CULP, INC.
2002 STOCK OPTION PLAN
ARTICLE I
GENERAL PROVISIONS
1.1 Purpose of the Plan. This Plan is intended to promote the interests of
the Company by giving eligible persons who provide services to the Company the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Company as an incentive to continue their
employment or service. Capitalized terms used in the Plan shall have the
meanings given to them in Appendix A attached hereto.
1.2 Administration of the Plan.
(a) The Plan shall be administered by the Board; provided, however, that
any or all administrative functions otherwise exercisable by the Board may be
delegated to the Committee. Members of the Committee shall serve for such period
of time as the Board may determine and shall be subject to removal by the Board
at any time. The Board also may, at any time, terminate the functions of the
Committee and reassume all powers and authority previously delegated to the
Committee. The Board or the Committee, as the Plan Administrator, shall have
full power and authority (subject to the provisions of the Plan) to establish
such rules and regulations as it may deem appropriate for the proper
administration of the Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding Options thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator shall be final
and binding on all parties who have an interest in the Plan or any Option issued
hereunder.
(b) Subject to the terms of the Plan, the Plan Administrator shall have
full power and authority to determine which eligible persons will receive Option
grants, the time or times when such grants will be made, the number of shares to
be covered by each grant, the status of each Option as either an Incentive
Option or a Non-Qualified Option, the time or times when each Option is
exercisable, the vesting schedule (if any) applicable to granted Options, the
maximum term for which an Option shall remain outstanding, and all other terms
and conditions of an Option granted under the Plan.
1.3 Eligibility. Only Employees are eligible to receive grants of Incentive
Options. The persons eligible to receive grants of Non-Qualified Options are (a)
Employees, (b) non-employee members of the Board or the board of directors of
any Parent or Subsidiary, and (c) consultants and other independent advisors who
provide services to the Company (or any Parent or Subsidiary). Additionally, the
maximum number of shares of Common Stock that may be covered by an Option
granted to any one individual shall be 50,000 shares during any one calendar
year period.
1.4 Stock Subject to the Plan. The stock issuable under the Plan shall be
shares of authorized but unissued Common Stock. The maximum number of shares of
Common Stock that may be issued under the Plan shall not exceed 1,000,0000
shares, and all such shares shall be available for issuance pursuant to the
grant of Incentive Options. Shares of Common Stock subject to outstanding
Options shall be available for subsequent issuance under the Plan to the extent
any Options expire or terminate for any reason prior to their exercise in full.
1.5 Adjustments in Common Stock. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other similar change, the Plan
Administrator shall cause appropriate adjustments to be made to (a) the maximum
number and/or class of securities issuable under the Plan and (b) the number
and/or class of securities and the exercise price per share in effect under each
outstanding Option, in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
ARTICLE II
OPTION GRANT PROGRAM
2.1 Grant of Options Generally. Each Option granted under this Plan shall
have such terms and conditions as approved by the Plan Administrator. Subject to
the provisions of this Plan, each Option shall be evidenced by one or more
documents in the form approved by the Plan Administrator, and no grant shall be
effective unless and until both the Company and the person to whom the Option is
being granted shall have executed such documents as required by the Plan
Administrator.
2.2 Exercise Price. The exercise price per share of each Option shall be
fixed by the Plan Administrator and, subject to the terms and conditions set
forth herein, may be equal to or greater than the Fair Market Value per share of
Common Stock on the Option grant date.
2.3 Vesting, Exercise and Term of Options. Each Option shall vest and be
exercisable at such time or times and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the Option grant. No Option, however, shall have a term in excess of ten (10)
years from the Option grant date.
2.4 Exercise Procedures.
(a) Subject to Section 2.7, an Option may be exercised only by the Optionee
to whom such Option was granted under the Plan. An Option shall be exercisable
at such time or times as set forth herein and in the documents evidencing the
grant of the Option. Notwithstanding anything in the Plan to the contrary, the
Plan Administrator, in its sole discretion, may at any time and from time to
time accelerate the date for exercising all or any part of an Option. In no
event, however, may an Option be exercised after the expiration of its fixed
term.
(b) Each Option granted under the Plan shall be deemed exercised when the
holder thereof (i) shall indicate the decision to do so in writing delivered to
the Company, (ii) shall at the same time tender to the Company payment in full
of the exercise price for the shares for which the Option is exercised in
accordance with Section 2.4(c), (iii) shall tender to the Company in accordance
with the Plan Administrator's instructions payment in full of all federal and
state withholding or other employment taxes applicable to the taxable income, if
any, of the holder resulting from such exercise, (iv) shall execute an option
exercise agreement in form and substance satisfactory to the Plan Administrator,
and (v) shall comply with such other requirements as the Plan Administrator may
establish.
(c) In connection with the exercise of any Option, the Optionee shall pay
the exercise price to the Company in cash, by check, or in such other manner as
permitted by the Plan Administrator, which may include the surrender of shares
of Common Stock or other unexercised Options held by the Optionee.
Notwithstanding the foregoing, should the Common Stock be registered under
Section 12 of the Exchange Act at the time an Option is exercised, then the
exercise price may also be paid as follows:
(i) in shares of Common Stock held for the requisite period necessary
to avoid a charge to the Company s earnings for financial reporting
purposes and valued at Fair Market Value on the exercise date, or
(ii) through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable instructions (A) to a
Company-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares and (B) to the Company to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
(d) An Option granted under the Plan may be exercised for any lesser number
of shares than the full amount for which it could be exercised. Such a partial
exercise shall not affect the right to exercise the Option for the remaining
shares from time to time in accordance with the Plan and the documents
evidencing the grant of the Option.
2.5 Effect of Termination of Service. The following provisions shall govern
the exercise of Options held by an Optionee at the time of such Optionee's
cessation of Service or death:
(a) should the Optionee cease to remain in Service for any reason other
than death, Permanent Disability or Misconduct, then the Optionee shall have a
period of three (3) months following the date of cessation of Service or such
longer period determined by the Plan Administrator, in its sole discretion, to
exercise each outstanding Option held by such Optionee;
(b) should the Optionee's Service terminate by reason of Permanent
Disability, then the Optionee shall have a period of twelve (12) months
following the date of cessation of Service or such longer period determined by
the Plan Administrator, in its sole discretion, to exercise each outstanding
Option held by such Optionee;
(c) if the Optionee dies while holding an outstanding Option, then the
personal representative of his or her estate or the Person or Persons to whom
the Option is transferred pursuant to the Optionee's will or the laws of
inheritance shall have twelve (12) months following the date of cessation of
Service or such longer period determined by the Plan Administrator, in its sole
discretion, to exercise each outstanding Option held by the Optionee;
(d) should the Optionee's Service be terminated for Misconduct, then all
outstanding Options held by the Optionee shall terminate immediately and cease
to remain outstanding, regardless of whether any Options have vested; and
(e) during the applicable post-Service exercise period, an Option may be
exercised only if it has vested and for no more than the aggregate number of
shares for which the vested Option is exercisable on the date of the Optionee's
cessation of Service. The Option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding with respect to any
and all Option shares for which the Option is not otherwise exercisable at that
time. Upon the expiration of the applicable exercise period or (if earlier) upon
the expiration of the Option term, the Option shall terminate and cease to be
outstanding.
2.6 Stockholder Rights. The holder of an Option shall have no stockholder
rights with respect to the shares subject to the Option until such Person shall
have exercised the Option in accordance with Section 2.4 and become the record
holder of the purchased shares. Each Person who validly exercises an Option and
is issued shares of Common Stock by the Company shall be subject to all of the
terms and conditions set forth in the applicable purchase agreement to be
executed by such person upon exercise.
2.7 Transferability of Options.
(a) Except as set forth in Section 2.7(b), Options may be transferred only
by will or the laws of inheritance upon the death of an Optionee. Otherwise, no
Option may be assigned, pledged, hypothecated or transferred in any manner. Upon
any attempt to assign, pledge, hypothecate or transfer an Option, such Option
shall immediately be cancelled and terminated.
(b) The Plan Administrator, may, in its sole discretion, permit a
Non-Qualified Option to be assigned in whole or in part during the Optionee's
lifetime as a gift to (i) one or more members of the Optionee's immediate
family, (ii) a trust in which Optionee and/or one or more of such family members
hold more than fifty percent (50%) of the beneficial interest, or (iii) an
entity in which more than fifty percent (50%) of the voting interests are owned
by the Optionee and/or one or more of such family members. The terms applicable
to the assigned Non-Qualified Option shall be the same as those in effect for
such Option immediately prior to the assignment, as more fully set forth herein
and in the documents evidencing the grant of the Option.
2.8 Incentive Options. All Incentive Options shall be subject to the terms
set forth in this Section 2.8. Options that are not specifically designated as
Incentive Options in the documentation evidencing the grant of such Options, or
that are specifically designated as Non-Qualified Options, shall not be subject
to the terms of this Section 2.8.
(a) Eligibility. Incentive Options may be granted only to Employees.
(b) Exercise Price. An Incentive Option's exercise price per share of
Common Stock shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the date such Option is granted.
(c) Dollar Limitation. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more Incentive Options granted to any Employee under the Plan (or any
other option plan of the Company or any Parent or Subsidiary) may for the first
time become exercisable during any one calendar year shall not exceed One
Hundred Thousand Dollars ($100,000). To the extent an Employee holds two or more
Incentive Options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability of such Incentive
Options shall be applied on the basis of the order in which such Options are
granted.
(d) Ten Percent (10%) Stockholder. If an Employee to whom an Incentive
Option is granted is a Ten Percent (10%) Stockholder, then the Incentive
Option's exercise price per share of Common Stock shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the Option grant date, and the Incentive Option's term shall not exceed five
years from the date of grant.
2.9 Change of Control Transactions.
(a) The Plan Administrator may, in its sole and absolute discretion,
determine that any outstanding Option shall become fully exercisable on an
accelerated basis immediately prior to a Change of Control, notwithstanding the
fact that any portion of such Option shall not have vested.
(b) Unless otherwise determined by the Plan Administrator, (i) upon
consummation of a Change of Control in which the Company is not the surviving
entity, all outstanding Options, to the extent not exercised, shall terminate
and cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof), and (ii) upon consummation of a Change of
Control in which the Company is the surviving entity, all outstanding Options,
to the extent not exercised, shall remain outstanding in full force and effect
on the same terms and conditions.
(c) The Plan Administrator shall have the discretion at any time to provide
for the immediate termination of any consent, repurchase or first refusal
rights of the Company with respect to the shares subject to those Options
upon the occurrence of a Change of Control, whether or not the Options are to
be assumed by any successor corporation (or parent thereof).
(d) In the event that any Option shall survive and remain outstanding after
a Change of Control, the Plan Administrator shall have full power and
authority at any time to structure or amend an Option so that it will
automatically vest on an accelerated basis should the Optionee's Service
terminate by reason of an Involuntary Termination within a designated period
following the effective date of the Change of Control.
(e) The portion of any Incentive Option accelerated in connection with a
Change of Control shall remain exercisable as an Incentive Option only to the
extent the applicable One Hundred Thousand Dollars ($100,000) limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of an Option shall be exercisable as a Non-Qualified Option and shall be
treated as such under the federal tax laws.
(f) The grant of Options under the Plan shall in no way affect the right of
the Company to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, enter into a share exchange, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
ARTICLE III
MISCELLANEOUS
3.1 Compliance with Securities Laws. The Plan Administrator shall take such
action as may be necessary to cause the administration of this Plan, including
the grant of Options and the issuance of shares of Common Stock pursuant to the
exercise thereof, to be made in compliance with all federal and state securities
laws.
3.2 Effective Date and Term.
(a) The Plan shall become effective when adopted by the Board, but no
Option granted under the Plan may be exercised, and no shares shall be issued
pursuant to the exercise of any Options, until the Plan is approved by the
Company's stockholders. Additionally, no Incentive Option shall be deemed to
have been granted unless and until this Plan is approved by the Company's
stockholders. If such stockholder approval is not obtained within twelve (12)
months after the date of the Board's adoption of the Plan, then all Options
previously granted under the Plan shall terminate and cease to be outstanding,
and no further Options shall be granted and no shares shall be issued pursuant
to the exercise of any Options.
(b) No further Options may be granted under the Plan upon the earlier of
(a) the expiration of the ten (10)-year period from the date the Plan is adopted
by the Board, (b) the date on which all shares available for issuance under the
Plan shall have been issued or (c) the termination of all outstanding Options in
connection with an Change of Control in which the Company is not the surviving
entity or otherwise. All Options outstanding upon the expiration of the ten
(10)-year period referenced in subclause (a) above shall continue to have full
force and effect in accordance with the provisions of the documents evidencing
the grant of such Options.
3.3 Amendment of the Plan. The Board shall have complete and exclusive
power and authority to amend or modify the Plan in any or all respects. However,
no such amendment or modification shall adversely affect any rights and
obligations in respect of any outstanding Options unless the holder thereof
consents to such amendment or modification. In addition, certain amendments may
require stockholder approval pursuant to applicable laws or regulations.
3.4 Governing Law. This Plan shall be governed and construed in accordance
with the laws of the State of North Carolina.
3.5 Severability. If any provision of this Plan or the application thereof
to any person or circumstance shall be invalid or unenforceable to any extent,
the remainder of this Plan and the application of such provision to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
3.6 Section Titles. The headings herein are inserted as a matter of
convenience only and do not define, limit or describe the scope of this Plan or
the intent of the provisions hereof.
3.7 No Employment or Service Rights. Nothing in the Plan shall confer upon
any Optionee the right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Company (or any Parent or Subsidiary employing or retaining such person) or of
the Optionee, which rights are hereby expressly reserved by each, to terminate
such person's Service at any time for any reason, with or without cause.
3.8 Notices. Any notice required to be given or delivered to the Company
under the Plan shall be in writing addressed to the Company at its principal
corporate offices. Any notice required to be given to an Optionee shall be in
writing and addressed to the address indicated on the option agreement executed
by the Optionee in connection with an Option grant. All notices shall be deemed
effective upon personal delivery or upon deposit in the U.S. mail, postage
prepaid and properly addressed to the party to be notified.
APPENDIX A
Defined Terms
The following terms shall have the following meanings under the Plan:
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Company's compensation committee or a committee
of one or more Board members appointed by the Board to exercise one or more
administrative functions under the Plan.
"Common Stock" means the common stock, $0.05 par value, of the Company.
"Company" means Culp, Inc., a North Carolina corporation, and any
successor corporation to all or substantially all the assets or voting stock
of Culp, Inc. that shall by appropriate action adopt the Plan.
A "Change of Control" shall be deemed to have occurred on:
(a) the date on which any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act), other than
the Company or any entity owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of Common Stock, becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act) of shares
representing more than 40% of the combined voting power of the
then-outstanding securities entitled to vote generally in the election
of directors of the Company; or
(b) the date on which (i) the Company merges with any other
entity, (ii) the Company enters into a statutory share exchange with
another entity, or (iii) the Company conveys, transfers or leases all
or substantially all of its assets to any person; provided, however,
that in the case of subclauses (i) and (ii), a Change of Control shall
not be deemed to have occurred if the stockholders of the Company
immediately before such transaction own, directly or indirectly
immediately following such transaction, more than 60% of the combined
voting power of the outstanding securities of the corporation resulting
from such transaction in substantially the same proportions as their
ownership of securities immediately before such transaction.
"Employee" means an individual who is in the employ of the Company (or
any Parent or Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and method
of performance.
"Exercise Date" means the date on which the Company shall have received
written notice of the exercise of an Option.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" per share of Common Stock on any relevant date
shall be the average closing selling price per share of Common Stock for the
ten (10) business days preceding the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange.
"Incentive Option" means an Option that satisfies the requirements of
Section 422 of the Code.
"Involuntary Termination" means the termination of the Service of any
individual by reason of:
(i) such individual's involuntary dismissal or discharge by
the Company (or any successor corporation or any Parent or Subsidiary,
as applicable) for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Company (or any successor
corporation or any Parent or Subsidiary, as applicable) which
materially reduces his or her duties and responsibilities or the level
of management to which he or she reports, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and
target bonuses under any corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of
such individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected
without the individual's consent; provided, however, that at the time
of such resignation, the Company (or any successor corporation or any
Parent or Subsidiary, as applicable) would not have reason to terminate
such individual's employment for Misconduct.
"Misconduct" means (i) the commission of any act of fraud, embezzlement
or dishonesty by a person against the Company (or any successor corporation
or any Parent or Subsidiary, as applicable), (ii) any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Company (or any successor corporation or any Parent or Subsidiary, as
applicable), (iii) intoxication with alcohol or drugs while conducting
employer business during regular business hours, (iv) a conviction of, or a
plea of guilty or nolo contendre by, such person for a criminal felony
conviction, (v) the continued failure or inability of such person to fulfill
the essential functions of his or her employment, or (vi) any other
misconduct by such person that causes or would reasonably be expected to
cause material harm to the business of the Company (or any successor
corporation or any Parent or Subsidiary, as applicable), as reasonably
determined in good faith by the Board.
"Non-Qualified Option" means an Option that does not satisfy the
requirements of Section 422 of the Code.
"Option" means an Incentive Stock Option or Non-Qualified Option
granted under the Plan.
"Optionee" means any person to whom an Option is granted under the Plan.
"Parent" means any corporation or limited liability company (other than
the Company) in an unbroken chain of entities ending with the Company,
provided each entity in the unbroken chain (other than the Company) owns, at
the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all equity interests in one of the
other entities in such chain.
"Permanent Disability" means the inability of a person to perform the
essential functions of the person's duties as an Employee by reason of any
medically determinable physical or mental impairment that is expected to
result in such person's death or has lasted or can be expected to last for a
period of six (6) consecutive months or more, as reasonably determined by the
Board.
"Plan" means the Culp, Inc. 2002 Stock Option Plan, as set forth herein.
"Plan Administrator" means either the Board or the Committee acting in
its capacity as administrator of the Plan.
"Service" means the provision of services to the Company (or any Parent
or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor,
except to the extent otherwise specifically provided in the documents
evidencing the Option grant or stock issuance.
"Stock Exchange" means either the American Stock Exchange or the New
York Stock Exchange.
"Subsidiary" means any corporation or limited liability company with
respect to which the company owns, directly or indirectly, stock or other
equity interests possessing fifty percent (50%) or more of the total combined
voting power of all classes of equity.
"Ten Percent (10%) Stockholder" means the owner of stock (as determined
under Section 424(d) of the Code) possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company (or
any Parent or Subsidiary).