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EXHIBIT 10
BASSETT FURNITURE INDUSTRIES, INCORPORATED
1997 EMPLOYEE STOCK PLAN
Effective Date: November 5, 1997
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CONTENTS
PAGE
Article 1. Establishment, Purpose, and Duration 1
Article 2. Definitions 1
Article 3. Administration 5
Article 4. Shares Subject to the Plan 6
Article 5. Eligibility and Participation 7
Article 6. Stock Options 7
Article 7. Stock Appreciation Rights 10
Article 8. Payment Shares and Restricted Stock 12
Article 9. Performance Shares 13
Article 10. Performance Measures 14
Article 11. Beneficiary Designation 15
Article 12. Deferrals 15
Article 13. Rights of Key Employees 15
Article 14. Change in Control 16
Article 15. Amendment, Modification, and Termination 18
Article 16. Withholding 19
Article 17. Indemnification 19
Article 18. Successors 20
Article 19. Legal Construction 20
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BASSETT FURNITURE INDUSTRIES, INCORPORATED
1997 EMPLOYEE STOCK PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Bassett Furniture Industries,
Incorporated, a Virginia corporation (hereinafter referred to as the
"Company"), hereby establishes an incentive compensation plan to be known as
the "Bassett Furniture Industries, Incorporated Employee Stock Plan"
(hereinafter referred to as the "Plan"), as set forth in this document. The
Plan permits the payment of compensation in shares of the Company's common
stock in lieu of cash and the grant of Nonqualified Stock Options, Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock, and Performance
Shares.
Subject to approval by the Company's shareholders, the Plan shall
become effective as of November 5, 1997 (the "Effective Date") and shall remain
in effect as provided in Section 1.3 hereof. The Plan shall not become
effective unless shareholder approval is obtained.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to
promote the success and enhance the value of the Company by linking the
personal interests of Participants to those of the Company's shareholders, and
by providing Participants with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the Company in
its ability to motivate, attract, and retain the services of Participants upon
whose judgment, interest and special effort the successful conduct of its
operation largely is dependent.
1.3 DURATION OF THE PLAN. The Plan shall commence on the
Effective Date, as described in Section 1.1 hereof, and shall remain in effect,
subject to the right of the Board of Directors to amend or terminate the Plan
at any time pursuant to Article 15 hereof, until all Shares subject to it shall
have been purchased or acquired according to the Plan's provisions. However, in
no event may an Award of an ISO be granted under the Plan after November 4,
2007.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized:
2.1 "AWARD" means, individually or collectively, a grant
under this Plan of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Payment Shares or Performance Shares.
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2.2 "AWARD AGREEMENT" means an agreement entered into by the
Company and each Participant setting forth the terms and provisions applicable
to Awards granted under this Plan.
2.3 "BOARD" or "BOARD OF DIRECTORS" means the Board of
Directors of the Company.
2.4 "CHANGE IN CONTROL" means and shall be deemed to have
occurred upon, any of the following events:
(i) The acquisition by any person, individual, entity or
"group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) (collectively, "Persons") of beneficial ownership (the phrases "beneficial
ownership," "beneficial owners" and "beneficially owned" as used herein being
within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or
more of either (i) the then outstanding shares of Common Stock (the
"Outstanding Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Voting Securities"); provided, however,
that the following acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Company, (ii) any acquisition by the Company
or any of its subsidiaries, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any of its
subsidiaries, (iv) any acquisition by any corporation with respect to which,
following such acquisition, more than 75% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors are then beneficially owned by all
or substantially all of the Persons who were the beneficial owners,
respectively, of the Outstanding Common Stock and Outstanding Voting Securities
immediately prior to such acquisition in substantially the same proportions as
their beneficial ownership, immediately prior to such acquisition, of the
Outstanding Common Stock and Outstanding Voting Securities, as the case may be;
or
(ii) Individuals who, as of November 5, 1997, constitute
the Board of Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors; provided,
however, that any individual who becomes a director subsequent to November 5,
1997 and whose election, or whose nomination for election by the Company's
shareholders, to the Board of Directors was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act), other actual or threatened solicitation of proxies or consents
or an actual or threatened tender offer; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
all or substantially all of the Persons who were the beneficial owners,
respectively, of the Outstanding Common Stock and
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Outstanding Voting Securities immediately prior to such reorganization, merger
or consolidation do not, following such reorganization, merger or
consolidation, beneficially own more than 75% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same proportions
as their beneficial ownership, immediately prior to such reorganization, merger
or consolidation, of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be; or
(iv) Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, more than 75% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned by all or substantially
all of the Persons who were the beneficial owners, respectively, of the
Outstanding Common Stock and Outstanding Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as their
beneficial ownership, immediately prior to such sale or other disposition, of
the Outstanding Common Stock and Outstanding Voting Securities, as the case may
be.
2.5 "CODE" means the Internal Revenue Code of 1986, as
amended from time to time. References to the Code shall include the valid and
binding governmental regulations, court decisions and other regulatory and
judicial authority issued or rendered thereunder.
2.6 "COMMITTEE" means the Organization, Compensation and
Nominating Committee of the Board, as specified in Article 3 herein, appointed
by the Board to administer the Plan with respect to grants of Awards.
2.7 "COMMON STOCK" means the common stock of the Company.
2.8 "COMPANY" means Bassett Furniture Industries,
Incorporated, a Virginia corporation, and any successor as provided in Article
18 herein.
2.9 "DIRECTOR" means any individual who is a member of the
Board of Directors of the Company.
2.10 "DISABILITY" with respect to a Participant, means
"disability" as defined from time to time under any long-term disability plan
of the Company or Subsidiary with which the Participant is employed.
2.11 "EARNINGS PER SHARE" means "earnings per common share" of
the Company determined in accordance with generally accepted accounting
principles that would be reported in the Company's Annual Report to
Shareholders.
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2.12 "EFFECTIVE DATE" shall have the meaning ascribed to such
term in Section 1.1 hereof.
2.13 "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor act thereto.
2.14 "FAIR MARKET VALUE" with respect to a share of the
Company's Common Stock at a particular time, shall be that value as determined
by the Committee which shall be (i) if such Common Stock is listed on a
national securities exchange, on any given date, (A) the average of the highest
and lowest market prices of shares of Common Stock, as reported on the
consolidated transaction reporting system for such exchange for that date, or
if shares of Common Stock were not traded on such date, on the next preceding
day on which shares of Common Stock were traded, or (B) if the Common Stock is
not reported on the consolidated transaction reporting system for such
exchange, the mean between the highest price and the lowest price at which the
Common Stock shall have been sold regular way on a national securities exchange
on said date, or, if no sales occur on said date, then on the next preceding
date on which there were such sales of Common Stock; or (ii) if the Common
Stock shall not be listed on a national securities exchange, the mean between
the average high bid and low asked prices last reported by the National
Association of Securities Dealers, Inc. for the over-the-counter market on said
date or, if no bid and asked prices are reported on said date, then on the next
preceding date on which there were such quotations; or (iii) if at any time
quotations for the Common Stock shall not be reported by the National
Association of Securities Dealers, Inc. for the over-the-counter market and the
Common Stock shall not be listed on any national securities exchange, the fair
market value determined by the Committee on the basis of available prices for
such Common Stock or in such other manner as the Committee may deem reasonable.
2.15 "FREESTANDING SAR" means an SAR that is granted
independently of any Options.
2.16 "INCENTIVE STOCK OPTION" or "ISO" means an option to
purchase Shares, granted under Article 6 herein, and which is designated as an
Incentive Stock Option which is intended to meet the requirements of Section
422 of the Code.
2.17 "INSIDER" shall mean an individual who is, on the
relevant date, an officer, director or ten percent (10%) beneficial owner of
any class of the Company's equity securities that is registered pursuant to
Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange
Act.
2.18 "KEY EMPLOYEE" means an employee of the Company,
including an officer of the Company, in a managerial or other important
position who can make important contributions to the Company, all as determined
by the Committee in its discretion.
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2.19 "NAMED EXECUTIVE OFFICER" means, for a calendar year, a
Participant who is one of the group of "covered employees" for such calendar
year within the meaning of Code Section 162(m) or any successor statute.
2.20 "NET INCOME" means "net income" of the Company determined
in accordance with generally accepted accounting principles that would be
reported in the Company's Annual Report to Shareholders.
2.21 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to
purchase Shares granted to Key Employees under Article 6 herein, and which is
not intended to meet the requirements of Code Section 422.
2.22 "OPERATING MARGIN" means the "operating margin" of the
Company determined in accordance with generally accepted accounting principles
as determined by the independent accountants regularly employed by the Company.
2.23 "OPTION" means an Incentive Stock Option or a
Nonqualified Stock Option.
2.24 "OPTION PRICE" means the price at which a Share may be
purchased by a Participant pursuant to an Option.
2.25 "OUTSIDE CONSULTANT" means any third party consultant
providing services to the Company to which the Committee determines to make an
Award (other than an ISO) under the Plan.
2.26 "PARTICIPANT" means a Key Employee, or to the extent
permitted by the Plan Outside Consultant, who has outstanding an Award granted
under the Plan.
2.27 "PAYMENT SHARES" means an Award granted to a Participant
pursuant to Article 8 herein (other than Restricted Stock) in lieu of cash
compensation otherwise payable to the Participant under the compensation plans
and arrangements of the Company.
2.28 "PERFORMANCE-BASED EXCEPTION" means the performance-based
exception set forth in Code Section 162(m)(4)(C) from the deductibility
limitations of Code Section 162(m).
2.29 "PERFORMANCE SHARE" means an Award granted to a Key
Employee, as described in Article 9 herein.
2.30 "PERIOD OF RESTRICTION" means the period during which the
transfer of Shares of Restricted Stock is limited in some way (based on the
passage of time, the achievement of performance goals, or upon the occurrence
of other events as determined by the Committee, at its discretion), and the
Shares are subject to a substantial risk of forfeiture, as provided in Article
8 herein.
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2.31 "RESTRICTED STOCK" means an Award granted to a
Participant pursuant to Article 8 herein (other than Payment Shares).
2.32 "RETURN ON ASSETS" means "return on average assets" of
the Company determined in accordance with generally accepted accounting
principles that would be reported in the Company's Annual Report to
Shareholders.
2.33 "RETURN ON EQUITY" means "return on average common
shareholders' equity" of the Company determined in accordance with generally
accepted accounting principles that would be reported in the Company's Annual
Report to Shareholders.
2.31 "REVENUES" means the "revenues" of the Company determined
in accordance with generally accepted accounting principles that would be
reported in the Company's Annual Report to Shareholders.
2.32 "SHARES" means the shares of Common Stock of the Company.
2.33 "STOCK APPRECIATION RIGHT" or "SAR" means an Award,
granted alone or in connection with a related Option, designated as an SAR,
pursuant to the terms of Article 7 herein.
2.34 "SUBSIDIARY" means any corporation, partnership, joint
venture, affiliate, or other entity in which the Company has an ownership
interest, and which the Committee designates as a participating entity in the
Plan.
2.35 "TANDEM SAR" means an SAR that is granted in connection
with a related Option, the exercise of which shall require forfeiture of the
right to purchase a Share under the related Option (and when a Share is
purchased under the Option, the Tandem SAR shall similarly be canceled).
2.36 "TOTAL SHAREHOLDER RETURN" means the percentage change in
value of an initial investment in Shares over a specified period assuming
reinvestment of all dividends during the period.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the
Organization, Compensation and Nominating Committee of the Board or by any
other Committee appointed by the Board consisting of not less than two (2)
Directors. The members of the Committee shall be appointed from time to time
by, and shall serve at the discretion of, the Board of Directors. Each of the
members of the Committee shall be a "Non-Employee Director" within the meaning
of Rule 16b-3 under the Exchange Act. In addition, any action taken with
respect to Named Executive Officers for purposes of meeting the
Performance-Based Exception shall be taken by the Committee only if all of the
members of the Committee are "outside directors" within the meaning of Code
Section 162(m), subject to any applicable transition rules under Code Section
162(m).
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If all of the members of the Committee are not "outside directors", such action
shall be taken by a subcommittee of the Committee comprised of at least two (2)
members who are "outside directors."
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law, or
by the Articles of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Key Employees
who shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and provisions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan; establish, amend, or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 15 herein),
amend the terms and provisions of any outstanding Award to the extent such
terms and provisions are within the discretion of the Committee as provided in
the Plan. Further, the Committee shall make all other determinations which may
be necessary or advisable for the administration of the Plan. To the extent
permitted by law, the Committee may delegate its authority hereunder.
3.3 DECISIONS BINDING. All determinations and decisions made
by the Committee pursuant to the provisions of the Plan and all related orders
and resolutions of the Board shall be final, conclusive and binding on all
persons, including the Company, its shareholders, employees, Participants, and
their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to the
provisions of this Article IV, the maximum number of Shares that may be
delivered to Participants (or their beneficiaries) under the Plan shall equal
the sum of:
(i) Nine Hundred Fifty Thousand (950,000); plus
(ii) the number of Shares available for future awards under
the Company's 1993 Long-Term Incentive Plan as of the
Effective Date; plus
(iii) any Shares that are represented by awards granted under
any prior plan of the Company which are forfeited, expire
or are canceled without the delivery of Shares or which
result in the forfeiture of Shares back to the Company.
Any Shares covered by an Award (or portion of an Award) granted under
the Plan which is forfeited, is canceled, expires or is settled in cash shall
be deemed to not have been delivered for purposes of determining the maximum
number of Shares available for delivery under the Plan. In addition, if any
Stock Option is exercised by the Participant tendering previously-acquired
Shares owned by the Participant in payment of all or a portion of the Option
Price, then only the number of Shares issued net of the Shares so tendered
shall be deemed delivered for purposes of determining the maximum number of
Shares available for delivery under the Plan. Further, Shares issued under the
Plan through the settlement, assumption or substitution of outstanding
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awards or obligations to grant future awards as a condition to the Company
acquiring another entity shall not reduce the maximum number of Shares
available for delivery under the Plan.
Notwithstanding any provision of this Plan to the contrary, the
following additional limits shall apply:
(i) No more than Nine Hundred Fifty Thousand (950,000) Shares
may cover Incentive Stock Options granted under the Plan.
(ii) The maximum number of Shares that may be covered by
Awards to an individual Participant shall not exceed Two
Hundred Eighty-Five Thousand (285,000) during any three
(3) consecutive calendar years.
The number of Shares reserved for grants of Awards and the limits on
such Awards under this Section 4.1 shall be subject to adjustment as provided
in Section 4.2.
4.2 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change
in corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether
or not such reorganization comes within the definition of such term in Code
Section 368) or any partial or complete liquidation of the Company, such
adjustment shall be made in the number and class of Shares which may be
delivered under the Plan under Section 4.1, and in the number and class of
and/or price of Shares subject to outstanding Awards granted under the Plan, as
may be determined to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights; provided, however,
that the number of Shares subject to any Award shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan
are any Outside Consultants selected by the Committee and all Key Employees of
the Company, as determined by the Committee, including Key Employees who are
Directors, but excluding Directors who are not Key Employees.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the
Plan, the Committee may, from time to time, select from any Outside Consultants
and all eligible Key Employees those to whom Awards shall be granted and shall
determine the nature and amount of each Award.
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ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of
the Plan, Options may be granted to Key Employees in such number, and upon such
terms, and at any time and from time to time as shall be determined by the
Committee. In addition, subject to the terms and provisions of the Plan, NQSOs
(but not ISOs) may be granted to Outside Consultants in such number, and upon
such terms, and at any time and from time to time as shall be determined by the
Committee
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by
an Award Agreement that shall specify the Option Price, the duration of the
Option, the number of Shares to which the Option pertains, and such other
provisions as the Committee shall determine. The Award Agreement also shall
specify whether the Option is intended to be an ISO within the meaning of
Section 422 of the Code, or an NQSO whose grant is intended not to fall under
Code Section 422.
6.3 OPTION PRICE. The Committee shall determine the Option
Price for each grant of an Option under this Plan, which such Option Price (i)
shall not be less than the Fair Market Value of a Share on the date of grant
and (ii) shall be set forth in the applicable Award Agreement.
6.4 DURATION OF OPTIONS. Each Option shall expire at such
time as the Committee shall determine at the time of grant; provided, however,
that no Option shall be exercisable later than the tenth (10th) anniversary
date of its grant.
6.5 EXERCISE OF OPTIONS. Options granted under this Article 6
shall be exercisable at such times and be subject to such restrictions and
conditions as the Committee shall in each instance approve and which shall be
set forth in the applicable Award Agreement, which need not be the same for
each grant or for each Participant.
6.6 PAYMENT. Options shall be exercised by the delivery of a
written notice of exercise to the Company, setting forth the number of Shares
with respect to which the Option is to be exercised, accompanied by full
payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
(either actually or by attestation) previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the total Option
Price (provided that the Shares which are tendered must have been held by the
Participant for at least six (6) months prior to their tender to satisfy the
Option Price), or (c) by a combination of (a) and (b).
The Committee also may allow cashless exercise as permitted under
Federal Reserve Board's Regulation G or Regulation T, subject to applicable
securities law restrictions, or by any other means which the Committee
determines to be consistent with the Plan's purpose and applicable law.
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As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may
impose such restrictions on any Shares acquired pursuant to the exercise of an
Option granted under this Article 6 as it may deem advisable, including,
without limitation, restrictions under applicable Federal securities laws,
under the requirements of any stock exchange or market upon which such Shares
are then listed and/or traded, and under any blue sky or state securities laws
applicable to such Shares.
6.8 TERMINATION OF EMPLOYMENT. Each Participant's Option
Award Agreement shall set forth the extent to which the Participant shall have
the right to exercise the Option following termination of the Participant's
employment with the Company and its Subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the
Award Agreement entered into with Participants, need not be uniform among all
Options issued pursuant to this Article 6, may reflect distinctions based on
the reasons for termination of employment and may include provisions relating
to the Participant's competition with the Company after termination of
employment. In that regard, if an Award Agreement permits exercise of an Option
following the death of the Participant, the Award Agreement shall provide that
such Option shall be exercisable to the extent provided therein by any person
that may be empowered to do so under the Participant's will, or if the
Participant shall fail to make a testamentary disposition of the Option or
shall have died intestate, by the Participant's executor or other legal
representative.
6.9 NONTRANSFERABILITY OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS. No ISO granted under this
Article 6 may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution. Further, all
ISOs granted to a Participant under the Plan shall be
exercisable during his or her lifetime only by such
Participant.
(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided
in a Participant's Award Agreement, no NQSO granted under
this Article 6 may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution.
Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs granted to a Participant under
this Article 6 shall be exercisable during his or her
lifetime only by such Participant.
6.10 NO RIGHTS. A Participant granted an Option shall have no
rights as a shareholder of the Company with respect to the Shares covered by
such Option except
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to the extent that Shares are issued to the Participant upon the due exercise
of the Option.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARS. Subject to the terms and provisions of the
Plan, SARs may be granted to Key Employees at any time and from time to time as
shall be determined by the Committee. The Committee may grant Freestanding
SARs, Tandem SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the
number of Shares covered by SARs granted hereunder (subject to Article 4
herein) and, consistent with the provisions of the Plan, in determining the
terms and provisions pertaining to such SARs. The number of Shares covered by a
Freestanding SAR shall be counted against the number of Shares available for
grants of Awards under Section 4.1, but the number of Shares covered by a
Tandem SAR shall not be so counted.
The grant price of a Freestanding SAR shall equal the Fair Market
Value of a Share on the date of grant of the SAR. The grant price of Tandem
SARs shall equal the Option Price of the related Option.
7.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for
all or part of the Shares subject to the related Option upon the surrender of
the right to exercise the equivalent portion of the related Option. A Tandem
SAR may be exercised only with respect to the Shares for which its related
Option is then exercisable.
Notwithstanding any other provision of this Plan to the contrary,
with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem
SAR will expire no later than the expiration of the underlying ISO; (ii) the
value of the payout with respect to the Tandem SAR may be for no more than one
hundred percent (100%) of the difference between the Option Price of the
underlying ISO and the Fair Market Value of the Shares subject to the
underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem
SAR may be exercised only when the Fair Market Value of the Shares subject to
the ISO exceeds the Option Price of the ISO.
7.3 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be
exercised upon whatever terms and provisions the Committee, in its sole
discretion, imposes upon them.
7.4 SAR AGREEMENT. Each SAR grant shall be evidenced by an
Award Agreement that shall specify the grant price, the term of the SAR, and
such other provisions as the Committee shall determine.
7.5 TERM OF SARS. The term of an SAR granted under the Plan
shall be determined by the Committee, in its sole discretion; provided,
however, that such term shall not exceed ten (10) years.
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7.6 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a
Participant shall be entitled to receive payment from the Company in an amount
determined by multiplying:
(a) The difference between the Fair Market Value of a Share
on the date of exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is
exercised.
At the discretion of the Committee, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, or in some combination thereof;
provided, however, that from and after the date of a Change in Control, the
exercise of an SAR may be settled only in cash.
7.7 RULE 16b-3 REQUIREMENTS. Notwithstanding any other
provision of the Plan, the Committee may impose such conditions on exercise of
an SAR (including, without limitation, the right of the Committee to limit the
time of exercise to specified periods) as may be required to satisfy the
requirements of Section 16 (or any successor provision) of the Exchange Act.
7.8 TERMINATION OF EMPLOYMENT. Each SAR Award Agreement shall
set forth the extent to which the Participant shall have the right to exercise
the SAR following termination of the Participant's employment with the Company
and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered
into with Participants, need not be uniform among all SARs issued pursuant to
the Plan, and may reflect distinctions based on the reasons for termination of
employment. In that regard, if an Award Agreement permits exercise of an SAR
following the death of the Participant, the Award Agreement shall provide that
such SAR shall be exercisable to the extent provided therein by any person that
may be empowered to do so under the Participant's will, or if the Participant
shall fail to make a testamentary disposition of the SAR or shall have died
intestate, by the Participant's executor or other legal representative.
7.9 NONTRANSFERABILITY OF SARS. Except as otherwise provided
in a Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
7.10 NO RIGHTS. A Participant granted an SAR shall have no
rights as a shareholder of the Company with respect to the Shares covered by
such SAR except to the extent that Shares are issued to the Participant upon
the due exercise of the SAR.
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ARTICLE 8. PAYMENT SHARES AND RESTRICTED STOCK
8.1 PAYMENT SHARES. The Committee may, at any time and from
time to time in its sole an exclusive discretion, grant to a Participant
Payment Shares in lieu of cash compensation otherwise payable to the
Participant under any compensation plans or arrangements of the Company, which
such Payment Shares shall have an aggregate Fair Market Value on the date of
grant equal to the amount of the cash compensation otherwise payable to the
Participant.
8.2 GRANT OF RESTRICTED STOCK. Subject to the terms and
provisions of the Plan, the Committee, at any time and from time to time, may
grant Shares of Restricted Stock to eligible Key Employees or Outside
Consultants in such amounts as the Committee shall determine.
8.3 RESTRICTED STOCK AWARD AGREEMENT. Each Restricted Stock
grant shall be evidenced by a Restricted Stock Award Agreement that shall
specify the Period of Restriction, or Periods, the number of Shares of
Restricted Stock granted, and such other provisions as the Committee shall
determine
8.4 TRANSFERABILITY. Except as provided in this Article 8,
the Shares of Restricted Stock granted herein may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified in
the Restricted Stock Award Agreement, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Restricted Stock Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant.
8.5 OTHER RESTRICTIONS. The Committee may impose such other
conditions and/or restrictions on any Shares of Restricted Stock granted
pursuant to the Plan as it may deem advisable including, without limitation, a
requirement that Participants pay a stipulated purchase price for each Share of
Restricted Stock, restrictions based upon the achievement of specific
performance goals (Company-wide, divisional, and/or individual), time-based
restrictions on vesting following the attainment of the performance goals,
and/or restrictions under applicable Federal or state securities laws.
The Company shall retain the certificates representing Shares of
Restricted Stock in the Company's possession until such time as all conditions
and/or restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8 or in the applicable
Award Agreement, Shares of Restricted Stock covered by each Restricted Stock
grant made under the Plan shall become freely transferable by the Participant
after the last day of the Period of Restriction.
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8.6 VOTING RIGHTS. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those Shares.
8.7 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of
Restriction, Participants holding Shares of Restricted Stock granted hereunder
may be credited with regular cash dividends paid with respect to the underlying
Shares while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate.
In the event that any dividend constitutes a "derivative security" or
an "equity security" pursuant to Rule 16(a) under the Exchange Act, such
dividend shall be subject to a vesting period equal to the remaining vesting
period of the Shares of Restricted Stock with respect to which the dividend is
paid.
8.8 TERMINATION OF EMPLOYMENT. Each Restricted Stock Award
Agreement shall set forth the extent to which the Participant shall have the
right to receive unvested Restricted Shares following termination of the
Participant's employment with the Company and its Subsidiaries. Such provisions
shall be determined in the sole discretion of the Committee, shall be included
in the Award Agreement entered into with Participants, need not be uniform
among all Shares of Restricted Stock issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of employment. In
amplification but not limitation of the foregoing, in the case of an award of
Restricted Stock to a Named Executive Officer which is intended to qualify for
the Performance-Based Exception, the Award Agreement may provide that such
Restricted Stock may become payable in the event of a termination of employment
by reason of death, Disability or Change in Control, such payment not to occur
before attainment of the related performance goal.
ARTICLE 9. PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE SHARES. Subject to the terms and
provisions of the Plan, Performance Shares may be granted to eligible Key
Employees or Outside Consultants in such amount and upon such terms, and at
such time(s), as shall be determined by the Committee. The number and/or
vesting of Performance Shares granted, in the Committee's discretion, shall be
contingent upon the degree of attainment of specified performance goals or
other conditions over a specified period (the "Performance Period"). The terms
and provisions of an Award of Performance Shares shall be evidenced by an
appropriate Award Agreement.
9.2 VALUE OF PERFORMANCE SHARES. The value of a Performance
Share at any time shall equal the Fair Market Value of a Share at such time.
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9.3 FORM AND TIMING OF PAYMENT OF PERFORMANCE SHARES. During
the course of a Performance Period, the Committee shall determine the number of
Performance Shares as to which the Participant has earned a right to be paid
pursuant to the terms of the applicable Award Agreement. The Committee shall
pay any earned Performance Shares as soon as practicable after they are earned
in the form of cash, Shares or a combination thereof (as determined by the
Committee) having an aggregate Fair Market Value equal to the value of the
earned Performance Shares as of the date they are earned. Any Shares used to
pay out earned Performance Shares may be granted subject to any restrictions
deemed appropriate by the Committee. In addition, the Committee, in its
discretion, may cancel any earned Performance Shares and grant Stock Options to
the Participant which the Committee determines to be of equivalent value based
on a conversion formula stated in the Performance Shares Award Agreement.
The Committee, in its discretion, may also grant dividend equivalents
rights with respect to earned but unpaid Performance Shares as evidenced by the
applicable Award Agreement. Performance Shares shall not have any voting
rights.
9.4 TERMINATION OF EMPLOYMENT. Each Performance Share Award
Agreement shall set forth the extent to which the Participant shall have the
right to receive unearned Performance Shares following termination of the
Participant's employment with the Company and its Subsidiaries. Such provisions
shall be determined in the sole discretion of the Committee, shall be included
in the Award Agreements entered into with Participants, need not be uniform
among all Performance Shares awarded pursuant to the Plan, and may reflect
distinctions based on the reasons of termination of employment. In
amplification but not limitation of the foregoing, in the case of an award of
Performance Shares to a Named Executive Officer which is intended to qualify
for the Performance-Based Exception, the Award Agreement may provide that such
Performance Shares may become payable in the event of a termination of
employment by reason of death, Disability or Change in Control, such payment
not to occur before attainment of the related performance goal.
9.5 NONTRANSFERABILITY. Except as otherwise provided in a
Participant's Award Agreement, Performance Shares may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution. Further, except as otherwise
provided in a Participant's Award Agreement, a Participant's rights under the
Plan shall be exercisable during the Participant's lifetime only by the
Participant.
ARTICLE 10. PERFORMANCE MEASURES
The performance measure(s) to be used for purposes of Awards (other
than Options) to Named Executive Officers which are designed to qualify for the
Performance-Based Exception shall be chosen from among the following
alternatives:
(a) Earnings Per Share;
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(b) Net Income;
(c) Operating Margin;
(d) Return On Assets;
(e) Return On Equity;
(f) Revenues; or
(g) Total Shareholder Return.
In the event that applicable tax and/or securities laws change to
permit Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval.
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death
before he or she receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
ARTICLE 12. DEFERRALS
The Committee may permit a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise
be due to such Participant by virtue of the exercise of an Option or SAR, the
lapse or waiver of restrictions with respect to Restricted Stock, or the
satisfaction of any requirements or goals with respect to Performance Shares.
If any such deferral election is required or permitted, the Committee shall, in
its sole discretion, establish rules and procedures for such payment deferrals.
ARTICLE 13. RIGHTS OF KEY EMPLOYEES
13.1 EMPLOYMENT. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to continue
in the employ of the Company. For purposes of this Plan, a transfer of a
Participant's employment between the Company and a Subsidiary, or between
Subsidiaries, shall not be deemed to be a termination of employment.
13.2 PARTICIPATION. No Key Employee shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to
be selected to receive a future Award.
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ARTICLE 14. CHANGE IN CONTROL
14.1 TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a
Change in Control, unless otherwise specifically prohibited under applicable
laws, or by the rules and regulations of any governing governmental agencies or
national securities exchanges:
(a) Any and all Options and SARs granted hereunder shall
become immediately exercisable, and shall remain
exercisable throughout their entire term;
(b) Any restriction periods and restrictions imposed on
shares of Restricted Stock shall lapse; and
(c) The target payout opportunities attainable under all
outstanding Awards of Restricted Stock and Performance
Shares shall be deemed to have been fully earned for the
entire Performance Period(s) as of the effective date of
the Change in Control, and the vesting of all Awards
shall be accelerated as of the effective date of the
Change in Control.
14.2 LIMITATION ON CHANGE-IN-CONTROL BENEFITS. It is the
intention of the Company and the Participants to reduce the amounts payable or
distributable to a Participant hereunder if the aggregate Net After Tax
Receipts (as defined below) to the Participant would thereby be increased, as a
result of the application of the excise tax provisions of Section 4999 of the
Code. Accordingly, anything in this Plan to the contrary notwithstanding, in
the event that the independent accountants regularly employed by the Company
immediately prior to any "change" described below (the "Accounting Firm") shall
determine that receipt of all Payments (as defined below) would subject the
Participant to tax under Section 4999 of the Code, it shall determine whether
some amount of Payments would meet the definition of a "Reduced Amount," (as
defined below). If the Accounting Firm determines that there is a Reduced
Amount, the aggregate Payments shall be reduced to such Reduced Amount in
accordance with the provisions of Section 14.2(b) below.
(a) For purposes of this Section 14.2(a):
(i) A "Payment" shall mean any payment or
distribution in the nature of compensation to
or for the benefit of a Participant who is a
"disqualified individual" within the meaning of
Section 280G(c) of the Code and which is
contingent on a "change" described in Section
280G(b)(2)(A)(i) of the Code with respect to
the Company, whether paid or payable pursuant
to this Plan or otherwise;
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(ii) "Plan Payment" shall mean a Payment paid or
payable pursuant to this Plan (disregarding
this Section 14.2);
(iii) "Net After Tax Receipt" shall mean the Present
Value of a Payment, net of all taxes imposed on
the Participant with respect thereto under
Sections 1 and 4999 of the Code, determined by
applying the highest marginal rate under
Section 1 of the Code which applied to the
Participant's Federal taxable income for the
immediately preceding taxable year;
(iv) "Present Value" shall mean such value
determined in accordance with Section
280G(d)(4) of the Code; and
(v) "Reduced Amount" shall mean the smallest
aggregate amount of Payments which (A) is less
than the sum of all Payments and (B) results in
aggregate Net After Tax Receipts which are
equal to or greater than the Net After Tax
Receipts which would result if all Payments
were paid to or for the benefit of the
Participant.
(b) If the Accounting Firm determines that aggregate Payments
should be reduced to the Reduced Amount, the Committee
shall promptly give the Participant notice to that effect
and a copy of the detailed calculation thereof, and the
Participant may then elect, in the Participant's sole
discretion, which and how much of the Payments, including
without limitation Plan Payments, shall be eliminated or
reduced (as long as after such election the Present Value
of the aggregate Payments is equal to the Reduced
Amount), and shall advise the Committee in writing of
such election within ten (10) days of the Participant's
receipt of notice. If no such election is made by the
Participant within such ten (10) day period, the
Committee may elect which of the Payments, including
without limitation Plan Payments, shall be eliminated or
reduced (as long as after such election the Present Value
of the aggregate Payments is equal to the Reduced Amount)
and shall notify the Participant promptly of such
election. All determinations made by the Accounting Firm
under this Section 14.2 shall be binding upon the Company
and the Participant and shall be made within sixty (60)
days immediately following the event constituting the
"change" referred to above. As promptly as practicable
following such determination, the Company shall pay to or
distribute for the benefit of the Participant such
Payments as are then due to the Participant under this
Plan.
(c) At the time of the initial determination by the
Accounting Firm hereunder, it is possible that amounts
will have been paid or distributed by the Company to or
for the benefit of the Participant pursuant to this Plan
which should not have
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been so paid or distributed ("Overpayment") or that
additional amounts which will have not been paid or
distributed by the Company to or for the benefit of the
Participant pursuant to this Plan could have been so paid
or distributed ("Underpayment"), in each case, consistent
with the calculation of the Reduced Amount hereunder. In
the event that the Accounting Firm, based either upon the
assertion of a deficiency by the Internal Revenue Service
against the Company or the Participant which the
Accounting Firm believes has a high probability of
success or controlling precedent or other substantial
authority, determines that an Overpayment has been made,
any such Overpayment paid or distributed by the Company
to or for the benefit of the Participant shall be treated
for all purposes as a loan ab initio to the Participant
which the Participant shall repay to the Company together
with interest at the applicable Federal rate provided for
in Section 7872(f)(2) of the Code; provided, however,
that no such loan shall be deemed to have been made and
no amount shall be payable by the Participant to the
Company if and to the extent such deemed loan and payment
would not either reduce the amount on which the
Participant is subject to tax under Section 1 and Section
4999 of the Code or generate a refund of such taxes.
In the event that the Accounting Firm, based upon
controlling precedent or other substantial authority,
determines that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or
for the benefit of the Participant together with interest
at the applicable Federal rate provided for in Section
7872(f)(2) of the Code.
14.3 TERMINATION, AMENDMENT, AND MODIFICATIONS OF
CHANGE-IN-CONTROL PROVISIONS. Notwithstanding any other provision of this Plan
or any Award Agreement provision, the provisions of this Article 14 may not be
terminated, amended, or modified on or after the date of a Change in Control to
affect adversely any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards; provided, however, the Board of Directors, upon
recommendation of the Committee, may terminate, amend, or modify this Article
14 at any time and from time to prior to the date of a Change in Control.
ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION
15.1 AMENDMENT, MODIFICATION, AND TERMINATION. The Board may
at any time and from time to time, alter, amend, suspend or terminate the Plan
in whole or in part. The Committee shall not have the authority to cancel
outstanding Awards and issue substitute Awards in replacement thereof.
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15.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
15.3 ACCELERATION OF AWARD VESTING; WAIVER OF RESTRICTIONS.
Notwithstanding any provision of this Plan or any Award Agreement provision to
the contrary, the Committee, in its sole and exclusive discretion, shall have
the power at any time to (i) accelerate the vesting of any Award granted under
the Plan, including without limitation, acceleration to such a date that would
result in said Awards becoming immediately vested, or (ii) waive any
restrictions of any Award granted under the Plan.
ARTICLE 16. WITHHOLDING
16.1 TAX WITHHOLDING. The Company shall have the power and the
right to deduct or withhold, or require a Participant to remit to the Company,
an amount sufficient to satisfy Federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of this Plan.
16.2 SHARE WITHHOLDING. With respect to withholding required
upon the exercise of Options or SARs, upon the lapse of restrictions on
Restricted Stock, or upon any other taxable event arising as a result of Awards
granted hereunder, Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares having a Fair Market Value on the date as of
which the tax is to be determined equal to the minimum statutory total tax
which could be imposed on the transaction. All such elections shall be made in
writing, signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
ARTICLE 17. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or
of the Board, shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him or her in
settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against
him or her, provided he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which
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such persons may be entitled under the Company's Articles of Incorporation or
Bylaws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
ARTICLE 18. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.
ARTICLE 19. LEGAL CONSTRUCTION
19.1 GENDER AND NUMBER. Except where otherwise indicated by
the context, any masculine term used herein also shall include the feminine;
the plural shall include the singular and the singular shall include the
plural.
19.2 SEVERABILITY. In the event any provision of the Plan
shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.
19.3 REQUIREMENTS OF LAW. The granting of Awards and the
issuance of Shares under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
19.4 SECURITIES LAW COMPLIANCE. With respect to Insiders,
transactions under this Plan are intended to comply with all applicable
conditions or Rule 16b-3 or its successors under the Exchange Act. To the
extent any provision of the plan or action by the Committee fails to so comply,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
19.5 GOVERNING LAW. To the extent not preempted by Federal
law, the Plan, and all agreements hereunder, shall be construed in accordance
with and governed by the laws of the Commonwealth of Virginia.
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