DEF 14A 1 ufi20130909_def14a.htm FORM DEF 14A ufi20130909_def14a.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C.  20549

 

SCHEDULE 14A

 

(Rule 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

 

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No.    )

 

Filed by the Registrant ☒

 

 

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))

Definitive Proxy Statement

 

 

Definitive Additional Materials

 

 

Soliciting Material Pursuant to § 240.14a-12

 

 

 

UNIFI, INC. 

(Name of Registrant as Specified in its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

 

PAYMENT OF FILING FEE (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

1)

Title of each class of securities to which transaction applies:

 

 

2)

Aggregate number of securities to which transaction applies:

 

 

3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11

(set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

4)

Proposed maximum aggregate value of transaction:

 

 

5)

Total fee paid:

 

Fee paid previously with preliminary materials:

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.  Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

1)

Amount Previously Paid:

 

 

2)

Form, Schedule or Registration Statement No.:

 

 

3)

Filing Party:

 

 

4)

Date Filed:

 

 

 
 

 

 

 

 

PROVIDING INNOVATIVE FIBERS AND COMPETITIVE SOLUTIONS®

 

7201 West Friendly Avenue

Greensboro, North Carolina 27410

 

September 13, 2013

 

 

To our Shareholders:

 

On behalf of the Board of Directors and management of Unifi, Inc., I invite you to the Annual Meeting of Shareholders of your Company to be held at 9:00 A.M. Eastern Time on Wednesday, October 23, 2013, at the Company’s corporate headquarters at 7201 West Friendly Avenue, Greensboro, North Carolina. We look forward to greeting those shareholders who are able to attend in person.

 

At the Annual Meeting, we will discuss and act on each item of business described in the Notice of Annual Meeting of Shareholders and our Proxy Statement, both of which are available on the Internet as described below, along with detailed information relating to our activities and operating performance that is contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2013 (the “2013 Form 10-K”).

 

We are providing access to our proxy materials over the Internet, and we are mailing a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) to our shareholders of record and beneficial owners at the close of business on September 6, 2013, which is the record date for the Annual Meeting. The Internet Notice will explain how all shareholders and beneficial owners can access all of the proxy materials and the 2013 Form 10-K, free of charge, on a website described in the Internet Notice.

 

It is very important that your shares are represented at the Annual Meeting, whether or not you plan to attend in person. Accordingly, we request and urge you to review the proxy materials and vote your shares in advance of the meeting by Internet. If you decide to attend the Annual Meeting and wish to vote there in person, you may do so by revoking your prior proxy at that time.

 

The Internet Notice also contains instructions to allow you to request paper copies of the proxy materials to be sent to you by mail. Any paper copies of the proxy materials sent to you will include a proxy card that will provide you with a telephone number you may call to cast your vote, or you may complete, sign and return the proxy card by mail. Your vote is very important and we appreciate your taking the time to vote promptly.

 

Sincerely,

 

 

 

William L. Jasper

Chairman and Chief Executive Officer          

 

 

 
 

 

 

 

 

PROVIDING INNOVATIVE FIBERS AND COMPETITIVE SOLUTIONS®

7201 West Friendly Avenue

Greensboro, North Carolina 27410

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON OCTOBER 23, 2013

 

To the Shareholders of Unifi, Inc.

 

Notice is hereby given that the Annual Meeting of Shareholders (the “Annual Meeting”) of Unifi, Inc. (the “Company”) will be held at the Company’s corporate headquarters at 7201 West Friendly Avenue, Greensboro, North Carolina, on Wednesday, October 23, 2013, at 9:00 A.M. Eastern Time, for the following purposes:

 

 

1.

To elect nine (9) directors to serve until the next Annual Meeting of Shareholders or until their respective successors are duly elected and qualified.

 

 

2.

To approve the Unifi, Inc. 2013 Incentive Compensation Plan.

 

 

3.

To approve, on an advisory basis, the compensation of the Company’s named executive officers as described in its 2013 Proxy Statement.

 

 

4.

To ratify the appointment of KPMG LLP as the independent registered public accounting firm for the Company for the fiscal year ending June 29, 2014.

 

 

5.

To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

 

The Board of Directors has fixed the close of business on September 6, 2013, as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. The transfer books of the Company will not be closed.

 

YOUR VOTE IS VERY IMPORTANT. We appreciate your taking the time to vote promptly. The Company’s 2013 Proxy Statement and a proxy solicited by the Board of Directors of the Company accompany this Notice, and the Proxy Statement explains the above items and how you can vote.

 

After reading the Proxy Statement, please vote at your earliest convenience by Internet, or request that a paper copy of the proxy materials be sent to you by mail. If you request the proxy materials by mail, included in those materials will be a proxy card with a telephone number you may call to cast your vote, or you may complete, sign and return the proxy card by mail. In any such case, if you decide to attend the Annual Meeting and wish to vote in person, you may do so by revoking your prior proxy at that time.

 

YOUR SHARES CANNOT BE VOTED UNLESS YOU EITHER (I) VOTE BY INTERNET, (II) REQUEST PROXY MATERIALS BE SENT TO YOU BY MAIL THAT WILL INCLUDE A PROXY CARD WITH A TELEPHONE NUMBER YOU MAY CALL TO CAST YOUR VOTE, OR YOU MAY COMPLETE, SIGN AND RETURN THE PROXY CARD BY MAIL, OR (III) ATTEND THE ANNUAL MEETING AND VOTE IN PERSON.

 

 

By Order Of The Board of Directors,

 

 

 

 

 

 

W. Randy Eaddy

 

Secretary

Greensboro, North Carolina

September 13, 2013

 

 
 

 

 

 

PROVIDING INNOVATIVE FIBERS AND COMPETITIVE SOLUTIONS®

 

7201 West Friendly Avenue

Greensboro, North Carolina 27410

 

PROXY STATEMENT

September 13, 2013

For the Annual Meeting of Shareholders
To be Held on October 23, 2013

 


 

proxy SOLICITATION and general information

 

General Information

 

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Unifi, Inc. (the “Company”) for use at the Annual Meeting of Shareholders to be held on Wednesday, October 23, 2013, at 9:00 A.M. Eastern Time, at the Company’s corporate headquarters located at 7201 West Friendly Avenue, Greensboro, North Carolina, or at any adjournment or postponement thereof (the “Annual Meeting”).

 

In accordance with rules and regulations adopted by the Securities and Exchange Commission (the “SEC”), the Company furnishes its proxy materials on the Internet instead of mailing a paper copy of its proxy materials to each shareholder of record. If you received a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) by mail, you will not receive a paper copy of the proxy materials other than as described in this Proxy Statement. Instead, the Internet Notice will instruct you as to how you may access and review all of the information contained in the proxy materials. The Internet Notice also instructs you as to how you may submit your proxy over the Internet. If you received an Internet Notice by mail and would like to receive a paper copy of our proxy materials or vote by telephone, you should follow the instructions for requesting proxy materials included in the Internet Notice.

 

It is anticipated that the Internet Notice will be sent to shareholders on or about September 13, 2013. The Proxy Statement and the form of proxy relating to the Annual Meeting will be made available to shareholders on the date that the Internet Notice is first sent.

 

Whether or not you received an Internet Notice, if you are a shareholder of record or a beneficial owner of our Common Stock as of the Record Date (defined below), you may request a paper copy of our proxy materials by contacting the Company at 7201 West Friendly Avenue, Greensboro, North Carolina 27410, Attention: Office of the Secretary.

 

Record Date and Shares Eligible to Vote

 

The Company’s common stock (the “Common Stock”), par value $.10 per share, is the only class of stock of the Company, and thus only holders of shares of Common Stock are eligible to vote. Only such shareholders of record as of the close of business on September 6, 2013 (the “Record Date”), will be entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. As of the Record Date, the Company had outstanding 19,537,947 shares of its Common Stock. Each share of the Common Stock entitles the holder to one vote with respect to each matter coming before the Annual Meeting, and all such shares vote as a single class.

 

 
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Voting by Shareholders with Shares Held Directly in Their Names

 

Shareholders with shares registered directly in their names in the Company’s stock records maintained by its transfer agent, American Stock Transfer and Trust Company (“AST”), may vote their shares:

 

 

by submitting a proxy through the Internet at the following web address: www.proxyvote.com and following the instructions provided in the Internet Notice;

 

 

by mailing a signed and dated proxy card in the envelope provided with a paper copy of this Proxy Statement; or

 

 

by making a toll-free telephone call in the U.S. or Canada to 1-800-690-6903.

 

In addition, ballots will be passed out to any shareholder who wants to vote in person at the Annual Meeting.

 

Specific instructions to be followed by registered shareholders are provided at the Internet website and are set forth on the form of proxy card. Proxies submitted by Internet, mail or telephone as described above must be received by 11:59 p.m., Eastern Time, on October 22, 2013. If you vote by Internet or telephone, you do not need to return a proxy card.

 

Voting by Shareholders with Shares Held Through a Bank, Brokerage Firm or Other Nominee

 

Shareholders who hold shares through a bank, brokerage firm or other nominee should refer to the voting instruction form forwarded by their bank or brokerage firm to see which options are available to them. In addition to voting by mail, a number of banks and brokerage firms participate in a program provided through Broadridge Financial Solutions, Inc. (“Broadridge”) that offers telephone and Internet voting options. Votes submitted by telephone or by using the Internet through Broadridge’s program must be received by 11:59 p.m., Eastern Time, on October 22, 2013.

 

In addition, ballots will be passed out to any shareholder who wants to vote in person at the Annual Meeting. Should you decide to attend the Annual Meeting and vote your shares in person, you MUST obtain a legal proxy executed in your favor from your bank, brokerage firm or other nominee for your ballot to be counted.

 

Voting of Proxies

 

All shares represented by valid proxies received pursuant to this solicitation, and not revoked before they are exercised, will be voted in the manner specified therein. If no specification is made with respect to the matter to be acted upon, the shares represented by the proxies will be voted (i) in favor of electing as directors of the Company the nine (9) nominees for director named in this Proxy Statement, (ii) in favor of approving the Unifi, Inc. 2013 Incentive Compensation Plan, (iii) in favor of the advisory vote to approve executive compensation, (iv) in favor of ratification of the appointment of KPMG LLP as the independent registered public accounting firm for the Company for the fiscal year ending June 29, 2014 and (v) in the discretion of the proxy holder on any other matters presented at the Annual Meeting.

 

Revocability of Proxies

 

If your shares are held directly in your name, you may revoke your proxy and change your vote at any time prior to the voting of the proxy at the Annual Meeting. You may do this by (1) sending written notice of revocation to Unifi, Inc., 7201 West Friendly Avenue, Greensboro, North Carolina 27410, Attention: Office of the Secretary, (2) submitting a subsequent proxy by Internet, mail or telephone with a later date or (3) voting in person at the Annual Meeting. Attendance at the Annual Meeting will not by itself revoke a proxy.

 

 
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If your shares are held through a bank, brokerage firm or other nominee, you may revoke your proxy and change your vote at any time prior to the voting of the proxy at the Annual Meeting. You may do this by sending written notice of revocation to your bank, brokerage firm or other nominee. Attendance at the Annual Meeting will not by itself revoke a proxy. Should you decide to attend the Annual Meeting and vote your shares in person, you MUST obtain a legal proxy executed in your favor from your bank, brokerage firm or other nominee for your ballot to be counted.

 

Quorum and Voting Requirements

 

The holders of a majority of the outstanding shares entitled to vote, present in person or represented by proxy at the Annual Meeting, will constitute a quorum for the transaction of business. New York law and the Company’s By-Laws require the presence of a quorum at annual meetings of shareholders. At the Annual Meeting, abstentions and “broker non-votes”, if any, are counted as present for purposes of determining a quorum.

 

Under the rules of the New York Stock Exchange, Inc. (“NYSE”), a bank, broker or other nominee holding the Company’s shares in “street name” for a beneficial owner has discretion (but is not required) to vote the client’s shares with respect to “routine” matters if the client does not provide voting instructions. The broker or other nominee, however, is not permitted to vote the client’s shares with respect to “non-routine” matters without voting instructions. A “broker non-vote” occurs when the broker or other nominee does not vote on a particular proposal because that broker or other nominee does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.

 

The proposal to elect directors, the proposal to approve the Unifi, Inc. 2013 Incentive Compensation Plan, and the advisory vote to approve executive compensation are each considered a non-routine matter under the NYSE rules, which means that your broker or other nominee may not use its discretion to vote your shares held in street name on these matters without your express voting instructions. The proposal to ratify the appointment of the Company’s independent registered public accounting firm is considered a “routine” matter under the NYSE rules, which means that your bank, broker or other nominee will have discretionary authority to vote your shares held in street name on that matter. Accordingly, if you do not instruct your broker or nominee to vote your shares, the broker or other nominee may either: (i) vote your shares on routine matters and cast a “broker non-vote” on non-routine matters or (ii) leave your shares unvoted altogether.

 

Each share represented is entitled to one vote on all matters properly brought before the Annual Meeting. Directors will be elected by a plurality of the votes cast by the shareholders at the Annual Meeting if a quorum is present. Approval of the Unifi, Inc. 2013 Incentive Compensation Plan, approval of the advisory vote on executive compensation, and ratification of the independent registered public accounting firm requires the affirmative vote of a majority of the votes cast by shareholders entitled to vote, present in person or represented by proxy at the Annual Meeting. Therefore, abstentions, shares not voted and broker non-votes, if any, will not be treated as votes cast and will have no effect on these matters.

 

Solicitation Expenses and Related Matters

 

The expense of this solicitation will be borne by the Company. Solicitations of proxies may be made in person, or by mail, telephone or electronic means by directors, officers and regular employees of the Company who will not be specially compensated in such regard. In addition, the Company has retained AST Phoenix Advisors, a division of AST, to assist in the solicitation of proxies and will pay such firm a fee equal to $7,000 plus reimbursement of expenses. Arrangements will be made with brokers, nominees and fiduciaries to send proxies and proxy materials, at the Company’s expense, to their principals.

 

 
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PRINCIPAL HOLDERS OF COMMON STOCK

 

The following table sets forth information, as of September 3, 2013, with respect to each person known or believed by the Company to be the beneficial owner of more than five percent (5%) of the Common Stock, which is the Company’s only class of voting security. The nature of beneficial ownership of the shares indicated is set forth in the notes following the table. Unless otherwise indicated in the notes, the respective holders below have sole voting and sole investment power over the shares.

 

Name and Address of Beneficial Owner

 

Amount and Nature of

Beneficial Ownership(1)

   

Percent of
Class

 

Dimensional Fund Advisors LP(2)

Palisades West, Building One

6300 Bee Cave Road

Austin, Texas 78746

    1,662,768       8.52 %

Royce & Associates, LLC(3)
745 Fifth Avenue
New York, NY 10151

    1,360,234       6.97 %

Impala Asset Management LLC(4)

134 Main Street

New Canaan, CT 06840

    1,351,577       6.93 %

Pinnacle Associates Ltd.(5)
335 Madison Avenue, 11th Floor
New York, NY 10017

    1,188,485       6.09 %

Dillon Yarn Corporation(6)

53 East 34th Street

Paterson, NJ 07514

    1,141,104       5.85 %

Kenneth G. Langone(7)

375 Park Avenue, Suite 2205

New York, NY 10152

    1,061,666       5.44 %

 


 

(1)

“Beneficial Ownership,” for purposes of the table, is determined according to the meaning of applicable securities regulations and based on a review of reports filed with the SEC pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

 

(2)

As indicated in its Schedule 13G/A, filed with the SEC on February 11, 2013, Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, may be deemed to beneficially own 1,662,768 shares by virtue of having sole voting and investment power over such shares.

 

 

(3)

As indicated in its Schedule 13G/A, filed with the SEC on January 24, 2013, Royce & Associates, LLC, an investment advisor registered under Section 203 of the Investment Advisers Act of 1940, may be deemed to beneficially own 1,360,234 shares by virtue of having sole voting and investment power over such shares.

 

 

(4)

As indicated in its Schedule 13G, filed with the SEC on February 13, 2013, Impala Asset Management LLC (“Impala”), an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, may be deemed to beneficially own 1,548,077 shares by virtue of having sole voting and investment power over such shares. In May 2013 the Company repurchased 196,500 shares of Common Stock from Impala under the Company’s share repurchase program, and accordingly the number of shares listed in the table above is reduced by such amount.

 

 

(5)

As indicated in its Schedule 13G/A, filed with the SEC on February 13, 2013, Pinnacle Associates Ltd., an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, may be deemed to beneficially own 1,188,485 shares by virtue of having sole voting and investment power over such shares.

 

 
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(6)

As indicated in its Schedule 13D/A, filed with the SEC on April 1, 2013, Dillon beneficially owned 1,141,104 shares by virtue of having sole voting and investment power over such shares. Mitchel Weinberger, a director of the Company, is President and Chief Operating Officer of Dillon and may be deemed to have shared voting and investment power of these shares. Mr. Weinberger disclaims beneficial ownership of these shares.

 

 

(7)

Mr. Langone’s beneficial ownership includes 100,000 shares owned by Invemed Associates, LLC, in which Mr. Langone owns an 81% interest, and of which Mr. Langone has shared voting and investment power and 5,000 shares owned by Mr. Langone’s wife, as to which he has shared voting and investment power, and of which Mr. Langone disclaims beneficial ownership. Also includes 12,779 shares that Mr. Langone has the right to receive pursuant to restricted stock units that will automatically convert into shares of Common Stock following termination of services as director; 3,333 shares that Mr. Langone would have the right to purchase pursuant to stock options that could become exercisable within 60 days of September 3, 2013, provided that the closing price of the Company’s Common Stock shall be at least $24.00 per share for 30 consecutive trading days, and 3,333 shares that Mr. Langone would have the right to purchase pursuant to stock options that could become exercisable within 60 days of September 3, 2013, provided that the closing price of the Company’s Common Stock shall be at least $30.00 per share for 30 consecutive trading days.

 

 
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PROPOSAL 1:

 

ELECTION OF DIRECTORS

 

General Information

 

The Board is presently comprised of nine (9) members. All the nominees for election are presently serving as directors and have consented to be named in this Proxy Statement and to serve, if elected. Although the Board expects that each of the nominees will be available for election, in the event a vacancy in the slate of nominees is occasioned by death or other unexpected occurrence, it is intended that shares represented by proxies in the accompanying form will be voted for the election of a substitute nominee selected by the person or persons named in the proxy.

 

Set forth below is the name of each of the nine (9) nominees for election to the Board, together with the nominee’s age, current principal occupation (which has continued for at least the past five years unless otherwise indicated), the name and principal business of the company by which he or she is employed, if applicable, the period or periods during which he or she has served as director, all positions and offices that he or she holds with the Company, his or her directorships in other companies with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or companies registered as an investment company under the Investment Company Act of 1940, and the specific experience, qualifications, attributes or skills that led to the conclusion that such person should serve as a director of the Company.

 

No director (and thus no nominee for director) has a family relationship as close as first cousin with any other director or nominee or executive officer of the Company.

 

Nominees For Election As Directors

 

WILLIAM J. ARMFIELD, IV (78) — Mr. Armfield has been the President of Spotswood Capital, LLC, Greensboro, North Carolina, a private investment company, since 1995. Mr. Armfield was a director and President of Macfield, Inc., a textile company in North Carolina, from 1970 until August 1991, when Macfield, Inc. merged with and into the Company. Mr. Armfield was the Vice Chairman and a director of the Company from 1991 to December 1995. Mr. Armfield again became a director of the Company in 2001, and has continued as a director since that time. He is a member of the Board’s Audit Committee and Compensation Committee, and is an audit committee financial expert.

 

Mr. Armfield brings operating and management experience, expertise in finance, and business development experience to the Company as a result of his professional experiences. In addition, through his experience at Macfield, he brings direct textile experience to the Board. These experiences provide the Board with, among other things, expertise and context important to the oversight of the Company’s financial reporting and business strategy implementation.

 

R. ROGER BERRIER, JR. (44) — Mr. Berrier has been the President and Chief Operating Officer of the Company since February 2011. He had been the Executive Vice President of Sales, Marketing and Asian Operations of the Company from September 2007 to February 2011. Prior to September 2007, he had been the Vice President of Commercial Operations from April 2006 and the Commercial Operations Manager responsible for corporate product development, marketing and brand sales management from April 2004 to April 2006. Mr. Berrier joined the Company in 1991 and has held various management positions within operations, including international operations, machinery technology, research & development and quality control. He has been a director since September 2007 and is a member of the Board’s Executive Committee.

 

Mr. Berrier brings executive decision making skills, operating and management experience, expertise in sales, marketing and branding, business development and direct textile industry business acumen to the Company as a result of his professional experiences. These experiences and Mr. Berrier’s on-going interaction with the Company’s customers and suppliers provide the Board with, among other things, industry expertise important to the Company’s businesses, as well as a detailed understanding of the Company’s business and operations and the economic environment in which it operates.

 

 
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ARCHIBALD COX, JR. (73) — Mr. Cox has been the Chairman of Sextant Group, Inc., a financial advisory and private equity firm, since 1993. Mr. Cox is the former Chairman of Barclays Americas, a position he held from May 2008 until June 2011. Mr. Cox was a director of Hutchinson Technology Incorporated from May 1996 to September 2009, was the Chairman of Magnequench, Inc., a manufacturer of magnetic material, from September 2005 to September 2006 and was the President and Chief Executive Officer of Magnequench, Inc., from October 1995 to August 2005. He was Chairman of Neo Material Technologies Inc., a manufacturer of rare earth, zirconium and magnetic materials, from September 2005 to September 2006. Mr. Cox has been a director of the Company since February 2008 and is a member of the Board’s Compensation Committee and Corporate Governance and Nominating Committee (Chair).

 

Mr. Cox brings executive decision making skills, operating and management experience, expertise in finance, investment and business development experience to the Company as a result of his professional experiences. In addition, through his experience as Chairman of Barclays Americas in particular, Mr. Cox brings to the Board considerable experience with financial and strategic planning matters critical to the oversight of the Company’s financial reporting, compensation practices and business strategy implementation.

 

WILLIAM L. JASPER (60) — Mr. Jasper has been the Company’s Chairman of the Board since February 2011 and Chief Executive Officer since September 2007. Mr. Jasper joined the Company in September 2004, was later appointed as the General Manager of the Polyester Division, and in April 2006 was promoted to Vice President of Sales. From September 2007 to February 2011, he was also President of the Company. Prior to joining the Company, he was the Director of INVISTA’s Dacron® polyester filament business. Before working at INVISTA, Mr. Jasper had held various management positions in operations, technology, sales and business for E.I. du Pont de Nemours and Co. since 1980. He has been a director since September 2007 and is a member of the Board’s Executive Committee (Chair).

 

Mr. Jasper brings executive decision making skills, operating and management experience, expertise in manufacturing operations, sales, business and consumer brand development and direct textile industry business acumen to the Company as a result of his professional experiences. These experiences and Mr. Jasper’s on-going leadership of the Company and interaction with the Company’s customers and suppliers provide the Board with, among other things, a detailed understanding of the Company’s businesses and the competitive environment in which it operates.

 

KENNETH G. LANGONE (77) — Mr. Langone has been the President and Chief Executive Officer of Invemed Associates, LLC, an investment banking firm, New York, New York, since 1974, and a director and Executive Chairman and Chief Executive Officer of Geeknet, Inc. since 2011. Mr. Langone was a co-founder of The Home Depot, Inc. and served as a director from 1978 to 2008. He also served as a director of ChoicePoint, Inc. from 2002 to 2008 and of General Electric Co. from 1999 to 2005. Mr. Langone has been a director of the Company since 1969, and is a member of the Board’s Corporate Governance and Nominating Committee.

 

Mr. Langone brings operating and management experience, including as chief executive officer of a financial services business, expertise in finance, and public company directorship and committee experience to the Company as a result of his professional experiences. In addition, Mr. Langone’s service on the Board since 1969 provides the Board with a valuable historical perspective through which it can contextualize and direct the Company’s performance and strategic planning.

 

GEORGE R. PERKINS, JR. (73) — Mr. Perkins is the retired Chairman of the Board and the former Chief Executive Officer of Frontier Spinning Mills, Inc., a company that he founded in 1996 and in which he served in these roles until 2009. Prior to founding Frontier, Mr. Perkins served from 1993 to 1996 as President of the spun yarns division of the Company and was a member of the Board. Mr. Perkins has served as a director of First BanCorp since 2006. He has been a director of the Company since August 2007, and is a member of the Board’s Corporate Governance and Nominating Committee.

 

 
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Mr. Perkins brings executive decision making skills, operating and management experience, and business development acumen to the Company as a result of his professional experiences. In addition, his deep understanding of the cotton business assists the Board in analyzing the Company’s businesses. These experiences provide the Board with, among other things, specific industry expertise important for an understanding of the Company’s businesses and operations.

 

SUZANNE M. PRESENT (54) – Ms. Present is a co-founder and has been a principal of Gladwyne Partners, LLC, a private partnership fund manager, since June 1998. Ms. Present currently serves on the board of directors of Anshe Chung Studios, Limited, a privately held Chinese-based developer of content for virtual worlds. She served on the board of directors of Geeknet, Inc. from September 2008 to July 2010 and on the board of directors of The Electric Sheep Company, Inc., a privately held developer of content and technologies for virtual worlds, from July 2006 to June 2012. She has been a director of the Company since February 2011. Ms. Present is a member of the Board’s Audit Committee (Chair), and is an audit committee financial expert.

 

Through her experiences at Gladwyne Partners and service on various boards of directors, Ms. Present brings extensive financial expertise important to the oversight of the Company’s audit functions and analysis of business strategies.

 

G. ALFRED WEBSTER (65) — Mr. Webster was an Executive Vice President of the Company (from 1986), and had held other officer positions with the Company (from 1979), through his retirement in 2003, and had been a director of the Company (from 1986) until October 2004. Mr. Webster again became a director of the Company in August 2007, has served as the independent “Lead Director” of the Board since April 2011, and is a member of the Board’s Audit Committee, Compensation Committee (Chair) and Executive Committee. Mr. Webster is a director and Chairman of the Compensation Committee of New Bridge Bank Corporation (formerly Lexington State Bank).

 

Mr. Webster brings executive decision making skills, operating and management experience, financial expertise and public company directorship and committee experience, as well as direct textile industry business acumen, to the Company as a result of his professional experiences. In addition, Mr. Webster’s prior tenure with the Company provides the Board with a valuable historical perspective on the Company. These experiences provide the Board with, among other things, industry expertise relevant to the oversight of the Company’s businesses.

 

MITCHEL WEINBERGER (44) — Mr. Weinberger has served as the President and Chief Operating Officer of Dillon Yarn Corporation since March 2011. He was the Executive Vice President of Dillon from January 2007 to March 2011 and its Strategic Marketing Manager from 1992 to November 2007. (The polyester and nylon texturing operations of Dillon were purchased by the Company on January 1, 2007, as discussed in more detail below under “Transactions with Related Persons, Promoters and Certain Control Persons—Transactions with Dillon Yarn Corporation”.) Mr. Weinberger has been a director of the Company since March 2011 and is a member of the Board’s Executive Committee.

 

Through his executive leadership experience at Dillon, Mr. Weinberger brings to the Board a solid understanding of the textile industry in which the Company operates as well as operating and management experience. These experiences provide the Board with, among other things, industry expertise important to the oversight of the Company’s management and execution of its business plans.

 

The Board recommends that the shareholders vote “FOR” the election of all of the nominees as directors.

 

 
8

 

 

COMPENSATION DISCUSSION AND ANALYSIS 

 

This Compensation Discussion and Analysis provides an overview of the Company’s executive compensation program, including:

 

 

the process the Compensation Committee used to determine compensation and benefits for our NEOs (as defined below) for fiscal year 2013;

 

 

the material elements of the Company’s executive compensation program;

 

 

the key principles and objectives, including the Company’s focus on pay for performance, that guide the Company’s executive compensation program; and

 

 

information about the fiscal year 2013 compensation earned by each of our NEOs listed below:

 

William L. Jasper

Chairman and Chief Executive Officer

R. Roger Berrier, Jr.

President and Chief Operating Officer

Thomas H. Caudle, Jr.

Vice President, Manufacturing

Ronald L. Smith

Former Vice President and Chief Financial Officer

Charles F. McCoy

Former Vice President, General Counsel and Secretary

 

Our Named Executive Officers

 

We refer to the five executive officers listed above, for whom information is provided in the Summary Compensation Table under “Executive Compensation,” as the “NEOs.” The Company had no other executive officers during fiscal year 2013. Mr. McCoy was an executive officer of the Company until May 13, 2013, and he subsequently separated from employment with the Company on July 31, 2013. Mr. Smith was an executive officer of the Company until his separation of employment with the Company on August 12, 2013. Under applicable SEC rules, Messrs. McCoy and Smith are treated as NEOs in this Proxy Statement. James M. Otterberg, who was appointed as interim Chief Financial Officer on August 12, 2013, served as the Company’s chief accounting officer, but did not serve as an executive officer of the Company, during fiscal year 2013; and accordingly is not an NEO for purposes of this Proxy Statement.

 

Executive Summary

 

The Company experienced an improving trend in its financial results during fiscal year 2013 despite an otherwise challenging business environment. The Company experienced continuing improvement in its underlying business, and maintained its focus on its core strategies. The Company achieved an adjusted EBITDA (as described below) above the target level set for fiscal year 2013. The Company also reported net income for fiscal year 2013 of $16.6 million, or $0.84 per basic share, an increase from $11.5 million, or $0.57 per basic share, for fiscal year 2012.

 

The Company’s ability to perform under adverse business conditions was due, in large part, to the leadership and performance of its executive team. In addition to guiding the Company through the continuing challenges of the economic environment in fiscal year 2013, the executive team also successfully completed the Company’s multi-year deleveraging strategy, including the prepayment of the Company’s Term B Loan. The deleveraging strategy has substantially lowered the Company’s debt levels and its annual interest expense.

 

As described in greater detail below, the Company believes its executive compensation program should attract top executive talent, pay for performance and link executive retention to long-term shareholder value. Accordingly, our NEOs were compensated as follows for fiscal year 2013:

 

 

Base salaries for fiscal year 2013 remained unchanged from base salaries for fiscal year 2012.

 

 

The NEOs received cash bonus payments for fiscal year 2013 performance at the amount payable under the annual incentive plan, which was established at the beginning of the fiscal year, due to the level of the Company’s achievement of the fiscal year 2013 adjusted EBITDA target, as described below.

 

 

Long-term incentives were granted in July 2013 (at half of the levels granted in fiscal year 2012), in the form of 3-year installment vesting stock options and restricted stock units, to promote executive retention and further align executive pay with long-term shareholder value.

 

9

 

Compensation Philosophy, Principles and Policies

 

The Company’s executive compensation philosophy is to:

 

Attract Top Executive Talent

 

Follow a Pay for Performance Compensation Model

 

Link Retention to Long-Term Shareholder Value

The Company’s compensation program should attract high-quality executives who possess the skills and talent necessary to support and achieve our strategic objectives.

 

Executives should be rewarded for their achievement of near-term and long-term performance goals.

 

The Company seeks to minimize executive turnover by utilizing retention arrangements that further link executive compensation to sustained shareholder value and consistent Company performance.

 

Therefore, the focus of the Company’s executive compensation program and the Compensation Committee is to ensure that an appropriate relationship exists between executive pay and the creation of shareholder value, while at the same time enabling the Company to attract, retain, reward and motivate high caliber employees. The Compensation Committee monitors the results of its executive compensation policy to ensure that compensation payable to executive officers creates proper incentives to enhance shareholder value, rewards superior performance, is justified by returns available to shareholders, and discourages employees from taking unnecessary or excessive risks that could ultimately threaten the value of the Company.

 

In establishing compensation for the NEOs, the following principles and policies guide the Company’s executive compensation decisions:

 

 

All components of executive compensation should be set so that the Company can continue to attract, retain, reward and motivate talented and experienced executives;

 

 

Ensure alignment of executive compensation with the Company’s corporate strategies, business objectives and the long-term interests of the shareholders;

 

 

Increase the incentive to achieve key strategic and financial performance measures by linking incentive award opportunities to the achievement of performance goals in those areas; and

 

 

Enhance the NEOs’ incentive to increase the Company’s long-term value, as well as promote retention of key personnel, by providing a portion of total compensation opportunities in the form of direct ownership in the Company through stock ownership.

 

The Compensation Committee reviews and approves all components of the NEOs’ compensation. The Compensation Committee also monitors the compensation levels in general for all other senior level employees of the Company. In addition, the Compensation Committee has the discretion to hire compensation and benefits consultants to assist in developing and reviewing overall executive compensation strategies.

 

 
10

 

 

Overview of Compensation Components

 

The Compensation Committee views executive compensation in four component parts:

 

A brief description of each of these components is provided below, together with a summary of its objectives:

 

Compensation Element

 

Description

 

Objectives

         

Base Salary

 

Fixed compensation that is reviewed annually based on performance.

 

●      Provide a base level of compensation that fairly accounts for the job and scope of the role being performed.

         
       

●      Attract, retain, reward and motivate qualified and experienced executives.

         

Annual Incentives

 

“At-risk” variable compensation earned based on performance measured against pre-established annual goals.

 

●      Provide incentives for achieving annual operating goals that ultimately contribute to long-term return to shareholders.

         

Long-Term Incentives

 

“At-risk” variable compensation in the form of equity awards whose value fluctuates according to shareholder value and which vest based on continued service.

 

●     Align the economic interests of the executives with the shareholders by rewarding executives for stock price improvement.

 

         
   

Supplemental retirement contributions based on executives’ respective base salaries that executives may earn over time contingent on continued service.

 

●     Promote retention (through time-based and performance vesting schedules).

         

Other Personal Benefits

 

Broad-based benefits provided to all the Company’s employees (e.g., health and group term life insurance), a retirement savings plan, and certain perquisites.

 

●     Provide a competitive total compensation package to attract and retain key executives.

 

 
11

 

 

Compensation Mix

 

Consistent with the philosophy, objectives and principles of the executive compensation program, the program places a substantial amount of the total executive compensation “at-risk” based on the performance of the Company and the executive through the annual cash incentive program and equity-based long-term incentive awards, the latter pursuant to the 2008 Unifi, Inc. Long-Term Incentive Plan (the “2008 LTIP”).

 

The following charts illustrate the mix of “at risk” compensation for the CEO and the other NEOs for fiscal year 2013 by illustrating the mix of target total direct compensation, using fiscal year 2013 base salaries, target annual cash incentives and the grant-date fair value of long-term equity awards:

 

CEO

All Other NEOs

 

 

 

 

 

 

 

As demonstrated above, we target a substantial portion of our CEO’s and other NEOs’ compensation to come in the form of annual and long-term incentives, which encourage our executives to achieve near-term and long-term performance goals designed to create shareholder value. Moreover, our long-term incentive programs provide retention incentives designed to promote stability among the Company’s executive team. We also provide our executives a fixed base salary, which provides them with a base-level of economic security.

 

Control by the Compensation Committee

 

The Compensation Committee reviews and approves corporate goals and objectives relevant to the compensation of each NEO, evaluates each NEO’s performance in light of these goals and objectives (with input from the Company’s CEO for NEOs other than the CEO), and sets each NEO’s compensation level based on this evaluation and consultation. The Compensation Committee also advises senior management with respect to the range of compensation to be paid to other employees of the Company, administers and makes recommendations to the Board concerning benefit plans for the Company’s directors, officers and employees and recommends benefit programs and future objectives and goals for the Company.

 

In connection with setting executive compensation for fiscal year 2012, the Compensation Committee reviewed a report prepared by Towers Watson in March 2011 to assist it in determining the market for executive compensation. The Compensation Committee also utilized information from the Towers Watson report in making its determination to set fiscal year 2013 compensation for the NEOs at the same level as fiscal year 2012. The Towers Watson report contains a broad-based survey compiled from information from a number of companies. While the Compensation Committee believes the information in the Towers Watson report was valuable, it did not use the report or any other report as a benchmark to set executive compensation for either fiscal year. At the time that Towers Watson prepared its report for the Compensation Committee, Towers Watson performed no other services for the Company, and its work for the Compensation Committee did not raise any conflict of interests. Since that time, the Company has used other services of Towers Watson, and the Compensation Committee no longer uses Towers Watson to assist it.

 

During fiscal year 2013, the Compensation Committee engaged Frederick W. Cook & Co., Inc. (“Cook & Co.”) as an independent advisor to assist the Compensation Committee with developing a peer group for compensation comparison purposes and to prepare a competitive market assessment of total compensation for the NEOs. However, the Compensation Committee had set fiscal year 2013 compensation prior to the engagement of Cook & Co., and did not consider any advice or information from Cook & Co. in setting executive compensation for fiscal year 2013. Cook & Co. performs no other services for the Company, and its work for the Compensation Committee has not raised any conflict of interests.

 

 
12

 

 

The Compensation Committee does not believe it is appropriate to tie executive compensation directly to the compensation awarded by other companies or to a particular survey or group of surveys. Instead, the purpose of the comparison reports obtained by the Compensation Committee from Towers Watson and Cook & Co. is to provide a general understanding of current compensation practices and trends of similarly situated companies. The Compensation Committee uses these reports as tools to compare the overall compensation of its own executives to the executives of other companies in similar sectors. No specific compensation decision for any individual was based on or justified by any market comparison reports or information.

 

As in the past, the Compensation Committee continued to consider a wide range of factors in making its fiscal year 2013 compensation decisions for our NEOs, including the historical practices of the Company, the individual NEO’s leadership and role in advancement of the Company’s long-term strategy, plans and objectives, the individual’s performance and contribution to the Company’s success, budget guidelines established by the Board and assessment of the Company’s financial condition. Additionally, the Compensation Committee considered the Company’s operating results and adjusted EBITDA and the current economic climate. Based on this information and these factors, the Compensation Committee set executive compensation for fiscal year 2013.

 

Detailed Review of Compensation Components

 

Base Salaries

 

As described above, the Compensation Committee reviewed market information concerning general executive compensation practices along with other factors it has historically reviewed when setting the NEOs’ base salaries for fiscal year 2013. These other factors included:

 

 

The executive’s leadership and advancement of the Company’s long-term strategy, plans and objectives;

 

 

The executive’s individual performance and contribution to the Company’s success and budget guidelines; and

 

 

An assessment of the Company’s financial condition.

 

The Compensation Committee believes in maintaining a close relationship between the Company’s performance and the base salary component of the compensation for each NEO. As in prior years, no formula-based or other salary increases were provided to the NEOs during fiscal year 2013.

 

In addition to reviewing the above factors, the Compensation Committee also believes that strong and effective communication with management helps the Company adhere to its compensation philosophy, objectives and principles. Therefore, the Compensation Committee consults with the CEO at least on an annual basis and reviews his recommendations regarding the compensation of all NEOs (other than the CEO) before making its final compensation decisions. Periodically, the CEO meets with the other NEOs regarding their performance. The Compensation Committee reviews the overall performance of each NEO annually, and then approves the actual base salary for each NEO.

 

Upon completing this process, the Compensation Committee determined to maintain each NEO’s base salary for fiscal year 2013.

 

NEO

 

Fiscal Year 2012 Base Salary

($)

 

Fiscal Year 2013 Base Salary

($)

 

Percentage

Increase

William L. Jasper

 

687,000

 

687,000

 

R. Roger Berrier, Jr.

 

462,000

 

462,000

 

Thomas H. Caudle, Jr.

 

317,000

 

317,000

 

Ronald L. Smith

 

356,000

 

356,000

 

Charles F. McCoy

 

317,000

 

317,000

 

 

 
13

 

 

Although the Company achieved a strong upward trend in the second half of fiscal year 2012, and the NEOs performed at or above the Company’s expectations, the Compensation Committee determined to leave the NEOs’ fiscal year 2013 salaries unchanged from fiscal year 2012 to reflect continuing uncertainty in the business environment in which the Company operates.

 

Annual Incentive Compensation

 

To encourage executives to achieve near-term performance goals, the Company has established an annual incentive compensation program in the form of a cash bonus. All NEOs are eligible to earn annual bonuses based on the Company’s fiscal year performance.

 

For fiscal year 2013, the Compensation Committee established a performance target of $49.1 million of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), adjusted to exclude certain items such as non-cash compensation expense net of distributions, gains and losses on sales or disposals of property, loss on previously held equity interest, operating expenses of Repreve Renewables, LLC, restructuring charges and startup costs, gains or losses on sales or disposals of property, plant and equipment, currency and derivative gains or losses, certain employee healthcare expenses, and other operating or non-operating income or expenses items (“adjusted EBITDA”). The Compensation Committee uses adjusted EBITDA as a measure for annual incentive compensation purposes because the Compensation Committee believes adjusted EBITDA provides a clear indicator of cash generation, which is a key performance indicator used by the Board and management to assess the Company’s operating results generally. The Compensation Committee also believes that a Company-wide performance metric, such as adjusted EBITDA, is appropriate for each NEO because each NEO plays a vital role in the overall success of the Company. Therefore, the Compensation Committee believes that the annual variable compensation received by the NEOs should reflect the Company’s near-term performance.

 

The annual incentive bonus awarded to NEOs may be increased or decreased by the Compensation Committee as a result of the individual’s performance and/or contribution to the Company’s achievement of its financial objectives. Each NEO’s performance, including the CEO’s, is evaluated against specific financial goals prior to payment of bonuses, and the final bonus payment may be adjusted relative to the achievement of those goals. The performance criteria in the annual incentive bonus program may be adjusted by either the Compensation Committee or the Board to account for unusual events, such as extraordinary transactions, asset dispositions and purchases, and merger and acquisitions if, and to the extent, either the Compensation Committee or the Board considers the effect of such events indicative of the Company’s performance. Additionally, the Compensation Committee or the Board has the discretion to award additional bonus compensation even if an executive officer would not be entitled to any bonus based on the targets previously determined.

 

For fiscal year 2013, the Compensation Committee set the threshold, target and maximum performance levels and corresponding potential annual incentive payments to the NEOs as set forth in the table below. An NEO would receive a maximum bonus equal to 150% of his base salary if the Company achieved 120% of the adjusted EBITDA target, or a threshold bonus equal to 37.5% of his base salary if the Company achieved 80% of its adjusted EBITDA target. The calculation of each NEO’s annual incentive bonus in the event of adjusted EBITDA results between these levels is made on a sliding scale on a pro rata basis between the two level amounts. The NEO would not be entitled to a bonus if the Company achieved less than 80% of its adjusted EBITDA target.

 

   

Annual Incentives for Fiscal Year 2013

NEO

 

Threshold:

$39.2 million adjusted EBITDA

($)(1)

 

Target:

$49.1 million adjusted EBITDA

($)(2)

 

Maximum:

$58.9 million adjusted EBITDA

($)(3)

William L. Jasper

 

257,625

 

515,250

 

1,030,500

R. Roger Berrier, Jr.

 

173,250

 

346,500

 

693,000

Thomas H. Caudle, Jr.

 

118,875

 

237,750

 

475,500

Ronald L. Smith

 

133,500

 

267,000

 

534,000

Charles F. McCoy

 

118,875

 

237,750

 

475,500

 

(1)     Amounts represent 37.5% of base salary.

(2)     Amounts represent 75% of base salary.

(3)     Amounts represent 150% of base salary.

 

 
14

 

 

As a result of the Company’s performance during fiscal year 2013, the Company achieved approximately 112% of its adjusted EBITDA target, and thus all NEOs were entitled to annual incentive bonus compensation equal to approximately 119% of their respective fiscal year 2013 base salaries. No amount of discretionary additional cash bonus was paid to any NEO for fiscal year 2013.

 

Long-Term Incentive Compensation

 

The Compensation Committee believes that stock-based performance compensation is essential to align the interests of management and the shareholders in enhancing the long-term value of the Company’s equity and to encourage executives to retain their employment with the Company. Consistent with these beliefs, the Compensation Committee awarded NEOs stock options and restricted stock units in fiscal year 2013, which have the attributes set forth below.

 

   

Stock Options

 

Restricted Stock Units

Align NEO and shareholder interests

 

●     Each option entitles recipient to purchase a share of Common Stock (at an exercise price equal to at least the stock price on the date of grant)

 

●     Upon vesting, each restricted stock units entitles recipient to one share of Common Stock

   

●     Only have value if price of a share of Common Stock exceeds option exercise price

 

●      Value of restricted stock units tied one-for-one to value of Common Stock

         

Promote NEO retention

 

●      Vest in equal installments over three years contingent upon continued service

 

●      Vest in equal installments over three years contingent upon continued service

   

●      Subject to accelerated vesting upon change in control, termination due to death or disability and approved retirement.

 

●      Accelerated vesting upon change in control, termination due to death or disability and approved retirement.

 

In fiscal year 2013, the Compensation Committee awarded the NEOs the number of stock options and restricted stock units listed in the table below. These amounts were half of the amounts granted in fiscal year 2012. When determining the number of stock options and restricted stock units to award each NEO, the Compensation Committee considered the difference between the base salary and bonus actually paid for fiscal year 2012 and the total compensation that the Compensation Committee sought to award to the NEO based on the Company’s performance in fiscal year 2012. The options are exercisable at a price of $11.23 per share, a third of which options vested July 25, 2013 and the remaining of which vest in equal installments at each of July 25, 2014 and July 25, 2015. A portion of the stock options granted to the NEOs are “incentive stock options” that, in general, offer the NEO the opportunity to receive favorable treatment if they retain the shares acquired upon exercise for one year. The restricted stock units vest in three equal installments at each of August 25, 2013, July 25, 2014 and July 25, 2015. For additional information on the stock options and restricted stock units granted in fiscal year 2013, see “Grants of Plan-Based Awards” below.

 

   

Fiscal Year 2013 Grants

NEO

 

Stock Options
(#)

 

Restricted Stock Units (#)

William L. Jasper

 

22,500

 

11,250

R. Roger Berrier, Jr.

 

17,500

 

8,750

Thomas H. Caudle, Jr.

 

3,000

 

1,500

Ronald L. Smith

 

12,500

 

6,250

Charles F. McCoy

 

8,000

 

4,000

 

Perquisites and Other Benefits

 

Perquisites. Starting in fiscal year 2012, the Compensation Committee determined that executives, including the NEOs, should receive only limited perquisites. Therefore, the Company has discontinued its practice of providing its NEOs with car allowances, reimbursements for car expenses and payment of country club dues.

 

Retirement Benefits. In order to provide employees at all levels with greater incentives, the Company makes available to all employees, including the NEOs, the opportunity to make contributions to the Company’s Retirement Savings Plan (“401(k) Plan”), under which employees may elect to defer up to 75% of their total compensation, not to exceed the amount allowed by applicable Internal Revenue Service regulations. Pursuant to the 401(k) Plan, in fiscal year 

 

15

 

2013 the Company matched contributions equal to 100% of the employee’s first 3% of compensation contributed to the 401(k) Plan and 50% of the next 2% of compensation contributed to the 401(k) Plan. 

 

Health Plan, Life Insurance and Other Benefits. The Company makes available health and insurance benefits to all employees, including the NEOs. The cost of the health plans is covered partially through employees’ payroll deductions, with the remainder covered by the Company. Disability and life insurance benefits are paid by the Company for all salaried employees; however, the NEOs receive additional life insurance coverage provided by the Company.

 

Supplemental Key Employee Retirement Plan. As an additional means of attracting top executive talent and encouraging executives to remain employed with the Company, the Company maintains the Unifi, Inc. Supplemental Key Employee Retirement Plan (the “SERP”). Participation in the SERP is limited to a select group of management employees that are selected by the Compensation Committee and includes each of our NEOs. As described in greater detail preceeding the Nonqualified Deferred Compensation table set forth elsewhere in this Proxy Statement, the SERP provides additional retirement benefits payable to our NEOs following their termination of employment.

 

Change in Control Agreements. The Company has historically provided its NEOs with severance benefits if their employment is involuntarily terminated after a change in control of the Company. Providing such “double-trigger” change in control benefits assists us in attracting and retaining executive talent and reduces the personal uncertainty that executives may feel when considering a corporate transaction. As a result, our NEOs are more likely to retain their employment with the Company and complete such a corporate transaction, thereby increasing the likelihood of enhancing long-term shareholder value.

 

The terms of the individual agreements, and a calculation of the estimated severance payments payable to each NEO under their respective arrangements, are set forth elsewhere in this Proxy Statement under “Executive Compensation – Potential Payments Upon Termination of Employment or Change in Control.”

 

Executive Officer Compensation Recoupment Policy

 

Effective at the beginning of fiscal year 2012, based on the Compensation Committee’s recommendation and authorization, the Company adopted a policy addressing the potential recovery of incentive compensation in the event of a material restatement of the Company’s financial results. This policy, also known as a “clawback” policy, applies to all of the Company’s executive officers.

 

Under the policy, the Company may recover any incentive compensation paid to a current or former executive officer of the Company as a result of material noncompliance with financial reporting requirements that results in a restatement of the Company’s financial results, to the extent that such compensation is attributable to the erroneous financial data and is in excess of what would have been paid under the accounting restatement. In addition, if the Board determines that any current or former employee has engaged in fraud or certain other specified misconduct, the Board may require reimbursement of all compensation granted, earned or paid under annual incentive and long-term incentive cash plans, cancellation of outstanding equity awards and reimbursement of any gains realized on the exercise, settlement or sale of equity awards. The recovery period pursuant to the policy is up to three years preceding the date on which the Company is required to prepare the accounting restatement.

 

Tax Impact on Compensation

 

The Compensation Committee has considered the impact of Section 162(m) of the Internal Revenue Code (the “Code”) on the Company’s executive compensation program. Code Section 162(m) denies a public company a deduction, except in limited circumstances, for compensation paid to “covered employees” – which includes the NEOs, other than the Company’s Chief Financial Officer – to the extent such compensation exceeds $1,000,000. Based on its review of the likely impact of Code Section 162(m) and other factors, the Compensation Committee recommended that Board replace the 2008 LTIP with the Unifi 2013 Incentive Compensation Plan that is being proposed for approval by the shareholders at the Annual Meeting. See “Proposal 2: Approval of the Unifi, Inc. 2013 Incentive Compensation Plan” set forth elsewhere in this Proxy Statement.

 

16

 

Risk Analysis of Compensation Policies and Practices

 

While the Company’s compensation policies and practices are designed to motivate its employees and encourage performance that improves the Company’s financial and other operating results, the Company and the Compensation Committee also seek to design and implement compensation programs and practices that discourage employees from taking unnecessary or excessive risks that could ultimately threaten the value of the Company or otherwise have a material adverse effect on the Company. Management and the Compensation Committee periodically review and assess potential risks associated with the Company’s compensation programs and practices. Management and the Compensation Committee believe that the Company’s incentive compensation programs and practices are appropriately balanced between value created indirectly by the performance of the Company’s stock and payments resulting from the achievement of specific financial performance objectives, so as to minimize the likelihood of unnecessary or excessive risk taking by Company employees. Management and the Compensation Committee have concluded that any risks from such programs and practices are not reasonably likely to have a material adverse effect on the Company. The Compensation Committee reached its conclusion after considering a number of features of the Company’s compensation structure that are designed to mitigate risk, such as:

 

 

The Company uses a balance of fixed and variable compensation in the form of cash and equity, which is designed to provide both near and long-term focus.

 

 

The overall compensation of our NEOs is not overly-weighted towards the achievement of performance criteria in a particular fiscal year, and an appropriate portion of compensation is awarded in the form of equity awards that vest over a multi-year period, subject to continued service by the recipient. This further aligns the interests of the NEOs to long-term shareholder value and helps retain management.

 

 

Payouts under the Company’s annual incentive compensation and other long-term incentive programs are based on performance criteria that the Compensation Committee believes to be challenging yet reasonable and attainable without excessive risk-taking.

 

 

The Company has implemented a compensation recoupment policy that allows the Company to recover certain compensation in the event of a restatement of its financial statements due to the material noncompliance of the Company with federal securities laws or in the event of certain fraud or other misconduct by an employee.

 

 

The Compensation Committee maintains an open dialogue with management regarding executive compensation policies and practices and the appropriate incentives to use in achieving near-term and long-term performance goals.

 

Shareholder Say-on-Pay Vote

 

At the 2012 Annual Meeting of Shareholders, our shareholders had the opportunity to vote, in a non-binding advisory vote, on a proposal to approve the compensation of the Company’s NEOs. This is referred to as a “say-on-pay” proposal. Approximately 93.4% of the votes cast on last year’s say-on-pay proposal were voted in favor of the proposal. The Compensation Committee believes this vote result reflects the general concurrence by the shareholders in the Company’s philosophy and approach to executive compensation. Therefore, the Company has continued its philosophy and approach to executive compensation as discussed above.

 

The Board has determined that the Company’s shareholders should vote on a say-on-pay proposal each year, consistent with the preference expressed by the shareholders at the 2011 Annual Meeting of Shareholders. Accordingly, at the Annual Meeting, shareholders will again have the opportunity to indicate their views on NEO compensation. For additional information, see “Proposal 3: Advisory Vote on Executive Compensation” in this Proxy Statement. The Compensation Committee will continue to consider the vote results for say-on-pay proposals in future years when making compensation decisions for our NEOs.

 

17

 

Severance Agreements with Former NEOs

 

On May 14, 2013, the Company and Mr. McCoy entered into a Severance Agreement and Waiver of Claims (the “McCoy Severance Agreement”) that provided for Mr. McCoy’s separation from employment with the Company. Following the end of fiscal year 2013, in connection with Mr. Smith’s resignation in August 2013, the Company and Mr. Smith entered into a Severance Agreement and Waiver of Claims (the “Smith Severance Agreement”). Because the Company was not previously party to any employment agreements with either of these former NEOs, the Company determined it was in the best interest of the Company to enter into a severance agreement with each of the former NEOs in order to provide for the smooth and orderly transition of the NEO. The severance agreements provide for certain compensation arrangements, as described in the paragraphs below. Under each severance agreement, the former NEO agreed, among other things, to (i) refrain from engaging in certain competitive activities for the applicable severance period, (ii) keep confidential the Company’s confidential information for a period of five years, (iii) fully release the Company and its subsidiaries and affiliate companies from all claims arising from his employment with or separation from the Company and (iv) provide continued cooperation and assistance to the Company, including with respect to transitioning his work assignments to others.

 

The McCoy Severance Agreement provides the following severance compensation arrangements for Mr. McCoy: (i) until July 31, 2013 (the “McCoy Separation Date”), Mr. McCoy received full pay and benefits, (ii) Mr. McCoy will receive aggregate severance payments of $422,667, subject to applicable withholding and deductions, on the Company’s normal bi-weekly payroll periods for a period of 16 months from August 1, 2013 through November 30, 2014, (iii) Mr. McCoy received three weeks of vacation pay on July 26, 2013, (iv) Mr. McCoy was eligible for and received a cash bonus under the terms of the Company’s fiscal year 2013 annual incentive bonus plan as described above, subject to applicable withholding and deductions and all terms and conditions of such bonus plan and (v) Mr. McCoy will continue to receive medical and dental coverage in accordance with the Company’s employee welfare benefit plan through the earlier of his new employment, gainful self-employment or November 30, 2014, provided that the premiums for such coverage shall be those applicable to other employees of the Company and shall be deducted from the severance payments described above. For additional information regarding the McCoy Severance Agreement, see “Executive Compensation – Potential Payments Upon Termination of Employment or Change in Control.”

 

The Smith Severance Agreement provides the following severance compensation arrangements for Mr. Smith: (i) Mr. Smith will receive aggregate severance payments of $474,667, subject to applicable withholding and deductions, on the Company’s normal bi-weekly payroll periods for a period of 16 months from September 2013 to November 2014, (ii) Mr. Smith received three weeks of vacation pay on August 23, 2013 and (iii) Mr. Smith will continue to receive medical and dental coverage in accordance with the Company’s employee welfare benefit plan through the earlier of his new employment, gainful self-employment or December 23, 2014, provided that the premiums for such coverage shall be those applicable to other employees of the Company and shall be deducted from the severance payments described above.

  

In connection with their respective separations from the Company, the unvested portion of restricted stock units granted to Mr. McCoy and Mr. Smith on July 27, 2011 and July 25, 2012, covering an aggregate of 6,666 and 10,416 shares to Mr. McCoy and Mr. Smith, respectively, were allowed to vest.

 

Compensation Consideration for Fiscal Year 2014

 

Subsequent to the end of fiscal year 2013, at its July 2013 meeting, the Compensation Committee determined to increase fiscal year 2014 base salaries for the then-current NEOs from their respective fiscal year 2013 base salaries, with the exception of Mr. Smith, whose salary remained unchanged. The increases in base salaries were made primarily to reflect the NEOs’ individual performance, their contribution to the Company’s overall performance and the expected continuation of their respective performance and contribution in those regards. In making these determinations, the Compensation Committee considered certain information regarding companies in the peer group analysis provided by Cook & Co. described above, but the Compensation Committee did not base its decisions on any specific comparisons or on information about any specific such company or companies. The Compensation Committee also granted the NEOs stock options and restricted stock units and set different incentive cash bonus ranges for the NEOs.

 

 
18

 

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee has reviewed and discussed with management the Company’s Compensation Discussion and Analysis, which is set forth above. Based on that review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement, which is incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013.

 

Submitted by the Compensation Committee of the Board:

 

G. Alfred Webster, Chair
William J. Armfield, IV
Archibald Cox, Jr.

 

 

 

 

 
19

 

 

EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following table is a summary of all compensation awarded or paid to (or earned by) our NEOs for services rendered in all capacities to the Company (including its subsidiaries) for each of the fiscal years indicated.

 

Name and Principal

Position

 

Year

 

Salary
($)(1)

   

Bonus
($)

   

Stock
Awards
($)(2)

   

Option
Awards
($)(2)

   

Non-Equity
Incentive Plan
Compensation
($)(3)

   

All Other
Compensation
($)(4)

   

Total
($)

 
                                                             

William L. Jasper

 

2013

    700,212             126,281       163,832       819,117       91,644       1,901,086  

Chairman and Chief

 

2012

    685,231       257,625       280,575       354,465             88,983       1,666,879  

Executive Officer

 

2011

    635,000                         333,375       91,518       1,059,893  
                                                             

R. Roger Berrier, Jr.

 

2013

    470,885             98,219       127,425       550,847       54,178       1,301,554  

President and Chief

 

2012

    460,231       173,250       218,225       275,695             49,788       1,177,189  

Operating Officer

 

2011

    375,385                         215,250       54,971       645,606  
                                                             

Thomas H. Caudle, Jr.

 

2013

    323,096             16,838       21,844       377,962       53,358       793,098  

Vice President,

 

2012

    316,192       118,875       37,410       47,262             48,673       568,412  

Manufacturing

 

2011

    290,000                         152,250       57,598       499,848  
                                                             

Ronald L. Smith(5)

 

2013

    362,846             70,156       91,018       424,462       43,980       992,462  

Former Vice President

 

2012

    355,115       133,500       155,875       196,925             41,559       882,974  

and Chief Financial Officer

 

2011

    325,000                         170,625       56,814       552,439  
                                                             

Charles F. McCoy(6)

 

2013

    323,096             44,900       58,251       377,962       40,237       844,446  

Former Vice President,

 

2012

    316,384       118,875       99,760       126,032             38,674       699,725  

General Counsel and Secretary

 

2011

    295,000                         154,875       46,399       496,274  

 


 

 

(1)

The NEO’s base salary for fiscal year 2013 and fiscal year 2012 differs only because the former contained 53 weeks and the latter contained 52 weeks.

 

 

(2)

Amounts reflect the grant date fair value computed in accordance with FASB ASC Topic 718, related to option and stock awards granted in the fiscal year noted. See Note 16 to the consolidated financial statements included in the 2013 Form 10-K for more information about the value of equity awards.

     
  (3) Amounts are attributable to cash bonus payments paid under the annual incentive plan for the applicable fiscal year, as described above under “Compensation Discussion and Analysis” with respect to fiscal year 2013 and as previously disclosed with respect to prior fiscal years.

 

 

(4)

All other compensation for each of the NEOs for fiscal year 2013 consists of the following:

 

   

William L. Jasper

   

R. Roger Berrier, Jr.

   

Thomas H. Caudle, Jr.

   

Ronald L. Smith

   

Charles F. McCoy

 

Life Insurance ($)

    23,049       4,197       15,925       3,172       2,804  

Matching 401(k) Contribution ($)

    10,200       10,711       10,488       10,548       10,488  

Contributions to Supplemental Key Employee Retirement Plan ($)

    58,395       39,270       26,945       30,260       26,945  

Total

    91,644       54,178       53,358       43,980       40,237  

 

 

(5)

Mr. Smith separated from the Company on August 12, 2013.

 

 

(6)

Mr. McCoy separated from the Company on July 31, 2013.

 

 
20

 

 

Grants of Plan-Based Awards

 

The fiscal year 2013 grants of plan-based performance bonus cash awards and plan-based long-term equity incentive awards to the NEOs, as well as estimated possible payouts under non-equity incentive plan awards, are set forth below.

 

       

Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1)

   

All Other Stock Awards: Number of Shares of Stock

   

All Other Option Awards: Number of Securities Underlying

   

Exercise or Base Price of Option

   

Grant Date Fair Value of Stock and Option

 

Name

Grant Type

Grant Date

 

Threshold

($)

   

Target

($)

   

Maximum

($)

    or Units

(#) (2)

    Options

(#) (3)

    Awards

($ / Share)

    Awards

($) (4)

 

William L. Jasper

Annual Cash Incentive

7/25/12

    257,625       515,250       1,030,500                          
 

Stock Options

7/25/12

                            22,500       11.23       163,832  
 

Restricted Stock Units

7/25/12

                      11,250                   126,281  
                                                             

R. Roger Berrier, Jr.

Annual Cash Incentive

7/25/12

    173,250       346,500       693,000                          
 

Stock Options

7/25/12

                            17,500       11.23       127,425  
 

Restricted Stock Units

7/25/12

                      8,750                   98,219  
                                                             

Thomas H. Caudle, Jr.

Annual Cash Incentive

7/25/12

    118,875       237,750       475,500                          
 

Stock Options

7/25/12

                            3,000       11.23       21,844  
 

Restricted Stock Units

7/25/12

                      1,500                   16,838  
                                                             

Ronald L. Smith

Annual Cash Incentive

7/25/12

    133,500       267,000       534,000                          
 

Stock Options

7/25/12

                            12,500       11.23       91,018  
 

Restricted Stock Units

7/25/12

                      6,250                   70,156  
                                                             

Charles F. McCoy

Annual Cash Incentive

7/25/12

    118,875       237,750       475,500                          
 

Stock Options

7/25/12

                            8,000       11.23       58,251  
 

Restricted Stock Units

7/25/12

                      4,000                   44,900  

 


 

 

(1)

Represents the threshold, target and maximum payments the NEOs were eligible to earn pursuant to the Company’s fiscal year 2013 annual cash incentive plan. The threshold, target and maximum payout amounts represent 37.5%, 75% and 150% of the respective NEO’s fiscal year 2013 base salary and were based on the Company achieving $39.2 million, $49.1 million and $58.9 million, respectively, of adjusted EBITDA for fiscal year 2013. Based on the Company’s actual fiscal year 2013 adjusted EBITDA, each NEO received a payment under the Company’s annual cash incentive plan equal to approximately 119% of base salary.

 

 

(2)

Represents restricted stock units granted to NEOs pursuant to the 2008 LTIP during fiscal year 2013. The restricted stock units vest in three equal installments, one third of which restricted stock units vested on August 25, 2013, and the remaining of which vest in equal installments on each of July 25, 2014 and July 25, 2015. Upon vesting, each restricted stock unit entitles the holder to one share of the Common Stock.

 

 

(3)

Represents stock options granted to NEOs pursuant to the 2008 LTIP during fiscal year 2013. The stock options are exercisable at a price of $11.23 per share, one third of which options vested on July 25, 2013 and the remaining of which vest in equal installments on each of July 25, 2014 and July 25, 2015. Upon vesting, each stock option entitles the holder to acquire one share of the Common Stock.

 

 

(4)

The amounts in this column do not represent amounts the NEOs received or are entitled to receive. As required by SEC rule, this column represents the full grant date fair value of the restricted stock units and the stock options granted to the NEOs during fiscal year 2013. The full grant date fair value is the amount that the Company will recognize in its financial statements over the award’s vesting schedule, subject to any forfeitures. The grant date fair value was determined under FASB ASC 718. See Note 16 to the Consolidated Financial Statements in the 2013 Form 10-K.

 

 

21

 

Employment Agreements and Other Individual Agreements

 

None of our NEOs are employed pursuant to employment agreements; however, the Company has entered into Change in Control Agreements with each of our NEOs. In general, the Change in Control Agreements provide our NEOs with severance benefits upon their involuntary termination without “cause” (or resignation for “good reason”) following a change in control of the Company. In addition, the Company entered into a severance agreement with each of Messrs. McCoy and Smith. Please refer to “Compensation Discussion and Analysis – Severance Agreements with Former NEOs” above and “Potential Payments Upon Termination or Change in Control” below for detailed information concerning these agreements.

 

We have also granted various long-term incentive awards to each of our NEOs. The material terms of these awards are discussed in the “Compensation Discussion and Analysis” section and set forth in the “Grants of Plan-Based Awards” and “Outstanding Equity Awards at Fiscal Year End” tables in this section.

 

 
22

 

 

Outstanding Equity Awards at Fiscal Year End

 

The following table provides information concerning the outstanding equity awards for each of the NEOs as of the end of fiscal year 2013.

 

Outstanding Equity Awards at 2013 Fiscal Year-End

 

   

Option Awards (1)

   

Stock Awards

 

Name

 

Number of Securities
Underlying Unexercised
Options (#) Exercisable

   

Number of Securities
Underlying Unexercised
Options (#) Unexercisable

   

Option
Exercise Price
($)

   

Option
Expiration
Date

   

Number of Shares or Units of Stock That Have Not Vested (#)

   

Market Value of Shares or Units of Stock That Have Not Vested ($)

 
                                                 

William L. Jasper

    33,333             10.20    

4/19/2016

             
      21,666             8.67    

7/26/2016

             
      133,333             8.16    

10/24/2017

             
      150,000             5.73    

7/28/2019

             
      15,000       30,000       12.47    

7/27/2021(2)

             
            22,500       11.23    

7/25/2022(3)

             
                              15,000       310,050 (4)
                              11,250       232,538 (5)
                                                 
                                                 

R. Roger Berrier, Jr.

    16,666             8.28    

7/1/2014

             
      16,666             10.20    

4/19/2016

             
      21,666             8.67    

7/26/2016

             
      99,999             8.16    

10/24/2017

             
      120,000             5.73    

7/28/2019

             
      11,666       23,334       12.47    

7/27/2021(2)

             
            17,500       11.23    

7/25/2022(3)

             
                              11,667       241,157 (4)
                              8,750       180,863 (5)
                                                 
                                                 

Thomas H. Caudle, Jr.

    39,999             8.28    

7/1/2014

             
      21,666             8.67    

7/26/2016

             
      16,666             8.16    

10/24/2017

             
      36,666             5.73    

7/28/2019

             
      2,000       4,000       12.47    

7/27/2021(2)

             
            3,000       11.23    

7/25/2022(3)

             
                              2,000       41,340 (4)
                              1,500       31,005 (5)
                                                 
                                                 

Ronald L. Smith

    16,666             8.28    

7/1/2014

             
      16,666             8.67    

7/26/2016

             
      49,999             8.16    

10/24/2017

             
      75,000             5.73    

7/28/2019

             
      8,333       16,667       12.47    

7/27/2021(2)

             
            12,500       11.23    

7/25/2022(3)

             
                              8,333       172,243 (4)
                              6,250       129,188 (5)
                                                 
                                                 

Charles F. McCoy

          10,667       12.47    

7/27/2021(2)

             
            8,000       11.23    

7/25/2022(3)

             
                              5,333       110,233 (4)
                              4,000       82,680 (5)

 

 
23

 

 


 

 

(1)

Represents grants made from 2004 through June 30, 2013. Unless otherwise noted, outstanding stock options are fully vested as of June 30, 2013.

 

 

(2)

The Company granted each NEO stock options on July 27, 2011, which vest in one-third increments on each of the first three anniversaries of the date of grant, contingent upon the NEO’s continued service through the applicable vesting date.

 

 

(3)

The Company granted each NEO stock options on July 25, 2012, which vest in one-third increments on each of the first three anniversaries of the date of grant, contingent upon the NEO’s continued service through the applicable vesting date.

 

 

(4)

The Company granted each NEO restricted stock units on July 27, 2011, which vest in one-third increments on each of August 27, 2012, July 27, 2013 and July 27, 2014, contingent upon the NEO’s continued service through the applicable vesting date.

 

 

(5)

The Company granted each NEO restricted stock units on July 25, 2012, which vest in one-third increments on each of August 25, 2013, July 25, 2014 and July 25, 2015, contingent upon the NEO’s continued service through the applicable vesting date.

 

 
24

 

 

Option Exercises and Stock Vested

 

The following table provides information with respect to stock options exercised by, and the vesting of stock awards issued to, the NEOs during fiscal year 2013 on an aggregated basis.

 

    Option Awards    

Stock Awards

 

Name

 

Number of Shares Acquired on Exercise

(#)

   

Value Realized on Exercise

($)(1)

   

Number of Shares Acquired on Vesting

(#)(2)

   

Value Realized on Vesting

($)(3)

 
                                 

William L. Jasper

                7,500       81,375  
                                 

R. Roger Berrier, Jr.

                5,833       63,288  
                                 

Thomas H. Caudle, Jr.

                1,000       10,850  
                                 

Ronald L. Smith

                4,167       45,212  
                                 

Charles F. McCoy

    113,664       1,246,809       2,667       28,937  

 

 

(1)

Calculated based on the difference between (a) the market price of the underlying shares of Common Stock, which was computed as the average of the high and low trading prices on the date of disposition and (b) the exercise price of the options.

 

 

(2)

Shares included in this column represent the shares of Common Stock underlying restricted stock units that vested during fiscal year 2013. Each NEO elected to defer receipt of these shares until 30 days following the NEO’s separation from service.

 

 

(3)

Calculated based on the market price of the shares of Common Stock underlying the restricted stock units, which was computed as the average of the high and low trading prices on the date of vesting.

 

Pension Benefits

 

The Company does not sponsor, maintain or contribute to any retirement plans that provide for a specified level of retirement benefits (i.e., defined benefit retirement plans).

 

Non-Qualified Deferred Compensation

 

The Company maintains the SERP to provide additional retirement benefits to a select group of management or highly-compensated employees, including each of our NEOs. On an annual basis, the Company credits to the participant’s account an amount equal to 8½% for executive officers, or 5½% for non-executive officers, multiplied by the participant’s base salary. Each participant is always 100% vested in the participant’s SERP account and earns a return on the amounts contributed to the participant’s account as if it had been invested in the stocks that make up the Standard & Poor’s 500 Index in the same proportion as their respective weighting therein. Participants are not entitled to a distribution from the SERP until their termination of employment with the Company, at which time they must wait six months to receive a lump sum payment equal to the balance of their respective accounts. If a participant’s termination is due to death or disability, this six-month delay period is waived.

 

 
25

 

 

The following table provides information with respect to the Company’s non-tax qualified compensation deferral plans for each of the NEOs.

 

   

Non-Qualified Deferred Compensation for Fiscal Year 2013

 

Name

 

Executive
Contributions
in Last
Fiscal Year
($)

   

Registrant
Contributions
in Last
Fiscal Year
($) (1)

   

Aggregate
Earnings (Loss)
in Last
Fiscal Year
($)

   

Aggregate
Withdrawals
and/or
Distributions
($)

   

Aggregate
Balance at
Last Fiscal
Year End
($)

 
                                         

William L. Jasper

          58,395       92,208             517,860  

R. Roger Berrier, Jr.

          39,270       60,602             340,713  

Thomas H. Caudle, Jr.

          26,945       57,991             321,774  

Ronald L. Smith

          30,260       48,539             272,414  

Charles F. McCoy

          26,945       54,733             304,304  

 


 

(1) Amounts represent Company contributions to the SERP on behalf of the NEOs during fiscal year 2013. These amounts are reported in the Summary Compensation Table under “All Other Compensation.”

 

Potential Payments Upon Termination or Change in Control

 

Change in Control Agreements. The Company is a party to Change in Control Agreements with each of its NEOs (the “Change in Control Agreements”). The Company entered into these agreements in August 2009 to promote stability and continuity within management in the event of a “change in control” (as defined below) transaction that might otherwise be distracting or disruptive to management’s continued performance of its responsibilities. The substantive terms are the same in each of the Change in Control Agreements, which were all amended as of December 31, 2011. The Change in Control Agreements will expire on December 31, 2014, unless a change in control occurs prior to that date; in the latter event, the Change in Control Agreements will extend past December 31, 2014 and expire on the two-year anniversary of the change in control event. An NEO’s Change in Control Agreement will expire earlier upon his termination of employment with the Company.

 

The Change in Control Agreement for each NEO provides for the severance benefits described below, in the event the NEO’s employment with the Company is terminated under certain circumstances following a change in control:

 

 

2.99 times the average total compensation paid to the NEO by the Company during the five calendar years (or less if the NEO has been employed by the Company for fewer than five years) preceding the change in control.

 

 

o

This amount is paid in 24 equal monthly installments without interest.

 

 

Continued participation in Company-sponsored life insurance, medical, health and accident and disability plans and programs until the earlier of the second anniversary of the NEO’s termination of employment or the NEO’s commencement of full-time employment with a new employer.

 

The NEO will receive the severance benefits if he is terminated without “cause” or if he resigns for “good reason” within two years following the change in control. “Cause” is defined to mean essentially fraud, misappropriation, or embezzlement or the NEO’s malfeasance or misfeasance in performing his duties owed to the Company. “Good reason” is defined to mean essentially the assignment to the NEO of duties materially inconsistent with his duties immediately prior to the change in control, a material change in the NEO’s titles or offices, a material reduction in the NEO’s base salary or a failure to increase the NEO’s base salary similar to those of other executive officers, the Company’s failure to continue certain benefit or bonus plans or arrangements previously available to the NEO, certain relocations of the Company’s principal executive offices or the relocation of the NEO’s office, and other similar specified reasons involving a material adverse consequence to the NEO.

 

 
26

 

 

The Change in Control Agreements do not provide for any tax “gross-up” payments, and the salary continuation payments may also be reduced to an amount such that they do not constitute an excess parachute payment under Code Section 280G.

 

A “change in control” under the Change in Control Agreements includes any of the following significant changes to the ownership or control of the Company:

 

 

1.

A consolidation or merger occurs in which the Company is not the surviving legal entity or pursuant to which shares of the Common Stock are converted in cash, securities or other property (other than a merger in which the Company’s stockholders have the same proportionate ownership of the surviving corporation after the merger);

 

 

2.

A sale, lease, exchange or other transfer of all or substantially all of the Company’s assets;

 

 

3.

The approval by the Company’s shareholders of any plan or proposal of liquidation or dissolution of the Company;

 

 

4.

The acquisition of 20% or more of the Company’s outstanding common stock by any “person” (as defined in Sections 13(d) and 14(d)(2) of the Exchange Act); or

 

 

5.

The failure, during any two consecutive year period, for individuals who constituted a majority of the Board at the beginning of the period to constitute a majority of the Board at the end of the period (unless the election or nomination of any new director was approved by at least two-thirds of the directors who were members of the Board at the beginning of the period).

 

Terms of Outstanding Equity Awards. Upon a “change in control” as defined for their purposes, all outstanding stock options and other stock awards under the Unifi, Inc. 1999 Long-Term Incentive Plan (the “1999 LTIP”) and the 2008 LTIP, including the stock options and restricted stock units awarded to our NEOs during fiscal year 2013, will become fully vested and/or will be immediately exercisable. The 2008 LTIP defines a change in control as:

 

 

The acquisition of more than 50% of the total fair market value or total voting power of the Company’s stock (other than an acquisition by a person, entity or group that already owns more than 50% of the total fair market value or total voting power before the acquisition);

 

 

The acquisition of 20% or more of the total voting power of the Company within a 12-month period by any person;

 

 

The replacement of a majority of the members of the Board during any 24-month period by directors whose appointment or election is not endorsed by two-thirds of the incumbent members of the Board; or

 

 

The acquisition of 40% or more of the total gross fair market value of the Company’s assets by any person.

 

The 1999 LTIP defines a change in control as:

 

 

A consolidation or merger in which the Company is not the surviving corporation or pursuant to which shares of Common Stock would be converted into consideration (other than a merger in which holders of Common Stock have the same proportionate ownership of Common Stock immediately after the merger);

 

 

Any sale, lease, exchange or other transfer to any person (other than to a subsidiary) of all or substantially all of the assets of the Company;

 

 

The approval by the Company’s shareholders of a plan or proposal for the liquidation or dissolution of the Company;

 

 

The acquisition of 20% or more of the outstanding Common Stock by any person; or

 

 

The replacement of a majority of the members of the Board during any 24-month period by directors whose appointment or election is not endorsed by two-thirds of the incumbent members of the Board.

 

27

 

Our NEOs may also become vested in the restricted stock units and certain stock options that vest based on continued service with the Company, including the stock options granted to them in fiscal year 2013, upon their retirement with approval by the Compensation Committee after attaining age 57 and upon a termination of employment due to death or disability. In addition, the restricted stock unit awards granted in fiscal year 2012 and fiscal year 2013 provide for accelerated vesting of all unvested restricted stock units upon a termination of an NEO’s employment without cause after August 27, 2012 and August 25, 2013, respectively.

 

Accrued and Vested Benefits. Each of the NEOs has accrued various benefits under the Company’s equity compensation programs such as the 1999 LTIP and the 2008 LTIP, retirement plans such as the SERP, and other broad-based employee benefit plans. Many of these benefits and awards are fully vested, and each NEO would receive all of his vested benefits and awards in the event that his employment with the Company ends for any reason.

 

The table below summarizes the potential payments upon termination of employment or a change in control of the Company as of June 30, 2013. Following the end of fiscal year 2013, the Change in Control Agreements with each of Messrs. McCoy and Smith expired on July 31, 2013 and August 12, 2013, respectively, due to his termination of employment with the Company; however, disclosure is provided with respect to hypothetical termination and/or change in control events under the Change in Control Agreements with respect to each of them as required by SEC rules.

 

NEO

 

Type of Payment or Benefit

 

Change in Control

($)

   

Termination For Any Reason

($)

   

Termination Due to Death, Disability or Approved Retirement

($)(1)

   

Termination without Cause or Resignation for Good Reason w/in 2 years After Change in Control

($)(1)

 

William L. Jasper

 

Severance and Benefit Continuation(2)

                      3,152,976  
   

Accelerated Equity Awards(3)(4)

    1,000,988             542,588       1,000,988  
   

Accrued and Vested Benefits(4)

          5,313,870       5,313,870       5,313,870  
   

Total

    1,000,988       5,313,870       5,856,458       9,467,834  
                                     

R. Roger Berrier, Jr.

 

Severance and Benefit Continuation(2)

                      1,938,478  
   

Accelerated Equity Awards(3)(4)

    778,559             422,020       778,559  
   

Accrued and Vested Benefits(4)

          4,241,706       4,241,706       4,241,706  
   

Total

    778,559       4,241,706       4,663,726       6,958,743  
                                     

Thomas H. Caudle, Jr.

 

Severance and Benefit Continuation(2)

                      1,482,972  
   

Accelerated Equity Awards(3)(4)

    133,465             72,345       133,465  
   

Accrued and Vested Benefits(4)

          1,870,706       1,870,706       1,870,706  
   

Total

    133,465       1,870,706       1,943,051       3,487,143  
                                     

Ronald L. Smith

 

Severance and Benefit Continuation(2)

                      1,624,551  
   

Accelerated Equity Awards(3)(4)

    556,100             301,431       556,100  
   

Accrued and Vested Benefits(4)

          2,579,348       2,579,348       2,579,348  
   

Total

    556,100       2,579,348       2,880,779       4,759,999  
                                     

Charles F. McCoy

 

Severance and Benefit Continuation(2)(5)

                      1,447,004  
   

Accelerated Equity Awards(3)(4)

    355,902             192,913       355,902  
   

Accrued and Vested Benefits(4)

          359,431       359,431       359,431  
   

Total

    355,902       359,431       552,344       2,162,337  

 

 
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(1)

Amounts shown assume the Company experienced a change in control and the NEO was terminated without cause or resigned for good reason on June 30, 2013.

 

(2)

Consists of severance benefits and health and welfare benefits. Health and welfare benefits represents the aggregate estimated net cost to the Company of health and welfare benefits provided to each NEO under the terms of the Change in Control Agreements.

 

(3)

As described above, all outstanding and unvested stock options and restricted stock units will become vested upon a change in control of the Company. In addition, upon an NEO’s termination of employment due to death, disability or approved retirement, the unvested stock options that vest solely based on the NEO’s continued service and all unvested restricted stock units are subject to accelerated vesting. Stock options that vest based on an NEO’s continued service and the Company’s achievement of a specified share price do not provide for such accelerated vesting upon termination due to death, disability or approved retirement.

 

(4)

For purposes of this table, it is assumed that: (a) all vested stock options are exercised on the last business day before June 30, 2013, and the value of such vested stock options is calculated by multiplying the number of stock options by the difference between the exercise price and the closing market price; and (b) as of the date of termination or change in control, as applicable, each vested restricted stock unit is converted into one share of Common Stock and the aggregate value of such vested restricted stock units is calculated by multiplying the number of restricted stock units by the closing market price.

 

(5)

Amounts do not include amounts payable to Mr. McCoy under the McCoy Severance Agreement discussed below.

 

Severance Agreements with Former NEOs

 

As described earlier in this Proxy Statement, on May 13, 2013, the Company and Mr. McCoy entered into the McCoy Severance Agreement, under which the Company agreed to pay Mr. McCoy certain severance compensation and benefits. The total estimated payments and benefits being provided under the McCoy Severance Agreement, including accrued and vested benefits and other benefits to which he otherwise would be entitled, equal approximately $826,917, as follows: $422,667 severance pay; $18,288 vacation pay; $377,962 cash bonus under the terms of the Company’s fiscal year 2013 annual incentive bonus plan; and $8,000 in benefits continuation. For additional information regarding the McCoy Severance Agreement, see “Compensation Discussion and Analysis-Severance Agreements with Former NEOs.”

 

As described earlier in this Proxy Statement, subsequent to fiscal year 2013, the Company and Mr. Smith entered into the Smith Severance Agreement.

 

 
29

 

 

EQUITY COMPENSATION PLAN INFORMATION

 

On October 29, 2008, the Company’s shareholders approved the 2008 LTIP, which is currently the Company’s only equity compensation plan. As described above, the 2008 LTIP authorized the issuance of up to 2,000,000 shares of Common Stock pursuant to the grant or exercise of stock options, including incentive stock options, non-qualified stock options and restricted stock, but not more than 1,000,000 shares may be issued as restricted stock.

 

The table below presents information as of June 30, 2013 regarding the number of shares of Common Stock that may be issued under the 2008 LTIP. Any option or restricted stock that is forfeited or canceled may be reissued under the terms of the 2008 LTIP and is included in the number of securities remaining available for future issuance in column (c) in the table below.

 

All per share prices, share amounts and computations using such amounts have been retroactively adjusted to reflect the November 3, 2010 1-for-3 reverse stock split.

 

Equity Compensation Plan Information

 

Plan category

 

Number of securities to be issued upon exercise of

outstanding options, warrants and rights

   

Weighted average

exercise price of outstanding options, warrants and rights

   

Number of securities remaining available for future issuance under equity compensation plans (excluding

securities reflected in column (a))

 
   

(a)

   

(b)

   

(c)

 

Equity compensation plans approved by shareholders

    1,727,974     $ 7.50       901,581  

Equity compensation plans not approved by shareholders

                 

Total

    1,727,974     $ 7.50       901,581  

 

If approved by the shareholders at the Annual Meeting, the Unifi, Inc. 2013 Incentive Compensation Plan (the "2013 Plan") will replace the 2008 LTIP for purposes of all future incentive awards to the Company’s personnel. As a result, no further awards would be made under the 2008 LTIP. We have reserved 1,000,000 shares of Common Stock for future awards under the 2013 Plan. Outstanding awards previously granted under the 2008 LTIP will continue in effect in accordance with the terms and conditions of the 2008 LTIP. For additional information see “Proposal 2: Approval of the Unifi, Inc. 2013 Incentive Compensation Plan.”

 

 
30

 

  

BENEFICIAL OWNERSHIP OF COMMON STOCK
BY DIRECTORS AND EXECUTIVE OFFICERS

 

The following table presents information regarding the beneficial ownership of the Common Stock, within the meaning of applicable securities regulations, of each director and nominee for director of the Company, each of the NEOs in the Summary Compensation Table included herein, and of all current directors and executive officers of the Company as a group, as of September 3, 2013.

 

Name of Beneficial Owner

 

Amount and Nature of
Beneficial Ownership(1)

   

Percent
of Class

 
                 

William J. Armfield, IV(2)

    307,835       1.58 %

R. Roger Berrier, Jr.(3)

    326,743       1.65 %

Thomas H. Caudle, Jr.(4)

    124,137    

°

 

Archibald Cox, Jr.(5)

    161,111    

°

 

William L. Jasper(6)

    400,682       2.01 %

Kenneth G. Langone(7)

    1,061,666       5.44 %

Charles F. McCoy

           

George R. Perkins, Jr.(8)

    348,817       1.79 %

Suzanne M. Present(9)

    9,179    

°

 

Ronald L. Smith

           

G. Alfred Webster(10)

    62,907    

°

 

Mitchel Weinberger(11)

    1,177,783       6.03 %

All directors and executive officers as a group (11 persons)(12)

    3,984,193       19.46 %

°

Represents less than one percent (1%) of the Common Stock.

 

(1)

All shares and underlying shares which the person has a right to receive, are owned or will be owned directly and with sole voting and investment power by the person indicated above, except as otherwise noted below. The information presented in this table was based upon Company information, information furnished to the Company by the named persons and information contained in filings with the SEC.

 

(2)

Mr. Armfield’s beneficial ownership includes: 258,491 shares that Mr. Armfield has pledged as collateral; 12,779 shares that Mr. Armfield has the right to receive pursuant to restricted stock units that will automatically convert into shares of Common Stock following termination of services as a director; 3,333 shares that Mr. Armfield would have the right to purchase pursuant to stock options that could become exercisable within 60 days of September 3, 2013, provided that the closing price of the Company’s Common Stock shall be at least $24.00 per share for 30 consecutive trading days; and 3,333 shares that Mr. Armfield would have the right to purchase pursuant to stock options that could become exercisable within 60 days of September 3, 2013, provided that the closing price of the Company’s Common Stock shall be at least $30.00 per share for 30 consecutive trading days.

 

(3)

Mr. Berrier’s beneficial ownership includes: 14,583 shares that Mr. Berrier has the right to receive pursuant to restricted stock units that will automatically convert into shares of Common Stock following termination of employment with the Company; 304,163 shares that Mr. Berrier has the right to purchase pursuant to stock options that are currently exercisable or become exercisable within 60 days of September 3, 2013; and 7,166 shares owned by the Julie Beamer Berrier Revocable Trust, as to which he does not have any voting or investment power.

 

(4)

Mr. Caudle’s beneficial ownership includes: 2,500 shares that Mr. Caudle has the right to receive pursuant to restricted stock units that will automatically convert into shares of Common Stock following termination of employment with the Company; and 119,997 shares that Mr. Caudle has the right to purchase pursuant to stock options that are currently exercisable or become exercisable within 60 days of September 3, 2013.

 

 
31

 

 

(5)

Mr. Cox’s beneficial ownership includes: 12,779 shares that Mr. Cox has the right to receive pursuant to restricted stock units that will automatically convert into shares of Common Stock following termination of services as director; and 6,666 shares that Mr. Cox has the right to purchase under stock options that are currently exercisable.

 

(6)

Mr. Jasper’s beneficial ownership includes: 18,750 shares that Mr. Jasper has the right to receive pursuant to restricted stock units that will automatically convert into shares of Common Stock following termination of employment with the Company; and 375,832 shares that Mr. Jasper has the right to purchase pursuant to stock options that are currently exercisable or become exercisable within 60 days of September 3, 2013.

 

(7)

Mr. Langone’s beneficial ownership includes: 100,000 shares owned by Invemed Associates, LLC, in which Mr. Langone owns an 81% interest, and of which Mr. Langone has shared voting and investment power; 5,000 shares owned by Mr. Langone’s wife, as to which he has shared voting and investment power and of which Mr. Langone disclaims beneficial ownership; 12,779 shares that Mr. Langone has the right to receive pursuant to restricted stock units that will automatically convert into shares of Common Stock following termination of services as director; 3,333 shares that Mr. Langone would have the right to purchase pursuant to stock options that could become exercisable within 60 days of September 3, 2013, provided that the closing price of the Company’s Common Stock shall be at least $24.00 per share for 30 consecutive trading days; and 3,333 shares that Mr. Langone would have the right to purchase pursuant to stock options that could become exercisable within 60 days of September 3, 2013, provided that the closing price of the Company’s Common Stock shall be at least $30.00 per share for 30 consecutive trading days.

 

(8)

Mr. Perkin’s beneficial ownership includes: 12,779 shares that Mr. Perkins has the right to receive pursuant to restricted stock units that will automatically convert into shares of Common Stock following termination of services as director; 3,333 shares that Mr. Perkins would have the right to purchase pursuant to stock options that could become exercisable within 60 days of September 3, 2013, provided that the closing price of the Company’s Common Stock shall be at least $24.00 per share for 30 consecutive trading days; and 3,333 shares that Mr. Perkins would have the right to purchase pursuant to stock options that could become exercisable within 60 days of September 3, 2013, provided that the closing price of the Company’s Common Stock shall be at least $30.00 per share for 30 consecutive trading days.

 

(9)

Ms. Present’s beneficial ownership consists of 9,179 shares that Ms. Present has the right to receive pursuant to restricted stock units that will automatically convert into shares of Common Stock following termination of services as director.

 

(10)

Mr. Webster’s beneficial ownership includes: 21,958 shares that Mr. Webster has the right to receive pursuant to restricted stock units that will automatically convert into shares of Common Stock following termination of services as director; 3,333 shares that Mr. Webster would have the right to purchase pursuant to stock options that could become exercisable within 60 days of September 3, 2013, provided that the closing price of the Company’s Common Stock shall be at least $24.00 per share for 30 consecutive trading days; 3,333 shares that Mr. Webster would have the right to purchase pursuant to stock options that could become exercisable within 60 days of September 3, 2013, provided that the closing price of the Company’s Common Stock shall be at least $30.00 per share for 30 consecutive trading days; and 34,283 shares that Mr. Webster owns jointly with his wife, and together they share voting and investment power.

 

(11)

Mr. Weinberger’s beneficial ownership includes: 1,141,104 shares owned by Dillon, as to which Mr. Weinberger has shared voting and investment power and as to which Mr. Weinberger disclaims beneficial ownership; and 9,179 shares that Mr. Weinberger has the right to receive pursuant to restricted stock units that will automatically convert into shares of Common Stock following termination of services as director.