<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
DIXIE YARNS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
DIXIE YARNS, INC.
1100 SOUTH WATKINS STREET
CHATTANOOGA, TENNESSEE 37404
(423) 698-2501
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
To the Shareholders of Dixie Yarns, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Dixie
Yarns, Inc., a Tennessee corporation (the "Company"), will be held at the
Company's general office, 1100 South Watkins Street, Chattanooga, Tennessee
37404, on May 1, 1997, at 10:00 a.m., Eastern Daylight Time, for the purpose of
considering and acting upon the following:
1. Election of nine individuals to the Board of Directors for a term of one
year each;
2. Approval of an amendment to the Company's Restated Charter to change the
Company's name to "The Dixie Group, Inc.";
3. Approval of certain amendments, described in the accompanying Proxy
Statement, to the Company's Incentive Stock Plan; and
4. Such other business as may properly come before the Annual Meeting of
Shareholders, or any adjournment or adjournments thereof.
Only shareholders of record of the Common Stock and Class B Common Stock at
the close of business on March 7, 1997 (the "Record Date") are entitled to
notice of, and to vote at, the Annual Meeting of Shareholders or any adjournment
thereof. A list of shareholders will be available for inspection by shareholders
at least ten days prior to the meeting at the general office of the Company as
shown above.
By Order of the Board of Directors
Daniel K. Frierson
Chairman of the Board
Chattanooga, Tennessee
Dated: April 1, 1997
PLEASE READ THE ATTACHED MATERIAL CAREFULLY AND COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY TO THE COMPANY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES OF COMMON STOCK AND CLASS B COMMON
STOCK WILL BE REPRESENTED AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY
REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON, SHOULD YOU SO DESIRE.
<PAGE>
DIXIE YARNS, INC.
1100 SOUTH WATKINS STREET
CHATTANOOGA, TENNESSEE 37404
(423) 698-2501
------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 1997
------------------------
PROXY STATEMENT
---------------------
INTRODUCTION
This Proxy Statement, the accompanying form of proxy (the "Proxy"), and the
Notice of Annual Meeting of Shareholders (collectively the "Proxy Material") are
being furnished by the Board of Directors of Dixie Yarns, Inc., a Tennessee
corporation (the "Company"), in connection with the solicitation of proxies by
the Company to be voted at the Annual Meeting of Shareholders to be held at the
Company's general office, 1100 South Watkins Street, Chattanooga, Tennessee
37404 on May 1, 1997, at 10:00 a.m., Eastern Daylight Time, and at any
adjournment or adjournments thereof (the "Annual Meeting"), for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders. It is
contemplated that this Proxy Material will be mailed on or about April 1, 1997,
to the shareholders of record of the Company's Common Stock and Class B Common
Stock as of the close of business on March 7, 1997 (the "Record Date").
At the Annual Meeting, holders of the Company's Common Stock, $3.00 par
value per share ("Common Stock"), and Class B Common Stock, $3.00 par value per
share ("Class B Common Stock"), will be asked to: (i) elect nine individuals to
the Board of Directors for a term of one year each; (ii) approve an amendment to
the Company's Restated Charter to change the Company's name to "The Dixie Group,
Inc."; (iii) approve certain amendments to the Company's Incentive Stock Plan as
described herein; and (iv) transact any other business that may properly come
before the meeting.
The Board of Directors recommends that the Company's shareholders vote FOR
the election of the nine nominees for director, FOR the amendment to the
Company's Restated Charter to change the name of the Company to "The Dixie
Group, Inc.," and FOR the amendments to the Company's Incentive Stock Plan.
<PAGE>
RECORD DATE, VOTE REQUIRED AND RELATED MATTERS
The Board has fixed the close of business on March 7, 1997, as the Record
Date for the determination of shareholders entitled to notice of, and to vote
at, the Annual Meeting. Each outstanding share of Common Stock is entitled to
one vote, and each outstanding share of Class B Common Stock is entitled to 20
votes, exercisable in person or by properly executed Proxy, on each matter
brought before the Annual Meeting. There are no outstanding shares of the
Company's Class C Common Stock. Cumulative voting is not permitted. As of March
7, 1997, 10,466,894 shares of Common Stock, representing 10,466,894 votes, were
held of record by approximately 4,500 shareholders (including an estimated 3,500
shareholders whose shares are held in nominee names), and 735,228 shares of
Class B Common Stock, representing 14,704,560 votes, were held by 16 individual
shareholders together representing an aggregate of 25,171,454 votes.
Shares represented at the Annual Meeting by properly executed Proxy will be
voted in accordance with the instructions indicated therein unless such Proxy
has previously been revoked. If no instructions are indicated, such shares will
be voted FOR the election of the nine nominees for director as set forth in this
Proxy Statement, FOR the amendment to the Company's Restated Charter to change
the Company's name to "The Dixie Group, Inc.," and FOR the amendments to the
Company's Incentive Stock Plan.
Any Proxy given pursuant to this solicitation may be revoked at any time by
the shareholder giving it by delivering to the Secretary of the Company a
written notice of revocation bearing a later date than the Proxy, by submitting
a later-dated, properly executed Proxy, or by revoking the Proxy and voting in
person at the Annual Meeting. Attendance at the Annual Meeting will not, in and
of itself, constitute a revocation of a Proxy. Any written notice revoking a
Proxy should be sent to Dixie Yarns, Inc., P. O. Box 751, Chattanooga, Tennessee
37401, Attention: Starr T. Klein, Secretary.
The persons designated as proxies were selected by the Board of Directors
and are Daniel K. Frierson, James H. Martin, Jr., and Robert J. Sudderth, Jr.,
directors of the Company. Daniel K. Frierson is Chairman of the Board,
President, and Chief Executive Officer of the Company.
The cost of solicitation of Proxies will be borne by the Company.
The presence, in person or by Proxy, of the holders of a majority of the
aggregate outstanding vote of Common Stock and Class B Common Stock entitled to
vote is necessary to constitute a quorum at the Annual Meeting for acting on the
election of directors. The affirmative vote of a plurality of the total votes
cast that are represented in person or by Proxy at the Annual Meeting is
required to elect the Board of Directors' nominees. Approval of Proposal 2
(concerning amendment of the Company's Restated Charter to change the Company's
name to "The Dixie Group, Inc.") and of Proposal 3 (concerning amendments to the
Incentive Stock Plan) will require the affirmative vote of the majority of the
votes cast by the shares present and voting (either in person or by proxy) on
such proposals at the Annual Meeting.
The Board is not aware of any other matter to be brought before the Annual
Meeting for a vote of shareholders. If, however, other matters are properly
presented, Proxies representing shares of Common Stock and Class B Common Stock
will be voted in accordance with the best judgment of the proxyholders on such
other matters. Shares covered by abstentions and broker non-votes, while counted
for purposes of determining the presence of a quorum at the Annual Meeting, will
not be counted as a "Yes" or "No" vote for any purpose and thus will have no
effect on the outcome of the vote with respect to any of the proposals submitted
to shareholders at the Annual Meeting.
A copy of the Company's Annual Report for the year ended December 28, 1996,
is enclosed herewith.
2
<PAGE>
PRINCIPAL SHAREHOLDERS
Shareholders of record of the Common Stock and Class B Common Stock on the
Record Date will be entitled to vote at the Annual Meeting. The number of shares
of Common Stock and Class B Common Stock outstanding and entitled to vote on
March 7, 1997, was 10,466,894, having one vote per share (representing
10,466,894 votes) and 735,228 having twenty votes per share (representing
14,704,560 votes), respectively, for a total of 25,171,454 votes. Messrs. Daniel
K. Frierson, T. Cartter Frierson, Paul K. Frierson, James W. Frierson, and J.
Burton Frierson, III collectively have the power to direct 15,245,878 votes
(577,078 shares of Common Stock and 733,440 shares of Class B Common Stock)
representing 60.57% of the total vote.
Under the rules of the Securities and Exchange Commission and for the
purposes of the disclosures being made herein, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting power,"
which includes the power to vote or to direct the voting of such security, or
"investment power," which includes the power to dispose or to direct the
disposition of such security. Under these rules, more than one person may be
deemed to be a beneficial owner of the same securities.
The following table sets forth certain information with respect to those
persons known to the Company to be the beneficial owners of more than five
percent (5%) of the Common Stock or Class B Common Stock as of the Record Date.
As to SunTrust Banks, Inc., The TCW Group, Inc., and Franklin Resources, Inc.,
the information is based on the respective reports filed by each such beneficial
owner with the Securities and Exchange Commission and with the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY % OF
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OWNED(1) CLASS(1)
- ------------------------------------------ -------------------------- -------------------- -----------
<S> <C> <C> <C>
Daniel K. Frierson Common Stock 1,263,045(2) 11.87%
111 East and West Road Class B Common Stock 661,440(3) 89.96%
Lookout Mountain, TN 37350
Paul K. Frierson Common Stock 1,071,533(4) 10.16%
606 Fleetwood Drive Class B Common Stock 251,373(5) 34.19%
Lookout Mountain, TN 37350
T. Cartter Frierson Common Stock 309,956(6) 2.96%
1103 Tinker Bell Lane Class B Common Stock 100,982(7) 13.73%
Lookout Mountain, GA 30750
SunTrust Banks, Inc. Common Stock 903,193(8) 8.63%
25 Park Place Class B Common Stock -- --
Atlanta, GA 30303
The TCW Group, Inc. Common Stock 908,300(9) 8.68%
865 South Figueroa Street Class B Common Stock -- --
Los Angeles, CA 90017
Franklin Resources, Inc. Common Stock 850,000(10) 8.12%
777 Mariners Island Bvld. Class B Common Stock -- --
San Mateo, CA 94404
</TABLE>
3
<PAGE>
(1) The Class B Common Stock is convertible on a share-for-share basis into
shares of Common Stock. However, information presented in this table as to
the number of shares of Common Stock beneficially owned and the percent of
class does not give effect to the possible conversion of shares of Class B
Common Stock into shares of Common Stock.
(2) Includes: (i) 9,559 shares of Common Stock as to which Mr. Frierson has
sole investment and sole voting power; (ii) 143,600 shares of Common Stock
for which Mr. Frierson has subscribed but has not yet purchased, pursuant to
the Company's Stock Ownership Plan; (iii) 27,433 shares of Common Stock
owned directly by Rowena K. Frierson but subject to a general power of
attorney granted to Daniel K. Frierson and T. Cartter Frierson; (iv) 926,806
shares of Common Stock owned by the Dixie Yarns, Inc. Retirement Plans for
which Daniel K. Frierson, Paul K. Frierson, and Robert J. Sudderth, Jr. are
fiduciaries and for which SunTrust Bank Chattanooga, N.A. serves as trustee
(see note 8 for a description of the affiliation between SunTrust Bank,
Chattanooga, N.A. and SunTrust Bank, Inc.); (v) 121,147 shares of Common
Stock owned by the wife and children of Daniel K. Frierson and as to which
he shares voting and investment power; (vi) options, which are exercisable
within 60 days of the Record Date, to purchase 33,500 shares of Common Stock
owned directly by Mr. Frierson; and (vii) options, which are exercisable
within 60 days of the Record Date, to purchase 1,000 shares of Common Stock
owned by one of his children and as to which he shares voting and investment
power.
(3) Includes: (i) 105,072 shares of Class B Common Stock owned by Mr.
Frierson's wife and children as to which he shares investment and voting
power and (ii) 556,368 shares of Class B Common Stock held pursuant to a
shareholder agreement under which Daniel K. Frierson has been granted a
proxy, which expires October 2005, to vote such shares (the "Shareholder
Agreement"). The proxy is terminable under certain limited circumstances
prescribed in the Shareholder Agreement. The parties to the Shareholder
Agreement are the Estate of J. Burton Frierson, the wife of J. Burton
Frierson (Rowena K. Frierson), and the five sons of J. Burton and Rowena K.
Frierson (Daniel K. Frierson; Paul K. Frierson; T. Cartter Frierson; James
W. Frierson; and J. Burton Frierson, III). The 556,368 shares of Class B
Common Stock subject to the Shareholder Agreement include: (a) 236,178
shares of Class B Common Stock owned directly by Daniel K. Frierson; (b)
94,069 shares of Class B Common Stock owned directly by Paul K. Frierson;
(c) 15,678 shares of Class B Common Stock owned directly by T. Cartter
Frierson; (d) 40,000 shares of Class B Common Stock held by Paul K.
Frierson, T. Cartter Frierson, and Daniel K. Frierson as co-trustees of the
Frierson Family Trusts; (e) 45,304 shares of Class B Common Stock held by
Paul K. Frierson, T. Cartter Frierson, and Daniel K. Frierson as co-trustees
of the Special Purpose Trust of J. Burton Frierson; and (f) 125,139 shares
of Class B Common Stock owned directly by Rowena K. Frierson but subject to
a general power of attorney granted to Daniel K. Frierson and T. Cartter
Frierson.
(4) Includes: (i) 17,225 shares of Common Stock as to which Mr. Frierson holds
sole investment and sole voting power; (ii) 68,700 shares of Common Stock
for which Mr. Frierson has subscribed, but has not yet purchased, pursuant
to the Company's Stock Ownership Plan;(iii) 926,806 shares of Common Stock
owned by the Dixie Yarns, Inc. Retirement Plans for which he, Daniel K.
Frierson and Robert J. Sudderth, Jr. are fiduciaries and for which SunTrust
Bank, Chattanooga, N.A. serves as trustee; (iv) 50,802 shares of Common
Stock owned by his wife and children and as to which he shares investment
and voting power; and (v) options, which are exercisable within 60 days of
the Record Date, to purchase 8,000 shares of Common Stock owned directly by
Mr. Frierson.
4
<PAGE>
(5) Includes: (i) 94,069 shares of Class B Common Stock owned directly by Mr.
Frierson and held subject to the Shareholder Agreement described in Note 3;
(ii) 72,000 shares of Class B Common Stock owned by his children and as to
which he shares investment and voting power; (iii) 40,000 shares of Class B
Common Stock held by Paul K. Frierson, T. Cartter Frierson, and Daniel K.
Frierson as co-trustees of the Frierson Family Trusts and held subject to
the Shareholder Agreement described in note 3; and (iv) 45,304 shares of
Class B Common Stock held by Paul K. Frierson, T. Cartter Frierson and
Daniel K. Frierson as co-trustees of the Special Purpose Trust of J. Burton
Frierson and held subject to the Shareholder Agreement described in note 3.
(6) Includes: (i) 160,402 shares of Common Stock as to which Mr. Frierson holds
sole investment and sole voting power; (ii) 122,121 shares of Common Stock
owned by his wife and children as to which he shares investment and voting
power; and (iii) 27,433 shares of Common Stock owned directly by Rowena K.
Frierson but subject to a general power of attorney held by T. Cartter
Frierson and Daniel K. Frierson.
(7) All such shares of Class B Common Stock are held subject to the Shareholder
Agreement described in note 3.
(8) SunTrust Banks, Inc., as Parent Holding Company for SunTrust Banks of
Tennessee, Inc.; SunTrust Banks of Georgia, Inc.; and in various fiduciary
capacities, has reported beneficial ownership of 903,193 shares of Common
Stock as follows: SunTrust Banks of Tennessee, Inc., as Parent Holding
Company for SunTrust Bank, Chattanooga, N.A. ("STB"), has reported 801,571
shares of Common Stock over which STB has sole power to vote, 68,162 shares
of Common Stock over which STB has shared power to vote, 505,509 shares of
Common Stock over which STB has sole investment power, and 197,729 shares of
Common Stock over which STB has shared investment power. SunTrust Banks of
Georgia, Inc., as Parent Holding Company of SunTrust Bank, Savannah, N.A.,
has reported 18,125 shares of Common Stock over which it has sole voting
power, 6,875 shares of Common Stock over which it has sole investment power,
and 11,250 shares of Common Stock over which it has shared investment power.
(9) The TCW Group, Inc., as Parent Holding Company for certain associated
entities, has reported beneficial ownership of 908,300 shares of Common
Stock, for which it has sole voting and sole investment power.
(10) The 850,000 shares of Common Stock are beneficially owned by one or more
open or closed-end investment companies or other managed accounts that are
advised by direct and indirect investments advisory subsidiaries of Franklin
Resources, Inc. Such advisory contracts grant the advisory subsidiaries of
Franklin Resources, Inc. sole voting and sole investment power over all such
shares.
5
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
INFORMATION ABOUT NOMINEES FOR DIRECTORS
Pursuant to the Company's Bylaws, all Directors are elected to serve a one
year term, or until their successors are elected and qualified. The Board of
Directors is permitted to appoint directors to fill the unexpired terms of
directors who resign.
The names of the nominees for election to the Board, their ages, their
principal occupations or employments (which have continued for at least the past
five years unless otherwise noted), directorships held by them in other
publicly-held corporations or investment companies, the dates they first became
directors of the Company, and certain other relevant information with respect to
such nominees are as follows:
PAUL K. BROCK, age 64, was the Chairman of Brach & Brock Confections, Inc.,
a candy manufacturer headquartered in Chattanooga, Tennessee until 1995. He has
been a director of the Company since 1983. Mr. Brock is Chairman of the
Company's Compensation Committee and a member of the Company's Executive
Committee.
J. DON BROCK, age 58, is the Chairman of the Board and the Chief Executive
Officer of Astec Industries, Inc., a manufacturer of asphalt and environmental
equipment located in Chattanooga, Tennessee. He serves as a director of Crown
Andersen, Inc. in Atlanta, Georgia. Mr. Brock has been nominated for election to
the Company's Board of Directors to fill the position vacated by J. Frank
Harrison, Jr., who is not standing for reelection to the Board of Directors at
the Annual Meeting.
LOVIC A. BROOKS, JR., age 69, is a Member of Constangy, Brooks & Smith, LLC,
attorneys-at-law, in Atlanta, Georgia. He has been a director of the Company
since 1993. Mr. Brooks is a member of the Company's Audit Committee.
DANIEL K. FRIERSON, age 55, is Chairman of the Board of the Company, a
position he has held since 1987. He also has been Chief Executive Officer of the
Company since 1980 and a director of the Company since 1973. Mr. Frierson serves
as a director of SunTrust Bank, Chattanooga, N.A. and of Astec Industries, Inc.,
headquartered in Chattanooga, Tennessee. Mr. Frierson is Chairman of the
Company's Executive Committee and a member of the Company's Retirement Plans
Committee.
PAUL K. FRIERSON, age 59, is Vice President of the Company and President of
Candlewick Yarns, positions he has held since 1989. He served as Executive Vice
President of Candlewick Yarns from 1984 to 1989 and has been a director of the
Company since 1988. Mr. Frierson serves as a director of NationsBank/
Chattanooga. Mr. Frierson is a member of the Company's Retirement Plans
Committee.
JAMES H. MARTIN, JR., age 77, was Chairman and the Chief Executive Officer
of Ti-Caro, Inc., prior to its acquisition by the Company in 1987. He has been a
director of the Company since 1987. Mr. Martin is a member of the Company's
Executive Committee.
JOHN W. MURREY, III, age 54, is a Senior Member of the law firm of Witt,
Gaither & Whitaker, P.C., general counsel to the Company, in Chattanooga,
Tennessee. He has been a director of the Company since 1996. Mr.Murrey serves as
a director of Coca-Cola Bottling Co. Consolidated in Charlotte, North Carolina.
6
<PAGE>
PETER L. SMITH, age 55, is a Managing Director of Lazard Freres & Co., LLC,
investment bankers, in New York, New York. He has been a director of the Company
since 1987. Mr. Smith is a member of the Company's Audit Committee.
ROBERT J. SUDDERTH, JR., age 54, is Chairman and Chief Executive Officer of
SunTrust Bank, Chattanooga, N.A. in Chattanooga, Tennessee. He has been a
director of the Company since 1983. Mr. Sudderth is Chairman of the Company's
Audit Committee, a member of the Company's Executive Committee, a member of the
Company's Compensation Committee, and a member of the Company's Retirement Plans
Committee.
Daniel K. Frierson and Paul K. Frierson are brothers, Paul K. Brock is the
first cousin of Daniel K. Frierson and Paul K. Frierson, and James H. Martin,
Jr. is the uncle of Daniel K. Frierson, Paul K. Frierson, and Paul K. Brock.
Other than as set forth above, no director, nominee, or executive officer of the
Company has any family relationship, not more remote than first cousin, to any
other director, nominee, or executive officer.
SECURITY OWNERSHIP OF MANAGEMENT
The following table presents certain information regarding the amount and
nature of beneficial ownership of the Company's equity securities by its
nominees for directors, by the Company's executive officers named in the Summary
Compensation Table (see "Executive Compensation"), and by all directors and
executive officers as a group as of March 7, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNERSHIP OF MANAGEMENT TITLE OF CLASS OWNED(1) % OF CLASS
- --------------------------------------------------- -------------------------- -------------------- -----------
<S> <C> <C> <C>
Philip H. Barlow................................... Common Stock 83,354(2) *
Class B Common Stock -- --
Paul K. Brock...................................... Common Stock 5,600 *
Class B Common Stock -- --
J. Don Brock....................................... Common Stock -- --
Class B Common Stock -- --
Lovic A. Brooks, Jr................................ Common Stock 5,000 *
Class B Common Stock -- --
Daniel K. Frierson................................. Common Stock 1,263,045(3) 11.87%
Class B Common Stock 661,440(4) 89.96%
Paul K. Frierson................................... Common Stock 1,071,533(5) 10.16%
Class B Common Stock 251,373(6) 34.19%
William N. Fry, IV................................. Common Stock 55,500(7) *
Class B Common Stock -- --
John W. Murrey, III................................ Common Stock 2,200 *
Class B Common Stock -- --
James H. Martin, Jr................................ Common Stock 7,000 *
Class B Common Stock -- --
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNERSHIP OF MANAGEMENT TITLE OF CLASS OWNED(1) % OF CLASS
- --------------------------------------------------- -------------------------- -------------------- -----------
George B. Smith.................................... Common Stock 70,935(8) *
Class B Common Stock -- --
<S> <C> <C> <C>
Peter L. Smith..................................... Common Stock 10,185 *
Class B Common Stock -- --
Robert J. Sudderth, Jr............................. Common Stock 927,806(9) 8.86%
Class B Common Stock -- --
All Directors and Executive Officers as a
Group (19 Persons)............................... Common Stock 1,843,533(10) 16.63%
Class B Common Stock 733,440(4)(6) 99.76%
</TABLE>
- ------------------------
* Percentage of shares beneficially owned does not exceed 1% of the Class.
(1) The Class B Common Stock is convertible on a share-for-share basis into
shares of Common Stock; however, information presented in this table as to
the number of shares of Common Stock beneficially owned and the percent of
class does not give effect to the possible conversion of shares of Class B
Common Stock into shares of Common Stock.
(2) Includes: (i) 11,310 shares of Common Stock owned directly by Mr. Barlow
with sole voting and investment power; (ii) 50,000 shares of Common Stock
for which Mr. Barlow has subscribed but has not yet purchased, pursuant to
the Company's Stock Ownership Plan; (iii) options, which are immediately
exercisable, to acquire 15,794 shares of Common Stock; and (iv) options,
which are exercisable within 60 days of the Record Date, to acquire 6,250
shares of Common Stock.
(3) Includes: (i) 9,559 shares of Common Stock as to which Mr. Frierson has
sole investment and sole voting power; (ii) 143,600 shares of Common Stock
for which Mr. Frierson has subscribed but has not yet purchased, pursuant to
the Company's Stock Ownership Plan; (iii) 27,433 shares of Common Stock
owned directly by Rowena K. Frierson but subject to a general power of
attorney granted to Daniel K. Frierson and T. Cartter Frierson; (iv) 926,806
shares of Common Stock owned by the Dixie Yarns, Inc. Retirement Plans for
which Daniel K. Frierson, Paul K. Frierson, and Robert J. Sudderth, Jr. are
fiduciaries and for which SunTrust Bank, Chattanooga, N.A. serves as
trustee; (v) 121,147 shares of Common Stock owned by the wife and children
of Daniel K. Frierson and as to which he shares voting and investment power;
(vi) options, which are exercisable within 60 days of the Record Date, to
purchase 33,500 shares of Common Stock owned directly by Mr. Frierson; and
(vii) options, which are exercisable within 60 days of the Record Date, to
purchase 1,000 shares of Common Stock owned by one of his children and as to
which he shares voting and investment power.
(4) Includes: (i) 105,072 shares of Class B Common Stock owned by Mr.
Frierson's wife and children as to which he shares investment and voting
power and (ii) 556,368 shares of Class B Common Stock held pursuant to a
shareholder agreement under which he has been granted a proxy, which expires
October 2005, to vote such shares (the "Shareholder Agreement"). The proxy
is terminable under certain limited circumstances prescribed in the
Shareholder Agreement. The Shareholder Agreement is among the Estate of J.
Burton Frierson, the wife of J. Burton Frierson (Rowena K. Frierson), and
the five sons of J. Burton and Rowena K. Frierson (Daniel K. Frierson; Paul
K. Frierson; T. Cartter Frierson; James W. Frierson; and J. Burton Frierson,
III). The 556,368 shares of Class B Common
8
<PAGE>
Stock subject to the Shareholder Agreement include: (a) 236,178 shares of
Class B Common Stock owned directly by Daniel K. Frierson; (b) 94,069 shares
of Class B Common Stock owned directly by Paul K. Frierson; (c) 15,678
shares of Class B Common Stock owned directly by T. Cartter Frierson; (d)
40,000 shares of Class B Common Stock held by Paul K. Frierson, T. Cartter
Frierson, and Daniel K. Frierson as co-trustees of the Frierson Family
Trusts; (e) 45,304 shares of Class B Common Stock held by Paul K. Frierson,
T. Cartter Frierson, and Daniel K. Frierson as co-trustees of the Special
Purpose Trust of J. Burton Frierson; and (f) 125,139 shares of Class B
Common Stock owned directly by Rowena K. Frierson but subject to a general
power of attorney granted to Daniel K. Frierson and T. Cartter Frierson.
(5) Includes: (i) 17,225 shares of Common Stock as to which Mr. Frierson holds
sole investment and sole voting power; (ii) 68,700 shares of Common Stock
for which Mr. Frierson has subscribed but has not yet purchased, pursuant to
the Company's Stock Ownership Plan;(iii) 926,806 shares of Common Stock
owned by the Dixie Yarns, Inc. Retirement Plans for which Paul K. Frierson,
Daniel K. Frierson and Robert J. Sudderth, Jr. are fiduciaries and for which
SunTrust Bank, Chattanooga, N.A. serves as trustee; (iv) 50,802 shares of
Common Stock owned by Mr. Frierson's wife and children and as to which he
shares investment and voting power; and (v) options, which are exercisable
within 60 days of the Record Date, to purchase 8,000 shares of Common Stock
owned directly by Mr. Frierson.
(6) Includes: (i) 94,069 shares of Class B Common Stock owned directly by Mr.
Frierson and held subject to the Shareholder Agreement described in Note 4;
(ii) 72,000 shares of Class B Common Stock owned by his children and as to
which he shares investment and voting power; (iii) 40,000 shares of Class B
Common Stock held by Paul K. Frierson, T. Cartter Frierson, and Daniel K.
Frierson as co-trustees of the Frierson Family Trusts and held subject to
the Shareholder Agreement described in note 4; and (iv) 45,304 shares of
Class B Common Stock held by Paul K. Frierson, T. Cartter Frierson, and
Daniel K. Frierson as co-trustees of the Special Purpose Trust of J. Burton
Frierson and held subject to the Shareholder Agreement described in note 4.
(7) Includes: (i) 500 shares owned directly by Mr. Fry (ii) 50,000 shares of
Common Stock for which Mr. Fry has subscribed but has not yet purchased,
pursuant to the Company's Stock Ownership Plan; and (iii) options, which are
exercisable within 60 days of the Record Date, to acquire 5,000 shares of
Common Stock.
(8) Includes: (i) 1,935 shares of Common Stock owned directly by Mr. Smith;
(ii) 61,500 shares of Common Stock for which Mr. Smith has subscribed but
has not yet purchased, pursuant to the Company's Stock Ownership Plan; and
(iii) options, which are exercisable within 60 days of the Record Date, to
acquire 7,500 shares of Common Stock.
(9) Includes: (i) 1,000 shares of Common Stock owned directly by Mr. Sudderth
and (ii) 926,806 shares of Common Stock owned by the Dixie Yarns, Inc.
Retirement Plans for which Mr. Sudderth, Daniel K. Frierson, and Paul K.
Frierson. are fiduciaries and for which SunTrust Bank, Chattanooga, N.A.
serves as trustee.
(10) Includes: (i) options, which are either immediately exercisable or
exercisable within 60 days of the Record Date, to acquire 103,544 shares of
Common Stock, and (ii) 199,422 shares held by spouses and children of
certain individuals comprising this group.
9
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and regulations of the
Securities and Exchange Commission ("SEC") thereunder require the Company's
executive officers and directors and persons who own more than 10% of the
Company's Common Stock, as well as certain affiliates of such persons, to file
initial reports of ownership and monthly transaction reports covering any
changes in ownership with the SEC and the National Association of Securities
Dealers. Executive officers, directors, and persons owning more than 10% of the
Company's Common Stock are required by SEC regulations to furnish the Company
with all such reports they file. Based solely on its review of the copies of
such reports received by it and written representations that no other reports
were required for such persons, the Company believes that, during fiscal year
1996, all filing requirements applicable to its executive officers, directors,
and owners of more than 10% of the Company's Common Stock were satisfied.
COMMITTEES, ATTENDANCE, AND DIRECTORS' FEES
The Company has an Executive Committee, an Audit Committee, a Retirement
Plans Committee, and a Compensation Committee, but no nominating committee.
The Board of Directors has an Executive Committee whose members during 1996
were Daniel K. Frierson, Paul K. Brock, James H. Martin, and Robert J. Sudderth,
Jr. Except as otherwise limited by law or by resolution of the Board of
Directors, the Committee has and may exercise all of the powers and authority of
the Board of Directors for the management of the business and affairs of the
Company, which power the Committee exercises between the meetings of the full
Board of Directors. The Executive Committee performs the function of a
nominating committee. The Executive Committee met seven times in 1996.
The Board of Directors has a standing Audit Committee whose members during
1996 were Robert J. Sudderth, Jr., Lovic A. Brooks, Jr., Joseph T. Spence, Jr.
(until June 1996), and Peter L. Smith. The Audit Committee evaluates audit
performance, handles relations with the Company's independent accountants, and
evaluates policies and procedures relating to internal accounting functions and
controls. The Committee recommends to the Board of Directors the appointment of
the independent accountants for the Company. The Audit Committee met two times
in 1996.
The Board of Directors has a Compensation Committee whose members during
1996 were Paul K. Brock and Robert J. Sudderth, Jr. The Compensation Committee
administers the Company's compensation plans, reviews and may establish the
compensation of the Company's officers, and makes recommendations to the Board
of Directors concerning such compensation and related matters. The Compensation
Committee met five times in 1996.
No director attended fewer than 75% of the total of meetings of the Board of
Directors and any Committee of the Board of Directors on which he served, except
for Mr. Harrison, who attended four of the seven meetings of the Board.
Directors who are not employees of the Company are paid a retainer of
$10,000 per year, $500 for each Board meeting attended, and $400 for each
committee meeting attended.
10
<PAGE>
CERTAIN TRANSACTIONS BETWEEN THE COMPANY AND DIRECTORS AND OFFICERS
In August, the Company's Board of Directors adopted a Stock Ownership Plan
applicable to the Chief Executive Officer, President, Chief Financial Officer,
and all Executive Vice Presidents and corporate Vice Presidents of the Company.
The purpose of this plan, which is administered by the Compensation Committee,
is to encourage each participant to make a significant investment in the
Company's Common Stock. Each corporate officer designated for participation in
the plan is allowed to subscribe for the purchase of a number of shares of
Common Stock up to, but not exceeding, that number of shares having a fair
market value equal to two (2) times such officer's base salary. For this
purpose, the fair market value of the Common Stock is deemed to be the closing
price of such stock as reported by NASDAQ on either (i) the date of adoption of
the plan or (ii) such date as shall be determined by the Compensation Committee
as the subscription date for any new participant selected to participate in the
plan.
The initial subscription price is the fair market value of the shares on the
initial subscription offering date for each participant (although the Company
retains the right to adjust the subscription terms any time prior to the actual
execution of a subscription agreement with any participant). Each participating
officer will also have the opportunity, on the two successive Anniversary Dates
following his Initial Subscription Offering Date (each as defined in the plan)
to subscribe for additional shares of Common Stock having a fair market value
equal to two (2) times his base salary, less the amount of his previous
subscriptions. The full subscription price for all shares purchased by a
participant is due and payable on the third Anniversary Date following his
Initial Subscription Offering Date. 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. Any termination of a participant's employment with
the Company will accelerate such due date as follows: termination due to death
or disability will cause the participant's subscription price to become due and
payable six (6) months from the date of such event; any other termination of a
participant's employment will cause the subscription price to be due and payable
ten (10) days from the participant's termination date.
As of March 7, 1997, nine of the Company's senior executive officers had
subscribed for an aggregate of 516,757 shares of the Company's Common Stock,
with subscription prices equal to $4.875 per share for 449,300 such shares and
$7.375 per share for the remaining 67,457 such shares. This includes
subscriptions for officers listed in the Summary Compensation Table of this
Proxy Statement as follows: Daniel K. Frierson--143,600 shares ($700,050
aggregate subscription price); John O. Sturdy--61,500 shares ($299,812.50
aggregate subscription price); Philip H. Barlow--50,000 shares ($243,750
aggregate subscription price); George B. Smith--61,500 shares ($299,812.50
aggregate subscription price); Paul K. Frierson-- 68,700 shares ($334,912.50
aggregate subscription price); and William N. Fry, IV--50,000 shares ($243,750
aggregate subscription price).
Mr. Martin provides advisory services to the Company as a consultant and was
paid $39,350 in Directors' fees, retainer fees, and other fees in 1996. Mr.
Brooks is a Member of Constangy, Brooks & Smith, LLC, a law firm that performed
certain legal services for the Company in 1996. Mr. Murrey is a Senior Member of
Witt, Gaither & Whitaker, P.C., a law firm that the Company paid $652,243 in
1996 for certain legal services performed for the Company. Mr. Smith is a
managing director of Lazard Freres & Co., LLC, an investment banking firm that
performs certain investment banking functions for the Company from time to time.
11
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly change in the
cumulative total shareholder return on the Common Stock against the total return
of the Standard & Poor's 500 Stock Index and of the Value Line Textiles Index
for the five year period ended December 31, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
<S> <C> <C> <C>
Dixie Yarns, Inc., Standard & Poors 500 And Value Line Textiles Index
(Performance Results Through 12/31/96)
Dixie Yarns,
Inc. Standard & Poors 500 Textiles
1991 $100.00 $100.00 $100.00
1992 $139.19 $107.79 $121.64
1993 $114.25 $118.66 $131.02
1994 $77.92 $120.56 $112.89
1995 $43.14 $165.78 $114.90
1996 $86.27 $204.32 $135.03
Assumes $100 invested at the close of trading 12/91 in Dixie Yarns, Inc.
common stock,
Standard & Poors 500, and the Value Line Textiles Index.
*Cumulative total return assumes reinvestment of dividends.
</TABLE>
12
<PAGE>
REPORT OF COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS OF DIXIE YARNS, INC.
The Compensation Committee of the Board of Directors is composed of Paul K.
Brock and Robert J. Sudderth, Jr., neither of whom is an employee of the
Company. The Committee administers the Company's compensation plans, annually
reviews and recommends compensation for all officers of the Company, and submits
its recommendations to the Board. Final decisions respecting compensation of
executive officers are made by the Board, with individuals abstaining from
decisions concerning their own compensation.
As part of its process of review, the Committee receives recommendations
from the Company's senior management, reviews both public and private
compensation surveys prepared by independent consultants and others, and reviews
executive compensation reported in proxy information from other public textile
and carpet companies. The Committee meets on an as needed basis during the year.
The following is a report submitted by the Compensation Committee addressing
the Company's compensation policies applicable to Daniel K. Frierson, the
Company's Chief Executive Officer, and to the other five executive officers
named in the accompanying summary compensation table for 1996.
COMPENSATION OF EXECUTIVE OFFICERS DURING FISCAL 1996
The Company's compensation policies are intended to attract, retain,
motivate, and reward qualified individuals to serve in executive positions with
the Company. Incentive compensation is provided to encourage such individuals to
originate and implement successful long-term business strategies that will
enhance long-term shareholder value. Accordingly, compensation of the Company's
executive officers, including the Chief Executive Officer, consists of a
combination of base salary, annual bonuses, and stock options as well as other
fringe benefits generally applicable to salaried employees. In establishing base
salary, the Committee considers the qualifications and experience of the
individual, the duties and responsibilities of the executive officer position,
the competitive market for executive talent, and the overall financial ability
of the Company to bear the expense.
Bonuses are considered for award annually and, for 1996, were based upon
return on capital employed and individual performance. Stock options may be
granted under the Company's Stock Option Plans and are typically granted at the
current market price of the Company's Common Stock at the time of issue in
amounts believed to be appropriate to the level of duties and responsibilities
for each executive position.
The Committee believes that it is important to retain flexibility in the
establishment of compensation for the Company's executive officers in order to
allow for the use of judgment and discretion with respect to each individual
officer. Compensation, in the opinion of the Committee, should reflect not only
overall Company performance but also performance in specific areas of
responsibility and exceptional individual performance. The Committee believes
that the overall compensation paid to the Company's executive officers,
including the Company's Chief Executive Officer and the other five individuals
named in the accompanying table, is reasonable under the circumstances.
13
<PAGE>
THE ELEMENTS OF EXECUTIVE OFFICER COMPENSATION
Compensation for each of the Company's senior executive officers may consist
of four elements: base salary; annual bonuses; stock options; and retirement and
other fringe benefits.
- BASE SALARY
The base salary of Daniel K. Frierson was unchanged in 1996 and has not been
increased since 1988. The base salaries of John O. Sturdy and Paul K. Frierson
were unchanged in 1996. The base salaries of Philip H. Barlow, William N. Fry,
IV, and George B. Smith were increased for 1996.
- BONUS
A management incentive plan establishes criteria for the discretionary award
of bonuses to the Company's executive officers and other key management
personnel (the "Incentive Plan"). The Incentive Plan is applicable to the
corporate officers and to each operating group of the Company and provides for
bonuses to be awarded based on achieving specified levels of return on capital
employed and on individual performance. Final bonus amounts are approved by the
Compensation Committee. Discretionary bonuses were awarded under the Incentive
Plan to John O. Sturdy, Executive Vice President/President, Masland Carpets,
Inc.; William N. Fry, IV, Executive Vice President/Chief Operating Officer,
Floorcovering Group; Paul K. Frierson, Vice President/President, Candlewick
Yarns; and Philip H. Barlow, Vice President/ President, Carriage Industries,
Inc.
- STOCK OPTIONS
Each executive officer of the Company is entitled to participate in the
Company's Incentive Stock Plan. Although the Plan has been structured to provide
the Company with maximum flexibility in awarding, pricing, and vesting options
granted under the Plan, the Company's practice has been to grant options under
the Plan exercisable generally at or above market prices and subject to phase-in
vesting schedules.
The Committee believes that the grant of stock options for shares of the
Company's Common Stock exercisable at the market price on the date of grant
provides grantees with an incentive to enhance long-term shareholder values. The
value of these options depends directly on increases in the trading price of the
Company's Common Stock.
To ensure option-related compensation is dependent upon long-term increases
in value of the underlying securities, the options vest over a five year period
commencing on the date of grant (except as described below with respect to
certain incentive stock options). All options granted under the Plan to the
named individuals in the accompanying summary compensation table (other than
incentive stock options granted to Daniel K. Frierson and Paul K. Frierson, as
explained below) were granted with an exercise price set at or above the market
price on the date of grant, and with the following vesting schedules: 25% after
two years from the date of grant; 50% after three years from the date of grant;
75% after four years from the date of grant; and 100% after five years from the
date of grant. In the case of incentive stock options granted to Daniel K.
Frierson and Paul K. Frierson, such options were granted in accordance with the
additional restrictions imposed by the Internal Revenue Code of 1986 on
incentive stock options granted to individuals who are 10% beneficial owners of
the Company. Accordingly, such options have an exercise price equal to 110% of
the market price on the date of grant, vest at the rate of 25% per year
14
<PAGE>
beginning on the first anniversary of the date of grant, and expire on the fifth
anniversary of the date of grant (as opposed to expiration on the tenth
anniversary for all other options granted under the Plan).
- RETIREMENT PLANS AND OTHER BENEFITS
The Company's compensation for its executive officers also includes the
opportunity to participate in two non-qualified plans and certain health
insurance, life insurance, relocation allowances, and other benefits.
During 1996, the Company maintained two non-qualified retirement plans in
which the Company's executive officers participate: a Non-qualified Savings Plan
and a Non-qualified Defined Contribution Plan, which are designed to be
substantially similar to the qualified plans available to other exempt, salaried
associates. No Company contributions are made to the Non-qualified Savings Plan.
Participants in the Non-qualified Defined Contribution Plan may receive
contributions from the Company equal to a percentage of each such participant's
compensation, based on a ratio of the Company's operating profit to net worth
and other discretionary factors. The Company made a contribution of 2% of such
compensation to the Non-qualified Defined Contribution Plan in 1996.
- CEO COMPENSATION
As previously indicated, compensation of the Company's executive officers is
intended to attract, retain, motivate, and reward such officers where
appropriate. Mr. Frierson's compensation in 1996 included his base salary and
other benefits, the opportunity to participate in the Incentive Plan (with
respect to which, no bonus was awarded to Mr. Frierson in 1996), and
participation in the Company's Incentive Stock Plan.
The Committee believes that Mr. Frierson's overall compensation, including
his base salary, falls within the lower tier of executive compensation for
similar positions in comparable companies.
Compensation Committee:
Paul K. Brock
Robert J. Sudderth, Jr.
15
<PAGE>
EXECUTIVE COMPENSATION INFORMATION
The following table sets forth the annual and long-term compensation during
the last three fiscal years for the Company's Chief Executive Officer and the
other five most highly compensated executive officers (the "Named Executive
Officers") as of December 28, 1996, as well as the annual compensation of each
such individual for the Company's two previous fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------- AWARDS
OTHER ANNUAL -------------
SALARY COMPENSATION OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($) ($)(A)(B) (#)(C)
- ----------------------------------------------------- --------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Daniel K. Frierson................................... 1996 $ 350,000 $ -- $ 229,147 74,000
Chairman of the Board and 1995 350,000 -- 216,846 134,000
Chief Executive Officer 1994 350,000 -- -- --
John O. Sturdy(d).................................... 1996 200,000 75,000 39,890 10,000
Executive Vice President and 1995 200,000 60,000 13,829 30,000
President, Masland Carpets, Inc. 1994 200,000 70,000 -- --
George B. Smith...................................... 1996 186,667 -- 3,734 30,000
Executive Vice President and 1995 180,000 -- 13 30,000
Chief Operating Officer, 1994 173,333 -- -- --
Textile/Apparel Group
William N. Fry, IV................................... 1996 170,000 125,000 3,983 40,000
Executive Vice President and 1995 119,896 60,000 1,305 20,000
Chief Operating Officer, 1994 100,974 65,000 1,245 --
Floorcovering Group
Paul K. Frierson..................................... 1996 167,500 75,000 141,181 15,000
Vice President and 1995 167,500 60,000 135,259 32,000
President, Candlewick Yarns 1994 163,333 60,000 -- --
Philip H. Barlow..................................... 1996 155,000 104,000 6,035 17,000
Vice President and; 1995 151,667 60,000 4,626 25,000
President, Carriage Industries, Inc. 1994 139,905 130,000 -- --
</TABLE>
- --------------------------
(a) Reflects the excess of actual earnings of funds held for such officers'
retirement in the Company's qualified and non-qualified defined contribution
and salary savings plans over 120% of the average applicable federal rates,
determined in accordance with applicable regulations of the Securities and
Exchange Commission. The actual rate of earnings of such plans is
substantially the same as the rate of earnings on the Company's other such
plans for salaried employees and is not established or guaranteed by the
Company. Such rate of earnings may vary from year to year.
(b) No named officer received perquisites or other personal benefits in an
amount exceeding the lesser of $50,000 or 10% of such officer's salary and
bonus for periods presented.
(c) Reflects the number of shares of the Company's Common Stock subject to
options granted to the Named Executive Officers for the periods presented.
(d) Due to illness, Mr. Sturdy resigned as President of Masland Carpets, Inc.
effective January 3, 1997. Mr. Sturdy died in February 1997.
16
<PAGE>
The following table sets forth information concerning options granted during
fiscal 1996 to the Named Executive Officers:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
OPTIONS STOCK PRICE
GRANTED TO APPRECIATION FOR
EMPLOYEES EXERCISE OR OPTION TERM(A)
OPTIONS IN FISCAL BASE PRICE EXPIRATION --------------------
NAME GRANTED (#) YEAR ($/SHARE) DATE 5%($) 10%($)
- ----------------------------------------- ------------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Daniel K. Frierson:
August 22, 1996 ....................... 5,000 0.81% $ 4.875 8/22/06 $ 15,325 $ 38,825
November 15, 1996...................... 69,000 11.17% 6.325 11/15/01 70,035 202,515
------ ----- ----------- --------- ---------
74,000 11.98% 6.227 85,360 241,340
John O. Sturdy:
January 15, 1996 ...................... 5,000 0.81% 4.000 1/15/06 12,600 31,850
August 22, 1996........................ 5,000 0.81% 4.875 8/22/06 15,325 38,825
------ ----- ----------- --------- ---------
10,000 1.62% 4.438 27,925 70,675
George B. Smith:
August 22, 1996 ....................... 5,000 0.81% 4.875 8/22/06 15,325 38,825
November 15, 1996...................... 25,000 4.05% 5.750 11/15/06 90,500 229,000
------ ----- ----------- --------- ---------
30,000 4.86% 5.604 105,825 267,825
William N. Fry, IV:
January 15, 1996 ...................... 10,000 1.62% 4.000 1/15/06 25,200 63,700
August 22, 1996 ....................... 5,000 0.81% 4.875 8/22/06 15,325 38,825
November 15, 1996...................... 25,000 4.05% 5.750 11/15/06 90,500 229,000
------ ----- ----------- --------- ---------
40,000 6.48% 5.203 131,025 331,525
Paul K. Frierson:
August 22, 1996 ....................... 5,000 0.81% 4.875 8/22/06 15,325 38,825
November 15, 1996...................... 10,000 1.62% 6.325 11/15/01 10,150 29,350
------ ----- ----------- --------- ---------
15,000 2.43% 5.842 25,475 68,175
Philip H. Barlow:
August 22, 1996 ....................... 5,000 0.81% 4.875 8/22/06 15,325 38,825
November 15, 1996...................... 12,000 1.94% 5.750 11/15/06 43,440 109,920
------ ----- ----------- --------- ---------
17,000 2.75% 5.493 58,765 148,745
</TABLE>
- ------------------------
(a) The assumed annual rates of appreciation of five and ten percent on the
market price of the Company's Common Stock at the date the options were
granted would result in the Company's Common Stock price per share
increasing as follows during the option term:
<TABLE>
<CAPTION>
ANNUAL RATE OF STOCK
APPRECIATION FOR OPTION
TERM
--------------------------
FIVE PERCENT TEN PERCENT
------------- -----------
<S> <C> <C>
Options issued at $4.000 exercise price............................ $ 6.52 $ 10.37
Options issued at $4.875 exercise price............................ 7.94 12.64
Options issued at $5.750 exercise price............................ 9.37 14.91
Options issued at $6.325 exercise price............................ 7.34 9.26
</TABLE>
(b) The Company did not grant any stock appreciation rights ("SARs") during
fiscal 1996.
17
<PAGE>
The following table presents summary information concerning options
exercised during 1996 and estimates the value of unexercised options held by the
Named Executive Officers at fiscal year end.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS/ SARS
ACQUIRED ON VALUE OPTIONS AT FY-END (#) AT FISCAL YEAR-END ($)
EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel K. Frierson............. -- -- -- 208,000 $ -- $ 112,700
John O. Sturdy................. -- -- -- 40,000 -- 33,125
George B. Smith................ -- -- -- 60,000 -- 64,375
William N. Fry, IV............. -- -- -- 60,000 -- 101,875
Paul K. Frierson............... -- -- -- 47,000 -- 28,625
Philip H. Barlow(a)............ -- -- 15,794 42,000 42,718 38,375
</TABLE>
- ------------------------
(a) Includes options to purchase 15,794 shares of the Company's Common Stock
issued on March 12, 1993, to replace options to purchase shares of
Carriage's common stock which were canceled upon the acquisition of Carriage
by the Company. Such options include: (i) options to purchase 3,057 shares
of Common Stock at an exercise price of $4.2934 per share; (ii) options to
purchase 2,547 shares of Common Stock at an exercise price of $5.0294 per
share; and (iii) options to purchase 10,190 shares of Common Stock at an
exercise price of $5.2748 per share.
18
<PAGE>
PROPOSAL 2
PROPOSAL TO CHANGE THE COMPANY'S NAME TO THE DIXIE GROUP, INC.
The Board of Directors proposes and recommends to the shareholders for their
approval an amendment to the Company's Restated Charter to change the name of
the Company by amending Article 1 to read: "The name of the Corporation is The
Dixie Group, Inc." Because of the growth in the Company's specialty
floorcovering business and entry into the finished apparel business, the name
Dixie Yarns, Inc. no longer describes the Company. Accordingly, the Company
believes that the name The Dixie Group, Inc. will provide the Company with a
corporate identity that is more appropriate to its current business.
PROPOSAL 3
PROPOSAL TO AMEND THE COMPANY'S INCENTIVE STOCK PLAN
The Company seeks approval of certain amendments to the Dixie Yarns, Inc.
Incentive Stock Plan (the "Plan"). These amendments, which were adopted by the
Board of Directors on November 14, 1996 and February 20, 1997, subject to
receipt of approval by the Company's shareholders at the 1997 Annual Meeting,
will: (i) increase the maximum number of shares of the Company's Common Stock
that may be issued pursuant to awards under the Plan from 770,000 to 1,770,000;
(ii) allow for the issuance of nonqualified stock options (I.E., stock options
that do not qualify as incentive stock options) to non-employee directors of the
Company; (iii) add certain provisions (concerning limiting the composition of
the Compensation Committee of the Board of Directors to "outside directors" and
placing an annual limitation of 100,000 shares on awards to any one Participant)
that will permit stock options granted under the Plan to qualify as
"performance-based compensation" exempt from the $1,000,000 deduction limits of
Section 162(m) of the Internal Revenue Code of 1986, should any of the Company's
compensation payments become subject to such limits in the future; (iv) modify
the provisions of the Plan pertaining to compliance with SEC Rule 16b-3 to
conform such provisions to the 1996 amendments to the SEC's regulations under
Section 16 of the Securities Exchange Act of 1934; (v) modify certain provisions
of the Plan pertaining to incentive stock options to clarify the effects of
compliance with all of the provisions of Section 422 of the Internal Revenue
Code of 1986 (which governs incentive stock options) and to provide that, while
the Company may grant nonqualified stock options with an exercise price not less
than 85% of the fair market value of the underlying Common Stock on the date of
grant, all incentive stock options must be granted with an exercise price equal
to (or greater than, where required by the regulations for 10% beneficial
owners) such fair market value; and (vi) make certain other non-substantive
changes to clarify the language of various Plan provisions.
The purposes of these amendments are (i) to assure that the Plan will
continue to provide the Company with a means to attract, motivate, and retain
experienced and highly qualified personnel by providing not only competitive
annual compensation packages but also long-term incentives linked to shareholder
return and Company and business unit performance over a period of years; (ii) to
promote the long-term success of the Company by affording non-employee directors
the opportunity to benefit from increases in the market value of the Company's
Common Stock, thereby providing a direct link between the interests of such
directors and the creation of long-term value for shareholders as well as
enhancing the Company's efforts to continue to attract and retain individuals
with outstanding abilities and skills for service on the Board of Directors;
(iii) to maximize the flexibility and usefulness of the Plan in the overall
19
<PAGE>
structure of the Company's compensation programs by ensuring the Plan's
continued compliance with SEC Rule 16b-3 (allowing awards made by the
Compensation Committee under the Plan to be exempt from the "short swing
trading" provisions of Section 16 of the Securities Exchange Act of 1934) and
with Internal Revenue Code Section 422 (allowing the continued granting of
incentive stock options as well as nonqualified stock options), and by
positioning the Plan so that, upon the approval of these amendments by
shareholders, future Awards of stock options can qualify for the
"performance-based compensation" exception to any limitation that might
otherwise apply to the Company's ability to deduct compensation expense in
excess of $1,000,000 for a single officer.
Counsel has advised the Company of the tax consequences of both incentive
stock options and nonqualified stock options under the Plan, for both the
Company and the individuals who are granted options. An optionee will not
realize taxable income upon the granting of a stock option pursuant to the Plan
nor will the Company be entitled to a deduction at that time. There will be no
realization of taxable income by an optionee upon the exercise of an incentive
stock option (if exercised no later than three months after termination of
employment in the case of retirement and one year in the case of disability, and
to the extent that the aggregate fair market value of Common Stock issuable with
respect to such incentive stock options, when first exercised, does not exceed
$100,000 during any calendar year). However, upon the exercise of an incentive
stock option, the excess of the fair market value of the shares of Common Stock
received over the option exercise price will be considered an "item of tax
preference" for such optionee, includable in his alternative minimum taxable
income calculation in the year of exercise, and such amount will be added to the
tax basis of such shares for purposes of determining alternative minimum taxable
income in the year or years such shares are sold. If an optionee sells or
otherwise disposes of Common Stock received upon exercise of an incentive stock
option after one year from the exercise date and two years from the date of
grant of the incentive stock option, any gain or loss on the sale will be
treated as long-term capital gain or loss, and the Company will not be entitled
to any deduction on account of the issuance of Common Stock or the grant of the
incentive stock option. Upon exercise of a nonqualified stock option, an
optionee will realize compensation income in the amount of the excess of the
fair market value of the Common Stock on the day of exercise over the stock
option exercise price, and the Company will receive a corresponding deduction.
The tax basis of any nonqualified stock option shares of Common Stock received
will be the fair market value of such shares on the date the stock option is
exercised. This discussion of tax consequences does not purport to be a complete
analysis of all potential tax effects relevant to recipients of options or to
the Company and does not address Awards under the Plan other than stock options.
It is based on federal income tax law and interpretational authorities as of the
date of this Proxy Statement, which are subject to change at any time.
The foregoing summary of the amendments to the Plan is qualified in its
entirety by reference to the full text of the Plan, as amended, which is set
forth as ANNEX A to this Proxy Statement.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the Company's shareholders vote FOR
the election of the Board of Directors' nominees for director as set forth in
this Proxy Statement, FOR the amendment to the Company's Restated Charter to
change the name of the Company to "The Dixie Group, Inc.," and FOR the
amendments to the Company's Incentive Stock Plan.
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SHAREHOLDER PROPOSALS
In the event any shareholder wishes to present a proposal to the
shareholders at the 1998 Annual Meeting of Shareholders, such proposal must be
received by the Company for inclusion in the Proxy Statement and Proxy relating
to such meeting on or before December 2, 1997.
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP has been selected as independent auditors for
the Company. A representative of Ernst & Young LLP is expected to be present at
the Annual Meeting and will have the opportunity to make a statement if he so
desires and to respond to appropriate questions from shareholders.
ADDITIONAL INFORMATION
The entire cost of soliciting proxies will be borne by the Company. In
addition to solicitation of proxies by mail, proxies may be solicited by the
Company's directors, officers, and other employees by personal interview,
telephone, and telegram. The persons making such solicitations will receive no
additional compensation for such services. The Company also requests that
brokerage houses and other custodians, nominees, and fiduciaries forward
solicitation materials to the beneficial owners of the shares of Common Stock
held of record by such persons and will pay such brokers and other fiduciaries
all of their reasonable out-of-pocket expenses incurred in connection therewith.
OTHER MATTERS
As of the date of this Proxy Material, the Board does not intend to present,
and has not been informed that any other person intends to present, any matter
for action at the Annual Meeting other than those specifically referred to
herein. If other matters should properly come before the Annual Meeting, it is
intended that the holders of the proxies will vote in accordance with their best
judgment.
Dixie Yarns, Inc.
Daniel K. Frierson
CHAIRMAN OF THE BOARD
Dated: April 1, 1997
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ANNEX A
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
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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
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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
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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
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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
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(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.
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(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
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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
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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
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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.
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(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 PARAGRAPH 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.
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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
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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 therefor.
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.
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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
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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.
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(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
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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.
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DIXIE YARNS, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 1997
The undersigned hereby appoints Daniel K. Frierson, James H. Martin, Jr.,
and Robert J. Sudderth, Jr., and each of them, proxies, with full power of
substitution, to act and to vote the shares of common stock which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be held
at 1100 South Watkins Street, Chattanooga, Tennessee 37404, at 10:00 A.M.,
Eastern Daylight Time, on May 1, 1997, and any adjournment or adjournments
thereof, as follows:
<TABLE>
<S> <C> <C> <C>
1. Election of Directors / / FOR all nominees / / WITHHOLD ALL AUTHORITY
(EXCEPT AS INDICATED TO THE CONTRARY BELOW) TO VOTE FOR ALL NOMINEES LISTED BELOW
</TABLE>
Paul K. Brock; J. Don Brock; Lovic A. Brooks, Jr.; Daniel K. Frierson; Paul K.
Frierson; James H. Martin, Jr.; John W. Murrey, III; Peter L. Smith; Robert J.
Sudderth, Jr.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW)
________________________________________
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2. To amend the Company's Restated Charter to change the Company's name to "The Dixie Group, Inc.":
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON REVERSE SIDE)
<PAGE>
<TABLE>
<S> <C> <C> <C>
3. To amend the Company's Incentive Stock Plan as described in the accompanying Proxy Statement:
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
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<S> <C> <C> <C>
4. Acting upon any other business which may be properly brought before said meeting or any adjournment or adjournments
thereof.
</TABLE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN
FAVOR OF PROPOSALS 1, 2 AND 3. THE BOARD IS NOT AWARE OF ANY OTHER MATTER TO BE
BROUGHT BEFORE THE ANNUAL MEETING FOR A VOTE OF SHAREHOLDERS. IF, HOWEVER, OTHER
MATTERS ARE PROPERLY PRESENTED, THE PROXIES WILL VOTE IN ACCORDANCE WITH THEIR
BEST JUDGMENT.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders, dated April 1, 1997, and the Proxy Materials furnished
therewith.
Dated this _____ day of _____, 1997
___________________________________
___________________________________
Note: Signature should agree with
name on stock certificate as
printed hereon. When signing in a
representative capacity, please
give your full title.
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ACCOMPANYING PREPAID
SELF-ADDRESSED ENVELOPE. THANK YOU.
