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
TULTEX CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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:
[Tultex Logo appears here]
Tultex Corporation
P.O. Box 5191
Martinsville, VA
24115
540-632-2961
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Tultex Corporation to be held on Thursday, May 27, 1999 at 10:00 a.m. at our
Customer Service Center in Martinsville, Virginia. Your Board of Directors and
management look forward to greeting you personally and discussing the affairs
of our Company.
At this year's meeting, we are asking that you (1) elect a Board of Directors;
(2) approve amendments to the 1996 Stock Incentive Plan increasing the number
of shares available under the Plan to 2,700,000 shares of Common Stock plus an
additional 300,000 shares for the Plan's replenishment provision; and (3)
ratify the appointment of PricewaterhouseCoopers, LLP as auditors. In addition
to these items of business, the officers will present their reports and be
available for questions from stockholders.
THE DIRECTORS BELIEVE THESE PROPOSALS ARE IN THE BEST INTEREST OF ALL OF THE
COMPANY'S STOCKHOLDERS AND UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR EACH OF
THEM.
On a personal note, F. Kenneth Iverson, former Chairman and Chief Executive
Officer of Nucor, Inc., is retiring from our Board of Directors at the 1999
Annual Meeting. Mr. Iverson has served as a director since 1995, and we extend
to him our Company's appreciation for his faithful service and wise counsel.
Please send in your proxy card as soon as possible. Thank you for your continued
interest and support.
Sincerely,
/s/ John M. Franck /s/ Charles W. Davies, Jr.
John M. Franck Charles W. Davies, Jr.
Chairman of the Board President and Chief Executive Officer
April 30, 1999
[Tultex Logo appears here]
Tultex Corporation
P.O. Box 5191
Martinsville, VA
24115
540-632-2961
Notice of Annual Meeting of Stockholders
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Tultex
Corporation will be held at the Company's Customer Service Center, State Route
174, Martinsville, Virginia, on Thursday, May 27, 1999 at 10:00 a.m. for the
following purposes:
1. To elect a Board of Directors, consisting of nine persons, to serve for the
ensuing year;
2. To approve amendments to the 1996 Stock Incentive Plan increasing the number
of shares available under the Plan to 2,700,000 shares of Common Stock plus
an additional 300,000 shares for the Plan's replenishment provision;
3. To ratify the Board of Directors' appointment of PricewaterhouseCoopers,
LLP, independent accountants, as auditors for the Company for fiscal 1999;
and
4. To transact such other business as may properly come before the meeting.
Your attention is directed to the accompanying proxy statement for further
information with respect to the matters to be acted upon at the meeting. Only
holders of Common Stock and Cumulative Convertible Preferred Stock, $7.50
Series B of record at the close of business on April 22, 1999, are entitled to
notice of and to vote on matters to be acted on at the Annual Meeting.
If you are present at the Annual Meeting, you may vote in person even though
you have previously delivered your proxy.
By Order of the Board of Directors
Regina C. Haynes, Secretary
April 30, 1999
[Tultex Logo appears here]
Tultex Corporation
P.O. Box 5191
Martinsville, VA
24115
540-632-2961
Proxy Statement dated April 30, 1999
General
Proxies in the form enclosed are solicited by the Board of Directors for the
1999 Annual Meeting of Stockholders to be held at 10:00 a.m. on Thursday, May
27, 1999, at the Company's Customer Service Center, State Route 174,
Martinsville, Virginia. Any stockholder giving a proxy may revoke it at any
time before it is voted by written notice to the Company, mailed to P.O. Box
5191, Martinsville, Virginia 24115, Attention: Regina C. Haynes, Corporate
Secretary, by the execution of a proxy with a later date, or by voting in
person the shares represented by the proxy. This proxy statement is being
mailed on or about May 3, 1999.
The cost of solicitation of proxies will be borne by the Company. In addition
to the use of the mails, proxies may be solicited personally or by telephone by
regular employees of the Company, but no special compensation will be paid to
any regular employees for personal solicitation of proxies. Banks, brokerage
houses and other institutions, nominees and fiduciaries will be requested to
forward the soliciting material to beneficial owners and to obtain
authorization for the execution of proxies. The Company will, upon request,
reimburse such parties for their reasonable expenses in forwarding proxy
material to their beneficial owners.
A majority of the votes entitled to be cast on matters to be considered at the
meeting constitutes a quorum. If a share is represented for any purpose at the
meeting, for quorum purposes it is present for all matters considered at the
meeting. Abstentions and shares held of record by a broker or its nominee
("Broker Shares") that are voted on any matter are included in determining the
number of votes present or represented at the meeting. Broker Shares that are
not voted on any matter at the meeting are not included in determining whether
a quorum is present. Directors are elected by a plurality of the votes cast by
holders of Common Stock and Series B Preferred Stock; the vote required on
other matters is disclosed under the caption for such matters. Votes that are
withheld and Broker Shares that are not voted (commonly referred to as "broker
non-votes") are not included in determining the number of votes cast in the
election of directors or other matters.
Ownership of Equity Securities
On April 22, 1999, the date for determining stockholders entitled to notice of
and to vote at the Annual Meeting, there were outstanding and entitled to vote
30,050,155 shares of Common Stock and 15,000 shares of Cumulative Convertible
Preferred Stock, $7.50 Series B (the "Series B Preferred Stock"). The Common
Stock and the Series B Preferred Stock have one vote per share on all matters
and vote together on all matters, including those to be acted on at the Annual
Meeting.
1
The table below presents certain information as of the Record Date regarding
beneficial ownership of shares of Common Stock by all directors and nominees
for director, by the Chief Executive Officer and the four next most highly
compensated executive officers, by all directors and executive officers, by all
directors and executive officers as a group, and by owners of 5% or more of the
Common Stock. The Series B Preferred Stock is owned by Simon Trust Partnership
No. 3 (25%), Herbert Simon Trust No. 3 (25%) and L. G. Sale Corporation, Inc.
(50%), respectively.
Sole Voting Aggregate
and Investment Percentage
Directors Power (1) Other (2) Owned
- ------------------------------------------------------- ------------------ ----------- -----------
Charles W. Davies, Jr. ................................ 118,601 142 *
John M. Franck ........................................ 755,426 141,233 2.98%
Lynn J. Beasley ....................................... 20,373 -- *
Seth P. Bernstein ..................................... 20,268 -- *
Lathan M. Ewers, Jr. .................................. 17,000 -- *
H. Richard Hunnicutt, Jr. ............................. 38,000 -- *
Bruce M. Jacobson ..................................... 27,418 -- *
O. Randolph Rollins ................................... 77,230 362,748 1.46
Richard M. Simmons .................................... 191,821 615 *
Officers:
Anthony J. Pichirallo ................................. 13,734 -- *
Walter J. Caruba ...................................... 33,231 -- *
John J. Smith ......................................... 64,675 47 *
Executive officers and directors as a group (20 persons
including those named above) ......................... 1,547,244 507,085 6.83
Piedmont Company, c/o MainStreet Trust Company, N.A.,
P. O. Box 5228, Martinsville, Virginia ............... 1,524,511 -- 5.07
Dimensional Fund Advisors, Inc., 1299 Ocean Avenue,
11th Floor, Santa Monica, California ................. 1,506,472(3) -- 5.01
- ----------
* Less than 1%.
(1) Includes shares that may be acquired by certain of the Company's officers
within 60 days under the Company's stock option plans and phantom stock
credited to certain directors in 1998 under the Directors Compensation
Plan.
(2) Includes shares (a) owned by or with certain relatives; (b) held in
various fiduciary capacities; and (c) held by certain corporations.
(3) Dimensional Fund Advisors, Inc., a registered investment advisor, is deemed
to have beneficial ownership of 1,506,472 shares, all of which shares are
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Corporation's directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, file with the
Securities and Exchange Commission initial reports of ownership and reports of
change
2
in ownership of Common Stock and other equity securities of the Company. The
same persons are also required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms that they file.
Based solely on its review of the forms required by Section 16(a) of the
Securities Exchange Act of 1934 that have been received by the Company or
written representations from certain reporting persons that no annual
statements on Form 5 were required because of late filing, the Company believes
that all filing requirements applicable to its officers, directors and
beneficial owners of greater than 10% of its Common Stock have been complied
with.
Election of Directors
Proxies will be voted for the election of nine nominees as directors to serve
until the 2000 Annual Meeting of Stockholders. The election of each nominee for
director requires the affirmative vote of the holders of a plurality of the
shares cast in the election of directors. Votes that are withheld and shares
held in street name that are not voted in the election of directors will not be
included in determining the number of votes cast. All of the nominees are
presently members of the Board. O. Randolph Rollins was elected a director by
the Board of Directors since last year's annual meeting. The Board of Directors
has no reason to believe that any of the nominees will be unavailable for
service if elected, but if any are unavailable, proxies will be voted for such
substitute as the Board may designate.
Name Age Director Since
- --------------------------------------- ----- ---------------
Lynn J. Beasley .................. 41 1997
Seth P. Bernstein ................ 38 1997
Charles W. Davies, Jr. ........... 50 1990
Lathan M. Ewers, Jr. ............. 57 1993
John M. Franck ................... 46 1984
H. Richard Hunnicut, Jr. ......... 60 1981
Bruce M. Jacobson ................ 49 1992
O. Randolph Rollins .............. 56 1998
Richard M. Simmons, Jr. .......... 72 1973
Lynn J. Beasley is Executive Vice President of R. J. Reynolds Tobacco Company,
Winston-Salem, NC. Ms. Beasley has been employed by R. J. Reynolds since 1982.
Seth P. Bernstein is a Managing Director of and Head of the Leveraged Finance
Group of J. P. Morgan & Company, Inc., New York. Mr. Bernstein has been
employed by J. P. Morgan since 1984.
Charles W. Davies, Jr. became President and Chief Executive Officer on January
1, 1995, after serving as President and Chief Operating Officer since January
1991, and prior thereto as Executive Vice President since December 1989.
Lathan M. Ewers, Jr. has been a partner since 1976 in Hunton & Williams,
Richmond, Virginia, counsel to the Company.
John M. Franck became Chairman of the Board of Directors and Chief Executive
Officer on January 1, 1991. He retired as Chief Executive Officer on January 1,
1995, and as an employee of the Company on July 1, 1997. He currently serves as
Chairman of the Board. Mr. Franck is President and CEO of Quibell
3
Spring Water Beverages, a privately-owned beverage company located in
Martinsville, Virginia. Mr. Franck is a director of Piedmont Trust Bank, a
subsidiary of MainStreet BankGroup, Incorporated.
H. Richard Hunnicutt, Jr. was Chairman and Chief Executive Officer of the
Company from November 1988 through December 1990, when he retired. He was
President and Chief Operating Officer from 1984 to 1988.
Bruce M. Jacobson is a senior partner in the certified public accounting firm
of Katz, Sapper & Miller, Indianapolis, Indiana, and has been a partner in such
firm since 1977.
O. Randolph Rollins became Executive Vice President and General Counsel of
Tultex on October 1, 1994. Prior to joining Tultex he was a partner with the
law firm of McGuire Woods Battle & Boothe, Richmond, Virginia, from 1973-1990
and for nine months in 1994; Deputy Secretary of Public Safety for the
Commonwealth of Virginia 1990-1991; and Secretary of Public Safety for the
Commonwealth of Virginia from 1992 - January 1994.
Richard M. Simmons, Jr. is a retired business executive. He was President of
American Furniture Company from 1961 to 1987 and its Chairman from 1974 to
1986.
Committees of the Board
The standing committees of the Board of Directors are the Audit Committee, the
Nominating Committee and the Executive Compensation Committee. The Audit
Committee reviews with management and the Company's auditors the scope of the
annual audit, the results of the audit and the Company's internal accounting
and control systems. The Audit Committee also recommends to the full Board of
Directors the auditors to be appointed by the Board (subject to stockholder
ratification) and reviews the auditors' services to the Company and their fees.
The Nominating Committee reviews the qualifications of possible candidates
recommended by stockholders, provided that stockholder recommendations are
submitted in writing addressed to the Secretary of the Company, are accompanied
by statements signed by the recommended candidates of their willingness to
serve, if elected, and are received not later than 120 days before the date
that proxy material is mailed to stockholders for the annual meeting of
stockholders at which the recommended candidates, if approved by the Nominating
Committee and the incumbent Board of Directors, would be nominated by the Board
for election by the stockholders. The Executive Compensation Committee
administers the Company's stock option plans and other incentive programs,
approves or recommends to the Board changes in compensation for the Chief
Executive Officer and approves all Company employee benefit programs.
The members of Committees of the Board are:
Audit Committee -- John M. Franck, Bruce M. Jacobson and Richard M. Simmons,
Jr.
Nominating Committee -- Lynn J. Beasley, Charles W. Davies, Jr., John M.
Franck, H. R. Hunnicutt, Jr. and F. Kenneth Iverson.
Executive Compensation Committee -- Seth P. Bernstein, Lathan M. Ewers, Jr. and
Bruce M. Jacobson.
The Board of Directors held four regular meetings and three special meetings
during the fiscal year ended January 2, 1998. The Audit Committee held four
meetings, the Executive Compensation Committee held four meetings, and the
Nominating Committee did not meet in 1998.
4
Compensation of Directors
Directors of the Company who are not full-time employees are paid a fee of
$2,500 for each fiscal quarter. In addition, they are paid $1,000 for each
Board meeting attended and $1,000 for each Committee meeting attended which
does not occur on the same date as a Board meeting day. They are paid $500 for
each Committee meeting attended that does occur on the same day as a Board
meeting. The Chairman of the Board is paid twice the fee paid other directors
for each fiscal quarter and each meeting attended.
The Board of Directors has adopted the 1996 Directors Compensation Plan, which
permits directors to defer their retainer and meeting fees for the purchase of
the Company's Common Stock. Deferred fees are credited with "phantom" Common
Stock valued at fair market value. Directors receive distribution of their
accounts at death, disability, termination of service as a director, or on
six-months' notice. Directors who participate are general unsecured creditors
of the Company for their account balances. At the time account balances are
distributed in the form of Common Stock, directors pay federal and state income
taxes on the Common Stock distributed valued at its fair market value, and the
Company is able to deduct as an ordinary business expense an amount equal to
the fair market value of the stock distributed.
Certain Relationships and Related Transactions
Seth P. Bernstein is a Managing Director at J. P. Morgan and Company, Inc.,
which has provided investment banking services to the Company.
Lathan M. Ewers, Jr. is a partner in the law firm of Hunton & Williams, counsel
to the Company, which provides legal services to the Company and its
subsidiaries.
The Company believes that the terms of the transactions described above are
comparable to terms available for similar transactions with entities
unaffiliated with its officers and directors.
5
Executive Compensation
The following table presents information relating to total compensation of the
Chief Executive Officer and the four next most highly compensated executive
officers of the Company during the fiscal year ended January 2, 1999.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Awards Compensation
- ------------------------------------------------------------ --------------------------------------------
(e)
Restricted (f) (g)
(a) (d) Stock Options/ All
Name and (b) (c) Bonus $ Award(s)(1) SARs Other
Principal Position Year Salary $ (1) (Shares) (Shares) Compensation
- -------------------------- ------ ---------- --------- ------------- ---------- ---------------
Charles W. Davies, Jr. 1998 300,000 -- -- 85,714 453(3)
President and 1997 300,000 -- -- 110,000 --
Chief Executive Officer 1996 300,000 87,570 3,020 10,000 --
O. Randolph Rollins 1998 210,000 20,000 -- 60,000
Executive Vice President 1997 210,000 -- -- 15,000 --
and General Counsel 1996 200,004 41,881 1,444 10,000 --
Anthony J. Picharillo 1998 205,770 -- -- 80,000 --
Vice President - 1997 164,500 -- -- 55,000 35,707(2)
Wholesale 1996 136,700 19,005 606 5,000 --
Walter J. Caruba 1998 174,000 -- -- 49,714 385(3)
Vice President - 1997 174,000 -- -- 15,000 --
Retail 1996 159,000 33,295 1,148 10,000 --
John J. Smith 1998 166,200 -- -- 47,486 --
Vice President - 1997 166,200 -- -- 15,000 --
Distribution & Systems 1996 158,400 33,169 1,144 10,000 --
- ----------
(1) Bonus represents cash Incentive Awards under the Consolidated Incentive
Plan (CIP) and Restricted Stock Awards represent Restricted Stock awarded
under the CIP. Shareholders approved the CIP at the 1996 Annual Meeting.
The CIP provides for cash Incentive Awards based primarily on return on
assets, for activewear and licensed apparel employees, and for Restricted
Stock Awards equal to 25% of the cash Incentive Award. Restricted Stock
Awards are valued at fair market value at the time of grant, and vest 20%
per year. Holders of Restricted Stock vote the shares and receive any
dividends paid thereon. Accelerated vesting of shares occurs in the event
of change in control, death, disability, normal retirement or other
circumstances determined by the Executive Compensation Committee. No Cash
Incentive or Restricted Stock Awards were granted in 1998. Mr. Rollins'
bonus in 1998 was awarded by the Board of Directors to recognize his
successful negotiation of the sale of the Company's Logo Athletic licensed
apparel business.
(2) Represents a reward recognition payment which was not part of the incentive
compensation plan.
(3) Excess life insurance.
6
The following tables present information concerning stock options granted to
the Chief Executive Officer and the four next most highly compensated executive
officers of the Company and exercises of options by such persons.
OPTION GRANTS IN LAST FISCAL YEAR TABLE
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term
- ----------------------------------------------------------------------------------------- ---------------------
Number % Total
of Securities Options
Underlying Granted to
Options Granted Employees in Exercise Expiration
Name (1) (Shares) # Fiscal Year or Base Price Date 5% 10%
- ---------------------------- ----------------- -------------- --------------- ----------- ---------- ----------
Charles W. Davies, Jr. ..... 85,570 18.14% $ 0.8750 12/31/03 $20,686 $ 45,711
O. Randolph Rollins ........ 60,000 12.72% $ 0.8750 12/31/03 $14,505 $ 32,052
Anthony J. Pichirallo ...... 80,000 16.96% $ 2.3125 08/04/03 $51,112 $112,944
Walter J. Caruba ........... 49,714 10.54% $ 0.8750 12/31/03 $12,018 $ 26,557
John J. Smith .............. 47,486 10.06% $ 0.8750 12/31/03 $11,480 $ 25,367
(1) Includes options granted in 1998 under a periodic program pursuant to which
key executive employees, including those named in the table, are awarded
options twice each year equal to 25% of the employee's base salary divided
by the fair market value of the Common Stock on the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUE TABLE
Number of Unexercised Value of Unexercised
Options at FY-End in-the-Money Options at
(Shares) FY-End
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- ----------------- ---------- ------------- --------------- ------------- --------------
Charles W. Davies, Jr. ..... -- -- 247,500 145,714 -- --
O. Randolph Rollins ........ -- -- 82,500 60,000 -- --
Anthony J. Pichirallo ...... -- -- 39,000 115,000 -- --
Walter J. Caruba ........... -- -- 42,500 49,714 -- --
John J. Smith .............. -- -- 42,500 47,486 -- --
7
RETIREMENT PLAN.The Company maintains for the benefit of its eligible employees
a defined benefit pension plan qualified under Section 401(a) of the Internal
Revenue Code. The following table illustrates annual retirement benefits
payable under the plan at the indicated Final Average Compensation and Credited
Service levels, assuming retirement at age 65 in 1998:
Years of Service
-------------------------------------------------
Final Average Earnings 10 20 30 40
- ------------------------ ---------- ---------- ---------- ----------
$100,000 ............... $10,200 $20,400 $30,600 $35,600
150,000 ............... 16,200 32,400 48,600 56,100
200,000 ............... 22,200 44,400 66,600 76,600
250,000 ............... 28,200 56,400 84,600 97,100
300,000 ............... 34,200 68,400 102,600 117,600
400,000 ............... 46,200 92,400 138,600 158,600
The benefits shown are annual payments based on an employee attaining age 65
during the 1998 plan year. Under current provision of the Internal Revenue
Code, these amounts are limited to $130,000. Compensation is limited to
$160,000. The amounts in the table are based upon the formula in the current
Salaried Plan assuming retirement after attainment of normal retirement age. In
no case will the benefit amount be less than the minimum accrued benefit at May
31, 1994 based on the 401(a)(17) compensation limit of $235,840 plus additional
accruals for service after May 31, 1994.
The number of credited years of service for each person named in the Summary
Compensation Table are as follows: Charles W. Davies, Jr. -- 22 years, O.
Randolph Rollins -- 4 years, John J. Smith -- 14 years, Walter J. Caruba -- 21
years, and Anthony J. Pichirallo -- 11 years.
The Company maintains a supplemental benefit plan to provide key management
personnel who have satisfied the eligibility requirements with supplemental
retirement benefits, including a retirement benefit which, when aggregated with
the benefit available under the retirement plan, is equivalent to 50% of their
final average earnings for 30 years of service. The eligibility requirements
include being 100% vested under the retirement plan. The majority of this
benefit will be funded through the retirement plan, with the balance being
funded by the Company through a supplemental nonqualified program which, until
January 2, 1999, was funded through life insurance policies owned by the
Company on each covered individual. Subsequent to January 2, 1999, the Company
surrendered these life insurance policies in exchange for cash and will
self-fund future plan payments. Benefits under the supplemental benefit plan
are fully vested after five years of service. The estimated annual benefits
under the supplemental benefit plan for each officer named in the Summary
Compensation Table as of December 31, 1998 are as follows: O. Randolph Rollins
- -- $26,449, Charles W. Davies, Jr. -- $77,096, John J. Smith -- $16,440, Walter
J. Caruba -- $29,098, and Anthony J. Pichirallo -- $16,312.
Employment Contracts and Employment Continuity Agreements
The Company has entered into employment continuity agreements with the five
officers named in the Summary Compensation Table, which provide for their
continued employment in the event of a change in control of the Company and the
payment of compensation and benefits if their employment is terminated
following a change in control. The Board of Directors believes that these
agreements will enable key employees to conduct the Company's business with
less concern for personal economic risk when
8
faced with a possible change in control. The Board believes the agreements also
should enhance the Company's ability to attract new key executives as needed.
The agreements define "change in control" as occurring when a person becomes
the owner of 20% or more of the Company's voting securities or when there is a
change in a majority of the members of the Board of Directors, direct or
indirect, as a result of a cash tender or exchange offer, a merger or other
business combination, a sale of assets, a contested election of directors or a
combination of such transactions. Upon a change in control, the Company agrees
to continue the employee's employment with responsibilities, compensation and
benefits identical to or greater than those prior to the change in control
until the earlier of the third anniversary following the change in control or
the employee's normal retirement date. If employment is terminated without
cause by the Company during this period, or if the employee voluntarily
terminates employment within six months after receiving less responsibilities,
compensation or benefits or after being relocated without his consent, and the
employee has made an offer to work that has been rejected by the Company, the
Company must pay the employee compensation as follows: (i) three times the
employee's annual base salary as of his termination date, (ii) three times the
employee's average incentive bonus payable for the two fiscal years prior to
the termination date, (iii) cash or property due as a result of exercise of
stock options, and (iv) amounts the employee is entitled to receive under the
Company's tax-qualified benefit plans and, at the employee's expense, health
care coverage under welfare plans. This compensation will be reduced, if
necessary, to assure that any payments would not be "excess parachute payments"
under the Internal Revenue Code, which imposes significant penalties on
payments under such severance agreements which equal or exceed 300% of an
employee's average annual compensation during the five most recent taxable
years ending prior to a change in control. The Company must pay all legal fees
and expenses incurred by the employee in seeking to obtain these benefits. All
agreements continue in effect from year to year unless the Company notifies the
employee before an anniversary date that the agreement will terminate. The
Company has entered into similar agreements with other members of management.
Executive Compensation Committee's Report on Executive Compensation
This report by the Executive Compensation Committee is required by rules of the
Securities and Exchange Commission. It is not to be deemed incorporated by
reference by any general statement which incorporates by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, and it is not to be otherwise deemed filed under either
such Act.
Three directors comprise the Executive Compensation Committee of the Board of
Directors. None of these directors serves on the board of the other committee
member's company or organization and none of the executive officers of Tultex
serve on the board of any committee member's organization. The Committee has
access to outside consultants and counsel.
The Committee oversees three elements of executive compensation: base pay or
salary, annual performance bonus, and long-term compensation, which consists of
a stock option plan approved by shareholders. The Committee seeks to provide a
competitive compensation package that enables the Company to attract and retain
key executives, to integrate pay programs with the business objectives of the
Company, and to link individual executive compensation with the Company's
performance. The Committee surveys other comparable companies and believes that
Tultex's current executive compensation generally is in line with comparable
companies.
9
BASE PAY. The salary paid to the Company's executives is targeted to be
competitive with related industry companies of similar size, taking into
account the responsibilities and experience of individual officers. In general,
the base salaries are fixed at lower levels to emphasize result-oriented
factors reflected in a bonus potential and the value of stock options. The
Committee reviews salaries and pay ranges for the named executives, and
salaries may be increased based on the Committee's assessment of an
individual's performance and contributions to Tultex's goals. The increase
reflected in the table for one officer in 1998 was approved by the Committee
following the recommendation of the Chief Executive Officer.
INCENTIVE AWARDS. The Consolidated Incentive Plan enables the Company's senior
executives to earn cash Incentive Awards based primarily on return on assets.
Approximately 597 officers and employees are eligible to participate in the
Cash Incentive Plan. The five named executives earned no cash incentive awards
in 1998. The Consolidated Incentive Plan also provides for Restricted Stock
Awards equal to 25% of the cash Incentive Award as long-term incentive for
executive officers.
LONG-TERM INCENTIVE. The Company awards long-term compensation through its
Stock Option Plan and as Restricted Stock Awards under the Consolidated
Incentive Plan. Approximately 597 officers and employees are eligible to
receive grants under the stock option plan, including the five named
executives. Options normally extend for 10 years, are priced at fair market
value on the date of grant, and are intended to provide incentive for future
performance rather than reward past performance. Together with base pay and
cash Incentive Awards, the Committee considers the record of comparable
companies in determining grants to be made to the named executives. In 1998,
the Company instituted a periodic program pursuant to which key executive
employees, including those named in the table, are awarded options twice each
year equal to 25% of the employee's base salary divided by the fair market
value of the Common Stock on the date of grant. In 1998, the Committee
recommended and the Board of Directors approved options for the named
executives reflected in the Option Grants in Last Fiscal Year Table. The
options granted to these five officers represent 68.4% of options granted to
employees in 1998. No Restricted Stock Awards were awarded in fiscal 1998.
1998 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER. In setting the Chief
Executive Officer's base salary, the Committee compares his salary to the
salaries of other chief executive officers in the Company's peer group,
including those included in the performance graph. Mr. Davies was paid at the
same annual rate in 1998, as in 1997, and is currently being paid at the same
annual rate in 1999. Mr. Davies is eligible to participate in the same bonus
and long-term executive compensation plans as the other named executives. The
Committee's approach to setting Mr. Davies' target annual compensation is to
set a compensation level commensurate with his responsibilities and the
objectives of his position that would be competitive with other textile and
apparel companies of comparable size. Mr. Davies was not awarded an increase in
compensation in 1998.
EXECUTIVE COMPENSATION COMMITTEE
Seth P. Bernstein
Lathan M. Ewers, Jr.
Bruce M. Jacobson
Dated: April 30 1999
10
Compensation Committee Interlocks and Insider Participation
The following two directors, with Bruce M. Jacobson, comprise the Executive
Compensation Committee of the Board of Directors.
Seth P. Bernstein is a Managing Director at J. P. Morgan and Company, Inc.,
which provides investment banking services to the Company.
Lathan M. Ewers, Jr., is a partner in the law firm of Hunton & Williams,
counsel to the Company, which provides legal services to the Company and its
subsidiaries.
PERFORMANCE OF COMPANY'S COMMON STOCK
The following graph compares the performance of the Company's Common Stock to
(1) the Standard & Poor 500 Index and (2) a Peer Group Index for the Company's
last five fiscal years. The Company's Peer Group consists of Fruit of the Loom,
Inc., Oneita Industries, Inc., Russell Corporation, Starter Corporation, and
the Company. The graph assumes that $100 was initially invested on December 31,
1993 in the Company's Common Stock and in each index and that all dividends
were reinvested.
11
COMPARISON OF FIVE YEAR
CUMULATIVE SHAREHOLDER RETURN
INDEXED RETURNS
YEARS ENDING
Base Period
Company Name/Index Dec. 93 Dec. 94 Dec. 95 Dec. 96 Dec. 97 Dec. 98
- -------------------- ------------- ----------- ----------- ----------- ----------- ----------
Tultex 100 $ 70.28 $ 59.46 $ 100.91 $ 58.56 $ 12.61
S&P 500 Index 100 101.32 139.40 171.40 228.59 293.91
Peer Group 100 101.34 90.75 122.77 89.01 54.55
Peer Group Companies:
Fruit of the Loom, Inc. - CLA
Oneita Industries, Inc.
Russell Corp.
Starter Corp.
Tultex Corp.
12
Proposal to Increase Shares Available for 1996 Stock Incentive Plan
The Board of Directors has adopted amendments to the 1996 Stock Incentive Plan,
subject to shareholder approval, increasing the number of shares available
under the Plan to 2,700,000 plus an additional 300,000 shares for the 1996
Plan's replenishment provision. Approval of the amendments to the Plan requires
the affirmative vote of a majority of the shares of Common Stock voted at the
Annual Meeting. Shareholders approved the Plan in 1996, covering at the time
700,000 shares of Common Stock. The Plan contained a 3% replenishment provision
which increases the number of shares of Common Stock authorized for issuance by
3% of the increase in the Company's outstanding shares from year to year, up to
a maximum of 750,000 shares. Options with respect to 488,231 shares have been
granted under the 1996 Plan, and only 211,769 remain available for grant under
the 1996 Plan.
The Board of Directors believes that the 1996 Plan has benefited the Company by
(i) assisting it in recruiting and retaining officers and key employees with
ability and initiative, (ii) providing greater incentive for officers and key
employees and (iii) aligning the interests of employees with those of the
Company and its stockholders through opportunities for increased stock
ownership. Proceeds from the sale of Common Stock issued under the 1996 Plan
will be used for general corporate purposes. On April 26, 1999, the last sale
price of the Common Stock on the New York Stock Exchange was $0.6875.
The 1996 Plan is administered by the Executive Compensation Committee of the
Board of Directors which, on the recommendation of management, selects
employees to be granted stock options. No member of the Compensation Committee
may participate in the 1996 Plan.
Awards are made to employees of Tultex Corporation and its subsidiaries, with
determinations being made on the basis of duties, responsibilities, ability to
affect profitability, and present and future contributions to the success of
the Company. Because grants of awards under the 1996 Plan are the at the
discretion of the Compensation Committee and the Plan provides for different
types of awards, benefits to those Executive Officers listed in the Summary
Compensation Table, or any other person, cannot be determined. Shares subject
to options, related stock appreciation rights (SARs), which lapse without
having been exercised, or performance share awards which are forfeited, become
available for new grants under the 1996 Plan. To the extent that SARs are
exercised and the corresponding option is canceled, shares subject to the
option will be charged against the maximum number of shares authorized under
the 1996 Plan, at the time such option was granted.
Options may be granted as incentive stock options (ISOs) intended to qualify
for favorable tax treatment under Federal tax law or as nonqualified stock
options (NQSOs). SARs may be granted with respect to any options granted under
the Plan and may be exercised only when the underlying option is exercisable.
An SAR permits the holder to surrender an option or any portion thereof and
receive in exchange shares of Common Stock, cash or a combination of shares and
costs, with an aggregate value equal to the excess of the fair market value of
one share of Common Stock with respect to which such SAR has been exercised
over the exercise price specified in the option multiplied by the number of
shares covered by the option or portion thereof which is to be exercised. The
1996 Plan requires that the exercise price of all options and SARs be equal to
or greater than the fair market value of Tultex Common Stock on the date of
grant of that option. The term of any ISO or related SAR cannot exceed 10 years
from the date of grant.
13
Subject to the discretion of the Committee, the exercise price of any option
may be paid in cash, in shares of Common Stock owned by the optionee for six
months or longer, with a combination of cash and shares, or by effecting a
"cashless exercise," or by payment of other consideration approved by the
Committee. A "cashless exercise" is a technique which allows the optionee to
exercise stock options without cash through the assistance of a broker through
either a simultaneous exercise and sale or broker loan. The "cashless exercise"
technique does not increase the compensation that the option provides; the
optionee receives the same economic benefit as he or she would upon exercise of
an SAR issued in tandem with the option. At the Committee's discretion, options
may be exercised by delivery of a note payable over not more than five years.
In the case of a "change in control,"options may become fully exercisable as to
all optioned shares from and after the date of such "change in control" in the
discretion of the Committee or as may otherwise be provided in the grantee's
option agreement. Generally, death, retirement or disability will not result in
the cancellation of options or awards. The Committee may accelerate the date or
dates at which options or awards are exercisable.
The Committee may grant shares of Common Stock to participants as Restricted
Stock. (Restricted Stock is stock where full ownership rights vest in
participants periodically in accordance with the terms of the award.)
Restricted Stock may not be sold, assigned, transferred, pledged, or encumbered
during a "Restricted Period" which will be not less than one year from the date
of grant. Except for such restrictions, the employee has all rights of a
stockholder including the right to vote and receive dividends.
If employment is terminated prior to the lapse of all restrictions, Restricted
Stock is forfeited, but the Committee may limit the effect of forfeiture. At
the end of the Restricted Period, Restricted Stock is transferred to the
employee free of restrictions. In the case of a "change in control,"an employee
may receive Restricted Stock free of restrictions in the discretion of the
Committee or as may otherwise be provided in the Restricted Stock award.
The Committee may make awards of Common Stock to be earned on the basis of the
Company's performance in relation to established performance measures for a
specific performance period as Performance Shares. Such measures may include
return on assets, earnings per share, return on stockholders' equity, or return
to stockholders. Performance Shares may not be sold, assigned, transferred,
pledged, or otherwise encumbered during the relevant performance period.
Performance Shares may be paid in cash, shares of Common Stock or shares of
Restricted Stock. An employee must be employed at the end of the performance
period to receive Performance Shares, but if an employee's employment is
terminated by death, disability, retirement, or other reason approved by the
Committee, the Committee may limit the effect of forfeiture. In the case of a
"change in control," an employee may receive Performance Shares in the
discretion of the Committee or as may otherwise be provided in the applicable
Performance Share award.
Since its adoption in 1996, awards under the Plan have been made principally in
the form of stock options; a small number of Restricted Stock awards were made
in 1996. In 1998, the Company instituted a program which grants options to key
executive employees twice a year equal to 25% of the employee's base salary
divided by the fair market value of the Common Stock on the date of grant.
14
The Board of Directors may amend the 1996 Plan, but no such amendment shall,
without approval of stockholders: (i) increase the number of shares available
for the granting of awards; (ii) change the class of persons eligible to
receive options or awards; or (iii) extend the period during which awards may
be granted or exercised.
There are no federal tax consequences either to the optionee or to the Company
involved in the grant of an ISO or a NQSO. Upon the exercise of an ISO, the
optionee will not recognize any income and the Company will not be entitled to
a deduction, although such exercise may give rise to alternative minimum tax
liability for the optionee. Generally, if the optionee disposes of shares
acquired upon exercise of an ISO within two years of the date of grant or one
year of the date of exercise, the optionee will recognize ordinary income, and
the Company will be entitled to a deduction, equal to the excess of the fair
market value of the shares on the date of exercise over the option price
(limited generally to the gain on the sale). The balance of any gain or loss
will be treated as a capital gain or loss to the optionee. If the shares are
disposed of after the foregoing holding requirements are met, the Company will
not be entitled to any deduction, and the entire gain or loss for the optionee
will be treated as a capital gain or loss.
On exercise of a NQSO, the date-of-exercise fair market value of the shares
acquired in excess of the option price will generally be taxable to the
optionee as ordinary income and deductible by the Company. The disposition of
shares acquired upon exercise of a NQSO will generally result in a capital gain
or loss for the optionee, but will have no tax consequences for Tultex
Corporation.
The Board of Directors Unanimously Recommends a Vote "FOR" the amendments to
the 1996 Stock Incentive Plan.
Ratification of Appointment of Auditors
The Board of Directors has appointed PricewaterhouseCoopers, LLP, independent
certified public accounts, to examine the financial statements of the Company
for the fiscal year ending January 1, 2000. Shareholders will be asked to
ratify this appointment at the Annual Meeting, which requires the affirmative
vote of a majority of Common Stock and Series B Preferred Stock (voting
together) voted at the Annual Meeting. PricewaterhouseCoopers, LLP has been the
Company's independent accountants since 1971.
Representatives of PricewaterhouseCoopers, LLP are expected to be present at
the meeting and will be given an opportunity to make a statement if they desire
to do so. They are expected to be available to respond to appropriate
questions.
The Board of Directors Unanimously Recommends a Vote "FOR" Ratification of
PricewaterhouseCoopers, LLP as Auditors.
Stockholder Proposals
Stockholders having proposals which they desire to present at next year's
annual meeting should, if they desire that such proposals be included in the
Board of Directors' proxy and proxy statement relating to such meeting, submit
such proposals in time to be received by the Company at its principal executive
15
offices in Martinsville, Virginia, not later than December 31, 1999. To be so
included, all such submissions must comply with the requirements of Rule 14a-8
of the Securities and Exchange Commission under the Securities Exchange Act of
1934 and the Board of Directors directs the close attention of interested
stockholders to that Rule.
Other Matters
As of the date of this Proxy Statement, the Board of Directors knows of no
matter to come before the meeting other than those stated in the notice of the
meeting. As to other matters, if any, that may properly come before the
meeting, it is intended that proxies in the accompanying form will be voted in
accordance with the best judgment of the persons named therein.
We hope that you will be able to attend this meeting in person, but if you
cannot be present, please execute the enclosed proxy and return it in the
accompanying envelope (no postage required) as promptly as possible. Your stock
will be voted in accordance with the instructions you give on the proxy, and in
the absence of any such instructions will be voted FOR election of directors
and FOR the ratification of appointment of auditors, as described herein.
Regina C. Haynes
Secretary
Martinsville, Virginia
April 30, 1999
16
********************************************************************************
APPENDIX
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
Please sign exactly as name
appears below. When shares
are held by joint tenants, both
should sign.
When signing as attorney,
executor, administrator, trustee
or guardian, please vote full
title as such. If a corporation,
please sign in full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Please sign and return, whether
or not you plan to attend the
meeting.
---------------------------------
SIGNATURE
---------------------------------
SIGNATURE IF HELD JOINTLY
DATE: , 1999
--------------- -------
FOLD AND DETACH HERE
- -----------------------------------------------------------------------------
COMMON STOCK PROXY
TULTEX CORPORATION
P.O. Box 5196, Martinsville, VA 24916
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Franck, Kimberly E. Adkins and
Regina C. Haynes, and each of them, with full power of substitution in each,
Proxies to vote all Common Stock of the undersigned in Tultex Corporation at
the annual meeting to be held on May 27, 1999 and at any and all
adjournments thereof. The Board of Directors recommends a vote FOR Proposals
1, 2 and 3.
1. Election of Directors.
[ ] FOR the nominees listed below [ ] VOTE WITHHELD To withhold authority
to vote for any individual nominee, strike a
line through the nominee's name in the list
below.
Nominees: Lynn J. Beasley, Seth P. Bernstein, Charles W. Davies, Jr. Lathan
M. Ewers, Jr. John M. Franck, H. Richard Hunnicut, Jr., Bruce M.
Jacobson, O. Randolph Rollins, Richard M. Simmons, Jr., EXCEPT AS
MARKED TO THE CONTRARY.
2. Approval of amendments to the 1996 Stock Incentive Plan increasing the
number of shares available under the Plan to 2,700,000 shares of common
stock plus an additional 300,000 shares of common stock for the Plan's
replenishment provision.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of the Board of Directors' appointment of
PricewaterhouseCoopers LLP, independent accountants, as auditors of the
Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.