Members of the Executive Committee are Daniel K. Frierson, Chairman, William F. Blue, Jr. and Lowry F. Kline. Except as otherwise limited by law or by resolution of the Board of Directors, the Executive 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 Executive Committee exercises between the meetings of the full Board of Directors. The Executive Committee met one (1) timefour (4) times in 2018.2020.
Members of the Audit Committee are Michael L. Owens, Chairman, William F. Blue, Jr., Charles E. Brock, Walter W. Hubbard, Lowry F. Kline, and Hilda S. Murray. All of the members of the Audit Committee are “independent directors” as that term is defined by applicable regulations and rules of the National Association of Securities Dealers, Inc. (“NASD”). The Audit Committee evaluates audit performance, handles relations with the Company’s independent auditors, and evaluates policies and procedures relating to internal accounting functions and controls. The Audit Committee has the authority to engage the independent accountants for the Company. The Audit Committee operates pursuant to an Audit Committee Charter adopted by the Board of Directors. The Audit Committee has implemented pre-approval policies and procedures related to the provision of audit and non-audit services performed by the independent auditors. Under these procedures, the Audit Committee approves the type of services to be provided and the estimated fees related to those services.
Annually, the Compensation Committee reviews the performance of the Chief Executive Officer against goals and objectives established by the Committee as part of the process of determining his compensation. The Compensation Committee reports to the Board on its performance review.
The Nominations and Corporate Governance Committee’s Charter includes the duties of a nominating committee. Nominees approved by a majority of the Committee are recommended to the full Board. In selecting and approving director nominees, the Committee considers, among other factors, the existing composition of the Board and the mix of Board members appropriate for the perceived needs of the Company. The Committee believes continuity in leadership and board tenure increase the Board’s ability to exercise meaningful board oversight. Because qualified incumbent directors provide stockholders the benefit of continuity of leadership and seasoned judgment gained through experience as a director of the Company, the Committee will generally give priority as potential candidates to those incumbent directors interested in standing for re-election who have satisfied director performance expectations, including regular attendance at, preparation for and meaningful participation in Board and committee meetings.
The Nominations and Corporate Governance Committee also considers the following in selecting the proposed nominee slate:
Mr. Daniel K. Frierson currently serves as the Chairman of the Board and the Chief Executive Officer of the Company. The positions of Chief Executive Officer and Chairman of the Board are combined. Executive sessionsSessions of the Board are chaired by the chairman of the Compensation Committee,Director Lowry F. Kline, who, as noted above, has extensive management and Board experience independent of his experience with the Company. Mr. Kline and the independent directors set their own agenda for meetings in executive sessionExecutive Session and may consider any topic relevant to the Company and its business. The Company believes that regular, periodic, meetings held in executive session,Executive Session, in the absence of management members or management directors, provide the Board an adequate opportunity to review and address issues affecting management or the Company that require an independent perspective. Additionally, the Company’s Audit Committee holds separate executive sessionsExecutive Sessions with the Company’s independent registered public accounts, internal auditor and management. The Audit Committee also sets its own agenda and may consider any relevant topic in its executive sessions.
The Board has determined that William F. Blue, Jr., Charles E. Brock, Walter W. Hubbard, Lowry F. Kline, Hilda S. Murray, and Michael L. Owens are independent within the meaning of the standards for independence set forth in the Company’s corporate governance guidelines, which are consistent with the applicable Securities and Exchange Commission (“SEC”) rules and NASDAQ standards.
The Company’s independent directors meet in executive session at each regularly scheduled quarterly meeting of the Board, with the chair of the Compensation CommitteeDirector Lowry Kline serving as chair of such executive sessions.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, and regulations of the SEC thereunder, require the Company’s executive officers and directors and persons who beneficially own more than 10% of the Company’s Common Stock, as well as certain affiliates of such persons, to file initial reports of such ownership and monthly transaction reports covering any changes in such 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 on its review of the copies of such reports received by it, the Company believes that, during fiscal year 2018,2020, all filing requirements applicable to its executive officers, directors, and owners of more than 10% of the Company's Common Stock have been met.
Management Succession
Periodically, the Board reviews a succession plan, developed by management, addressing the policies and principles for selecting successors to the Company’s executive officers, including the Company’s CEO. The succession plan includes an assessment of the experience, performance and skills believed to be desirable for possible successors to the Company’s executive officers.
Certain Transactions between the Company and Directors and Officers
The Company’s Nominations and Corporate Governance Committee has adopted written policies and procedures concerning the review, approval or ratification of all transactions required to be disclosed under the SEC’s Regulation S-K, Rule 404. These policies and procedures cover all related party transactions required to be disclosed under the SEC’s rules as well as all material conflict of interest transactions as defined by relevant state law and the rules and regulations of NASDAQ that are applicable to the Company, and require that all such transactions be identified by management and disclosed to the committee for review. If required and appropriate under the circumstances, the committee will consider such transactions for approval or ratification. Full disclosure of the material terms of any such transaction must be made to the committee, including:
•the parties to the transaction and their relationship to the Company, its directors and officers;
•the terms of the transaction, including all proposed periodic payments; and
•the direct or indirect interest of any related parties or any director, officer or associate in the transaction.
To be approved or ratified, the committee must find any such transaction to be fair to the Company. Prior approval of such transactions must be obtained generally, if they are material to the Company. If such transactions are immaterial, such transactions may be ratified and prior approval is not required. Ordinary employment transactions may be ratified.
Certain Related Party Transactions
During its fiscal year ended December 29, 2018,26, 2020, the Company purchased a portion of its product needs in the form of fiber, yarn, and carpet from Engineered Floors, an entity substantially controlled by Robert E. Shaw, a shareholder of the Company. Mr. Shaw has reported holding approximately 7.2%7.7% of the Company’s Common Stock, which, as of year-end, represented approximately 3.5% of the total vote of all classes of the Company’s Common Stock. Engineered Floors is one of several suppliers of such products to the Company. Total purchases from Engineered Floors for 20182020 were approximately $8.2$4.5 million; or approximately 2.6%1.9% of the Company’s cost of goods sold in 2018.2020. In accordance with the terms of its charter, the CompensationNominations and Corporate Governance Committee reviewed the Company’s supply relationship with Engineered Floors. The dollar value of Mr. Shaw’s interest in the transactions with Engineered Floors is not known to the Company.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors is composed of sevenfive members, each of whom is an independent, non-employee director. The Audit Committee operates under a written Audit Committee Charter adopted and approved by the Board of Directors. The Charter is reviewed at least annually by the Committee. While the Committee has the responsibilities and powers set forth in its written charter, it is not the duty of the Committee to plan or conduct audits. This function is conducted by the Company’s management and its independent registered public accountants.
The Committee has reviewed and discussed with management the audited financial statements of the Company for the year ended December 29, 201826, 2020 (the “Audited Financial Statements”). In addition, the Committee has discussed with Dixon Hughes Goodman LLP all matters required by applicable auditing standards.
The Committee also has received the written report, disclosure and the letter from Dixon Hughes Goodman required by PCAOB Rule 3526, “Communication with Audit Committees Concerning Independence”, and the Committee has reviewed, evaluated, and discussed with that firm the written report and its independence from the Company. The Committee also has discussed with management of the Company and Dixon Hughes Goodman LLP such other matters and received such assurances from them as the Committee deemed appropriate.
Based on the foregoing review and discussions and relying thereon, the Committee has recommended to the Company’s Board of Directors the inclusion of the Company’s Audited Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 29, 2018,26, 2020, to be filed with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Michael L. Owens, Chairman
William F. Blue, Jr.
Charles E. Brock
Walter W. Hubbard
Lowry F. Kline
Hilda S. Murray
AUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that Michael L. Owens, Chairman of the Audit Committee, is an audit committee financial expert as defined by Item 407(d)(5) of Regulation S-K of the Securities Exchange Act of 1934, as amended, and is independent within the meaning of Rule 10A-3(b)(l) of the Securities Exchange Act of 1934 of the Securities Exchange Act of 1934. For a brief list of Mr. Owens’ relevant experience, please refer to Mr. Owens’ biographical information as set forth in the Election of Directors section of this proxy statement. Additionally, the Board believes the remaining members of the Audit Committee would qualify as audit committee financial experts, within the meaning of applicable rules, based on each individual's qualification and expertise.
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee sets compensation for the Company’s executive officers, and its decisions are reported to and reviewed by the Board of Directors. The Compensation Committee currently consists of threetwo independent directors chosen annually by the Board.
Compensation of the Company’s executive officers is intended to be competitive with compensation offered by other companies generally similar to the Company in size and lines of business. In determining what types and levels of compensation to offer, the Committee may review relevant, publicly available data and, from time to time, it may receive advice and information from professional compensation consultants.
The Elements of Executive Officer Compensation
Compensation for each of the Company’s executive officers consists generally of base salary, retirement plan benefits and other customary employment benefits, as well as potential cash incentive awards and stock plan awards pursuant to an annual incentive plan reviewed and adopted by the Committee at the beginning of each year. The annual incentive plan is customarily structured so that a significant portion of each executive’s potential annual compensation may consist of equity awards, the award value of which is tied to accomplishing both financial and non-financial goals and objectives.
Compensation for 20182020..
Effective February 19, 2018,of 2020, the Compensation Committee selected performance goals and a range of possible incentives for the Company’s 20182020 Incentive Compensation Plan (the “2018“2020 Plan”). Pursuant to the 20182020 Plan, each executive officer had the opportunity to earn a Cash Incentive Award, a Primary Long-Term Incentive Award of restricted stock, and an award of restricted stock denominated as “Career Shares.” The potential range of cash incentives and conditions to vesting of the restricted stock awards are described below.below under the heading “Potential Incentive Awards for 2020”.
No incentive awards were awardedIn March 2020, the pandemic caused by the outbreak of the COVID-19 virus began affecting the Company’s business and the flooring industry as a whole. The business downturn in March and April was dramatic. Considerable uncertainty surrounded the possible duration and extent of the pandemic, as well as the possible effect of the pandemic on the Company’s operations. Accordingly, the Committee elected to wait until year end to assess the Company'simpact of the pandemic on the 2020 Plan, reserving to itself the discretion, granted under the terms of the plan, to treat the pandemic and its effects as an unusual event. As such, the Committee was authorized to preserve the potential award structure of the 2020 Plan (described in detail below) and evaluate the performance criteria established by the plan in light of the effects of the pandemic on the Company, its operations and its financial results.
The 2020 Plan also required an evaluation of various individual goals and objectives for each executive officer participating in the plan. The Committee determined that, in each case, the Company’s executive officers for 2018. Incentive awards earnedhad achieved a high level of success with respect to resultstheir individual goals and objectives. The Company realized material improvements in many aspects of its operations: residential sales increased dramatically; waste was reduced and service levels significantly improved; products using alternate yarn systems were successfully developed and introduced to the market; the Company’s supplier base was broadened and expanded; inventory levels improved (once the worst of the COVID-19 disruptions was past); safety dramatically improved; the Company’s long term debt and credit arrangements were improved and restructured; and expenses were significantly controlled.
Considering the foregoing factors the Committee determined that the Company’s residential performance had reached the maximum level of success as measured by the 2020 Plan, and that the corporate level of performance had reached a level midway between the plan’s target and maximum levels. The Committee determined that the Company’s commercial business failed to reach the plan’s target levels, notwithstanding adjustment for 2017disruptions caused by the pandemic. The following awards were however,then granted under the plan: Cash Incentive awards were paid inpursuant to the first quarter2020 Plan to the Company’s Named Executive Officers: Daniel K. Frierson - $478,125; D. Kennedy Frierson - $244,800; and T.M. Nuckols - $162,938. The following Career Shares were awarded: Daniel K. Frierson- 25,000; Kennedy Frierson - 22,400; and T.M. Nuckols - 11,000. The following Long-Term Incentive Plan Shares were awarded: Daniel K. Frierson - 77,219; D. Kennedy Frierson - 39,536; and T.M. Nuckols - 30,656. Continued employment at the time of 2018, inpayment and award is a requirement under the 2020 Incentive plan; accordingly, awards earned under the 2020 Incentive Plan will be reported as income for 2021. In accordance with past practice.the terms of the 2020 Plan, all cash incentives were paid, and all share awards were granted in March 2021.
For 2018,2020, each executive officer also received customary retirement plan benefits and other customary employment benefits, as in prior years.
Salary for 20182020 and 2021. The base salaries for the executive officers were not adjusted during 2018.2020 to reflect the impact of the COVID-19 pandemic. The Chief Executive Officer's salary was reduced by 15% for a period of six and one-half months. All other executive officers' salaries were reduced by 10% for a period of six and one-half months. See the 20182020 Summary Compensation Table for a tabular presentation of the amount of salary and other compensation elements paid in proportion to total compensation for each named executive officer.
Potential Incentive Awards for 20182020. The CEO and all executive officers whose responsibilities primarily relate to corporate level administration had the opportunity to earn a cash payment ranging from 15% to no more than 105% of such executive’s base salary (from 45% to 105% for the Chief Executive Officer and Chief Operating Officer, and from 30% to 90% for the Chief Financial Officer and from 15% to 75% for all other officers). Fifty percent of the amount of the potential award was based on achievement of specified levels of operating
income from continuing operations for the Company, as adjusted for unusual items, 30% of the amount was based on achievement of specified levels of operating income of the Company’s residential business operations, as adjusted for unusual items, and 20% of the amount was based on achievement of specified levels of the Company’s commercial business operating income, as adjusted for unusual items. As noted above, the Committee treated the COVID-19 pandemic as an unusual item in its evaluation of results for 2020.
Executive officers whose responsibilities primarily relate to one of the Company’s business units, had the opportunity to earn a cash payment ranging from 15% to no more than 75% of such participant’s base salary. Fifty fiveFifty-five percent of the amount was based on achievement of specified levels of their annual business unit operating income, as adjusted for unusual items, 30% was based on the achievement of specified levels of the Company’s consolidated operating income, as adjusted for unusual items, and 15% was based on achievement of specified levels of the annual operating income of the Company’s other business units, as adjusted for unusualitems. As noted above, the Committee treated the COVID-19 pandemic as an unusual item in its evaluation of results for 2020.
Primary Long-Term Incentive Share Awards and Career Shares Awards for 2018. The incentive plan provided for two possible awards of restricted stock: Primary Long-Term Incentive Share Awards and Career Share Awards. Receipt of the Primary Long-Term Incentive Share Awards was contingent on the Company’s achievement of minimum levels of adjusted operating income and, in the case of Career Share Awards was contingent on the Company's having a profitable operating income, as adjusted.
The Primary Long-Term Incentive Share Award was designed as a possible award of restricted shares, in value equal to no more than 35% of the executive’s base salary as of the beginning of 20182020 plus any cash incentive award paid for such year. Any Primary Long-Term Incentive Share Awards, if earned, vest ratably over three years.
Career Shares were designed as a possible award of restricted stock valued at 20% of each executive officer’s base salary as of the beginning of the year, excluding the Company’s Chief Operating Officer and Chief Financial Officer. The level of career share awards was set at 35% and 30%, respectively, of the Chief Operating Officer’s and Chief Financial Officer’s base salary for 2018.2020.
In accordance with past practice, any such award, if earned, would be granted in 2019.2021. For participants age 61 or older, the Career Share Awards vest ratably over two years from the date of the grant. For the participants age 60 or younger, shares vest ratably over five years from the date of grant after the participant reaches age 61.
Additionally, all Share Awards are subject to vesting or forfeiture under certain conditions as follows: death, disability or a change in control will result in immediate vesting of all Share Awards; termination without cause will also result in immediate vesting of all Career Share Awards and in immediate vesting of that portion of Long-Term Incentive Share Awards that have been expensed; voluntary termination of employment prior to retirement, or termination for cause will result in forfeiture of all unvested awards; to the extent that the Company has recognized compensation expense related to the shares subject to the awards, such amounts vest at retirement age and are paid out by March 15th of the subsequent year.
All awards of restricted stock are subject to a $5.00 minimum price per share when determining the number of shares awarded. The Compensation Committee retained the discretion to reduce any award by up to 30% of the amount otherwise earned based on the participant’s failure to achieve individual performance goals set by the committee.
No 2018 Incentive Awards. No awards were granted under the 2018 Incentive Compensation Plan.
Incentive Compensation Applicable to 2019.2021. Following year-end, the Committee adopted an incentive plan for 20192021 providing for possible cash incentive awards and restricted stock awards in the form of Long-Term Incentive Share Awards and Career Share awards, as in prior years, and similar in structure to the annual plan adopted for 2018.2020. The Committee reserved to itself the discretion to increase as well as reduce awards based on its evaluation of various factors applicable to the plan and each participant. The Committee was authorized to modify the plan and the assessment of individual performance based on unusual or extraordinary items. Any such awards, if earned, will be paid, in the case of the cash award, or granted, in the case of the restricted stock awards, in March 2020.2022.
Retirement Plans and Other Benefits. The Company’s compensation for its executive officers also includes the opportunity to participate in two retirement plans, one qualified and one non-qualified for federal tax purposes, and certain health insurance, life insurance, relocation allowances, and other benefits. Such benefits are designed to be similar to the benefits available to other exempt, salaried associates of the Company, and to be comparable to and competitive with benefits offered by businesses with which the Company competes for executive talent.
Executive officers may elect to contribute a limited amount of their compensation to the qualified plan and make deferrals into the non-qualified plan (up to 90% of total compensation). Although the plans permit the Company to make discretionary contributions in an aggregate amount equal to up to 3% of the executive officer’s cash compensation, for 20182020 the Company made a contribution of 1% to the qualified plan, while no Company contributions were made to the non-qualified plan.
In 2015, the Company's Chief Executive Officer, Daniel K. Frierson, was awarded a 100,000 share retention grant with both a continued service condition and a performance condition. The performance condition was not met at the year end of 2018, and in accordance with the terms of the award, it was forfeited.
Compensation Considerations for 20182020 and 20192021.The tax effect of possible forms of compensation on the Company and on the executive officers is a factor considered in determining types of compensation to be awarded. Similarly, the accounting treatment accorded various types of compensation may be an important factor used to determine the form of compensation. The deductibility, for tax purposes, of compensation paid to named executive officers is subject to limits imposed by Section 162 of the Internal Revenue Code. Annual compensation exceeding $1 million is non-deductible. Accordingly, all compensation in excess of $1 million paid to any of the Company's named executive officersNamed Executive Officers (and the Chief Financial Officer) in any given year will be non-deductible.
The Company held a “Say on Pay” vote at its annual meeting in 2018.2020. At that meeting, in excess of 98%94% of the votes were cast “For” approval of our executive compensation as described in the Proxy Statement for that meeting. The Committee intends to consider these results as part of its ongoing review of executive compensation.
Termination Benefits. Upon a Participant's reaching retirement age (as defined in the plan), all Long-Term Incentive Plan and Career Share restricted stock awards vest to the extent such awards have been expensed in the Company’s financial statements. As of year-end, Daniel K. Frierson and Mr. E. David Hobbs wereis the only Named Executive OfficersOfficer eligible for retirement in accordance with the terms of the restricted stock awards. If Mr. Frierson had retired at year end, the number of shares subject to such awards that would have vested and the value of such shares would have been 22,35917,190 shares and $15,652. If Mr. Hobbs had retired at year end, the number of shares subject to such awards that would have vested and the value of such shares would have been 7,664 shares and $5,365.$44,866. For purposes of valuing the foregoing awards, the Company used the year-end market value of the Company’s Common Stock, which was $0.70/share.$2.61 /share.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis, set forth above, withmanagement.
Based on our review and the discussions we held with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Materials.
Respectfully submitted,
Lowry F. Kline, Chairman
William F. Blue, Jr., Chairman
Walter W. HubbardLowry F. Kline
EXECUTIVE COMPENSATION INFORMATION
The following table sets forth information as to all compensation earned during the fiscal years ended December 31, 2016, December 30, 201728, 2019 and December 29, 201826, 2020 for (i) the Company's Chief Executive Officer; and (ii) the Company's Chief Financial Officer, (iii) the threetwo other most highly compensated executive officers who served as such during the fiscal year ended December 29, 201826, 2020 (the “Named Executive Officers”). For a more complete discussion of the elements of executive compensation, this information should be read in conjunction with the other tabular information presented in the balance of this section.
Summary Compensation Table
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Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(4) | Stock Awards ($)(2)(4) | Option Awards ($) | Nonqualified Compensation Earnings ($)(3) | All Other Compensation ($)(5) | Total ($) |
| | | | | | | | |
Daniel K Frierson Chief Executive Officer | 2020 | 574,219 | — | 70,000 | — | — | 5,895 | 650,114 |
2019 | 625,000 | — | — | — | — | 5,629 | 630,629 |
| | | | | | | |
| | | | | | | | |
D. Kennedy Frierson, Jr. Chief Operating Officer | 2020 | 302,667 | — | 62,720 | — | — | 5,593 | 370,980 |
2019 | 320,000 | — | — | — | — | 5,407 | 325,407 |
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| | | | | | | |
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| | | | | | | | |
| | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | |
T.M. Nuckols, Vice President, President Residential | 2020 | 260,104 | — | 30,800 | — | — | 5,219 | 296,123 |
2019 | 275,000 | — | — | — | — | 4,922 | 279,922 |
| | | | | | | |
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|
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Name and Principal Position (a) | Year (b) | Salary ($)(c)(1) | Bonus ($)(d)(2) | Stock Awards ($)(e)(3) | Option Awards ($)(f) | Nonqualified Compensation Earnings ($)(h)(4) | All Other Compensation ($)(i)(5) | Total ($) (j) |
| | | | | | | | |
Daniel K Frierson Chief Executive Officer | 2018 | 625,000 |
| 257,656 |
| 203,210 |
| | — |
| 5,529 |
| 1,091,395 |
|
2017 | 625,000 |
| — |
| — |
| 55,748 |
| — |
| 5,087 |
| 685,835 |
|
2016 | 625,000 |
| — |
| 109,000 |
| — |
| — |
| 5,479 |
| 739,479 |
|
| | | | | | | | |
D. Kennedy Frierson, Jr. Chief Operating Officer | 2018 | 320,000 |
| 125,975 |
| 130,026 |
| — |
| — |
| 5,307 |
| 581,308 |
|
2017 | 320,000 |
| — |
| — |
| 34,842 |
| — |
| 4,874 |
| 359,716 |
|
2016 | 320,000 |
| — |
| 97,664 |
| — |
| — |
| 5,479 |
| 423,143 |
|
| | | | | | | | |
Jon A. Faulkner, Chief Financial Officer | 2018 | 270,000 |
| 84,351 |
| 98,840 |
| — |
| — |
| 5,163 |
| 458,354 |
|
2017 | 270,000 |
| — |
| — |
| 23,366 |
| — |
| 4,602 |
| 297,968 |
|
2016 | 270,000 |
| — |
| 70,632 |
| — |
| — |
| 5,389 |
| 346,021 |
|
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T.M. Nuckols, Vice President, President, Dixie Residential | 2018 | 275,000 |
| 123,750 |
| 90,980 |
| — |
| — |
| 4,647 |
| 494,377 |
|
2017 | 248,958 |
| — |
| 70,000 |
| 23,366 |
| — |
| 2,172 |
| 344,496 |
|
2016 | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| | | | | | | | |
E. David Hobbs, Vice President, President, Dixie Commercial | 2018 | 250,000 |
| 55,000 |
| 68,774 |
| — |
| — |
| 2,960 |
| 376,734 |
|
2017 | 247,500 |
| — |
| — |
| 23,366 |
| — |
| 3,879 |
| 274,745 |
|
2016 | 203,437 |
| — |
| 16,786 |
| — |
| — |
| 3,705 |
| 223,928 |
|
| |
(1) | Includes all amounts deferred at the election of the Named Executive Officer. |
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(2) | Cash bonuses are shown in the year granted, not earned, because employment through year-end is a condition of earning the award. Therefore, the bonus shown in the column for 2018 relates to performance achieved in 2017. |
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(3) | Amounts reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for the year presented of stock awards to the Named Executive Officers. Continued employment is a condition of the Plan so the grant date is in the year after the year for which the performance was earned. |
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(4) | The Dixie Group does not provide above-market or preferential earnings on deferred compensation. The Named Executive Officers did not participate in any defined benefit or actuarial pension plans for the periods presented. |
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(5) | The following table is a summary and quantification of all amounts included in column (i). |
(1)Includes all amounts deferred at the election of the Named Executive Officer.
(2)Amounts reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for the year presented of stock awards to the Named Executive Officers. Continued employment is a condition of the Plan so the grant date is in the year after the year for which the performance was earned.
(3)The Dixie Group does not provide above-market or preferential earnings on deferred compensation. The Named Executive Officers did not participate in any defined benefit or actuarial pension plans for the periods presented.
(4) Continued employment at the time of grant and payment is required under the 2020 Incentive Plan; accordingly, bonuses and stock awards earned under the plan will be reported as compensation for 2021.
(5)The following table is a summary and quantification of all amounts included in All Other Compensation.
All Other Compensation | | | | | | | | | | | | | | | | | |
Name | Year | Registrant Contributions to Defined Contributions Plans ($) | Insurance Premiums ($) | Other ($)(1) | Total Perquisites and Other Benefits($) |
| | | | | |
Daniel K. Frierson | 2020 | 2,800 | 3,095 | — | 5,895 |
2019 | 2,750 | 2,879 | — | 5,629 |
| | | | | |
D. Kennedy Frierson, Jr. | 2020 | 2,800 | 2,793 | — | 5,593 |
2019 | 2,750 | 2,657 | — | 5,407 |
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T.M. Nuckols | 2020 | — | 2,618 | — | 2,618 |
2019 | 2,750 | 2,172 | — | 4,922 |
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Name (a) | Year (b) | Registrant Contributions to Defined Contributions Plans ($)(c) | Insurance Premiums ($)(d) | Other ($)(f) (1&2) | Total Perquisites and Other Benefits($)(g) |
| | | | | |
Daniel K. Frierson | 2018 | 2,650 |
| 2,879 |
| | 5,529 |
|
2017 | 2,208 |
| 2,879 |
| | 5,087 |
|
2016 | 2,600 |
| 2,879 |
| | 5,479 |
|
| | | | | |
D. Kennedy Frierson, Jr. | 2018 | 2,650 |
| 2,657 |
| | 5,307 |
|
2017 | 2,208 |
| 2,666 |
| | 4,874 |
|
2016 | 2,600 |
| 2,879 |
| | 5,479 |
|
| | | | | |
Jon A. Faulkner | 2018 | 2,650 |
| 2,513 |
| | 5,163 |
|
2017 | 2,208 |
| 2,394 |
| | 4,602 |
|
2016 | 2,600 |
| 2,789 |
| | 5,389 |
|
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T.M. Nuckols | 2018 | 2,475 |
| 2,172 |
| | 4,647 |
|
2017 | | 2,172 |
| | 2,172 |
|
2016 | | | | — |
|
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E. David Hobbs | 2018 | 1,115 |
| 1,845 |
| | 2,960 |
|
2017 | 2,034 |
| 1,845 |
| | 3,879 |
|
2016 | 1,925 |
| 1,780 |
| | 3,705 |
|
| |
(1) | (1)No named Executive Officer received any tax reimbursement, discounted securities purchases, or payment or accrual on termination plans for the period presented. |
Grants of Plan-Based Awards
|
| | | | | | |
| Estimated Future Payouts Under Equity Incentive Plan Awards (1) |
| Name (a) | Grant Date (b) | | | Shares of Stock or Units (#) (i) | Grant Date Fair Value of Stock and Option Awards ($) |
| Securities Underlying Options (#) (j) | Base Price of Option ($/#) (k) |
|
|
| | | | | | |
| Daniel K. Frierson | 3/12/2018 | | | 25,000 | $70,000 |
| | 3/12/2018 | | | 47,575 | $133,210 |
| | | | | | |
| D. Kennedy Frierson, Jr. | 3/12/2018 | | | 22,400 | $62,720 |
| | 3/12/2018 | | | 24,038 | $67,306 |
| | | | | | |
| Jon A. Faulkner | 3/12/2018 | | | 16,200 | $45,360 |
| | 3/12/2018 | | | 19,100 | $53,480 |
| | | | | | |
| T.M. Nuckols | 3/12/2018 | | | 11,000 | $30,800 |
| | 3/12/2018 | | | 21,493 | $60,180 |
| | | | | | |
| E. David Hobbs | 3/12/2018 | | | 9,200 | $25,760 |
| | 3/12/2018 | | | 15,362 | $43,014 |
| |
(1) | The amount set forth in the table reflects the grant date fair value of the award determined in accordance with FASB ASC Topic 718. |
No awards of restricted stock made to the Named Executive Officers under the 2018 Incentive Compensation Plan were granted
in 2019, in accordance with the terms of the plan.
Option Exercises and Stock Vested
|
| | | | | | | | |
| Option Awards | Stock Awards |
Name (a) | Number of Shares Acquired on Exercise (#)(b) | Value Realized on Exercise ($)(c) (1) | Number of Shares Acquired on Vesting (#)(d) | Value Realized on Vesting ($)(e)(2) |
Daniel K. Frierson | — |
| — |
| 12,500 |
| 35,500 |
|
| | | | |
D. Kennedy Frierson, Jr. | — |
| — |
| — |
| — |
|
| | | | |
Jon A. Faulkner | — |
| — |
| — |
| — |
|
| | | | |
T.M. Nuckols | — |
| — |
| — |
| — |
|
| | | | |
E. David Hobbs | — |
| — |
| 1,925 |
| 5,467 |
|
| |
(1) | The value realized is calculated as average of the high and low price on the relevant exercise date minus the option price times the number of acquired shares. |
(2) The value realized is calculated as the average of the high and low price on the relevant vesting date times the number of vested shares.
The following table sets forth information concerning the Company’s Non-Qualified Defined Contribution Plan for each of the Named Executive Officers for the fiscal year ended December 29, 2018. The Company does not maintain any other non-tax qualified deferred compensation plans. There were two withdrawals or distributions by the Named Executive Officers in the fiscal year ended 2018.period presented.
Nonqualified Deferred Compensation
|
| | | | | | | | | | |
Name (a) | Executive Contribution in Last FY ($)(b)(1)(2) | Registrant Contribution in Last FY ($)(c)(1)(2) | Aggregate Earnings in Last FY ($) (d)(1)(2)(3) | Aggregate Withdrawals/ Distributions ($)(e) | Aggregate Balance at Last FYE ($)(f) |
Daniel K. Frierson | 82,781 |
| — |
| (215,307 | ) | (1,619,451 | ) | 966,666 |
|
| | | | | |
D. Kennedy Frierson, Jr. | 50,694 |
| — |
| (43,732 | ) | — |
| 631,973 |
|
| | | | | |
Jon A. Faulkner | 67,481 |
| — |
| (151,447 | ) | (98,810 | ) | 1,306,327 |
|
| | | | | |
T.M. Nuckols | — |
| — |
| — |
| — |
| — |
|
| | | | | |
E. David Hobbs | 41,600 |
| — |
| (10,534 | ) | — |
| 125,548 |
|
| |
(1) | For each of the named executive officers, the entire amount reported in this column (b) is included within the amount report in column (c) of the 2018 Summary Compensation Table. |
| |
(2) | None of the amounts reported in this column (d) are reported in column (h) of the 2018 Summary Compensation Table because the Company does not pay guaranteed, above-market or preferential earnings on deferred compensation. |
| |
(3) | Amounts reported in this column (f) for each named executive officer include amounts previously reported in the Company's Summary Compensation Table last year when earned if that officer's compensation was required to be disclosed in the previous year. This total reflects the cumulative value of each named executive officer's deferrals and investment experience. |
The following table sets forth information concerning outstanding equity awards for each of the Named Executive Officers at fiscal year-end.
Outstanding Equity Awards at Fiscal Year-End
| | | | | | | | | | | | | | | | | | | | | | | | | |
Option Awards | | | Stock Awards |
Name | Exercisable (#) | Unexercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Option (#) | Option Exercise Price ($) | Option Expiration Date | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(a) |
| | | | | | | | | |
Daniel K. Frierson | — | 40,000 | — | 4.59 | 5/30/2022 | | | 40,858 | 106,639 |
| | | | | | | | |
| | | | | | | | | |
D. Kennedy Frierson, Jr. | — | 25,000 | — | 4.59 | 5/30/2022 | | | 139,704 | 419,323 |
| | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | |
| | | | | | | | | |
T.M. Nuckols | — | 15,000 | — | 4.17 | 5/30/2022 | | | 29,164 | 76,118 |
| | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | |
a.The market value of the restricted stock set forth in the table has been calculated by multiplying the closing price of the Company’s Common Stock at year-end ($2.61/share) by the number of shares of unvested restricted stock subject to the award.
|
| | | | | | | | | | | | |
Option Awards | Stock Awards |
Name (a) | Exercisable(#)(b) | Unexercisable (#)(c) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Option (#)(d) | Option Exercise Price ($)(e) | Option Expiration Date (f) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(j) |
| | | | | | | |
Daniel K. Frierson | 50,000 |
| — |
| — |
| 5.00 |
| 11/4/2019 | 72,575 |
| 50,803 |
| 40,000 |
| | 4.59 |
| 5/30/2022 | | |
| | | | | | | |
D. Kennedy Frierson, Jr. | 22,000 |
| — |
| — |
| 5.00 |
| 11/4/2019 | 133,330 |
| 93,331 |
| 25,000 |
| | 4.59 |
| 5/30/2022 | | |
| | | | | | | |
Jon A. Faulkner | 11,000 |
| — |
| — |
| 5.00 |
| 11/4/2019 | 106,843 |
| 74,790 |
| 15,000 |
| | 4.17 |
| 5/30/2022 | | |
| | | | | | | |
T.M. Nuckols | — |
| 15,000 |
| — |
| 4.17 |
| 5/30/2022 | 52,493 |
| 36,745 |
| | | | | | |
| | | | | | | |
E. David Hobbs | — |
| 15,000 |
| — |
| 4.17 | 5/30/2022 | 24,562 |
| 17,193 |
| | | | | | |
| |
(1) | The market value of the restricted stock set forth in the table has been calculated by multiplying the closing price of the Company’s Common Stock at year-end ($0.70/share) by the number of shares of unvested restricted stock subject to the award. |
DIRECTOR COMPENSATION
| | | | | | | | | | | | | | | | | |
Name | Fees earned or paid in cash ($)(1) | Stock Awards ($)(2) | Option Awards ($) | All Other Compensation ($) | Total ($) |
|
|
|
William F. Blue, Jr. | 40,500 | 2,700 | — | — | 43,200 |
| | | | | |
Charles E. Brock | 30,000 | 2,700 | — | — | 32,700 |
| | | | | |
Lowry F. Kline | 38,500 | 2,700 | — | — | 41,200 |
| | | | | |
Hilda S. Murray | 34,500 | 2,700 | — | — | 37,200 |
| | | | | |
Michael L. Owens | 37,500 | 2,700 | — | — | 40,200 |
|
| | | | | | |
| Name (a) | Fees earned or paid in cash ($) (b)(1) | Stock Awards ($) (c)(2) | Option Awards ($) (d)(3) | All Other Compensation ($) (e)(4) | Total ($) |
|
|
|
| William F. Blue, Jr. | 29,000 | 11,520 | — | — | 40,520 |
| | | | | | |
| Charles E. Brock | 30,500 | 11,520 | — | — | 42,020 |
| | | | | | |
| Walter W. Hubbard | 30,500 | 11,520 | — | — | 42,020 |
| | | | | | |
| Lowry F. Kline | 39,500 | 11,520 | — | — | 51,020 |
| | | | | | |
| Hilda S. Murray | 32,000 | 11,520 | — | — | 43,520 |
| | | | | | |
| Michael L. Owens | 37,500 | 11,520 | — | — | 49,020 |
(1)Directors who are employees of the Company do not receive any additional compensation for their services as members of the Board of Directors. Non-employee directors receive an annual retainer of $36,000, payable $18,000 in cash and the remainder in Performance Units (subject, for payments made in 2020, to a $5.00 minimum value per unit). For 2020 the value awarded was $13,052 in Performance Units determined as of the date of grant. In addition to the annual retainer, directors who are not employees of the Company received $1,500 for each Board meeting attended and $1,000 for each committee meeting attended. Chairmen of the Audit and Compensation committees receive an additional annual payment of $8,000 and the Chairman of the Nominations and Corporate Governance Committee receives an additional annual payment of $4,000. Also, directors receive reimbursement of the expenses they incur in attending all board and committee meetings.
| |
(1) | Directors who are employees of the Company do not receive any additional compensation for their services as members of the Board of Directors. Non-employee directors receive an annual retainer of $36,000, payable $18,000 in cash and the remainder in Performance Units (subject, for payments made in 2016, 2017 and 2018, to a $5.00 minimum value per unit). For 2018 the value awarded was $11,520 in Performance Units determined as of the date of grant. In addition to the annual retainer, directors who are not employees of the Company received $1,500 for each Board meeting attended and $1,000 for each committee meeting attended. Chairmen of the Audit and Compensation committees receive an additional annual payment of $8,000 and the Chairmen of the Nominations and Corporate Governance Committee receives an additional annual payment of $4,000. Also, directors receive reimbursement of the expenses they incur in attending all board and committee meetings. |
(2)The value presented is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, using the annual meeting date as the grant date.
| |
(2) | The value presented is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The value of the Performance Units awarded to each non-employee director under the Company's 2018 Incentive Compensation Plan was $11,520. |
At fiscal year-end, each non-employee director was issued the following outstanding equity awards, with respect to service for 2018:
| | | | | | | | |
Name | Performance Units (#)(1) | | | |
|
|
|
William F. Blue, Jr. | 3,600 | | | | |
| | | |
| Name (a) | Performance Units (#)(b)(1) |
|
|
|
| William F. Blue, Jr. | 3,600 |
|
| | |
| Charles E. Brock | 3,600 |
| | | |
| | | | |
| Walter W. Hubbard | 3,600 |
|
| | |
| Lowry F. Kline | 3,600 |
| | | |
| | | | |
| Hilda S. Murray | 3,600 |
| | | |
| | | | |
| Michael L. Owens | 3,600 |
| | | |
| |
(1) | The performance units represent an equal number of shares of the Company's Common Stock. At year-end, the aggregate value of such stock was $15,120, determined by multiplying the number of performance units issued by the year-end per share market value of the Company's Common Stock ($0.70/share). |
(1)The performance units represent an equal number of shares of the Company's Common Stock. At year-end, the aggregate value of such stock was $46,980 determined by multiplying the number of performance units issued by the year-end per share market value of the Company's Common Stock ($2.61/share).
PROPOSAL TWO
ADVISORY VOTE ON EXECUTIVE COMPENSATION
As required under recent amendments to the Securities Exchange Act of 1934, our stockholders may cast an advisory vote on the compensation of our Named Executive Officers, as described in this proxy statement.
Our executive compensation programs are designed to attract, motivate and retain our Named Executive Officers, who are critical to our success. Please read the Compensation Discussion and Analysis for additional details about our executive compensation programs, including information about the fiscal 20182020 compensation of our Named Executive Officers.
We are asking our Shareholders to indicate their approval of our Named Executive Officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our Named Executive Officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this proxy statement.
We recommend that stockholders vote, on an advisory basis, “FOR” the following resolution:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as discussed and disclosed in the Compensation Discussion and Analysis, the executive compensation tables and related narrative executive compensation disclosure in this proxy statement.”
The above resolution will be deemed to be approved if it receives the affirmative vote of a majority of the total votes cast on the Proposal Two at the annual meeting. Abstentions and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote. As this vote is an advisory vote, the outcome is not binding on us with respect to future executive compensation decisions, including those relating to our named executive officers.Named Executive Officers. Our Board of Directors and our Compensation Committee, however, value the opinions of our stockholders, and to the extent there is any significant vote against the Named Executive Officer compensation as disclosed in this proxy statement, the Compensation Committee will consider our stockholders’ concerns and will evaluate whether any actions are necessary to address those concerns.
The Board of Directors recommends that the Company’s shareholders vote FOR the approval of Proposal Two.
PROPOSAL THREE
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY SAY-ON-PAY VOTES
Our stockholders also have the opportunity to indicate how frequently we should seek an advisory vote on the compensation of our named executive officers. By voting on Proposal Three, stockholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two, or three years. You will have the opportunity to vote on this issue at least once every six years.
Our Board of Directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for our company. Accordingly, our Board of Directors recommends that you vote for a one-year interval for the advisory vote on executive compensation.
You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, or three years. You may also abstain from voting. The option that receives the highest number of advisory votes by shareholders will be the frequency for the advisory vote on executive compensation deemed to have been selected by stockholders. Abstentions and broker non-votes will have no effect on the outcome of the vote.
As the vote is advisory and not binding, the Board of Directors may decide that it is in the best interests of the Company and its shareholders to hold an advisory vote on executive compensation more or less frequently than the option selected by our shareholders (but not less often than once every three years). However, we value the opinions of our shareholders and will consider the outcome of the advisory vote in deciding how often to hold the advisory vote on executive compensation in future years.
The Board of Directors recommends a vote FOR the frequency of the say-on-pay advisory vote to be "one year".
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR 20192021
The firm of Dixon Hughes Goodman LLP served as independent registered public accountants for the Company for fiscal year 2018. Subject to ratification of its decision by the Company’s shareholders, the Company has selected the firm of Dixon Hughes Goodman LLP to serve as its independent registered public accountants for its 20192021 fiscal year. A representative of Dixon Hughes Goodman 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.
The Board of Directors recommends that that the Company’s shareholders vote FOR Proposal Four.Three.
In the event that the Company’s shareholders do not ratify the selection of Dixon Hughes Goodman LLP as independent registered public accountants for fiscal 2019,2021, the Board of Directors will consider other alternatives, including appointment of another firm to serve as independent registered public accountants for fiscal 2019.2021.
AUDIT FEES DISCUSSION
The following table sets forth the fees paid to Dixon Hughes Goodman LLP for services provided during fiscal year 20172019 and 2018:2020:
|
| | | | | | |
| 2018 | 2017 |
Audit fees paid to Dixon Hughes Goodman LLP (1) | $ | 610,026 |
| $ | 652,536 |
|
Audit related fees (2) | $ | 3,354 |
| $ | 23,612 |
|
Tax fees (3) | $ | 45,495 |
| $ | 174,975 |
|
All other fees (4) | $ | 5,716 |
| $ | — |
|
Total Audit Fees | $ | 664,591 |
| $ | 851,123 |
|
| | | | | | | | |
| 2020 | 2019 |
Audit fees paid to Dixon Hughes Goodman LLP (1) | $ | 603,642 | | $ | 649,670 | |
Tax fees (2) | $ | 1,450 | | $ | 1,425 | |
All other fees (3) | $ | 10,000 | | $ | — | |
Total Audit Fees | $ | 615,092 | | $ | 651,095 | |
| |
(1) | Represents fees for professional services paid to Dixon Hughes Goodman LLP provided in connection with the audit of the Company’s annual financial statements, review of the Company’s quarterly financial statements, review of other SEC filings and technical accounting issues during 2017 and 2018. |
| |
(2) | Represents fees for discussions of recent accounting pronouncements and review of SEC comment letter. |
| |
(3) | Represents fees for tax compliance and tax planning services. |
| |
(4) | Represents fees related to a sale leaseback transaction. |
1. Represents fees for professional services paid to Dixon Hughes Goodman LLP provided in connection with the audit of the Company’s annual financial statements, review of the Company’s quarterly financial statements, review of other SEC filings and technical accounting issues during 2019 and 2020.
2. Represents fees for tax compliance and tax planning services.
3. Represents fees related to the S-8 Registration Statement filing.
It is the policy of the Audit Committee to pre-approve all services provided by its independent registered public accountants. In addition, the Audit Committee has granted the Chairman of the Audit Committee the power to pre-approve any services that the Committee, as a whole, could approve. None of the fees were approved by the Audit Committee pursuant to the de minimis exception of Reg. S-X T Rule 2-01(c)(7)(i)(C).
SHAREHOLDER PROPOSALS
FOR INCLUSION IN NEXT YEAR'S PROXY STATEMENT
In the event any shareholder wishes to present a proposal at the 20202022 Annual Meeting of Shareholders, such proposal must be received by the Company on or before November 1512, 2019,2021, to be considered for inclusion in the Company's proxy materials. All shareholder proposals should be addressed to the Company at its principal executive offices, P.O. Box 2007, Dalton, Georgia 30722-2007, Attention: Corporate Secretary, and must comply with the rules and regulations of the Securities and Exchange Commission.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Shareholders who wish to communicate with members of the Board, including the independent directors individually or as a group, may send correspondence to them in care of the Corporate Secretary at the Company’s corporate headquarters, P.O. Box 2007, Dalton, Georgia 30722-2007.
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.
The Dixie Group, Inc.
Daniel K. Frierson
Chairman of the Board
Dated: March 22, 2019
19, 2021