Culp, Inc. 2002 Stock Option Plan



 



CULP, INC.

2002 STOCK OPTION PLAN



ARTICLE I



GENERAL PROVISIONS



     1.1 Purpose of the Plan. This Plan is intended to promote the interests
of the Company by giving eligible persons who provide services to the Company
the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Company as an incentive to continue their
employment or service. Capitalized terms used in the Plan shall have the
meanings given to them in Appendix A attached hereto.


     1.2 Administration
of the Plan.


     (a)  The Plan shall be administered by the Board; provided, however, that
any or all administrative functions otherwise exercisable by the Board may be
delegated to the Committee. Members of the Committee shall serve for such
period of time as the Board may determine and shall be subject to removal by
the Board at any time. The Board also may, at any time, terminate the
functions of the Committee and reassume all powers and authority previously
delegated to the Committee. The Board or the Committee, as the Plan
Administrator, shall have full power and authority (subject to the provisions
of the Plan) to establish such rules and regulations as it may deem appropriate
for the proper administration of the Plan and to make such determinations
under, and issue such interpretations of, the Plan and any outstanding Options
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any Option issued hereunder.


     (b)  Subject to the terms of the Plan, the Plan Administrator shall have
full power and authority to determine which eligible persons will receive
Option grants, the time or times when such grants will be made, the number of
shares to be covered by each grant, the status of each Option as either an
Incentive Option or a Non-Qualified Option, the time or times when each Option
is exercisable, the vesting schedule (if any) applicable to granted Options,
the maximum term for which an Option shall remain outstanding, and all other
terms and conditions of an Option granted under the Plan.


     1.3 Eligibility. Only Employees are eligible to receive grants of
Incentive Options. The persons eligible to receive grants of Non-Qualified
Options are (a) Employees, (b) non-employee members of the Board or the board
of directors of any Parent or Subsidiary, and (c) consultants and other
independent advisors who provide services to the Company (or any Parent or
Subsidiary). Additionally, the maximum number of shares of Common Stock that
may be covered by an Option granted to any one individual shall be 50,000
shares during any one calendar year period.


     1.4 Stock Subject to the Plan. The stock issuable under the Plan shall be
shares of authorized but unissued Common Stock. The maximum number of shares
of Common Stock that may be issued under the Plan shall not exceed 1,000,0000
shares, and all such shares shall be available for issuance pursuant to the
grant of Incentive Options. Shares of Common Stock subject to outstanding
Options shall be available for subsequent issuance under the Plan to the extent
any Options expire or terminate for any reason prior to their exercise in full.







 


     1.5 Adjustments in Common Stock. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other similar change, the Plan
Administrator shall cause appropriate adjustments to be made to (a) the maximum
number and/or class of securities issuable under the Plan and (b) the number
and/or class of securities and the exercise price per share in effect under
each outstanding Option, in order to prevent the dilution or enlargement of
benefits thereunder. The adjustments determined by the Plan Administrator
shall be final, binding and conclusive.


ARTICLE II



OPTION GRANT PROGRAM



     2.1 Grant of Options Generally. Each Option granted under this Plan shall
have such terms and conditions as approved by the Plan Administrator. Subject
to the provisions of this Plan, each Option shall be evidenced by one or more
documents in the form approved by the Plan Administrator, and no grant shall be
effective unless and until both the Company and the person to whom the Option
is being granted shall have executed such documents as required by the Plan
Administrator.


     2.2 Exercise Price. The exercise price per share of each Option shall be
fixed by the Plan Administrator and, subject to the terms and conditions set
forth herein, may be equal to or greater than the Fair Market Value per share
of Common Stock on the Option grant date.


     2.3 Vesting, Exercise and Term of Options. Each Option shall vest and be
exercisable at such time or times and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the Option grant. No Option, however, shall have a term in excess of ten (10)
years from the Option grant date.


     2.4 Exercise Procedures.


     (a)  Subject to
Section 2.7, an Option may be exercised only by the Optionee
to whom such Option was granted under the Plan. An Option shall be exercisable
at such time or times as set forth herein and in the documents evidencing the
grant of the Option. Notwithstanding anything in the Plan to the contrary, the
Plan Administrator, in its sole discretion, may at any time and from time to
time accelerate the date for exercising all or any part of an Option. In no
event, however, may an Option be exercised after the expiration of its fixed
term.


     (b) Each Option granted under the Plan shall be deemed exercised when the
holder thereof (i) shall indicate the decision to do so in writing delivered to
the Company, (ii) shall at the same time tender to the Company payment in full
of the exercise price for the shares for which the Option is exercised in
accordance with Section 2.4(c), (iii) shall tender to the Company in accordance
with the Plan Administrator’s instructions payment in full of all federal and
state withholding or other employment taxes applicable to the taxable income,
if any, of the holder resulting from such exercise, (iv) shall execute an
option exercise agreement in form and substance satisfactory to the Plan
Administrator, and (v) shall comply with such other requirements as the Plan
Administrator may establish.







 


     (c)  In connection with the exercise of any Option, the Optionee shall pay
the exercise price to the Company in cash, by check, or in such other manner as
permitted by the Plan Administrator, which may include the surrender of shares
of Common Stock or other unexercised Options held by the Optionee.
Notwithstanding the foregoing, should the Common Stock be registered under
Section 12 of the Exchange Act at the time an Option is exercised, then the
exercise price may also be paid as follows:



		
	 	     (i) in shares of Common Stock held for the requisite period
necessary to avoid a charge to the Company’s earnings for financial
reporting purposes and valued at Fair Market Value on the exercise date,
or
	 
	 	     (ii) through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable instructions
(A) to a Company-designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares and (B) to the
Company to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale.



     (d)  An Option granted under the Plan may be exercised for any lesser
number of shares than the full amount for which it could be exercised. Such a
partial exercise shall not affect the right to exercise the Option for the
remaining shares from time to time in accordance with the Plan and the
documents evidencing the grant of the Option.


     2.5 Effect of Termination of Service. The following provisions shall
govern the exercise of Options held by an Optionee at the time of such
Optionee’s cessation of Service or death:


     (a)  should the Optionee cease to remain in Service for any reason other
than death, Permanent Disability or Misconduct, then the Optionee shall have a
period of three (3) months following the date of cessation of Service or such
longer period determined by the Plan Administrator, in its sole discretion, to
exercise each outstanding Option held by such Optionee;


     (b)  should the Optionee’s Service terminate by reason of Permanent
Disability, then the Optionee shall have a period of twelve (12) months
following the date of cessation of Service or such longer period determined by
the Plan Administrator, in its sole discretion, to exercise each outstanding
Option held by such Optionee;


     (c)  if the Optionee dies while holding an outstanding Option, then the
personal representative of his or her estate or the Person or Persons to whom
the Option is transferred pursuant to the Optionee’s will or the laws of
inheritance shall have twelve (12) months following the date of cessation of
Service or such longer period determined by the Plan Administrator, in its sole
discretion, to exercise each outstanding Option held by the Optionee;


     (d)  should the Optionee’s Service be terminated for Misconduct, then all
outstanding Options held by the Optionee shall terminate immediately and cease
to remain outstanding, regardless of whether any Options have vested; and


     (e)  during the applicable post-Service exercise period, an Option may be
exercised only if it has vested and for no more than the aggregate number of
shares for which the vested Option is exercisable on the date of the Optionee’s
cessation of Service. The Option shall, immediately upon the Optionee’s
cessation of Service, terminate and cease to be outstanding with respect to any
and all Option shares for







 


which the Option is not otherwise exercisable at that time.
Upon the expiration of the applicable exercise period or (if earlier) upon the
expiration of the Option term, the Option shall terminate and cease to be
outstanding.


     2.6 Stockholder Rights. The holder of an Option shall have no stockholder
rights with respect to the shares subject to the Option until such Person shall
have exercised the Option in accordance with Section 2.4 and become the record
holder of the purchased shares. Each Person who validly exercises an Option
and is issued shares of Common Stock by the Company shall be subject to all of
the terms and conditions set forth in the applicable purchase agreement to be
executed by such person upon exercise.


     2.7 Transferability of Options.


     (a)  Except as set forth in Section 2.7(b), Options may be transferred only
by will or the laws of inheritance upon the death of an Optionee. Otherwise,
no Option may be assigned, pledged, hypothecated or transferred in any manner.
Upon any attempt to assign, pledge, hypothecate or transfer an Option, such
Option shall immediately be cancelled and terminated.


     (b)  The Plan Administrator, may, in its sole discretion, permit a
Non-Qualified Option to be assigned in whole or in part during the Optionee’s
lifetime as a gift to (i) one or more members of the Optionee’s immediate
family, (ii) a trust in which Optionee and/or one or more of such family
members hold more than fifty percent (50%) of the beneficial interest, or (iii)
an entity in which more than fifty percent (50%) of the voting interests are
owned by the Optionee and/or one or more of such family members. The terms
applicable to the assigned Non-Qualified Option shall be the same as those in
effect for such Option immediately prior to the assignment, as more fully set
forth herein and in the documents evidencing the grant of the Option.


     2.8 Incentive Options. All Incentive Options shall be subject to the
terms set forth in this Section 2.8. Options that are not specifically
designated as Incentive Options in the documentation evidencing the grant of
such Options, or that are specifically designated as Non-Qualified Options,
shall not be subject to the terms of this Section 2.8.


     (a)  Eligibility. Incentive Options may be granted only to Employees.


     (b)  Exercise Price. An Incentive Option’s exercise price per share of
Common Stock shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the date such Option is granted.


     (c)  Dollar Limitation. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more Incentive Options granted to any Employee under the Plan (or any
other option plan of the Company or any Parent or Subsidiary) may for the first
time become exercisable during any one calendar year shall not exceed One
Hundred Thousand Dollars ($100,000). To the extent an Employee holds two or
more Incentive Options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability of such Incentive
Options shall be applied on the basis of the order in which such Options are
granted.


     (d)  Ten Percent (10%) Stockholder. If an Employee to whom an Incentive
Option is granted is a Ten Percent (10%) Stockholder, then the Incentive
Option’s exercise price per share of Common Stock shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common







 


Stock
on the Option grant date, and the Incentive Option’s term shall not exceed five
years from the date of grant.


     2.9 Change of Control Transactions.


     (a)  The Plan Administrator may, in its sole and absolute discretion,
determine that any outstanding Option shall become fully exercisable on an
accelerated basis immediately prior to a Change of Control, notwithstanding the
fact that any portion of such Option shall not have vested.


     (b)  Unless otherwise determined by the Plan Administrator, (i) upon
consummation of a Change of Control in which the Company is not the surviving
entity, all outstanding Options, to the extent not exercised, shall terminate
and cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof), and (ii) upon consummation of a Change of
Control in which the Company is the surviving entity, all outstanding Options,
to the extent not exercised, shall remain outstanding in full force and effect
on the same terms and conditions.


     (c)  The Plan Administrator shall have the discretion at any time to
provide for the immediate termination of any consent, repurchase or first
refusal rights of the Company with respect to the shares subject to those
Options upon the occurrence of a Change of Control, whether or not the Options
are to be assumed by any successor corporation (or parent thereof).


     (d)  In the event that any Option shall survive and remain outstanding
after a Change of Control, the Plan Administrator shall have full power and
authority at any time to structure or amend an Option so that it will
automatically vest on an accelerated basis should the Optionee’s Service
terminate by reason of an Involuntary Termination within a designated period
following the effective date of the Change of Control.


     (e)  The portion of any Incentive Option accelerated in connection with a
Change of Control shall remain exercisable as an Incentive Option only to the
extent the applicable One Hundred Thousand Dollars ($100,000) limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of an Option shall be exercisable as a Non-Qualified Option and shall
be treated as such under the federal tax laws.


     (f)  The grant of Options under the Plan shall in no way affect the right
of the Company to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, enter into a share exchange,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.


ARTICLE III



MISCELLANEOUS



     3.1 Compliance with Securities Laws. The Plan Administrator shall take
such action as may be necessary to cause the administration of this Plan,
including the grant of Options and the issuance of shares of Common Stock
pursuant to the exercise thereof, to be made in compliance with all federal and
state securities laws.







 


     3.2 Effective Date and Term.


     (a)  The Plan shall become effective when adopted by the Board, but no
Option granted under the Plan may be exercised, and no shares shall be issued
pursuant to the exercise of any Options, until the Plan is approved by the
Company’s stockholders. Additionally, no Incentive Option shall be deemed to
have been granted unless and until this Plan is approved by the Company’s
stockholders. If such stockholder approval is not obtained within twelve (12)
months after the date of the Board’s adoption of the Plan, then all Options
previously granted under the Plan shall terminate and cease to be outstanding,
and no further Options shall be granted and no shares shall be issued pursuant
to the exercise of any Options.


     (b)  No further Options may be granted under the Plan upon the earlier of
(a) the expiration of the ten (10)-year period from the date the Plan is
adopted by the Board, (b) the date on which all shares available for issuance
under the Plan shall have been issued or (c) the termination of all outstanding
Options in connection with an Change of Control in which the Company is not the
surviving entity or otherwise. All Options outstanding upon the expiration of
the ten (10)-year period referenced in subclause (a) above shall continue to
have full force and effect in accordance with the provisions of the documents
evidencing the grant of such Options.


     3.3 Amendment of the Plan. The Board shall have complete and exclusive
power and authority to amend or modify the Plan in any or all respects.
However, no such amendment or modification shall adversely affect any rights
and obligations in respect of any outstanding Options unless the holder thereof
consents to such amendment or modification. In addition, certain amendments
may require stockholder approval pursuant to applicable laws or regulations.


     3.4 Governing Law. This Plan shall be governed and construed in
accordance with the laws of the State of North Carolina.


     3.5 Severability. If any provision of this Plan or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Plan and the application of such provision to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.


     3.6 Section Titles. The headings herein are inserted as a matter of
convenience only and do not define, limit or describe the scope of this Plan or
the intent of the provisions hereof.


     3.7 No Employment or Service Rights. Nothing in the Plan shall confer
upon any Optionee the right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Company (or any Parent or Subsidiary employing or retaining such person) or of
the Optionee, which rights are hereby expressly reserved by each, to terminate
such person’s Service at any time for any reason, with or without cause.


     3.8 Notices. Any notice required to be given or delivered to the Company
under the Plan shall be in writing addressed to the Company at its principal
corporate offices. Any notice required to be given to an Optionee shall be in
writing and addressed to the address indicated on the option agreement executed
by the Optionee in connection with an Option grant. All notices shall be
deemed effective upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.











 



Exhibit 4.1


APPENDIX A



Defined Terms



     The following terms shall have the following meanings under the Plan:


     “Board” means the Board of Directors of the Company.


     “Code” means the Internal Revenue Code of 1986, as amended.


     “Committee” means the Company’s compensation committee or a committee of
one or more Board members appointed by the Board to exercise one or more
administrative functions under the Plan.


     “Common Stock” means the common stock, $0.05 par value, of the Company.


     “Company” means Culp, Inc., a North Carolina corporation, and any
successor corporation to all or substantially all the assets or voting stock of
Culp, Inc. that shall by appropriate action adopt the Plan.


     A “Change of Control” shall be deemed to have occurred on:



		
	 	     (a) the date on which any “person” or “group” (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), other than the
Company or any entity owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership
of Common Stock, becomes the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) of shares representing more than 40% of
the combined voting power of the then-outstanding securities entitled to
vote generally in the election of directors of the Company; or
	 
	 	     (b) the date on which (i) the Company merges with any other entity,
(ii) the Company enters into a statutory share exchange with another
entity, or (iii) the Company conveys, transfers or leases all or
substantially all of its assets to any person; provided, however, that in
the case of subclauses (i) and (ii), a Change of Control shall not be
deemed to have occurred if the stockholders of the Company immediately
before such transaction own, directly or indirectly immediately following
such transaction, more than 60% of the combined voting power of the
outstanding securities of the corporation resulting from such transaction
in substantially the same proportions as their ownership of securities
immediately before such transaction.



     “Employee” means an individual who is in the employ of the Company (or any
Parent or Subsidiary), subject to the control and direction of the employer
entity as to both the work to be performed and the manner and method of
performance.


     “Exercise Date” means the date on which the Company shall have received
written notice of the exercise of an Option.


     “Exchange Act” means the Securities Exchange Act of 1934, as amended.


     “Fair Market Value” per share of Common Stock on any relevant date shall
be the average closing selling price per share of Common Stock for the ten (10)
business days preceding the date in question on


 






 




the Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange.


     “Incentive Option” means an Option that satisfies the requirements of
Section 422 of the Code.


     “Involuntary Termination” means the termination of the Service of any
individual by reason of:



		
	 	     (i) such individual’s involuntary dismissal or discharge by the
Company (or any successor corporation or any Parent or Subsidiary, as
applicable) for reasons other than Misconduct, or
	 
	 	     (ii) such individual’s voluntary resignation following (A) a change
in his or her position with the Company (or any successor corporation or
any Parent or Subsidiary, as applicable) which materially reduces his or
her duties and responsibilities or the level of management to which he or
she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and target bonuses under any
corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual’s place of
employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected without the individual’s
consent; provided, however, that at the time of such resignation, the
Company (or any successor corporation or any Parent or Subsidiary, as
applicable) would not have reason to terminate such individual’s
employment for Misconduct.



     “Misconduct” means (i) the commission of any act of fraud, embezzlement or
dishonesty by a person against the Company (or any successor corporation or any
Parent or Subsidiary, as applicable), (ii) any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Company (or
any successor corporation or any Parent or Subsidiary, as applicable), (iii)
intoxication with alcohol or drugs while conducting employer business during
regular business hours, (iv) a conviction of, or a plea of
guilty or nolo
contendre by, such person for a criminal felony conviction, (v) the continued
failure or inability of such person to fulfill the essential functions of his
or her employment, or (vi) any other misconduct by such person that causes or
would reasonably be expected to cause material harm to the business of the
Company (or any successor corporation or any Parent or Subsidiary, as
applicable), as reasonably determined in good faith by the Board.


     “Non-Qualified Option” means an Option that does not satisfy the
requirements of Section 422 of the Code.


     “Option” means an Incentive Stock Option or Non-Qualified Option granted
under the Plan.


     “Optionee” means any person to whom an Option is granted under the Plan.


     “Parent” means any corporation or limited liability company (other than
the Company) in an unbroken chain of entities ending with the Company, provided
each entity in the unbroken chain (other than the Company) owns, at the time of
the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all equity interests in one of the other entities in
such chain.


     “Permanent Disability” means the inability of a person to perform the
essential functions of the person’s duties as an Employee by reason of any
medically determinable physical or mental impairment that is expected to result
in such person’s death or has lasted or can be expected to last for a period of
six (6) consecutive months or more, as reasonably determined by the Board.


 






 


     “Plan” means the Culp, Inc. 2002 Stock Option Plan, as set forth herein.


     “Plan Administrator” means either the Board or the Committee acting in its
capacity as administrator of the Plan.


     “Service” means the provision of services to the Company (or any Parent or
Subsidiary) by a person in the capacity of an Employee, a non-employee member
of the board of directors or a consultant or independent advisor, except to the
extent otherwise specifically provided in the documents evidencing the Option
grant or stock issuance.


     “Stock Exchange” means either the American Stock Exchange or the New York
Stock Exchange.


     “Subsidiary” means any corporation or limited liability company with
respect to which the company owns, directly or indirectly, stock or other
equity interests possessing fifty percent (50%) or more of the total combined
voting power of all classes of equity.


     “Ten Percent (10%) Stockholder” means the owner of stock (as determined
under Section 424(d) of the Code) possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company (or any
Parent or Subsidiary).