a.m., local time, at the Sheraton Charleston Hotel, 170 Lockwood Drive,
Charleston, South Carolina 29403, to consider and take action with respect to
the following matters:
(1) The election of two directors for three-year terms or until their
successors are duly elected and qualified.
(2) The ratification of the appointment of Ernst & Young LLP as
independent auditors for the year ending January 2, 1999.
(3) The transaction of such other business as may properly come before
the Annual Meeting and any adjournments or postponements thereof.
Holders of record of the Corporation's Common Stock at the close of business
on April 10, 1998, are entitled to receive notice of and to vote on all
matters presented at the Annual Meeting and at any adjournments or
postponements thereof.
By order of the Board of Directors
/s/ James G. Boyd
James G. Boyd
Secretary
May 1, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON AND
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED TO ENSURE THAT
YOUR SHARES WILL BE REPRESENTED. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU
ATTEND THE ANNUAL MEETING.
<PAGE>
POLYMER GROUP, INC.
4838 JENKINS AVENUE
NORTH CHARLESTON, SOUTH CAROLINA 29405
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1998
----------------
This proxy statement (the "Proxy Statement") is being furnished to the
holders of common stock, par value $0.01 per share (the "Common Stock"), of
Polymer Group, Inc. (the "Corporation") in connection with the solicitation of
proxies on behalf of the Board of Directors of the Corporation (the "Board of
Directors" or "Board") for the 1998 annual meeting (the "Annual Meeting") of
stockholders to be held on May 29, 1998 at the Sheraton Charleston Hotel, 170
Lockwood Drive, Charleston, South Carolina 29403, and at any adjournments or
postponements thereof. Proxy Statements and proxies are being mailed to
stockholders on or about May 1, 1998.
When you sign and return the enclosed proxy, the shares represented thereby
will be voted FOR the slate of directors described herein, FOR the proposal
set forth in Item 2 of the Notice of Meeting and, as to any other business as
may properly be brought before the Annual Meeting and any adjournments or
postponements thereof, in accordance with the judgment of the person or
persons voting on such matter or matters.
Returning your completed proxy will not prevent you from voting in person at
the Annual Meeting should you be present and wish to do so. In addition, you
may revoke your proxy any time before it is voted by written notice to the
Secretary of the Corporation prior to the Annual Meeting or by submission of a
later-dated proxy.
Each outstanding share of Common Stock entitles the holder thereof to one
vote. Holders are not entitled to vote fractional shares. On April 10, 1998,
the record date, there were 32,000,000 shares of Common Stock outstanding. The
presence in person or by proxy of the holders of a majority of such shares of
Common Stock shall constitute a quorum. Under Delaware law, abstentions are
treated as present and entitled to vote and therefore have the effect of a
vote against the matter. If an executed proxy is returned by a broker holding
shares in street name which indicates that the broker does not have
discretionary authority as to certain shares to vote on one or more matters (a
"broker non-vote"), such shares will be considered present at the Annual
Meeting for purposes of determining a quorum, but will not be considered to be
represented at the Annual Meeting for purposes of calculating the vote with
respect to such matter. The New York Stock Exchange considers broker non-votes
to be neither present nor entitled to vote at the Annual Meeting.
ELECTION OF DIRECTORS
The Board of Directors is currently comprised of seven directors divided
into three classes. The term of each class expires in different years. The two
nominees for election to the Board of Directors this year to serve for three-
year terms or until their successors are duly elected and qualified are James
G. Boyd and Michael J. McGovern. Messrs. Boyd and McGovern are currently
directors of the Corporation. The Board of Directors expects all nominees
named herein to be available for election. In case any nominee is not
available, the proxy holders may vote for a substitute, unless the Board of
Directors reduces the number of directors.
<PAGE>
Directors will be elected at the Annual Meeting by a plurality of the votes
cast at the Annual Meeting by the holders of shares represented in person or
by proxy. There is no right to cumulate voting as to any matter, including the
election of directors.
The following sets forth information as to each director and nominee for
director as of April 10, 1998, including age, principal occupation and
employment during the past five years, directorships in other publicly held
companies, membership on committees of the Board of Directors and period of
service as a director of the Corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RE-ELECTION OF MESSRS.
BOYD AND MCGOVERN TO THE BOARD OF DIRECTORS.
NOMINEES FOR BOARD OF DIRECTORS
James G. Boyd, 53, has served as Executive Vice President, Chief Financial
Officer, Treasurer, Secretary and a Director of the Corporation since its
inception. In addition to his duties with the Corporation, Mr. Boyd presently
serves as Executive Vice President, Treasurer, Secretary and Director of The
InterTech Group, Inc. ("InterTech"), one of the Corporation's principal
stockholders, and has served in this capacity since 1986.
Michael J. McGovern, 35, has been a director of the Corporation since May
1996. Mr. McGovern has served as a Managing Director in the Global Investment
Banking Division of Chase Securities Inc. since April 1996. Prior thereto, Mr.
McGovern was a Managing Director in the Global Corporate Finance division of
The Chase Manhattan Bank, N.A. from January 1996 until April 1996. Mr.
McGovern was a Vice President in Global Corporate Finance for The Chase
Manhattan Bank, N.A. from December 1990 until January 1996.
CURRENT DIRECTORS
Jerry Zucker, 48, has served as Chairman, President, Chief Executive Officer
and a Director of the Corporation since its inception. In addition to his
duties with the Corporation, Mr. Zucker presently serves as Chairman,
President, Chief Executive Officer and a Director of InterTech, and has served
in this capacity since 1983.
Bruce V. Rauner, 42, has been a Director of the Corporation since its
inception. Mr. Rauner has been a Principal of Golder, Thoma, Cressey, Rauner,
Inc. ("Golder, Thoma") since 1984, and has been a Principal of GTCR Golder
Rauner, L.L.C. ("Golder Rauner") since January 1998, where he is responsible
for originating and making new investments, monitoring portfolio companies and
recruiting and training associates. Mr. Rauner is also a Director of Province
Healthcare Company, Lason, Inc., Coinmach Laundry Corporation and COREStaff,
Inc.
David A. Donnini, 32, has served as a Director of the Corporation since its
inception. Mr. Donnini has been a Principal of Golder, Thoma since 1993 and a
Principal of Golder Rauner since January 1998. From 1991 to 1993, Mr. Donnini
was an Associate with Golder, Thoma. Prior to joining Golder, Thoma in 1991,
Mr. Donnini attended The Stanford Graduate School of Business. Mr. Donnini is
also a director of Coinmach Laundry Corporation.
L. Glenn Orr, Jr., 57, has served as a Director of the Corporation since
February 1997. Mr. Orr has been Chairman, President and Chief Executive
Officer of Orr Management Company, a management consulting firm, since
February 1995. Prior thereto, from October 1990 until February 1995, Mr. Orr
was Chairman, President and Chief Executive Officer of Southern National
Corporation, a bank holding company. Mr. Orr is also a director of Southern
National Corporation, Ladd Furniture Company and Highwood Properties.
John F. ("Jack") Ruffle, 61, has served as a Director of the Corporation
since May 1997. Mr. Ruffle currently serves as a consultant to J.P. Morgan &
Co. Incorporated, where he served as Vice Chairman and a Director from 1985
through his retirement in May 1993. Mr. Ruffle is a past president of the
Board of Trustees of the Financial Accounting Foundation and a past chairman
of the Financial Executives Institute. Mr. Ruffle is
2
<PAGE>
presently also a Director of Bethlehem Steel Corporation, American Shared
Hospital, Trident Corp., Wackenhut Corrections Corp. and The John Hopkins
University, and is a trustee of JPM Series Trust II.
There are no family relationships among the foregoing persons.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held four meetings (exclusive of committee meetings)
in person and two telephonic meetings during the preceding fiscal year. The
Board of Directors has established the following committees, the functions and
current members of which are noted below. Each current director attended 75%
or more of the number of meetings held during the preceding fiscal year of the
Board of Directors and any committees on which such director served.
Compensation Committee. The Compensation Committee of the Board of Directors
consists of Messrs. Donnini, Orr and Rauner. The Compensation Committee
reviews and makes recommendations to the Board of Directors regarding
salaries, compensation and benefits of executive officers and key employees of
the Corporation. The Compensation Committee met twice during the preceding
fiscal year.
Stock Option Committee. The 1996 Key Employee Stock Option Plan Committee
(the "Stock Option Committee") of the Board of Directors consists of Messrs.
Donnini and Rauner. The Stock Option Committee is empowered to grant options
to purchase Common Stock of the Corporation. The Stock Option Committee met
twice during the preceding fiscal year.
Audit Committee. The Audit Committee of the Board of Directors consists of
Messrs. Donnini, McGovern and Rauner. The Audit Committee, among other duties,
reviews the internal and external financial reporting of the Corporation,
reviews the scope of the independent audit and considers comments by the
auditors regarding internal controls and accounting procedures and
management's response to those comments. The Audit Committee met three times
during the preceding fiscal year.
The Corporation does not have a nominating committee.
COMPENSATION OF DIRECTORS
Management directors are not entitled to receive any fees for their service
on the Board of Directors. Non-management directors are reimbursed for out-of-
pocket expenses incurred in connection with attending meetings. In addition,
all non-management directors received $1,250 per meeting attended for service
on the Board of Directors during 1997 and $500 for any committee meetings
attended on a day other than a Board meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's officers, directors and persons
who beneficially own more than ten percent of a registered class of the
Corporation's equity securities to file reports of securities ownership and
changes in such ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and greater-than-ten percent beneficial owners
also are required by rules promulgated by the SEC to furnish the Corporation
with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Corporation, or written representations that no Form 5 filings were required,
the Corporation believes that during the period from December 29, 1996 through
January 3, 1998, all Section 16(a) filing requirements applicable to its
officers, directors and greater-than-ten percent beneficial owners were
complied with.
3
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation by the Audit Committee, has
appointed Ernst & Young LLP as independent auditors to examine the financial
statements of the Corporation for the year ending January 2, 1999 (fiscal
1998) and to perform other appropriate accounting services.
A proposal will be presented at the Annual Meeting to ratify the appointment
of Ernst & Young LLP as the Corporation's independent auditors. One or more
members of that firm are expected to be present at the Annual Meeting to
respond to questions and to make a statement if they desire to do so. If the
stockholders do not ratify this appointment by the affirmative vote of a
majority of the shares represented in person or by proxy at the Annual
Meeting, other independent auditors will be considered by the Board of
Directors upon recommendation by the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE CORPORATION'S INDEPENDENT AUDITORS.
OTHER BUSINESS
At the date of this Proxy Statement, the Corporation has no knowledge of any
business other than that described above that will be presented at the Annual
Meeting. If any other business should come before the Annual Meeting, the
proxies will be voted in the discretion of the proxy holders.
SECURITY OWNERSHIP
The following information with respect to the outstanding shares of Common
Stock beneficially owned by each director and nominee for director of the
Corporation, the chief executive officer and the five other most highly
compensated executive officers, all beneficial owners of more than five
percent of the Common Stock known to the Corporation and the directors and
executive officers as a group is furnished as of April 10, 1998, except as
otherwise indicated.
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
NUMBER OF PERCENT OF
NAME SHARES(1) CLASS(2)
- ---- ---------- ----------
<S> <C> <C>
Jerry Zucker(3)(4)(5).................................... 6,937,127 21.7%
James G. Boyd(4)(5)(6)................................... 4,337,979 13.6
The InterTech Group, Inc.(5)(7).......................... 3,861,208 12.1
Golder, Thoma, Cressey Fund III Limited
Partnership(4)(5)(8).................................... 7,109,096 22.2
Bruce V. Rauner(8)....................................... 7,109,096 22.2
David A. Donnini......................................... 10,000 *
Michael J. McGovern...................................... 0 *
John F. ("Jack") Ruffle.................................. 5,000 *
L. Glenn Orr, Jr. ....................................... 1,000 *
S. Grant Reeves.......................................... 4,000 *
Thomas E. Phillips....................................... 1,500 *
James L. Schaeffer....................................... 2,000 *
Gregg Wilkinson.......................................... 100 *
Leeway & Co.(5)(9)....................................... 795,838 2.5
First Pacific Advisors, Inc.(10)......................... 3,607,000 11.3
J. & W. Seligman & Co. Incorporated(11).................. 1,854,329 5.8
All directors and executive officers as a group (13 per-
sons)(12)............................................... 14,547,594 45.5
</TABLE>
4
<PAGE>
- --------
(1) Each holder has sole voting and investment power with respect to the
shares listed unless otherwise indicated.
(2) Percentages less than one percent are denoted by an asterisk.
(3) Includes 3,068,979 shares held by Mr. Zucker, 4,080 held by Mr. Zucker's
wife, 2,860 held in trust for Mr. Zucker's children, 3,599,557 shares held
by InterTech, and 261,651 shares held by FTG, Inc. ("FTG"). Mr. Zucker is
Chairman, Chief Executive Officer and President of InterTech and FTG, and
as a result may be deemed to have voting and dispositive power over the
shares held by InterTech and FTG.
(4) Each of these Stockholders has entered into an agreement pursuant to
which, upon the occurrence of certain events, Messrs. Zucker and Boyd and
Chase Manhattan Investment Holdings, Inc. ("CMIHI") would acquire
additional shares of Common Stock from Golder, Thoma, Cressey Fund III
Limited Partnership ("GTC Fund III"), which would result in an increase in
the ownership of Common Stock by Messrs. Zucker and Boyd and CMIHI and a
corresponding decrease in the ownership of Common Stock by GTC Fund III.
(5) Each of these parties has entered into an agreement providing for the
election of directors. Each such party disclaims beneficial ownership of
shares of Common Stock owned by each other party.
(6) Includes 476,771 shares held by Mr. Boyd, 3,599,557 shares held by
InterTech and 261,651 shares held by FTG. Mr. Boyd is Executive Vice
President, Secretary and Treasurer of InterTech and FTG.
(7) Includes 3,599,557 shares held by InterTech and 261,651 shares held by
FTG. The address of InterTech is 4838 Jenkins Avenue, North Charleston, SC
29405.
(8) All of the reported shares are held by GTC Fund III, of which Golder,
Thoma, Cressey & Rauner, L.P. is the general partner. Mr. Rauner is a
general partner of Golder, Thoma, Cressey & Rauner, L.P., but disclaims
beneficial ownership of such shares. The address of GTC Fund III is c/o
Golder, Thoma, Cressey, Rauner, Inc., 6100 Sears Tower, Chicago, IL 60606-
6402.
(9) The address of Leeway & Co. is c/o State Street Bank and Trust Co., Master
Trust Division--Q4W, P.O. Box 1992, Boston, MA 02110.
(10) First Pacific Advisors, Inc. reported as of December 31, 1997, shared
voting power over 1,360,000 shares and shared dispositive power over
3,607,000 shares. FPA Paramount Fund, Inc. reported sole voting power
over 2,037,000 shares and shared dispositive power over 2,037,000 shares.
The information set forth herein is based solely on Form 13Gs filed by
such entities for the year ended December 31, 1997. The address for such
entities, as so reported, was 11400 West Olympic Boulevard, Suite 1200,
Los Angeles, CA 90064.
(11) J. & W. Seligman & Co. Incorporated ("J. & W. Seligman") reported as of
December 31, 1997, shared voting power over 1,610,200 shares and shared
dispositive power over 1,854,329 shares. William C. Morris, who owns a
majority of the outstanding voting securities of J. & W. Seligman,
reported similar shared voting and dispositive power of such shares. The
information set forth herein is based solely on Form 13Gs filed by J. &
W. Seligman and Mr. Morris for the year ended December 31, 1997. The
address of J. & W. Seligman and Mr. Morris, as so reported, was 100 Park
Avenue, New York, NY 10017.
(12) Includes shares held by GTC Fund III, InterTech and FTG.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table specifies the components of the
Corporation's chief executive officer and four other most highly compensated
executive officers (the "Named Executives") compensation packages for the
years ended January 3, 1998, December 28, 1996 and December 30, 1995. The
Corporation does not maintain any long-term compensation plans.
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
----------------- ------------------
STOCK RESTRICTED ALL OTHER
NAME AND FISCAL SALARY BONUS OPTIONS STOCK COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#) AWARDS ($) ($)(1)
------------------ ------ ------ -------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jerry Zucker ........... 1997 $801,313 $800,000 200,000 -- $25,523
Chairman, President 1996 858,836 722,056 -- -- 32,246
and Chief
Executive Officer 1995 649,791 604,000 -- -- 29,835
James G. Boyd........... 1997 460,780 500,000 75,000 -- 24,872
Executive Vice
President, Chief 1996 505,294 470,694 -- -- 21,922
Financial Officer, 1995 350,000 321,000 -- -- 20,343
Treasurer and
Secretary
James L. Schaeffer...... 1997 160,581 115,000 50,000 -- 10,775
Chief Operating 1996 148,484 115,000 5,555 -- 10,633
Officer,
Nonwovens Division 1995 126,410 75,000 -- -- 8,917
Thomas E. Phillips...... 1997 160,581 115,000 50,000 -- 9,950
Group Vice President-- 1996 148,484 115,000 5,555 -- 10,614
Sales
(Americas), Finance, 1995 126,410 75,000 -- -- 8,917
Information Technology
and Human Resources,
Nonwovens Division
Gregg Wilkinson......... 1997 160,581 115,000 50,000 -- 10,400
Group Vice President-- 1996 148,484 115,000 5,555 -- 10,595
Marketing and 1995 126,410 75,000 -- -- 8,917
International Business
Development, Nonwovens
Division
</TABLE>
- --------
(1) The Following table identifies and quantifies the amount of All Other
Compensation for each named executive officer.
<TABLE>
<CAPTION>
MONEY
PURCHASE 401(K) 401(H)
FISCAL PENSION CORPORATION CORPORATION
NAME YEAR PLAN CONTRIBUTION CONTRIBUTION
---- ------ -------- ------------ ------------
<S> <C> <C> <C> <C>
Jerry Zucker......................... 1997 $19,625 $1,941 $3,957
1996 26,423 1,941 3,882
1995 24,087 1,866 3,882
James G. Boyd........................ 1997 17,875 4,624 2,373
1996 14,480 4,613 2,829
1995 13,357 4,657 2,329
James L. Schaeffer................... 1997 6,050 4,725 0
1996 5,647 4,536 450
1995 5,125 3,792 0
Thomas E. Phillips................... 1997 6,050 3,900 0
1996 5,647 4,517 450
1995 5,125 3,792 0
Gregg Wilkinson...................... 1997 6,050 4,350 0
1996 5,647 4,498 450
1995 5,125 3,792 0
</TABLE>
The amounts included under the column entitled "Money Purchase Pension Plan"
are amounts paid by the Corporation into a trust fund which provides
retirement benefits and, under certain circumstances, death or disability
benefits or benefits upon termination of employment.
6
<PAGE>
The following tables disclose, for the named executive officers, information
regarding stock options granted or exercised during, or held at the end of,
1997.
OPTION GRANT TABLE
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
OPTIONS OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5%($)(1) 10%($)(1)
- ---- ------- ------------ -------- ---------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Jerry Zucker............ 200,000 34% $14.25 Variable(2) $ 756,700 $ 1,607,805
James G. Boyd........... 75,000 13 14.25 Variable(2) 283,763 602,927
Thomas E. Phillips...... 50,000 8 14.25 Variable(2) 189,175 401,951
James L. Schaeffer...... 50,000 8 14.25 Variable(2) 189,175 401,951
Gregg Wilkinson......... 50,000 8 14.25 Variable(2) 189,175 401,951
</TABLE>
- --------
(1) Amounts reflect certain assumed rates of appreciation set forth in the
SEC's executive compensation disclosure rules. Actual gains, if any, on
stock option exercises depend on future performance of the Common Stock
and overall stock market conditions. No assurance can be made that the
amounts reflected in these columns will be achieved.
(2) The options granted were 20% vested on the date of grant, August 25, 1997.
The options vest an additional 20% each year over the next 4 years. Each
incremental portion expires on the second anniversary of the date on which
such portion became vested.
OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#) AT FY-END ($)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(1) REALIZED ($)(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
- ---- -------------- --------------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jerry Zucker............ -- -- 160,000 40,000 $ 0 $ 0
James G. Boyd........... -- -- 60,000 15,000 0 0
Thomas E. Phillips...... -- -- 44,444 11,111 0 0
James L. Schaeffer...... -- -- 44,444 11,111 0 0
Gregg Wilkinson......... -- -- 44,444 11,111 0 0
</TABLE>
- --------
(1) None of the options granted to the Named Executives has been exercised.
THE 1996 KEY EMPLOYEE STOCK OPTION PLAN
In March 1996, the Board of Directors of the Corporation approved the 1996
Key Employee Stock Option Plan (the "Key Employee Plan" or "Plan"). The Key
Employee Plan was approved by the stockholders of the Corporation in April
1996. The Key Employee Plan is administered by the Stock Option Committee. Any
person who is a full-time, salaried employee of the Corporation (excluding
non-management directors) is eligible to participate in the Plan (a
"Participant"). Approximately 965 persons are currently eligible to
participate in the Key Employee Plan. The Stock Option Committee selects the
Participants and determines the terms and conditions of the options. In April
1996, the Board of Directors approved the Plan providing for up to 1,500,000
7
<PAGE>
shares to be issued thereunder, subject to certain adjustments reflecting
changes in the Corporation's capitalization. On April 9, 1998, the market
value of the Common Stock underlying the 1,500,000 options was $18,750,000.
The description of the Key Employee Plan set forth herein is qualified in its
entirety by reference to the complete text of such Plan, which is filed as an
Exhibit to the Corporation's Registration Statement on Form S-1 (Reg. No. 333-
2424), and incorporated herein by reference.
OPTION GRANTS
The following table sets forth the number of options which have been granted
during the past fiscal year under the Key Employee Plan to the Corporation's
chief executive officer ("CEO"), the four other most highly compensated
executive officers, all executive officers as a group, each other person who
received or is to receive five percent of such options and all employees,
including all current officers who are not executive officers, as a group.
<TABLE>
<CAPTION>
OPTIONS
GRANTED
NAME AND POSITION (#)
----------------- -------
<S> <C>
Jerry Zucker...................................................... 200,000
Chairman, President and Chief Executive Officer
James G. Boyd..................................................... 75,000
Executive Vice President, Chief Financial Officer, Treasurer and
Secretary
James L. Schaeffer................................................ 50,000
Chief Operating Officer, Nonwovens Division
Thomas E. Phillips................................................ 50,000
Group Vice President-Sales (Americas), Finance, Information
Technology and Human Resources, Nonwovens Division
Gregg Wilkinson................................................... 50,000
Group Vice President-Marketing and International Business
Development, Nonwovens Division
All executive officers as a group (8 persons)..................... 465,000
All employees, including officers who are not executive officers,
as a group....................................................... 130,000
</TABLE>
TERMS OF THE KEY EMPLOYEE PLAN
Options granted under the Key Employee Plan may be either incentive stock
options ("ISOs") or such other forms of nonqualified stock options ("NQOs") as
the Compensation Committee may determine. ISOs are intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Code. The
exercise price of the options will be at least 100% of the fair market value
of a share of Common Stock on the date of grant, except that the exercise
price of an ISO granted to an individual who directly (or by attribution under
Section 424(d) of the Code) owns shares possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation will be at
least 110% of the fair market value of a share of Common Stock on the date of
grant.
Options granted under the Key Employee Plan may be subject to time vesting
and certain other restrictions at the Stock Option Committee's sole
discretion. Subject to certain exceptions and unless otherwise provided in the
Option Agreement, the right to exercise an option generally terminates at the
earlier of (i) the first date on which the initial grantee of such option is
not employed by either the Corporation or any subsidiary for any reason other
than termination without cause, death or permanent disability or (ii) the
expiration date of the option. If the holder of an option dies or suffers a
permanent disability while still employed by the Corporation or any
subsidiary, the right to exercise all unexpired installments of such option
shall be accelerated and shall accrue as of the date of such death or the
later of the date of such permanent disability or the discovery of such
permanent disability, and such option shall be exercisable, subject to certain
exceptions, for 90 days after such date. If the holders of an option are
terminated without cause, to the extent the option has vested, such option
shall be exercisable for 30 days after such date.
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The Board of Directors has the power and authority to amend the Plan at any
time without approval of the Corporation's stockholders; provided, that the
Board of Directors shall not amend the Plan to cause any outstanding ISOs to
no longer qualify as ISOs or materially increase the benefits or number of
shares under the Plan or modify the eligibility requirements without the
affirmative approval of the Corporation's stockholders. In addition, the Board
of Directors shall not amend the Plan to materially and adversely affect the
rights of an option holder under such option without the consent of such
option holder.
Supplemental cash payments may also be made in conjunction with options
granted under the Key Employee Plan.
EMPLOYMENT AND MANAGEMENT AGREEMENTS
Pursuant to management agreements originally entered into in October 1992
(the "PGI Polymer Management Agreements"), Messrs. Zucker and Boyd
(collectively, the "Executives") have agreed to serve as President and Chief
Executive Officer, and Executive Vice President, Secretary and Treasurer,
respectively, of the Corporation's subsidiaries, PGI Polymer, Inc. ("PGI
Polymer") and FiberTech Group, Inc. ("FiberTech"). Pursuant to management
agreements entered into in March 1995 (the "Chicopee Management Agreements"
and, together with the PGI Polymer Management Agreements, the "Management
Agreements"), the Executives have agreed to serve in the same capacities for
the Corporation's subsidiary, Chicopee, Inc. ("Chicopee"). The Management
Agreements provide that the Executives' employment thereunder will continue
until the Executive's resignation, permanent disability, death or termination
by PGI Polymer's or Chicopee's Board of Directors, as the case may be.
The PGI Polymer Management Agreements provide for an annual base salary of
$250,000 to be paid to Mr. Zucker and an annual base salary of $150,000 to be
paid to Mr. Boyd, while the Chicopee Management Agreements provide for an
annual base salary of $400,000 to be paid to Mr. Zucker and an annual base of
$200,000 to be paid to Mr. Boyd, all of which amounts may be increased as
determined in good faith by the Board of Directors. The Management Agreements
also provide for a bonus to be paid at the end of each fiscal year to each of
the Executives in an amount determined by the Board of Directors, but not to
exceed such Executive's base salary.
The Management Agreements provide that upon the termination of either
Executive's employment, such Executive is entitled to receive severance
payments equal to either one-half (in the case of death, disability,
resignation without good reason or termination for cause) or three times (in
all other cases) his annual salary.
The Corporation has not entered into written employment contracts with any
of its other executive officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Corporation's Compensation Committee are Messrs. Donnini
and Rauner. Mr. Rauner, a director of the Corporation, is also a general
partner of Golder, Thoma, Cressey & Rauner, L.P. Golder, Thoma, Cressey &
Rauner, L.P. is the general partner of GTC Fund III, which owns 22.2% of the
Corporation's Common Stock. Messrs. Zucker, Rauner and Donnini served as
members of the Compensation Committee of the Board during fiscal year 1995.
Mr. Zucker was an officer and an employee of the Corporation during such
period.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
pleased to present its report on executive compensation. The Committee reviews
and makes recommendations to the Board of Directors regarding salaries,
compensation and benefits of executive officers and key employees of the
Corporation. This Committee report documents the components of the
Corporation's executive officer compensation programs and describes the bases
upon which compensation will be determined by the Committee with respect to
the executive officers of the Corporation, including the Named Executives.
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This Committee report shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Exchange Act, except to
the extent that the Corporation specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
Compensation Philosophy. The compensation philosophy of the Corporation is
to endeavor to directly link executive compensation to continuous improvements
in corporate performance and increases in shareholder value. The Committee has
adopted the following objectives as guidelines for compensation decisions.
. Display a willingness to pay levels of compensation that are necessary to
attract and retain highly qualified executives.
. Be willing to compensate executive officers in recognition of superior
individual performance, new responsibilities or new positions within the
Corporation.
. Take into account historical levels of executive compensation and the
overall competitiveness of the market for high quality executive talent.
. Implement a balance between short- and long-term compensation to
complement the Corporation's annual and long-term business objectives and
strategy and to encourage executive performance in furtherance of the
fulfillment of those objectives.
. Provide variable compensation opportunities based on the performance of
the Corporation, encourage stock ownership by executives and align
executive remuneration with the interests of stockholders.
Compensation Program Components. The Committee regularly reviews the
Corporation's compensation program to ensure that pay levels and incentive
opportunities are competitive with the market and reflect the performance of
the Corporation. The particular elements of the compensation program for
executive officers are further explained below.
Base Salary. The Corporation's base pay levels are largely determined by
evaluating the responsibilities of the position held and the experience of the
individual and by comparing the salary scale with companies of similar size
and complexity. Actual base salaries are kept within a competitive salary
range for each position that is established through job evaluation and market
comparisons and approved by the Committee as reasonable and necessary. Mr.
Zucker's salary has been set at $650,000 per year pursuant to the Management
Agreements, which is comparable to salaries paid for executives holding
positions with comparable responsibilities. The Management Agreements provide
that the Compensation Committee may increase the base salary for each year at
its discretion. In 1997, Mr. Zucker's base salary was increased by the
Compensation Committee to $801,313.
Annual Incentives. The Management Agreements provide that Messrs. Zucker and
Boyd may also receive an annual bonus, determined by the Board of Directors,
of up to their base salaries. In 1997, Mr. Zucker's and Mr. Boyd's annual
bonuses were $800,000 and $500,000 respectively. Although the Management
Agreements provide that the annual bonus paid shall not exceed the Executive's
base salary, Mr. Boyd was paid a bonus in excess of his base salary for fiscal
1997 ($500,000 versus annual base salary of $460,780) in light of his role in
the origination and execution of the strategic transactions consummated during
the year.
Stock Option Program. The Committee strongly believes that by providing
those persons who have substantial responsibility over the management and
growth of the Corporation with an opportunity to increase their ownership of
the Corporation's stock, the interests of stockholders and executives will be
closely aligned. Therefore, the Corporation's key employees (including the
Named Executives) are eligible to receive either incentive stock options or
nonqualified stock options as the Stock Option Committee may determine from
time to time, giving them the right to purchase shares of the Corporation's
Common Stock at an exercise price equal to 100% of the fair market value of
such Common Stock at the date of grant (or such greater amount as the Stock
Option Committee may determine). The number of stock options granted to
executive officers is based on competitive practices.
Certain Tax Considerations. Section 162(m) of the Code generally limits the
corporate tax deduction for compensation paid to the Named Executives to
$1,000,000 in any given taxable year, unless certain requirements
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are met. The Compensation Committee has carefully considered the impact of
this tax code provision. The Committee currently believes that it has
structured the compensation plans for the Named Executives as necessary in
order to maximize the Corporation's corporate tax deduction without limiting
the Corporation's ability to attract and retain qualified executives.
Summary. After its review of all existing programs, the Committee continues
to believe that the total compensation program for executives of the
Corporation is focused on increasing values for stockholders and enhancing
corporate performance. The Committee currently believes that the compensation
of executive officers is properly tied to stock appreciation through their
significant ownership interests in the Corporation. The Committee believes
that executive compensation levels at the Corporation are competitive with the
compensation programs provided by other corporations with which the
Corporation competes. The foregoing report has been approved by all members of
the Committee.
COMPENSATION COMMITTEE
David A. Donnini
L. Glenn Orr, Jr.
Bruce V. Rauner
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE NONWOVENS TRANSACTIONS
On January 29, 1998, DT Acquisition Inc. ("DT Acquisition"), a special-
purpose subsidiary of the Corporation, consummated the Nonwovens Acquisition
and the Nonwovens Acquisition Refinancing (each as defined below). The
Nonwovens Acquisition and Nonwovens Acquisition Refinancing are collectively
referred to as the "Nonwovens Transactions."
The Nonwovens Acquisition
On December 19, 1997, pursuant to the terms of its Offer to Purchase dated
October 29, 1997, as amended (the "Dominion Tender Offer"), DT Acquisition
completed the purchase of 98% of the outstanding Common Shares of Dominion
Textile Inc. ("Dominion") for Cdn$14.50 per share and 96% of the outstanding
First Preferred Shares of Dominion for Cdn$150 per share. On December 29,
1997, DT Acquisition acquired an additional 331,207 Common Shares. The
Corporation had previously announced that it had entered into a Purchase
Agreement, dated October 27, 1997, with Galey & Lord, Incorporated ("Galey")
to sell the denim and career wear business of Dominion (the "Apparel Fabrics
Business") to Galey following the consummation of the Dominion Tender Offer.
The Dominion Tender Offer was financed with $215 million of borrowings under
DT Acquisition's $600 million senior secured credit facilities, and
subordinated advances of $141 million, $69 million and $25 million by Galey,
ZB Holdings, Inc. ("ZB Holdings") and the Corporation, respectively. ZB
Holdings is a wholly-owned subsidiary of InterTech, an affiliate of the
Corporation wholly-owned by Jerry Zucker and James G. Boyd.
On January 29, 1998, DT Acquisition acquired the remaining Common Shares and
First Preferred Shares of Dominion in a compulsory acquisition effectuated
pursuant to Section 206 of the Canada Business Corporation Act, and acquired
all outstanding Second Preferred Shares pursuant to a notice of redemption
issued December 29, 1997. Dominion then underwent a "winding up" pursuant to
which all assets of Dominion were transferred to DT Acquisition, all
liabilities of Dominion were assumed by DT Acquisition and all of the
outstanding Common Shares and First Preferred Shares held by DT Acquisition
were redeemed. Pursuant to the 2003 Tender Offer and the 2006 Tender Offer
(each as defined below), Dominion Textile (USA) Inc. ("DT USA"), then a
wholly-owned subsidiary of Dominion and the issuer of the 2003 Notes and the
2006 Notes (each as defined
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below), accepted for purchase all 2003 Notes and 2006 Notes validly tendered
and not revoked. Immediately thereafter, the Apparel Fabrics Business was sold
to Galey for approximately $464.5 million, including related fees and
expenses, and the Corporation acquired (the "Nonwovens Acquisition") the
assets and liabilities of Dominion that comprised the nonwovens and industrial
fabrics operations (the "Nonwovens Business"). The Corporation borrowed
approximately $326.6 million under the Amended Credit Facility (as defined
below) to finance the Nonwovens Acquisition, for which it paid a gross price
of approximately $351.6 million, including related fees and expenses. In
connection with the sale of the Apparel Fabrics Business and the Nonwovens
Business, DT Acquisition repaid the subordinated advances from Galey, ZB
Holdings and the Corporation in full, with accrued interest to date.
In connection with the formation of DT Acquisition and commencement of the
Dominion Tender Offer, (i) the Corporation transferred 3,108,000 common shares
of Dominion ("Dominion Common Shares") to DT Acquisition and received 60
common shares of DT Acquisition and a subordinated promissory note of $25.0
million (the "Corporation Contribution Note") and $6.7 million in cash, (ii)
InterTech transferred 1,470,000 Dominion Common Shares to DT Acquisition and
received 28 common shares of DT Acquisition and a subordinated promissory note
of $15.0 million (the "InterTech Contribution Note"), and (iii) ZB Holdings
transferred $54.0 million cash to DT Acquisition in exchange for a
subordinated promissory note in the same amount from DT Acquisition (the "ZB
Holdings Contribution Note"). The Corporation agreed to pay interest on the
InterTech Contribution Note and the ZB Holdings Contribution Note at an
effective rate of 9.5% per annum. The amounts paid to the Corporation and to
InterTech in exchange for their respective shares contributed to DT
Acquisition were determined using the Cdn$14.50 per share price offered to all
holders of Dominion Common Shares in the Dominion Tender Offer, converted
using the then-current exchange rate of Cdn$1.4225 to U.S.$1.00. Interest paid
on the InterTech Contribution Note and the ZB Holdings Contribution Note was
determined using prevailing market rates for similar investments.
InterTech purchased its 1,470,000 Dominion Common Shares transferred to DT
Acquisition at a total cost of approximately $8.4 million. In addition to the
gain realized through the contribution of such shares, InterTech also received
$398,900 of accrued interest on the InterTech Contribution Note. DT
Acquisition paid ZB Holdings $621,195 of accrued interest on the ZB Holdings
Contribution Note. Mr. Zucker also tendered 1,377,000 of personally held
Dominion Common Shares in the Dominion Tender Offer for total consideration of
$13.9 million, reflecting a gain of $6.2 million. Following the consummation
of the Dominion Tender Offer and the sale of the Nonwovens Business and the
Apparel Fabrics Business, all shares of DT Acquisition held by InterTech were
redeemed for Cdn$1.00 per share. Mr. Zucker is also one of three trustees of a
charitable foundation which held and tendered 265,000 Dominion Common Shares
to DT Acquisition in the Dominion Tender Offer. Mr. Zucker had no beneficial
ownership of or pecuniary interest in such shares.
In connection with the acquisition by the Corporation of the Nonwovens
Business of Dominion, ZB Holdings requested consideration from the Corporation
in return for providing a portion of the financing required by the Corporation
to complete the tender offer for the outstanding Common Shares and First
Preferred Shares of Dominion, which was the first step in the Nonwovens
Acquisition. The members of the Board of the Corporation who are
"disinterested" for purposes of this transaction have engaged independent
legal counsel, and intend to retain an independent investment banking firm, to
examine this request and advise such directors.
The Nonwovens Acquisition Refinancing
On January 29, 1998, in connection with the Nonwovens Acquisition, the
Corporation amended its Credit Facility (as defined below) with The Chase
Manhattan Bank ("Chase Bank") to provide for a $125.0 million secured term
loan and to modify certain terms of the revolving portion of the Credit
Facility. The Amended Credit Facility provides for revolving credit facilities
with an aggregate commitment of up to $325.0 million. Concurrent with the sale
of the Apparel Fabrics Business, and pursuant to the 2003 Tender Offer and
2006 Tender Offer, DT USA purchased approximately $145.6 million of its $150.0
million outstanding 2003 Notes and approximately $124.5 million of its $125.0
million outstanding 2006 Notes. Pursuant to both the 2003 Tender Offer and the
2006 Tender Offer, DT USA received the requisite consents from tendering
holders to
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amend the indentures under which the 2003 Notes and the 2006 Notes were issued
and paid a consent fee to holders who tendered their notes and delivered
consents prior to the expiration of the consent solicitations.
The Corporation's amendment to the Credit Facility resulting in the Amended
Credit Facility and repurchase of the 2003 Notes and 2006 Notes pursuant to
the 2003 Tender Offer and 2006 Tender Offer (described more fully below) are
collectively referred to as the "Nonwovens Acquisition Refinancing."
2003 Tender Offer and 2006 Tender Offer
On November 1, 1993, DT USA issued $150.0 million of 8 7/8% Guaranteed
Senior Notes due 2003 (the "2003 Notes") pursuant to an indenture, dated as of
November 1, 1993, among DT USA, Dominion, as the Parent Guarantor, and First
Union National Bank, as successor trustee (the "2003 Notes Indenture"). On
April 1, 1996, DT USA issued an additional $125.0 million of 9 1/4% Guaranteed
Senior Notes due 2006 (the "2006 Notes") pursuant to an indenture, dated as of
April 1, 1996, among DT USA, Dominion and First Union National Bank, as
successor trustee (the "2006 Notes Indenture"). Both the 2003 Notes and 2006
Notes are senior indebtedness of DT USA and are guaranteed on a joint and
several basis by DT USA and DT Acquisition (formerly Dominion).
On December 23, 1997, following the initial take-up of Dominion shares by DT
Acquisition in the Dominion Tender Offer, DT USA made tender offers to
purchase any and all outstanding 2003 Notes and 2006 Notes (the "2003 Tender
Offer" and "2006 Tender Offer," respectively), and solicited consents to
certain proposed amendments to the 2003 Notes Indenture and 2006 Notes
Indenture. The tender of notes in the 2003 Tender Offer and 2006 Tender Offer
was contingent upon such holder's consent to the proposed amendments to the
2003 Notes Indenture and the 2006 Notes Indenture, until, in each case, such
time that the requisite number of consents to approve the proposed amendments
had been obtained and a supplemental indenture relating thereto had been
executed. The proposed amendments eliminated substantially all of the
protective covenants in each of the 2003 Notes Indenture and the 2006 Notes
Indenture.
The total consideration offered for each validly tendered 2003 Note and
properly delivered consent was $1,065.32, which was equal to the present value
of $1,043.75 (the amount for which each 2003 Note could be repurchased at
November 1, 1998, its earliest call date) and any interest payments due from
the payment date to such call date, discounted using the yield rate of a
chosen reference security plus a fixed spread. The total consideration offered
for each validly tendered 2006 Note and properly delivered consent was
$1,138.50, which was equal to the present value of $1,046.25 (the amount for
which each 2003 Note could be repurchased at April 1, 2001, its earliest call
date), and any interest payments due from the payment date to such call date,
discounted using the yield rate of a chosen reference security plus a fixed
spread. Holders who tendered in the 2003 Tender Offer and the 2006 Tender
Offer prior to each respective expiration date for consents received a consent
payment equal to 1% of the outstanding principal amount of notes tendered
(included in the total consideration described above).
On January 28, 1998, the expiration date for the 2003 Tender Offer and the
2006 Tender Offer, DT USA accepted for repurchase $145.6 million of 2003 Notes
and $124.5 million of 2006 Notes. DT USA currently has $4.4 million aggregate
principal amount of 2003 Notes and $0.3 million aggregate principal amount of
2006 Notes outstanding. DT USA repurchased $25,000 of 2003 Notes in the Change
of Control Offer, which expired on March 17, 1998 and $0.2 million of 2006
Notes in a subsequent, privately negotiated transaction.
THE JUNE REFINANCING
In the June Refinancing (the "June Refinancing"), the Corporation (i)
refinanced its outstanding indebtedness under its 12 1/4% Senior Notes due
2002 (the "Senior Notes") by consummating (a) the June Offering and subsequent
September Exchange Offer, and (b) the Senior Notes Tender Offer and Consent
Solicitation, and (ii) entered into the Credit Facility.
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The Private Placement and September Exchange Offer
On July 3, 1997, the Corporation issued $400 million of 9% Senior
Subordinated Notes due 2007 (the "Privately Placed Notes") to Chase Securities
Inc. ("Chase") in a transaction not registered under the Securities Act in
reliance upon an exemption under the Securities Act (the "Private Placement")
pursuant to an indenture dated as of July 1, 1997 among the Corporation, the
guarantors named therein and Harris Trust & Savings Bank, as trustee (the "9%
Notes Indenture"). Chase subsequently placed the Privately Placed Notes with
qualified institutional buyers in reliance under Rule 144A under the
Securities Act. The Privately Placed Notes accrued interest from their
original issuance date at the rate of 9% per annum, and had customary
provisions with respect to redemption (including optional redemption in the
first three years in connection with one or more public equity offerings),
changes in control, ranking, asset sales and other restrictive covenants. The
Privately Placed Notes were unsecured senior subordinated obligations of the
Corporation and were subordinated in right of payment to all existing and
future senior indebtedness of the Corporation.
Pursuant to a Registration Statement on Form S-4 (Reg. No. 333-32605) filed
with the Commission on August 1, 1997 and declared effective on September 3,
1997, the Corporation offered to exchange $1,000 principal amount of its 9%
Senior Subordinated Notes due 2007, Series B (the "9% Notes") for each $1,000
principal amount outstanding of the Privately Placed Notes (the "September
Exchange Offer"). The September Exchange Offer was undertaken to comply with
certain Registration Rights granted to holders of the Original Notes in
connection with the Private Placement pursuant to the Registration Rights
Agreement dated July 3, 1997. The form and terms of the 9% Notes offered in
the September Exchange Offer are substantially the same as the form and terms
of the Privately Placed Notes (which they replaced). The September Exchange
Offer was consummated on October 3, 1997, with all $400 million principal
amount of Privately Placed Notes being tendered for exchange.
Senior Notes Tender Offer and Consent Solicitation
In connection with the Private Placement, pursuant to an independent Offer
to Purchase and Consent Solicitation Statement dated June 5, 1997, the
Corporation offered to repurchase all, but not less than a majority, of its
outstanding Senior Notes (the "Senior Notes Tender Offer") at a price equal to
$1,103.64 per $1,000 aggregate principal amount of Senior Notes. The price
offered was equal to the present value on the payment date of $1,061.25 (the
amount for which each Senior Note could be repurchased on July 15, 1998, its
earliest call date) and any interest payments due from the payment date to
such call date, discounted using the yield rate of a chosen reference security
plus a fixed spread.
The Corporation also solicited consents from the tendering holders of Senior
Notes to certain proposed amendments to the Senior Notes indenture which
eliminated substantially all of the protective covenants contained in that
indenture. Holders who timely consented to the proposed amendments received a
consent payment equal to 1% of their principal amount of Senior Notes ($10.00
per $1,000 principal amount). In response to the Senior Notes Tender Offer,
which was consummated on July 3, 1997, the Corporation received tenders of,
and consents relating to, all of its outstanding Senior Notes.
Credit Facility
As part of the June Refinancing, the Corporation and certain of its
subsidiaries entered into revolving credit facilities (the "Credit Facility"),
dated July 3, 1997, with a group of lenders and with Chase Bank, as
administrative agent (the "Agent"), by amending and restating its original
credit facility dated May 15, 1996. Prior to the amendment consummated in
connection with the Nonwovens Acquisition, the Credit Facility provided for
aggregate borrowings of up to $325.0 million in term and revolving
commitments.
INVESTMENT BANKING SERVICES AND RELATIONSHIP TO CREDIT FACILITY
Chase Securities Inc. and its affiliates perform various investment banking
and commercial banking services on a regular basis for the Corporation and its
affiliates. Mr. McGovern is a Managing Director in the Global Investment
Banking Division of Chase Securities Inc. Chase Securities Inc. is an
affiliate of The Chase
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Manhattan Bank, which is agent bank and a lender to the Corporation under the
Amended Credit Facility. Chase Securities Inc. acted as Initial Purchaser for
the February 1998 offering of the Corporation's 8 3/4% Senior Subordinated
Notes due 2008, for the June 1997 offering of the Corporation's 9% Senior
Subordinated Notes due 2007 and as Dealer Manager and Solicitation Agent for
the June 1997 12 1/4% Senior Notes Tender Offer. In addition, Chase Securities
Inc. acted as Dealer Manager and Solicitation Agent in connection with DT
USA's 2003 Tender Offer and 2006 Tender Offer in December 1997, and as the
Dealer Manager for the Dominon Tender Offer in the United States.
RIGHT OF FIRST REFUSAL, REGISTRATION AGREEMENT AND VOTING AGREEMENT
In June 1994, Messrs. Zucker and Boyd entered into an agreement with the
Corporation pursuant to which Messrs. Zucker and Boyd granted to the
Corporation the prior right to acquire any business identified by either of
them (while employed by the Corporation), or their affiliates, engaged in, or
planning to engage in, the manufacture and marketing of nonwoven and woven
polyolefin fabrics for industrial and consumer applications or any other
business then engaged in by the Corporation. To the extent the Corporation
does not elect to pursue any such acquisition, Messrs. Zucker and Boyd are
free to acquire such business.
In June 1995, the Corporation and certain of the stockholders entered into
an Amended and Restated Registration Agreement, pursuant to which such
stockholders have the right, in certain circumstances and subject to certain
conditions, to require the Corporation to register shares of the Corporation's
Common Stock held by them under the Securities Act of 1933. Under the
Registration Agreement, except in certain limited circumstances, the
Corporation is obligated to pay all expenses in connection with such
registration.
In May 1996, certain of the Corporation's stockholders entered into an
agreement (the "Voting Agreement") providing, among other things, for the
nomination and voting for up to six directors of the Corporation by such
stockholders. As of April 10, 1998, such stockholders owned approximately
47.8% of the outstanding Common Stock of the Corporation. Under the Voting
Agreement, each of the stockholders thereto has agreed to vote its shares in
favor of the Corporation's Chief Executive Officer and Executive Vice
President, two nominees designated by GTC Fund III and two outside directors
to be jointly designated by GTC Fund III and InterTech. Each director
nominated by parties to the Voting Agreement may be removed only at the
request of the party who nominated such director. The Voting Agreement
terminates at such time as (a) GTC Fund III and its affiliates cease to own at
least 10% of the Common Stock and (b) InterTech and its affiliates cease to
own 10% of the Common Stock. The stockholders who are parties to the Voting
Agreement hold, in the aggregate, a substantial amount of the voting power of
the Corporation and thus, if acting in unison or in various combinations,
could likely be able to elect a majority of the directors of the Corporation
even if the Voting Agreement were not in place.
OTHER TRANSACTIONS
The Corporation's corporate headquarters are housed in space leased by
InterTech from an affiliate of InterTech. A portion of the payments and other
expenses, primarily insurance and allocated costs, are charged to the
Corporation. Such amounts approximated $1.8 million during 1997.
On September 1, 1993, ConX, Inc. ("ConX"), a subsidiary of InterTech,
acquired a manufacturing facility in Vineland, New Jersey for the benefit of
Technetics Group, Inc. ("Technetics"), a wholly owned subsidiary of FiberTech,
and entered into a lease of the facility to Technetics at a base rate of $2.50
per square foot, subject to adjustment to account for inflation, which is
comparable to similar properties in the area. The lease terminates on August
31, 2003 and is subject to a purchase option at termination. The leased
facility consists of 83,500 square feet of manufacturing space and was
acquired by ConX for $1,250,000.
On January 11, 1996, the Corporation authorized and issued 10,000 shares of
the Corporation's Redeemable Preferred Stock to ConX II for $10.0 million in
cash. Of the $10.0 million purchase price, an aggregate of $4.0 million was
loaned to ConX II by InterTech, ZB Holdings and Mr. Zucker, while $6.0 million
was advanced to ConX II by a third-party lender (the repayment of which was
guaranteed by GTC Fund III). The Redeemable Preferred Stock was redeemed by
the Corporation in May 1996, at a price of $10 million, plus accrued but
unpaid interest of $500,000.
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PERFORMANCE GRAPH
The following graph compares the Corporation's cumulative total stockholder
return since the Common Stock became publicly traded on May 9, 1996 with the
Standard & Poor's Industrials 400 Stock Index and with selected companies from
the Standard & Poor's Manufacturing-Specialties Index. The Corporation
believes that the peer group selected from the S&P Manufacturing-Specialties
Index is comprised of companies that are most comparable to the Corporation.
Specifically, the peer group index is comprised of: Avery Dennison
Corporation, Briggs & Stratton Corporation, Millipore Corporation, Pall
Corporation and Parker Hannifin Corporation. The broad equity market index and
peer group selected by the Corporation are consistent with the comparison of
total return reflected in the Corporation's 1997 Notice of Annual Meeting and
Proxy Statement, except that the peer group data below no longer includes the
performance data of Giddings & Lewis, Inc., which was acquired by Thyssen
Industrie AG in 1997.
COMPARISON OF TOTAL RETURN*
POLYMER GROUP, INC., STANDARD & POOR'S INDUSTRIALS 400 STOCK INDEX
AND PEER GROUP SELECTED FROM STANDARD & POOR'S MANUFACTURING-SPECIALTIES INDEX
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5/9/96 6/28/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Polymer Group $100.00 95.14 77.78 77.11 73.61 89.61 71.56 52.78
Peer Group $100.00 97.22 99.39 102.60 106.41 121.10 125.69 124.74
S&P Industrials $100.00 102.91 105.62 113.57 116.58 137.31 146.51 148.80
</TABLE>
- --------
*Total Return assumes reinvestment of dividends.
16
<PAGE>
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the annual meeting in
1999 must be received by the Secretary of the Corporation, at the address
below, not later than December 31, 1998 to be considered for inclusion in the
Corporation's 1999 proxy materials.
ADDITIONAL INFORMATION
THIS SOLICITATION IS BEING MADE BY THE CORPORATION. All expenses of the
Corporation in connection with this solicitation will be borne by the
Corporation. In addition to the solicitation by mail, proxies may be solicited
by directors, officers and other employees of the Corporation by telephone,
telefax, in person or otherwise, without additional compensation. The
Corporation will request brokerage firms, nominees, custodians and fiduciaries
to forward proxy materials to the beneficial owners of shares held of record
by such persons and will reimburse such persons and the Corporation's transfer
agent for their reasonable out-of-pocket expenses in forwarding such
materials.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 3,
1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
FINANCIAL STATEMENTS AND THE SCHEDULE THERETO. REQUESTS FOR COPIES OF SUCH
ANNUAL REPORT ON FORM 10-K SHOULD BE DIRECTED TO JAMES BRYANT, DIRECTOR OF
INVESTOR RELATIONS, AT THE ADDRESS BELOW. A list of shareholders entitled to
vote on matters at the Annual Meeting will be available for inspection at the
Corporation's headquarters beginning on May 18, 1998.
PLEASE COMPLETE THE ENCLOSED PROXY AND MAIL IT IN THE ENCLOSED POSTAGE-PAID
ENVELOPE AS SOON AS POSSIBLE.
By order of the Board of Directors
/s/ James G. Boyd
-------------------------
James G. Boyd
Secretary
Polymer Group, Inc.
4838 Jenkins Avenue
North Charleston, SC 29405
May 1, 1998
17
<PAGE>
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
POLYMER GROUP, INC.
4838 JENKINS AVENUE
NORTH CHARLESTON, SOUTH CAROLINA 29405
1998 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Jerry Zucker and James G. Boyd, and each of
them, proxies, with power of substitution and revocation, acting by a majority
of those present and voting or if only one is present and voting then that one,
to vote the stock of Polymer Group, Inc. which the undesigned is entitled to
vote, at the Annual Meeting of Stockholders to be held May 29, 1998 and at any
adjournment or postponements thereof, with all the powers the undersigned would
possess if present, with respect to the following:
1. Election of directors: [_] FOR the nominees [_] WITHHOLD
AUTHORITY
James G. Boyd Michael J. McGovern
TO WITHHOLD AUTHORITY FOR AN INDIVIDUAL NOMINEE, DRAW A LINE THROUGH HIS NAME.
2. Ratification of the appointment of Ernst & Young LLP as the Corporation's
independent public accountants:
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF SIGNED AND NO DIRECTION IS
GIVEN FOR ANY ITEM, THIS PROXY WILL BE VOTED
FOR ALL NOMINEES AND FOR ITEM 2.
Please return your executed form as soon as
possible in the envelope provided to First
Union National Bank of North Carolina,
Shareholder Services Group, 230 South Tryon
St., 11th Floor, Charlotte, North Carolina,
28288-1154, Attention: Patty McCool
PLEASE SIGN EXACTLY AS NAME
APPEARS ON THIS PROXY. JOINT
OWNERS SHOULD EACH SIGN.
TRUSTEES, EXECUTORS, ETC.
SHOULD INDICATE THE CAPACITY
IN WHICH THEY ARE SIGNING.
------------------------------
Signature Date
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Signature Date
