SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 28, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to _______.
Commission File Number: 0-2585
Dixie Yarns, Inc.
(Exact name of registrant as specified in its charter)
Tennessee 62-0183370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 South Watkins Street
Chattanooga, Tennessee 37404
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (423) 698-2501
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $3.00 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or other
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
-Continued-
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Continued)
State the aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 7, 1997: Common Stock - $69,474,609; Class B
Common Stock - No market exists for the shares of Class B Common Stock,
which is neither registered under Section 12 of the Act nor subject to
section 15(d) of the Act.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date.
Class Outstanding as of March 7, 1997
Common Stock, $3.00 Par Value 10,466,894 shares
Class B Common Stock, $3.00 Par Value 735,228 shares
Class C Common Stock, $3.00 Par Value 0 shares
Documents Incorporated By Reference
Specified portions of the following document are incorporated by reference:
Proxy Statement of the registrant for annual meeting of shareholders to be
held May 1, 1997 (Part III).
PART I
ITEM 1. BUSINESS
GENERAL
In 1992, the Company had $470 million in sales consisting of yarns, thread,
and fabrics, sold to industrial manufacturers, all of which required
further processing by the Company's customers prior to reaching the
consumer. The Company has grown into a group of businesses with aggregate
sales in excess of $600 million, approximately two-thirds of which are sold
into selected floorcovering markets and the remainder into certain textile
and apparel markets. Over fifty percent of the Company's products are
supplied to its customers in the final form used by the ultimate consumer.
The Company expanded into the floorcovering business through the
acquisitions of Carriage Industries, Inc., and Masland Carpets, Inc. in
1993 and Patrick Carpets Mills, Inc. in 1994. In early fiscal 1997, the
Company acquired the assets and business of Danube Carpets Mills, Inc.
Since the later part of 1992, the Company has sold or closed a substantial
number of textile facilities, including the sale of the Company's thread
business. In late 1996, the Company announced its intent to sell its
Tarboro, North Carolina textile spinning facility. In each case, the
Company has either exited specific markets or product lines in an effort to
focus on higher-margin products. Where applicable, equipment and
operations have been consolidated into existing facilities in order to
continue the production and sale of products that fit the Company's
strategy. The Company intends to pursue growth in selected finished apparel
markets in order to take advantage of its vertical manufacturing
capabilities. The Company believes that vertical expansion into selected
finished apparel markets will provide value to its customers through a
quality controlled, quick response production and distribution process.
FLOORCOVERING
THE CARPET INDUSTRY - Based on information compiled by the national trade
association representing carpet and rug manufacturers, the domestic carpet
and rug industry is composed of over 100 manufacturers of which the top 10
account for 75% of the industry's production. The industry has two primary
markets, residential and commercial, with the residential market making up
the largest portion of the industry's sales. A substantial portion of
industry shipments is made in response to replacement demand. The
residential market consists of broadloom carpets, rugs, and bathmats in a
broad range of styles, colors, and textures. The commercial market
consists primarily of broadloom carpets for a variety of institutional
applications. The carpet industry also manufactures carpet for the
automotive, recreational vehicle, and small boat industries.
There is a high degree of competition within the domestic carpet industry,
which also faces competition from the hard surface floorcovering industry.
The principal methods of competition within the carpet industry are
quality, style, price, and service.
THE COMPANY'S FLOORCOVERING BUSINESS - The Company's floorcovering business
consists of four distinct specialty businesses including proprietary yarn
for the tufting industry and products for a variety of floorcovering
applications. Each business is described below.
Candlewick Yarns produces yarn for the tufting industry. Candlewick's yarn
systems are sold for applications in residential and commercial carpet,
bath and decorative accent rugs, and automotive floorcovering. Candlewick
competes in markets that emphasize product quality, innovation, and
customer service. Candlewick's relationships with fiber suppliers and its
product development center allow customers a means to evaluate yarn and
fiber variations to achieve product enhancement and product
differentiation. Approximately 35% of Candlewick's yarn production is used
internally by the Company's other floorcovering businesses. Products to
outside customers are marketed through Candlewick's own salaried sales
force.
Carriage Industries is a vertically integrated carpet manufacturer
supplying tufted broadloom carpet for customers of the manufactured/modular
housing, recreational vehicle, van conversion, and exposition trade show
industries. Carriage creates specialty products geared to specifications
that maximize efficiency and minimize waste for their customers with a
just-in-time delivery approach through its own trucking fleet. The recent
acquisition of Danube Carpet Mills will increase Carriage's sales in the
manufactured housing and recreation vehicle industries and provide the
opportunity to be more competitive by expanding its core business.
Carriage's product lines are marketed by a staff of salaried sales
personnel.
Bretlin is a manufacturer of indoor/outdoor needlebond carpet and runners,
floormats, decorative accent rugs, commercial/industrial polypropylene
needlebond carpet, and synthetic fiber cushion. Its products are marketed
to home centers, mass merchants, floorcovering groups or co-ops,
distributors, and independent floorcovering retailers. High service
standards in terms of speed and accuracy in filling orders for its
customers are key competitive factors for Bretlin. Products of Bretlin are
marketed primarily through its own sales force, and to a lesser extent,
commission sales representatives.
Masland Carpets is a manufacturer of specialty carpets and rugs for the
high-end residential and commercial marketplaces. Masland's products are
marketed to the architectural and interior design community and specialty
floorcovering showrooms. Masland competes in each of these markets through
quality, service, and innovation in styling and product design. Masland's
Patrick Carpet line is designed to cater to the value oriented commercial
customers where style, design, and quality are required. Masland's product
lines are marketed by its own sales force.
The Company's sales order backlog position in its floorcovering businesses,
excluding Carriage, was approximately $28,000,000 at December 28, 1996 and
December 30, 1995. Approximately 90% of orders received by Carriage are
shipped within the same week. All of the order backlog can reasonably be
expected to be filled within the 1997 fiscal year.
The Company's floorcovering businesses own a variety of trademarks under
which their products are marketed. While such trademarks are important to
the Company's businesses, there is no one trademark, other than the name
Masland itself, which is of material importance to the floorcovering
business.
TEXTILES/APPAREL
TEXTILE INDUSTRY - The domestic textile industry encompasses yarn
preparation, fabric formation, and product distribution. The industry is
structured with various degrees of vertical integration depending on the
products involved. Textile products are manufactured for a variety of end
uses including home furnishings, industrial products, transportation
applications, and apparel. The textile industry is made up of a great
number of companies, none of which are believed to have sales that comprise
as much as 10% of the total market.
The domestic apparel market, which includes a substantial portion of the
customers for the Company's textile products, is continually faced with
competition from imports. Additionally, the Company believes that consumer
buying patterns will continue to be influenced by mass merchandisers and
retailers emphasizing price competition. The domestic textile industry
also services the home furnishing and other industries in a number of
applications which are impacted by housing sales as well as domestic
automotive production levels.
Information published by the U. S. Department of Commerce indicates an
increase in the supply of apparel into domestic markets from Mexico and the
Caribbean Basin compared with Asian suppliers. The Company believes a
substantial portion of the increase has resulted from enacted trade
legislation and has increased the demand for domestic textile products as a
source of fabric for the manufacture of finished apparel. The Company also
believes that merchandisers in the domestic apparel industry prefer a
supply of complete finished apparel products. Sales data presented at the
annual meeting of the trade association representing American textile
manufacturers indicate anticipated sales growth at department stores and
specialty outlets. These factors are expected to benefit the high-end
value added products of the Company's textile business and support the
Company's strategy to grow its package finished apparel business by
utilizing the Company's vertical yarn and fabric capabilities and sewing
resources in Central America or Mexico.
THE COMPANY'S TEXTILE/APPAREL BUSINESS - The Company's textile/apparel
group is comprised of three separate businesses that compete to varying
degrees in several textile markets. Products include high quality yarns,
knit fabric, and upper-end knit sport finished apparel. The Company
intends to utilize its vertical capacity capabilities to further expand its
finished knit apparel products. Each business is discussed below.
The Company's yarn business spins, dyes, and processes value-added cotton
and high performance specialty synthetic yarns to select manufacturers of
high-end upholstery, home furnishings, premium sportswear, hosiery,
sweaters, underwear, and automotive body cloth. Products manufactured by
the Yarn Group are primarily made from cotton fiber but also include
products made from branded specialty synthetic fibers which impart
strength, heat resistance, stretch and/or characteristics relating to
comfort and insulation properties. A portion of the yarn produced is
further processed by the Company's mercerizing and package dye facility.
Natural, dyed, and synthetic yarns are marketed through a combination of
salaried sales force and, to a lesser extent, commissioned sales agents.
Caro Knit produces 100% cotton knit fabrics. Markets served by Caro Knit's
customers include manufacturers of apparel for sportswear, golf shirts,
activewear/athletic, and impressions (print-ons). The higher-end products
made from Caro Knit fabric compete on the basis of design, fabric
consistency, and color. The Company has invested in state-of-the-art
dyeing and finishing facilities to achieve optimum color consistency. Caro
Knit supplies 100% of the fabric to the Company's recently established
finished apparel business. Caro Knit products are sold primarily by the
group's salaried sales force.
C-Knit Apparel produces and markets finished knit apparel products catering
to sports apparel, branded lines, golf related manufacturers, and
advertising specialty and screen printers. C-Knit utilizes the vertical
yarn and fabric manufacturing capabilities of the Company along with
cutting and contract sewing in order to control the quality and delivery
process. C-Knit products are marketed through its own salaried sales
force.
The Company's sales order backlog position in its textile/apparel
businesses was approximately $56,500,000 on December 28, 1996 compared to
$44,000,000 on December 30, 1995. All of these orders can reasonably be
expected to be filled within the 1997 fiscal year.
The Company owns a number of patents used in its textile business, and
patent protection is sought as a matter of course when machinery or process
improvements are made that are considered patentable. However, in the
opinion of the Company, its textile operations are not materially dependent
upon patents and patent applications.
CUSTOMER AND PRODUCT CONCENTRATION
There was no single class of products exceeding 10 percent of the Company's
consolidated sales volume for 1996, 1995, or 1994 and no single customer's
sales volume exceeded 10 percent of the Company's consolidated sales volume
for 1996.
SEASONALITY
Within the varied markets serviced by the Company, there are a number of
seasonal production cycles, but the Company's business as a whole is not
considered to be significantly affected by seasonal factors. Consequently,
there are no material impacts on working capital relating to seasonality.
ENVIRONMENTAL
While compliance with current federal, state and local provisions
regulating the discharge of material into the environment may require
additional expenditures by the Company, these expenditures are not expected
to have a material effect on capital expenditures, earnings or the
competitive position of the Company.
RAW MATERIALS
The Company obtains natural and synthetic raw materials from a number of
domestic suppliers. Cotton fiber is purchased at market rates from
numerous cotton merchants and directly from cotton growing cooperatives
under short-term supply contracts at costs which are significant factors in
the Company's pricing of its products. Man-made fibers are purchased from
major chemical suppliers. Although the Company's procurement of raw
materials is subject to variations in price and availability due to
agricultural and other market conditions and in the price of petroleum used
to produce man-made fibers, the Company believes that its sources of raw
materials are adequate and that it is not materially dependent on any
single supplier.
UTILITIES
The Company uses electricity as its principal energy source, with oil or
natural gas used in some facilities for finishing operations as well as
heating. During the past five years the Company has not experienced any
material problems in obtaining electricity, natural gas or oil at
anticipated prices. Nevertheless, energy shortages of extended duration
could have an adverse effect on the Company's operations.
EMPLOYMENT LEVEL
The Company had approximately 4,600 associates as of the end of fiscal
1996.
ITEM 2. PROPERTIES
The following table lists the Company's facilities according to location,
type of operation and approximate total floor space as of March 7, 1997.
Approximate
Location Type of Operation Square Feet
FLOORCOVERING
Administrative:
Dalton, GA Administrative 13,000
Calhoun, GA Administrative 60,000
Mobile, AL Administrative 20,000
Total Administrative 93,000
Warehousing:
Ringgold, GA Warehousing 119,000
Manufacturing:
Lemoore, CA Tufted Yarn Spinning 322,000
Ringgold, GA Tufted Yarn Spinning 290,000
(1) Roanoke, AL Tufted Yarn Spinning 190,000
Calhoun, GA Carpet Manufacturing,
Distribution 1,439,000
Atmore, AL Carpet Manufacturing,
Distribution 342,000
Mobile, AL Rug Manufacturing, Distribution 400,000
LaFayette, GA Filament Processing 73,000
Total Manufacturing 3,056,000
TEXTILE/APPAREL
Manufacturing:
Chattanooga, TN Yarn Spinning 440,000
Mebane, NC Yarn Spinning 99,000
Ranlo, NC Yarn Spinning 319,000
(2) Tarboro, NC Yarn Spinning 340,000
Chattanooga, TN Package Yarn Dyeing, Bleaching
and Mercerizing 276,000
Jefferson, SC Knitting, and Fabric Dyeing
and Finishing 274,000
Total Manufacturing 1,748,000
CORPORATE
Administrative:
Chattanooga, TN Administrative 41,000
Total 5,057,000
ITEM 2. PROPERTIES - CONTINUED
(1) This property is currently leased. Under the provisions of the
Roanoke, AL lease, the Company is acquiring title to the property over the
term of the lease, which is expected to terminate in 2004.
(2) Currently operating; "held for sale".
In addition to the facilities listed above, the Company owns or leases
various administrative, storage, warehouse and office spaces.
In the opinion of the Company, its manufacturing facilities are well
maintained and the machinery is efficient and competitive. Operations at
each plant generally vary between 120 hours and 168 hours per week. There
are no material encumbrances on any of the Company's operations.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or its
subsidiaries are a party or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of 1996 to a vote
of the shareholders.
Pursuant to instruction G of Form 10-K the following is included as an
unnumbered item to Part I.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, positions and offices held by the executive officers of
the registrant as of March 7, 1997, are listed below along with their
business experience during the past five years.
Name, Age Business Experience During
and Position Past Five Years
Daniel K. Frierson, 55 Director since 1973, Chairman of
Chairman of the Board, President the Board since 1987 and Chief
and Chief Executive Officer, Executive Officer since 1980.
Director, Member of Executive Director of SunTrust Bank,
Committee Chattanooga, N.A. Brother of
Paul K. Frierson.
Glenn A. Berry, 49 Executive Vice President and Chief
Executive Vice President and Financial Officer since January,
Chief Financial Officer 1997. Vice President, Lighting
Products Group, MagneTek, Inc.,
March, 1995 to December, 1996.
Vice President, Allied Signal
Laminate Systems 1986 to 1994.
William N. Fry, IV, 38 Executive Vice President and Chief
Executive Vice President and Chief Operating Officer, Floorcovering
Operating Officer, Floorcovering Group since January, 1997.
Group Executive Vice President and Chief
Operating Officer, Candlewick,
Carriage and Bretlin since January,
1996. President, Bretlin from
January, 1995 to January, 1996.
Executive Vice President, Bretlin
from November, 1993 to January,
1995. Business Analyst, Carriage
from July, 1993 to November, 1993.
General Manager, Dyed Yarns from
May, 1992 to July, 1993. Assistant
Plant Manager, Chattanooga Finishing
from July, 1991 to May, 1992.
EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED
Name, Age Business Experience During
and Position Past Five Years
George B. Smith, 56 Executive Vice President and
Executive Vice President Chief Operating Officer, Textile/
and Chief Operating Officer, Apparel Group since September, 1996.
Textile/Apparel Group Executive Vice President and
President, Natural/Dyed Yarns
and Knits since March, 1994.
President, Natural and Dyed Yarn
Group from August, 1993 to March,
1994. President Natural Yarn Group
from October, 1992 to August, 1993.
Self-employed (Consulting and
Commission Sales) June, 1990 to
November, 1992.
Philip H. Barlow, 47 Vice President and President of
Vice President and President, Carriage Industries, Inc. since
Carriage Industries, Inc. 1993. Vice President of Sales and
Marketing, Carriage, 1988 to 1993.
Director of Sales and Marketing,
Carriage, 1986 to 1988.
Kenneth L. Dempsey, 38 Vice President and President,
Vice President and President, Masland Carpets, Inc. since
Masland Carpets, Inc. January, 1997. Vice President
of Marketing, Masland, 1991 to 1996.
Director of Marketing, The Harbinger
Company, Inc., subsidiary of Horizon
Industries, Inc., 1982 to 1991.
Paul K. Frierson, 59 Director since 1988. Vice President
Vice President and President, and President, Candlewick Yarns
Candlewick Yarns, Director since 1989. Director of
NationsBank/Chattanooga. Brother of
Daniel K. Frierson.
W. Derek Davis, 46 Vice President of Human Resources
Vice President, Human since January, 1991. Corporate
Resources Employee Relations Director,
1990 to 1991.
EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED
Name, Age Business Experience During
and Position Past Five Years
Gary A. Harmon, 51 Treasurer since 1993.
Treasurer Director of Tax and Financial
Planning, 1985 to 1993.
D. Eugene Lasater, 46 Controller since 1988.
Controller
Starr T. Klein, 54 Secretary since November, 1992.
Secretary Assistant Secretary, 1987 to 1992.
The executive officers of the registrant are elected annually by the Board
of Directors at its first meeting held after each annual meeting of the
Company's shareholders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
The Company's Common Stock trades on the over-the-counter National Market
System with the NASDAQ symbol DXYN. No market exists for the Company's
Class B Common Stock.
As of March 7, 1997, the total number of record holders of the Company's
Common Stock was approximately 4,500 and the total number of holders of the
Company's Class B Common Stock was 16. Management of the Company estimates
that there are approximately 3,600 shareholders who hold the Company's
Common Stock in nominee names. Dividends and Price Range of Common Stock
for the four quarterly periods in the years ended December 28, 1996 and
December 30, 1995 are as follows:
<TABLE>
DIXIE YARNS, INC.
QUARTERLY FINANCIAL DATA, DIVIDENDS
AND PRICE RANGE OF COMMON STOCK
(Unaudited)
(dollars in thousands, except per share data)
<CAPTION>
1996
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $161,520 $167,962 $145,400 $140,199
Gross profit 24,260 30,429 24,958 20,229
Net income (loss) (991) 1,320 2,030 (13,572)
Earnings (loss) per common and
common equivalent share (.09) .12 .18 (1.21)
Dividends:
Common Stock --- --- --- ---
Class B Common Stock --- --- --- ---
Common Stock prices:
High $ 5.13 $ 5.38 $ 5.13 $ 8.13
Low 3.81 4.25 3.88 4.38
<CAPTION>
1995
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $181,646 $177,809 $161,289 $150,099
Gross profit 28,552 26,172 23,395 19,962
Net income (loss) 883 431 (6,030) (47,463)
Earnings (loss) per common and
common equivalent share .06 .03 (.53) (4.24)
Dividends:
Common Stock --- --- --- ---
Class B Common Stock --- --- --- ---
Common Stock prices:
High $ 7.13 $ 7.19 $ 7.13 $ 6.00
Low 4.88 5.50 5.63 3.75
<FN>
The total of quarterly earnings per share does not equal the annual earnings per share
due primarily to Common Stock purchased and issued during the respective periods.
During the fourth quarter of 1996, the Company recognized asset valuation losses of
$18,995 ($13,074, or $1.17 per share after taxes). During the fourth quarter of 1995,
the Company recognized asset valuation losses of $53,751 ($44,674, or $3.99 per share
after taxes).
The discussion of restrictions on payment of dividends is included in Note E to the
Consolidated Financial Statements included herein.
</FN>
ITEM 6. SELECTED FINANCIAL DATA
(dollars in thousands, except per share data)
<FN>
The following selected financial data should be read in conjunction with the related consolidated financial statements and notes
thereto included under Items 8, 14(a) (1) and (2) and 14 (d) of the report on Form 10-K.
<CAPTION>
Year Ended
December 28, December 30, December 31, December 25, December 26,
1996 1995 1994 1993(1) 1992
<S> <C> <C> <C> <C> <C>
Net sales $615,081 $670,842 $682,859 $591,408 $469,832
Income (loss) from continuing
operations(2) (11,213) (52,179) (3,227) 4,684 5,467
Total assets 328,135 396,997 488,320 496,579 397,080
Long-term debt:
Senior indebtedness 34,036 97,383 87,025 87,650 70,023
Subordinated notes 50,000 50,000 50,000 50,000 50,000
Convertible subordinated debentures 44,782 44,782 44,782 44,782 44,782
Common Stock, subject to put option --- --- 18,178 18,178 ---
Per Share:
Income (loss) from continuing
operations: (2)
Primary (1.00) (4.44) (.24) .41 .62
Fully diluted (1.00) (4.44) (.24) .40 .62
Cash dividends declared:
Common Stock --- --- .20 .20 .20
Class B Common Stock --- --- .20 .20 .20
<FN>
(1) Includes the results of operations of Carriage Industries, Inc. and Masland Carpets, Inc. subsequent to their acquisitions on
March 12, 1993 and July 9, 1993, respectively.
(2) Income (loss) from continuing operations includes asset valuation losses of $13,074, or $1.17 per share, for the year ended
December 28, 1996, asset valuation losses of $51,058, or $4.35 per share, and casualty insurance gains of $3,298, or $.28 per
share, for the year ended December 30, 1995, asset valuation losses of $6,446, or $.49 per share, and a nontaxable life
insurance gain of $12,835, or $.97 per share, for the year ended December 31, 1994. See Note B, Note K, Note L, Note M, and
Note N to the Consolidated Financial Statements.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
An integral part of the Company's strategy has involved expansion of its
floorcovering business and to focus its textile/apparel business on higher
margin markets as well as vertical growth through finished apparel.
Another part of the Company's strategy, which is shared by both business
groups, is to be consumer driven and to increase its production and sales
of products that are sold in the form used by the ultimate consumer.
The Company expanded its floorcovering business early in fiscal 1997 when
the assets and business of Danube Carpet Mills, Inc. were acquired for
$18.2 million cash. Danube, which had 1996 sales of approximately $75.0
million, manufactures carpet for the manufactured housing, recreational
vehicle, and van conversion industries. The carpet manufacturing and
distribution operations of Danube have been consolidated into existing
facilities and its carpet yarn plant is operating as a part of the
Company's carpet yarn operation. This acquisition complements the
Company's floorcovering business and is expected to significantly enhance
operating results through an increase in production volume and a favorable
product mix.
Implementation of these strategies resulted in unusual charges to
operations in 1996, 1995, and 1994. The results for 1996 included charges
of $20.6 million ($14.3 million after-tax, or $1.27 per share), primarily
relating to the write-down of the Company's Tarboro textile spinning
facility, which is being held for sale, costs associated with the sale of
the Company's thread business, as well as costs to consolidate operations
and exit certain lower-margin product lines. In 1995, net charges of $58.4
million ($47.9 million after-tax, or $4.07 per share), were recorded
principally related to the disposal of the Company's thread business, asset
impairment losses, a plant sale, and facility consolidations. The
Company's 1994 results included a $12.8 million nontaxable life insurance
gain and $19.6 million of net charges to write-down idled facilities and
for losses related to discontinued product lines. The aggregate effect of
these items in 1994 was a pre-tax charge of $6.8 million ($.6 million
after-tax gain, or $.05 per share).
Including the unusual items described above, the Company reported a net
loss of $11.2 million, or $1.00 per share, in 1996, $52.2 million, or $4.44
per share, in 1995, and $3.2 million, or $.24 per share, in 1994.
Excluding the unusual items, net income was $3.1 million, or $.27 per
share, in 1996, compared with a net loss of $4.3 million, or $.37 per
share, in 1995, and a net loss of $3.8 million, or $.29 per share, in 1994.
The following table reflects selected operating data related to the two
business segments of the Company: Floorcovering and Textile/apparel (see
additional information in Note P to the consolidated financial statements).
The effects of the unusual items have been reported separately in order to
more clearly understand the operations of each segment.
(dollars in millions)
1996 1995 1994
Sales
Floorcovering $366.4 $361.5 $354.0
Textile/apparel 252.0 313.7 332.5
Intersegment elimination (3.3) (4.4) (3.6)
Total sales $615.1 $670.8 $682.9
Operating profit (loss)
Floorcovering
Excluding unusual items $ 25.4 $ 20.1 $ 25.4
Unusual items (1.9) 0.1 2.7
Floorcovering operating profit 23.5 20.2 28.1
Textile/apparel
Excluding unusual items (1.3) (5.4) (10.9)
Unusual items (18.7) (58.5) (22.1)
Textile/apparel operating loss (20.0) (63.9) (33.0)
Combined
Excluding unusual items 24.1 14.7 14.5
Unusual items (20.6) (58.4) (19.4)
Company operating profit (loss) $ 3.5 $(43.7) $ (4.9)
1996 Compared to 1995 (excluding unusual items) - Operating profits in the
Company's floorcovering business increased by $5.3 million or 26% in 1996,
compared with 1995. During this period sales increased by 1%. The
improvement in operating profit was attributable to a shift in sales mix to
higher-margin products, and a $2.8 million gain from liquidation of LIFO
inventories.
Operating losses for the Company's textile/apparel business declined $4.1
million in 1996 compared with 1995 despite a 20% decline in net sales. The
improved results in 1996 were attributable to the exit of lower-margin
product lines and businesses and reduced manufacturing, selling and
administrative expenses. The decline in sales is principally attributable
to the sale of the Company's thread business on June 3, 1996.
Interest expense declined in 1996 compared with 1995 by $2.6 million due to
a $62.9 million reduction in debt, which was funded by the proceeds from
the sale of the Company's thread business and operating cash flows.
1995 Compared to 1994 (excluding unusual items) - Although sales in the
Company's floorcovering business increased 2% in 1995 compared with 1994,
operating profits declined by $5.3 million in 1995 compared with the 1994
results. Excess capacity and a slowdown in demand in the carpet industry
resulted in pressure on selling prices during a period when material costs
increased. During 1995, disruption costs were incurred as a result of
capacity expansions at Carriage and Masland. These expansions positioned
the floorcovering segment to take advantage of anticipated growth. Selling
expense increased in 1995 compared with 1994 to accommodate new product
introductions and to increase staff for anticipated sales growth.
Sales in the Company's textile/apparel business declined 6% in 1995
compared with 1994. The decline in sales occurred in the last half of
1995, particularly in the fourth quarter, as the Company's customers,
primarily apparel and upholstery fabric manufacturers, were severely
affected by a general slowdown in retail sales of their products.
Additionally, sales volume was negatively impacted as a result of plant
consolidations and a plant sale in the second and third quarters of 1995,
respectively. Operating losses in the textile/apparel business declined by
$5.5 million in 1995 compared with 1994. The 1995 improvement resulted
from significant cost reductions due to manufacturing efficiencies and
lower selling and administrative costs which more than offset higher cotton
and other raw material costs.
Interest expense increased by $1.8 million in 1995 compared with 1994 due
to the general increase in interest rates. During 1996, 1995, and 1994,
the Company's effective income tax rate differs from statutory income tax
rates primarily due to nondeductible amortization and write-offs of
intangible assets and the nontaxable life insurance gain in 1994.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities". The Statement has a
required adoption date of 1997 and provides new accounting and financial
reporting rules for sales, securitizations, and servicing of receivables
and other financial assets, for secured borrowing and collateral
transactions, and for extinguishments of liabilities. The required changes
from the adoption of this new standard are not expected to have a material
effect on the Company's financial statements.
LIQUIDITY AND CAPITAL RESOURCES
During the three-year period ended December 28, 1996, cash flows generated
from operating activities totaled $103.9 million and were supplemented by
$34.3 million from asset sales and $16.8 million of life insurance
proceeds. These funds were used to finance the Company's operations and
capital expenditures, to reduce debt, and to repurchase stock upon exercise
of the put option issued in connection with the acquisition of Masland
Carpets, Inc.
Capital expenditures (including expenditures of $3.1 million in 1994
related to casualty losses) were $83.7 million during the three-year period
ended December 28, 1996 and were directed toward upgrading equipment to
improve quality and manufacturing efficiency, as well as expanding
manufacturing capacity and service capability in the Company's
floorcovering business. During this period, charges for depreciation and
amortization totaled $99.4 million.
During 1996, the Company's debt was reduced by $62.9 million, primarily
from proceeds related to the sale of the Company's thread business. The
Company's operating activities generated $55.0 million in cash flows
(including $31.8 million in working capital reductions related to the sale
of the thread business) and $24.1 million of funds were generated from
asset sales (including $21.9 million for the sale of the thread business).
These funds substantially financed the Company's operations, fixed asset
purchases of $17.6 million and the debt reduction.
In 1993, approximately 1.0 million shares of the Company's Common Stock
were issued under a put option arrangement relating to the acquisition of
Masland Carpets, Inc. The holders exercised their right on July 10, 1995
to put the shares to the Company at a price of approximately $18.00 per
share.
In October 1993, the Company entered into a seven-year agreement and sold a
$45.0 million undivided interest in a revolving pool of its trade accounts
receivable. The sale is reflected as a reduction of accounts receivable in
the Company's balance sheets. No further interest has been sold under this
agreement subsequent to the original sale. The cost of this program was
fixed at 6.08% per annum of the undivided interest sold plus administrative
fees typical in such transactions. In addition, the Company is generally
at risk for credit losses associated with sold receivables and provides for
such in the Company's financial statements.
At December 28, 1996, the Company's debt structure consisted of $44.8
million of convertible subordinated debentures, $50.0 million of
subordinated notes and $34.0 million of senior indebtedness, principally
under the Company's revolving credit and term loan agreement. The
convertible subordinated debentures require annual mandatory sinking fund
payments of $2.5 million, beginning in 1998. Principal payments are not
required under the Company's subordinated notes until the year 2000. The
revolving credit and term loan agreement was renewed for five years in
March, 1995. The amended agreement provides for revolving credit of up to
$125.0 million through the five-year commitment period and a $10.0 million
term loan. Principal payments on the term loan are due in quarterly
installments of $625,000 which began in March, 1996. Under the terms of
the revolving credit agreement, borrowing capacity is permanently reduced
by 50% of the net cash proceeds from certain significant asset sales.
Accordingly, the borrowing line has been reduced by $24.6 million as a
result of the sales of the Company's Newton plant in September, 1995 and
thread business in June, 1996.
Interest rates available under the facility are selected by the Company
from a number of options which effectively allow for borrowings at rates
equal to or lower than the greater of the lender's prime rate or the
federal funds rate plus .5%. At year end, the available unused borrowing
capacity under revolving credit facilities was $77.1 million. Early in
fiscal 1997, $18.2 million of the availability was used to finance the
acquisition of Danube Carpet Mills, Inc.
Under restrictions set forth in the Company's subordinated note agreement,
and absent a waiver from the lender or an amendment, future dividends may
be paid only to the extent of 75% of the excess of cumulative income,
excluding extraordinary items, for periods subsequent to December 28, 1996
above $68.6 million. During the fourth quarter of 1996, the subordinated
note lender granted the Company a waiver to permanently exclude the write-
down and subsequent sale of the carrying amounts of the property,
machinery, and related assets of the Company's Tarboro spinning facility
from a net worth covenant contained within the agreement.
Availability under the Company's debt arrangements and expected operating
cash flows are deemed adequate to finance the Company's future liquidity
requirements, which are anticipated to consist primarily of capital
expenditures and seasonal working capital needs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The supplementary financial information as required by Item 302 of Regulation
S-K is included in PART II, ITEM 5 of this report and the remaining response is
included in a separate section of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The section entitled "Information about Nominees for Directors" in the Proxy
Statement of the registrant for the annual meeting of shareholders to be held
May 1, 1997 is incorporated herein by reference. Information regarding the
executive officers of the registrant is presented in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation Information" in the Proxy
Statement of the registrant for the annual meeting of shareholders to be
held May 1, 1997 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Principal Shareholders", as well as the beneficial
ownership table (and accompanying notes) from the section entitled "Information
About Nominees for Directors" in the Proxy Statement of the registrant for the
annual meeting of shareholders to be held May 1, 1997 is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions Between the Company and Directors
and Officers" in the Proxy Statement of the registrant for the annual meeting
of shareholders to be held May 1, 1997 is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2)-- The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) Listing of Exhibits:
(i) Exhibits Incorporated by Reference:
(3a) Restated Charter of Dixie Yarns, Inc.
(3b) Amended and Restated By-Laws of Dixie Yarns, Inc.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(4a) Second Amended and Restated Revolving Credit and
Term Loan Agreement dated January 31, 1992 by and
among Dixie Yarns, Inc., and Trust Company Bank,
NationsBank of North Carolina, N.A. and Chemical
Bank.
(4b) Loan Agreement dated February 6, 1990, between
Dixie Yarn, Inc. and New York Life Insurance
Company and New York Life Insurance and Annuity
Corporation.
(4c) Form of Indenture, Dated May 15, 1987 between Dixie
Yarns, Inc. and Morgan Guaranty Trust Company of
New York as trustee.
(4d) Revolving Credit Loan Agreement dated as of
September 16, 1991 by and among Ti-Caro, Inc. and
Trust Company Bank, individually and as Agent, NCNB
National Bank and Chemical Bank.
(4e) First Amendment to Revolving Credit Loan Agreement
dated as of August 19, 1992 by and among Ti-Caro,
Inc., T-C Threads, Inc. and Trust Company Bank,
individually and as agent, NCNB National Bank, and
Chemical Bank.
(4f) First Amendment, dated August 25, 1993 to Second
Amended and Restated Revolving Credit and Term Loan
Agreement dated January 31, 1992, by and among
Dixie Yarns, Inc. and Trust Company Bank,
NationsBank of North Carolina, N.A. and Chemical
Bank.
(4g) Third Amended and Restated Credit Agreement dated
March 31, 1995.
(4h) Waiver and First Amendment to Credit Agreement dated
February 27, 1996.
(10c) Dixie Yarns, Inc. Nonqualified Defined Contribution
Plan.
(10d) Dixie Yarns, Inc. Nonqualified Employee Savings
Plan.
(10e) Dixie Yarns, Inc. Incentive Compensation Plan.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(10f) Asset Transfer and Restructuring Agreement dated
July 19, 1993, by and among Dixie Yarns, Inc.,
Masland Carpets, Inc., individual management
investors of Masland Carpets, Inc., The Prudential
Insurance Company of America and Pruco Life
Insurance Company.
(10g) Assignment and Bill of Sale dated July 9, 1993, by
and between Dixie Yarns, Inc. and Masland Carpets,
Inc.
(10h) Assignment and Assumption Agreement dated July 9,
1993, by and between Dixie Yarns, Inc. and Masland
Carpets, Inc.
(10i) Stock Rights and Restrictions Agreement dated July
9, 1993, by and among Dixie Yarns, Inc., Masland
Carpets, Inc., The Prudential Insurance Company of
America and Pruco Life Insurance Company of
America.
(10j) Pooling and Servicing Agreement dated as of October
15, 1993, among Dixie Yarns, Inc., Dixie Funding,
Inc. and NationsBank of Virginia, N.A. (as
Trustee).
(10k) Annex X - Definitions, to Pooling and Servicing
Agreement dated as of October 15, 1993, among Dixie
Yarns, Inc., Dixie Funding, Inc. and NationsBank of
Virginia, N.A. (as Trustee).
(10l) Series 1993-1 Supplement, dated as of October 15,
1993, to Pooling and Servicing Agreement dated as
of October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding Inc. and NationsBank of Virginia, N.A. (as
Trustee).
(10m) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and New York Life Insurance and
Annuity Corporation.
(10n) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and John Alden Life Insurance
Company.
(10o) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and John Alden Life Insurance Company
of New York.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(10p) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and Keyport Life Insurance Company.
(10q) Form of Nonqualified Stock Option Agreement Under the
Dixie Yarns, Inc. Incentive Stock Plan.
(10r) Form of Amendment to Nonqualified Stock Option
Agreement Under the Dixie Yarns, Inc. Incentive Stock
Plan.
(10s) Asset Purchase Agreement dated May 23, 1996, by and
among T-C Threads, Inc. d/b/a Threads USA, Threads of
Puerto Rico, Inc., Productos para la Industria de la
Maquila, S. A., PRIMA, Hilos y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc. and American & Efird, Inc.
(10t) Amendment, dated May 31, 1996, to Asset Purchase
Agreement dated May 23, 1996, by and among T-C Threads,
Inc. d/b/a Threads USA, Threads of Puerto Rico, Inc.,
Productos para la Industria de la Maquila, S. A.,
PRIMA, Hilos y Accessorios, S. A. de C. V., and Dixie
Yarns, Inc. and American & Efird, Inc.
(10u) Second Amendment, dated June 3, 1996, to Asset Purchase
Agreement dated May 23, 1996, by and among T-C Threads,
Inc., d/b/a Threads USA, Threads of Puerto Rico, Inc.,
Productos para la Industria de la Maquila, S. A.,
PRIMA, Hilos y Accessorios, S. A. de C. V., and Dixie
Yarns, Inc. and American & Efird, Inc.
(10v) Yarn and Finished Goods Agreement dated as of June 3,
1996, by and among T-C Threads, Inc. d/b/a Threads USA,
Threads of Puerto Rico, Inc., Productos para la
Industria de la Maquila, S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V., and Dixie Yarns, Inc. and
American & Efird, Inc.
(10w) Accounts Receivable Agreement dated as of June 3, 1996,
by and among T-C Threads, Inc. d/b/a Threads USA,
Threads of Puerto Rico, Inc., Productos para la
Industria de la Maquila, S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V., and Dixie Yarns, Inc. and
American & Efird, Inc.
(10x) Noncompetition Agreement dated as of June 3, 1996, by
and among T-C Threads, Inc. d/b/a Threads USA, Threads
of Puerto Rico, Inc., Productos para la Industria de la
Maquila, S. A., PRIMA, Hilos y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc. and American & Efird, Inc.
(ii) Exhibits filed with this report:
(4i) Waiver and Modification Agreement dated November 1,
1996.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(4j) Waiver Letter dated December 13, 1996.
(10a) Dixie Yarns, Inc. Incentive Stock Plan as amended.
(10b) Form of Stock Option Agreement Under the Dixie Yarns,
Inc. Incentive Stock Plan as amended.
(10y) Dixie Yarns, Inc. Stock Ownership Plan as amended.
(11) Statement Re: Computation of Earnings Per Share.
(21) Subsidiaries of the Registrant.
(23) Consent of Ernst & Young LLP.
(b) Reports on Form 8-K--No reports on Form 8-K have been filed by the
registrant during the last quarter of the period covered by this
report.
(c) Exhibits--The response to this portion of Item 14 is submitted as a
separate section of this report. See Item 14 (a) (3) (ii) above.
(d) Financial Statement Schedules--The response to this portion of Item 14
is submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DIXIE YARNS, INC.
March 26, 1997 BY: /s/DANIEL K. FRIERSON
Daniel K. Frierson,
Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Chairman of the Board,
President, Director and
/s/DANIEL K. FRIERSON Chief Executive Officer March 26, 1997
Daniel K. Frierson
Vice President,
President of Candlewick
/s/PAUL K. FRIERSON Yarns and Director March 26, 1997
Paul K. Frierson
Executive Vice President and
/s/GLENN A. BERRY Chief Financial Officer March 26, 1997
Glenn A. Berry
/s/D. EUGENE LASATER Controller March 26, 1997
D. Eugene Lasater
/s/PAUL K. BROCK Director March 26, 1997
Paul K. Brock
SIGNATURES -- CONTINUED
/s/LOVIC A. BROOKS, JR. Director March 26, 1997
Lovic A. Brooks, Jr.
/s/J. FRANK HARRISON, JR. Director March 26, 1997
J. Frank Harrison, Jr.
/s/JAMES H. MARTIN, JR. Director March 26, 1997
James H. Martin, Jr.
/s/JOHN W. MURREY, III Director March 26, 1997
John W. Murrey, III
/s/PETER L. SMITH Director March 26, 1997
Peter L. Smith
/s/ROBERT J. SUDDERTH, JR. Director March 26, 1997
Robert J. Sudderth, Jr.
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14 (a)(1) AND (2) AND ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 28, 1996
DIXIE YARNS, INC.
CHATTANOOGA, TENNESSEE
FORM 10-K--ITEM 14(a)(1) and (2)
DIXIE YARNS, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Dixie Yarns, Inc. and
subsidiaries are included in Item 8:
Report of Independent Auditors
Consolidated balance sheets--December 28, 1996 and
December 30, 1995
Consolidated statements of operations--Years ended
December 28, 1996, December 30, 1995, and December 31, 1994
Consolidated statements of cash flows--Years ended
December 28, 1996, December 30, 1995, and December 31, 1994
Consolidated statements of stockholders' equity--Years ended
December 28, 1996, December 30, 1995, December 31, 1994
The following consolidated financial statement schedule of Dixie Yarns, Inc.
and subsidiaries is included in Item 14(d):
Schedule II--Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions, or are inapplicable, or the information is otherwise
shown in the financial statements or notes thereto, and therefore have been
omitted.
Report of Independent Auditors
Board of Directors
Dixie Yarns, Inc.
We have audited the accompanying consolidated balance sheets of Dixie
Yarns, Inc. and subsidiaries as of December 28, 1996 and December 30, 1995,
and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
December 28, 1996. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Dixie Yarns, Inc. and subsidiaries at December 28, 1996 and
December 30, 1995, and the consolidated results of their operations and
cash flows for each of the three years in the period ended December 28,
1996, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
As discussed in Note A to the consolidated financial statements, in
1995 the Company adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of."
ERNST & YOUNG LLP
Chattanooga, Tennessee
February 20, 1997
DIXIE YARNS, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,988 $ 3,413
Accounts receivable (less allowance for doubtful
accounts of $3,614 in 1996 and $3,156 in 1995) 14,628 17,369
Inventories 93,226 103,253
Assets held for sale 10,350 22,090
Other 10,520 10,518
TOTAL CURRENT ASSETS 130,712 156,643
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 8,673 9,128
Buildings and improvements 65,960 72,544
Machinery and equipment 263,940 302,069
338,573 383,741
Less accumulated amortization and depreciation 182,797 190,238
NET PROPERTY, PLANT AND EQUIPMENT 155,776 193,503
INTANGIBLE ASSETS (less accumulated amortization of
$6,928 in 1996 and $5,973 in 1995) 31,611 35,775
OTHER ASSETS 10,036 11,076
TOTAL ASSETS $328,135 $396,997
<FN>
See notes to consolidated financial statements.
<CAPTION>
December 28, December 30,
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 31,473 $ 20,394
Accrued expenses 24,338 23,294
Current portion of long-term debt 2,641 2,171
TOTAL CURRENT LIABILITIES 58,452 45,859
LONG-TERM DEBT
Senior indebtedness 34,036 97,383
Subordinated notes 50,000 50,000
Convertible subordinated debentures 44,782 44,782
TOTAL LONG-TERM DEBT 128,818 192,165
OTHER LIABILITIES 9,555 11,486
DEFERRED INCOME TAXES 22,760 29,197
STOCKHOLDERS' EQUITY
Common Stock ($3 par value per share): Authorized
80,000,000 shares, issued - 13,876,826 shares in
1996 and 13,862,799 shares in 1995 41,630 41,588
Class B Common Stock ($3 par value per share):
Authorized 16,000,000 shares, issued - 735,228
shares in 1996 and 1995 2,206 2,206
Common Stock subscribed - 449,300 shares in 1996 1,348 ---
Additional paid-in capital 132,475 131,618
Stock subscriptions receivable (2,190) ---
Retained earnings (deficit) (8,766) 2,447
Minimum pension liability adjustment (2,668) (4,116)
164,035 173,743
Less Common Stock in treasury at cost - 3,409,872
shares in 1996 and 3,404,123 shares in 1995 55,485 55,453
TOTAL STOCKHOLDERS' EQUITY 108,550 118,290
Commitments - Note O
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $328,135 $396,997
<FN>
See notes to consolidated financial statements.
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
<CAPTION>
Year Ended
December 28, December 30, December 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales $615,081 $670,842 $682,859
Cost of sales 515,205 572,762 595,732
GROSS PROFIT 99,876 98,080 87,127
Selling and administrative expenses 74,061 82,624 82,293
Asset valuation losses 18,995 63,425 10,397
Life insurance gain --- --- (12,835)
Other expense - net 9,363 1,112 5,469
INCOME (LOSS) BEFORE INTEREST AND TAXES (2,543) (49,081) 1,803
Interest expense 13,000 15,591 13,748
LOSS BEFORE INCOME TAXES (15,543) (64,672) (11,945)
Income tax benefit (4,330) (12,493) (8,718)
NET LOSS $(11,213) $(52,179) $ (3,227)
Net loss per common and
common equivalent share $ (1.00) $ (4.44) $ (.24)
<FN>
See notes to consolidated financial statements.
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION>
Year Ended
December 28, December 30, December 31,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $(11,213) $(52,179) $ (3,227)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 28,195 35,980 35,199
Benefit for deferred income taxes (5,395) (11,416) (7,410)
Loss on property, plant and
equipment disposals and asset
valuation adjustments 18,706 65,037 10,936
Life insurance gain --- --- (12,835)
Changes in operating assets and
liabilities, net of effects of
business combinations:
Accounts receivable 2,740 11,549 (3,532)
Inventories 10,028 3,517 (2,788)
Other current assets (721) (585) 1,170
Other assets (3) (552) (547)
Accounts payable and accrued expenses 12,222 (21,143) 1,698
Other liabilities 443 279 (278)
NET CASH PROVIDED BY OPERATING ACTIVITIES 55,002 30,487 18,386
CASH FLOWS FROM INVESTING ACTIVITIES
Life insurance proceeds --- --- 16,761
Net proceeds from sales and insurance
recovery of property, plant and equipment 24,057 7,773 2,445
Purchase of property, plant and equipment
(includes $3,118 in 1994 for casualty
damages) (17,634) (30,266) (35,792)
Cash payments in connection with business
combinations, net of cash acquired --- --- (230)
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 6,423 (22,493) (16,816)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in credit line
borrowings (60,080) 2,529 (635)
Borrowings (payments) under term loan
facility (2,500) 10,000 ---
Common stock acquired (32) (18,457) (191)
Dividends paid --- --- (2,450)
Other (238) (557) (437)
NET CASH USED IN FINANCING ACTIVITIES (62,850) (6,485) (3,713)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,425) 1,509 (2,143)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 3,413 1,904 4,047
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,988 $ 3,413 $ 1,904
<FN>
See notes to consolidated financial statements.
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands, except per share data)
<CAPTION>
Class B Common Additional Stock Retained Pension Common
Common Common Stock Paid-In Subscriptions Earnings Liability Stock In
Stock Stock Subscribed Capital Receivable (Deficit) Adjustment Treasury
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 25, 1993 $41,557 $2,206 $131,684 $ 60,303 $(4,982) $(55,086)
Common Stock acquired for treasury-
19,344 shares (191)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 5,409 shares 16 26
Net loss for the year (3,227)
Minimum pension liability adjustment 652
Dividends - Common Stock and Class B
Common Stock $.20 per share (2,450)
BALANCE AT DECEMBER 31, 1994 41,573 2,206 131,710 54,626 (4,330) (55,277)
Common Stock acquired for treasury-
28,133 shares (176)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 5,157 shares 15 11
Net loss for the year (52,179)
Minimum pension liability adjustment 214
Adjustment for purchase of shares
subject to put option (103)
BALANCE AT DECEMBER 30, 1995 41,588 2,206 131,618 2,447 (4,116) (55,453)
Common Stock acquired for treasury-
5,749 shares (32)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 14,027 shares 42 15
Common Stock subscribed -
449,300 shares $1,348 842 $(2,190)
Net loss for the year (11,213)
Minimum pension liability adjustment 1,448
BALANCE AT DECEMBER 28, 1996 $41,630 $2,206 $1,348 $132,475 $(2,190) $ (8,766) $(2,668) $(55,485)
<FN>
See notes to consolidated financial statements.
</TABLE>
DIXIE YARNS, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of Dixie Yarns, Inc. and its wholly-owned subsidiaries (the
"Company"). Significant intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash Equivalents: Highly liquid investments with original maturities of
three months or less when purchased are reported as cash equivalents.
Credit and Market Risk: The Company sells floorcovering and
textile/apparel products to a wide variety of manufacturers and retailers
located primarily throughout the United States. The Company performs
ongoing credit evaluations of its customers and generally does not require
collateral. An allowance for doubtful accounts is maintained at a level
which management believes is sufficient to cover potential credit losses
including potential losses on receivables sold (see Note C). The Company
invests its excess cash in short-term investments and has not experienced
any losses on those investments.
Inventories: Substantially all inventories are stated at cost determined
by the last-in, first-out (LIFO) method, which is less than market. The
reduction of certain inventory quantities resulted in liquidations of LIFO
inventory quantities carried at lower costs prevailing in prior years. The
effect of these reductions was to decrease the net losses for 1996, 1995,
and 1994 by approximately $4,909 ($.44 per share), $750 ($.06 per share),
and $670 ($.05 per share), respectively. The 1996 effect includes $3,195
($.29 per share) relating to inventory reductions resulting from the sale
of the Company's thread business.
Inventories are summarized as follows:
1996 1995
At current cost:
Raw materials $ 20,276 $ 21,012
Work-in-process 26,294 24,441
Finished goods 54,109 73,314
Supplies, repair parts and other 4,000 6,772
104,679 125,539
Excess of current cost over LIFO value (11,453) (22,286)
Total inventories $ 93,226 $103,253
Property, Plant and Equipment: Property, plant and equipment is stated at
the lower of cost or impaired value. Provision for depreciation and
amortization of property, plant and equipment has been computed for
financial reporting purposes using the straight-line method over the
estimated useful lives of the related assets, ranging from 10 to 40 years
for buildings and improvements, and 3 to 10 years for machinery and
equipment. Applicable statutory recovery methods are used for tax
purposes. Depreciation and amortization of property, plant and equipment
for financial reporting purposes totaled $26,893 in 1996, $33,545 in 1995,
and $32,679 in 1994.
Intangible Assets: The excess of the purchase price over the fair market
value of identifiable net assets acquired in business combinations is
recorded as goodwill and is amortized using the straight-line method over
40 years.
Impairment of Assets: In 1995, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". The Statement
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets.
There was no material effect on the financial statements from the adoption
because the Company's prior impairment recognition practice was consistent
with the major provisions of the Statement. Under provisions of the
Statement, impairment losses are recognized when expected future cash flows
are less than the assets' carrying value. Accordingly, when indicators of
impairment are present, the Company evaluates the carrying value of
property, plant, and equipment and intangibles in relation to the operating
performance and estimated future undiscounted cash flows of the underlying
business. The Company adjusts the net book value of the underlying assets
if the sum of expected future cash flows is less than book value.
Stock Based Compensation: During 1996, the Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". The Company grants stock options for a fixed number of
shares to employees with an exercise price equal to or greater than the
fair value of the shares at the date of grant. As permitted under
Statement No. 123, the Company continues to account for stock option grants
in accordance with Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", and accordingly, recognizes no compensation
expense for the stock option grants.
Earnings per Share: Primary earnings per common and common equivalent
share is computed using the weighted average number of shares of Common
Stock outstanding and includes the effects of the assumed conversion of
Class B Common Stock and the potentially dilutive effects of the exercise
of stock options. Fully-diluted earnings per share reflect the maximum
potential dilution of per share earnings which would have occurred
assuming, if dilutive, the exercise of stock options and the conversion of
the subordinated debentures. Such effects were anti-dilutive for 1996,
1995 and 1994 and, accordingly, were excluded from per share computations.
Revenue Recognition: The Company recognizes revenue for goods sold at the
time title passes to the customer.
Reclassifications: Certain amounts for 1995 and 1994 have been
reclassified to conform with the 1996 presentation.
NOTE B - SALE OF THE COMPANY'S THREAD BUSINESS
On June 3, 1996, the Company sold substantially all of the property, plant
and equipment, raw material and in-process inventories, and certain other
assets related to its thread business to American & Efird, Inc. for $27,157
cash (including $1,500 held in escrow). Under the terms of the asset
purchase agreement: (i) greige and finished thread inventories were
retained by the Company and held for purchase by American & Efird to
service the acquired business; (ii) the Company's branded thread product
lines were to be continued until the earlier of six months or all such
inventories were purchased from the Company; and (iii) the Company is
prohibited from competing in the thread business for a period of five
years. Accounts receivable associated with the Company's thread business
were retained. From June 3, 1996, through the end of the fiscal year, net
proceeds related to the disposition of the Company's thread business were
approximately $53,694, including the collection of substantially all of the
accounts receivable and the sale of approximately seventy percent of the
unit volumes of inventories retained by the Company.
During 1996, operations of the thread business generated sales of $53,034,
including $12,483 subsequent to June 3, 1996 related to inventories
retained by the Company. The Company's results included operating losses
of the thread business of $369 during 1996. The Company recorded $5,154 of
costs to exit the thread business. Included in the exit costs were $3,867
relating to 63 selling and administrative associates receiving termination
benefits and approximately 700 wage associates receiving excess benefits
under a pre-existing pension plan. At December 28, 1996, $328 remains
accrued. Also included were other exit costs of $1,287 consisting
primarily of contractual support expenses under the sales agreement and
non-fixed asset valuation losses. At December 28, 1996, $148 remains
accrued. These costs were classified in "Other expense-net" in the
Company's consolidated statements of operations.
NOTE C--SALE OF ACCOUNTS RECEIVABLE
On October 15, 1993, the Company entered into a seven-year agreement and
sold a $45,000 undivided interest in a revolving pool of its trade accounts
receivable. No further interest has been sold under this agreement
subsequent to the original sale. At December 28, 1996 and December 30,
1995, the $45,000 interest sold is reflected as a reduction of accounts
receivable in the Company's consolidated balance sheets. Costs of this
program were fixed at 6.08% per annum on the amount of the interest sold
plus administrative fees typical in such transactions. These costs, which
were approximately $2,948 for 1996, $2,998 for 1995 and $2,983 for 1994 are
included in other expense - net. In addition, the Company is generally at
risk for credit losses associated with sold receivables and provides for
such in the Company's financial statements.
NOTE D--ACCRUED EXPENSES
Accrued expenses include the following:
1996 1995
Compensation and benefits $ 10,263 $ 10,148
Interest expense 2,708 3,364
NOTE E--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
1996 1995
Senior indebtedness:
Credit line borrowings $ 28,314 $ 88,394
Term loan 7,500 10,000
Other 863 1,160
Total senior indebtedness 36,677 99,554
Less current portion (2,641) (2,171)
Total long-term senior indebtedness 34,036 97,383
Subordinated notes 50,000 50,000
Convertible subordinated debentures 44,782 44,782
Total long-term debt $128,818 $192,165
The Company's unsecured revolving credit and term loan agreement provides
revolving credit of up to $125,000 (reduced for certain significant asset
sales) through March of 2000 and a $10,000 term loan payable in quarterly
installments of $625 which began in March, 1996. The terms of the
agreement provide for a reduction in the revolving credit availability by
50% of the net cash proceeds from certain significant asset sales, but the
credit availability cannot be reduced below $90,000. The total reduction
of the facility for asset sales through December 28, 1996 was $24,605.
Interest rates available under the facility may be selected by the Company
from a number of options which effectively allow for borrowing at rates
equal to or lower than the greater of the lender's prime rate or the
federal funds rate plus .5%. The effective annual interest rate on the
revolving credit and term loan agreement was 6.85%, 7.21%, and 4.88% for
1996, 1995, and 1994, respectively. The interest rate on debt outstanding
under this agreement was 6.81% at December 28, 1996. Commitment fees,
ranging from .25% to .375% per annum on the revolving credit line are
payable on the average daily unused balance of the revolving credit
facility. At December 28, 1996, unused borrowing capacity under the
Company's credit agreements (including amounts available under a $5,000
short-term credit line) was approximately $77,081.
The Company's subordinated notes are unsecured, bear interest at 9.96%
payable semiannually, and are due in semiannual installments of $2,381
beginning February 1, 2000.
The Company's convertible subordinated debentures bear interest at 7%
payable semiannually, are due in 2012, and are convertible by the holder
into shares of Common Stock of the Company at an effective conversion price
of $32.20 per share, subject to adjustment under certain circumstances.
The debentures are redeemable at the Company's option through May 15, 1997,
in whole or in part, at prices ranging from 102.8% to 100.7% of their
principal amount. Mandatory sinking fund payments commencing May 15, 1998
will retire $2,500 principal amount of the debentures annually and
approximately 70% of the debentures prior to maturity. The convertible
debentures are subordinated in right of payment to all other indebtedness
of the Company.
The Company's long-term debt and credit arrangements contain financial
covenants relating to minimum net worth, the ratio of debt to
capitalization, payment of dividends and certain other financial ratios.
Under restrictions set forth in the Company's subordinated note agreement,
and absent a waiver from the lender or an amendment, future dividends may
be paid only to the extent of 75% of the excess of cumulative income,
excluding extraordinary items, for periods subsequent to December 28, 1996
above $68,580.
Approximate maturities of long-term debt for each of the five years
succeeding December 28, 1996 are $2,641 in 1997, $5,143 in 1998, $5,113 in
1999, $35,597 in 2000, and $7,285 in 2001.
Interest payments in 1996, 1995, and 1994 were $13,550, $14,852, and
$13,408, respectively.
NOTE F--FAIR VALUE OF FINANCIAL INSTRUMENTS
All of the Company's financial instruments are held or issued for purposes
other than trading. The carrying amounts and estimated fair values of the
Company's financial instruments are summarized as follows:
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets
Cash and cash
equivalents $ 1,988 $ 1,988 $ 3,413 $ 3,413
Notes receivable
(including current
portion) 2,158 2,158 1,059 1,059
Other 1,751 1,751 251 251
Financial liabilities
Long-term debt
(including current
portion) $131,460 $123,295 $194,336 $183,559
The carrying amounts of cash and cash equivalents approximate fair values
due to the short-term maturity of these instruments. The carrying amounts
of notes receivable approximate fair values due to the short-term maturity
and adjustable interest rate provision of these instruments. Other current
assets include amounts held in escrow from asset sales, and the carrying
values of such amounts approximate fair values due to the estimated short-
term maturity of these contracts. The fair values of the Company's long-
term debt were estimated using discounted cash flow analyses based on
incremental borrowing rates for similar types of borrowing arrangements and
quoted market rates for the Company's convertible debentures.
NOTE G--PENSION PLANS
The Company has defined benefit and defined contribution pension plans
which cover essentially all associates. Benefits for associates
participating in the defined benefit plans are based on years of service
and compensation during the period of participation. Plan assets consist
primarily of cash equivalents and publicly traded stocks and bonds. All
accrued benefits under the Company's largest defined benefit plan became
fully vested and were frozen at December 24, 1993, and participants became
eligible to participate in a 401(k) defined contribution plan. A portion
of these accrued benefits have been settled through lump sum payments.
Losses from settlements (excluding losses related to the sale of the
Company's thread business, see Note B) were $772, $1,209, and $1,575 during
1996, 1995, and 1994, respectively.
The Company's practice is to fund its defined benefit plans in accordance
with minimum contribution requirements of the Employee Retirement Income
Security Act of 1974. Costs of the defined contribution plans are based on
several factors including each participant's compensation, the operating
performance of the Company and matching Company contributions.
The net periodic pension cost of all plans included the following
components:
1996 1995 1994
Defined benefit plans:
Service cost $ 42 $ 30 $ 31
Interest cost 1,464 1,434 1,694
Actual return on plan assets (1,788) (3,305) 204
Other components 1,748 3,382 116
1,466 1,541 2,045
Defined contribution plans 2,009 1,715 1,764
Net periodic pension cost $ 3,475 $ 3,256 $3,809
The following table sets forth the funded status of the Company's defined
benefit retirement plans and related amounts included in the Company's
consolidated balance sheets:
1996 1995
Actuarial present value of benefit obligations:
Vested benefits $ 14,727 $ 21,003
Nonvested benefits 27 6
Accumulated benefit obligations $ 14,754 $ 21,009
Plan assets at fair value $ 10,941 $ 14,932
Projected benefit obligation (14,754) (21,009)
Projected benefit obligation in
excess of plan assets (3,813) (6,077)
Unrecognized net loss 4,373 6,747
Adjustment to recognize minimum liability (4,373) (6,747)
Pension related liability included in the
consolidated balance sheets $ (3,813) $ (6,077)
In accordance with the provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions," the Company has
recorded an additional minimum liability representing the excess of the
accumulated benefit obligation over the fair value of plan assets and
accrued pension liability. This additional liability, net of the related
income tax benefit, reduced stockholders' equity by $2,668 at December 28,
1996 and $4,116 at December 30, 1995.
The weighted average discount rate used in determining the projected
benefit obligation was 7.0% for 1996 and 1995, and 8.0% for 1994. There
has been no increase in future compensation levels assumed due to the
freezing of benefits in 1993. The assumed long-term rate of return on plan
assets was 8.5% for each year presented.
NOTE H--INCOME TAXES
The provision (benefit) for income tax on income (loss) from continuing
operations consists of the following:
1996 1995 1994
Current Deferred Current Deferred Current Deferred
Federal $ (158) $(3,603) $(1,825) $ (9,586) $(2,590) $(6,476)
State 1,223 (1,792) 748 (1,830) 1,282 (934)
Total $1,065 $(5,395) $(1,077) $(11,416) $(1,308) $(7,410)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the tax bases of those assets and liabilities.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
Deferred Tax Liabilities: 1996 1995
Property, plant and equipment $28,042 $37,300
Inventories 3,404 4,107
Intangible assets 972 1,425
Other 3,016 3,718
Total deferred tax liabilities 35,434 46,550
Deferred Tax Assets:
Post-retirement benefits 3,150 3,460
Other employee benefits 2,276 2,814
Alternative minimum tax 5,739 4,305
Allowances for bad debts,
claims and discounts 2,749 2,472
Net operating loss carryforward --- 4,183
Other 1,366 2,179
Valuation reserve --- ---
Total deferred tax assets 15,280 19,413
Net deferred tax liabilities $20,154 $27,137
Differences between the benefit for income taxes and the amount computed by
applying the statutory Federal income tax rate to loss from continuing
operations are reconciled as follows:
1996 1995 1994
Statutory rate applied to
loss from continuing
operations $(5,285) $(21,988) $(4,181)
Plus state income taxes net of
Federal tax provision (benefit) (375) (714) 226
Total statutory benefit (5,660) (22,702) (3,955)
Increase(decrease) attributable to:
Nondeductible amortization and
impairment of intangible assets 1,020 9,816 634
Nondeductible portion of
travel and entertainment 193 267 268
Nontaxable life insurance
gain --- --- (4,492)
Capital loss carryback benefit --- --- (1,200)
Other items 117 126 27
Total tax benefit $(4,330) $(12,493) $(8,718)
Income tax payments, net of income tax refunds received, were $1,677 and
$2,645 in 1996 and 1994, respectively. Income tax refunds received, net of
income tax payments, were $1,072 in 1995.
NOTE I--COMMON STOCK
Holders of Class B Common Stock have the right to twenty votes per share on
matters that are submitted to Shareholders for approval and to dividends in
an amount not greater than dividends declared and paid on Common Stock.
Class B Common Stock is restricted as to transferability and may be
converted into Common Stock on a one share for one share basis. The
Company's Charter authorizes 200,000,000 shares of Class C Common Stock, $3
par value per share, and 16,000,000 shares of Preferred Stock. No shares
of Class C Common Stock or Preferred Stock have been issued.
In August 1996, the Company's Board of Directors adopted a stock ownership
plan applicable to the senior management of the Company for the purpose of
encouraging each participant to make a significant investment in the
Company's Common Stock. Pursuant to the plan, in September 1996, the
Company entered into stock subscription agreements with seven of the
Company's senior executive officers for the purchase of an aggregate of
449,300 shares at a price of $4.875 per share.
NOTE J--STOCK PLANS
The Company's 1990 Incentive Stock Plan reserves 1,770,000 shares of Common
Stock (including 1,000,000 shares approved by the Board of Directors and
recommended to the shareholders for approval at the annual meeting) for
sale or award to key associates under stock options, stock appreciation
rights, restricted stock performance grants, or other awards. The Board of
Directors has also approved and recommended to the shareholders for
approval certain amendments to the Plan which would allow for the granting
of stock options or other awards to the outside directors of the Company.
Outstanding options are exercisable at a cumulative rate of 25% per year
after the second year from the date the options are granted. Options
outstanding were granted at prices at or above market price on the date of
grant and include grants under the 1983 Incentive Stock Plan, under which
no further options may be granted. At December 28, 1996 no options remain
outstanding under the 1983 plan.
On May 4,1995, the Board of Directors acted, effective as of such date, to
reprice outstanding options granted prior to 1995 under the Company's 1990
Incentive Stock Plan. Options to purchase 516,000 shares of the Company's
Common Stock, originally granted at prices ranging from $10.25 to $15.25
per share, were amended to provide for a revised exercise price of $8.00
per share, which was above the market price of $6.25 per share on the
effective date of the amendment. The expiration date of the repriced
options was also amended to provide for a new ten-year term commencing on
May 4, 1995, under which the options become exercisable at a cumulative
rate of 25% per year beginning on May 4, 1997.
In 1993, the Company issued options for the purchase of 83,044 shares of
Common Stock, which were immediately exercisable at prices ranging from
$3.19 - $5.27 per share, in connection with the acquisition of Carriage
Industries, Inc.
A summary of the option activity for 1995 and 1994 is as follows:
Number of Option Price
Shares Per Share
Outstanding at December 25, 1993 700,257 $ 3.19 - $30.75
Granted 10,000 10.25
Exercised (1,529) 4.29 - 5.03
Cancelled (90,412) 10.75 - 30.75
Outstanding at December 31, 1994 618,316 3.19 - 19.50
Granted 716,000 6.50 - 8.00
Exercised (3,057) 3.43 - 5.03
Cancelled (561,500) 8.00 - 17.00
Outstanding at December 30, 1995 769,759 $ 3.19 - $19.50
A summary of the 1996 option activity is as follows:
Weighted-
Weighted- Average
Number Average Fair Value of
of Exercise Options Granted
Shares Price During the Year
Outstanding at December 30, 1995 769,759 $ 7.74
Granted at market price 532,500 5.49 $2.61
Granted above market price 85,000 6.33 2.57
Exercised (12,227) 3.96
Forfeited (111,190) 7.55
Expired (4,000) 19.50
Outstanding at December 28, 1996 1,259,842 $ 6.71
Options exercisable at
December 28, 1996 45,342 $ 4.85
The following table summarizes information about stock options outstanding
at December 28, 1996:
Options Weighted-Average
Range of Outstanding at Remaining Weighted-Average
Exercise Prices December 28, 1996 Contractual Life Exercise Price
$3.43 - $4.29 28,755 6.3 years $4.03
4.88 - 5.75 549,087 9.6 5.51
6.33 - 8.00 682,000 8.5 7.79
Options
Range of Exercisable at Weighted-Average
Exercise Prices December 28, 1996 Exercise Price
$3.43 - $4.29 13,755 $4.07
4.88 - 5.75 31,587 5.19
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
1996 Grants
Expected life 5 years
Expected volatility 44.3%
Risk-free interest rate 6.38%
Dividend yield 0%
Pro forma information reflecting the effect of applying the fair value
method to the Company's accounting for stock option grants has not been
presented because such effect is not materially different from amounts
reported.
The Company also has a stock purchase plan which authorizes 108,000 shares
of Common Stock for purchase by supervisory associates at the market price
prevailing at the time of purchase. At December 28, 1996, 64,280 shares
remained available for issue. Shares sold under this plan are held in
escrow until paid for and are subject to repurchase agreements which give
the Company the right of first refusal at the prevailing market price.
Numbers of shares sold under the plan were 1,800 in 1996, 2,100 in 1995,
and 3,880 in 1994.
NOTE K--ASSET VALUATION LOSSES
Asset valuation losses of $18,995 ($13,074, after taxes), $63,425 ($51,058,
after taxes), and $10,397 ($6,446, after taxes) were recorded in 1996,
1995, and 1994, respectively.
The losses recorded in 1996 consisted of $14,297 related to a write-down of
the Company's Tarboro textile spinning operation to its estimated net
recoverable value following the Company's decision to exit this business
and hold the facility for sale. Losses relating to Tarboro operations of
$4,304, excluding the write-down described above, were included in the
Company's textile segment results for 1996. Additional losses of $4,698
consisted primarily of write-downs of fixed assets and related intangibles
where expected future cash flows are less than the assets' carrying value.
Included in the 1996 asset valuation losses are $3,395 related to
intangibles.
Asset valuation losses recorded in 1995 included a $41,480 loss to adjust
the assets of the Company's thread business to their estimated fair market
value following an agreement in principle to sell the assets. Additional
1995 asset valuation losses of $17,988 in the Company's textile business
related to a plant sold in 1995, equipment write-downs and the
consolidation of certain facilities. The floorcovering segment included
losses of $3,957 primarily related to the write-down of equipment utilized
for a product line to be discontinued.
The asset valuation losses in 1994 of $10,397 related to idle facilities
and machinery and equipment permanently taken out of service during the
year.
NOTE L--RESTRUCTURING AND EXIT COSTS
At December 28, 1996, the financial statements included $1,311 of accrued
costs associated with the exit of two product lines in the Company's
floorcovering business and consolidations of facilities in both the
floorcovering and textile/apparel businesses.
Included in the accrual were $600 associated with involuntary termination
benefits related to 40 production associates and 29 sales, administrative
or distribution associates. These costs were classified in "Selling and
administrative expenses" in the Company's financial statements.
Additional costs that were incremental and directly attributable to the
exit and consolidations totaling $711 were recorded in 1996. These costs
primarily relate to inventory devaluations and impairment of current assets
associated with discontinued product lines and clean up costs related to a
facility idled in a consolidation. Of these costs, $326 were classified in
"Cost of sales" and $385 were classified in "Other expense - net" in the
Company's financial statements.
NOTE M--LIFE INSURANCE GAIN
The Company recorded a nontaxable gain of $12,835 in the fourth quarter of
1994 from the receipt of insurance proceeds on the life of the former
Chairman of Carriage Industries, Inc.
NOTE N--CASUALTY DAMAGE
During 1994 and 1993, certain of the Company's manufacturing facilities
were damaged or destroyed by weather-related casualties and a fire. By the
end of 1994, all of the damaged facilities were either replaced, repaired
or their production capacities consolidated into other manufacturing
facilities, and all costs associated with the casualties had been recorded.
Each damaged facility was covered by insurance. Insurance benefits
recognized by the Company amounted to $5,148 in 1995 and $10,068 in 1994.
The 1995 amount is included in other income in the financial statements.
Casualty insurance benefits exceeded the carrying amounts of the destroyed
assets and cost to repair damaged assets by $8,210 in 1994, and is
reflected in the financial statements as a reduction to cost of sales of
$7,941 and as other income of $269.
NOTE O--COMMITMENTS
The Company had outstanding commitments for purchases of machinery and
equipment and for building construction of approximately $4,827 at
December 28, 1996.
NOTE P--INDUSTRY SEGMENT INFORMATION
The Company operates in two industry segments: floorcovering and
textile/apparel. Floorcovering includes carpet for manufactured housing,
recreational vehicles, high-end residential and commercial markets, rugs
and yarns. Textile/apparel includes yarns, knit fabrics and apparel.
Net Sales Operating Profit(Loss)(1)
1996 1995 1994 1996 1995 1994
Business Segments:
Floorcovering $366,431 $361,520 $353,960 $ 23,584 $ 20,213 $ 28,117
Textile/apparel 251,968 313,697 332,482 (20,166) (63,958) (33,039)
Intersegment
elimination (3,318) (4,375) (3,583) 18 (3) ---
Total Segment $615,081 $670,842 $682,859 3,436 (43,748) (4,922)
Interest expense 13,000 15,591 13,748
Corporate expenses 6,156 5,444 5,915
Life insurance gain --- --- (12,835)
Other (income) expense - net (177) (111) 195
Consolidated loss before
income taxes $(15,543) $(64,672) $(11,945)
Identifiable Capital
Assets at Year End Expenditures
1996 1995 1994 1996 1995 1994
Business Segments:
Floorcovering $185,071 $189,208 $205,444 $11,016 $19,591 $21,912
Textile/apparel 129,692 192,134 265,932 5,539 10,222 9,673
Corporate 13,372 15,655 16,944 1,079 453 1,089
Total $328,135 $396,997 $488,320 $17,634 $30,266 $32,674
Depreciation
and Amortization
1996 1995 1994
Business Segments:
Floorcovering $13,847 $13,988 $12,193
Textile/apparel 13,802 21,444 22,460
Corporate 546 548 546
Total $28,195 $35,980 $35,199
(1) Operating profit (loss) on a segment basis includes (income) expense
related to casualty insurance (gains) losses and asset valuation losses
which were recognized as follows:
1996 1995 1994
Floorcovering $ 1,136 $ (91) $(4,015)
Textile/apparel 17,609 58,468 14,143
NOTE Q--SUBSEQUENT EVENT
In early 1997, the Company acquired the assets and business of Danube
Carpet Mills, Inc., a manufacturer of carpet for the manufactured housing,
recreational vehicle and van conversion industries for $18,154 cash.
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
DIXIE YARNS, INC. AND SUBSIDIARIES
(dollars in thousands)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
(1) (2)
DESCRIPTION Balance at Charged to Charged to Deductions- Balance at
Beginning of Costs and Other Accounts Describe End of Period
Period Expenses -Describe
Year ended December 28, 1996:
Reserves deducted from asset
accounts:
Allowance for doubtful
<S> <C> <C> <C> <C> <C>
accounts $ 3,156 $ 1,538 $-0- $ 1,080 (2) $ 3,614
Provision to reduce
inventories to net
realizable value 9,668 -0- -0- 2,322 (3) 7,346
Provision to reduce
assets held for sale
to estimated fair
market value 23,005 13,425 -0- 17,866 (4) 18,564
Year ended December 30, 1995:
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts $ 3,617 $ 1,259 $-0- $ 1,720 (2) $ 3,156
Provision to reduce
inventories to net
realizable value 10,052 -0- -0- 384 (3) 9,668
Provision to reduce assets
held for sale to estimated
fair market value 1,999 21,006 -0- -0- 23,005
</TABLE>
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
DIXIE YARNS, INC. AND SUBSIDIARIES
(dollars in thousands)
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
(1) (2)
DESCRIPTION Balance at Charged to Charged to Deductions- Balance at
Beginning of Costs and Other Accounts Describe End of Period
Period Expenses -Describe
Year ended December 31, 1994:
Reserves deducted from asset
accounts:
Allowance for doubtful
<S> <C> <C> <C> <C> <C>
accounts $ 3,900 $ 829 $605 (1) $ 1,717 (2) $ 3,617
Provision to reduce
inventories to net
realizable value 7,337 1,802 (3) 913 (1) -0- 10,052
Provision to reduce assets
held for sale to estimated
fair market value -0- 1,999 -0- -0- 1,999
<FN>
(1) Increase in reserves in connection with business combinations.
(2) Uncollectible accounts written off, net of recoveries.
(3) Provision for current items net of reductions for previous items.
(4) Reserve reductions for assets sold.
</TABLE>
ANNUAL REPORT ON FORM 10-K
ITEM 14 (c)
EXHIBITS
YEAR ENDED DECEMBER 28, 1996
DIXIE YARNS, INC.
CHATTANOOGA, TENNESSEE
Exhibit Index
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(3a) Restated Charter of Dixie Incorporated by reference to
Yarns, Inc. Exhibit (3a) to Dixie's Annual
Report on Form 10-K for the year
ended December 30, 1989.*
(3b) Amended and Restated By- Incorporated by reference to
Laws of Dixie Yarns, Inc. Exhibits (3b) and (3c) to Dixie's
Annual Report on Form 10-K for
the year ended December 29,
1990.*
(4a) Second Amended and Restated Incorporated by reference to
Revolving Credit and Term Exhibit (4a) to Dixie's Annual
Loan Agreement, dated Report on Form 10-K for the
January 31, 1992, by and year ended December 28, 1991.*
among Dixie Yarns, Inc. and
Trust Company Bank, NationsBank
of North Carolina, N.A. and
Chemical Bank.
(4b) Loan Agreement, dated Incorporated by reference to
February 6, 1990 between Exhibit (4d) to Dixie's Annual
Dixie Yarns, Inc. and New Report on Form 10-K for the
York Life Insurance Company year ended December 30, 1989.*
and New York Life Annuity
Corporation.
(4c) Form of Indenture, dated Incorporated by reference to
May 15, 1987 between Dixie Exhibit 4.2 to Amendment No. 1
Yarns, Inc. and Morgan of Dixie's Registration
Guaranty Trust Company of Statement No. 33-140 78 on Form
New York as Trustee. S-3, dated May 19, 1987.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(4d) Revolving Credit Loan Incorporated by reference to
Agreement dated as of Exhibit (4d) to Dixie's Annual
September 16, 1991 by Report on Form 10-K for the
and among Ti-Caro, Inc. and year ended December 28, 1991.*
Trust Company Bank,
individually and as agent,
NCNB National Bank, and
Chemical Bank.
(4e) First Amendment to Revolving Incorporated by reference to
Credit Loan Agreement dated Exhibit (4e) to Dixie's Annual
as of August 19, 1992 by and Report on form 10-K for the
among Ti-Caro, Inc., T-C year ended December 26, 1992.*
Threads, Inc. and Trust
Company Bank, individually
and as agent, NCNB National
Bank, and Chemical Bank.
(4f) First Amendment, dated Incorporated by reference to
August 25, 1993 to Second Exhibit (4f) to Dixie's Annual
Amended and Restated Report on form 10-K for the year
Revolving Credit and Term ended December 25, 1993.*
Loan Agreement dated
January 31, 1992, by and among
Dixie Yarns, Inc. and Trust
Company Bank, NationsBank of
North Carolina, N.A. and
Chemical Bank.
(4g) Third Amended and Restated Incorporated by reference to
Credit Agreement dated Exhibit (4) to Dixie's Quarterly
March 31, 1995. Report on Form 10-Q for the
quarter ended April 1, 1995.*
(4h) Waiver and First Amendment Incorporated by reference to
to Credit Agreement dated Exhibit (4h) to Dixie's Annual
February 27, 1996. Report on Form 10-K for the year
ended December 30, 1995.*
(4i) Waiver and Modification Filed herewith.
Agreement dated
November 1, 1996.
(4j) Waiver Letter dated Filed herewith.
December 13, 1996.
(10a) Dixie Yarns, Inc. Incentive Filed herewith.
Stock Plan as amended.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10b) Form of Stock Option Filed herewith.
Agreement Under the Dixie
Yarns, Inc. Incentive
Stock Plan as amended.
(10c) Dixie Yarns, Inc. Nonquali- Incorporated by reference to
fied Defined Contribution Exhibit (10c) to Dixie's Annual
Plan. Report on form 10-K for the
year ended December 26, 1992.*
(10d) Dixie Yarns, Inc. Nonquali- Incorporated by reference to
fied Employee Savings Plan. Exhibit (10d) to Dixie's Annual
Report on form 10-K for the
year ended December 26, 1992.*
(10e) Dixie Yarns, Inc. Incentive Incorporated by reference to
Compensation Plan. Exhibit (10e) to Dixie's Annual
Report on form 10-K for the
year ended December 26, 1992.*
(10f) Asset Transfer and Restruc- Incorporated by reference to
turing Agreement dated Exhibit (2a) to Dixie's Current
July 9, 1993, by and among Report on Form 8-K dated
Dixie Yarns, Inc., Masland July 9, 1993.*
Carpets, Inc., individual
management investors of
Masland Carpets, Inc., The
Prudential Insurance Company
of America and Pruco Life
Insurance Company.
(10g) Assignment and Bill of Sale Incorporated by reference to
dated July 9, 1993, by and Exhibit (2b) to Dixie's Current
between Dixie Yarns, Inc. Report on Form 8-K dated July 9,
and Masland Carpets, Inc. 1993.*
(10h) Assignment and Assumption Incorporated by reference to
Agreement dated July 9, 1993, Exhibit (2c) to Dixie's Current
by and between Dixie Yarns, Report on Form 8-K dated July 9,
Inc. and Masland Carpets, 1993.*
Inc.
(10i) Stock Rights and Restrictions Incorporated by reference to
Agreement dated July 9, 1993, Exhibit (2d) to Dixie's Current
by and among Dixie Yarns, Report on Form 8-K dated July 9,
Inc., Masland Carpets, Inc., 1993.*
The Prudential Insurance
Company of America and Pruco
Life Insurance Company.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10j) Pooling and Servicing Incorporated by reference to
Agreement dated as of Exhibit (2a) to Dixie's
October 15, 1993, among Current Report on Form 8-K
Dixie Yarns, Inc., Dixie dated October 15, 1993.*
Funding, Inc. and
NationsBank of Virginia,
N.A. (as Trustee).
(10k) Annex X - Definitions, to Incorporated by reference to
Pooling and Servicing Exhibit (2b) to Dixie's
Agreement dated as of Current Report on Form 8-K
October 15, 1993, among dated October 15, 1993.*
Dixie Yarns, Inc., Dixie
Funding, Inc. and
NationsBank of Virginia,
N.A. (as Trustee).
(10l) Series 1993-1 Supplement, Incorporated by reference to
dated as of October 15, Exhibit (2c) to Dixie's
1993, to Pooling and Current Report on Form 8-K
Servicing Agreement dated as dated October 15, 1993.*
of October 15, 1993, among
Dixie Yarns, Inc., Dixie
Funding, Inc. and
NationsBank of Virginia,
N.A. (as Trustee).
(10m) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2d) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and New York Life Insurance
and Annuity Corporation.
(10n) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2e) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and John Alden Life
Insurance Company.
(10o) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2f) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and John Alden Life
Insurance Company of New
York.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10p) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2g) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and Keyport Life Insurance
Company.
(10q) Form of Nonqualified Stock Incorporated by reference to
Option Agreement Under the Exhibit (10a) to Dixie's Quarterly
Dixie Yarns, Inc. Incentive Report on Form 10-Q for the
Stock Plan. quarter ended July 1, 1995.*
(10r) Form of Amendment to Incorporated by reference to
Nonqualified Stock Option Exhibit (10b) to Dixie's Quarterly
Agreement Under the Dixie Report on Form 10-Q for the
Yarns, Inc. Incentive Stock quarter ended July 1, 1995.*
Plan.
(10s) Asset Purchase Agreement Incorporated by reference to
dated May 23, 1996, by and Exhibit (2a) to Dixie's Current
among T-C Threads, Inc. Report on Form 8-K dated
d/b/a Threads USA, Threads June 3, 1996.*
of Puerto Rico, Inc.,
Productos para la Industria
de la Maquila, S. A., PRIMA,
Hilos y Accessorios, S. A.
de C. V., and Dixie Yarns,
Inc. and American & Efird,
Inc.
(10t) Amendment, dated May 31, Incorporated by reference to
1996, to Asset Purchase Exhibit (2b) to Dixie's Current
Agreement dated May 23, Report on Form 8-K dated
1996, by and among T-C June 3, 1996.*
Threads, Inc. d/b/a Threads
USA, Threads of Puerto Rico,
Inc., Productos para la
Industria de la Maquila,
S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V.,
and Dixie Yarns, Inc. and
American & Efird, Inc.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10u) Second Amendment, dated Incorporated by reference to
June 3, 1996, to Asset Exhibit (2c) to Dixie's Current
Purchase Agreement dated Report on Form 8-K dated
May 23, 1996, by and among June 3, 1996.*
T-C Threads, Inc., d/b/a
Threads USA, Threads of
Puerto Rico, Inc., Productos
para la Industria de la
Maquila, S. A., PRIMA, Hilos
y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
(10v) Yarn and Finished Goods Incorporated by reference to
Agreement dated as of Exhibit (2d) to Dixie's Current
June 3, 1996, by and among Report on Form 8-K dated
T-C Threads, Inc. d/b/a June 3, 1996.*
Threads USA, Threads of
Puerto Rico, Inc., Productos
para la Industria de la
Maquila, S. A., PRIMA, Hilos
y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
(10w) Accounts Receivable Incorporated by reference to
Agreement dated as of Exhibit (2e) to Dixie's Current
June 3, 1996, by and among Report on Form 8-K dated
T-C Threads, Inc. d/b/a June 3, 1996.*
Threads USA, Threads of
Puerto Rico, Inc., Productos
para la Industria de la
Maquila, S. A., PRIMA, Hilos
y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
(10x) Noncompetition Agreement Incorporated by reference to
dated as of June 3, 1996, by Exhibit (2f) to Dixie's Current
and among T-C Threads, Inc. Report on Form 8-K dated
d/b/a Threads USA, Threads June 3, 1996.*
of Puerto Rico, Inc.,
Productos para la Industria
de la Maquila, S. A., PRIMA,
Hilos y Accessorios, S. A.
de C. V., and Dixie Yarns,
Inc. and American & Efird,
Inc.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10y) Dixie Yarns, Inc. Stock Filed herewith.
Ownership Plan as
amended.
(11) Statement re: Computation Filed herewith.
of Earnings Per Share.
(21) Subsidiaries of the Filed herewith.
Registrant.
(23) Consent of Ernst & Young LLP. Filed herewith.
*Commission File No. 0-2585
EXHIBIT (4i)
WAIVER AND MODIFICATION AGREEMENT
DATED NOVEMBER 1, 1996
To SunTrust Bank, Atlanta,
as Agent and each of the
Lenders party to the
Credit Agreement described
below
Re: Credit Facility from SunTrust Bank, Atlanta, individually and as
Agent, NationsBank, N.A., individually and a Lead
Manager and Chemical Bank to Dixie Yarns, Inc.
Ladies and Gentlemen:
Reference is hereby made to that certain Third Amended and Restated
Credit Agreement, dated as of March 31, 1995, by and among SunTrust Bank,
Atlanta, individually and as Agent (in such capacity, the "Agent"), and
each of the other financial institutions listed above (collectively
referred to herein as the "Lenders") and Dixie Yarns, Inc., a Tennessee
corporation (the "Borrower") (as heretofore amended or modified, the
"Credit Agreement"). All terms used herein without definition shall have
the meanings ascribed to such terms in the Credit Agreement.
Pursuant to Section 9.03(b) of the Credit Agreement, the Borrower is
prohibited from making certain Investments in its Subsidiaries which
Investments exceed $10,000,000 at any one time outstanding after the
Closing Date. The Borrower has requested that the Lenders waive the
restrictions of Section 9.03(b) in order to allow the Borrower to
contribute certain assets and liabilities with such assets having a book
value not exceeding $30,000,000 to one or more wholly-owned Subsidiaries of
the Borrower described on the attachment hereto, with such Subsidiary or
Subsidiaries to assume expressly such accompanying liabilities (the
"Transaction").
Each of the Lenders, by its signature below, hereby consents to the
Transaction upon the express understanding that (i) no Default or Event of
Default will exist under the Credit Agreement either before or after giving
effect thereto, (ii) this letter agreement shall not be deemed to
constitute a consent to any further transfer of such assets, (iii) each
Subsidiary is in compliance with Section 9.02 of the Credit Agreement and
any Intercompany notes or Subsidiary Note Assignments required to be
executed by such Subsidiary pursuant to the Credit Agreement are promptly
executed and delivered to the Agent. In addition, the Lenders, the Agent
and the Borrower hereby agree that Schedule 9.03(b) to the Credit Agreement
is modified to add the information set forth on Schedule 1 attached hereto
thereto simultaneously with any such transfer, with the result that the
Investment described above shall not be included for purposes of
calculating compliance with the $10,000,000 limit set forth in Section
9.03(b).
This letter agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof, and any other prior or
contemporaneous agreements, whether written or oral, with respect thereto
are expressly superseded hereby. This letter agreement is governed by the
laws of the State of Georgia and shall inure to the benefit of, and be
binding upon, the successors and assigns of the Agent, the Lenders and the
Borrower.
This letter agreement shall be deemed to be effective when an executed
counterpart is received by the Agent from the Borrower and the Required
Lenders.
Very truly yours,
DIXIE YARNS, INC.
By: Gary A. Harmon
Title: Treasurer
ACCEPTED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN:
SUNTRUST BANK, ATLANTA,
individually and as Agent
By: C. Wes Burton, Jr.
Title: Vice President
By: Thomas R. Banks
Title: Banking Officer
NATIONSBANK, N.A.
By: E. Phifer Helms
Title: Senior Vice President
CHEMICAL BANK
By: Peter C. Eckstein
Title: Vice President
SCHEDULE 1
Additional Permitted Investments in Subsidiaries
Name of Subsidiary Amount of Investment
Caro Knit Incorporated:
Investment - October 1, 1996 $ 7,597,195
Investment - November 6, 1996 6,856,555
Total Caro Knit Incorporated $14,453,750
C-Knit Apparel, Inc. - October 1, 1996 $ 2,363,909*
JXM, Inc. (Tarboro Plant) $12,000,000**
Total Additional Permitted Investments
in Subsidiaries: $28,817,659
*Estimated, will be revised when actual investment is available.
**Estimated. Investment is contingent upon possible sale of the Tarboro
Plant to a third party. If sale is not made, assets will be contributed.
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
DIXIE YARNS, INC. AND SUBSIDIARIES
(amounts in thousands, except per share data)
<CAPTION>
Year End
December 28, December 30, December 31,
1996 1995 1994
PRIMARY:
<S> <C> <C> <C>
Net loss $(11,213) $(52,179) $(3,227)
SHARES:
Weighted average number of common
shares outstanding assuming
conversion of Class B Common Stock 11,200 11,744 12,249
Net effect of dilutive stock
options based on the treasury
stock method using average market
price --- --- 34
Net effect of put option based
on the reverse treasury stock
method using average market price --- --- 988
TOTAL SHARES 11,200 11,744 13,271
PER SHARE AMOUNT $ (1.00) $ (4.44) $ (.24)
FULLY-DILUTED:
Net loss $(11,213) $(52,179) $(3,227)
After-tax interest requirement of
convertible subordinated debentures (A) --- --- ---
ADJUSTED NET LOSS $(11,213) $(52,179) $(3,227)
SHARES:
Weighted average number of common
shares outstanding assuming
conversion of Class B Common Stock 11,200 11,744 12,249
Net effect of dilutive stock options
based on the treasury stock method
using year-end market price if higher
than the average market price --- --- 34
Net effect of put option based on
the reverse treasury stock method
using year-end market price if lower
than the average market price --- --- 1,568
Effect of assumed conversion of
convertible subordinated
debentures(A) --- --- ---
TOTAL SHARES 11,200 11,744 13,851
PER SHARE AMOUNT (B) $ (1.00) $ (4.44) $ (.23)
<FN>
A) The assumed conversion of convertible subordinated debentures into 1,391 shares with
an after-tax interest requirement of $1,895 for the years ended December 28, 1996,
December 30, 1995 and December 31, 1994, has been excluded from the computation since
the effect was anti-dilutive.
B) Fully diluted earnings per share for 1994 reported as $(.24) due to calculated
earnings per share reflecting anti-dilution.
</TABLE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-30473) pertaining to the Employee Stock Purchase Plan of
Dixie Yarns, Inc., the Registration Statement (Form S-8 No. 33-59564)
pertaining to options to acquire Common Stock of Dixie Yarns, Inc. issued
in connection with the acquisition of Carriage Industries, Inc., the
Registration Statement (Form S-8 No. 33-42615) pertaining to the Incentive
Stock Option Plan of Dixie Yarns, Inc., and Post-Effective Amendment Number
2 to the Registration Statements (Form S-8 No. 2-20604 and No. 2-56744)
pertaining to the Employee Stock Purchase Plan and Employee Stock Option
Plan of Dixie Yarns, Inc. of our report dated February 20, 1997, with
respect to the consolidated financial statements and schedule of Dixie
Yarns, Inc. included in the Annual Report (Form 10-K) for the year ended
December 28, 1996.
ERNST & YOUNG LLP
Chattanooga, Tennessee
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF DIXIE YARNS, INC. AT AND
FOR THE TWELVE MONTHS ENDED DECEMBER 28, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 1,988
<SECURITIES> 0
<RECEIVABLES> 18,242
<ALLOWANCES> 3,614
<INVENTORY> 93,226
<CURRENT-ASSETS> 130,712
<PP&E> 338,573
<DEPRECIATION> 182,797
<TOTAL-ASSETS> 328,135
<CURRENT-LIABILITIES> 58,452
<BONDS> 128,818
<COMMON> 43,836
0
0
<OTHER-SE> 64,714
<TOTAL-LIABILITY-AND-EQUITY> 328,135
<SALES> 615,081
<TOTAL-REVENUES> 615,081
<CGS> 515,205
<TOTAL-COSTS> 515,205
<OTHER-EXPENSES> 18,995
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,000
<INCOME-PRETAX> (15,543)
<INCOME-TAX> (4,330)
<INCOME-CONTINUING> (11,213)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,213)
<EPS-PRIMARY> (1.00)
<EPS-DILUTED> (1.00)
</TABLE>
EXHIBIT (4j)
WAIVER LETTER DATED DECEMBER 13, 1996
Mr. Gary A. Harmon
Treasurer
Dixie Yarns, Inc.
P O Box 751
Chattanooga, TN 37401
Re: Dixie Yarns, Inc. ("Dixie") 9.96% Senior
Subordinated Notes Due February 1, 2010 ("Notes")
Dear Mr. Harmon:
The Notes, pursuant to the terms of Section 9(G), provide that Dixie shall
not permit its consolidated Net Worth to be at any time less than
$115,000,000. You have informed all holders of the Notes ("Noteholders")
that Dixie proposes to write-down the book value of the property, machinery
and related assets of its Tarboro manufacturing facility located in
Tarboro, North Carolina ("Tarboro Assets") prior to or simultaneously with
the sale of the Tarboro Assets. Due to the terms of such section and the
expected effect of the write-down of the Tarboro Assets on the
determination of the consolidated Net Worth, it is anticipated that no
write-down of the book value of the Tarboro Assets may occur without a
waiver by Noteholders of Dixie's compliance with its obligations as set
forth in such section. Dixie has requested such a waiver.
Pursuant to Dixie's request, New York Life Insurance and Annuity
Corporation hereby waives Dixie's compliance with the terms of Section 9(G)
of the Notes only to the extent that when computing Net Worth Dixie is not
required to take into account the write-down of the book value of the
Tarboro Assets; provided further, however, that in the event of a
subsequent write-up of the Tarboro Assets as a result of their sale or
otherwise, such write-up shall also not be taken into account in the
computation of Net Worth.
This waiver is not intended to be a waiver of Dixie's compliance with any
other terms of the Notes or the Loan Agreement ("Agreement") dated
February 6, 1990, executed by Dixie and the Noteholders that are parties
thereto in connection with the issuance of the Notes and shall not be
construed as a waiver or amendment of any other provisions or sections of
the Notes or the Agreement. In all other respects the Notes and the
Agreement shall continue in full force and effect.
Sincerely,
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
By: Steven M. Benevento
Its: Assistant Vice President
EXHIBIT (10a)
DIXIE YARNS, INC.
INCENTIVE STOCK PLAN
1. PURPOSE. The purpose of the Dixie Yarns, Inc. Incentive Stock Plan
(the "Plan") is to advance the interests of Dixie Yarns, Inc. and its
shareholders by providing incentives to directors of the Company and to
certain selected key employees performing services for the Company and its
Affiliates (as hereinafter defined) who contribute significantly to the
strategic and long-term performance objectives and growth of the Company
and its Affiliates (collectively, "Participants").
2. ADMINISTRATION. The Plan shall be administered solely by the
Compensation Committee (the "Committee") of the Board of Directors (the
"Board") of the Company as such Committee is from time to time constituted,
or by any successor committee that the Board may designate to administer
the Plan; provided that if at any time Rule 16b-3 or any successor rule
("Rule 16b-3") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), so permits without adversely affecting the ability of the
Plan to comply with the conditions for exemption from Section 16 of the
Exchange Act (including for purposes of the Plan any successor provision to
such Section) provided by Rule 16b-3, the Committee may delegate the
administration of the Plan in whole or in part, on such terms and
conditions, and to such person or persons as it may determine in its
discretion. Whenever the context in the Plan so permits, any reference to
the "Committee" shall include, if applicable, any successor or delegate of
the Committee as permitted herein. The membership of the Committee shall be
constituted so as to comply at all times with the applicable requirements
of Rule 16b-3. In particular, no member of the Committee shall have any
present or prior relationship with the Company or any of its Affiliates
that would prevent such member from qualifying as a "non-employee director"
under Rule 16b-3; provided that, if at any time Rule 16b-3 so permits
without adversely affecting the ability of the Plan to comply with its
conditions for exemption from Section 16 of the Exchange Act, one or more
members of the Committee may cease to be "non-employee directors." Unless
the Board should determine for any period that it is not important to the
Company for stock options granted under the Plan to be excludable from the
$1,000,000 deduction limit of Internal Revenue Code Section 162(m) as
"performance-based compensation," the membership of the Committee shall at
all times be constituted so that each member of the Committee also
qualifies as an "outside director" for purposes of Section 162(m).
The Committee has all the powers vested in it by the terms of the
Plan set forth herein, such powers to include exclusive authority to select
the Participants to be granted awards under the Plan ("Awards"), to
determine the type, size and terms of the Award to be made to each
individual selected, to modify the terms of any Award that has been
granted, to determine the time when Awards will be granted, to establish
performance objectives, to make any adjustments necessary or desirable as a
result of the granting of Awards to eligible individuals and to prescribe
the form of the instruments embodying Awards made under the Plan. The
Committee is authorized to interpret the terms of the Plan and the Awards
granted under the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, and to make any other determinations
which it deems necessary or desirable for the administration of the Plan.
The Committee may correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any Award in the manner and to the
extent the Committee deems necessary or desirable to carry it into effect.
The Committee may act only by a majority of its members in office, except
that the members thereof may authorize any one or more of their members or
any officer of the Company to execute and deliver documents or to take any
other ministerial action on behalf of the Committee with respect to Awards
made or to be made to Plan Participants. No member of the Board or of the
Committee, and no officer of the Company, shall be liable for anything done
or omitted to be done by him, by any other member of the Board or the
Committee, or by any officer of the Company in connection with the
performance of duties under the Plan, except for his own willful misconduct
or as expressly provided by statute.
3. PARTICIPATION.
(a) NON-DIRECTOR PARTICIPANTS. Consistent with the purposes of the
Plan, the Committee shall have exclusive power to select the key employees
of the Company who may be granted Awards as Participants under the Plan.
Eligible individuals shall be selected individually or by groups or
categories as determined by the Committee.
(b) DIRECTOR PARTICIPANTS. Consistent with the purposes of the
Plan, all non-employee directors of the Company shall be eligible to
receive Awards in accordance with PARAGRAPH 5(A). Directors who are not
employees of the Company shall not be eligible for Awards under the Plan
except as provided in PARAGRAPH 5(A).
(c) AFFILIATES. The term "Affiliate" means any entity in which the
Company has a substantial direct or indirect equity interest, as determined
by the Committee. If an Affiliate of the Company wishes to participate in
the Plan and its participation shall have been approved by the Board upon
the recommendation of the Committee, the board of directors or other
governing body of the Affiliate shall adopt a resolution in form and
substance satisfactory to the Committee authorizing participation by the
Affiliate in the Plan with respect to its key employees (except that, where
the Company owns, directly or indirectly, 100% of the equity of any such
Affiliate, approval of the Affiliate's participation by the Company's Board
shall be sufficient, and no separate approval by the Affiliate's Board of
Directors shall be required).
An Affiliate participating in the Plan may cease to be a
participating company at any time by action of the Board or by action of
the board of directors or other governing body of such Affiliate, which
latter action shall be effective not earlier than the date of delivery to
the Secretary of the Company of a certified copy of a resolution of the
Affiliate's board of directors or other governing body taking such action.
If the participation in the Plan by an Affiliate shall terminate, such
termination shall not relieve it of any obligations theretofore incurred by
it under the Plan, except as may be approved by the Committee.
4. AWARDS UNDER THE PLAN.
(a) TYPES OF AWARDS. Awards under the Plan may include one or more
of the following types, either alone or in any combination thereof: (i)
"Stock Options," (ii) "Stock Appreciation Rights," (iii) "Restricted
Stock," (iv) "Performance Grants" and (v) any other type of Award deemed by
the Committee to be consistent with the purposes of the Plan. Stock
Options, which include "Nonqualified Stock Options" and "Incentive Stock
Options" or combinations thereof, are rights to purchase Common Stock and
stock of any other class into which such shares may thereafter be changed
(the "Common Shares"). Nonqualified Stock Options and Incentive Stock
Options are subject to the terms, conditions and restrictions specified in
PARAGRAPH 5. Stock Appreciation Rights are rights to receive (without
payment to the Company) cash, Common Shares, other Company securities
(which may include, but need not be limited to, debentures, preferred
stock, warrants, securities convertible into Common Shares or other
property, and other types of securities including, but not limited to,
those of the Company or an Affiliate, or any combination thereof ("Other
Company Securities")) or property, or other forms of payment, or any
combination thereof, as determined by the Committee, based on the increase
in the value of the number of Common Shares specified in the Stock
Appreciation Right. Stock Appreciation Rights are subject to the terms,
conditions and restrictions specified in PARAGRAPH 6. Shares of Restricted
Stock are Common Shares which are issued subject to certain restrictions
pursuant to PARAGRAPH 7. Performance Grants are contingent awards subject
to the terms, conditions and restrictions described in PARAGRAPH 8,
pursuant to which Participants may become entitled to receive cash, Common
Shares, Other Company Securities or property, or other forms of payment, or
any combination thereof, as determined by the Committee.
(b) MAXIMUM NUMBER OF SHARES THAT MAY BE ISSUED. There may be
issued under the Plan (as Restricted Stock, in payment of Performance
Grants, pursuant to the exercise of Stock Options or Stock Appreciation
Rights, or in payment of or pursuant to the exercise of such other Awards
as the Committee may determine) an aggregate of not more than 1,770,000
Common Shares, subject to adjustment as provided in PARAGRAPH 15. Common
Shares issued pursuant to the Plan may be either authorized but unissued
shares, treasury shares, reacquired shares, or any combination thereof. If
any Common Shares issued as Restricted Stock or otherwise subject to
repurchase or forfeiture rights are reacquired by the Company pursuant to
such rights, or if any Award is canceled, terminates or expires
unexercised, any Common Shares that would otherwise have been issuable
pursuant thereto will be available for issuance under new Awards.
(c) ANNUAL LIMITATION ON AWARDS. The Committee shall not grant
Awards covering more than a maximum of 100,000 shares in the aggregate
(subject to adjustment as provided in PARAGRAPH 15) to any single
Participant during any one calendar-year period.
(d) RIGHTS WITH RESPECT TO COMMON SHARES AND OTHERS SECURITIES.
(i) Unless otherwise determined by the Committee, a Participant
to whom an Award of Restricted Stock has been made (or his successor) shall
have, after issuance of a certificate for the number of Common Shares
awarded and prior to the expiration of the Restricted Period or the earlier
repurchase of such Common Shares as herein provided, ownership of such
Common Shares, including the right to vote the same and to receive
dividends or other distributions made or paid with respect to such Common
Shares (provided that such Common Shares, and any new, additional or
different shares, or Other Company Securities or property, or other forms
of consideration which the Participant may be entitled to receive with
respect to such Common Shares as a result of a stock split, stock dividend
or any other change in the corporation or capital structure of the Company,
shall be subject to the restrictions hereinafter described as determined by
the Committee), subject, however, to the options, restrictions and
limitations imposed thereon pursuant to the Plan. Notwithstanding the
foregoing, a Participant with whom an Award agreement is made to issue
Common Shares in the future, shall have no rights as a shareholder with
respect to Common Shares related to such agreement until issuance of a
certificate to him.
(ii) Unless otherwise determined by the Committee, a
Participant to whom a grant of Stock Options, Stock Appreciation Rights,
Performance Grants or any other Award is made (or his successor) shall have
no rights as a shareholder with respect to any Common Shares or as a holder
with respect to any other securities, if any, issuable pursuant to any such
Award until the date of the issuance to him of a stock certificate or other
instrument of ownership representing such Common Shares. Except as provided
in PARAGRAPH 15, no adjustment shall be made for dividends, distributions
or other rights (whether ordinary or extraordinary, and whether in cash,
Securities, other property or other forms of consideration, or any
combination thereof) for which the record date is prior to the date such
stock certificate or other instrument of ownership is issued.
5. STOCK OPTIONS. The Committee may grant Stock Options either alone,
or in conjunction with Stock Appreciation Rights, Performance Grants or
other Awards, either at the time of grant or by amendment thereafter;
provided that an Incentive Stock Option may be granted only to an eligible
employee of the Company or its subsidiary corporation. Each Stock Option
(referred to herein as an "Option") granted under the Plan shall be
evidenced by an instrument in such form as the Committee shall prescribe
from time to time in accordance with the Plan and shall comply with the
following terms and conditions, and with such other terms and conditions,
including, but not limited to, restrictions upon the Option or the Common
Shares issuable upon exercise thereof, as the Committee shall establish:
(a) OPTION GRANTS TO OUTSIDE DIRECTORS. Each member of the Board of
Directors on November 14, 1996 who is not an employee of the Company, and
each person who becomes a non-employee director of the Company following
such date, shall be eligible, subject to approval by the full Board of
Directors, to be granted Nonqualified Stock Options to purchase a number of
Common Shares to be determined by the Board of Directors at the time of
such grant, with an exercise price per share equal to the fair market value
(as defined in PARAGRAPH 17) of such shares on the date of grant and with
such other terms, consistent with this Plan, as may be established by the
Board of Directors at the time of grant.
(b) OPTION PRICE. In the case of Options granted to employees
selected by the Committee, the option price may be less than, equal to, or
greater than, the fair market value (as defined in PARAGRAPH 17) of the
Common Shares subject to such Option at the time the Option is granted, as
determined by the Committee. The option price may either be fixed when the
option is granted or may be determined in accordance with a formula
prescribed by the Committee for such purpose, PROVIDED, HOWEVER, that in no
event will the option price be less than (i) in the case of an Incentive
Stock Option, 100% of the fair market value of the Common Shares subject to
such Option at the time such Option is granted, or (ii) in the case of a
Nonqualified Stock Option, 85% of the fair market value of the Common
Shares subject to such Option at the time such Option is granted.
Additionally, in the case of an Incentive Stock Option granted to an
employee Participant who owns, directly or indirectly (as determined by
reference to Section 424(d) of the Code), stock representing more than ten
percent of the voting power of all classes of stock of the Company or of
its parent or subsidiary (a "Ten Percent Employee"), such option price
shall in no event be less than 110% of such fair market value at the time
the Option is granted. In no event will the option price for any Option be
less than the par value of the Common Shares subject to such Option.
(c) NUMBER OF SHARES SUBJECT TO OPTION. The Committee shall
determine the number of Common Shares to be subject to each Option. The
number of Common Shares subject to an outstanding Option may be reduced on
a share-for-share or other appropriate basis, as determined by the
Committee, to the extent that Common Shares under such Option are used to
calculate the cash, Common Shares, Other Company Securities or property, or
other forms of payment, or any combination thereof, received pursuant to
exercise of a Stock Appreciation Right attached to such Option, or to the
extent that any other Award granted in conjunction with such Option is
paid.
(d) TIMING OF EXERCISE. Unless the Committee determines otherwise,
the Options shall not be exercisable for at least six months after the date
of grant, unless the grantee ceases employment or performance of services
before the expiration of such six-month period by reason of his disability
(as defined in PARAGRAPH 12) or his death. Subject to the restrictions of
the preceding sentence (and, in the case of Incentive Stock Options,
subject to PARAGRAPH 5(F)), such Options may become exercisable in
accordance with any vesting schedule prescribed by the Committee.
(e) CONDITIONS TO EXERCISE. The Option shall not be exercisable:
(i) in the case of any Incentive Stock Option granted to a Ten
Percent Employee, after the expiration of five years from the date it is
granted, and, in the case of any other Option, after the expiration of ten
years from the date it is granted;
(ii) unless payment in full is made for the shares being
acquired thereunder (as well as for any amounts required to be withheld in
accordance with PARAGRAPH 17(F)) at the time of exercise. Such payment
shall be made in such form (including, but not limited to, cash, Common
Shares, or the surrender of another outstanding Award under the Plan, or
any combination thereof) as the Committee may determine in its discretion;
(iii) in the case of Options granted to Participants who are
employees selected by the Committee, unless the Participant exercising the
Option has been, at all times during the period beginning with the date of
the grant of the Option and ending on a date not more than ninety (90) days
prior to such exercise, employed by or otherwise performing services for
the Company (or a parent or subsidiary corporation of the Company), or a
corporation, or subsidiary of a corporation, issuing or assuming the Option
in a transaction to which Section 424(a) of the Internal Revenue Code of
1986, as amended (the "Code"), is applicable, subject to the following
exceptions:
(A) in the case of any Nonqualified Stock Option (or any
Incentive Stock Option that is converted into a Nonqualified Stock Option
by reason of its extension pursuant to this subparagraph), if such
Participant shall cease to be employed by or otherwise performing services
for the Company solely by reason of a period of Related Employment as
defined in PARAGRAPH 14, he may, during such period of Related Employment,
exercise the Nonqualified Stock Option as if he continued such employment
or performance of service; or
(B) if such Participant shall cease such employment or
performance of services by reason of his disability as defined in PARAGRAPH
12 or early, normal or late retirement under an approved retirement program
of the Company (or such other plan or arrangement as may be approved by the
Committee for this purpose) while holding an Option which has not expired
and has not been fully exercised, such Participant, at any time within one
(1) year (or such other period determined by the Committee) after the date
he ceased such employment or performance of services (but in no event after
the Option has expired), may exercise the Option with respect to any shares
as to which he could have exercised the Option on the date he ceased such
employment or performance of services, or with respect to such greater
number of shares as determined by the Committee up to the total number of
shares subject to the Option; provided, however, that any such extension of
the period within which an Incentive Stock Option may be exercised beyond
three months following cessation of employment (twelve months in the case
of Participant's permanent disability) will result in the Option ceasing to
qualify as an Incentive Stock Option; or
(C) if any person to whom an Option has been granted dies
holding an Option which has not expired and has not been fully exercised,
his successor may, at any time within one (1) year (or such other period
determined by the Committee) after the date of death (but in no event after
the Option has expired), exercise the Option with respect to any shares as
to which the decedent could have exercised the Option at the time of his
death, or with respect to such greater number of shares as determined by
the Committee up to the total number of shares subject to the Option.
(iv) in the case of Options granted to Participants who are
non-employee directors of the Company, unless such Participant either:
(A) is actively serving as a member of the Board of Directors of the
Company or (B) ceased to serve as a member of the Board of Directors on a
date not more than one (1) year prior to such exercise, in which case such
Participant (or his successor, in the event of the Participant's death or
legal incapacity) may exercise the Option during such period (or such other
period determined by the Committee, but in no event after the Option has
expired) with respect to any shares as to which the Participant could have
exercised the Option on the date when he ceased to serve as a Director of
the Company, or with respect to such greater number of shares as determined
by the Committee up to the total number of shares subject to the Option.
(f) INCENTIVE STOCK OPTION LIMITS. In the case of an Incentive
Stock Option, the aggregate fair market value (as defined in PARAGRAPH 17)
of Common Shares, determined at the time of grant of the Option, with
respect to which Incentive Stock Options are exercisable for the first time
by an employee during any calendar year (under all such plans of the
Company and any parent or subsidiary corporation of the Company) shall not
exceed $100,000.
(g) INTENT. It is the intent of the Company that Nonqualified Stock
Options granted under the Plan not be classified as Incentive Stock
Options, that the Incentive Stock Options granted under the Plan be
consistent with and contain or be deemed to contain all provisions required
under Section 422 and the other appropriate provisions of the Code and any
implementing regulations (including any successor provisions thereto), and
that any ambiguities in construction shall be interpreted in order to
effectuate such intent.
6. APPRECIATION RIGHTS. The Committee may grant Stock Appreciation
Rights either alone, or in conjunction with Stock Options, Performance
Grants or other Awards, either at the time of grant or by amendment
thereafter. Each Award of Stock Appreciation Rights granted under the Plan
shall be evidenced by an instrument in such form as the Committee shall
prescribe from time to time in accordance with the Plan and shall comply
with the following terms and conditions, and with such other terms and
conditions, including, but not limited to, restrictions upon the Award of
Stock Appreciation Rights or the cash, Common Shares or Other Company
Securities issuable upon exercise thereof, as the Committee shall
establish:
(a) COMMITTEE DISCRETION. The Committee shall determine the number
of Common Shares to be subject to each Award of Stock Appreciation Rights.
The number of Common Shares subject to an outstanding Award of Stock
Appreciation Rights may be reduced on a share-for-share or other
appropriate basis, as determined by the Committee, to the extent that any
other Award granted in conjunction with such Award of Stock Appreciation
Rights is paid.
(b) TIMING OF EXERCISE. Unless the Committee determines otherwise,
the Award of Stock Appreciation Rights shall not be exercisable for at
least six months after the date of grant, unless the grantee ceases
employment or performance of services before the expiration of such six-
month period by reason of his disability as defined in PARAGRAPH 12 or his
death. Subject to the restrictions of the preceding sentence (and, in the
case of Stock Appreciation Rights granted in conjunction with Incentive
Stock Options, subject to PARAGRAPH 5(F) hereof), such Stock Appreciation
Rights may become exercisable in accordance with any vesting schedule
prescribed by the Committee.
(c) CONDITIONS TO EXERCISE. The Award of Stock Appreciation Rights
shall not be exercisable:
(i) in the case of any Award of Stock Appreciation Rights that
are attached to an Incentive Stock Option granted to a Ten Percent
Employee, after the expiration of five years from the date it is granted,
and, in the case of any other Award of Stock Appreciation Rights, after the
expiration of ten years from the date it is granted. Any Award of Stock
Appreciation Rights may be exercised during such period only at such time
or times and in such installments as the Committee may establish;
(ii) unless any Option or other Award to which the Award of
Stock Appreciation Rights may be attached is at the time exercisable; and
(iii) unless the Participant exercising the Award of Stock
Appreciation Rights has been, at all times during the period beginning with
the date of the grant of the Option and ending on a date not more than
ninety (90) days prior to such exercise, employed by or otherwise
performing services for the Company (or a parent or subsidiary corporation
of the Company), or a corporation, or subsidiary of a corporation, issuing
or assuming the Award of Stock Appreciation Rights in a transaction to
which Section 424(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), is applicable, subject to the following exceptions:
(A) in the case of any Award of Stock Appreciation
Rights, if such person shall cease to be employed by or otherwise
performing services for the Company solely by reason of a period of Related
Employment as defined in PARAGRAPH 14, he may, during such period of
Related Employment, exercise the Award of Stock Appreciation Rights as if
he continued such employment or performance of services (provided, however,
that if such Stock Appreciation Rights are attached to an Incentive Stock
Option, application of this subparagraph will result in such Option ceasing
to qualify as an Incentive Stock Option if the period of Related Employment
lasts for more than ninety (90) days); or
(B) if such Participant shall cease such employment or
performance of services by reason of his disability as defined in PARAGRAPH
12 or early, normal or late retirement under an approved retirement program
of the Company (or such other plan or arrangement as may be approved by the
Committee for this purpose) while holding an Award of Stock Appreciation
Rights which has not expired and has not been fully exercised, such
Participant, at any time within one (1) year (or such other period
determined by the Committee) after the date he ceased such employment or
performance of services (but in no event after the Award of Stock
Appreciation Rights has expired), may exercise the Award of Stock
Appreciation Rights with respect to any shares as to which he could have
exercised the Award of Stock Appreciation Rights on the date he ceased such
employment or performance of services, or with respect to such greater
number of shares as determined by the Committee up to the total number of
shares subject to the Award; provided, however, that, in the case of any
Award of Stock Appreciation Rights attached to an Incentive Stock Option,
any such extension of the period within which the Award may be exercised
beyond ninety (90) days following cessation of employment (twelve months in
the case of Participant's permanent disability) will result in the attached
Option ceasing to qualify as an Incentive Stock Option; or
(C) if any person to whom an Award of Stock Appreciation
Rights has been granted dies holding an Award of Stock Appreciation Rights
which has not expired and has not been fully exercised, his successor may,
at any time within one (1) year (or such other period determined by the
Committee) after the date of death (but in no event after the Award of
Stock Appreciation Rights has expired), exercise the Award with respect to
any shares as to which the decedent could have exercised the Award at the
time of his death, or with respect to such greater number of shares as
determined by the Committee up to the total number of shares subject to the
Award.
(d) PAYMENT OF THE AWARD. An Award of Stock Appreciation Rights
shall entitle the Participant (or his successor) to exercise such Award or,
if applicable, to surrender to the Company unexercised the Option (or other
Award) to which the Stock Appreciation Right is attached (or any portion of
such Option or other Award), and to receive from the Company in exchange
therefor, without payment to the Company, that number of Common Shares
having an aggregate value equal to (or, in the discretion of the Committee,
less than) the excess of the fair market value of one share, at the time of
such exercise, over the exercise price (or Option Price, as the case may
be) per share, times the number of shares subject to the Award of the
Option (or other Award), or portion thereof. which is so exercised or
surrendered, as the case may be. The Committee may elect to settle the
obligation arising out of the exercise of a Stock Appreciation Right by the
payment of cash or Other Company Securities or property, or other forms of
payment, or any combination thereof, as determined by the Committee, equal
to the aggregate value of the Common Shares it would otherwise be obligated
to deliver. Any such election by the Committee shall be made as soon as
practicable after the receipt by the Committee of written notice of the
exercise of the Stock Appreciation Right. The value of a Common Share,
Other Company Securities or property, or other forms of payment determined
by the Committee for this purpose shall be the fair market value thereof on
the last business day next preceding the date of the election to exercise
the Stock Appreciation Right, unless the Committee determines otherwise.
(e) DEEMED EXERCISE. A Stock Appreciation Right may provide that it
shall be deemed to have been exercised at the close of business on the
business day preceding the expiration date of the Stock Appreciation Right
or of the related Option (or other Award), or such other date as specified
by the Committee, if at such time such Stock Appreciation Right has a
positive value. Such deemed exercise shall be settled or paid in the same
manner as a regular exercise thereof as provided in PARAGRAPH 6(D) hereof.
(f) NO FRACTIONAL SHARES. No fractional shares may be delivered
under this PARAGRAPH 6, but in lieu thereof a cash or other adjustment
shall be made as determined by the Committee.
7. RESTRICTED STOCK. Each Award of Restricted Stock under the Plan
shall be evidenced by an instrument in such form as the Committee shall
prescribe from time to time in accordance with the Plan and shall comply
with the following terms and conditions, and with such other terms and
conditions as the Committee shall establish:
(a) CONSIDERATION. The Committee shall determine the number of
Common Shares to be issued to a Participant pursuant to the Award, and the
extent, if any, to which they shall be issued in exchange for cash, other
consideration, or both.
(b) RESTRICTED PERIOD AND COMPANY REPURCHASE OPTION. Common Shares
issued to a Participant in accordance with the Award may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of,
except by will or the laws of descent and distribution, or as otherwise
determined by the Committee, for such period as the Committee shall
determine, from the date on which the Award is granted (the "Restricted
Period"). The Company will have the option to repurchase the shares subject
to the Award at such price as the Committee shall have fixed when the Award
was made or as amended thereafter, which option will be exercisable:
(i) subject to PARAGRAPH 7(C), if the Participant's continuous employment
or performance of services for the Company shall terminate for any reason,
except solely by reason of a period of Related Employment as defined in
PARAGRAPH 14, prior to the expiration of the Restricted Period, (ii) if, on
or prior to the expiration of the Restricted Period or the earlier lapse of
such repurchase option, the Participant has not paid to the Company an
amount equal to any federal, state, local or foreign income or other taxes
which the Company determines is required to be withheld in respect of such
shares, or (iii) under such other circumstances as determined by the
Committee and set forth in the terms of the Award. Such repurchase option
shall be exercisable on such terms, in such manner and during such period
as shall be determined by the Committee when the Award is made or as
amended thereafter. Each certificate for Common Shares issued pursuant to a
Restricted Stock Award shall bear an appropriate legend referring to the
foregoing repurchase option and other restrictions (and to the fact that
the shares are partly paid, if applicable), shall be deposited by the Award
holders with the Company, together with a stock power endorsed in blank, or
shall be evidenced in such other manner permitted by applicable law as
determined by the Committee. Any attempt to dispose of any such Common
Shares in contravention of the foregoing repurchase option and other
restrictions shall be null and void and without effect. If Common Shares
issued pursuant to a Restricted Stock Award shall be repurchased pursuant
to the repurchase option described above, the Participant or his successor
shall forthwith deliver to the Secretary of the Company the certificates
for the Common Shares awarded to the Participant, accompanied by such
instrument of transfer, if any, as may reasonably be required by the
Secretary of the Company. If the repurchase option described above is not
exercised by the Company during the Restricted Period, such option and the
restrictions imposed pursuant to the first sentence of this PARAGRAPH 7(B)
shall terminate and be of no further force and effect.
(c) TERMINATION OF EMPLOYMENT. If a Participant who has been in
continuous employment or performance of services for the Company or an
Affiliate since the date on which a Restricted Stock Award was granted to
him shall, while in such employment or performance of services, die, or
terminate such employment or performance of services by reason of
disability as defined in PARAGRAPH 12 or by reason of early, normal or late
retirement under an approved retirement program of the Company or an
Affiliate (or such other plan or arrangement as may be approved by the
Committee for this purpose) and any of such events shall occur after the
date on which the Award was granted to him and prior to the end of the
Restricted Period for such Award, the Committee may determine to cancel the
repurchase option (and any or all other restrictions) on any or all of the
Common Shares subject to such Award. The repurchase option shall become
immediately exercisable at such time with respect to any remaining shares
for which the Committee does not determine to cancel such restrictions.
8. PERFORMANCE GRANTS. The Award of a Performance Grant ("Performance
Grant") to a Participant will entitle him to receive a specified amount
determined by the Committee (the "Actual Value"), if the terms and
conditions specified herein and in the Award are satisfied. Each Award of a
Performance Grant shall be subject to the following terms and conditions,
and to such other terms and conditions, including but not limited to,
restrictions upon any cash, Common Shares, Other Company Securities or
property, or other forms of payment, or any combination thereof, issued in
respect of the Performance Grant, as the Committee shall establish, and
shall be embodied in an instrument in such form and substance as is
determined by the Committee:
(a) COMMITTEE DETERMINATION OF AWARD. The Committee shall determine
the value or range of values of a Performance Grant to be awarded to each
Participant selected for an Award and whether or not such a Performance
Grant is granted in conjunction with an Award of Options, Stock
Appreciation Rights, Restricted Stock or other Award, or any combination
thereof, under the Plan (which may include, but need not be limited to,
deferred Awards) concurrently or subsequently granted to the Participant
(the "Associated Award"). As determined by the Committee, the maximum value
of each Performance Grant (the "Maximum Value") shall be: (i) an amount
fixed by the Committee at the time the Award is made or as amended
thereafter; (ii) an amount which varies from time to time based in whole or
in part on the then current value of a Common Share, Other Company
Securities or property, or other securities or property, or any combination
thereof; or (iii) an amount that is determinable from criteria specified by
the Committee. Performance Grants may be issued in different classes or
series having different names, terms and conditions. In the case of a
Performance Grant awarded in conjunction with an Associated Award, the
Performance Grant may be reduced on an appropriate basis to the extent that
the Associated Award has been exercised, paid to or otherwise received by
the Participant, as determined by the Committee.
(b) AWARD PERIOD AND PERFORMANCE OBJECTIVES. The award period
("Award Period") in respect of any Performance Grant shall be a period
determined by the Committee. At the time each Award is made, the Committee
shall establish performance objectives to be attained within the Award
Period as the means of determining the Actual Value of such a Performance
Grant. The performance objectives shall be based on such measure or
measures of performance (which may include, but need not be limited to, the
performance of the Participant, the Company, one or more of its
subsidiaries or one or more of their divisions or units, or any combination
of the foregoing) as the Committee shall determine, and may be applied on
an absolute basis or be relative to industry or other indices, or any
combination thereof. The Actual Value of a Performance Grant shall be equal
to its Maximum Value only if the performance objectives are attained in
full, but the Committee shall specify the manner in which the Actual Value
of Performance Grants shall be determined if the performance objectives are
met in part. Such performance measures, the Actual Value or the Maximum
Value, or any combination thereof, may be adjusted in any manner by the
Committee at any time and from time to time during or as soon as
practicable after the Award Period, if it determines that such performance
measures, the Actual Value or the Maximum Value, or any combination
thereof, are not appropriate under the circumstances.
(c) PROVISIONAL RIGHTS. The rights of a Participant in Performance
Grants awarded to him shall be provisional and may be canceled or paid in
whole or in part, all as determined by the Committee, if the Participant's
continuous employment or performance of services for the Company shall
terminate for any reason prior to the end of the Award Period, except
solely by reason of a period of Related Employment as defined in PARAGRAPH
14.
(d) ACTUAL VALUE. The Committee shall determine whether the
conditions of PARAGRAPHS 8(B) or PARAGRAPH 8(C) hereof have been met and,
if so, shall ascertain the Actual Value of the Performance Grants. If the
Performance Grants have no Actual Value, the Award and such Performance
Grants shall be deemed to have been canceled and the Associated Award, if
any, may be canceled or permitted to continue in effect in accordance with
its terms. If the Performance Grants have any Actual Value and:
(i) were not awarded in conjunction with an Associated Award,
the Committee shall cause an amount equal to the Actual Value of the
Performance Grants earned by the Participant to be paid to him or his
successor as provided below; or
(ii) were awarded in conjunction with an Associated Award, the
Committee shall determine, in accordance with criteria specified by the
Committee (A) to cancel the Performance Grants, in which event no amount in
respect thereof shall be paid to the Participant or his successor, and the
Associated Award may be permitted to continue in effect in accordance with
its terms, (B) to pay the Actual Value of the Performance Grants to the
Participant or his successor as provided below, in which event the
Associated Award may be canceled or (C) to pay to the Participant or his
successor as provided below, the Actual Value of only a portion of the
Performance Grants, in which event all or a portion of the Associated Award
may be permitted to continue in effect in accordance with its terms or be
canceled, as determined by the Committee.
Such determination by the Committee shall be made as promptly as
practicable following the end of the Award Period or upon the earlier
termination of employment or performance of services, or at such other time
or times as the Committee shall determine, and shall be made pursuant to
criteria specified by the Committee.
Payment of any amount in respect of the Performance Grants which the
Committee determines to pay as provided above shall be made by the Company
as promptly as practicable after the end of the Award Period or at such
other time or times as the Committee shall determine, and may be made in
cash, Common Shares, Other Company Securities or property, or other forms
of payment, or any combination thereof or in such other manner, as
determined by the Committee. Notwithstanding anything in this PARAGRAPH 8
to the contrary, the Committee may determine and pay out the Actual Value
of the Performance Grants at any time during the Award Period.
9. DEFERRAL OF COMPENSATION. The Committee shall determine whether an
Award shall be made in conjunction with deferral of the Participant's
salary, bonus or other compensation, or any combination thereof, and
whether such deferred amounts may be:
(i) forfeited to the Company or to other Participants, or any
combination thereof, under certain circumstances (which may include, but
need not be limited to, certain types of termination of employment or
performance of services for the Company and its Affiliates);
(ii) subject to increase or decrease in value based upon the
attainment of or failure to attain, respectively, certain performance
measures; and/or
(iii) credited with income equivalents (which may include, but need
not be limited to, interest, dividends or other rates of return) until the
date or dates of payment of the Award, if any.
10. DEFERRED PAYMENT OF AWARDS. The Committee may specify that the
payment of all or any portion of cash, Common Shares, Other Company
Securities or property, or any other form of payment, or any combination
thereof, under an Award shall be deferred until a later date. Deferrals
shall be for such periods or until the occurrence of such events, and upon
such terms, as the Committee shall determine. Deferred payments of Awards
may be made by undertaking to make payment in the future based upon the
performance of certain investment equivalents (which may include, but need
not be limited to, government securities, Common Shares, other securities,
property or consideration, or any Combination thereof), together with such
additional amounts of income equivalents (which may be compounded and may
include, but need not be limited to, interest, dividends or other rates of
return, or any combination thereof) as may accrue thereon until the date or
dates of payments, such investment equivalents and such additional amounts
of income equivalents to be determined by the Committee.
11. AMENDMENT OR SUBSTITUTION OF AWARDS UNDER THE PLAN. The terms of
any outstanding Award under the Plan may be amended from time to time by
the Committee in any manner that it deems appropriate (including, but not
limited to, acceleration of the date of exercise of any Award and/or
payments thereunder); provided that no such amendment shall reduce the
amount of any benefit which a Participant is then entitled to obtain or
collect at such time, unless the Committee determines that there have
occurred or are about to occur significant changes in the Participant's
position, duties or responsibilities, or significant changes in economic,
legislative, regulatory, tax, accounting or cost-benefit conditions which
are determined by the Committee to have or to be expected to have a
substantial effect on the performance of the Company, or any subsidiary,
Affiliate, division or department thereof, on the Plan or on any Award
under the Plan. The Committee may require or permit holders of Awards under
the Plan to surrender outstanding Awards in order to exercise or realize
the rights under other Awards, or in exchange for the grant of new Awards,
and may require holders of Awards to surrender outstanding Awards as a
condition precedent to the grant of new Awards under the Plan.
12. DISABILITY. For the purposes of this Plan, a Participant shall be
deemed to have terminated his employment or performance of services for the
Company by reason of disability, if the Committee shall determine that the
physical or mental condition of the Participant by reason of which such
employment or performance of services terminated was such at that time as
would entitle him to payment of monthly disability benefits under the
Company's Long Term Disability Benefit Plan, or, if the Participant is not
eligible for benefits under such plan, under any similar disability plan of
the Company in which he is a participant. If the Participant is not
eligible for benefits under any disability plan of the Company, he shall be
deemed to have terminated such employment or performance of services by
reason of disability if the Committee determines that his physical or
mental condition would entitle him to benefits under the Company's Long
Term Disability Benefit Plan if he were eligible therefore.
13. TERMINATION OF A PARTICIPANT. For all purposes under the Plan,
the Committee shall determine whether a Participant has terminated
employment by or the performance of services for the Company; provided,
however, that transfers between the Company and an Affiliate or between
Affiliates, and approved leaves of absence may not be deemed such a
termination, in the Committee's discretion.
14. RELATED EMPLOYMENT. For the purposes of this Plan, Related
Employment shall mean the employment or performance of services by an
individual for an employer other than the Company, provided that (i) such
employment or performance of services is undertaken by the individual at
the request of the Company, (ii) immediately prior to undertaking such
employment or performance of services, the individual was employed by or
performing services for the Company or was engaged in Related Employment as
herein defined, and (iii) such employment or performance of services is in
the best interests of the Company and is recognized by the Committee, in
its discretion, as Related Employment for purposes of this PARAGRAPH 14.
The death or disability of an individual during a period of Related
Employment as herein defined shall be treated, for purposes of this Plan,
as if the death or onset of disability had occurred while the individual
was employed by or performing services for the Company.
15. DILUTION, CHANGE IN CONTROL AND OTHER ADJUSTMENTS. In the event
of any change in the outstanding Common Shares of the Company by reason of
any stock split, reverse stock split, stock dividend, split-up, split-off,
spin-off, recapitalization, merger, consolidation, rights offering,
reorganization, combination or exchange of shares, a sale by the Company of
all or part of its assets, a change in control (as defined in PARAGRAPH
17(o)), any distribution to shareholders other than a normal cash dividend,
or other extraordinary or unusual event, if the Committee shall determine
that such change equitably requires an adjustment in the terms of any Award
or the number of Common Shares available for Awards, such adjustment may be
made by the Committee and shall be final, conclusive and binding for all
purposes of the Plan.
16. DESIGNATION OF BENEFICIARY BY PARTICIPANT. A Participant may name
a beneficiary to receive any payment to which he may be entitled in respect
of any Award under the Plan in the event of his death, on a written form to
be provided by and filed with the Committee, and in a manner determined by
the Committee. The Committee reserves the right to review and approve
beneficiary designations. A Participant may change his beneficiary from
time to time in the same manner, unless such Participant has made an
irrevocable designation. Any designation of beneficiary under the Plan
accepted by the Committee shall be controlling over any other disposition,
testamentary or otherwise. If no designated beneficiary is living on the
date on which any amount becomes payable to such Participant's beneficiary,
such payment will be made to the estate of the Participant, the legal
representatives of the Participant's estate, or any heir or other person or
entity legally entitled to act for or on behalf of such Participant after
such Participant's death (the "Participant's successor"). Any reference in
the Plan to the "successor" of a Participant shall include any one or more
of the above, as appropriate. The Committee shall resolve any question as
to the legal right of any person or entity to receive a distribution under
the Plan as a Participant's successor, and upon payment of the amount in
question to the successor determined by the Committee, the Company, the
Board and the Committee, and the members thereof will have no further
liability to anyone with respect to such amount.
17. MISCELLANEOUS PROVISIONS.
(a) NO EMPLOYMENT RIGHTS CREATED PURSUANT TO THE PLAN. No employee
or other person shall have any claim or right to be granted an Award under
the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any employee or other person any right to continue to
be employed by or perform services for the Company, and the right to
terminate the employment of or performance of services by any Participant
at any time and for any reason is specifically reserved.
(b) WRITTEN REQUIREMENT. No Participant or other person shall have
any right with respect to the Plan, the Common Shares reserved for issuance
under the Plan or in any Award, contingent or otherwise, until written
evidence of the Award shall have been delivered to the recipient and all
the terms, conditions and provisions of the Plan and the Award applicable
to such recipient or his successor have been met. The rights of each
Participant shall be limited to those that are specifically granted in the
written evidence of the Award. Any right not specifically granted therein
is reserved entirely to the discretion of the Board.
(c) NO ALIENATION. Except as may be approved by the Committee where
such approval shall not adversely affect compliance of the Plan with Rule
16b-3 under the Exchange Act, a Participant's rights and interest under the
Plan may not be assigned or transferred, hypothecated or encumbered in
whole or in part either directly or by operation of law and otherwise
(except in the event of a Participant's death) including, but not by way of
limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or
in any other manner; provided, however, that any Incentive Stock Option or
similar right (including any Stock Appreciation Right granted in
conjunction with any such Option) offered pursuant to the Plan shall not be
transferable other than by will or the laws of descent and distribution and
shall be exercisable during the Participant's lifetime only by him (or by a
duly appointed guardian or personal representative). Any such transferee of
a Participant's rights approved by the Committee shall be treated as the
"Participant" for all purposes of the Plan, unless the Committee directs
otherwise.
(d) LEGAL COMPLIANCE. No Common Shares, Other Company Securities or
property, other securities or property, or other forms of payment shall be
issued hereunder with respect to any Award unless counsel for the Company
is satisfied that such issuance will be in compliance with applicable
federal, state, local and foreign legal, securities exchange and other
applicable laws and regulations.
(e) ISO RULES AND SEC RULE 16B-3 COMPLIANCE. It is the intent of
the Company that the Plan comply in all respects with Rule 16b-3 under the
Exchange Act and (with respect to those Plan provisions affecting Incentive
Stock Options) with Section 422 of the Code, that any ambiguities or
inconsistencies in construction of the Plan be interpreted to give effect
to such intention and that if any provision of the Plan is found not to be
in compliance with Rule 16b-3 or with Code Section 422 (as applicable),
such provision shall be deemed null and void to the extent required to
permit the Plan to comply with Rule 16b-3 or with Code Section 422 (as
applicable). The Board shall have the power, without further approval of
the Company's shareholders, to amend the Plan in any respect necessary at
any point in time to permit the Plan, and Awards granted under the Plan, to
continue to comply with Rule 16b-3 and with Section 422 of the Code, as
applicable.
(f) WITHHOLDING. The Company and its Affiliates shall have the
right to deduct from any payment made under the Plan any federal, state,
local or foreign income or other taxes required by law to be withheld with
respect to such payment. It shall be a condition to the obligation of the
Company to issue Common Shares, Other Company Securities or property, other
securities or property, or other forms of payment, or any combination
thereof, upon exercise, settlement or payment of any Award under the Plan,
that the Participant or his successor pay to the Company, upon its demand,
such amount as may be requested by the Company for the purpose of
satisfying any liability to withhold federal, state, local or foreign
income or other taxes. If the amount requested is not paid, the Company may
refuse to issue Common Shares, Other Company Securities or property, other
securities or property, or other forms of payment, or any combination
thereof. Notwithstanding anything in the Plan to the contrary, the
Committee may permit an eligible Participant or his successor to elect to
pay a portion or all of the amount requested by the Company for such taxes
with respect to such Award, at such time and in such manner as the
Committee shall determine (including, but not limited to, by authorizing
the Company to withhold, or agreeing to surrender to the Company on or
about the date such tax liability is determinable, Common Shares, other
Company Securities or property, other securities or property, or other
forms of payment, or any combination thereof, owned by such person or a
portion of such forms of payment that would otherwise be distributed, or
have been distributed, as the case may be, pursuant to such Award to such
person, having a fair market value equal to the amount of such taxes);
provided, however, that any election by a Participant to utilize any equity
security of the Company to satisfy such tax liability must fully comply
with all applicable requirements of Rule 16b-3 and of Code Section 422.
(g) PLAN EXPENSES. The expenses of the Plan shall be borne by the
Company. However, if an Award is made to an individual employed by or
performing services for an Affiliate, and the Company does not own
(directly or indirectly) 100% of the equity of such Affiliate:
(i) if such Award results in payment of cash to the
Participant, such Affiliate shall pay to the Company an amount equal to
such cash payment; and
(ii) if the Award results in the issuance by the Company to the
Participant of Common Shares, Other Company Securities or property, other
securities or property, or other forms of payment, or any combination
thereof, such Affiliate shall pay to the Company an amount equal to the
fair market value thereof, as determined by the Committee, on the date such
Common Shares, Other Company Securities or property, other securities or
property, or other forms of payment, or any combination thereof, are issued
(or, in the case of the issuance of Restricted Stock or of Common Shares,
Other Company Securities or property, or other securities or property, or
other forms of payment subject to transfer and forfeiture conditions, equal
to the fair market value thereof on the date on which they are no longer
subject to applicable restrictions), minus the amount, if any, received by
the Company in respect of the purchase of such Common Shares, Other Company
Securities or property, other securities or property or other forms of
payment, or any combination thereof.
(h) UNFUNDED. The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any Award under the Plan,
and rights to the payment of Awards shall be no greater than the rights of
the Company's general creditors.
(i) PARTICIPANT CONSENT. By accepting any Award or other benefit
under the Plan, each Participant or his successor shall be conclusively
deemed to have indicated his acceptance and ratification of, and consent
to, any action taken under the Plan by the Company, the Board or the
Committee or its delegates.
(j) FAIR MARKET VALUE. Fair market value in relation to Common
Shares, Other Company Securities or property, other securities or property
or other forms of payment of Awards under the Plan, or any combination
thereof, as of any specific time shall mean such value as determined by the
Committee in accordance with applicable law.
(k) DETERMINATIONS OF COMMITTEE. Determinations made by the
Committee under the Plan need not be uniform and may be made selectively
among eligible individuals under the Plan, whether or not such eligible
individuals are similarly situated. All determinations and decisions made
by the Committee shall be final, conclusive, and binding on all parties
concerned and are made in the sole and absolute discretion of the Committee
unless a contrary standard for action is expressly stated in the Plan.
(1) GENDER AND NUMBER. The masculine pronoun includes the feminine
and the singular includes the plural wherever appropriate.
(m) INFORMATION FILINGS. The appropriate officers of the Company
shall cause to be filed any reports, returns or other information regarding
Awards hereunder or any Common Shares issued pursuant hereto as may be
required by the Code, by the Exchange Act or by any other applicable
statute, rule or regulation (or any successor provisions thereto).
(n) GOVERNING LAW. The validity, construction, interpretation,
administration and effect of the Plan, and of its rules and regulations,
and rights relating to the Plan and to Awards granted under the Plan, shall
be governed by the laws of the State of Tennessee.
(o) CHANGE IN CONTROL. A change in control is any event which
results in a "person" (as such term is defined in Sections 3(a)(9) and
13(d)(3) of the Securities and Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder) acquiring directly or
indirectly, whether by sale, transfer, assignment, pledge, hypothecation,
gift, or other disposition, in one or more transactions, a majority
controlling interest in the voting capital stock of the Company (or the
entering into of any agreement with the Company to do any of the
foregoing); PROVIDED, HOWEVER, that a change in control shall not include
any transaction in which one or more members of the Frierson family (which
shall include all current members of the family of J. Burton Frierson,
including descendants and spouses, and trusts for the benefit of same, who
presently own capital stock) shall have a majority controlling interest in
the Company.
18. PLAN AMENDMENT OR SUSPENSION. The Plan may be amended, suspended,
or terminated in whole or in part at any time and from time to time by the
Board, but no amendment shall be effective unless and until the same is
approved by shareholders of the Company where the failure to obtain such
approval would adversely affect the compliance of the Plan with Rule 16b-3
under the Exchange Act or with any other applicable law.
19. PLAN TERMINATION. This plan shall terminate upon the earlier of
the following dates or events to occur:
(a) upon the adoption of a resolution of the Board terminating the
Plan; or
(b) ten years from the date the Plan is initially approved and
adopted by the shareholders of the Company in accordance with PARAGRAPH 20
hereof; provided, however, that the Board may, prior to the expiration of
such ten-year period, extend the term of the Plan for an additional period
of up to five years for the grant of Awards other than Incentive Stock
Options.
20. SHAREHOLDER ADOPTION. The Plan was initially approved and adopted
by the shareholders of the Company at a meeting held on May 3, 1990.
Subsequently, at a meeting held on November 14, 1996, the Board of
Directors of the Company approved the amendment of the Plan in various
respects, subject to the approval and adoption of such amendments and of
the restated Plan, as amended, by the shareholders of the Company at a
meeting to be held on May 1, 1997, or at any adjournment thereof. Such
amendments to the Plan shall not be effective and no Award made in reliance
on any of the terms of such amendments shall be permitted to become
effective, unless and until such amendments (and the Plan, as amended and
restated accordingly) have been so approved and adopted. The shareholders
shall be deemed to have approved and adopted such amendments to the Plan
only if they are approved and adopted at a meeting of the shareholders duly
held by vote taken in the manner required by the laws of the State of
Tennessee.
EXHIBIT (10b)
DIXIE YARNS, INC.
Stock Option Agreement
Under
1990 Incentive Stock Plan
Stock Option Agreement made this _____ day of ______________, 19___,
by and between Dixie Yarns, Inc., a Tennessee corporation (hereinafter
referred to as the "COMPANY"), and ______________________________, an
employee or Director of the Company (hereinafter referred to as the
"OPTIONEE");
W I T N E S S E T H:
WHEREAS, the shareholders of the Company approved the 1990 Incentive
Stock Plan effective May 3, 1990, and are scheduled to vote on the approval
of certain amendments thereto at the Company's 1997 Annual Meeting of
Shareholders, to be held on May 1, 1997 (the 1990 Incentive Stock Plan, as
amended to date, is hereinafter referred to as the "PLAN"), for the purpose
of providing long-term incentive compensation to directors and selected key
management employees performing services for the Company and to develop and
maintain a significant long-term ownership position in the common stock of
the Company on the part of such individuals; and
WHEREAS, the Company desires to grant to the Optionee the option(s) to
purchase the Company's common stock described herein; and
WHEREAS, the Optionee desires to accept such grant.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, for other good and valuable consideration, and subject to the terms
and conditions of the Plan (a copy of which is attached hereto) which are
hereby incorporated by reference, the parties hereto hereby agree as
follows:
1. ADMINISTRATION. The Compensation Committee (the "COMMITTEE") of
the Board of Directors of the Company (the "BOARD") shall administer the
Plan, grant stock options and other awards under the Plan, construe and
interpret the Plan, establish rules and regulations and perform all other
acts as it believes reasonable and proper. In accordance with the
conditions and limitations prescribed in the Plan, the Committee may also
delegate the administration of the Plan in whole or in part, on such terms
and conditions, and to such person or persons as it may determine in its
discretion. Whenever the context in this Agreement so permits, any
reference to the "Committee" shall include any successor or delegate of the
Committee, as applicable. Options granted hereunder may be canceled if an
Optionee violates the terms of either this Stock Option Agreement or the
Plan or acts in a manner which the Committee determines to be inimical to
the best interest of the Company. Any decision made, or action taken, by
the Committee shall be final, conclusive and binding on all parties to this
Agreement.
2. GRANT OF INCENTIVE STOCK OPTION. Effective _____________, 19 ___,
the Committee hereby grants to the Optionee, not in lieu of salary or any
other compensation for services, the right and option (hereinafter referred
to as the "ISO OPTION") to purchase from the Company _______________ shares
of the Company's Common Stock, three dollars ($3.00) par value per share,
as an incentive stock option (as defined in Section 422 of the Internal
Revenue Code) (hereinafter referred to as the "ISO Optioned Stock"),
subject to the terms and conditions hereinafter set forth.
3. GRANT OF NSO STOCK OPTION. Effective ________________, 19____,
the Committee hereby grants to the Optionee, not in lieu of salary or any
other compensation for services, the right and option (hereinafter referred
to as the "NSO OPTION") to purchase from the Company _____________ shares
of the Company's Common Stock, three dollars ($3.00) par value per share,
as a non-statutory stock option (hereinafter referred to as the "NSO
OPTIONED STOCK"), subject to the terms and conditions hereinafter set
forth.
4 PURCHASE PRICE. The purchase price of the ISO Optioned Stock
shall be $_____________ per share (hereinafter referred to as the "ISO
OPTION PRICE"). The purchase price of the NSO Optioned Stock shall be
$___________ per share (hereinafter referred to as the "NSO OPTION PRICE").
5. TIME AND MANNER OF EXERCISE.
(a) Vesting Schedule. Subject to the other provisions of this
Agreement, the ISO Option and/or the NSO Option (as applicable) shall
become exercisable as to the percentage of the aggregate number of shares
initially covered by each such option (as adjusted in accordance with
Section 8 hereof, if applicable) on and after each of the following dates:
If the above schedule results in a fractional number of shares
attributable to one or more installments, such fractions shall be added
together or apportioned in such a manner as to add one or more additional
whole shares to the first installment to become exercisable as set forth
above, leaving an equal number of whole shares assigned to each of the
remaining installments. To the extent not previously exercised in
accordance with the terms of this Agreement, both the ISO Option and the
NSO Option shall expire as of 11:59 p.m., Eastern Time, on the tenth (10th)
anniversary of the date of this Agreement.
(b) Minimum Exercise. A minimum of 100 shares, or such lesser number
as is exercisable if fewer than 100 shares are exercisable, may be
purchased by the Optionee from the Company at any one time under either the
ISO Option or the NSO Option.
(c) Method of Exercise and Payment. Subject to the other provisions
of this Agreement, both the ISO Option and the NSO Option may be exercised,
in whole or in part, by giving written notice of such exercise, in the form
annexed to this Agreement, to the Secretary of the Company at the Company's
corporate headquarters office, 1100 South Watkins Street, Chattanooga,
Tennessee, 37404. In order to be effective, such notice must be
accompanied by payment, in the form of a certified or bank cashier's check
made payable to "Dixie Yarns, Inc.," of the full amount of the aggregate
ISO Option Price and/or NSO Option Price for the ISO Optioned Stock and/or
the NSO Optioned Stock then being purchased. Alternatively, payment of the
exercise price for either such option may be made (in accordance with such
procedures and limitations as the Committee may deem appropriate): (A) by
means of surrender to the Company of whole shares of the Company's Common
Stock owned by the Optionee having a fair market value (as defined in the
Plan) on the date of exercise at least equal to the aggregate ISO Option
Price or NSO Option Price of the stock then being purchased (provided, if
the shares to be tendered were previously acquired upon the exercise of
another ISO Option, such tendered shares must have been owned by the
Optionee for at least as long as the ISO Holding Period (as defined in
Section 9 hereof) applicable to such other ISO Option) or (B) by means of a
combination of the surrender of such Common Stock and payment of any
remaining balance of the aggregate exercise price with such a certified or
bank cashier's check.
(d) Certain Additional Restrictions. Except as provided in Section 7
hereof (and except for Optionees who are Directors of the Company), neither
the ISO Option nor the NSO Option may be exercised unless the Optionee is
an employee of the Company, as provided in Section 10 hereof, at the time
of exercise. Neither the Optionee nor his heirs, legatees, distributees,
or legal representatives of his estate shall have any rights of a
stockholder with respect to the ISO Optioned Stock or the NSO Optioned
Stock (as applicable) unless and until certificates for such shares have
been issued upon the exercise of the ISO Option or the NSO Option. Unless
otherwise provided herein, no adjustments shall be made for dividends or
other rights for which the record date is prior to the date of exercise of
the applicable option.
6. ANTI-ASSIGNMENT PROVISION. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, and the successors and
assigns of the Company and its subsidiaries. However, except as may be
approved by the Committee where such approval will not adversely affect
compliance of the Plan with Rule 16b-3 under the Exchange Act, neither the
ISO Option nor the NSO Option shall be transferable by the Optionee
otherwise than by will or the laws of descent and distribution, and each
such option shall be exercisable, during the Optionee's lifetime, only by
him (or by a duly appointed guardian or personal representative). More
particularly (but without limiting the generality of the foregoing),
neither the ISO Option nor the NSO Option may be assigned, transferred,
pledged, hypothecated or encumbered in whole or in part either directly or
by operation of law or otherwise (except as otherwise permitted in this
Section 6) including, but not by way of limitation, by execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner. In the
event of any unapproved attempted assignment, transfer, pledge,
hypothecation or other disposition of any ISO Option or NSO Option contrary
to the provisions hereof, or the levy of any attachment or similar process
upon such option, such option shall automatically become null and void.
Any transfer of an ISO Option or NSO Option approved by the Committee shall
cause the transferee to be treated as the "Optionee" for all purposes of
the Plan and this Agreement unless the Committee directs otherwise.
7. TERMINATION OF EMPLOYMENT/SERVICE OR DEATH OF OPTIONEE.
(a) Termination Not Involving Death/Disability/Retirement. In the
event an Optionee (other than an Optionee who is a non-employee Director of
the Company) shall cease to be employed by, or performing services for, the
Company, in accordance with Section 10 hereof, while holding one or more
stock options (including both ISO Options and NSO Options), each option
held shall immediately cease to be exercisable on the date of such
termination of employment; provided, however, that, in the case of a period
of Related Employment pursuant to Paragraph 14 of the Plan, the Committee
may permit the Optionee to continue to be able to exercise the NSO Option
(as well as any ISO Option that becomes an NSO Option by virtue of its
continuation during a period of Related Employment which extends for more
than 90 days) in accordance with all of the other terms of such option.
Additionally, the Committee shall have the discretion, in the event of
termination for any reason other than the Optionee's death, disability or
retirement, to permit the Optionee to exercise any option that vested prior
to such termination for a period of up to 90 days following such
termination. Subject to Section 14 hereof, the Committee shall also have
discretion to vest some or all non-vested options, as it deems appropriate,
in the event of termination for any reason other than the Optionee's death,
disability or retirement (subject, however, in the case of ISO Options, to
the loss of favorable ISO treatment under federal tax laws to the extent
that such action causes options covering shares with a fair market value in
excess of $100,000 on the date such options were granted to first become
exercisable within a single calendar year.
(b) Disability or Retirement of Optionee. In the event that an
Optionee (other than an Optionee who is a non-employee Director of the
Company) shall cease to be employed by, or performing services for, the
Company, in accordance with Section 10 hereof due to the Optionee's
disability or retirement (as contemplated by Paragraph 5(e)(iii)(B) of the
Plan), then each option then held by the Optionee may be exercised by the
Optionee (or by his successor, in the event of the Optionee's death or
legal incapacity), to the extent that such option was exercisable at the
time of such termination of employment (and subject to Section 7(c) and
Section 14 hereof), at any time during a period of one (1) year following
the date of such termination.
(c) Death of Optionee. Subject to Section 14 hereof, in the event
that an Optionee should die while any portion of the ISO Option and/or the
NSO Option remains exercisable, such option may be exercised by the
Optionee's designated beneficiary to the same extent that such option was
exercisable by the Optionee immediately prior to his death (or to the
extent that such option would have been exercisable in the year immediately
following Optionee's death had he survived, if subsequent installments
would have vested) at any time during a period of one (1) year following
Optionee's death. If Optionee has not made any designation of beneficiary,
then the duly appointed legal representative of Optionee's estate shall be
entitled to exercise such options in accordance with this Section 7(c).
(d) Non-employee Directors. In the case of an Optionee who is a non-
employee Director of the Company, if such Optionee should cease (for any
reason) to serve as a member of the Board of Directors while any portion of
the NSO Option granted to him remains exercisable, then such Optionee (or
his successor, in the event of the Optionee's death or legal incapacity)
may exercise the option during a period of up to one (1) year following the
cessation of his service as a Director (or such other period determined by
the Committee, but in no event after the option has expired) with respect
to any shares as to which the Optionee could have exercised the option on
the date when he ceased to serve as a Director of the Company, or with
respect to such greater number of shares as determined by the Committee up
to the total number of shares subject to the option.
(e) Expiration of Options. All vested (as well as any non-vested)
options shall expire at (a) the expiration of such option's term or (b)
such earlier date as may be fixed by the Committee pursuant hereto. None
of the provisions of this Section 7 shall be construed as permitting the
exercise of either an ISO Option or an NSO Option, or any part thereof, at
any time after 10 years from the date of this Agreement.
8. ADJUSTMENT IN NUMBER OF SHARES OF OPTIONED STOCK AND OPTION PRICE.
In the event of any change in the outstanding Common Shares of the Company
by reason of any stock split, reverse stock split, stock dividend, split-
up, split-off, spin-off, recapitalization, merger, consolidation, rights
offering, reorganization, combination or exchange of shares, a sale by the
Company of all or part of its assets, a change in control (as defined in
Paragraph 17(o) of the Plan), any distribution to shareholders other than a
normal cash dividend, or other extraordinary or unusual event, if the
Committee shall determine that such change equitably requires an adjustment
in the terms of any ISO Option or NSO Option granted pursuant to this
Agreement, such adjustment may be made by the Committee. In the case of
any such adjustment by the Committee regarding the shares subject to any
option, the exercise price per share also shall be appropriately adjusted
to reflect the adjustment in the number of shares subject to such option.
No fractional share of Common Stock shall be issued upon the exercise of
any ISO Option or NSO Option as a result of any such adjustment. In the
discretion of the Committee, the minimum number of full shares which may be
purchased upon exercise of any such option pursuant to Section 5(b) hereof
also may be adjusted in connection with such event. Any such adjustments
made by the Committee shall be final, conclusive and binding for all
purposes of this Agreement and the Plan.
9. DISPOSAL OF ISO OPTION SHARES. Any Optionee who disposes of
shares of Common Stock acquired on the exercise of an ISO Option by sale or
exchange either (i) within two years after the date of the grant of the ISO
Option under which the stock was acquired or (ii) within one year after the
acquisition of such shares ((i) and (ii), collectively, the "ISO HOLDING
PERIOD") must notify the Company of such disposition and of the amount
realized upon such disposition. Optionee hereby covenants and agrees with
the Company that Optionee will fully comply with the requirements of this
Section 9. Any failure by Optionee to fulfill this requirement will be
grounds for the Committee's exclusion of such Optionee from eligibility to
receive any future Awards under the Plan.
10. EMPLOYMENT. As used herein, the term "employment" shall mean the
employment by an individual performing services for the Company or any of
its Affiliates (as defined in the Plan) and shall also include periods of
"Related Employment" (as described in Paragraph 14 of the Plan) as
designated by the Committee. Any transfer of the Optionee from employment
by the Company to an Affiliate of the Company (as defined in the Plan) or
from employment by an Affiliate to the Company shall not be deemed to be a
termination of employment for purposes of this Agreement.
11. NO RIGHT TO CONTINUED EMPLOYMENT OR OTHER RELATIONSHIP. It is
understood that this Agreement shall not be construed as an agreement or
commitment by the Company or any subsidiary or Affiliate to employ the
Optionee during the term of the ISO Option and/or the NSO Option or for any
fixed period of time. It is further understood that this Agreement does
not interfere in any way with the right of the Company or of any Affiliate
of the Company to terminate the employment of the Optionee (or any other
relationship with the Optionee) at any time, with or without cause.
12. WITHHOLDING. Upon the exercise of either the ISO Option or the
NSO Option, the Company shall not deliver or otherwise make shares of
Common Stock available to the Optionee or his beneficiary or representative
until the Company has received from the applicable party, in cash or any
other form acceptable to the Committee, the amount necessary to enable the
Company to remit to the appropriate governmental entity, on behalf of the
applicable party, any amounts required to be withheld for taxes with
respect to such transaction.
13. AVAILABILITY OF SHARES; PAYMENT OF EXPENSES. The Company shall
at all times during the term of the ISO Option and/or the NSO Option,
reserve and keep available such number of shares of common stock as will be
sufficient to satisfy the requirements of this Agreement, shall pay all
fees and expenses necessarily incurred by the Company in connection with
the issue of shares pursuant hereto and will use its best efforts to comply
with all laws and regulations which, in the opinion of counsel for the
Company, shall be applicable.
14. SEC REGISTRATION AND SHAREHOLDER APPROVAL. This Agreement has
been entered into pursuant to Paragraph 5 of the Plan. Notwithstanding
anything to the contrary contained in this Agreement, the ISO Option and/or
the NSO Option (as applicable) granted hereby shall not be exercisable
unless and until: (A) a registration statement under the Securities and
Exchange Act of 1934 as amended has been filed and has become effective
with respect to the shares of Common Stock covered by such option; (B) any
required approval of the Company's shareholders has been obtained in
accordance with the terms of the Plan; and (C) any other applicable laws,
rules and regulations, and such approvals by any governmental agencies as
may be required, shall have been complied with or obtained.
15. GOVERNING LAW. This Option Agreement has been entered into
pursuant to and shall be governed by the laws of the State of Tennessee.
16. GENDER AND NUMBER. Any use of the masculine includes the
feminine and the neuter; and any use of the singular includes the plural,
whenever such meanings are appropriate.
17. HEADINGS AND DEFINITIONS. The headings appearing at the
beginning of each Section in this Agreement are intended only as an index
and are not to be construed to vary the meaning of the provision to which
they refer. Any capitalized terms used but not defined herein shall have
the meanings assigned to such terms the Plan.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Optionee and the Company has caused this Agreement to be duly executed by
its officers thereunto duly authorized on the date and year above written.
ATTEST: DIXIE YARNS, INC.
__________________________ By:____________________________________
Name:
Title:
_______________________________________
OPTIONEE
Social Security No.: __________________
EXERCISE FORM FOR STOCK OPTION AGREEMENT UNDER
DIXIE YARNS, INC. INCENTIVE STOCK PLAN
Date:___________________________
Dixie Yarns, Inc.
1100 South Watkins Street
Chattanooga, TN 37404
Attn: Corporate Secretary
Ladies and Gentlemen:
Enclosed are (i) my check for $_________________ and/or (ii) my stock
certificate(s) (or other evidence of ownership) representing ______________
shares of Dixie Yarns, Inc. Common Stock and duly endorsed for transfer to
Dixie Yarns, Inc., which are hereby tendered in payment for the purchase
of:
(A) ______________ shares of Dixie Yarns, Inc. Common Stock at $ __________
per share pursuant to the exercise of ISO Options granted under the terms
of my Stock Option Agreement with Dixie Yarns, Inc., dated _____________,
19 ______, and/or
(B) ______________ shares of Dixie Yarns, Inc. Common Stock at $ __________
per share pursuant to the exercise of NSO Options granted under the terms
of my Stock Option Agreement with Dixie Yarns, Inc., dated _______________,
19______.
Please register said stock in the name(s) of _________________________
________________________________________________________ (you can either
have the stock registered in your name only or in your and your spouse's
names as joint tenants with right of survivorship) and forward the stock
certificates, dividends, and all other stockholder information to (give
exact address) ___________________________________________________________
__________________________________________________________________________
__________________________________________________________________________.
________________________________
Signature
Social Security Number: ______________________
Spouse's Social Security Number
(if stock to be registered as joint tenants): ____________________________
EXHIBIT (10y)
DIXIE YARNS, INC.
STOCK OWNERSHIP PLAN
PURPOSE: The Board of Directors believes that it is desirable and in the
best interest of the Company to encourage ownership of Common Stock of the
Company by the principal officers of the Company. It is believed that a
substantial investment in the Company by such officers will encourage and
enhance their incentive to manage the Company for the long term benefit of
its shareholders. Accordingly, the Board of Directors adopts this Plan in
order to carry out such goals.
GOAL: Every participant is encouraged to own that number of shares of
Common Stock of the Company that represents in fair market value two (2)
times such participant's base salary commencing on the first business day
three (3) years following (a) the date of adoption of this Plan, or (b) the
first anniversary date of the adoption of this Plan occurring after a new
participant is selected to participate in the Plan, whichever is
applicable. For the purpose of such determination, fair market value shall
be determined by the closing price of the Company's Common Stock as
reported by NASD on the date of such determination, or if the Common Stock
is not traded on such day, then the earliest day prior thereto when such
stock trades (the "NASD Price".)
PARTICIPANTS: This Plan shall apply to the Chief Executive Officer,
President, Chief Financial Officer, and all Corporate vice-presidents, and,
such other persons as may be identified periodically from time to time
hereafter by the Compensation Committee.
PURCHASE FROM COMPANY: In order to facilitate the acquisition of Common
Stock of the Company, the Company will on the date of adoption of the Plan
by the Board of Directors, or as soon thereafter as may be practical, or on
the next anniversary date of the adoption of the Plan (an "Anniversary
Date") that occurs following the selection of a new corporate officer
eligible to participate in the Plan (or on such earlier date as the
Compensation Committee may designate in the case of a new corporate
officer) (such date, as applicable, the "Initial Subscription Offering
Date"), allow each participant to subscribe for shares of Common Stock up
to but not to exceed that number of shares having a fair market value based
upon the NASD Price on the Initial Subscription Offering Date equal to two
(2) times the participant's base salary.
Thereafter on the two (2) successive Anniversary Dates following the
Initial Subscription Offering Date, a participant shall be allowed to
subscribe for the purchase of additional shares of Common Stock having a
fair market value equal to two (2) times the participant's base salary on
such Anniversary Date less the dollar amount of any previous subscriptions.
The purchase price of such shares shall be the NASD Price of the Common
Stock on the applicable Anniversary Date of the offering.
Each subscription shall be automatically called for payment on the third
Anniversary Date following the Initial Subscription Offering Date with
respect to the participant. At that time, the participant may pay the
subscription price entirely in cash or through a combination of cash and/or
the surrender to the Company of either (i) shares of Common Stock already
owned by the participant or (ii) a portion of the shares of Common Stock
otherwise covered by the subscription.
DEATH OR DISABILITY: In the event of the death of a participant or the
disability of a participant such that the participant shall no longer
continue to be employed by the Company, all subscriptions outstanding shall
become due and payable, if not earlier pursuant to their terms, six (6)
months from the date of such participant's death or disability, as
applicable.
TERMINATION OF EMPLOYMENT: In the event of the termination of employment
of a participant for any reason other than death or disability, whether for
or without cause, voluntary or involuntary, all subscriptions outstanding
shall become due and payable, if not earlier pursuant to their terms, ten
(10) days from the participant's termination date.
ACQUISITION: In the event that the Company is acquired by another person,
corporation or legal entity, whether by merger, consolidation, sale of
assets, tender offer or other means, the Company shall have the right to
immediately call all outstanding subscriptions for payment, at its sole
option.
RESTRICTED STOCK: All shares of Common Stock purchased by a participant
from the Company shall be restricted stock and shall be subject to the
resale restrictions imposed by all applicable federal and state securities
laws.
RULE 16B-3 REQUIREMENTS: The Board of Directors reserves the right to
modify the Plan retroactively and/or submit the Plan to the Company's
shareholders for approval should it determine that it is desirable to do so
in order to meet the requirements of Rule 16b-3 of the Securities Exchange
Act of 1934.
AUTHORITY TO MODIFY THE PLAN: The Company reserves the right to modify or
terminate the Plan at all times, provided that the Company will not change
the number of shares of Common Stock or the maturity date of any
subscription agreement outstanding without such participant's consent.
COMPENSATION COMMITTEE AUTHORITY: The Board of Directors grants to the
Compensation Committee the authority to administer the Plan and to make any
changes in the Plan necessary or desirable in order to carry out the
purposes of the Plan. Furthermore, the Compensation Committee shall have
exclusive authority to interpret the Plan provisions and to waive or modify
any requirement of the Plan or any terms of a subscription agreement issued
to a participant in the Plan.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
DIXIE YARNS, INC. SUBSIDIARIES
STATE/COUNTRY
OF
SUBSIDIARY INCORPORATION
Dixie Export, Inc. USVI
Carriage Industries, Inc. Georgia
Masland Carpets, Inc. Alabama
Patrick Carpet Mills, Inc. California
Candlewick - Ringgold, Inc. Tennessee
Candlewick - Lemoore, Inc. Tennessee
Candlewick - Roanoke/Tennessee, Inc. Tennessee
Dixie Funding, Inc. Tennessee
DEL, Inc. Tennessee
RMK, Inc. North Carolina
Caro Knit Incorporated South Carolina
C-Knit Apparel, Inc. Tennessee
