<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [x]
Filed by a party other than the registrant
Check the appropriate box:
[ ] Preliminary proxy statement
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
McRae Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
McRae Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)
(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies.
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing of which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- -------------------------------------------------------------------------------
(3) Filing party:
- -------------------------------------------------------------------------------
(4) Date filed:
- -------------------------------------------------------------------------------
<PAGE> 2
MCRAE INDUSTRIES, INC.
402 North Main Street
Mount Gilead, North Carolina 27306
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 19, 1996
To: The Shareholders of McRae Industries, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of McRae
Industries, Inc. (the "Company") will be held at 3:00 p.m. on the 19th day of
December, 1996, at the offices of the Company located at 402 North Main Street,
Mount Gilead, North Carolina, for the following purposes:
1. To elect the Board of Directors consisting of seven persons,
of whom five are to be elected by the holders of the Class B
Common Stock and two are to be elected by the holders of the
Class A Common Stock.
2. To ratify the appointment of Gleiberman Spears Shepherd &
Menaker, P.A. as independent certified public accountants for
the current fiscal year.
3. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on November 4, 1996 as
the record date for the shareholders entitled to notice of and to vote at the
meeting or any adjournment thereof and only holders of Class A and Class B
Common Stock of record at such date are entitled to notice of and to vote at
the Annual Meeting of Shareholders.
By Order of the Board of Directors
James W. McRae
Secretary
November 20,1996
IMPORTANT
Whether you expect to attend the meeting or not, please vote, sign, date, and
return the enclosed proxy in the enclosed self-addressed envelope as promptly
as possible. If you attend the meeting, you may vote your shares in person,
even though you have previously signed and returned your proxy.
<PAGE> 3
MCRAE INDUSTRIES, INC.
402 North Main Street
Mount Gilead, North Carolina 27306
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of proxies to be used at the Annual Meeting of Shareholders
of McRae Industries, Inc., a Delaware corporation (the "Company"), to be held
at 3:00 p.m., local time, on December 19, 1996 at its principal office, 402
Main Street, Mount Gilead, North Carolina. This Proxy Statement and
accompanying proxy are being sent to the shareholders of the Company on or
about November 20,1996.
The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers, nominees, and fiduciaries for the out-of-pocket and
clerical expenses of transmitting copies of the proxy material to the
beneficial owners of shares held of record by such persons will be borne by the
Company. The Company does not intend to solicit proxies otherwise than by use
of the mail, but certain officers and regular employees of the Company or its
subsidiaries, without additional compensation, may use their personal efforts,
by telephone or otherwise, to obtain proxies. The materials are being mailed
to shareholders of record at the close of business on November 4, 1996.
A shareholder signing and returning a proxy on the enclosed form has the power
to revoke it at any time before the shares subject to it are voted by filing
with the Secretary of the Company an instrument revoking it, by filing a duly
executed proxy bearing a later date with the Secretary of the Company or by
attending the meeting and voting in person. If a shareholder specifies how the
proxy is to be voted with respect to any of the proposals for which a choice is
provided, the proxy will be voted in accordance with such specifications. If a
shareholder fails to so specify with respect to such proposals, the proxy will
be voted FOR the proposals.
Only shareholders of the Class A and Class B Common Stock of record at the
close of business on November 4, 1996 are entitled to vote at the meeting. On
that date, the Company had outstanding and entitled to vote a total of
1,801,964 shares of Class A Common Stock and 957,035 shares of Class B Common
Stock. Each share of Class A is entitled to one-tenth vote and each share of
Class B is entitled to one full vote at meetings of shareholders.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any shareholder proposal to be presented at the Company's 1997 annual meeting
of shareholders must be received at the offices of the Company, Post Office Box
726, 402 North Main Street, Mount Gilead, North Carolina 27306, no later than
July 23, 1997 for inclusion in the Company's proxy statement and form of proxy
for that meeting.
<PAGE> 4
PRINCIPAL SHAREHOLDERS AND HOLDINGS OF MANAGEMENT
Listed in the following table are the only beneficial owners, known to the
Company as of November 4, 1996, of more than five percent of the Company's $1
par value Class A and Class B Common Stock and the number of shares
beneficially owned by directors and executive officers as a group. Voting
securities beneficially owned by individual directors, director nominees and
Named Executive Officers (as defined herein) are disclosed under Election of
Directors, below.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
Amount and Amount and
Nature of Percent Nature of Percent
Name and Address of Beneficial of Beneficial of
Beneficial Owner Ownership (1) Class A Ownership (1) Class B
- ---------------------------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C>
B.J. McRae 534,819(2) 30% 542,699(2) 57%
Post Office Box 726
Mount Gilead, N.C. 27306
NationsBank Corporation 290,523(3) 16% 121,283(3) 13%
Charlotte, N.C. 28255
All Directors and Executive Officers 615,022(4) 34% 602,368(4) 63%
as a group (8 persons)
</TABLE>
- ------------------------
(1) All shares owned directly and with sole voting and investment power
except as otherwise noted.
(2) Includes 349 shares registered in the name of McRae Bros. Mfg.
Company, of which B.J. McRae is the sole shareholder, 16,443 shares
owned by Mr. McRae's wife and 2,391 shares owned jointly by Mr. McRae
and his wife.
(3) These shares represent shares held by wholly owned banking
subsidiaries of NationsBank Corporation ("NationsBank") and include
all shares held by the ESOPT for which NationsBank, N.A. serves as
trustee. NationsBank has sole voting power with respect to such
shares and disclaims any power to dispose of such shares. Information
with respect to NationsBank is as of December 31, 1995 and is derived
from the Schedule 13G dated February 15, 1996 filed by NationsBank
with the Securities and Exchange Commission.
(4) Does not include interest in shares held by the Company's ESOPT.
ELECTION OF DIRECTORS
The Bylaws of the Company provide for seven directors, two to be elected by the
holders of the Class A Common Stock and five to be elected by the holders of
the Class B Common Stock. Directors elected at the Annual Meeting will serve,
subject to the provisions of the Bylaws, until the next Annual Meeting of
Shareholders and until their successors are duly elected and qualified. If for
any reason any nominee shall not become a candidate for election as a director
at the meeting, an event not now anticipated, the enclosed proxy will be voted
for such substitute as shall be designated by the Board of Directors.
2
<PAGE> 5
It is the intention of the persons named in the accompanying Proxy to vote all
proxies solicited by the Board of Directors FOR the seven nominees listed below
unless authority to vote for the nominees is withheld by a shareholder in such
shareholder's proxy. Directors are elected by a plurality of the votes of the
applicable class of Common Stock cast by the holders of shares of such class
entitled to vote at a meeting at which a quorum is present. The Company's
Bylaws provide that, where a class vote is required, a quorum consists of the
presence, in person or by proxy, of the holders of a majority of the
outstanding shares of a particular class entitled to vote as a class at the
meeting. Provided a quorum is represented at the meeting, abstentions and
shares not voted are not taken into account in determining a plurality with
respect to the directors elected by the holders of either class of Common
Stock. Cumulative voting for directors is not permitted.
The two nominees for election as Directors by the holders of Class A Common
Stock, both of whom are currently members of the Board of Directors, are listed
below. The two nominees were elected to their terms, which expire in 1996, at
the Annual Meeting of Shareholders held on December 21, 1995.
Directors to be Elected by Holders of Class A Common Stock
<TABLE>
<CAPTION>
Percentage of
Shares of Common Stock Common Stock
First Beneficially Owned(1) Outstanding
Name and Principal Became --------------------- -----------------
Occupation or Employment Age Director Class A Class B Class A Class B
------------------------ --- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
D. Gary McRae (2) 46 1979 39,202 (3) 35,202 2% 4%
First Vice President of the
Company since 1980 and Treasurer
since 1991.
Harold W. Smith 53 1985 4,510 - (4) (4)
Vice President - McRae
Graphics since 1993;
Vice President-Finance
and Accounting 1981 to 1993.
</TABLE>
3
<PAGE> 6
The five nominees for election as Directors by holders of Class B Common Stock,
all of whom are currently members of the Board of Directors, are listed below.
The five nominees were elected to their terms, which expire in 1996, at the
Annual Meeting of Shareholders held on December 21, 1995.
Directors to be Elected by Holders of Class B Common Stock
<TABLE>
<CAPTION>
Percentage of
Shares of Common Stock Common Stock
First Beneficially Owned (1) Outstanding
Name and Principal Became ----------------------- ----------------
Occupation or Employment Age Director Class A Class B Class A Class B
------------------------ --- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
B.J. McRae (2) 76 1959 534,819 (5) 542,699 (5) 30% 57%
President of the
Company since 1959;
Treasurer from 1959 to 1991.
George M. Bruton 67 1982 588 588 (4) (4)
Owner of George M. Bruton
Insurance Agency, Inc.,
Mount Gilead, North Carolina
since 1950.
Hilton J. Cochran 66 1985 400 500 (4) (4)
Part-Owner of J. Morris &
Associates, Inc., Troy, NC
since 1952.
Victor A. Karam 62 1972 15,194 (6) - (4) (4)
Vice President-Footwear and
General Manager, Footwear
Division since 1969.
James W. McRae (2) 44 1985 20,309 (7) 23,379 1% 2%
Vice President of the
Company since 1986;
Secretary since 1991; plant
manager Footwear Division
since 1985.
</TABLE>
(1) All shares owned directly and with sole voting and investment power as
of November 4, 1996 except as otherwise noted. Does not include
interest in shares held by the Company's ESOPT.
(2) D. Gary McRae and James W. McRae are the sons of B.J. McRae.
(3) Includes 4,000 shares owned by Mr. D. Gary McRae's minor children.
(4) Less than 1%.
(5) Includes 349 shares registered in the name of McRae Bros. Mfg.
Company, of which B.J. McRae is the sole shareholder, 16,443 shares
owned by Mr. McRae's wife, 2,391 shares owned jointly by Mr. McRae and
his wife.
(6) Includes 500 shares owned by Mr. Karam's wife.
(7) Includes 4,000 shares owned by Mr. James W. McRae's minor children.
4
<PAGE> 7
DIRECTOR COMPENSATION
Directors are paid $700 for attending each Board of Directors and the Audit and
Incentive Stock Option Committee (directors who are also officers or employees
of the Company are paid $350 for attending such meetings).
EXECUTIVE OFFICERS
Messrs. B.J. McRae, D. Gary McRae, James W. McRae, Victor A. Karam and Harold
W. Smith are executive officers as well as directors. The executive officers
of the Company were appointed by written consent as of December 21, 1995, and
serve at the pleasure of the Board of Directors. Marvin Kiser, age 48, has
served as Controller for the Company since September, 1996. Previously, Mr.
Kiser was treasurer of Robert W. Chapman & Company from 1988 to 1996.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held five meetings during the past year. Each director
attended more than 75% of the aggregate total number of meetings of the Board
of Directors and the total number of meetings of any Committee on which he
served. The Board of Directors has no nominating committee.
The Audit and Incentive Stock Option Committee is composed of George M. Bruton
and Hilton J. Cochran and is responsible for recommending independent auditors
for the Company, reviewing the Company's financial statements, audit report,
internal financial controls and internal audit procedures and approving
services to be performed by the Company's independent auditors. The Committee
is also responsible for selecting key employees to whom stock options and stock
appreciation rights will be awarded under the 1985 McRae Industries, Inc.
Non-Qualified Stock Option Plan, for reviewing any transactions or arrangements
between the Company and any of its affiliates, and along with the President of
the Company, for recommending executive compensation to the Board of Directors.
The Committee met once during the fiscal year.
INTERLOCKS AND INSIDER PARTICIPATION
The Audit and Incentive Stock Option Committee of the Board of Directors of the
Company, along with the President of the Company, makes recommendations to the
Board of Directors concerning the Company's compensation arrangements. The
Company's Audit and Incentive Stock Option Committee is also responsible for,
among other things, selecting key employees to whom stock options and stock
appreciation rights will be awarded under the 1985 McRae Industries, Inc. Non-
Qualified Stock Option Plan. The Board of Directors is currently composed of
B.J. McRae, President of the Company, George M. Bruton, Hilton J. Cochran,
Victor A. Karam, Vice President - Footwear of the Company, James W. McRae, Vice
President and Secretary of the Company, D. Gary McRae, First Vice President and
Treasurer of the Company, and Harold W. Smith, Vice President - McRae
Graphics. Messrs. Bruton and Cochran currently comprise the Company's Audit
and Incentive Stock Option Committee.
5
<PAGE> 8
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS INVOLVING AMERICAN MORTGAGE & INVESTMENT COMPANY
Since 1970, the Company has owned a substantial equity interest in American
Mortgage & Investment Company ("AMIC"), a company engaged primarily in the
business of land development and sales in the coastal region of South Carolina.
B.J. McRae serves as a director and president of AMIC without compensation.
The Company owns shares of the common stock of AMIC which represents about 13%
of its outstanding common stock. In addition, the Company owns all
outstanding shares of AMIC's 20% Cumulative Convertible Preferred Stock.
Because of arrearages in dividends on preferred stock, each share of preferred
stock is currently entitled to one vote on any matter submitted to a vote of
AMIC shareholders. The Company presently has the majority of the voting power
of AMIC. B.J. McRae, President and Director of the Company, owns 1,996 shares
of AMIC's $20 par value Common Stock.
At the beginning of the Company's 1996 fiscal year, the Company had investments
in and advances to AMIC of approximately $600,000. During the 1996 fiscal
year, the Company made additional advances to AMIC totaling approximately
$62,000. AMIC repaid $15,000 of its indebtedness to the Company during fiscal
1996. The investment in AMIC's stock and amounts due from AMIC were reduced to
the extent that the recorded amounts exceed shareholder equity as reported by
AMIC. Because of AMIC's financial condition, the Company has not accrued any
interest on the AMIC obligations. At the end of the fiscal year, the Company
had recorded investments in and advances to AMIC of approximately $631,000.
AMIC has been operating under Chapter X of the United States Bankruptcy Act
since 1974 and the court has imposed certain restrictions under a Plan of
Reorganization.
Management believes that the Company's advances to and continued financial
support of AMIC are justified in light of its investment to date in AMIC and a
lack of any other viable alternative. AMIC cannot continue operations without
the support of the Company and, in management's opinion, the ultimate
realizable market value of AMIC's real estate holdings is greater than the
value of such holdings were the Company to discontinue its support, forcing
AMIC to liquidate its holdings at substantially discounted values. Management
believes remaining amounts due the Company from AMIC are ultimately
recoverable.
TRANSACTIONS WITH AUTOMOBILE DEALERSHIP
The Company rents facilities to an automobile dealership which is owned by B.
J. McRae, President of the Company. Rent paid during the past fiscal year was
$24,000. During fiscal 1996, the Company purchased vehicles from the
dealership for a total purchase price of approximately $295,000. During fiscal
1996, the Company also provided financing of approximately $556,000 for
vehicles purchased from the dealership by third parties.
At August 3, 1996 the dealership owed the Company approximately $1,111,000.
Such indebtedness is composed of accounts receivable and notes that bear
interest at the federal funds rate plus 2%. Such indebtedness is composed of
rent obligations, funds advanced to the dealership for working capital,and
interest on such amounts. The Company believes that the costs of automobiles
from the dealership are comparable to or lower than the cost of comparable
automobiles from other dealerships. Amounts owed by the dealership are
guaranteed by B.J. McRae.
6
<PAGE> 9
INDEBTEDNESS OF B.J. MCRAE
The Company has from time to time made loans to B.J. McRae. At August 3, 1996,
B.J. McRae owed the Company approximately $617,000, under these loans, which
was the maximum outstanding during the year. Approximately $342,000 of this
indebtedness bears interest at the federal funds rate plus 2%. The remaining
$275,000 of indebtedness, which does not bear interest, represents a guarantee
from Mr. McRae on certain receivables purchased from the automobile dealership
by the Company.
EXECUTIVE COMPENSATION
The table below shows the compensation paid or accrued by the Company,
for the three fiscal years ended August 3, 1996, to or for the account of the
Chief Executive Officer and Victor A. Karam, D. Gary McRae and Harold W. Smith,
the only executive officers of the Company whose total annual salary and bonus
exceeded $100,000 for the 1996 fiscal year (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-----------------------------------------------------------
Awards
----------------------
Other
Name and Annual Restricted
Principal Fiscal Salary Bonus Compen- Stock Options/ All Other
Position Year ($) ($) sation Award(s) SARs Compensation
($)(1) ($) (#) ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
B.J. McRae 1996 222,684 45,000 -- 0 0 212,000 (2)
President 1995 214,191 50,000 -- 0 0 223,000 (2)
1994 209,514 50,000 -- 0 0 248,300 (2)
Victor A. Karam 1996 128,456 15,750 -- 0 0 0 (3)
Vice President -- 1995 125,184 17,500 -- 0 0 5,900 (3)
Footwear 1994 118,460 16,000 -- 0 0 6,000 (3)
D. Gary McRae 1996 116,112 24,000 -- 0 0 0 (3)
First Vice 1995 112,348 24,000 -- 0 0 5,600 (3)
President 1994 105,914 20,000 0 0 5,500 (3)
--
Harold W. Smith 1996 98,488 8,800 -- 0 0 0 (3)
Vice President -- 1995 95,649 11,000 -- 0 0 4,400 (3)
McRae Graphics 1994 92,133 11,000 -- 0 0 4,500 (3)
</TABLE>
(1) No Named Executive Officer has received personal benefits during the
listed years in excess of 10% of annual salary.
(2) Represents $212,000, $212,000 and $237,000 in premiums paid for the
purchase of split-dollar life insurance on the lives of Mr. and Mrs.
McRae in 1996, 1995 and 1994, respectively, and $11,000
7
<PAGE> 10
and $11,000 accrued for the account of Mr. McRae in 1995 and 1994,
respectively, under the ESOPT. Upon Mr. and Mrs. McRae's death, the
Company will be paid death benefits under the policies not to exceed
the greater of (i) the cash surrender value of the policy or (ii) the
cumulative premiums paid by the Company. The remainder of the life
insurance proceeds will be payable to their children.
(3) Represents amounts accrued under the ESOPT.
The following table presents the value of all unexercised options that were
held by the Named Executive Officers at fiscal year end. No options were
granted during the past three fiscal years.
AGGREGATE OPTION/SAR EXERCISES IN THE 1996 FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value Number of Value of Unexercised
Shares Acquired on Realized Unexercised Options In-the Money Options at
Name Exercise (#SH) ($)(1) at Fiscal Year-End Fiscal Year-End($)(2)
---- ------------------ -------- ------------------- ---------------------
Class A Class B Class A Class B Class A Class B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
B.J. McRae 7,500 7,500 78,376 0 0 0 0
D. Gary McRae 7,000 7,000 73,150 0 0 0 0
Harold W. Smith 190 0 986 0 0 0 0
</TABLE>
(1) Represents the aggregate difference between the respective exercise
price of the options and the fair market value of each of the
Company's respective class of Common Stock on the date the options
were exercised.
(2) Represents the total gain which would be realized if all options were
exercised for which the fair market value of the respective class of
Common Stock at fiscal year-end was greater than the exercise price.
PENSION PLAN
The Company historically maintained a non-contributory, defined benefit pension
plan (the "Pension Plan") which covered its employees based on length of
service from date of employment. Effective September 30, 1992 the Company
terminated the Pension Plan, and no additional benefits will accrue for
participants under the Pension Plan. The Company is liquidating the Pension
Plan and will apply its assets, in accordance with the provisions set forth in
the Pension Plan and applicable federal law, to provide the retirement benefits
accrued by the participants through September 30, 1992.
The Company anticipates that participants in the Pension Plan will either
receive a cash distribution or have an annuity contract purchased for them in
the near future. Messrs. B.J. McRae, Karam, D. Gary McRae, Smith and James W.
McRae were credited with 33, 23, 17, 12 and 15 years of service, respectively
under the Pension Plan. As of September 30, 1992, Messrs. B.J. McRae, Karam,
D. Gary McRae, Smith, and James W. McRae had accrued annual retirement benefits
under the Pension Plan of approximately $34,580, $12,080, $4,805, $7,586 and
$4,657, respectively.
8
<PAGE> 11
COMPENSATION COMMITTEE REPORT
The Audit and Incentive Stock Option Committee, whose members are named above,
together with B.J. McRae, President of the Company, make recommendations to the
Board of Directors concerning the Company's compensation arrangements. In
connection with such arrangements, Messrs. McRae, Bruton and Cochran have
provided the following report:
The Company's overall compensation philosophy is as follows:
- Attract and retain quality talent, which is critical to both
the short-term and long-term success of this Company;
- Reinforce strategic performance objectives through the use of
incentive compensation programs; and
- Create a mutuality of interest between executive officers and
shareholders through compensation structures that share the
rewards and risks of strategic decision making.
Base Compensation - The Company's approach to base compensation is to offer
competitive salaries in comparison to market practices. The 1996 average base
salaries of the three Named Executive Officers other than the President (which
appear on the summary compensation table) increased an average of 3 percent in
1996.
The Committee, consisting of two outside directors, along with the Chairman of
the Board of Directors, Mr. B.J. McRae, annually examine market compensation
levels and trends observed in the labor market. For its purposes, the
Committee has defined the labor market as the pool of executives who are
currently employed in similar positions in companies with similar sales and
market capitalization. Market information is used as a frame of reference for
annual salary adjustments and starting salaries.
The Committee makes salary decisions in the annual review process with input
from the President. This annual review considers the decision-making
responsibilities of each position and the experience, work performance, and
team-building skills of position incumbents. The Committee views work
performance as the single most important measurement factor and places most of
the weight in this area. The remaining measurement factors, decision-making
responsibilities, work experience and team-building skills, are weighted
equally.
Incentive Compensation - The Audit and Incentive Stock Option Compensation
Committee, along with the Chairman of the Board of Directors, annually make
recommendations to the Board of Directors whether to pay and the amount of cash
incentive bonuses. For executive officers other than the President,
consideration is given to overall corporate performance of the specific areas
of the Company under a participant's direct control. This balance supports the
accomplishment of overall objectives and rewards individual contributions by
our executive officers. Individual annual bonus level targets are consistent
with market practices for positions with comparable decision-making
responsibilities. Target performance levels are based upon historic patterns
of Company performance and strategic objectives. All annual bonus-level
performance targets are set above normal expectations of performance. Such
performance measure threshold ensures that bonuses are not paid for substandard
accomplishments. The average bonus earned by the three Named Executive
Officers other than the President (which appear in the Summary Compensation
Table) was 14 percent of their base salaries compared to 16 percent in 1995.
9
<PAGE> 12
President Compensation - As indicated in the discussion above, the Company's
total compensation program is based upon market conditions and business
performance. A portion of an executive's yearly compensation is dependent upon
the Company's performance for the fiscal year based upon the executive's level
of responsibility and authority. Therefore, the President's bonus is generally
a larger percentage of his total compensation than for the other officers. In
1996 his bonus was 20 percent of his base salary. The base salary for Mr. B.J.
McRae increased by 4 percent over 1995.
Hilton J. Cochran George M. Bruton B.J. McRae
STOCK PERFORMANCE GRAPH
The accompanying graph sets forth the cumulative total shareholder return to
the Company's shareholders during the five year period ended August 3, 1996, as
well as an overall stock market index (AMEX Index) and a composite rate
combining the AMEX sub-indices for technology and consumer goods, industry
segments in which the Company is actively involved.
[Graphical Image Omitted]
The graph presented in the proxy statement was composed using the following
information:
<TABLE>
<CAPTION>
McRAE McRAE AMEX COMPOSITE
CLASS A CLASS B INDEX RATE
-----------------------------------------------------
<S> <C> <C> <C> <C>
1991 100 100 100 100
-------------------------------------------------------------
1992 102 102 102 82
-------------------------------------------------------------
1993 150 117 117 111
-------------------------------------------------------------
1994 156 136 114 105
-------------------------------------------------------------
1995 171 124 134 130
-------------------------------------------------------------
1996 184 143 145 134
-------------------------------------------------------------
</TABLE>
The above composite rate index has been weighted by the proportion of the
Company's segment revenue to total revenues of the Company as follows:
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
TECHNOLOGY .32 .35 .33 .43 .33
CONSUMER GOODS .68 .65 .67 .57 .67
---- ---- ---- ---- ----
1.00 1.00 1.00 1.00 1.00
==== ==== ==== ==== ====
</TABLE>
10
<PAGE> 13
RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has appointed Gleiberman Spears Shepherd & Menaker, P.A.
as independent certified public accountants for the 1997 fiscal year and
recommends to shareholders that they vote for ratification of that appointment.
The Board of Directors will reconsider the selection of independent certified
public accountants if the shareholders do not ratify the appointment of
Gleiberman Spears Shepherd & Menaker, P.A.
A representative of Gleiberman Spears Shepherd & Menaker, P.A. is expected to
attend the annual meeting with the opportunity to make a statement if the
representative desires to do so, and is expected to be available to respond to
appropriate questions.
The Board of Directors recommends a vote FOR ratification of the appointment of
Gleiberman Spears Shepherd & Menaker, P.A. as its independent certified public
accountants to audit the consolidated financial statements of the Company for
the 1997 fiscal year and proxies solicited by the Board of Directors will be so
voted unless shareholders specify otherwise.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than 10% of the
Company's Class A Common Stock and Class B Common Stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of such Class A and Class B Common Stock. Executive
officers, directors and greater than 10% stockholders are required to furnish
the Company with copies of all such reports they file. To the Company's
knowledge, based solely on a review of the copies of such reports furnished to
the Company, during the fiscal year ended August 3, 1996, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial owners were complied with, except Mr. Cochran who failed to
timely file a Form 4 in connection with 6 transactions within the prescribed
time.
OTHER MATTERS
The Board of Directors is not aware of any other matters which may be presented
for action at the meeting, but if other matters do properly come before the
meeting, it is intended that shares represented by proxies in the accompanying
form will be voted in accordance with the best judgment of the person or
persons voting the proxy.
11
<PAGE> 14
APPENDIX A
FOR USE BY CLASS A SHAREHOLDERS
MCRAE INDUSTRIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDER TO BE HELD
DECEMBER 19, 1996
The undersigned hereby appoints B.J. McRae, D. Gary McRae and James W. McRae
and each or any of them, with full power of substitution, with all the powers
which the undersigned would possess if personally present, to vote as
designated below, all shares of the $1 par value Class A Common Stock of the
undersigned in McRae Industries, Inc. at the Annual Meeting of Shareholders to
be held at 3:00 P.M. on the 19th day of December, 1996, and at any adjournment
thereof.
UNLESS SPECIFIED, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2 SHOWN BELOW: The
Board of Directors recommends voting for all items.
1. Election of Directors: Nominees are D. Gary McRae and Harold W.
Smith.
[ ] For all listed nominees (except do not vote for nominee(s) whose
name(s) I have written below)
- -------------------------------------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for all listed nominees
- -------------------------------------------------------------------------------
2. Ratification of appointment of Gleiberman Spears Shepherd and Menaker,
P.A. as accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(Please sign on reverse side)
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
Receipt of Notice of Annual Meeting and accompanying Proxy Statement
is hereby acknowledge.
Please date, sign exactly as printed below and return promptly in the
enclosed postage-paid envelope.
Date , 1996
--------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
(When signing as attorney, executor, administrator,
trustee, guardian, etc. give title as such. If a
joint account, each joint owner should sign personally.)
<PAGE> 15
APPENDIX B
FOR USE BY CLASS B SHAREHOLDERS
MCRAE INDUSTRIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDER TO BE HELD
DECEMBER 19, 1996
The undersigned hereby appoints B.J. McRae, D. Gary McRae and James W. McRae
and each or any of them, with full power of substitution, with all the powers
which the undersigned would possess if personally present, to vote as
designated below, all shares of the $1 par value Class B Common Stock of the
undersigned in McRae Industries, Inc. at the Annual Meeting of Shareholders to
be held at 3:00 P.M. on the 19th day of December, 1996, and at any adjournment
thereof.
UNLESS SPECIFIED, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2 SHOWN BELOW.
1. Election of Directors: Nominees are B. J. McRae, George M. Bruton,
Hilton J. Cochran, Victor A. Karam and James W. McRae.
[ ] FOR all listed nominees (except do not vote for nominee(s) whose
name(s) I have written below)
- -------------------------------------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for all listed nominees
- -------------------------------------------------------------------------------
2. Ratification of appointment of Gleiberman Spears Shepherd and Menaker,
P.A. as accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(Please sign on reverse side)
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
Receipt of Notice of Annual Meeting and accompanying Proxy Statement
is hereby acknowledge.
Please date, sign exactly as printed below and return promptly in the
enclosed postage-paid envelope.
Date , 1996
--------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
(When signing as attorney, executor, administrator,
trustee, guardian, etc. give title as such. If a
joint account, each joint owner should sign personally.)
