Document:

10.1 - Summary Incentive Plan

EXHIBIT 10.1
Summary of Incentive Plan for 2015.

Annual 2015 Incentive Plan.  On March 12, 2015, the Compensation Committee adopted the annual incentive plan for 2015, 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. Any such awards, if earned, would be paid, in the case of the cash award, or granted, in the case of the restricted stock awards, by March 15, 2016.  As described below, the potential awards are subject to both a performance condition and a service condition.
All awards are subject to shareholder approval of the material terms of the performance goals of the annual incentive plan applicable to 2015-2019 which were submitted to shareholders for approval at the annual meeting of shareholders to be held April 28, 2015.
 Potential Cash Incentive Awards.  The CEO and all executive officers whose responsibilities primarily relate to corporate level administration have 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, from 30% to 90% for the Chief Financial Officer and from 15% to 75% for other officers). Fifty percent of the amount of the potential cash award is based on achievement of specified levels of Operating Income from Continuing Operations for the Company, as Adjusted (as defined in the plan), 30% of the amount is based on achievement of specified levels of Operating Income from Continuing Operations of  the Company’s residential business operations, as Adjusted (as defined in the plan), and 20% of the amount is based on achievement of specified levels of Operating Income from Continuing Operations of the Company’s commercial business operations, as Adjusted (as defined in the plan). 
Executive Officers whose responsibilities primarily relate to one of the Company’s business units, have the opportunity to earn a cash payment ranging from 15% to no more than 75% of such participant’s base salary.  Fifty five percent of the amount is based on achievement of specified levels of their business unit’s Operating Income from continuing Operations, as Adjusted (as defined in the plan), 30% is based on the achievement of specified levels of the Company’s Operating Income from Continuing Operations, as Adjusted (as defined in the plan), and 15% is based on achievement of specified levels of the annual Operating Income as Adjusted (as defined in the plan) of the Company’s other business units. 
Maximum potential awards are determined by formula; to be eligible for any award, the participant must be employed by the Company as of the date of determination.  The Compensation Committee must determine and certify achievement of the relevant performance and service conditions. 
The Compensation Committee retains the discretion to reduce any award by up to 30% of the amount otherwise earned based on the participant’s level of achievement of certain individual performance goals, which are less quantifiable and more subjective in nature than the formula goals otherwise set by the plan.  Individual goals are set by the Committee for each participant.
Any cash award will be paid out to the participants by March 15, 2016.

Primary Long-Term Incentive Share Awards and Career Share Awards.
The incentive plan also provides for two possible awards of restricted stock: Primary Long-Term Incentive Share Awards and Career Share Awards.  
The Primary Long-Term Incentive Share Awards is 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 2015 plus any cash incentive award paid for such year. To be eligible for an award of Primary Long-term Incentive Shares the Company must achieve an Operating Income from Continuing Operations, as Adjusted (as defined in the plan) of at least the threshold level set for determining the potential cash award. If such threshold level of operating income is attained, the Participant will receive an award of restricted shares equal in value to 35% of his base salary as of the beginning of 2015 plus any cash incentive paid for the year. The Compensation Committee must certify achievement of the threshold level of Operating Income as Adjusted. The Participant must be employed by the Company as of the date of determination in order to receive the award. The Awards will be made no later than March 15, 2016.
Vesting.  If earned, the Primary Long-Term Incentive Shares vest equally over 3 years from the potential award date (March 12, 2016).  Upon vesting, each ratable portion of the award becomes unrestricted and must be paid or made available by March 15 of the year following vesting.  That portion of the award that has been expensed by the Company (as of its most recent year end financial statements), and which has not previously become unrestricted and paid or made available to the Participant, vests upon a Participant’s attaining age 60. For Participants age 60 or older, the vested portion becomes unrestricted and is paid or made available by March 15 of the year immediately following the year of vesting. Shares subject to the award vest on the Participant’s death, disability or termination of employment by the Company, other than for cause.  In no event will shares subject to the Award become unrestricted and paid and made available later than March 15th of the year following the year in which the shares are no longer subject to a substantial risk of forfeiture, as defined under relevant IRC regulations. 
The Career Share Award is a possible award of restricted shares, in value equal to 20% of each Participant’s base salary at the beginning of 2015, for all executive officers other than the Chief Operating Officer and Chief financial Officer; for the Chief Operating Officer, the award is equal in value to 35% of his base salary, and for the Chief Financial Officer, such award is equal in value to 30% of his base salary at the beginning of 2015.  To be eligible for an award of Career Shares, the Company must have achieved a profitable level of Operating Income from Continuing Operations, as Adjusted (as defined in the plan). The Compensation Committee must certify achievement of the minimum level of Operating Income from continuing Operations, as Adjusted.  The Participant must be employed by the Company as of the date of determination in order to receive the award.
Vesting.  If earned, the Career Share award vests when the participant: (i) becomes eligible to retire; and (ii) has retained the shares for a minimum of 24 months from the grant date of the award. For participants under age 60, shares vest ratably over 5 years beginning on such executive officer’s 61st birthday. That cumulative portion of the award that has been expensed by the Company (as of its most recent year ending financial statements) and which has not become unrestricted and paid or made available to the Participant, vests upon a Participant’s attaining age 60.  The vested portion of each award becomes unrestricted and is paid or made available March 15 of the year immediately following the year of vesting. In no event will shares subject to the Award become unrestricted and be paid and made available later than March 15th of the year following the year in which the shares are no longer subject to a substantial risk of forfeiture, as defined under relevant IRC regulations.

Retention Awards.
In addition to the potential awards of restricted stock described above, the Committee approved three additional awards of restricted stock, structured as retention grants.  Two grants were made to the Company’s President Residential, and one grant was proposed to be made to the Company’s Chief Executive Officer.  
President Residential. The retention grants are structured to incentivize the Company’s President Residential to continue providing his services to the Company for the duration of the grants. Accordingly they are structured as cliff vesting grants and are forfeitable in the event of voluntary retirement prior to the respective vesting terms of the grants. The awards are structured as two separate awards: one in the amount of 10,000 shares that vests, if the Continued Service Condition is met, on March 12, 2017, and one in the amount of 20,000 shares that vests, if the Continued Service Condition is met, on March 12, 2018. The Compensation Committee must certify that the Continued Service Condition has been met and any award must become unrestricted and be paid and made available no later than March 15th of the year following the year in which the award is no longer subject to a substantial risk of forfeiture under relevant IRC regulations.
Chief Executive Officer. The retention grant proposed to be made to the Chief Executive Officer is intended to incentivize the Chief executive Officer to continue providing his services to the Company for the duration of the grant.  Accordingly it is structured as a cliff vesting grant and is forfeitable in the event of voluntary  termination prior to the vesting term of the grant. The retention grant will only be made if the Company’s Shareholders approve the material terms of the Performance Goals applicable to the 2015-2019 annual incentive plan. Such terms have been submitted to shareholders for approval at the annual meeting of shareholders to be held April 28, 2015. Vesting of this award is subject to both a Continued Service Condition and a Performance Condition.  It is structured as a 100,000 share award vesting March 12, 2019, if the Continued Service Condition and the Performance Condition have been met. The Performance Condition requires that the Company’s cumulative Operating Income from Continuing Operations as Adjusted (as defined in the plan) as of fiscal year end 2018 (or in the case of death, disability, change of control, or other involuntary termination without cause, as of the end of the most recent quarterly accounting period), must equal or exceed 440% of the Company’s Operating Income from Continuing Operations, as Adjusted (as defined in the plan) as of fiscal year end 2014.  The award vests upon death, disability, or a change in control of the Company, only if the Performance Condition has been met as of such date. The Compensation Committee must certify that the Continued Service Condition and the Performance Condition have been met, and any award must become unrestricted and be paid and made available no later than March 15th of the year following the year in which the award is no longer subject to a substantial risk of forfeiture under relevant IRC regulations.10.2 - LTIP Award B Shareholder

EXHIBIT 10.2

[For Participant who holds
Class B Common Stock]

RESTRICTED STOCK AWARD
UNDER THE
2006 STOCK AWARDS PLAN
AND THE
20__ INCENTIVE COMPENSATION PLAN

Long Term Incentive Plan Shares

To:    

Date:    March 12, 20__

The Dixie Group, Inc. (the “Company”) hereby awards you ________ shares of restricted stock, as an award of Long Term Incentive Plan Shares (LTIP Shares) pursuant to the 20__ Incentive Compensation Plan, subject to the terms and conditions set forth below:

1.    Restricted Stock.  All LTIP Shares are shares of restricted stock and are actual shares of common stock (or, subject to your election, shares of Class B Common Stock) of the Company. A stock certificate (or certificates, if a portion of your award is in Class B Common Stock) representing all LTIP Shares will be issued in your name, but will be held by the Company. You have the right to elect to receive Class B Common Stock in proportion to the shares of Class B Common Stock which you now hold. Such shares will be issued in your name upon the effectiveness of this Award. To make your election, please complete Annex A and deliver it to Starr T. Klein, Corporate Secretary. 

2.    Ownership Rights.  Immediately upon effectiveness of this Award, you will have all the rights of ownership with respect to the shares represented by the Award, except that such shares cannot be sold, pledged or transferred until the restrictions are removed, and such shares are subject to forfeiture, as described in this Award document. You are entitled to vote shares of restricted stock subject to this Award and to receive any dividends paid on such shares.

3.    Vesting.  Shares of Restricted Stock subject to this Award vest in accordance with the schedule set forth in Annex B, subject to earlier vesting upon your death, disability, or upon a change of control of the Company, in which case such Award shall be 100% vested.  That portion, if any, of the restricted shares subject to this Award that is equal to the portion of the award that has been expensed pursuant to the terms of, shall vest upon your reaching retirement age, and shall be payable to you no later than 3/15 of the following year.

4.    Effects of Termination on Unvested Restricted Stock. All unvested shares of Restricted Stock subject to this Award will be forfeited if and to the extent such shares have not vested before or upon your voluntary termination of employment (other than by retirement) or involuntary termination by the Company for cause.

    

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5.    Definitions.  For purposes of this Award:

a.  “Disability” shall be determined according to the definition of “disability,” in effect at the time of determination, in The Dixie Group, Inc. 401k Plan.

b.  “Affiliated Company” includes The Dixie Group, Inc. and any company of which The Dixie Group, Inc. owns at least 20% of the voting or capital stock if (1) such company is a party to an agreement that provides for continuation of your employee benefits upon immediate employment by you with such company and (2) such company agrees to your subsequent employment.

c.  “Retirement” means the voluntary termination of your employment on or after the earliest date on which you would be eligible for an immediately payable benefit under The Dixie Group, Inc. 401K Plan.

d.  “Change in Control” shall be deemed to have occurred under any of the circumstances described below:

If any “person,” except for:
the Company or any subsidiary of the Company;

a trustee or the other entity holding securities under any employee benefit plan of the Company or any subsidiary of the Company; and 

The Frierson Family 

is or becomes the “beneficial owner” directly or indirectly, of securities of the Company representing more than 50% of the combined total voting power of the Company’s then-outstanding securities. 
 
As used in this definition of “change in control”

“The Frierson Family” shall mean the immediate family of Daniel K. Frierson, including his wife, children and grandchildren and their spouses, his siblings and their spouses, and any trust for the benefit of any of the foregoing persons. 
 
“person” is used as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (as amended); and
 
“beneficial owner” is used as defined in Rule 13d-3 of the Securities Exchange Act of 1934 (as amended).

e.  “cause” shall mean for the purposes of this award only (i) participant has committed an act or has failed to act, where such act or failure to act constitutes intentional misconduct including, without limitation, dishonesty, fraud or embezzlement, a reckless disregard of the consequences of such act or failure to act, or gross negligence by participant; (ii) a conviction of or the entering of a guilty or no contest plea to any felony or any crime involving moral turpitude; or (iii) a failure to cease or correct a material failure to discharge participant’s duties and responsibilities as an employee of The Dixie Group, Inc.

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f.  “open trading period” means a period during which trading in the Company’s Common Stock and Class B Common Stock is permitted for persons subject to and in accordance with the Company’s Insider Trading Policy Statement, as such statement may be amended from time to time hereafter.

6.    Certain Tax Consequences.  Certain tax consequences of the Award are set forth on Annex C, attached hereto. The Company recommends that you consult your financial advisor about the tax consequences to you of an award of Restricted Stock. Income received as a result of vesting of restricted stock is subject to immediate withholding of federal, state or local income tax and FICA, to the extent applicable. Payment to the Company of applicable taxes or satisfactory arrangement to make such payment, is required upon vesting of any portion of this award. See Section 8, below

7.    Tax Obligations. By accepting this award, you agree to be responsible for any required minimum tax withholding obligations that may occur when your shares vest. In the event you have not satisfied these tax obligations before the Company must forward them to the appropriate tax authorities, the Company may take any of the following actions: retain custody of your shares until you have reimbursed the Company for the amounts paid on your behalf, take deductions from any kind or payment otherwise due you until the tax obligations satisfied, or withhold from your award the number of shares necessary to satisfy the tax obligations.

8.    Plan Administration.  The Compensation Committee of the Board of Directors is the administrator of the Plan, whose function is to ensure the Plan is managed according to its respective terms and conditions. A request for a copy of the Plan and any questions pertaining to the Plan should be directed to:

The Dixie Group, Inc.
Stock Plan Administrator
c/o Starr T. Klein, Secretary
P.O. Box 25107
Chattanooga, TN 37422-5107

9.    Adjustment of Shares Subject to Award.     The number of shares subject to this Award shall be adjusted to reflect any increase or decrease in the number of shares of common stock and Class B Common Stock outstanding as a result of any stock dividend or split or other such corporate action which, in the opinion of the Plan Administrator, shall require such adjustment.

10.    Restrictions on Transfer. Until the restricted shares subject to this Award vest, and except as may be approved by the Plan Administrator, such shares shall not be transferable by you, and may not be sold, assigned or transferred (whether by sale, gift or otherwise), pledged, hypothecated or encumbered in whole or in part either directly or by operation of law or otherwise including, but not by way of limitation, by execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner. Any attempted assignment, transfer, pledge, hypothecation or other disposition of any of the restricted shares in violation of the foregoing provisions shall be null and void and without effect.

11.    No Right to Continued Employment.  It is understood that this Award is not intended and shall not be construed as an agreement or commitment by the Company or any subsidiary or Affiliate to employ you or to continue your employment for any period of time whatsoever.

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12.    Governing Law. This Award has been entered into pursuant to and shall be governed by the laws of the State of Tennessee.

13.    Mandatory Payout.  Anything to the contrary herein notwithstanding, any portion of the award no longer subject to a substantial risk of forfeiture, including but not limited to shares that would have been vested at retirement age, under either Section 83 or 409A of the Internal Revenue Code of 1986, as amended, shall be transferred, paid or otherwise made available to the grantee no later than March 15, of the year following the calendar year in which such substantial risk of forfeiture no longer exists.

ACKNOWLEDGMENT AND ACCEPTANCE

By signing below, I acknowledge and accept this Award, subject to the terms hereof.

Date:    _______________________________    ____________________________________
   (Participant)

Date:   _______________________________          ____________________________________
                                                                                                                                         (Chairman)

Date:  ________________________________          ___________________________________
                                                                                                                                              (Attest) 

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ANNEX A

Participant election with respect to Class B Common Stock

		
	1.  
	Election to Receive Maximum Number of Shares of Class B Common Stock:

By signing below, I elect to receive the maximum number of shares of Class B Common Stock
 permissible under Section 6(h) of the 2006 Stock Awards Plan (the “Plan”) and the Award of Restricted Stock granted to me pursuant to such Plan, as follows:

a.  current holdings of Common Stock _____________________;

b.  current holdings of Class B Common Stock ____________________;

c.  ratio of Class B to Common __________/________ = ______%.

Dated:    _____________________________    ____________________________________
(Participant)

		
	2.  
	Election to Receive Less Than Maximum Number of Shares of Class B Common Stock:

By signing below, I elect to receive ____% of my Award in Class B Common Stock. [must be less than percentage set forth in (c), above.]

Dated:    _____________________________    ____________________________________
(Participant)

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ANNEX B
 

Restricted Stock Award

		
	•
	Pursuant to the 2006 Stock Awards Plan and the 20__ Incentive Compensation Plan

Primary Long Term Incentive Award
    
              Shares

Vesting Schedule:

1/3 (             shares) vest on March 12, 20__ (33 1/3%)

1/3 (             shares) vest on March 12, 20__ (66 2/3%)

1/3 (             shares) vest on March 12, 20__ (100%)

Subject to Sections 3 and 4 hereof.

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ANNEX C

AWARD OF RESTRICTED STOCK
CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES TO PARTICIPANT  

The following is a brief summary of the principal United States federal income tax consequences of a restricted stock award under the 2006 Stock Awards Plan, based on current United States federal income tax laws. This summary is not intended to be exhaustive, does not constitute tax advice and, among other things, does not describe state, local or foreign tax consequences, which may be substantially different.

Restricted Stock. A participant generally will not be taxed at the time a restricted stock award is granted, but will recognize taxable ordinary income when the award vests or otherwise is no longer subject to a substantial risk of forfeiture. The amount of taxable income recognized will equal the fair market value of the shares subject to the award (or the portion of the award that is then vesting) at that time. Participants may elect to be taxed based on the fair market value of the shares at the time of grant by making an election under Section 83(b) of the Code within 30 days of the award date. If a restricted stock award with respect to which a participant has made such an election under Section 83(b) is subsequently canceled, no deduction or tax refund will be allowed for the amount previously recognized as income.

Unless a participant makes a Section 83(b) election, dividends paid to a participant on shares of an unvested restricted stock award will be taxable to the participant as ordinary income. If the participant made a Section 83(b) election, the dividends will be taxable to the participants as dividend income, which generally is subject to the same rate as capital gains income.

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