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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 [X]
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))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Bassett Furniture Industries, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] 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:
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[ ] 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
2-20-98
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BASSETT FURNITURE INDUSTRIES, INCORPORATED
BASSETT, VIRGINIA
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 24, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Bassett Furniture Industries, Incorporated (the Company) will be held at the
Bassett Country Club, Oak Level Road at Highway 57 West, Bassett, Virginia, on
Tuesday, March 24,1998, at 11:30 a.m., Local Time, for the purpose of
considering and acting upon the following:
1. The election of thirteen Directors.
2. A proposal to approve the Bassett Furniture Industries,
Incorporated 1997 Employee Stock Plan.
3. A proposal to ratify the selection of Arthur Andersen LLP as
independent public accountants for the fiscal year ending
November 28, 1998.
4. A shareholder proposal requesting that the Board of Directors
amend the Bylaws to require that the Chairperson of the Board
of Directors be an independent director.
5. Any and all other matters that may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February 18,
1998 as the record date for determining the stockholders entitled to notice of
and to vote at the meeting and any adjournment thereof, and only holders of
Common Stock of the Company of record at such date will be entitled to notice
of or to vote at the meeting.
THE BOARD OF DIRECTORS WILL APPRECIATE THE PROMPT RETURN OF THE
ENCLOSED PROXY, DATED AND SIGNED. THE PROXY MAY BE REVOKED BY YOU AT ANY TIME
BEFORE IT IS EXERCISED AND WILL NOT BE EXERCISED IF YOU ATTEND THE MEETING AND
VOTE IN PERSON.
By Order of the Board of Directors
Paul Fulton
Chairman and Chief Executive Officer
Bassett, Virginia
February 20, 1998
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BASSETT FURNITURE INDUSTRIES, INCORPORATED
Post Office Box 626, Bassett, Virginia 24055
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of proxies to be used at the Annual Meeting of
Stockholders of Bassett Furniture Industries, Incorporated (the Company) to be
held at Bassett Country Club, Oak Level Road at Highway 57 West, Bassett,
Virginia, at 11:30 a.m., Local Time, on Tuesday, March 24, 1998. This Proxy
Statement and accompanying proxy are being sent to the stockholders of the
Company on or about February 20, 1998.
Solicitation other than by mail may be made personally and by
telephone by regularly employed officers and employees of the Company who will
not be additionally compensated therefor. The Company will request brokers,
dealers, banks or voting trustees, or their nominees, who hold stock in their
names for others or hold stock for others who have the right to give voting
instructions, to forward proxy materials to their principals and request
authority for the execution of the proxy and will reimburse such institutions
for their reasonable expenses in so doing. The total cost of soliciting
proxies will be borne by the Company.
Any proxy delivered in the accompanying form may be revoked by the
person executing the proxy at any time, before the authority thereby granted is
exercised, by written request addressed to Douglas W. Miller, Vice President
and Chief Financial Officer, Bassett Furniture Industries, Incorporated, Post
Office Box 626, Bassett, Virginia 24055 or by attending the meeting and
electing to vote in person. Proxies received in such form will be voted as
therein set forth at the meeting or any adjournment thereof.
The only matters to be considered at the meeting, so far as known to
the Board of Directors, are the matters set forth in the Notice of Annual
Meeting of Stockholders, and routine matters incidental to the conduct of the
meeting. However, if any other matters should come before the meeting or any
adjournment thereof, it is the intention of the persons named in the
accompanying form of proxy, or their substitutes, to vote said proxy in
accordance with their judgment on such matters.
Stockholders present or represented and entitled to vote on a matter
at the meeting or any adjournment thereof will be entitled to one vote on such
matter for each share of the Common Stock of the Company held by them of record
at the close of business on February 18, 1998, which is the record date for
determining the stockholders entitled to notice of and to vote at such meeting
or any adjournment thereof. Voting on all matters, including the election of
Directors, will be by voice vote or by show of hands. The number of shares of
Common Stock of the Company outstanding on February 18, 1998 was 13,051,279.
PRINCIPAL STOCKHOLDERS AND HOLDINGS OF MANAGEMENT
At February 2, 1998, the only persons known to the Company to be the
beneficial owners of more than 5% of the $5.00 par value Common Stock of the
Company (the Common Stock) was as follows:
NUMBER OF SHARES
NAME AND ADDRESS OF AND NATURE OF PERCENT OF COMMON
BENEFICIAL OWNER BENEFICIAL OWNERSHIP STOCK OUTSTANDING
- -------------------------- ----------------------------- ------------------------------
Bassett Employee Savings/ 945,836(1) 7.25%
Retirement Plan
Douglas W. Miller, Trustee
Bassett, Virginia 24055
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NUMBER OF SHARES
NAME AND ADDRESS OF AND NATURE OF PERCENT OF COMMON
BENEFICIAL OWNER BENEFICIAL OWNERSHIP STOCK OUTSTANDING
- -------------------------- ----------------------------- ------------------------------
Lazard Freres Inc. 742,800(2) 5.69%
30 Rockefeller Plaza
New York, NY 10020
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(1) In his capacity as Trustee, Douglas W. Miller, Vice President of the
Company, has sole voting and dispositive power over these shares.
(2) The information concerning beneficial ownership has been provided to the
Company by Lazard Freres, Inc. (Lazard). Lazard has sole voting power
over all of these shares, sole dispositive power of 697,300 shares and
shared dispositive power over none of these shares.
The following table sets forth, as of February 2, 1998, information as
to the beneficial ownership of the Common Stock by all Directors and executive
officers of the Company as a group and by the named Executive Officers who are
not also nominees for Directors. Information with respect to the beneficial
ownership of the Common Stock by the nominees for Directors is contained in the
table under "Election of Directors."
NUMBER OF SHARES
NAME OF AND NATURE OF PERCENT OF COMMON
BENEFICIAL OWNER BENEFICIAL OWNERSHIP STOCK OUTSTANDING(1)
- ---------------- -------------------- --------------------
Directors and executive 1,553,430(2,3) 11.55%
officers as a group
(25 persons)
Richard W. Downing 8,463(4,5) (6)
Grover S. Elliott 4,455(4) (6)
Glenn A. Hunsucker(7) 21,822(4) (6)
Douglas W. Miller 952,030(3,4) 7.29%
J. C. Philpott 21,740(4) (5)
Robert H. Spilman, Sr.(8) 155,450(4,9) 1.19%
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(1) Based on the number of shares outstanding plus options held by
directors and executive officers that are currently exercisable or
that are exercisable within 60 days.
(2) Includes 404,329 shares subject to options held by directors and
executive officers that are currently exercisable or that are
exercisable within 60 days.
(3) Includes 945,836 shares of Common Stock held by the Company's Employee
Savings/ Retirement Plan, for which Douglas W. Miller, Vice President
of the Company, has sole voting and dispositive power in his capacity
as Trustee.
(4) Includes shares subject to options that are currently exercisable or
that are exercisable within 60 days as follows: Richard Downing 3,000;
Grover Elliott 1,500; Glenn Hunsucker 17,939; Douglas Miller 2,500; J.
C. Philpott 13,999; and Robert H. Spilman, Sr. 28,590. Also includes
shares of restricted stock as follows: Richard Downing 4,063; Grover
Elliott 2,955; Douglas Miller 3,694; and J. C. Philpott 2,216.
(5) Includes 100 shares held by Mr. Downing's wife and 200 shares held by
certain trusts for which Mr. Downing serves as trustee.
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(6) Less than 1% of the outstanding Common Stock.
(7) Glenn A. Hunsucker resigned as an executive officer and director of
the Company on May 7, 1997.
(8) Robert H. Spilman, Sr. retired as Chairman of the Board and Chief
Executive Officer of the Company on July 7, 1997. He is the father of
Robert H. Spilman, Jr., President and Chief Operating Officer of the
Company and a director.
(9) Includes 106,897 shares held by Mr. Spilman's wife, held by certain
trusts for which Mr. Spilman's wife serves as trustee, and shares held
by a trust for which Mr. Spilman serves as trustee. Mr. Spilman
disclaims ownership of these shares.
ELECTION OF DIRECTORS
The Bylaws of the Company provide for thirteen Directors. At the
meeting, thirteen Directors will be elected to serve, subject to the provisions
of the Bylaws, until the 1999 Annual Meeting of Stockholders and until their
successors are duly elected and qualified. Directors are elected by a
plurality of the votes cast by the holders of the shares entitled to vote at a
meeting at which a quorum is present. Provided a quorum is present,
abstentions and shares not voted are not taken into account in determining a
plurality. A quorum consists of a majority of votes entitled to be cast. It
is the intention of the persons named in the accompanying proxy to vote all
proxies solicited by the Board of Directors FOR the thirteen nominees listed
below unless authority to vote for the nominees or any individual nominee is
withheld by a stockholder in such stockholder's proxy. If for any reason any
nominee shall not become a candidate for election as a Director at the meeting,
an event not now anticipated, the proxies will be voted for the thirteen
nominees including such substitutes as shall be designated by the Board of
Directors.
The thirteen nominees for election as a Director are listed below.
All of the nominees are currently members of the Board of Directors. They were
elected to their current terms, which expire in 1998, at the Annual Meeting of
Stockholders held on February 19, 1997, except that Amy Woods Brinkley, Willie
D. Davis, Howard H. Haworth, Michael Murphy and Robert H. Spilman, Jr. were
elected on February 10, 1998, January 13, 1998, January 13, 1998, August 6,
1997 and May 7, 1997, respectively, by the Board of Directors to fill vacancies
created by the resignations of Glenn A. Hunsucker, Robert H. Spilman, Sr. and
John W. Snow and increases in the size of the Board of Directors.
PERCENT OF
OFFICES WITH THE COMPANY OR OTHER SHARES OF COMMON
NAME AND OCCUPATION DURING COMMON STOCK STOCK
DIRECTOR SINCE AGE PAST FIVE YEARS OWNED(1) OUTSTANDING(1)
--------------- --- --------------- -------- --------------
Amy Woods Brinkley 42 Executive Vice President and 0 (2)
1998 Marketing Group Executive,
NationsBank Corporation (bank holding
company). Director of MECA Software.
Peter W. Brown, M.D. 55 Partner, Virginia Surgical Associates 4,776(3) (2)
1993 of Richmond (general surgery).
Director of America's Utility Fund
and Dominion Resources, Inc.
Thomas E. Capps 62 Chairman of the Board, President and 2,712(3) (2)
1989 Chief Executive Officer, Dominion
Resources, Inc. (electric utility
holding company). Director of
Dominion Resources, Inc. and
NationsBank Corporation.
Willie D. Davis 63 President of All Pro Broadcasting, 0 (2)
1997 Inc. (radio broadcasting). Director
of Sara Lee Corporation, K-Mart
Corp., Dow Chemical Company, MGM
Grand Inc., Alliance Bank, WICOR
Inc., Johnson Controls, Inc., LA
Gear, Inc. Strong Capital Management
Fund and Rally's Inc.
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PERCENT OF
OFFICES WITH THE COMPANY OR OTHER SHARES OF COMMON
NAME AND OCCUPATION DURING COMMON STOCK STOCK
DIRECTOR SINCE AGE PAST FIVE YEARS OWNED(1) OUTSTANDING(1)
--------------- --- --------------- -------- --------------
Alan T. Dickson 66 Chairman of the Board since 1994 and 3,875(3) (2)
1989 President from 1968 to 1994 of
Ruddick Corporation (diversified
holding company); Director of Lance,
Inc., NationsBank Corporation and
Sonoco Products Company .
Paul Fulton 63 Chairman and Chief Executive Officer 254,785(4) 1.92%
1993 of the Company since 1997; Dean of
the Kenan-Flagler Business School of
the University of North Carolina at
Chapel Hill from 1994 to 1997;
President of Sara Lee Corporation
(packaged food and consumer products)
until 1993; Director of Sonoco
Products Company, NationsBank
Corporation, Cato Corporation,
Hudson's Bay Company and Lowe's
Companies, Inc.
William H. Goodwin, Jr. 57 Chairman of the Board of CCA 21,285(3) (2)
1992 Industries, Inc. (diversified holding
company); Director of First Union
Corporation; Board of Visitors,
University of Virginia.
Howard H. Haworth 63 President, Haworth Group since 1984 0 (2)
1997 (personal and family investment
group). Director of First Union
Corporation.
James W. McGlothlin 57 Chairman of the Board and Chief 22,468(3) (2)
1981 Executive Officer, The United Company
(energy, real estate, financial
services, hotel and golf properties,
retail and industrial supplies).
Director of CSX Corporation.
Thomas W. Moss, Jr. 69 Speaker of the Virginia House of 1,100(5) (2)
1996 Delegates; Senior Partner of the law
firm Thomas W. Moss, Jr., P.C.
Director of Star Oil & Gas, Ltd.,
Goodman-Segar-Hogan-Hoffler, Inc. and
Saxon Mortage, Inc.
Michael E. Murphy 61 Private investor. Vice Chairman and 1,000 (2)
1997 Chief Administrative Officer of Sara
Lee Corporation, 1994 to 1997;
Executive Vice President and Chief
Financial and Administrative Officer
from 1993 to 1994, Director of GATX
Corporation, Payless ShoeSource,
Inc., True North Communications Inc.,
Northwestern Memorial Corporation,
and American General Corporation.
Albert F. Sloan 68 Private investor. Chairman of the 2,387(2) (2)
1984 Board and Chief Executive Officer
Lance, Inc. 1976 to 1990; Chairman of
the Board until 1991(snack foods).
Director of PCA International, Inc.,
Richfoods Holdings, Inc. and Cato
Corporation.
Robert H. Spilman, Jr. 41 President and Chief Operating Officer 179,078(6) 1.36%
1997 of the Company since 1997; Executive
Vice President, Marketing and
Merchandising, 1993 to 1997.
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(1) Based on the number of shares outstanding as of February 2, 1998 plus
options held by directors and executive officers that are currently
exercisable or that are exercisable within 60 days of such date.
(2) Less than 1% of the outstanding Common Stock.
(3) Includes 2,000 shares subject to options that are currently exercisable
or exercisable within 60 days.
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(4) Includes 250,000 shares that are subject to options that are presently
exercisable or are exercisable within 60 days.
(5) Includes 1,000 shares that are subject to an option that is presently
exercisable or are exercisable within 60 days.
(6) Includes 92,714 shares that are subject to options that are presently
exercisable or exercisable within 60 days, 12,835 shares held by Mr.
Spilman's wife, 23,884 shares held by his children, and 20,477 shares
held in trusts of which Mr. Spilman is beneficiary.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met six times during the 1997 fiscal year.
Each Director attended at least 75% of the meetings of the Board of Directors
and Committees on which such director served, except for Mr. McGlothlin, who
attended 66% of the meetings of the Board of Directors and Mr. Moss, who
attended 66% of the meetings of the Audit Committee. The Board of Directors'
committees include an Audit Committee and an Organization, Compensation and
Nominating Committee.
The Audit Committee is currently composed of Messrs. Brown, Dickson
and Moss. Messrs. Capps, Fulton and Sloan also served on the Audit Committee
during the fiscal year. The Audit Committee is responsible for monitoring the
performance of the independent auditors for the Company, recommending their
engagement or dismissal to the Board of Directors, approving all audit and
related fees and reviewing and evaluating the internal auditor's audit
schedule. The Audit Committee met three times during the fiscal year.
The Organization, Compensation and Nominating Committee is currently
composed of Messrs. Capps and Sloan. Messrs. Dickson, Goodwin, McGlothlin and
Snow served on the Organization, Compensation and Nominating Committee during
the fiscal year. The Organization, Compensation and Nominating Committee
reviews and makes recommendations to the Board of Directors with respect to
executive and officer compensation; establishes, reviews and recommends changes
to the organizational structure of the Company so as to utilize the management
resources to best respond to the changing demands of the marketplace; reviews
the individual performance of each director in terms of overall contribution to
the betterment of the Company, including meeting attendance and participation;
reviews the composition of the Board, and; recommends a slate of directors for
nomination to the Board. The Organization, Compensation and Nominating
Committee met four times during the fiscal year.
ORGANIZATION, COMPENSATION AND NOMINATING COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Mr. McGlothlin, a member of the Organization, Compensation and
Nominating Committee during the fiscal year, is Chairman of the Board and Chief
Executive Officer of The United Company. Blue Ridge Industrial Supply Company,
a subsidiary of The United Company, had sales of approximately $1,450,000 to
the Company in the 1997 fiscal year. The prices charged by Blue Ridge
Industrial Supply Company were negotiated on an arms-length basis and the
Company believes such prices are at or below the prices charged for comparable
products by other companies in the area. Mr. McGlothlin's daughter is a member
of a limited liability company licensed by the Company as an authorized
retailer to sell certain of the Company's products in stores bearing the
Company's name. In connection with the license agreement the Company has
executed a guaranty, on which no payments have been due, with respect to the
limited liability company's lease of its retail premises and certain equipment.
The Company's maximum exposure pursuant to such guaranties is approximately
$300,000 per year for five years. The terms of the license agreement and the
guaranties were negotiated on an arms-length basis and are comparable to the
Company's arrangements with other authorized retailers. Transactions between
the Company's authorized retailers, including the limited liability company of
which Mr. McGlothlin's daughter is a member, are negotiated on an arms-length
basis. Robert H. Spilman, Sr., former Chairman of the Board and Chief
Executive Officer of the Company, served on the Organization and Compensation
Committee of the Board of Directors of Dominion Resources, Inc. during the
fiscal year. Thomas E. Capps, a member of the Company's Board of Directors, is
Chairman of the Board, President and Chief Executive Officer of Dominion
Resources, Inc.
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ORGANIZATION, COMPENSATION AND NOMINATING COMMITTEE REPORT
The Organization, Compensation and Nominating Committee of the Board
of Directors has assisted the Company in developing and implementing
compensation policies and programs which seek to improve the profitability of
the Company and to maximize stockholder value over time. To accomplish this,
the directors who comprise the Organization, Compensation and Nominating
Committee have developed executive compensation policies which are consistent
with, and directly linked to, the Company's business objectives. These
business objectives represent a composite of factors that are considered
important for the future success of the Company. These factors attempt to
balance long and short-term performance, including the continued maintenance
of a strong balance sheet, growth of pre-tax profitability and earnings per
share, control of costs, market growth and diversification and other criteria
which may be introduced over time as a result of changes in the household
furniture environment. The members of the Organization, Compensation and
Nominating Committee deliberate on matters affecting executive compensation.
The decisions are reviewed by the full Board, with the exception of decisions
on stock or option awards which are made by the Organization, Compensation and
Nominating Committee to satisfy tax law requirements.
The key principles which the Organization, Compensation and Nominating
Committee emphasizes in developing compensation programs affecting senior
executives are:
- Paying for performance that emphasizes corporate, business unit
and individual achievement.
- Motivating senior executives to the achievement of strategic and
tactical business goals and objectives and rewarding outstanding
achievement.
- Linking the interests of senior executives with the long-term
interests of the stockholders through ownership of the Common
Stock.
As the level of responsibility increases, an executive's compensation
will be proportionately at greater risk, reflecting the rewards earned as a
result of goal attainment. As responsibility increases, the compensation mix
will rely increasingly on the value of stock awards.
The four components of executive compensation are:
Base Salary. Base salaries are generally competitive with
high-performing, similar-sized companies in the industry. In recent years the
base salaries have been kept at a relatively fixed rate to reflect the general
economic conditions of the industry and to keep fixed costs under control.
Increases in base salary have been the result of increased responsibilities
assumed by an executive officer and profitability of the Company or a business
unit in an increasingly competitive industry. The Organization, Compensation
and Nominating Committee emphasizes rewards in the total compensation context,
rather than increasing base salary.
Annual Incentive Bonuses. Target annual incentives are established
for each executive in the form of a percentage of base salary. Discretionary
adjustments to targets are made based on performance criteria, subjectively
applied, which include the continued maintenance of a strong balance sheet,
growth of pre-tax profitability and earnings per share, control of costs,
market growth and diversification and other criteria which may be introduced
over time as a result of changes in the household furniture environment.
Annual bonuses are considered part of the total compensation package and
represent a targeted portion of such total compensation. There were
approximately 330 participants in the executive and management incentive plans
for the 1997 fiscal year.
Annual Stock Option Grants. The Organization, Compensation and
Nominating Committee may grant options to acquire shares of Company Common
Stock to those key executives who, in their judgment, have achieved goals and
objectives as described in the corporate business plans.
The performance criteria used to determine the eligibility to receive
a stock option include growth of pre-tax profitability and earnings per share,
control of costs, market growth and diversification, continued maintenance of a
strong balance sheet and other criteria which may be introduced over time as a
result of changes in the household furniture environment. The number of option
shares granted to each executive is determined by taking a percentage of the
total cash compensation and dividing that amount by the fair market value per
share at the date of grant. The
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percentage is set annually by the Organization, Compensation and Nominating
Committee on a subjective basis, based upon individual performance. Stock
option grants are considered part of the total compensation package and
represent a targeted portion of such total compensation.
Benefits. These programs are designed to provide protection against
financial catastrophe that can result from illness, disability or death.
Benefits offered to senior executives are those offered to all employees, with
certain variations, to promote tax efficiency and replacement of benefits lost
due to regulatory limitations.
The Organization, Compensation and Nominating Committee believes that
executive compensation programs serve the interest of the stockholders of the
Company. Pay delivered to the senior executive is intended to emphasize the
achievement of goals and objectives of the Company. At risk, performance-based
bonus compensation averaged approximately 45% of total annual cash compensation
for the named Executive Officers during the fiscal year ended November 30,
1997. The range of bonus compensation can be from zero to a multiple of base
salary, depending upon performance against goals and objectives for the year.
The use of equity in the form of stock option grants requires executives to
invest in the company they manage, and stockholder value creation becomes
important, as with other stockholders.
In addition, in connection with his retirement from the Company, the
Company entered into a consulting agreement with Glenn A. Hunsucker, former
President and Chief Operating Officer of the Company. Pursuant to the
Consulting Agreement, Mr. Hunsucker will provide consulting services to the
Company when and as requested by the Company, and will be paid $75,000 per year
for a period of two years.
Chief Executive Officer's 1997 Compensation. Robert H. Spilman, Sr.
who served as Chairman of the Board and Chief Executive Officer of the Company
until July 7, 1997, and Paul Fulton who was appointed Chief Executive Officer
on July 7, 1997, were each eligible during fiscal 1997 to participate in the
same compensation programs available to other senior executives. The
Organization, Compensation and Nominating Committee seeks to be competitive
with high-performing, similar-sized companies in the household furniture
industry in the context of total compensation, placing more emphasis on at-risk
incentives than on base salary. While this performance-driven compensation may
produce variable compensation over the years, it is the belief of the
Organization, Compensation and Nominating Committee that this approach focuses
the executive on the achievement of short and long-term goals and objectives
which enhance stockholder value.
The Organization, Compensation and Nominating Committee determines,
subjectively, the emphasis and importance of the above criteria each year to
reflect the economic conditions of the household furniture industry and that of
the Company.
The base salary component of total compensation for Mr. Spilman, Sr.
for fiscal year 1997 was $489,250 on an annualized basis. Mr. Spilman, Sr.'s
salary was competitive when compared to company size, performance and position
within the industry.
The annual bonus paid to Mr. Spilman, Sr. was based upon the
subjective application of the objective performance criteria stated above. The
annual bonus for fiscal year 1997 was determined using these criteria and then
pro rated to reflect his retirement prior to the end of the fiscal year,
resulting in a payment of $135,000. This would have represented a bonus equal
to $202,500 on an annualized basis, which was no change from 1996. No stock
options were awarded to Mr. Spilman, Sr. in 1997. Mr. Spilman, Sr. is
entitled to certain benefits pursuant to a Deferred Compensation Agreement
under the Company's Executive Employee Deferred Compensation Plan and certain
payments pursuant to the Company's Supplemental Retirement Income Plan.
Amounts paid pursuant to such plans were paid in conjunction with Mr. Spilman,
Sr.'s retirement and not as part of his compensation as Chief Executive
Officer.
Paul Fulton was named as successor to Mr. Spilman, Sr. on May 6, 1997.
The base salary component of total compensation for Mr. Fulton for fiscal year
1997 was $300,000, on an annualized basis, which is approximately 39% less than
the base salary component of Mr. Spilman's total compensation. The annual
bonus paid to Mr. Fulton was based upon the subjective application of the
objective performance criteria stated above. The annual bonus for fiscal year
1997 was determined using these criteria and then pro rated to reflect his
employment by the Company for only a portion of the fiscal year, resulting in a
payment of $150,201. This would have represented a bonus equal to $375,000
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on an annualized basis. This reduction in base salary and increase in bonus
from the compensation package created for Mr. Spilman, Sr. reflects the
Committee's decision to cause a greater percentage of each executive officer's
compensation to be subject to the attainment of certain performance goals. In
addition, in connection with Mr. Fulton's employment by the Company, Mr. Fulton
was granted an option to purchase 250,000 shares of Common Stock on May 6,
1997. This option became exercisable (a) with respect to125,000 shares upon
satisfaction of both of the following (i) the price of the Company's Common
Stock as reported by NASDAQ equaled or exceeded $29 per share and (ii) such
option had been held for six months and (b) become exercisable with respect to
the remaining 125,000 shares on November 6, 1997, provided, however, shares
acquired upon exercise of such latter portion of the option may not be sold
until the earlier of May 6, 2002 and the price of the Common Stock as reported
by NASDAQ equaling or exceeding $37 per share for ten consecutive days.
For fiscal year 1998, the Organization, Compensation and Nominating
Committee will again establish performance criteria designed to enhance
stockholder value. These criteria will be consistent with financial objectives
of the Company and will be representative of the success needed to insure
growth and profitability.
Thomas E. Capps, Chairman
Albert F. Sloan
James W. McGlothlin, former Chairman
Alan T. Dickson, former member
William H. Goodwin, Jr., former member
STOCKHOLDER RETURN PERFORMANCE GRAPH
Presented on the following page is a line graph comparing the yearly
percentage change in the cumulative total stockholder return on the Company's
Common Stock against the cumulative total return of the Standard & Poor's 500
Index and the Company's New Peer Group for the period commencing December 1,
1992 and ending November 30, 1997, covering the Company's five fiscal years
ended November 30, 1997, and a line graph comparing the yearly percentage
change in the cumulative total stockholder return on the Company's Common Stock
against the cumulative total return of the Standard & Poor's 500 Index and the
Company's Old Peer Group for the period commencing December 1, 1992 and ending
November 30, 1997, covering the Company's five fiscal years ended November 30,
1997. The Company's Old Peer Group (the Old Peer Group) consisted of nine
publicly traded companies: the Company, Ameriwood Industries International
Corporation, Bush Industries, Inc. Class A Common Stock, DMI Furniture, Inc.,
La-Z-Boy Incorporated, Ladd Furniture, Inc., Masco Corp., Pulaski Furniture
Corp. and Rowe Furniture Corp. The Company's New Peer Group consists of ten
publicly-traded companies: the Company, Bush Industries, Inc. Class A Common
Stock, Chromcraft Revington Inc., Ethan Allen Interiors, Inc., Furniture Brands
International, Inc., La-Z-Boy Incorporated, Ladd Furniture, Inc., Pulaski
Furniture Corp., Rowe Furniture Corp. and Stanley Furniture Company, Inc., each
of which is in the household furniture industry. The Company believes that the
New Peer Group more accurately reflects companies that are in businesses
comparable to the Company, eliminating certain companies engaged in the
ready-to-assemble and other distinguishable sectors of the furniture industry
and adding others engaged in business that more closely resembles the Company.
These graphs assume that $100 was invested in the Company's Common Stock on
December 1, 1992, in the S&P 500 Index ,the New Peer Group and the Old Peer
Group and that dividends were reinvested.
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COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG THE COMPANY,
S&P 500 INDEX AND THE NEW PEER GROUP
[GRAPH]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG THE COMPANY,
S&P 500 INDEX AND THE OLD PEER GROUP
[GRAPH]
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EXECUTIVE COMPENSATION
The table below shows the compensation paid or accrued by the Company
for the three fiscal years ended November 30, 1997, to or for the account of
each individual who served during fiscal 1997 as the Chief Executive Officer,
the Company's four other most highly compensated officers who were serving at
the end of the fiscal year and whose total annual salary and bonus exceeded
$100,000 for the 1997 fiscal year and two additional officers who would have
been included with such four executive officers had they been serving as
officers at the end of the fiscal year (collectively, the named Executive
Officers).
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------
LONG TERM
ANNUAL COMENSATION COMPENSATION
- -----------------------------------------------------------------------------------------------------------------
RESTRICTED SECURITIES ALL OTHER
OTHER ANNUAL STOCK UNDERLYING COMPEN-
NAME AND FISCAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS SATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) ($) (#SH) ($)(4)
- ---
Robert H. Spilman, Sr.(5) 1997 326,167 135,000 --- 0 0 200,176(6)
Chairman of the Board and 1996 475,000 202,500 --- 0 0 9,919
Chief Executive Officer 1995 450,000 225,000 --- 0 0 9,919
- -----------------------------------------------------------------------------------------------------------------
Paul Fulton(5) 1997 120,161 150,201 --- 0 250,000 0
Chairman of the Board and
Chief Executive Officer
- -----------------------------------------------------------------------------------------------------------------
Robert H. Spilman, Jr. 1997 175,000 174,583 --- 0 80,000 5,635
President and Chief 1996 135,000 45,000 --- 0 0 6,210
Operating Officer 1995 120,000 45,000 --- 0 0 5,865
- -----------------------------------------------------------------------------------------------------------------
J. C. Philpott 1997 126,175 65,000 --- 61,494(7) 2,000 8,625
Executive Vice President - 1996 122,500 65,000 --- 0 0 8,573
Manufacturing Wood
Operations 1995 119,000 65,000 --- 0 0 10,341
- -----------------------------------------------------------------------------------------------------------------
Richard W. Downing (8) 1997 135,000 15,000 --- 112,748(7) 3,000 1,121
Vice President -
Sales & Merchandising 1996 65,192 2,500 --- 0 0 0
- -----------------------------------------------------------------------------------------------------------------
Grover S. Elliott (7) 1997 125,000 5,000 --- 82,001(7) 1,500 0
Vice President - 1996 15,873 0 --- 0 0 0
Strategic Planning
- -----------------------------------------------------------------------------------------------------------------
Douglas W. Miller 1997 100,000 30,000 --- 102,508(7) 1,500 2,990
Vice President - 1996 93,333 10,000 --- 0 1,000 2,357
and Chief Financial
Officer 1995 85,416 7,500 --- 0 0 2,127
- -----------------------------------------------------------------------------------------------------------------
Glenn A. Hunsucker(9) 1997 128,750 58,500 --- 0 0 75,069(10)
1996 250,000 117,000 --- 0 0 8,625
1995 240,000 130,000 --- 0 0 9,919
- -----------------------------------------------------------------------------------------------------------------
- ----------------
(1) The salaries shown above include deferred compensation for each named
Executive Officer under the Section 401(k) qualified, defined contribution
Employee Savings/Retirement Plan.
(2) Under the Company's incentive bonus program, executives are paid cash
awards which are directly related to their performance and contribution
to the attainment of Company objectives and individual goals. Awards are
made annually following the completion of the fiscal year.
(3) No named Executive Officer has received personal benefits during the
listed years in excess of the lesser of $50,000 or 10% of annual salary
and bonus.
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(4) Company matching contributions under the Company's Employee
Savings/Retirement Plan. Also includes $160,477 and $31,400 paid to
Messrs. Spilman, Sr. and Hunsucker, respectively, during the fiscal year
pursuant to the Company's Supplemental Retirement Income Plan.
(5) Mr. Spilman resigned as Chairman of the Board and Chief Executive Officer
on July 7, 1997 and Mr. Fulton was named as his successor on May 6, 1997.
(6) Includes $31,074 paid to Mr. Spilman, Sr. pursuant to a Deferred
Compensation Agreement pursuant to which benefits became payable upon Mr.
Spilman Sr.'s retirement.
(7) Amount represents the dollar value of shares of restricted stock issued
to the named Executive Officers as of the date of the award. At November
30, 1997, J.C. Philpott held 2,216 shares of restricted stock with a
value equal to $63,710, Richard Downing held 4,063 shares of restricted
stock with a value equal to $116,811, Grover S. Elliott held 2,955 shares
of restricted stock with a value equal to $84,956 and Douglas W. Miller
held 3,694 shares of restricted stock with a value equal to $106,202,
based on a closing price of the Common Stock of $28.75 on such date. The
shares are subject to a restriction on sale for a period of five years
from the date of grant, and are subject to forfeiture in the event the
holder's employment terminates by reason other than death, disability or
retirement within five years from the date of grant. Dividends will be
paid with respect to the restricted shares.
(8) Mr. Downing and Mr. Elliott were appointed executive officers of the
Company in 1996.
(9) Mr. Hunsucker resigned as a director and President and Chief Operating
Officer on May 7, 1997.
(10) Includes $37,500 paid to Mr. Hunsucker pursuant to a consulting
arrangement entered into in connection with Mr. Hunsucker's resignation
from the Company. The arrangement requires Mr. Hunsucker to provide
consulting services to the Company when and as requested by the Company
for a two year period, and provides for compensation to Mr. Hunsucker of
$75,000 per year. Also includes $17,766 paid to Mr. Hunsucker pursuant
to a Deferred Compensation Agreement pursuant to which benefits became
payable upon Mr. Hunsucker's retirement.
The table below shows the individual grants to the named Executive
Officers of stock options during the fiscal year ended November 30, 1997.
OPTION GRANTS IN THE 1997 FISCAL YEAR
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------------------------------
% OF TOTAL
OPTIONS/SARS
GRANTED TO GRANT DATE
NAME OPTIONS/SARS EMPLOYEES EXERCISE OR BASE EXPIRATION PRESENT
GRANTED (#SH) IN FISCAL YEAR PRICE ($/SH) DATE VALUE ($)(1)
- -------------------------------------------------------------------------------------------------------------------
Robert H. Spilman, Sr. 0 0 0 N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Paul Fulton 250,000(2) 69% $22.625 5/6/2007 1,527,500
- -------------------------------------------------------------------------------------------------------------------
Robert H. Spilman, Jr. 80,000(2) 22% $22.625 5/6/2007 488,800
- -------------------------------------------------------------------------------------------------------------------
J.C. Philpott 2,000(3) 0.6% $22.625 5/6/2007 12,200
- -------------------------------------------------------------------------------------------------------------------
Richard Downing 3,000(3) 0.8% $22.625 5/6/2007 18,330
- -------------------------------------------------------------------------------------------------------------------
Grover S. Elliott 1,500(3) 0.4% $22.625 5/6/2007 9,165
- -------------------------------------------------------------------------------------------------------------------
Douglas W. Miller 1,500(3) 0.4% $22.625 5/6/2007 9,165
- -------------------------------------------------------------------------------------------------------------------
Glenn A. Hunsucker 0 0 0 N/A N/A
- -------------------------------------------------------------------------------------------------------------------
- ------------
(1) Based on the Black-Scholes option pricing model adapted for use in
valuing executive stock options. The estimated values under the model
are based on arbitrary assumptions as follows: options to be exercised in
five years, stock price volatility at 0.2953, annual dividend yield of
3.29% and a risk-free interest rate of 6.620%. No downward adjustments
are made to the resulting grant-date option values to account for
potential forfeitures or
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non-transferability of the options. The actual value of the options
depends upon the actual performance of the Company's stock during the
applicable period.
(2) These options, granted on May 6, 1997 pursuant to the Company's 1993 Long
Term Incentive Plan, (a) became exercisable with respect to one half of
the shares upon satisfaction of both of the following (i) the price of
the Company's Common Stock as reported by NASDAQ equaled or exceeded $29
per share and (ii) such option had been held for six months and (b)
become exercisable with respect to the remaining one half of the shares
on November 6, 1997, provided, however, shares acquired upon exercise of
such latter portion of the option may not be sold until the earlier of
May 6, 2002 and the price of the Common Stock as reported by NASDAQ
equaling or exceeding $37 per share for ten consecutive days. See
"Organization, Compensation and Nominating Committee Report" for a more
detailed discussion of the terms of these options.
(3) These options, granted on May 6, 1997 pursuant to the Company's 1993 Long
Term Incentive Plan, became exercisable on November 6, 1997.
The table below shows, on an aggregated basis, each exercise of stock
options or SARs during the fiscal year ended November 30, 1997 by the Chief
Executive Officer and each named Executive Officer and the 1997 fiscal year-end
value of unexercised in-the-money options and SARs.
AGGREGATED OPTION/SAR EXERCISES IN THE 1997 FISCAL YEAR
AND FY-END OPTION/SAR VALUES
- ---------------------------------------------------------------------------------------------------------------------
SHARES
ACQUIRED NUMBER OF UNEXERCISED VALUE OF IN-THE-MONEY
UPON OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END
EXERCISE VALUE (#SH)(1) ($)(1)(2)
NAME (#SH) REALIZED ($) EXERCISABLE/1UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------------------------
Robert H. Spilman, Sr. 0 0 28,590/17,838 19,641/9,823
- ---------------------------------------------------------------------------------------------------------------------
Paul Fulton 2,000 5,062 250,000/0 1,687,500/0
- ---------------------------------------------------------------------------------------------------------------------
Robert H. Spilman, Jr. 0 0 92,713/0 552,387/0
- ---------------------------------------------------------------------------------------------------------------------
J. C. Philpott 0 0 13,999/0 24,905/0
- ---------------------------------------------------------------------------------------------------------------------
Richard W. Downing 0 0 3,000/0 20,250/0
- ---------------------------------------------------------------------------------------------------------------------
Grover S. Elliott 0 0 1,500/0 10,125/0
- ---------------------------------------------------------------------------------------------------------------------
Douglas W. Miller 0 0 2,500/0 12,276/0
- ---------------------------------------------------------------------------------------------------------------------
Glenn A. Hunsucker 0 0 12,937/14,741 13,250/0
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------
(1) No SARs were exercised in 1997 and there were no SARs outstanding at the
1997 fiscal year end.
(2) The exercise price for unexercised options is $22.625 per share for 1997
grants, $26.25 per share for 1994 grants, $37.40 per share for 1993
grants and $28 per share for 1992 grants. The fair market value of the
Company's common stock at November 30, 1997 was $29.375 per share.
SUPPLEMENTAL RETIREMENT INCOME PLAN
The Company has a Supplemental Retirement Income Plan (the Supplemental
Plan) that covers certain senior executives to promote their long service and
dedication and to provide an additional retirement benefit. Upon retirement,
the Supplemental Plan provides for lifetime monthly payments in an amount equal
to 65% of the Participant's final average compensation as defined in the
Supplemental Plan, which amount is reduced by (i) 50% of old age social
security benefits, (ii) the benefit that would be payable on a life annuity
basis from Company contributions to the Employee Savings/Retirement Plan based
on a formula using maximum employee contributions, and (iii) the benefit that
would be payable on a life annuity basis from funds the Company contributed to
a Defined Benefit Plan that was terminated in 1977. There is no provision
under the Supplemental Plan for a disability benefit if a participant's
employment is terminated prior to age 65 due to disability; however, the
participant, notwithstanding the termination of employment, shall continue to
be covered by the Supplemental Plan. The death benefit is divided into (a)
prior to retirement death, which pays the beneficiary 50% of final average
compensation for a period of 120 months, and (b) post retirement death, which
pays the beneficiary 200% of final average compensation in a single payment.
There are no benefits payable as a result of a termination of employment for
any reason other than death or retirement.
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15
The Supplemental Plan contains a change of control provision which provides for
the immediate vesting and payment of the retirement benefit under the
Supplemental Plan in the event of an employment termination resulting from a
change of control. The Supplemental Plan is an unfunded liability of the
Company which is credited with an interest rate representative of the Company's
interest rate used in its major financial transactions and fluctuates with the
market. The executives covered under this Supplemental Plan have waived
participation in the Company's Group Life Insurance Program.
Assuming no change in the rate of compensation after November 30, 1997,
the estimated annual net benefit payable on retirement at age 65 for J. C.
Philpott, the only named Executive Officer who is likely to receive payment
under the Supplemental Plan, is $69,950. Inasmuch as the estimated annual net
benefit is based on the assumption of no change in the rate of compensation
after November 30, 1997, it is projected that the net benefit payable to Robert
H. Spilman, Jr. will be covered by the benefits calculated (using the
aforementioned formula) to be payable from Company contributions to the
Employee Savings/Retirement Plan. Robert H. Spilman, Sr. and Glenn A.
Hunsucker, former executive officers of the Company who resigned during the
fiscal year, will receive annual benefits pursuant to the Supplemental Plan in
the amount of $385,144 and $188,398, respectively.
DEFERRED COMPENSATION AGREEMENTS
Robert H. Spilman Jr., Robert H. Spilman, Sr., J. C. Philpott and Glenn
A. Hunsucker have each entered into Deferred Compensation Agreements with the
Company pursuant to the Executive Employee Deferred Compensation Plan.
Pursuant to such agreements, such executive officers deferred a portion of
their compensation over a four year period. Upon such executive officers'
retirement, death or disability, such officers would be entitled to certain
payments from the Company. Messrs. Spilman, Sr. and. Hunsucker are currently
receiving payments equal to $93,223 and $35,532 per year, respectively, such
amounts to be paid in equal monthly installments. Such amounts will continue
to be paid to such officers for a fifteen year period. Messrs. Spilman, Jr.
and Philpott will be entitled to payments for a fifteen year period equal to
$108,125 and $21,859 per year, respectively, upon their retirement, $8,200 and
$18,400 per year, respectively, upon their disability, and $14,776 and $21,859
per year, respectively, upon their death.
DIRECTOR COMPENSATION
Directors who are also employees of the Company receive no additional
compensation for serving as directors. Directors who are not employees of the
Company receive an annual retainer fee of $17,500.
Under the Company's 1993 Stock Plan for Non-Employee Directors (the
Director Plan), Directors who are not regular employees of the Company were
each automatically granted an option to purchase 500 shares of Common Stock on
April 1 of each year, subject to adjustment in the event of stock dividends and
splits, recapitalizations and similar transactions. On April 1, 1997, nine
Directors were each granted an option to purchase 500 shares of Common Stock at
$23.875 per share. In November 1997, the Director Plan was amended by the
Board of Directors to increase the amount of the annual option grant to 1,000
shares of Common Stock. In addition, the Director Plan was amended to provide
each Director who was not a regular employee of the Company at November 7, 1997
(seven persons) with a one-time grant of an option to purchase 2,500 shares of
Common Stock at an exercise price of $27.75 per share. In addition, the
Director Plan was amended to provide that each director who is not an employee
of the Company, upon such director's initial election to the Board of
Directors, will receive an option to purchase 2,500 shares of the Common Stock
at an exercise price equal to the then fair market value.
An option granted under the Director Plan is not exercisable unless the
optionee remains available to serve as a Director of the Company for six months
after the date of grant. An optionee's rights under all outstanding options
will terminate three years after his termination as a Director, unless the
termination is because of death or disability, in which case the options will
be exercisable for one year after such termination. Unless earlier terminated,
all options granted under the Director Plan expire ten years from the date of
grant.
In addition, the Director Plan provides that eligible Directors of the
Company may make an annual irrevocable election to receive up to 100% of their
annual retainer fee in the form of a stock award. The total number of shares
subject to a stock award will be determined based on the fair market value of
the Common Stock on the date the award is made. The Director may specify the
percentage of the Director's annual retainer fee subject to the election, and
the percentage of and the dates on which the shares covered by the stock award
are to be issued. In the event a Director
13
16
ceases to be a member of the Board of Directors for any reason, the total
number of shares subject to the award which have not yet been issued to the
Director will be issued to the Director within one year of his termination as a
Director.
The Company also has established a planned gift program for directors
funded by life insurance policies on directors as part of its overall program
to promote charitable giving. After the death of a Director, the Company will
donate $500,000 to one or more qualifying charitable organizations recommended
by the individual director and subsequently be reimbursed by life insurance
proceeds. Individual directors derive no financial benefit from this program
since all charitable deductions accrue solely to the Company. The program does
not result in any material cost to the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the Exchange Act)
requires the Company's Directors and executive officers and persons who own
more than 10% of the Company's Common Stock to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of the Common Stock and other equity securities. Executive officers,
Directors and greater than 10% stockholders are required to furnish the Company
with copies of all such reports they file. To the Company's knowledge, based
solely on a review of the copies of such reports furnished to the Company and
written representations that no other reports were required, during the fiscal
year ended November 30, 1997, all Section 16(a) filing requirements applicable
to its executive officers, Directors and greater than 10% beneficial
stockholders were complied with, except that R. W. Downing, D. W. Miller, J.
C. Philpott, M. B. Gosnell, S. P. Rindskopf, J. F. Albanese, G. S. Elliott, P.
E. Booker, J. E. Bassett, III and J. R. Hervey, all officers of the Company,
failed to report the award of restricted shares on November 7, 1997 on a timely
basis; such awards have since been reported for each such officer.
PROPOSAL TO APPROVE THE BASSETT FURNITURE INDUSTRIES, INCORPORATED 1997
EMPLOYEE STOCK PLAN
The Board of Directors has adopted, subject to shareholder approval,
the Bassett Furniture Industries, Incorporated 1997 Employee Stock Plan (the
1997 Stock Plan). The 1997 Stock Plan reserves a number of shares of the
common stock of the Company for issuance to certain key employees of and
outside consultants to the Company in the form of stock options, stock
appreciation rights (SARs), restricted stock and performance shares.
BACKGROUND AND PURPOSE
One of the fundamental components of compensation for the Company's
key employees is long term incentive compensation. The Company has for a
number of years provided long term incentive compensation to its key employees
pursuant to the Bassett Furniture Industries, Incorporated 1993 Long Term
Incentive Plan (the 1993 Plan). The 1993 Plan provides for both awards of
cash-based and equity-based long term incentive compensation, including stock
options, SARs, restricted stock and performance units.
Section 162(m) of the Internal Revenue Code (Section 162(m)) limits
the deductibility to the Company of certain compensation paid to certain key
employees in excess of $1,000,000. Section 162(m) excludes from this limit
compensation that qualifies as "performance-based compensation". In order to
provide both short and long term cash incentive awards and equity-based
incentive awards that meet the requirements of "performance-based compensation"
under Section 162(m), the Company desires to replace the 1993 Plan with the
1997 Stock Plan.
The purpose of the 1997 Stock Plan is to promote the success and
enhance the value of the Company by linking the personal interests of the
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 participant's upon whose
judgement, interest and special effort the successful conduct of its operation
largely is dependent. Approval of the 1997 Stock Plan would better position
the Company to take advantage of the "performance-based compensation" exception
to the deduction limits of Section 162(m) and would enhance the Company's
ability to put greater emphasis on variable, performance-related compensation.
The following is a summary of the material terms of the 1997 Stock Plan as
proposed.
14
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NUMBER OF SHARES
The maximum number of shares of Common Stock of the Company available
for granting awards under the 1997 Stock Plan is nine hundred fifty thousand
(950,000) plus the number of shares of Common Stock available for future awards
under the 1993 Plan. All shares available for granting awards in any year that
are not used, as well as shares allocated to awards under the 1997 Stock Plan
that are cancelled or forfeited would be available for use in subsequent years.
ADMINISTRATION
The Plan would be administered by the Organization, Compensation and
Nominating Committee of the Board of Directors (the Committee). It is intended
that the Committee would at all times be made up of "disinterested persons"
within the meaning of Rule 16b-3 promulgated under Section 16(b) of the
Securities Exchange Act of 1934 and that all of its members would be "outside
directors" within the meaning of Section 162(m). Under the 1997 Stock Plan,
the Committee would (i) select the key employees and outside consultants to
receive awards from time to time, (ii) make awards in such amounts as it
determines, (iii) impose such limitations, restrictions and conditions upon
awards as it deems appropriate, (iv) establish performance targets and
allocation formulas for awards of restricted stock or performance shares
intended to be "performance-based compensation" under Section 162(m), (v)
certify the attainment of performance goals, if applicable, as required by
Section 162(m), (vi) interpret the 1997 Stock Plan and adopt, amend and rescind
administrative guidelines and other rules and regulations relating to the 1997
Stock Plan, (vii) correct any defect or omission or reconcile any inconsistency
in the 1997 Stock Plan or any award granted thereunder and (viii) make all
other determinations and take all other actions necessary or advisable for the
implementation and administration of the 1997 Stock Plan. The Committee would
also have the authority to accelerate the vesting and/or waive any restrictions
of any outstanding awards. No awards of "incentive stock options" would be
made under the Plan after November 4, 2007. In no event may an individual
receive awards under the Plan for three (3) consecutive calendar years covering
in excess of 285,000 shares.
ELIGIBILITY
Only "key employees" of the Company and "outside consultants" selected
by the Committee may participate in the 1997 Stock Plan. "Key employees" are
those employees of the Company who occupy managerial or other important
positions and who have made or are expected to make important contributions to
the business of the Company, as determined by the Committee. "Outside
Consultants" are third party consultants who provide services to the Company,
as determined by the Committee. Approximately 75 employees and outside
consultants are expected to be eligible to participate. As mentioned above,
the Committee in its discretion would select which key employees and outside
consultants would in fact receive any awards from time to time.
AWARDS OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The 1997 Stock Plan provides for the grant of options to purchase
shares of Common Stock of the Company at option prices determined by the
Committee as of the date of grant. For stock option awards intended to qualify
as "performance-based compensation" under Section 162(m) or for incentive stock
options (described below), the option price would not be less than the fair
market value of shares of Common Stock at the close of business on the date of
grant. (The fair market value of the Common Stock on February 2 1998 was
$27.50). The 1997 Stock Plan also provides for the grant of SARs (either in
tandem with stock options or freestanding), which entitle holders upon exercise
to receive either cash or shares of Common Stock or a combination thereof, as
the Committee in its discretion shall determine, with a value equal to the
difference between (i) the fair market value on the exercise date of the shares
with respect to which an SAR is exercised and (ii) the fair market value of
such shares on the date of grant (or, if different, the exercise price of the
related option in the case of a tandem SAR).
Awards of options under the 1997 Stock Plan, which may be either
incentive stock options (which qualify for special tax treatment) or
non-qualified stock options, are determined by the Committee. The terms and
conditions of each option and of any SAR are to be determined by the Committee
at the time of grant.
Exercise of an option (or an SAR) will result in the cancellation of
any related SAR (or option) to the extent of the number of shares in respect of
which such option or SAR has been exercised. Options and SARs
15
18
granted under the 1997 Stock Plan will expire not more than ten (10) years from
the date of grant, and the option agreements entered into with the optionees
will specify the extent to which options and SARs may be exercised during their
respective terms, including in the event of the optionee's death, disability or
termination of employment.
Payment for shares issuable pursuant to the exercise of an option may
be made either in cash or by tendering shares of Common Stock of the Company
with a fair market value at the date of the exercise equal to the portion of
the exercise price which is not paid in cash.
AWARDS OF RESTRICTED STOCK AND PERFORMANCE SHARES
The 1997 Stock Plan provides for the issuance of shares of restricted
stock to such key employees and outside consultants and on such terms and
conditions as determined from time to time by the Committee. The restricted
stock award agreement with the participant will set forth the terms of the
award, including the applicable restrictions. Such restrictions may include
the continued service of the participant with the Company, the attainment of
specified performance goals or any other conditions deemed appropriate by the
Committee.
The stock certificates evidencing the restricted stock will bear an
appropriate legend and will be held in the custody of the Company until the
applicable restrictions have been satisfied. The participant cannot sell,
transfer, pledge, assign or otherwise alienate or hypothecate shares of
restricted stock until the applicable restrictions have been satisfied. Once
the restrictions are satisfied, the shares will be delivered to the
participant. During the period of restriction, the participant may exercise
full voting rights with respect to the restricted stock. The participant will
also be credited with dividends with respect to the restricted stock. Such
dividends may be payable currently or subject to additional restrictions as
determined by the Committee and set forth in the award agreement.
In addition to restricted stock, the Committee may award performance
shares to selected key employees or outside consultants. The value of a
performance share will equal the fair market value of a share of Common Stock.
The 1997 Stock Plan provides that the number of performance shares granted
and/or the vesting of granted performance shares can be contingent on the
attainment of certain performance goals or other conditions over a period of
time (called the "performance period"), all as determined by the Committee and
evidenced by an award agreement. During the performance period, the Committee
would determine what number (if any) of performance shares have been earned.
Earned performance shares may be paid in cash, shares of Common Stock or a
combination thereof having an aggregate fair market value equal to the value of
the earned performance shares as of the payment date. Common Stock used to pay
earned performance shares may have additional restrictions as determined by the
Committee. In addition, the Committee may cancel any earned performance shares
and replace them with stock options determined by the Committee to be of
equivalent value based on a conversion formula specified in the participant's
performance share award agreement. Earned but unpaid performance shares may
have dividend equivalents rights as determined by the Committee and evidenced
in the award agreement.
CODE SECTION 162(m)
Because stock options and SARs granted under the 1997 Stock Plan that
are intended to qualify as "performance-based compensation" under Section
162(m) must have an exercise price equal to at least the fair market value at
the date of grant, compensation from the exercise of such stock options and
SARs should be treated as "performance-based compensation" for Section 162(m)
purposes.
In addition, the 1997 Stock Plan authorizes the Committee to make
awards of restricted stock or performance shares that are conditioned on the
satisfaction of certain performance criteria. For such awards intended to
result in "performance-based compensation," the Committee will establish prior
to or within ninety (90) days after the start of the applicable performance
period the applicable performance conditions. The Committee may select from
the following performance measures for such purpose: (i) return on average
common shareholders' equity of the Company, (ii) return on average assets of
the Company, (iii) net income of the Company, (iv) earnings per common share of
the Company or (v) total shareholder return of the Company. The performance
conditions will be stated in the form of an objective, nondiscretionary
formula, and the Committee will certify in writing the attainment of such
performance conditions prior to any payout with respect to such awards.
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WITHHOLDING FOR PAYMENT OF TAXES
The 1997 Stock Plan provides for the withholding and payment by a
participant of any payroll or withholding taxes required by applicable law.
The 1997 Stock Plan permits a participant to satisfy such requirement, with the
approval of the Committee and subject to the terms of the 1997 Stock Plan, by
having the Company withhold from the participant a number of shares of Common
Stock of the Company otherwise issuable under the award having a fair market
value equal to the amount of the applicable payroll and withholding taxes.
CHANGES IN CAPITALIZATION AND SIMILAR CHANGES
In the event of any change in the outstanding shares of Common Stock
of the Company by reason of any stock dividend, split, spin-off,
recapitalization, merger, consolidation, combination, exchange of shares or
otherwise, the aggregate number of shares of Common Stock with respect to which
awards may be made under the 1997 Stock Plan, and the terms, types of shares
and number of shares of any outstanding awards under the 1997 Stock Plan may be
equitably adjusted by the Committee in its discretion to preserve the benefit
of the award for the Company and the participant.
CHANGES IN CONTROL
The 1997 Stock Plan provides that in the event of a change in control
of the Company, all options and SARs will be fully exercisable as of the date
of the change in control and shall remain exercisable through their full term.
Outstanding awards of restricted stock and performance shares will become
immediately vested, and any applicable performance conditions shall be deemed
satisfied (at the target performance condition, if applicable) as of the date
of the change in control.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors will have the power to amend, modify or
terminate the 1997 Stock Plan on a prospective basis. Shareholder approval
will be obtained for any change to the material terms of the 1997 Stock Plan to
the extent required by Section 162(m) or Section 16(b) under the Securities
Exchange Act of 1934.
FEDERAL INCOME TAX TREATMENT
Incentive Stock Options. Incentive stock options ("ISOs") granted
under the 1997 Stock Plan will be subject to the applicable provisions of the
Internal Revenue Code, including Code Section 422. If shares of Common Stock
of the Company are issued to an optionee upon the exercise an ISO, and if no
"disqualifying disposition" of such shares is made by such optionee within one
year after the exercise of the ISO or within two years after the date the ISO
was granted, then (i) no income will be recognized by the optionee at the time
of the grant of the ISO, (ii) no income, for regular income tax purposes, will
be realized by the optionee at the date of exercise, (iii) upon sale of the
shares acquired by exercise of the ISO, any amount realized in excess of the
option price will be taxed to the optionee, for regular income tax purposes, as
a capital gain and any loss sustained will be a capital loss, and (iv) no
deduction will be allowed to the Company for federal income tax purposes. If a
"disqualifying disposition" of such shares is made, the optionee will realize
taxable ordinary income in an amount equal to the excess of the fair market
value of the shares purchased at the time of exercise over the option price
(the bargain purchase element) and the Company will be entitled to a federal
income tax deduction equal to such amount. The amount of any gain in excess of
the bargain purchase element realized upon a "disqualifying disposition" will
be taxable as capital gain to the holder (for which the Company will not be
entitled a federal income tax deduction). Upon exercise of an ISO, the
optionee may be subject to alternative minimum tax.
Nonqualified Stock Options. With respect to nonqualified stock
options ("NQSOs") granted to optionees under the 1997 Stock Plan, (i) no income
is realized by the optionee at the time the NQSO is granted, (ii) at exercise,
ordinary income is realized by the optionee in an amount equal to the
difference between the option price and the fair market value of the shares on
the date of exercise, and the Company receives a tax deduction for the same
amount, and (iii) on disposition, appreciation or depreciation after the date
of exercise is treated as capital gain or loss with the applicable tax rate
depending on how long the shares have been held and the optionee's tax bracket.
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Restricted Stock. Upon becoming entitled to receive shares at the end
of the applicable restriction period without a forfeiture, the recipient has
ordinary income in an amount equal to the fair market value of the shares at
that time. However, a recipient who elects under Code Section 83(b) within 30
days of the date of the grant will have ordinary taxable income on the date of
the grant equal to the fair market value of the shares of restricted stock as
if the shares were unrestricted and could be sold immediately. If the shares
subject to such election are forfeited, the recipient will not be entitled to
any deduction, refund or loss for tax purposes. Upon sale of the shares after
the forfeiture period has expired, the holding period to determine whether the
recipient has long-term of short-term capital gain or loss begins when the
restriction period expires, and the tax basis will be equal to the fair market
value of the shares when the restriction period expires. However, if the
recipient timely elects to be taxed as of the date of grant, the holding period
commences on the date of the grant and the tax basis will be equal to the fair
market value of the shares on the date of the grant as if the shares were then
unrestricted and could be sold immediately. The Company generally will be
entitled to a deduction equal to the amount that is taxable as ordinary
compensation income to the recipient.
Performance Shares. A participant who is awarded performance shares
will not recognize income and the Company will not be allowed a deduction at
the time the award is made. When a participant receives payment for
performance shares in cash or shares of Common Stock of the Company, the amount
of the cash and the fair market value of the shares received will be ordinary
income to the participant and will be allowed as a deduction for federal income
tax purposes to the Company. However, if there is a substantial risk that any
shares used to pay out earned performance shares will be forfeited (for
example, because the Committee conditions such shares on the performance of
future services), the taxable event is deferred until the risk of forfeiture
lapses. In this case, the participant can elect to make a Code Section 83(b)
election as previously described. The Company can take the deduction at the
time the income is recognized by the participant.
The Board recommends a vote FOR approval of the 1997 Stock Plan. The
affirmative vote of a majority of votes cast is required for approval of the
1997 Stock Plan. Abstentions and broker non-votes will not be counted for this
purpose.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
On November 21, 1997, the Board of Directors terminated the engagement
of KPMG Peat Marwick as the Company's independent accountants and engaged
Arthur Andersen LLP as the Registrant's independent accountants. Prior to such
engagement, the Company did not consult with Arthur Andersen LLP regarding any
of the items specified in Item 304(a)(2) of Regulation S-K or otherwise.
Upon the recommendation and approval of the Audit Committee, the Board of
Directors has approved the selection of Arthur Andersen LLP as independent
public accountants to audit the financial statements of the Company for the
fiscal year ending November 28, 1998. This selection is being presented to the
stockholders for their ratification at the Annual Meeting of Stockholders. The
firm of Arthur Andersen LLP is considered well qualified.
Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting of Stockholders with an opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions.
KPMG Peat Marwick served as the Registrant's independent accountant to
audit the financial statements of the Registrant and its subsidiaries for each
of the two most recent fiscal years ended November 30, 1996 and for prior
fiscal years. In addition, KPMG Peat Marwick continued to provide accounting
services to the Company until the date of the termination of their engagement.
Arthur Andersen LLP will serve as the Company's independent accountant for the
fiscal year ended November 30, 1997. The decision to change accountants was
recommended and approved by the Audit Committee of the Board of Directors and
approved by the entire Board of Directors.
KPMG Peat Marwick's report on the financial statements of the Company
and its subsidiaries for the year ended November 30, 1996 did not contain an
adverse opinion or a disclaimer of opinion, nor was it qualified or modified as
to uncertainty, audit scope or accounting principles. In connection with its
audits for the Company's two most recent fiscal years ended November 30, 1996,
(1) there were no disagreements with KPMG Peat Marwick on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure
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which disagreement(s), if not resolved to the satisfaction of KPMG Peat
Marwick, would have caused it to make reference to the subject matter of the
disagreement(s) in its report on the Company's financial statements for such
years, and (2) no "reportable event" (as defined in Item 304(a)(1)(iv) of
Regulation S-K) occurred. In a letter to the Securities and Exchange
Commission, KPMG Peat Marwick has indicated that they are in agreement with the
statements made in this Proxy Statement with respect to their audits.
The Board of Directors recommends a vote FOR the ratification of the
selection of Arthur Andersen LLP as independent public accountants to audit the
financial statements of the Company for the fiscal year ending November 28,
1998, and proxies solicited by the Board of Directors will be so voted unless
stockholders specify a different choice. If the stockholders do not ratify the
selection of Arthur Andersen LLP, the selection of independent public
accountants will be reconsidered by the Board of Directors.
STOCKHOLDER PROPOSAL
INDEPENDENT CHAIRPERSON OF THE BOARD OF DIRECTORS
The Company has received a proposal from California Public Employees'
Retirement System (CalPERS), P. O. Box 942708, Sacramento, California
94229-2708. CalPERS owns approximately 186,725 shares of the Company's Common
Stock and has given notice that it will present the following resolution at the
1998 Annual Meeting of Stockholders:
RESOLVED, that the stockholders of Bassett Furniture Industries,
Incorporated (the Company) recommend that the Board of Directors take
steps necessary to amend the Company's Bylaws to require that the Board's
Chairperson be an Independent Director. For purposes of this proposal,
the stockholders further recommend that the term "Independent Director"
means a director who: (i) has not been employed by the Company in an
executive capacity within the last five years; (ii) is not, and is not
affiliated with a company that is, an advisor or consultant to the
Company; (iii) is not affiliated with a significant customer or supplier
of the Company; (iv) has no personal services contract(s) with the
Company; (v) is not affiliated with a not-for-profit entity that receives
significant contributions from the Company; (vi) within the last five
years, has not had any business relationship with the company (other than
service as a director) for which the Company has been required to make
disclosure under Regulation S-K of the Securities and Exchange
Commission; (vii) is not employed by a public company at which an
executive officer of the Company serves as a director; (viii) has not had
a relationship described in (i) through (vii) above with any affiliate of
the Company; and (ix) is not a member of the immediate family of any
person described in (i) through (viii) above. This provision may only be
amended by the affirmative vote of the holders of the outstanding common
stock of the company.
SHAREHOLDER'S SUPPORTING STATEMENT
How important is the Board of Directors? As a trust fund with
approximately 1,045,500 participants, and as owner of some 186,725 shares of
the Company's stock, CalPERS believes that the Board - and most particularly
its Chairperson - is of paramount importance. This is why we are sponsoring
this proposal which urges the Board to amend the Company's Bylaws so that the
Board's leader will be a person who is independent of the Company and its
officers. Through this proposal, we seek to promote strong, objective
leadership on the Board.
A Board of Directors must formulate corporate policies and monitor
management's implementations of those policies. The Chairperson is responsible
for leading the Board in these tasks, and ensuring that directors are given the
information necessary to perform their duties. In our view, when the Board's
Chairperson is also an officer, employee or otherwise closely related to the
Company's management, it is difficult to objectively perform this monitoring
and evaluation function. We believe that an independent Chairperson would best
ensure that the interests of stockholders are served, rather than the interests
of management.
The benefits of independent directors are generally well accepted. The
New York Stock Exchange, for example, requires that at least two members of the
board of a listed company, and all members of the company's audit committee,
must meet the Exchange's standards of independence. The Investment Company Act
of 1940 (the law that
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governs the activities of investment companies) also includes an independent
director provision, generally requiring investment company boards to be
comprised of at least 40 percent "disinterested"directors.
Help us send a message to this Board and its Chairperson.
If you AGREE, please mark your proxy FOR this resolution.
MANAGEMENT'S STATEMENT
THE BOARD OF DIRECTORS FAVORS A VOTE AGAINST THE ADOPTION OF THIS PROPOSAL FOR
THE FOLLOWING REASONS:
The Board of Directors has been, and continues to be, a strong
proponent of independent leadership at the board level. To reinforce this, the
Board of Directors has adopted Corporate Governance Guidelines that ensure
independent board leadership whether or not the Chairman and Chief Executive
Officer roles are separated. The Company recognizes that independence from
management is essential to the Board of Directors' ability to fulfill its duty.
Currently 11 of the 13 members of the Board of Directors are independent
directors.
The Board of Directors believes that the appropriate balancing of
independent board structure with flexibility in determining board leadership is
expressed in its current Guidelines and reflected in its current nominees.
Guideline 1, addressing the "Selection of Chairman and CEO," ensures
flexibility by providing that: "the Board should be free to make this choice
any way that seems best for the Company at a given point in time." Although at
this point the Board of Directors has determined that both positions should be
filled by the same person, the Board of Directors recognizes and has
affirmatively stated that such a structure may not always be desirable;
however, the Board of Directors must have the flexibility to fill this role in
the manner that it deems suitable.
In light of these and other mechanisms in the Guidelines that ensure
the Board's independence from Management and accountability to stockholders,
the Board believes that no purpose is served by imposing an absolute rule
against a member of Management serving as Board Chairman. Rather, such a bylaw
may result in the Board of Directors being forced to appoint as Chairman an
individual not best suited or qualified for the position at that point in time.
Indeed, that is why the Board provided itself the flexibility to select either
an employee or non-employee as Chairman. The resolution would reduce the Board
of Director's flexibility to select a style of leadership best suited to time
and circumstances.
THE BOARD OF DIRECTORS FAVORS A VOTE AGAINST THIS STOCKHOLDER
PROPOSAL, ITEM NO. 4. Proxies solicited by the board of directors will be so
voted unless stockholders specify a different choice. The affirmative vote of a
majority of votes cast is required for approval of the stockholder proposal.
Abstentions and broker non-votes will not be counted for this purpose.
PROPOSALS FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS
Any proposal that a stockholder intends to present for action at the 1999
Annual Meeting of Stockholders, currently scheduled for March 22, 1999, must be
received by the Company no later than October 23, 1998, in order for the
proposal to be included in the proxy statement and form of proxy for the 1999
Annual Meeting of Stockholders. The proposal should be sent to Jay R. Hervey,
Secretary, Bassett Furniture Industries, Incorporated, Post Office Box 626,
Bassett, Virginia 24055.
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SUMMARY AND LOCATION OF DOCUMENT
Author: BAY
Document Type: DOC
Description: 1998 ANNUAL MEETING - PROXY STATEMENT
Client: 09606
Matter: 604
Document #: 1524313.2
Revised by: TEMPFLOATER12
Date: February 21, 1998
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
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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.
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
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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 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.
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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.
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.
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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.
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.
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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.
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.
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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). 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
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(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 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.
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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.
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).
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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.
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.
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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 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.
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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.
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;
(b) Net Income;
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(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.
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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.
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.
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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;
(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
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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 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
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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.
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 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.
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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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PROXY BASSETT FURNITURE INDUSTRIES, INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING TO BE HELD MARCH 24, 1998
The undersigned hereby appoints Jay R. Hervey and Douglas W. Miller
each or either of them, proxies, with full power of substitution, with the
powers the undersigned would possess if personally present, to vote, as
designated below, all shares of the $5.00 par value Common Stock of the
undersigned in Bassett Furniture Industries, Incorporated at the Annual Meeting
of Stockholders to be held March 24, 1998, and at any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED HEREIN AND, UNLESS OTHERWISE
DIRECTED, WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AS DIRECTORS, FOR THE
APPROVAL OF THE COMPANY'S 1997 EMPLOYEE STOCK PLAN, FOR THE SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS AND AGAINST THE STOCKHOLDER PROPOSAL. The Board
of Directors recommends voting FOR on items 1, 2 and 3 and AGAINST on item 4.
1. ELECTION OF DIRECTORS: Nominees are Amy Woods Brinkley, Peter W. Brown,
M.D., Thomas E. Capps, Willie D. Davis, Alan T. Dickson, Paul Fulton,
William H. Goodwin, Jr., Howard H. Haworth, James W. McGlothlin, Thomas
W. Moss, Jr., Michael E. Murphy, Albert F. Sloan, and Robert H. Spilman,
Jr.
[ ] FOR all listed nominees (except do not vote for
the nominee(s) whose name(s) I have written below)
-------------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for listed nominees
2. APPROVAL OF THE COMPANY'S 1997 EMPLOYEE STOCK PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. STOCKHOLDER PROPOSAL REGARDING INDEPENDENT CHAIRPERSON
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued on other side)
45
(continued from other side)
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. Receipt of Notice of
Annual Meeting of Stockholders and accompanying Proxy Statement is hereby
acknowledged by the undersigned. Please date and sign exactly as printed
below and return promptly in the enclosed postage paid envelope.
Dated: , 1998
-------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
When signing as attorney, executor, administrator, trustee, guardian,
etc. give title as such. If joint account, each joint owner should sign.)
PLEASE DETACH AND RETURN THIS PORTION IN THE ENCLOSED POSTAGE PAID ENVELOPE.
SEE OTHER SIDE FOR A DESCRIPTION OF THE
PROPOSALS AND THE BOARD OF DIRECTORS' VOTING RECOMMENDATIONS.
DATE AND SIGN ABOVE AFTER COMPLETING THE OTHER SIDE, THEN DETACH AND
RETURN THE ABOVE PORTION OF THE CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
46
DIRECTORS
PROPOSALS RECOMMEND
- --------- ---------
1. Election of all nominees as Directors. All nominees are incumbent
Directors seeking either re-election for a one-year term or initial
election to a full one-year term. FOR -->
2. Approval of 1997 Employee Stock Plan, replacing 1993 Long Term Incentive
Plan. FOR -->
3. Ratification of Selection of Arthur Anderson LLP as independent public
accountants for 1998 fiscal year. FOR -->
4. Proposal from stockholder seeking amendment of Company's Bylaws to require
that an "Independent Director" be appointed to serve as Chairperson of the
Board of Directors. AGAINST -->
