<PAGE> 1
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
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Bassett Furniture Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[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:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE> 2
BASSETT FURNITURE INDUSTRIES, INCORPORATED
BASSETT, VIRGINIA
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 30, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Bassett Furniture Industries, Incorporated (the Company), will be held at the
Bassett Furniture Showroom, 500 Bassett Drive, at Highway 68 and Business 85, in
Thomasville, North Carolina, on Tuesday, March 30, 1999, at 11:30 a.m., local
time, for the purpose of considering and acting upon the following:
1. The election of eleven Directors.
2. A proposal to increase the number of shares of the
Company's Common Stock reserved for issuance under the
Company's 1997 Employee Stock Plan by 500,000.
3. A proposal to ratify the selection of Arthur Andersen
LLP as independent public accountants for the fiscal
year ending November 27, 1999.
4. 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
9, 1999 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 27, 1999
<PAGE> 3
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 the Bassett Furniture Showroom, 500 Bassett Drive, at
Highway 68 and Business 85, in Thomasville, North Carolina at 11:30 a.m., local
time, on Tuesday, March 30, 1999. This Proxy Statement and accompanying proxy
are being sent to the stockholders of the Company on or about February 27, 1999.
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 Barry C. Safrit, Vice President and
Chief Accounting 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 Common Stock of the Company held by them of record at
the close of business on February 9, 1999, 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 9, 1999 was 12,768,453.
Presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the meeting will
constitute a quorum. If a quorum is present, Directors will be elected by a
plurality of the votes cast and action on other matters submitted to the
stockholders will be approved if the votes cast in favor of the action exceed
the votes cast opposing the action. Shares for which the holder has elected to
abstain or to withhold the proxies' authority to vote (including broker
non-votes) on a matter will count toward a quorum but will have no effect on the
action taken with respect to such matter.
PRINCIPAL STOCKHOLDERS AND HOLDINGS OF MANAGEMENT
At February 9, 1999, the only persons known to the Company to be the
beneficial owners of more than 5% of Common Stock, par value $5.00 per share, of
the Company (the "Common Stock") were as follows:
1
<PAGE> 4
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF AND NATURE OF PERCENT OF COMMON
BENEFICIAL OWNER BENEFICIAL OWNERSHIP STOCK OUTSTANDING
- ---------------- -------------------- -----------------
<S> <C> <C>
Bassett Employee Savings/ 906,074(1) 7.10%
Retirement Plan
Barry C. Safrit, Trustee
Bassett, Virginia 24055
Lazard Freres Inc. 1,028,400(2) 8.05%
30 Rockefeller Plaza
New York, NY 10020
FMR Corp. 730,300(3) 5.72%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- --------------------
(1) In his capacity as Trustee, Barry C. Safrit, Vice President of the
Company, has sole voting and dispositive power over these shares. Mr.
Safrit disclaims beneficial ownership of these shares.
(2) The information concerning beneficial ownership has been provided to the
Company by Lazard Freres, Inc. Lazard Freres, Inc. has sole dispositive
power over all of these shares, sole voting power over 970,200 of these
shares and shared dispositive power over none of these shares.
(3) The information concerning beneficial ownership has been provided to the
Company by FRM Corp. FMR Corp. has sole dispositive power over all of
these shares, sole voting power over 255,300 of these shares and shared
voting power over none of these shares. Edward C. Johnson 3rd, Chairman
of FRM Corp., Abigail P. Johnson, a director of FMR Corp., and other
members of the Johnson family may be deemed, under the Investment Company
Act of 1940, to form a controlling group with respect to FMR Corp.
The following table sets forth, as of February 9, 1999, information
as to the beneficial ownership of the Common Stock by all Directors and
executive officers of the Company as a group, by those Directors who are
retiring from the Board of Directors effective at the Annual Meeting 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."
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF AND NATURE OF PERCENT OF COMMON
BENEFICIAL OWNER BENEFICIAL OWNERSHIP STOCK OUTSTANDING
- ---------------- -------------------- -----------------
<S> <C> <C>
Directors and executive 1,554,866(2,3) 11.77%
officers as a group
(28 persons)
James W. McGlothlin 19,968(4,5) 1
Thomas W. Moss, Jr. 4,600(4) 1
J. C. Philpott(6) 23,105(4) 1
Janice E. Hamlin 0 --
Douglas W. Miller(7) 8,469(4) 1
</TABLE>
2
<PAGE> 5
- ----------------------------
(1) Less than 1% of the outstanding Common Stock.
(2) Includes 439,828 shares subject to options held by directors and
executive officers that are currently exercisable or that are exercisable
within 60 days.
(3) Includes 906,074 shares held by the Company's Employee Savings/Retirement
Plan, for which Barry C. Safrit, Vice President of the Company, has sole
voting and dispositive power in his capacity as Trustee. Mr. Safrit
disclaims beneficial ownership of these shares.
(4) Includes shares subject to options that are currently exercisable or that
are exercisable within 60 days as follows: James W. McGlothlin 5,500;
Thomas W. Moss, Jr. 4,500; J. C. Philpott 13,999; and Douglas W. Miller
2,500.
(5) Includes 10,000 shares held by The United Company of which Mr. McGlothlin
is Chairman of the Board and Chief Executive Officer.
(6) J. C. Philpott resigned as an executive officer of the Company in
December 1998.
(7) Douglas W. Miller resigned as an executive officer of the Company in
January 1999.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Bylaws of the Company provide for eleven Directors. At the
meeting, eleven Directors will be elected to serve, subject to the provisions of
the Bylaws, until the 2000 Annual Meeting of Stockholders and until their
successors are duly elected and qualified. It is the intention of the persons
named in the accompanying proxy to vote all proxies solicited by the Board of
Directors FOR the eleven 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 eleven nominees including such substitutes as
shall be designated by the Board of Directors.
The eleven nominees for election as Directors 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 1999, at the Annual Meeting of
Stockholders held on March 24, 1998.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OF COMMON
NAME AND OFFICES WITH THE COMPANY OR OTHER OCCUPATION DURING COMMON STOCK STOCK
DIRECTOR SINCE AGE PAST FIVE YEARS AND DIRECTORSHIPS OWNED OUTSTANDING
- --------------- --- --------------------------------- ----- -----------
<S> <C> <C> <C> <C>
Amy Woods Brinkley 43 Executive Vice President and Marketing Group 3,500(2) 1
1998 Executive, BankAmerica Corporation (bank holding
company). Director of MECA Software.
Peter W. Brown, M.D. 56 Partner, Virginia Surgical Associates of Richmond 8,276(2) 1
1993 (general surgery). Director of America's Utility Fund
and Dominion Resources, Inc.
Thomas E. Capps 63 Chairman of the Board, President and Chief Executive 6,212(2) 1
1989 Officer, Dominion Resources, Inc. (electric utility
holding company). Director of Dominion Resources, Inc.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
PERCENT OF
SHARES OF COMMON
NAME AND OFFICES WITH THE COMPANY OR OTHER OCCUPATION DURING COMMON STOCK STOCK
DIRECTOR SINCE AGE PAST FIVE YEARS AND DIRECTORSHIPS OWNED OUTSTANDING
- --------------- --- --------------------------------- ----- -----------
<S> <C> <C> <C> <C>
Willie D. Davis 64 President of All Pro Broadcasting, Inc. (radio 3,691(2) 1
1997 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.
Alan T. Dickson 67 Chairman of the Board since 1994 and President from 7,566(2) 1
1989 1968 to 1994 of Ruddick Corporation (diversified
holding company); Director of Lance, Inc., BankAmerica
Corporation and Sonoco Products Company.
Paul Fulton 64 Chairman and Chief Executive Officer of the Company since 254,785(2) 1.96%
1993 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, BankAmerica Corporation,
Cato Corporation, Hudson's Bay Company and Lowe's
Companies, Inc.
William H. Goodwin, Jr 58 Chairman of the Board of CCA (diversified holding company); 29,785(23) 1
1992 Director of First Union Corporation; Board of Visitors,
University of Virginia.
Howard H. Haworth 65 President, Haworth Group since 1984 (personal and family 3,500(2) 1
1997 investment group); Chief Executive Officer from 1973 to
1982 and Chairman and Chief Executive Officer from 1982
to 1985 of Drexel Heritage Furnishings; Secretary of
Commerce of the State of North Carolina
from 1985 to 1986.
Michael E. Murphy 62 Private investor. Vice Chairman and Chief Administrative
1997 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.,
and American General Corporation. 6,191(2) 1
Albert F. Sloan 69 Private investor. Chairman of the Board and Chief Executive
1984 Officer of Lance, Inc., 1976 to 1990; Chairman of the Board
until 1991(snack foods). Director of Richfoods Holdings,
Inc. and Cato Corporation. 5,887(2) 1
Robert H. Spilman, Jr. 42 President and Chief Operating Officer of the Company 175,7572(4) 1.37%
1997 since 1997; Executive Vice President, Marketing and
Merchandising, 1993 to 1997.
</TABLE>
- ------------------
(1) Less than 1% of the outstanding Common Stock.
(2) Includes shares subject to options that are currently exercisable or
exercisable within 60 days as follows: Amy Woods Brinkley 3,500; Peter W.
Brown 5,500; Thomas E. Capps 5,500; Willie D. Davis 3,500; Alan T.
Dickson 5,500; Paul Fulton 250,000; William H. Goodwin, Jr. 5,500; Howard
H. Haworth 3,500; Michael E. Murphy 3,500; Albert F. Sloan 5,500; and
Robert H. Spilman, Jr. 92,713.
4
<PAGE> 7
(3) Includes 20,000 shares held by Mr. Goodwin's children.
(4) Includes 12,171 shares held by Mr. Spilman's wife, 21,892 shares held by
his children, and 13,962 shares held in trusts of which Mr. Spilman is
the beneficiary
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met four times during the 1998 fiscal year.
Each Director attended at least 75% of the meetings of the Board of Directors
and Committees on which such Director served. The Board of Directors' committees
include an Audit Committee and an Organization, Compensation and Nominating
Committee.
The Audit Committee is composed of Ms. Brinkley and Messrs. Moss,
Murphy and Sloan. 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 audit activities. The Audit Committee
met four times during the fiscal year.
The Organization, Compensation and Nominating Committee is composed
of Messrs. Brown, Capps, Davis and Haworth. 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.
The Organization, Compensation and Nominating Committee will
consider recommendations by stockholders as to nominees for Directors. Such
recommendations should be submitted in writing addressed to Jay R. Hervey,
Secretary, Bassett Furniture Industries, Incorporated, Post Office Box 626,
Bassett, Virginia 24055.
CERTAIN TRANSACTIONS
The daughter of James W. McGlothlin (a Director of the Company) 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 certain other licensed retailers. Transactions
between the Company and its retailers, including the limited liability company
of which Mr. McGlothlin's daughter is a member, are negotiated on an arms-length
basis.
ORGANIZATION, COMPENSATION AND NOMINATING COMMITTEE REPORT
The Organization, Compensation and Nominating Committee of the Board
of Directors (the "Committee") 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 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 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 Committee to satisfy tax law requirements.
5
<PAGE> 8
The key principles which the 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. The Committee believes that base salaries are generally
in the low- to mid-range compared with those at similar-sized companies. In
recent years the base salaries have been kept at a relatively fixed level to
reflect the general economic conditions of the industry and to keep fixed costs
under control. Increases in base salary have generally 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
Committee and the Company emphasize rewards in the total compensation context
(i.e., with greater emphasis on at-risk compensation), rather than appreciably
increasing base salary.
Annual Incentive Bonuses. Annual incentives are established for each
executive in the form of a percentage of base salary. Bonus targets are based on
performance criteria related to achievement of the Company's annual plans, such
as profitability, earnings per share, market growth and returns on invested
capital and equity. The bonuses paid to the Company's executives for the 1998
fiscal year generally ranged from 51% to 78% of the executives' maximum
potential bonus amounts for the year. The determination of the amount of any
bonus to be paid is made after the end of the year based on the degree to which
the performance criteria have been met. 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 28, 1998.
Stock Option Grants. Grants of stock options to the Company's
executives under the Company's stock option plans provide incentives to achieve
the Company's long-term performance objectives. Because the value of stock
options is entirely a function of the value of the Company's stock, the
Committee believes that this component of the Company's compensation package
closely aligns the interests of executive officers with those of the Company's
stockholders. Whether a grant will be made to an executive officer, and if so in
what amount, is determined by the Committee based on the Committee's subjective
evaluation of the executive officer's potential contribution to the Company's
future success, the level of incentive already provided by the number and terms
of the executive officer's existing stock option holdings and the market price
of the Company's Common Stock. Consistent with the Committee's compensation
philosophy, all stock options awarded in fiscal year 1998 were granted with a
two and one-half to three-year vesting requirement.
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 similar to those offered to all
employees, with certain variation, to promote tax efficiency and the replacement
of benefits lost due to regulatory limitations.
Chief Executive Officer's 1998 Compensation. Paul Fulton, the
Company's Chief Executive Officer, was eligible during fiscal 1998 to
participate in the same compensation programs available to other senior
executives. The base salary component of Mr. Fulton's compensation for fiscal
year 1998 was $300,000 which is unchanged from his base salary in fiscal year
1997, on an annualized basis. The annual bonus paid to Mr. Fulton for fiscal
year 1998 was based upon the application of quantifiable, objective performance
criteria (which were operating income, return on equity, earnings per share and
a comparison of the Company's total stockholder return to that of the peer group
6
<PAGE> 9
established by the Company for purposes of the performance graph) and equaled
64% of his maximum potential bonus amount for the year. No stock options were
granted to Mr. Fulton during fiscal year 1998.
For fiscal year 1999, the Organization, Compensation and Nominating
Committee has again established performance criteria designed to enhance
stockholder value. These criteria are consistent with financial objectives of
the Company and are representative of the success needed to insure growth and
profitability.
Howard H. Haworth, Chairman
Thomas E. Capps
Peter W. Brown
Willie D. Davis
Albert F. Sloan, former member
STOCKHOLDER RETURN PERFORMANCE GRAPH
Presented below 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 peer group for the period commencing December 1, 1993 and ending
November 28, 1998, covering the Company's five fiscal years ended November 28,
1998. The Company's 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. This graph assumes that $100 was invested on December 1,
1993 in the Company's Common Stock, the S&P 500 Index and the peer group and
that dividends were reinvested.
[LINE GRAPH]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Company/Index/Market 1993 1994 1995 1996 1997 1998
Bassett Furniture 100.00 90.16 73.38 76.69 102.99 91.04
Peer Group 100.00 89.27 88.22 108.59 170.02 188.96
S&P Composite 100.00 101.05 138.41 176.99 227.45 281.27
</TABLE>
7
<PAGE> 10
EXECUTIVE COMPENSATION
The table below shows the compensation paid or accrued by the
Company for the three fiscal years ended November 28, 1998, to or for the
account of the Chief Executive Officer and 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 $100,000 for the 1998 fiscal year
(collectively, the "named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
LONG TERM
ANNUAL COMPENSATION COMPENSATION
- ---------------------------------------------------------------------------------------------------------------------------------
RESTRICTED SECURITIES ALL OTHER
OTHER ANNUAL STOCK UNDERLYING COMPEN-
NAME AND FISCAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS SATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) ($) (#Sh) ($)(4)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul Fulton
Chairman of the Board and 1998 300,000 241,125 --- 0 0 1,725
Chief Executive Officer 1997 120,161 150,201 0 250,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Robert H. Spilman, Jr. 1998 210,000 108,360 --- 0 40,000 16,371
President and Chief 1997 175,000 174,583 --- 0 80,000 11,628
Operating Officer 1996 135,000 45,000 --- 0 0 11,551
- ---------------------------------------------------------------------------------------------------------------------------------
J. C. Philpott 1998 130,000 65,000 --- 0 23,419 18,034
formerly Executive Vice President- 1997 126,175 65,000 --- 61,494(5) 2,000 18,954
Manufacturing Wood Operations 1996 122,500 65,000 --- 0 0 17,610
- ---------------------------------------------------------------------------------------------------------------------------------
Janice E. Hamlin(6)
Vice President - Marketing 1998 120,000 43,920 --- 0 20,000 690
- ---------------------------------------------------------------------------------------------------------------------------------
Douglas W. Miller
formerly Vice President 1998 115,000 43,860 --- 0 29,031 2,645
and Chief Financial 1997 100,000 30,000 --- 102,508(5) 1,500 2,990
Officer 1996 93,333 10,000 --- 0 1,000 2,357
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------
(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.
(4) Includes amounts accrued under deferred compensation agreements with
certain of the executives and Company matching contributions under the
Company's Employee Savings/Retirement Plan. During the 1998 fiscal
year, amounts accrued under deferred compensation agreements with
Messrs. Spilman and Philpott were $6,725 and $11,805, respectively.
(5) Amount represents the dollar value of shares of restricted stock issued
to the named Executive Officers as of the date of the award. On
November 28, 1998, J.C. Philpott held 2,216 shares of restricted stock
with a value equal to $55,400, and Douglas W. Miller held 3,694 shares
of restricted stock with a value equal to $92,350, based on a closing
price of the Common Stock of $25.00 on the most recent trading day
preceding November 28, 1998. The shares are subject to a restriction on
sale until November 7, 2002 and are subject to forfeiture in
8
<PAGE> 11
the event the holder's employment terminates by reason other than
death, disability or retirement prior to November 7, 2002. Dividends
will be paid with respect to the restricted shares.
(6) Ms. Hamlin was appointed an executive officer of the Company in
December 1997.
The table below shows the individual grants to the named Executive
Officers of stock options during the fiscal year ended November 28, 1998.
OPTION/SAR GRANTS IN THE 1998 FISCAL YEAR
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
% OF TOTAL
OPTIONS/SARs GRANT DATE
OPTIONS/SARS GRANTED TO EMPLOYEES EXERCISE OR BASE EXPIRATION PRESENT
NAME GRANTED (#Sh) IN FISCAL YEAR PRICE ($/Sh) DATE VALUE ($)(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul Fulton 0 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
Robert H. Spilman, Jr. 40,000(2) 5% $32.25 3/24/2008 382,600
- ------------------------------------------------------------------------------------------------------------------------------
J.C. Philpott 23,419(2) 3% $32.25 3/24/2008 224,003
- ------------------------------------------------------------------------------------------------------------------------------
Janice E. Hamlin 20,000(2) 2% $32.25 3/24/2008 191,300
- ------------------------------------------------------------------------------------------------------------------------------
Douglas W. Miller 29,031(2) 4% $32.25 3/24/2008 277,682
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
(1) Based on the Black-Scholes option pricing model adapted for use in
valuing executive stock options. The estimated values under the model
are based on arbitrary assumptions as follows: options to be exercised
in five years, stock price volatility at 0.3419, annual dividend yield
of 2.98% and a risk-free interest rate of 5.57%. No downward
adjustments are made to the resulting grant-date option values to
account for potential forfeitures or non-transferability of the
options. The actual value of the options depends upon the actual
performance of the Company's stock during the applicable period.
(2) These options, granted on March 24, 1998 pursuant to the Company's 1997
Employee Stock Plan become exercisable on November 7, 2000 and were
granted with an exercise price equal to the market price of the
Company's Common Stock on the date of grant. The exercisability of the
options is subject to acceleration in the discretion of the
Organization, Compensation and Nominating Committee and upon the
occurrence of a change in control.
The table below shows, on an aggregated basis, each exercise of stock
options during the fiscal year ended November 28, 1998 by each named Executive
Officer and the 1998 fiscal year-end value of unexercised in-the-money options.
AGGREGATED OPTION/SAR EXERCISES IN THE 1998 FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SHARES
ACQUIRED NUMBER OF UNEXERCISED VALUE OF IN-THE-MONEY
UPON OPTIONS/SARs AT FY-END OPTIONS/SARs AT FY-END
EXERCISE VALUE REALIZED (#Sh)(1) ($)(1)(2)
NAME (#Sh) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Paul Fulton 0 0 250,000/0 593,750/--
- --------------------------------------------------------------------------------------------------------------------------
Robert H. Spilman, Jr. 0 0 92,713/40,000 190,000/0
- --------------------------------------------------------------------------------------------------------------------------
J. C. Philpott 0 0 13,999/23,419 4,750/0
- --------------------------------------------------------------------------------------------------------------------------
Janice E. Hamlin 0 0 0/20,000 --/0
- --------------------------------------------------------------------------------------------------------------------------
Douglas W. Miller 0 0 2,500/29,031 3,563/0
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
(1) No SARs were exercised in 1998 and there were no SARs outstanding at
the 1998 fiscal year end.
9
<PAGE> 12
(2) Represents the difference between the fair market value of the
Company's Common Stock and the exercise price at the fiscal year end.
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, will 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. 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 executives covered under this Supplemental Plan have
waived participation in the Company's Group Life Insurance Program.
J. C. Philpott, who retired from the Company in December 1998, is
receiving monthly payments of $5,251 under the Supplemental Plan. Assuming no
change in the rate of compensation for Robert H. Spilman, Jr. after November 28,
1998, it is projected that the benefit that would otherwise have been payable on
retirement at age 65 to Mr. Spilman will be fully offset by the benefits
calculated (using the aforementioned formula) to be payable from Company
contributions to the Employee Savings/Retirement Plan.
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, as
amended (the "Director Plan"), each Director who is not a regular employee of
the Company automatically receives an option to purchase 2500 shares of Common
Stock upon his or her initial election to the Board of Directors and on each
April 1 thereafter automatically receives an option to purchase 1000 shares of
Common Stock. All such options have an exercise price equal to the market price
of the Common Stock on the date of grant and are subject to adjustment in the
event of stock dividends and splits, recapitalizations and similar transactions.
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 quarterly irrevocable elections to receive up to 100% of their
retainer fees in the form of stock awards. 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 retainer fees 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 ceases to be a member of the Board of Directors for any
reason, the total number of shares subject to an 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.
10
<PAGE> 13
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 28, 1998, all Section 16(a) filing requirements applicable
to its executive officers, Directors and greater than 10% beneficial
stockholders were complied with, except that William H. Goodwin was less than
one month late in reporting a purchase of Common Stock for members of his
family.
PROPOSAL NO. 2
PROPOSAL TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER 1997
EMPLOYEE STOCK PLAN
The Board of Directors has adopted, subject to stockholder approval,
an amendment to the Bassett Furniture Industries, Incorporated 1997 Employee
Stock Plan (the "1997 Stock Plan") to increase the number of shares of Common
Stock reserved for issuance from 950,000 to 1,450,000. Under the 1997 Stock
Plan, awards may be made 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. 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 stockholders
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 judgement,
interest and special effort the successful conduct of its operation largely is
dependent. The following is a summary of the material terms of the 1997 Stock
Plan as proposed to be amended.
NUMBER OF SHARES
The maximum number of shares of Common Stock of the Company
available for granting awards under the 1997 Stock Plan will be 1,450,000 (after
giving effect to the proposed amendment) plus the number of shares of Common
Stock available for future awards under the Company's 1993 Long Term Incentive
Plan (the "1993 Plan"). Shares allocated to awards under the 1997 Stock Plan
that are cancelled or forfeited will be available for future awards.
ADMINISTRATION
The Plan is administered by the Organization, Compensation and
Nominating Committee of the Board of Directors (the "Committee"). It is intended
that the Committee will at all times be made up of "non-employee directors"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act") and that only those members who are "outside directors" within
the meaning of Section 162(m) of the Internal Revenue Code ("Section 162(m)")
will take action with respect to certain awards to the named Executive Officers.
Under the 1997 Stock Plan, the Committee may (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 also has
the authority to accelerate the vesting and/or waive any restrictions of any
outstanding awards. No awards of "incentive stock options" may be made under the
Plan after November 4, 2007. In no event may an individual receive awards under
the Plan during three (3) consecutive calendar years covering in excess of
285,000 shares in the aggregate.
11
<PAGE> 14
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 eligible to participate. As mentioned above, the Committee in
its discretion selects which key employees and outside consultants will 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 may 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 9, 1999 was $21.69). 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 granted under the
1997 Stock Plan will expire not more than ten 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 sets forth the terms of an 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
12
<PAGE> 15
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)
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". 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 of the underlying shares 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, (v) total shareholder return of the Company, (vi) operating margin of
the Company and (vii) revenues 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.
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 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
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.
13
<PAGE> 16
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors has 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 Rule 16b-3 under the Exchange Act.
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. No income will be recognized
by the optionee at the time of the grant of the ISO or upon exercise of the ISO.
If shares of Common Stock of the Company are issued to an optionee upon the
exercise of 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 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 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 to a federal income tax
deduction). Upon exercise of an ISO, the optionee will have an item of tax
preference for the difference between the option price and the fair market value
of the shares at exercise and 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.
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 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 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.
14
<PAGE> 17
The Board recommends a vote FOR the increase in the number of shares
reserved for issuance under the 1997 Stock Plan.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
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 27, 1999. 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.
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 Securities and
Exchange Commission Regulation S-K or otherwise.
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 served as the Company's independent accountant for the
fiscal years ended November 30, 1997 and November 28, 1998. 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 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 27,
1999, 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 PROPOSALS FOR INCLUSION IN THE PROXY STATEMENT
Any proposal that a stockholder intends to present for action at the
2000 Annual Meeting of Stockholders, currently scheduled for March 28, 2000,
must be received by the Company no later than October 30, 1999, in order for the
proposal to be included in the proxy statement and form of proxy for the 2000
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.
15
<PAGE> 18
OTHER STOCKHOLDER PROPOSALS AND NOMINATIONS
The Company's Bylaws prescribe the procedures that a stockholder must
follow to nominate directors for election at an annual meeting or to bring other
business before an annual meeting (other than matters that have been included in
the Company's proxy statement for such meeting). The Chairman of the meeting may
refuse to acknowledge the nomination of any person as a director or any other
proposal by a stockholder not made in compliance with these procedures. The
following summary of these procedures is qualified by reference to the Company's
Bylaws, a copy of which may be obtained, without charge, upon written request to
Jay R. Hervey, Secretary, Bassett Furniture Industries, Incorporated, Post
Office Box 626, Bassett, Virginia 24055.
A stockholder who desires to nominate a director for election at an
annual meeting must give timely written notice thereof to the Secretary of the
Company by personal delivery or by registered or certified mail, postage
prepaid, at the address shown above. To be timely, a stockholder's notice must
be received not later than December 31, 1999 for nominations to be made at the
2000 Annual Meeting. The notice must contain the information specified in the
Bylaws regarding the stockholder giving the notice and each person whom the
stockholder wishes to nominate for election as a director. The notice must be
accompanied by the written consent of each proposed nominee to serve as a
director of the Company, if elected.
A stockholder who desires to bring any other business before an annual
meeting (other than matters that have been included in the Company's proxy
statement for such meeting) must give timely written notice thereof to the
Secretary of the Company by personal delivery or by registered or certified
mail, postage prepaid, at the address shown above. To be timely, a stockholder's
notice must be received not later than October 22, 1999 for business to be acted
upon at the 2000 Annual Meeting. The notice must contain the information
specified in the Bylaws regarding the stockholder giving the notice and the
business proposed to be brought before the meeting.
With respect to stockholder proposals not included in the Company's
proxy statement for the 2000 Annual Meeting, the persons named in the Board of
Directors' proxy for such meeting will be entitled to exercise the discretionary
voting power conferred by such proxy under the circumstances specified in Rule
14a-4(c) under the Exchange Act, including with respect to proposals received by
the Company after October 22, 1999.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED NOVEMBER 28, 1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
CAN BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO JAY R. HERVEY, SECRETARY,
BASSETT FURNIURE INDUSTRIES, INCORPORATED, POST OFFICE BOX 626, BASSETT,
VIRGINIA 24055.
16
<PAGE> 19
<TABLE>
<CAPTION>
DIRECTORS
PROPOSALS RECOMMEND
- --------- ---------
<S> <C>
Election of all nominees as Directors. All nominees
are incumbent Directors seeking
re-election for a one-year term.
FOR --
Approval of increase in the number of shares
reserved for issuance under the 1997 Employee
Stock Plan by 500,000 shares.
FOR --
Ratification of Selection of Arthur Andersen LLP
as independent public accountants for 1999 fiscal year.
FOR --
</TABLE>
PROXY BASSETT FURNITURE INDUSTRIES, INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING TO BE HELD MARCH 30, 1999
The undersigned hereby appoints Jay R. Hervey and Barry C. Safrit 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 30, 1999, 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 INCREASING THE COMPANY'S 1997 EMPLOYEE STOCK PLAN AND FOR THE
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS. The Board of Directors recommends
voting FOR on items 1, 2 and 3.
<TABLE>
<CAPTION>
1. ELECTION OF DIRECTORS: Nominees are Amy Woods Brinkley, Peter
W. Brown, M.D., Thomas E. Capps, Willie D. Davis, Howard H. Haworth,
Alan T. Dickson, Paul Fulton, William H. Goodwin, Jr.,
Michael E. Murphy, Albert F. Sloan, and Robert H. Spilman, Jr.
<S> <C> <C> <C>
[ ] FOR all listed nominees (except [ ] WITHHOLD AUTHORITY to
do not vote for the nominee(s) vote for all listed
whose name(s) I have written below) nominees
-----------------------------------
2. APPROVAL OF INCREASE IN THE NUMBER OF SHARES RESERVED FOR
ISSUANCE UNDER 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
</TABLE>
<PAGE> 20
(continued from other side)
4. 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.
Date: , 1999
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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.
