<PAGE> 1
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 [ ] 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 Rule 14a-11(c) or Rule 14a-12
McRae Industries, Inc.
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
MCRAE INDUSTRIES, INC.
400 North Main Street
Mount Gilead, North Carolina 27306
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 14, 2000
To: The Stockholders of McRae Industries, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of McRae
Industries, Inc. (the "Company") will be held at 3:00 p.m. on the 14th day of
December, 2000, at the offices of the Company located at 400 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 October 27, 2000 as
the record date for the stockholders 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 Stockholders.
By Order of the Board of Directors
James W. McRae
Secretary
November 14, 2000
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.
400 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 Stockholders
of McRae Industries, Inc., a Delaware corporation (the "Company"), to be held at
3:00 p.m., local time, on December 14, 2000 at its principal office, 400 North
Main Street, Mount Gilead, North Carolina. This Proxy Statement and accompanying
proxy are being sent to the stockholders of the Company on or about November 14,
2000.
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 first being
mailed to stockholders of record on or about November 14, 2000.
A stockholder 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 stockholder 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
stockholder fails to so specify with respect to such proposals, the proxy will
be voted FOR the proposals.
Only stockholders of the Class A and Class B Common Stock of record at the close
of business on October 27, 2000 are entitled to vote at the meeting. On that
date, the Company had outstanding and entitled to vote a total of 1,859,692
shares of Class A Common Stock and 908,807 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 stockholders.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any stockholder proposal to be presented at the Company's 2001 annual meeting of
stockholders must be received at the offices of the Company, Post Office Box
1239, 400 North Main Street, Mount Gilead, North Carolina 27306, no later than
July 17, 2001 for inclusion in the Company's proxy statement and form of proxy
for that meeting. In addition, if the Company receives notice of stockholder
proposals after September 30, 2001, then the persons named as proxies in such
proxy statement and form of proxy will have discretionary authority to vote on
such stockholder proposals, without discussion of such matters in the proxy
statement and without such proposals appearing as a separate item on the proxy
card.
PRINCIPAL STOCKHOLDERS AND HOLDINGS OF MANAGEMENT
Listed in the following table are the only beneficial owners, known to the
Company as of October 27, 2000, of more than five percent of the Company's $1
par value Class A and Class B Common Stock and the equity
<PAGE> 4
securities of the Company and its subsidiaries beneficially owned by the
directors and executive officers as a group. Equity securities of the Company
and its subsidiaries beneficially owned by individual directors, director
nominees and the 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>
D. Gary McRae 426,212 (2) 23% 552,079 (3) 61%
P.O. Box 1239
Mount Gilead, NC 27306
James W. McRae 409,588 (4) 22% 544,265 (3) 60%
P.O. Box 1239
Mt. Gilead, NC 27306
Branch Banking & Trust Co. 341,298 (5) 18% 97,659(5) 11%
P.O. Box 29542
Raleigh, NC 27626
All Directors and Executive 494,835 (7) 27% 573,555 (8) 63%
Officers as a group
(8 persons)
</TABLE>
(1) All shares owned directly and with sole voting and investment power
except as otherwise noted.
(2) Includes 4,000 shares owned by Mr. D. Gary McRae's minor children,
1,111 shares owned by his wife and 361,925 shares held by the estate of
the late B. J. McRae (the "Estate") as to which he has shared voting
and investment power as co-executor with his brother, Mr. James W.
McRae. Does not include any interest in shares held by the Company's
Employee Stock Ownership Plan (the "ESOP").
(3) Includes 523,877 shares held by the Estate as to which Messrs. D. Gary
McRae and James W. McRae have shared voting and investment power as
co-executors of the Estate. Does not include any interest in shares
held by the ESOP.
(4) Includes 4,000 shares owned by Mr. James W. McRae's children and
361,925 shares held by the Estate as to which he has shared voting and
investment power as co-executor with his brother, Mr. D. Gary McRae.
Does not include any interest in shares held by the ESOP.
(5) These shares represent shares held by Branch Banking & Trust Co.
("BB&T") and include all shares held by the ESOP for which BB&T serves
as trustee. BB&T has sole voting and investment power with respect to
such shares. Information with respect to BB&T is as of October 27, 2000
and was provided to the Company by BB&T in a telephone call on October
30, 2000.
(6) Does not include any shares of AMIC (as defined herein) held by the
Estate. See "Certain Relationships and Related Transactions -
transactions Involving American Mortgage & Investment Company."
(7) Includes 361,925 shares held by the Estate.
(8) Includes 523,877 shares held by the Estate.
2
<PAGE> 5
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
Stockholders 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.
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 stockholder in such
stockholder'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. Each was elected to his respective term, which expires in 2000, at the
Annual Meeting of Stockholders held on December 16, 1999.
DIRECTORS TO BE ELECTED BY HOLDERS OF CLASS A COMMON STOCK
<TABLE>
<CAPTION>
PERCENTAGE OF
FIRST SHARES OF COMMON STOCK COMMON STOCK
NAME AND PRINCIPAL BECAME BENEFICIALLY OWNED(1) OUTSTANDING
OCCUPATION OR EMPLOYMENT AGE DIRECTOR CLASS A CLASS B CLASS A CLASS B
------------------------ --- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Brady W. Dickson 55 1997 9,960 (2) - (4) (4)
Consultant since 1995; President,
Standard Packaging, Mount Gilead,
North Carolina from 1972 to 1995.
Harold W. Smith 57 1985 4,700 - (4) (4)
Vice President - McRae
Office Solutions since 1993;
Vice President-Finance
and Accounting 1981 to 1993.
</TABLE>
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 2000, at the
Annual Meeting of Stockholders held on December 16, 1999.
3
<PAGE> 6
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>
George M. Bruton 71 1982 588 588 (4) (4)
Owner of George M. Bruton
Insurance Agency, Inc.,
Mount Gilead, North Carolina
since 1950.
Hilton J. Cochran 70 1985 400 500(3) (4) (4)
Part-Owner of
J. Morris & Associates,
Inc., Troy, NC since 1952; President
1952 - 1998.
Victor A. Karam 66 1972 5,312 (4) (4)
President-Footwear Division since
1998; General Manager, Footwear
Division since 1969 and
Vice-President,
Footwear Division 1969 - 1998.
D. Gary McRae (5) 50 1979 426,212(6) 552,079(6) 23% 61%
President of the Company since
1997, Treasurer since 1991 and Vice
President 1980-1997.
James W. McRae (5) 48 1985 409,588(6) 544,265(6) 22% 60%
Vice President
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 October 27, 2000 except as otherwise noted. Does not include any
interest in shares held by the Company's ESOP. The disclosures in this
table do not include any shares of AMIC held by the Estate. See
"Certain Relationships and Related Transactions - Transactions
Involving American Mortgage & Investment Company."
(2) Includes 6,000 shares owned by his wife.
(3) Owned jointly with his wife.
(4) Less than 1%.
(5) D. Gary McRae and James W. McRae are brothers.
(6) Information as to beneficial ownership of these shares is provided in
the table of principal stockholders on page 2.
DIRECTOR COMPENSATION
Directors are paid $725 for attending meetings of the Board of Directors
(directors who are also officers or employees of the Company are paid $375 for
attending such meetings). In addition, directors are paid $100 for attending
committee meetings.
4
<PAGE> 7
EXECUTIVE OFFICERS
Messrs. 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 unanimous written consent of the Board of Directors on
December 16, 1999 and serve at the pleasure of the Board of Directors. Marvin
Kiser, age 52, 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 six 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 was composed of George M. Bruton,
Brady W. Dickson and Hilton J. Cochran and was 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 was also responsible for administering and selecting key
employees to whom stock options and stock appreciation rights will be awarded
under the Company's 1998 Incentive Equity 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.
On May 30, 2000, the Board of Directors split the Audit and Incentive Stock
Option Committee into the Audit Committee and the Incentive Stock Option
Committee. The Audit Committee 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 Incentive
Stock Option Committee is responsible for administering and selecting key
employees to whom stock options and stock appreciation rights will be awarded
under the Company's 1998 Incentive Equity 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. Each committee is composed of George M. Bruton, Brady W.
Dickson and Hilton J. Cochran. Neither Committee has held a meeting since the
split.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The 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
Incentive Stock Option Committee is also responsible for, among other things,
administering the Company's 1998 Incentive Equity Plan. The Board of Directors
is currently composed of D. Gary McRae, President and Treasurer of the Company,
George M. Bruton, Hilton J. Cochran, Brady W. Dickson, Victor A. Karam,
President - Footwear, James W. McRae, Vice President and Secretary, and Harold
W. Smith, Vice President - McRae Office Solutions. Messrs. Bruton, Dickson and
Cochran currently comprise the Company's 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.
D. Gary McRae serves as a director of AMIC and was appointed its president on
March 18, 1997. He serves 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 the 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. The Estate owns 1,996 shares of AMIC's common stock. Messrs. D. Gary McRae
and James W. McRae are co-executors of the Estate.
At the beginning of the Company's 2000 fiscal year, the Company had investments
in and advances to AMIC of approximately $729,000. During the 2000 fiscal year,
the Company received payments of approximately $38,000 from AMIC. The investment
in AMIC's stock and amounts due from AMIC were reduced to the extent that the
recorded amounts exceed stockholder 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 $652,000. 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.
INDEBTEDNESS OF THE ESTATE
The Company from time to time made loans to the late B. J. McRae prior to his
death. At July 29, 2000, all outstanding indebtedness owed the Company by the
Estate had been paid.
INDEBTEDNESS OF VICTOR A. KARAM
On August 22, 2000, the Company made a loan of $300,000 to Mr. Karam, a director
and executive officer of the Company. Mr. Karam used the proceeds to purchase
real estate. The loan is payable on demand, but in no event later than August
22, 2001. The loan bears interest at a rate of 6.88% per year.
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
6
<PAGE> 9
year ended August 1, 1998, all Section 16(a) filing requirements applicable to
its executive officers, directors and greater than 10% beneficial owners were
complied with.
EXECUTIVE COMPENSATION
The table below shows the compensation paid or accrued by the Company, for the
three fiscal years ended July 29, 2000 to or for the account of D. Gary McRae,
the only person who has served as Chief Executive Officer during the fiscal year
and James W. McRae, Victor A. Karam and Harold W. Smith, the only other
executive officers of the Company whose total annual salary and bonus exceeded
$100,000 for the 2000 fiscal year (collectively, the "Named Executive
Officers"). At fiscal year-end, no Named Executive Officer held any unexercised
options.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM
COMPENSATION
----------------------------------------------------------------
AWARDS
------------------------
OTHER RESTRICTED
NAME AND ANNUAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL FISCAL SALARY BONUS COMPEN- AWARD(S) SARS COMPENSATION
POSITION YEAR ($) ($) SATION ($) (#) ($)(2)
($)(1)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
D. Gary McRae 2000 168,240 3,307 -- 0 0 5,092
President and 1999 162,954 29,700 -- 0 0 5,083
Treasurer 1998 145,481 33,000 -- 0 0 4,909
Victor A. Karam 2000 149,560 25,471 -- 0 0 2,578
President-- 1999 142,585 24,300 -- 0 0 2,902
Footwear 1998 136,750 27,000 -- 0 0 4,103
Harold W. Smith 2000 118,288 2,300 -- 0 0 3,584
Vice President-- 1999 111,923 20,000 -- 0 0 3,948
McRae Office 1998 104,933 13,500 -- 0 0 3,552
Solutions
James W. McRae 2000 105,226 18,194 -- 0 0 3,391
Vice President and 1999 101,346 14,400 -- 0 0 3,484
Secretary 1998 96,668 16,000 -- 0 0 3,380
---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No Named Executive Officer received personal benefits during the listed
years in excess of 10% of his respective annual salary and bonus.
(2) Company match on 401(k) contributions.
COMPENSATION COMMITTEE REPORT
The Incentive Stock Option Committee, whose members are named above, together
with the Chairman of the Board, make recommendations to the Board of Directors
concerning the Company's compensation arrangements. In connection with such
arrangements, Messrs. D. Gary McRae, Bruton, Dickson and Cochran have provided
the following report:
7
<PAGE> 10
The Company's overall compensation philosophy is as follows:
o Attract and retain quality talent, which is critical to both
the short-term and long-term success of this Company;
o Reinforce strategic performance objectives through the use of
annual and long-term incentive compensation programs; and
o Create a mutuality of interest between executive officers and
stockholders 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 2000 average base
salaries of the three Named Executive Officers other than the President
increased an average of 5 percent in 2000.
The Committee, consisting of three outside directors, along with the Chairman of
the Board of Directors, Mr. D. Gary 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 and team-building skills, are weighted equally.
Incentive Compensation - The Incentive Stock Option 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 and 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 was 12
percent of their base salaries compared to 16 percent in 1999.
Long-term incentives provide another key element of executive compensation.
Previously, the Company has granted non-qualified options from time to time
under the Company's 1985 Non-Qualified Stock Option Plan. To expand the
Company's flexibility to offer long-term incentives to its key employees, the
Stockholders and the Board of Directors have adopted the 1998 Incentive Equity
Plan, which replaced the Company's 1985 Non-Qualified Stock Option Plan. No
awards were made under the 1998 Incentive Equity Plan during 2000.
8
<PAGE> 11
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
2000, Mr. D. Gary. McRae received a bonus equal to 2 percent of his base salary
(and his base salary was increased 3 percent over 1999).
Hilton J. Cochran George M. Bruton
Brady W. Dickson D. Gary McRae
STOCK PERFORMANCE GRAPH
The accompanying graph and table set forth the cumulative total stockholder
return to the Company's stockholders during the five year period ended July 31,
1999, for each of the Company's Class A and Class B Common Stock, as well as an
overall stock market index (AMEX Index) and the Dow Jones Industry Group Index
for each of footwear, office equipment and industrial technology, the principal
industry segments in which the Company is actively involved.
9
<PAGE> 12
<TABLE>
<CAPTION>
EQUITY/INDEX 1995 1996 1997 1998 1999 2000
------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
McRae Class A Common Stock 100 108 130 111 97 94
McRae Class B Common Stock 100 116 135 114 90 78
AMEX Index 100 108 129 141 158 189
Dow Jones Industrial Group Index - Office Equipment 100 130 198 254 290 156
Dow Jones Industrial Group Index - Industrial Technology 100 119 166 135 186 305
Dow Jones Industrial Group Index - Footwear 100 163 189 128 139 131
</TABLE>
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 2001 fiscal year and
recommends to stockholders that they vote for ratification of that appointment.
The Board of Directors will reconsider the selection of independent certified
public accountants if the stockholders 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 2001 fiscal year and proxies solicited by the Board of Directors will be so
voted unless stockholders specify otherwise.
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.
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
UPON WRITTEN REQUEST OF A STOCKHOLDER, THE COMPANY WILL FURNISH WITHOUT CHARGE A
COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JULY 29, 2000
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 2000. SUCH
REQUEST SHOULD BE SUBMITTED TO OFFICE OF THE SECRETARY, MCRAE INDUSTRIES, INC.,
P.O. BOX 1239, MOUNT GILEAD, NORTH CAROLINA 27306.
<PAGE> 13
APPENDIX A
FOR USE BY CLASS A STOCKHOLDERS
MCRAE INDUSTRIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
DECEMBER 14, 2000
The undersigned hereby appoints D. Gary McRae and James W. McRae and each or
either 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 Stockholders to be held at 3:00 p.m.
on the 14th day of December, 2000, and at any adjournment thereof.
UNLESS SPECIFIED, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3 SHOWN BELOW: The
Board of Directors recommends voting for all items.
1. Election of Directors: Nominees are Brady W. Dickson 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
[ ] [ ] [ ]
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 acknowledged.
Please date, sign exactly as printed and return promptly in the
enclosed postage-paid envelope.
Date: , 2000
---------------------------------
--------------------------------------------
--------------------------------------------
(When signing as attorney, executor,
administrator, trustee, guardian, etc. give
title as such. If a joint account, each
joint owner should sign personally.)
<PAGE> 14
APPENDIX B
FOR USE BY CLASS B STOCKHOLDERS
MCRAE INDUSTRIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
DECEMBER 14, 2000
The undersigned hereby appoints D. Gary McRae and James W. McRae and each or
either 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 Stockholders to be held at 3:00 p.m.
on the 14th day of December, 2000, and at any adjournment thereof.
UNLESS SPECIFIED, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3 SHOWN BELOW: The
Board of Directors recommends voting for all items.
1. Election of Directors: Nominees are George M. Bruton, Hilton J.
Cochran, Victor A. Karam, D. Gary McRae 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
[ ] [ ] [ ]
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 acknowledged.
Please date, sign exactly as printed and return promptly in the
enclosed postage-paid envelope.
Date: , 2000
---------------------------------
--------------------------------------------
--------------------------------------------
(When signing as attorney, executor,
administrator, trustee, guardian, etc. give
title as such. If a joint account, each
joint owner should sign personally.)
