<PAGE>
Stanley Furniture Company, Inc.
1641 Fairystone Park Highway
Stanleytown, Virginia 24168
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held August 24, 2000
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
Stanley Furniture Company, Inc. (the "Company") will be held at the Company's
corporate headquarters, 1641 Fairystone Park Highway, Stanleytown, Virginia, on
Thursday, August 24, 2000, at 11:00 A.M., for the following purposes:
(1) To act upon a proposal, previously approved by the Board of Directors,
to approve the Stanley Furniture Company, Inc. 2000 Incentive
Compensation Plan; and
(2) To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
The stockholders of record of the Company's common stock at the close
of business on July 13, 2000 are entitled to notice of and to vote at this
Special Meeting or any adjournment thereof.
Even if you plan to attend the meeting in person, we request that you
mark, date, sign and return your proxy in the enclosed self-addressed envelope
as soon as possible so that your shares may be certain of being represented and
voted at the meeting. Any proxy given by a stockholder may be revoked by that
stockholder at any time prior to the voting of the proxy.
By Order of the Board of Directors,
Douglas I. Payne
Secretary
July 20, 2000
<PAGE>
Stanley Furniture Company, Inc.
1641 Fairystone Park Highway
Stanleytown, Virginia 24168
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
August 24, 2000
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Stanley Furniture Company, Inc. (the "Company") for use at the
Special Meeting of Stockholders (the "Special Meeting") to be held on Thursday,
August 24, 2000, at 11:00 A.M., at the Company's corporate headquarters, 1641
Fairystone Park Highway, Stanleytown, Virginia, and any adjournment thereof. The
matters to be considered and acted upon at such meeting are described in the
foregoing notice of the meeting and this proxy statement. This proxy statement
and the related form of proxy are being mailed on or about July 20, 2000 to all
holders of record of the Company's common stock, $.02 par value (the "Common
Stock") on July 13, 2000. Shares of the Common Stock represented in person or by
proxy will be voted as hereinafter described or as otherwise specified by the
stockholder. Any proxy given by a stockholder may be revoked by such stockholder
at any time prior to the voting of the proxy by delivering a written notice to
the Secretary of the Company, by executing and delivering a later-dated proxy or
by attending the meeting and voting in person.
The cost of preparing, assembling and mailing the proxy, this proxy
statement, and other material enclosed, and all clerical and other expenses of
solicitations will be borne by the Company. In addition to the solicitation of
proxies by use of the mails, directors, officers and employees of the Company
may solicit proxies by telephone, telegram or personal interview. The Company
also will request brokerage houses and other custodians, nominees and
fiduciaries to forward soliciting material to the beneficial owners of Common
Stock held of record by such parties and will reimburse such parties for their
expenses in forwarding soliciting material.
VOTING RIGHTS
On July 13, 2000 there were 7,346,734 Common Stock outstanding and
entitled to vote. Each such share of Common Stock entitles the holder thereof to
one vote.
STANLEY FURNITURE COMPANY, INC.
2000 INCENTIVE COMPENSATION PLAN
Introduction
------------
The Board of Directors of the Company has approved and adopted the
Stanley Furniture Company, Inc. 2000 Incentive Compensation Plan (the "2000
Plan") and directed that it be submitted to stockholders for approval. The
principal features of the 2000 Plan are summarized below. The complete text of
the plan is attached as Exhibit A.
The 2000 Plan is intended to provide a means for selected employees and
non-employee directors of the Company to increase their personal stock holdings
in the Company, thereby stimulating their efforts and strengthening their desire
to remain with the Company (references to the "Company" in this section will
include any parent or subsidiary corporations).
<PAGE>
The Company's 1992 and 1994 Stock Option Plans authorize the issuance
to key employees of up to 1.4 million shares of Common Stock, substantially all
of which were covered by options granted before 1996. As a result of substantial
option exercises during 2000, primarily by Albert L. Prillaman, Chairman,
President and Chief Executive Officer of the Company, the number of outstanding
unexercised options and shares remaining for issuance under these plans has been
reduced to 416,466. As a result, the Board of Directors believes additional
shares can now be made available for grant to key executives without creating
inappropriate dilution to the Company's existing stockholders.
To support and enhance the Company's compensation programs, the Board
of Directors believes that it will be in the best interest of the Company to
make grants of options under the 2000 Plan during the current year. The Board of
Directors called the Special Meeting to obtain favorable accounting treatment
for the new grants. Approval of the 2000 Plan at the Special Meeting rather than
at the next annual meeting will conform to new accounting interpretations
effective July 1, 2000. Under these interpretations, options granted before
stockholder approval will result in a charge to earnings if the Company's stock
price increases between the date of an option grant and the date of stockholder
approval of the plan authorizing the option grant.
Eligibility and Administration
------------------------------
All present and future employees of the Company and directors who are
not employees are eligible to receive incentive awards under the 2000 Plan. The
Company estimates that it has approximately 3,200 employees (seven of whom are
officers) and five non-employee directors who may be eligible for incentive
awards.
The 2000 Plan will be administered by a committee of non-employee
directors of the Company. The 2000 Plan is intended to comply with the
provisions of SEC Rule 16b-3 and to meet the requirements for performance-based
compensation under Internal Revenue Code Section 162(m). Unless otherwise
determined by the Board of Directors, the committee administering the 2000 Plan
will be the Compensation Committee of the Board of Directors. The committee has
the power and complete discretion to select employees to receive incentive
awards and to determine for each employee the nature of the incentive award and
the terms and conditions of each incentive award. The Board of Directors has
these same responsibilities with respect to incentive awards to non-employee
directors.
Types of Incentive Awards That May Be Granted Under The 2000 Plan
-----------------------------------------------------------------
Employees may receive incentive stock options, nonstatutory stock
options and performance grants under the 2000 Plan. Non-employee directors may
receive only nonstatutory stock options under the 2000 Plan. Performance grants
are included in the 2000 Plan to comply with Code Section 162(m) and are payable
in either cash or stock.
Amount of Stock Available For Incentive Awards
----------------------------------------------
The Company has reserved 1,000,000 shares of Common Stock for issuance
under the 2000 Plan. The maximum number of shares that can be issued under
performance grants is 100,000. The maximum number of shares that can be issued
to any one individual in any calendar year under Incentive Awards is 300,000.
The maximum annual cash payment that can be made to any one individual under a
performance grant is $2,000,000.
If an incentive award under the 2000 Plan or the Company's prior stock
option plans is cancelled, terminates or lapses unexercised, any unissued shares
allocable to such incentive award may be subjected again to an incentive award
under the 2000 Plan. The Plan prohibits option repricing in which the exercise
price is reduced. The number of shares that may be issued under the 2000 Plan
can be adjusted in the event of a future stock dividend, stock split or other
similar events affecting the Common Stock.
The Common Stock is traded on the Nasdaq-National Market, and on July
14, 2000, the closing price was $22.06.
2
<PAGE>
Stock Options
-------------
The 2000 Plan authorizes grants of incentive stock options or
nonstatutory stock options. Incentive stock options qualify for favorable tax
treatment under Section 422 of the Internal Revenue Code, while nonstatutory
stock options do not. The purchase price of Common Stock covered by either type
of option may not be less than 100% of the fair market value of the Common Stock
on the date the option is granted. Fair market value is the closing registered
sales price of a share of Common Stock on the Nasdaq-National Market on the day
prior to the date on which the value of Common Stock must be determined.
Options may be exercised at such times as may be specified by the
committee. The maximum term of any option is ten years from the date of grant.
Incentive stock options may not be exercised after the first to occur of (i) ten
years from the date of grant, (ii) three months from the participant's
termination of employment with the Company for reasons other than death or
disability, or (iii) one year from the participant's termination of employment
due to death or disability. The committee may accelerate outstanding options
upon a change in control of the Company.
The value of incentive stock options, based on the exercise price, that
can be exercisable for the first time in any calendar year under the 2000 Plan
or any other similar plan maintained by the Company is limited to $100,000 for
each participant. A participant may pay the purchase price of an option in cash,
or, if the participant's incentive award so permits, by delivering certain
shares of Common Stock, or by exercising in a broker-assisted transaction.
Performance Grants
------------------
Performance grants are subject to the achievement of pre-established
performance goals and are administered to comply with the requirements of Code
Section 162(m). Performance goals use objective and quantifiable performance
criteria. The permissible performance measures are cash flow; cost reduction (or
limits on cost increases); debt to capitalization; debt to equity; earnings;
earnings before interest and taxes, earnings before interest, taxes,
depreciation and amortization; earnings per share (including or excluding
nonrecurring items); earnings per share before extraordinary items; income from
operations (including or excluding nonrecurring items); income from operations
to capital spending; free cash flow; net income (including or excluding
nonrecurring items and/or extraordinary items); net sales; price per share of
Common Stock; return on assets; return on capital employed; return on equity;
return on investment; return on sales; sales volume; or total return to
shareholders. The committee will set target and maximum amounts payable under
the performance grant. The committee must make performance grants prior to the
90th day of the period for which the performance grant relates or before the
completion of 25% of such period.
The employee receives the appropriate payments if the performance goals
were met. Payments under a performance grant can be cash, Common Stock, or both.
The committee may permit an employee to make a prior election to defer payment
under a performance grant, subject to such terms and conditions as the committee
may determine.
Transferability of Awards
-------------------------
Nonstatutory stock options and performance grants are transferable to
the extent provided in the award agreement. Incentive stock options are not
transferable except after death.
Amendment of the 2000 Plan and Awards
-------------------------------------
The Board of Directors may amend the 2000 Plan in such respects as it
deems advisable. To the extent required by law, stockholder approval of
amendments is required to increase the total number of shares of Common Stock
reserved under the Plan. The Board of Directors must obtain the consent of a
participant to an amendment that adversely affects a participant's rights under
3
<PAGE>
an existing Incentive Award. However, the Board of Directors may unilaterally
amend the 2000 Plan and incentive awards with respect to participants to ensure
compliance with applicable laws and regulations.
Federal Income Tax Consequences
-------------------------------
Generally, a participant in the 2000 Plan will not incur federal income
tax when he is awarded an incentive stock option, nonstatutory stock option or
performance grant.
Upon exercise of a nonstatutory stock option, a participant generally
will recognize compensation income equal to the difference between the fair
market value of the Common Stock on the date of the exercise and the option
price. Generally, such amounts will be included in the participant's gross
income in the taxable year in which exercise occurs. The compensation income
recognized by the participant is subject to income tax withholding by the
Company.
Upon exercise of an incentive stock option, a participant generally
will not recognize income subject to tax, unless the participant is subject to
the alternative minimum tax. If the participant holds the Common Stock acquired
upon the exercise of an incentive stock option until the later of two years
after the option was awarded to the participant or one year after the Common
Stock was issued to the participant, then any profit or loss realized on the
later sale or exchange of the Common Stock will be capital gain or loss.
Payment under a performance grant in cash or stock will be ordinary
income to participants in the year it is paid.
If the incentive award so provides, a participant may pay the purchase
price on the exercise of a nonstatutory stock option or an incentive stock
option by delivery of cash or certain shares of Common Stock, or a combination
of cash and Common Stock. Usually when a participant delivers shares of Common
Stock in satisfaction of all, or any part, of the purchase price, no taxable
gain is recognized on any appreciation in the value of the previously held
Common Stock.
Assuming that a participant's compensation is otherwise reasonable and
that the statutory limitations on compensation deductions by publicly-held
companies imposed under Section 162(m) of the Code do not apply, the Company
usually will be entitled to a business expense deduction at the time and in the
amount that the recipient of an nonstatutory stock option or a performance grant
recognizes ordinary compensation income in connection therewith, as described
above. The Company generally does not receive a deduction in connection with the
exercise of an incentive stock option, unless the participant disposes of Common
Stock received upon exercise of such option in violation of the holding period
requirements.
This summary of Federal income tax consequences of incentive stock
options, nonstatutory stock options and performance grants does not purport to
be complete. There may also be state and local income taxes applicable to these
transactions.
Effective Date and Termination
------------------------------
The 2000 Plan becomes effective as of August 24, 2000. Unless sooner
terminated by the Board of Directors, the Plan will terminate on August 24,
2010. No awards may be made under the 2000 Plan after its termination.
Vote Required
-------------
Approval of the Stanley Furniture Company, Inc. 2000 Incentive
Compensation Plan requires the affirmative vote of the holders of a majority of
the shares of Common Stock voting at the Special Meeting.
The Board of Directors believes that approval of the 2000 Plan is in
the best interest of all shareholders and, accordingly, recommends a vote "FOR"
approval of the proposed 2000 Plan.
4
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table
--------------------------
The following table sets forth, for the years ended December 31, 1999,
1998 and 1997, the annual and long-term compensation for services in all
capacities to the Company of those persons who at December 31, 1999 were the
Company's Chief Executive Officer and the next four most highly compensated
executive officers of the Company for the year ended December 31, 1999
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------------------- -------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options (#)(1) Compensation(2)
--------------------------- ---- ------- ----- ------------ ------------- ---------------
(2)
<S> <C> <C> <C> <C> <C> <C>
ALBERT L. PRILLAMAN 1999 $ 380,004 $ 380,000 $ 2,898 - $ 26,116
Chairman, President and 1998 350,040 350,000 280,610 (3) - 26,116
Chief Executive Officer.... 1997 350,040 350,000 298,570 (3) - 25,380
DOUGLAS I. PAYNE
Senior Vice President - 1999 $ 180,000 $ 144,000 $ 72 - $ 4,800
Finance and Administration, 1998 160,008 135,000 63 - 4,800
Secretary and Treasurer.... 1997 150,012 90,000 122 - 3,362
WILLIAM A. SIBBICK, JR. 1999 $ 165,000 $ 124,000 $ 356 - $ 4,800
Senior Vice President - 1998 148,008 105,000 403 - 4,800
Sales...................... 1997 136,008 60,000 444 - 3,557
JOHN W. JOHNSON 1999 $ 165,000 $ 124,000 $ 1,802 - $ 4,800
Senior Vice President - 1998 144,000 105,000 1,533 10,000 4,800
Manufacturing.............. 1997 132,000 60,000 1,675 - 3,200
KELLY S. CAIN
Senior Vice President - 1999 $ 159,996 $ 120,000 $ 131 $ 4,800
Product Development and 1998 140,004 105,000 114 - 4,800
Merchandising.............. 1997 124,008 60,000 178 - 3,788
</TABLE>
------------
(1) All share and per share information in this proxy statement reflect a
two-for-one stock split effective May 15, 1998.
(2) All Other Compensation listed for Mr. Prillaman reflects premiums paid by
the Company in connection with a split-dollar life insurance agreement
($21,316 in 1999) and employer contributions to the Company's 401(k)
Plan ($4,800 in 1999). The amounts for each of Messrs. Payne, Sibbick,
Johnson and Cain reflect employer contributions to the Company's 401(k)
Plan.
(3) Includes forgiveness of interest and principal, and payroll taxes paid by
the Company, with respect to a loan under the Executive Loan Plan for Mr.
Prillaman of $270,512 for 1998 and $283,837 for 1997.
5
<PAGE>
Option Value Table
------------------
The following table sets forth information concerning the year-end
number and value of unexercised options for each of the Named Executive
Officers.
AGGREGATED OPTION EXERCISES IN 1999 AND 1999 YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-
Options at Fiscal Money Options
Shares Year End (#) At Fiscal Year End ($) (1)
Acquired on Value --------------------------- --------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Albert L. Prillaman........... 70,000 $ 1,355,825 330,420(2) - $4,419,368 $ -
Douglas I. Payne.............. 11,686 222,833 81,000 4,000 1,051,125 40,750
William A. Sibbick, Jr........ 10,000 155,755 51,006 - 697,830 -
John W. Johnson............... - - 59,000 6,000 751,250 -
Kelly S. Cain................. 17,252 269,843 23,000 1,000 312,750 12,313
</TABLE>
----------
(1) In-the-money options are those for which the December 31, 1999 fair market
value of the underlying shares of Common Stock (as determined by the
closing price on The Nasdaq Stock Market) exceeds the exercise price of the
option.
(2) In March 2000, Mr. Prillaman exercised all of his outstanding options and
purchased 330,420 shares of Common Stock with a realized value of
$3,696,574. Mr. Prillaman delivered a promissory note in payment of the
exercise price and withholding taxes. The promissory note, which was
approved by the Compensation Committee pursuant to the Company's 1994 Stock
Option Plan, is for an aggregate principal amount of $2,584,982.70, bears
interest at 6.71% per annum and provides for a balloon payment at maturity
in April 2005 in an amount equal to the aggregate principal amount plus
interest of $991,723.28. The note is secured by a pledge of the acquired
Common Stock and may be prepaid without penalty.
Employment Agreements
---------------------
Mr. Prillaman has an employment agreement with the Company that
provides that he has the duties of President, Chief Executive Officer and
Chairman of the Board of Directors of the Company at a base salary, which was
initially $275,000 per year, subject to annual upward adjustment by the Board.
Mr. Prillaman is also entitled to a graduated bonus amount up to a maximum of
80% of his then current base salary, contingent upon the achievement of certain
threshold profit objectives to be determined by the Board at the beginning of
each year. The agreement is automatically extended for an additional one year
term at the end of each year unless either party to the agreement gives notice
on or before November 1 of any year that the agreement will not be extended. In
the event of such notice, employment terminates as of December 31 of the year in
which such notice is given. If the Company gives such notice, Mr. Prillaman is
entitled to severance pay during the two years following termination in an
amount equal to his base salary plus the average of bonuses paid for the three
fiscal years preceding the year in which notice of termination is given. Mr.
Prillaman is entitled to receive the total severance pay in a single payment in
the event a change in control (as defined in the agreement) occurs. During the
two years after such a change of control, Mr. Prillaman is entitled to terminate
his employment with the Company and receive such severance pay in a single
payment. The agreement provides that Mr. Prillaman will not compete with the
Company for two years after termination of the employment agreement, except that
this non-competition covenant does not apply if: (i) Mr. Prillaman terminates
his employment within two years after a change of control or (ii) Mr. Prillaman
voluntarily terminates his employment and the Company does not elect to pay
severance to Mr. Prillaman.
In addition, the Company has entered into employment agreements with
the following executives: Douglas I. Payne, William A. Sibbick, Jr., John W.
Johnson, and Kelly S. Cain. Each of these employment agreements is on similar
terms as those discussed above with respect to Mr. Prillaman, with the following
exceptions: Mr. Payne serves as Senior Vice President - Finance and
Administration, Treasurer and Secretary of the Company, his base salary is at
least $136,000, and he is entitled to receive a potential annual bonus of
$50,000, subject to upward adjustment; Mr. Sibbick serves as Senior Vice
President - Sales, his base salary is at least $165,000, and he is entitled to
receive a potential annual bonus of $124,000, subject to upward adjustment; Mr.
Johnson serves as Senior Vice President - Manufacturing, his base salary is at
least $165,000, and he is entitled to receive a potential annual bonus of
$124,000, subject to upward adjustment; and, Mr. Cain serves as Senior Vice
President - Product Development and Merchandising, his base salary is at least
6
<PAGE>
$160,000, and he is entitled to receive a potential annual bonus of $120,000,
subject to upward adjustment. In addition, during the first year after a change
of control (as defined in the agreement) Messrs. Sibbick, Johnson, and Cain are
entitled to terminate their employment with the Company and receive severance
pay only if: (i) their base salary is reduced, (ii) they are not in good faith
considered for an annual bonus, (iii) they are denied certain customary fringe
benefits, (iv) their place of employment is relocated further than 100 miles
from their current place of employment, or (v) their duties and responsibilities
are substantially reduced.
In connection with the employment agreement with Mr. Prillaman, the
Company has entered into a split-dollar life insurance agreement under which the
Company has agreed to pay premiums with respect to a life insurance policy for
Mr. Prillaman until the cash surrender value of the policy and all paid up
additions are sufficient to repay the Company all premiums and other amounts
paid by it and to maintain the policy's death benefit at a level no less than
the policy's initial face amount without further premium payments. At such time,
Mr. Prillaman is obligated to repay such premiums to the Company. Mr. Prillaman
has executed a collateral assignment of his policy in favor of the Company to
secure repayment to the Company of the premiums paid on such policy. The initial
face amount of the policy for Mr. Prillaman is $1 million. During the year ended
December 31, 1999, the Company paid $21,316 in premiums for the policy of Mr.
Prillaman.
Defined Benefit Pension Plans
-----------------------------
The Company maintains a qualified defined benefit pension plan for all
its eligible employees, The Stanley Retirement Plan, and also maintains a
nonqualified, unfunded supplemental retirement plan for certain of its
employees. Effective on December 31, 1995, future benefit accruals under both
plans were curtailed. Although participants continue their participation in both
plans, additional benefits do not accrue. The accrued monthly benefit under The
Stanley Retirement Plan, assuming retirement at age 65, for each of the Named
Executive Officers through December 31, 1995, was: Albert L. Prillaman, $5,244;
Douglas I. Payne, $993; William A. Sibbick, Jr., $515; John W. Johnson, $2,864;
and Kelly S. Cain, $692. The accrued monthly benefit under the Supplemental
Retirement Plan, assuming retirement at age 65, for each of the Named Executive
Officers through December 31, 1995, was: Albert L. Prillaman, $8,838; Douglas I.
Payne, $591; William A. Sibbick, Jr., $0; John W. Johnson, $1,422; and Kelly S.
Cain $322.
Compensation of Directors
-------------------------
Each director of the Company, other than Robert G. Culp, III and Albert
L. Prillaman, received compensation in the amount of $15,000 for serving as a
director in 1999. Mr. Culp received $7,500 in 1999. Mr. Prillaman did not
receive any separate compensation for serving in that capacity during 1999. The
annual compensation for outside directors of the Company will be increased to
$20,000 for 2000.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of July 13, 2000, by each
stockholder known by the Company to be the beneficial owner of more than 5% of
its outstanding Common Stock, by each director, by each of the Named Executive
Officers and by all directors and executive officers as a group:
<TABLE>
<CAPTION>
Amount and Nature Percent of
Name of Beneficial Ownership Class
------ ----------------------- -----------
<S> <C> <C>
FMR Corp. (a).................................................... 702,100 (a) 9.6%
Brinson Partners, Inc. and affiliated entities (b)............... 607,932 (b) 8.3%
T. Rowe Price Associates, Inc. (c)............................... 567,500 (c) 7.7%
Albert L. Prillaman (d).......................................... 548,214 7.5%
Dimensional Fund Advisors Inc.(e)................................ 516,100 (e) 7.0%
J.P. Morgan & Co. Incorporated (f)............................... 512,600 (f) 7.0%
Muhlenkamp & Company, Inc. and affiliated entities (g)........... 507,910 (g) 6.9%
Investment Counselors of Maryland, Inc. (h)...................... 359,000 (h) 4.9%
Douglas I. Payne (d)............................................. 86,000 (i) 1.2%
John W. Johnson (d).............................................. 63,097 (j) (l)
William A. Sibbick, Jr. (d)...................................... 51,006 (k) (l)
Kelly S. Cain (d)................................................ 25,158 (l) (l)
Edward J. Mack (d)............................................... 11,232 (l)
David V. Harkins (n)............................................. 5,000 (l)
T. Scott McIlhenny (d)........................................... 2,600 (l)
Thomas L. Millner (d)............................................ 1,800 (l)
Robert G. Culp, III (d).......................................... 300 (l)
All directors and executive officers as a group (11 persons)..... 803,107 (o) 10.6%
</TABLE>
------------------------
(a) The information concerning the shares beneficially owned by FMR Corp. is
based upon the Schedule 13G/A filed with the SEC February 14, 2000 by FMR
Corp. together with Edward C. Johnson 3d, Chairman of FMR Corp., and
Abigail P. Johnson, a director of FMR Corp. Fidelity Management & Research
Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp., is the
beneficial owner of 702,100 shares of Common Stock as a result of acting as
investment advisor to Fidelity Low-Priced Stock Fund, which owned all
702,100 shares. Edward C. Johnson 3d, FMR Corp., through its control of
Fidelity, and Fidelity Low-Priced Stock Fund each has sole power to dispose
of the 702,100 shares owned by Fidelity Low-Priced Stock Fund. Neither
Edward C. Johnson 3d nor FMR Corp. has sole power to vote or direct the
voting of the shares owned directly by Fidelity Low-Priced Stock Fund,
which power resides with the Board of Trustees of Fidelity Low-Priced Stock
Fund. The principal business address of FMR Corp., Fidelity and Fidelity
Low-Priced Stock Fund is 82 Devonshire Street, Boston, Massachusetts 02109.
(b) The beneficial ownership information with respect to Brinson Partners, Inc.
("BPI") is based upon the Schedule 13G/A filed with the SEC February 11,
2000 by BPI together with UBS AG ("UBS AG"). BPI is an indirect,
wholly-owned subsidiary of UBS AG. The Schedule 13G/A indicates that UBS
AG, through its ownership of BPI and otherwise, has sole voting and shared
dispositive power with respect to 607,932 shares and that BPI has sole
voting and shared dispositive power with respect to 604,032 of such shares.
BPI and UBS AG disclaim beneficial ownership of such shares. The principal
business address of BPI is 209 South LaSalle, Chicago, Illinois 60604. The
principal business address of UBS AG is Bahnhofstrasse 45, 8021, Zurich,
Switzerland.
(c) The beneficial ownership information for T. Rowe Price Associates, Inc.
("Price Associates") is based upon the Schedule 13G/A filed with the SEC
February 8, 2000 by Price Associates together with T. Rowe Price Small-Cap
Value Fund, Inc. ("TRP Small-Cap"). Price Associates has sole dispositive
power with respect to 567,500 shares (and has sole voting power with
respect to 128,000 of such shares). Such shares are owned by various
individual and institutional investors, including TRP Small-Cap (which has
sole voting power with respect to 400,000 of such shares, representing 5.6%
of the shares outstanding) which Price Associates serves as investment
advisor. Price Associates disclaims beneficial ownership of such shares.
The principal business address of Price Associates and TRP Small-Cap is 100
E. Pratt Street, Baltimore, Maryland 21202.
(d) The business address for such persons is c/o Stanley Furniture Company,
Inc., 1641 Fairystone Park Highway, Stanleytown, Virginia 24168.
(e) The beneficial ownership information with respect to Dimensional Fund
Advisors Inc. ("Dimensional") is based upon its Schedule 13G/A filed with
the SEC February 3, 2000. Dimensional has sole voting and dispositive power
with respect to 516,100 shares in its capacities as investment advisor to
four investment companies and investment manager to certain other
investment vehicles (collectively, the "Dimensional Funds"). Such shares
are owned by the Dimensional Funds, and Dimensional disclaims beneficial
ownership of such shares. The principal business address of Dimensional is
1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(f) The beneficial ownership information with respect to J.P. Morgan & Co.
Incorporated ("J.P. Morgan") is based upon its Schedule 13G/A filed with
8
<PAGE>
the SEC February 14, 2000. The Schedule 13G/A indicates that J.P. Morgan
has sole voting power with respect to 431,900 shares and sole dispositive
power with respect to 512,600 shares. The principal business address of
J.P. Morgan is 60 Wall Street, New York, New York 10260.
(g) The beneficial ownership information with respect to Muhlenkamp & Company,
Inc. ("Muhlenkamp & Co.") is based upon its Schedule 13G filed with the SEC
February 28, 2000. The Schedule 13G indicates that Muhlenkamp & Co. has
shared voting and dispositive power with respect to 507,910 shares. The
principal business address of Muhlenkamp & Co. is 12300 Perry Highway,
Wexford, Pennsylvania 15090.
(h) The beneficial ownership information with respect to Investment Counselors
of Maryland, Inc. ("Investment Counselors of Maryland") is based upon its
Schedule 13G filed with the SEC February 10, 2000. The Schedule 13G
indicates that Investment Counselors of Maryland has sole voting power with
respect to 316,000 shares, shared voting power with respect to 43,000
shares and sole dispositive power with respect to 359,000 shares. The
principal business address of Investment Counselors of Maryland is 803
Cathedral Street, Baltimore, Maryland 21201-5297.
(i) Includes 81,000 shares which could be acquired through the exercise of
stock options.
(j) Includes 59,000 shares which could be acquired through the exercise of
stock options.
(k) Less than 1%.
(l) Represents 51,006 shares which could be acquired through the exercise of
stock options.
(m) Mr. Cain has sole voting power and dispositive power with respect to 1,100
shares and shared voting and dispositive power with respect to 1058 shares.
Includes 23,000 shares which could be acquired through the exercise of
stock options.
(n) The business address for such person is c/o Thomas H. Lee Company, 75 State
Street, Boston, Massachusetts 02109.
(o) Includes 222,706 shares which could be acquired through the exercise of
stock options.
OTHER BUSINESS
Management knows of no other business which will be presented for
consideration at the Special Meeting, but should any other matters be brought
before the meeting, it is intended that the persons named in the accompanying
proxy will vote such proxy at their discretion.
ADDITIONAL INFORMATION
Voting Procedures. Votes will be tabulated by one or more Inspectors of
Elections. Approval of the 2000 Plan and any other matters properly brought
before the meeting will require the affirmative vote of the holders of at least
a majority of the shares of outstanding Common Stock represented at the meeting.
If a stockholder, present in person or by proxy, abstains on any matter, the
stockholder's shares will not be voted on such matter. Thus an abstention from
voting on a matter has the same legal effect as a vote "against" the matter,
even though the stockholder may interpret such action differently.
A majority of the shares entitled to vote, represented in person or by
proxy, will constitute a quorum for the transaction of business at the meeting.
Shares for which the holder has elected to abstain or to withhold the proxies'
authority to vote on a matter will count toward a quorum. "Broker non-votes"
will not count toward a quorum and will not be voted on any matter to be
considered at the meeting.
Stockholder Proposals for 2001 Annual Meeting. Any stockholder desiring
to present a proposal to the stockholders at the 2001 Annual Meeting and who
desires that such proposal be included in the Company's proxy statement and
proxy card relating to that meeting, must transmit such to the Secretary of the
Company so that it is received at the Company's principal executive offices on
or before November 10, 2000. All such proposals should be in compliance with
applicable Securities and Exchange Commission regulations. With respect to
stockholder proposals that are not included in the proxy statement for the 2001
Annual Meeting, the persons named in the proxy solicited by the Company's Board
of Directors for the 2001 Annual 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 Securities Exchange Act of 1934, as
amended, including with respect to proposals received by the Company after
January 24, 2001.
By Order of the Board of Directors,
Douglas I. Payne
Secretary
July 20, 2000
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EXHIBIT A
STANLEY FURNITURE COMPANY, INC.
2000 INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this Stanley Furniture Company, Inc. 2000
Incentive Compensation Plan (the "Plan") is to further the long term stability
and financial success of Stanley Furniture Company, Inc. ("Stanley Furniture" or
the "Company"), and its Subsidiaries by attracting and retaining employees and
non-employee directors through the use of cash and stock incentives. It is
believed that ownership of Company Stock and the use of cash incentives will
stimulate the efforts of those employees and directors upon whose judgment and
interests the Company is and will be largely dependent for the successful
conduct of its business. It is also believed that Incentive Awards granted to
such employees and directors under this Plan will strengthen their desire to
remain with the Company and will further identify their interests with those of
the Company's shareholders. The Plan is intended to operate in compliance with
the provisions of Securities and Exchange Commission Rule 16b-3.
2. Definitions. As used in the Plan, the following terms have the
meanings indicated:
(a) "Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Applicable Withholding Taxes" means the aggregate minimum
statutory amount of federal, state and local income and payroll taxes that an
Employer is required to withhold in connection with any Performance Grant, or
any exercise of a Nonstatutory Stock Option.
(c) "Board" means the Board of Directors of Stanley
Furniture.
(d) "Change in Control" means an event described in (i),
(ii), (iii), or (iv):
(i) The acquisition by a Group of Beneficial
Ownership of 35% or more of the Stock or the Voting Power of
the Company, but excluding for this purpose: (A) any
acquisition by the Company (or a subsidiary), or an employee
benefit plan of the Company; (B) any acquisition of common
stock of the Company by management employees of the Company;
or (C) any acquisition by a Group that owns 10% or more of the
Stock or Voting Power of the Company on the effective date of
the Plan. "Group" means any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of the Act,
"Beneficial Ownership" has the meaning in Rule 13d-3
promulgated under the Act, "Stock" means the then outstanding
shares of common stock, and "Voting Power" means the combined
voting power of the outstanding voting securities entitled to
vote generally in the election of directors.
(ii) Individuals who constitute the Board on the
effective date of the Plan (the "Incumbent Board") cease to
constitute at least a majority of the Board, provided that any
director whose nomination was approved by a majority of the
Incumbent Board shall be considered a member of the Incumbent
Board unless such individual's initial assumption of office is
in connection with an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Act).
(iii) Approval by the shareholders of the Company of
a reorganization, merger or consolidation, in each case, in
which the owners of more than 50% of the Stock or Voting Power
of the Company do not, following such reorganization, merger
or consolidation, beneficially own, directly or indirectly,
more than 50% of the Stock or Voting Power of the corporation
resulting from such reorganization, merger or consolidation.
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(iv) A complete liquidation or dissolution of the
Company or of its sale or other disposition of all or
substantially all of the assets of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means the Compensation Committee of the Board,
provided that, if any member of the Compensation Committee does not qualify as
both an outside director for purposes of Code section 162(m) and a non-employee
director for purposes of Rule 16b-3, the remaining members of the committee (but
not less than two members) shall be constituted as a subcommittee of the
Compensation Committee to act as the Committee for purposes of the Plan.
(g) "Company Stock" means common stock of Stanley Furniture.
In the event of a change in the capital structure of Stanley Furniture (as
provided in Section 12), the shares resulting from such a change shall be deemed
to be Company Stock within the meaning of the Plan.
(h) "Covered Employee" means any employee who is or, in the
determination of the Committee, may be a "covered employee" within the meaning
of Code section 162(m).
(i) "Date of Grant" means the date on which the Committee
grants an Incentive Award.
(j) "Disability" or "Disabled" means, as to an Incentive Stock
Option, a Disability within the meaning of Code section 22(e)(3). As to all
other Incentive Awards, a physical or mental condition that prevents the
Participant from performing his customary duties with the Company. The Committee
shall determine whether a Disability exists on the basis of competent medical
evidence, and such determination shall be conclusive.
(k) "Employer" means Stanley Furniture and each Subsidiary
that employs one or more Participants.
(l) "Fair Market Value" means the closing registered sale
price of a share of Company Stock on the Nasdaq-National Market on the day prior
to the Date of Grant or any other date for which the value of Company Stock must
be determined under the Plan.
(m) "Incentive Award" means, collectively, a Performance Grant
or the award of an Option under the Plan.
(n) "Incentive Stock Option" means an Option intended to meet
the requirements of, and qualify for favorable federal income tax treatment
under, Code section 422.
(o) "Mature Shares" means shares of Company Stock for which
the holder thereof has good title, free and clear of all liens and encumbrances
and which such holder either (i) has held for at least six months or (ii) has
purchased on the open market.
(p) "Nonstatutory Stock Option" means an Option that does not
meet the requirements of Code section 422, or, even if meeting the requirements
of Code section 422, is not intended to be an Incentive Stock Option and is so
designated.
(q) "Option" means a right to purchase Company Stock granted
under the Plan, at a price determined in accordance with the Plan.
(r) "Participant" means any employee of Stanley Furniture or
a Subsidiary who receives an Incentive Award under the Plan.
(s) "Performance Criteria" means any of the following areas of
performance of Stanley Furniture: cash flow; cost reduction (or limits on cost
increases); debt to capitalization; debt to equity; earnings; earnings before
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interest and taxes, earnings before interest, taxes, depreciation and
amortization; earnings per share (including or excluding nonrecurring items);
earnings per share before extraordinary items; income from operations (including
or excluding nonrecurring items); income from operations to capital spending;
free cash flow; net income (including or excluding nonrecurring items and/or
extraordinary items); net sales; price per share of Company Stock; return on
assets; return on capital employed; return on equity; return on investment;
return on sales; sales volume; or total return to shareholders. Any Performance
Criteria may be used to measure the performance of Stanley Furniture as a whole
or any business unit of Stanley Furniture. As determined by the Committee, any
Performance Criteria shall be calculated in accordance with Stanley Furniture's
public financial statements, generally accepted accounting principles, or under
a methodology established by the Committee prior to the issuance of a
Performance Grant which is consistently applied. The Committee shall have the
power and complete discretion to determine the methodology for the calculation
of Performance Criteria.
(t) "Performance Goal" means an objectively determinable
performance goal established by the Committee with respect to a given
Performance Grant that relates to one or more Performance Criteria.
(u) "Performance Grant" means an Incentive Award made
pursuant to Section 8.
(v) "Plan Year" means January 1 to December 31.
(w) "Rule 16b-3" means Rule 16b-3 of the Securities and
Exchange Commission promulgated under the Securities Exchange Act of 1934, as
amended. A reference in the Plan to Rule 16b-3 shall include a reference to any
corresponding rule (or number redesignation) of any amendments to Rule 16b-3
enacted after the effective date of the Plan's adoption.
(x) "Subsidiary" means any corporation in which Stanley
Furniture owns stock possessing at least 50 percent of the combined voting power
of all classes of stock or which is in a chain of corporations with Stanley
Furniture in which stock possessing at least 50% of the combined voting power of
all classes of stock is owned by one or more other corporations in the chain.
3. General. The following types of Incentive Awards may be granted
under the Plan: Performance Grants or Options. Options granted under the Plan
may be Incentive Stock Options or Nonstatutory Stock Options.
4. Stock. Subject to Section 12 of the Plan, there shall be reserved
for issuance under the Plan an aggregate of one million (1,000,000) shares of
Company Stock, which shall be authorized, but unissued shares, plus any shares
of Company stock allocated to awards under any prior plan of the Company that
are forfeited, expire, or are cancelled without delivery of shares. Shares
allocable to Incentive Awards or portions thereof granted under the Plan that
expire, are forfeited, or otherwise terminate unexercised may again be subjected
to an Incentive Award under the Plan. For purposes of determining the number of
shares that are available for Incentive Awards under the Plan, such number shall
include the number of shares of Company Stock surrendered by a Participant or
retained by Stanley Furniture in payment of Applicable Withholding Taxes and any
Mature Shares surrendered by a Participant upon exercise of an Option or in
payment of Applicable Withholding Taxes. No more than three hundred thousand
(300,000) shares of Company Stock may be allocated to the Incentive Awards,
including the maximum amounts payable under a Performance Grant, that are
granted to any individual Participant during any single Plan Year. No more than
one hundred thousand (100,000) shares may be issued to Participants under
Performance Grants.
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5. Eligibility.
(a) All present and future employees of Stanley Furniture and
its Subsidiaries (whether now existing or hereafter created or acquired) shall
be eligible to receive Incentive Awards under the Plan. The Committee shall have
the power and complete discretion, as provided in Section 13, to select eligible
employees to receive Incentive Awards and to determine for each employee the
nature of the award and the terms and conditions of each Incentive Award.
(b) The grant of an Incentive Award shall not obligate an
Employer to pay an employee any particular amount of remuneration, to continue
the employment of the employee after the grant or to make further grants to the
employee at any time thereafter.
6. Stock Options.
(a) The Committee may make grants of Options to Participants.
Whenever the Committee deems it appropriate to grant Options, notice shall be
given to the Participant stating the number of shares for which Options are
granted, the Option price per share, whether the Options are Incentive Stock
Options or Nonstatutory Stock Options, and the conditions to which the grant and
exercise of the Options are subject.
(b) The exercise price of shares of Company Stock covered by
an Option shall be not less than 100% of the Fair Market Value of such shares on
the Date of Grant. The maximum term for an Option shall be ten years from the
Date of Grant.
(c) Options may be exercised in whole or in part at such times
as may be specified by the Committee in the Participant's stock option
agreement; provided that, the exercise provisions for Incentive Stock Options
shall in all events not be more liberal than the following provisions:
(i) No Option may be exercised as an Incentive Stock
Option after the first to occur of (x) ten years from the Date
of Grant, (y) three months following the date of the
Participant's retirement or termination of employment with all
Employers for reasons other than Disability or death, or (z)
one year following the date of the Participant's termination
of employment on account of Disability or death.
(ii) An Incentive Stock Option by its terms, shall be
exercisable in any calendar year only to the extent that the
aggregate Fair Market Value (determined at the Date of Grant)
of the Company Stock with respect to which Incentive Stock
Options are exercisable for the first time during the calendar
year does not exceed $100,000 (the "Limitation Amount").
Incentive Stock Options granted under the Plan and all other
plans of any Employer shall be aggregated for purposes of
determining whether the Limitation Amount has been exceeded.
The Committee granting the Option may impose such conditions
as it deems appropriate on an Incentive Stock Option to ensure
that the foregoing requirement is met. If Incentive Stock
Options that first become exercisable in a calendar year
exceed the Limitation Amount, the excess Options will be
treated as Nonstatutory Stock Options to the extent permitted
by law.
(d) The Committee is expressly prohibited from reducing the
exercise price of an Option after the Date of Grant (except as provided in
Section 12) and from making a new Incentive Award in the form of an Option if
the exercise price of the new Option is less than the exercise price of the
Option under an existing Incentive Award surrendered for cancellation.
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7. Method of Exercise of Options.
(a) Options may be exercised by the Participant giving written
notice of the exercise to the Employer, stating the number of shares the
Participant has elected to purchase under the Option. The notice shall be
effective if accompanied by the exercise price in full in cash or, if the terms
of an Option permit, the Participant may (i) deliver Mature Shares (valued at
their Fair Market Value) in satisfaction of all or any part of the exercise
price, or (ii) deliver a properly executed exercise notice together with
irrevocable instructions to a broker to deliver promptly to the Employer, from
the sale or proceeds of a loan from the broker with respect to the sale of
Company Stock or a broker loan secured by Company Stock, the amount necessary to
pay the exercise price and, if required by the terms of the Option, Applicable
Withholding Taxes.
(b) Stanley Furniture may place on any certificate
representing Company Stock issued upon the exercise of an Option any legend
deemed to comply with federal or state securities laws. Until the Participant
has made any required payment, including any Applicable Withholding Taxes, and
has had issued a certificate for the shares of Company Stock acquired, he or she
shall possess no shareholder rights with respect to the shares.
(c) Each Participant shall agree as a condition of the
exercise of an Option to pay to the Employer, or make arrangements satisfactory
to the Employer regarding the payment to the Employer of, Applicable Withholding
Taxes. Until such amount has been paid or arrangements satisfactory to the
Employer have been made, no stock certificate shall be issued upon the exercise
of an Option.
(d) As an alternative to making a cash payment to the Employer
to satisfy Applicable Withholding Taxes, if the Option so provides, the
Participant may elect to (i) to deliver Mature Shares (valued at their Fair
Market Value) or (ii) to have the Employer retain that number of shares of
Company Stock (valued at their Fair Market Value) that would satisfy all or a
specified portion of the Applicable Withholding Taxes.
8. Performance Grants.
(a) Performance Grants may be made to any Participant. Each
Performance Grant shall be evidenced by an agreement (a "Grant Agreement")
setting forth the Performance Goals for the award, including the Performance
Criteria, the target and maximum amounts payable and such other terms and
conditions as are applicable to the Performance Grant. Each Performance Grant
shall be granted and administered to comply with the requirements of Code
section 162(m). The aggregate maximum cash amount payable under the Plan to any
Participant in any Plan Year shall not exceed $2,000,000. In the event of any
conflict between a Grant Agreement and the Plan, the terms of the Plan shall
govern.
(b) The Committee shall establish the Performance Goals for
Performance Grants. The Committee shall determine the extent to which any
Performance Criteria shall be used and weighted in determining Performance
Grants. The Committee may vary the Performance Criteria, Performance Goals and
weightings from Participant to Participant, Performance Grant to Performance
Grant and Plan Year to Plan Year. The Committee may increase, but not decrease,
any Performance Goal during a Plan Year.
(c) The Committee shall establish for each Performance Grant
the amount of cash or Company Stock payable at specified levels of performance,
based on the Performance Goal for each Performance Criteria. Any Performance
Grant shall be made not later than 90 days after the start of the period for
which the Performance Grant relates and shall be made prior to the completion of
25% of such period. All determinations regarding the achievement of any
Performance Goals will be made by the Committee. The Committee may not increase
the amount of cash or Common Stock that would otherwise be payable upon
achievement of the Performance Goal or Goals but may reduce or eliminate the
payments as provided in a Performance Grant.
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(d) The actual payments to a Participant under a Performance
Grant will be calculated by applying the achievement of a Performance Criteria
to the Performance Goal as established in the Grant Agreement. All calculations
of actual payments shall be made by the Committee and the Committee shall
certify in writing the extent, if any, to which the Performance Goals have been
met.
(e) Performance Grants will be paid in cash, Company Stock or
both, at such time or times as are provided in the Grant Agreement. The
Committee may provide in the Grant Agreement that the Participant may make an
election to defer the payment under a Performance Grant subject to such terms
and conditions as the Committee may determine.
(f) Nothing contained in the Plan will be deemed in any way to
limit or restrict any Employer or the Committee from making any award or payment
to any person under any other plan, arrangement or understanding, whether now
existing or hereafter in effect.
(g) A Participant who receives a Performance Grant payable in
Company Stock shall have no rights as a shareholder until the Company Stock is
issued pursuant to the terms of the Performance Grant. The Company Stock may be
issued without cash consideration.
(h) A Participant's interest in a Performance Grant may not be
sold, assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(i) Whenever payments under a Performance Grant are to be made
in cash, the Employer will withhold therefrom an amount sufficient to satisfy
any Applicable Withholding Taxes. Each Participant shall agree as a condition of
receiving a Performance Grant payable in the form of Company Stock, to pay to
the Employer, or make arrangements satisfactory to the Employer regarding the
payment to the Employer of, Applicable Withholding Taxes. Until such amount has
been paid or arrangements satisfactory to the Employer have been made, no stock
certificate shall be issued to such Participant. As an alternative to making a
cash payment to the Employer to satisfy Applicable Withholding Taxes, if the
Grant Agreement so provides, the Participant may elect to (i) to deliver Mature
Shares (valued at their Fair Market Value) or (ii) to have the Employer retain
that number of shares of Company Stock (valued at their Fair Market Value) that
would satisfy all or a specified portion of the Applicable Withholding Taxes.
9. Transferability of Incentive Awards. Nonstatutory Stock Options
shall not be transferable by a Participant and exercisable by a person other
than the Participant, except as expressly provided in the Incentive Award.
Incentive Stock Options, by their terms, shall not be transferable except by
will or by the laws of descent and distribution and shall be exercisable, during
the Participant's lifetime, only by the Participant. Performance Grants shall
not be transferable unless expressly provided in the Incentive Award.
10. Effective Date of the Plan. The effective date of the Plan is
August 24, 2000. The Plan shall be submitted to the shareholders of Stanley
Furniture for approval. Until (i) the Plan has been approved by Stanley
Furniture's shareholders, and (ii) the requirements of any applicable Federal or
State securities laws have been met, no Option granted shall be exercisable.
11. Termination, Modification, Change. If not sooner terminated by the
Board, this Plan shall terminate at the close of business on August 24, 2010. No
Incentive Awards shall be made under the Plan after its termination. The Board
may amend or terminate the Plan in such respects as it shall deem advisable;
provided that, if and to the extent required by law, no change shall be made
that increases the total number of shares of Company Stock reserved for issuance
pursuant to Incentive Awards granted under the Plan (except pursuant to Section
12), unless such change is authorized by the shareholders of Stanley Furniture.
Notwithstanding the foregoing, the Board may unilaterally amend the Plan and
Incentive Awards with respect to Participants as it deems appropriate to ensure
compliance with Rule 16b-3 and to cause Incentive Stock Options to meet the
requirements of the Code and regulations thereunder. Except as provided in the
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preceding sentence, a termination or amendment of the Plan shall not, without
the consent of the Participant, adversely affect a Participant's rights under an
Incentive Award previously granted to him or her.
12. Change in Capital Structure.
(a) In the event of a stock dividend, stock split or
combination of shares, recapitalization or merger in which Stanley Furniture is
the surviving corporation or other change in Stanley Furniture's capital stock
(including, but not limited to, the creation or issuance to shareholders
generally of rights, options or warrants for the purchase of common stock or
preferred stock of Stanley Furniture), the number and kind of shares of stock or
securities of Stanley Furniture to be subject to the Plan and to Incentive
Awards then outstanding or to be granted thereunder, the maximum number of
shares or securities which may be delivered under the Plan under Section 4, the
maximum number of shares or securities that can be granted to an individual
Participant under Section 4, the maximum number of shares that can be issued
under Performance Grants, the exercise price of Options, the terms of Incentive
Awards and other relevant provisions shall be appropriately adjusted by the
Committee, whose determination shall be binding on all persons. If the
adjustment would produce fractional shares with respect to any unexercised
Option, the Committee may adjust appropriately the number of shares covered by
the Option so as to eliminate the fractional shares.
(b) If Stanley Furniture is a party to a consolidation or a
merger in which Stanley Furniture is not the surviving corporation, a
transaction that results in the acquisition of substantially all of Stanley
Furniture's outstanding stock by a single person or entity, or a sale or
transfer of substantially all of Stanley Furniture's assets, the Committee may
take such actions with respect to outstanding Incentive Awards as the Committee
deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of any Participant,
and the Committee's determination shall be conclusive and binding on all persons
for all purposes.
13. Administration of the Plan.
(a) The Plan shall be administered by the Committee. The
Committee shall have general authority to impose any limitation or condition
upon an Incentive Award that the Committee deems appropriate to achieve the
objectives of the Incentive Award and the Plan and, without limitation and in
addition to powers set forth elsewhere in the Plan, shall have the power and
complete discretion to determine:
(i) which eligible employees shall receive Incentive Awards
and the nature of each Incentive Award, (ii) the terms and
conditions of any Incentive Award, (iii) whether all or any
part of an Incentive Award shall be accelerated upon a Change
in Control, (iv) the number of shares of Company Stock to be
covered by each Incentive Award, (v) whether Options shall be
Incentive Stock Options or Nonstatutory Stock Options, (vi)
the time or times when an Incentive Award shall be granted,
(vii) whether an Incentive Award shall become vested over a
period of time and when it shall be fully vested, (viii) the
manner in which payment will be made upon the exercise of
Options, (ix) the terms of Incentive Awards about payment of
Applicable Withholding Taxes, and (x) any additional
requirements relating to Incentive Awards that the Committee
deems appropriate. Except as provided in Section 6 or Section
11, the Committee shall have the power to amend the terms of
previously granted Incentive Awards that were granted by that
Committee so long as the terms as amended are consistent with
the terms of the Plan and provided that the consent of the
Participant is obtained with respect to any amendment that
would be detrimental to him or her, except that such consent
will not be required if such amendment is for the purpose of
complying with Rule 16b-3 or any requirement of the Code
applicable to the Incentive Award.
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(b) The Committee may adopt rules and regulations for carrying
out the Plan with respect to Participants. The interpretation and construction
of any provision of the Plan by the Committee shall be final and conclusive as
to any Participant. The Committee may consult with counsel, who may be counsel
to the Employer, and shall not incur any liability for any action taken in good
faith in reliance upon the advice of counsel.
(c) A majority of the members of the Committee shall
constitute a quorum, and all actions of the Committee shall be taken by a
majority of the members present. Any action may be taken by a written instrument
signed by all of the members, and any action so taken shall be fully effective
as if it had been taken at a meeting.
(d) This subsection will apply if Stanley Furniture is
involved in any merger or similar transaction that Stanley Furniture intends to
treat as a "pooling of interest" for financial reporting purposes. In this case,
the Committee may amend the terms of any Incentive Award or of the Plan to the
extent that Stanley Furniture's independent accountants determine that such
terms would preclude the use of "pooling of interest" accounting. The authority
of the Committee to amend the terms of any Incentive Award or of the Plan
includes, without limitation, the right (i) to rescind or suspend any terms that
are contingent on a Change in Control, such as the acceleration of vesting; (ii)
to modify Incentive Awards to comply with prior practices of Stanley Furniture
as to terms of Incentive Awards; (iii) to provide for payment to the optionee of
Common Stock or stock of the other party to the transaction equal to the fair
value of the Incentive Award; and (iv) to suspend any provisions for payment of
an Incentive Award in cash. The authority of the Committee under this subsection
may be exercised in the Committee's sole and complete discretion.
14. Notice. All notices and other communications required or permitted
to be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid, as
follows (a) if to Stanley Furniture -- at the principal business address of
Stanley Furniture to the attention of the Corporate Secretary of Stanley
Furniture; and (b) if to any Participant -- at the last address of the
Participant known to the sender at the time the notice or other communication is
sent.
15. Interpretation. The terms of this Plan are subject to all present
and future regulations and rulings of the Secretary of the Treasury of the
United States or his or her delegate relating to the qualification of Incentive
Stock Options under the Code. If any provision of the Plan conflicts with any
such regulation or ruling, then that provision of the Plan shall be void and of
no effect. The terms of this Plan shall be governed by the laws of the State of
Delaware.
16. Grants To Outside Directors. In addition to the Incentive Awards
otherwise provided under the Plan, the Plan also permits the award of
Nonstatutory Stock Options to directors on the Board if such directors are not
employees of Stanley Furniture ("Outside Directors"). The Board shall have the
power and complete discretion to select Outside Directors to receive Incentive
Awards. The Board shall have the complete discretion, under provisions
consistent with Sections 6 and 11 as to Participants, to determine the terms and
conditions, the nature of the award and the number of shares to be allocated as
part of each Incentive Award for each Outside Director. The grant of an
Incentive Award shall not obligate Stanley Furniture to make further grants to
the Outside Director at any time thereafter or to retain any person as a
director for any period of time.
17
<PAGE>
REVOCABLE PROXY
STANLEY FURNITURE COMPANY, INC.
Special Meeting of Stockholders - August 24, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Douglas I. Payne and David W. Robertson and
either of them, proxies of the undersigned, with full power of substitution, to
vote all the shares of Common Stock of Stanley Furniture Company, Inc. (the
"Company") held of record by the undersigned on July 13, 2000, at the Special
Meeting of Stockholders to be held August 24, 2000, and at any adjournment
thereof.
(1) Approval of Stanley Furniture Company, Inc. 2000 Incentive Compensation
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) In their discretion the proxies are authorized to vote upon such other
matters as may come before the meeting or any adjournment thereof.
All as more particularly described in the Company's Proxy Statement for the
Special Meeting of Stockholders to be held on August 24, 2000, receipt of which
is hereby acknowledged.
(Continued and to be dated and signed on reverse side)
--------------------------------------------------------------------------------
(continued from reverse side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BY THE
UNDERSIGNED STOCKHOLDER. IF NO CHOICE IS SPECIFIED BY THE STOCKHOLDER, THIS
PROXY WILL BE VOTED "FOR" ITEM (1), AND IN THE PROXIES' DISCRETION ON ANY OTHER
MATTERS COMING BEFORE THE MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies and confirms all that
said proxies, their substitutes or any of them may lawfully do by virtue hereof.
Please date this Proxy Card and
sign your name exactly as it
appears hereon. Where there is more
than one owner, each should sign.
When signing as an attorney,
administrator, executor, guardian
or trustee, please add your title
as such. If executed by a
corporation, this Proxy Card should
be signed by a duly authorized
officer. If executed by a
partnership, please sign in
partnership name by authorized
persons.
Dated ______________________, 2000.
___________________________________
___________________________________
Please promptly mark, sign, and
mail this Proxy Card in the
enclosed envelope. No postage is
required.
