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NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS
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DATE:
Monday, May 10, 2021
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ITEMS OF BUSINESS:
1. Election of directors:
Holders of Class A Common Stock
to elect six directors.
Holders of Common Stock
to elect two directors.
2. Advisory Vote on Executive Compensation.
3. Advisory Vote on the Frequency of the Stockholder Vote on
Executive Compensation.
4. Approval of 2021 Long-Term Incentive Plan.
5. Ratification of the appointment of Grant Thornton LLP as our
independent registered public accounting firm for 2021.
6. Transact such other business as may properly come before the
annual meeting or any adjournments.
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TIME:
10:00 a.m.
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||
PLACE:
Marriott SpringHill Suites
120 East Redwood Street
Baltimore, Maryland
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RECORD DATE:
March 12, 2021
If you are a holder of record of Common or Class A Common Stock at the close of business on March 12, 2021, then you are entitled to receive notice of and to vote at the meeting.
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Internet:
Visit - www.proxyvote.com.*
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Telephone
Call - 1-800-690-6903*
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Vote by mail. Sign, date and return your proxy card or voting instruction form.
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*You will need the 11-digit control number included in your proxy card,
voting instructions form or notice.
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Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be held on May 10, 2021.
The proxy statement and annual report for 2020 are available at www.proxyvote.com and on Havertys’ Investor Relations website at
havertys.com under “Investor Information” then “SEC Filings.”
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TABLE OF CONTENTS
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Appendix A
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Appendix B
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Election of Havertys Board of Directors
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What am I voting on?
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✔ Holders of Class A common stock are being asked to elect six directors for a
one-year term.
✔ Holders of common stock are being asked to elect two directors for a one-year
term.
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Voting recommendation:
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✔ Our board of directors recommends a vote “For” each of the director nominees.
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Class A Common Stock
Nominees
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Common Stock Nominees
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||||||||
Haverty
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Mangum
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Palmer
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Schiller
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Smith
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Trujillo
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Dukes
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Hough
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Current/Former CEO
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✔
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✔
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✔
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✔
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|||||
Public Board Experience
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✔
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✔
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✔
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✔
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✔
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✔
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✔
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Finance
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✔
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✔
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✔
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✔
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✔
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✔
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Risk Assessment
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✔
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✔
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✔
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✔
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✔
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✔
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✔
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✔
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Consumer Focused
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✔
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✔
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✔
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✔
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✔
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✔
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✔
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Marketing/Brand Building
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✔
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✔
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✔
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✔
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✔
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||||
Sales
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✔
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✔
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✔
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✔
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✔
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✔
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Experience and Skills Legend
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Current/Former CEO
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Public Board Exerience
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Finance
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Risk
Assessment
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Consumer Focused
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Marketing/
Brand Building
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Sales
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Rawson Haverty, Jr. Management Director since 1992
Age 64
Principal Occupation: Senior Vice President, Real Estate and Development of Havertys since 1998. Over 36 years with Havertys in various positions.
Directorships: Chick-Fil-A Foundation, Akola Project, StarPound Technologies, and a member of the Advisory Board of the Center for Ethics at Emory
University.
Experience:
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Mylle H. Mangum Independent Director since 1999
Age 72
Principal Occupation: Chief Executive Officer of IBT Holdings, LLC, a provider of design, construction and consultant services for the retail
banking and specialty retail industries, since 2003.
Directorships: Barnes Group, Inc., Express, Inc. and The Shopping Center Group. Former director of PRGX Global, Inc. which merged with Ardian in
March 2021.
Experience:
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Vicki R. Palmer Independent Director since 2001
Age 67
Principal Occupation: Retired, former Executive Vice President, Financial Services and Administration for Coca‑Cola Enterprises Inc. from 2004
until 2009. Senior Vice President, Treasurer and Special Assistant to the CEO of Coca-Cola Enterprises Inc. from 1999 to 2004.
Directorships: First Horizon National Corporation and a member of the Governing Board of Woodward Academy.
Experience:
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Derek G. Schiller Independent Director since 2020
Age 50
Principal Occupation: President and Chief Executive Officer of the Atlanta Braves, a Major League Baseball Club, since March 2018. President of
Business for the Braves from March 2016 to March 2018; Executive Vice President of Sales and Marketing from August 2007 to March 2016 for the Braves.
Directorships: Board Member of the Metro Atlanta Chamber of Commerce, the Atlanta Convention and Visitors Bureau, the Atlanta Sports Council, and
the Jack and Jill Late-Stage Cancer Foundation.
Experience:
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Clarence H. Smith
Age 70
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Management Director since 1989 Chairman of the board since 2012
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Principal Occupation: Chief Executive Officer of Havertys since 2003. President and Chief Executive Officer from 2003 until March 2021. Over 46
years with Havertys in various positions.
Directorships: Oxford Industries, Inc. and member of the Board of Trustees of Marist School.
Experience:
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Al Trujillo Independent Director since 2003
Age 61
Principal Occupation: President and Chief Operating Officer of the Georgia Tech Foundation since 2013. Investment Funds Advisor from 2007 to
2013. Former President and Chief Executive Officer of Recall Corporation, a global information management company until 2007.
Directorships: Member of the Board of Trustees of Marist School. Former director of SCANA Corporation, which was acquired by Dominion Energy in
2018.
Experience:
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Clarence H. Smith and Rawson Haverty, Jr. are first cousins and officers of Havertys.
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L. Allison Dukes Independent Director since 2016
Age 46
Principal Occupation: Senior Managing Director and Chief Financial Officer, Invesco Ltd. since August 2020. Deputy Chief Financial Officer, Invesco
Ltd. from March 2020 to August 2020. Former Chief Financial Officer for SunTrust Banks, Inc., from March 2018 until December 2019. Head of Commercial Banking for SunTrust Banks, Inc. from 2017 until
2018. President, Chairman and CEO of the Atlanta Division of SunTrust Banks, Inc. from 2015 until 2017.
Directorships: Member of the Executive Board of Junior Achievement of Georgia and a member of the Board of Trustees of Children’s Healthcare of
Atlanta, and the Atlanta History Center.
Experience:
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G. Thomas Hough Independent Director since 2018
Age 66 Lead
Director-elect
Principal Occupation: Retired, Americas Vice Chair of Ernst & Young LLP (“EY”). Vice Chair of Assurance
Services of EY in New York from 2009 to 2014.
Directorships: Equifax Inc. and a director/trustee of the Federated Hermes Fund Family. Member of the President’s Cabinet of the University of
Alabama. Former director of Publix Super Markets, Inc. from 2015 until 2020.
Experience:
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Retiring Director – Not Standing for Election
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John T. Glover
Age 74
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Independent Director since 1996
Lead Director since 2017
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Principal Occupation: Retired, Vice Chairman of Post Properties, Inc., a real estate investment trust that developed and operated upscale
multifamily apartment communities, from March 2000 to February 2003; President of Post Properties, Inc. from 1994 to 2000. Post Properties, Inc. was acquired in 2016 by Mid-America Apartment Communities, Inc.
Directorships: Emory Healthcare Inc., Trustee Emeritus of Emory University, and Trustee Emeritus of The Lovett School.
Experience:
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CORPORATE GOVERNANCE
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Name, Meetings and Members
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Principal Functions
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Audit Committee
Meetings: 4
Al Trujillo – Chair
John Glover
Tom Hough
Vicki Palmer
Each member has been designated as “an audit committee financial expert” as defined by the Securities and Exchange Commission (“SEC”) and meets the independence requirements of the New York Stock Exchange (“NYSE”),
SEC, and our Governance Guidelines as well as the enhanced standards for Audit Committee members in Section 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
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• Discusses the integrity of the company’s accounting policies, internal controls, financial reporting, practices and the financial statements with management, the independent auditors and internal audit.
• Reviews and discusses with management the company’s risk assessment framework and management policies, including the framework with respect to significant financial risk exposures.
• Monitors the qualifications, independence and performance of the company’s internal audit function and independent auditor and meets periodically with management, internal audit and the independent auditor in
separate executive sessions.
• Other matters as the board deems appropriate.
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NCG Committee
Meetings: 3
Mylle Mangum – Chair
John Glover
Allison Dukes
Derek Schiller
Al Trujillo
Each member meets the independence requirements of the NYSE, SEC and our Governance Guidelines as well as the enhanced standards for Compensation Committee members in Rule 16b-3 promulgated under the Exchange Act.
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• Translates our compensation objectives into a compensation strategy that reinforces alignment of the interests of our executives with that of our stockholders.
• Approves and evaluates the company’s director and executive officer compensation plans, policies and programs.
• Conducts an annual review and evaluation of the CEO’s performance in light of the company’s goals and objectives.
• Reviews and makes recommendations for composition and structure of the board and policies relating to the recruitment of new board members and nomination and reelection of existing board members.
• Oversees the compliance structure and programs with annual reviews of Havertys’ corporate governance documents.
• Reviews and approves related person transactions in accordance with board practices.
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CORPORATE GOVERNANCE
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Name, Meetings and Members
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Principal Functions
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Executive Committee
Meetings: 0
Independent Members:
John Glover – Chair
Mylle Mangum
Al Trujillo
Management Member:
Clarence Smith
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• In accordance with our bylaws, acts with the power and authority of the board in the management of our business and affairs in the interim between meetings of the board.
• Generally, holds meetings to approve specific terms of financings or other transactions after these items have previously been presented to the board.
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Annual Equity Retainer
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$54,000
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Annual Cash Retainer
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$27,000
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Independent Lead Director Cash Retainer
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$12,000
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Audit and NCG Chairman Cash Retainer
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$10,000
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Annual Stock Grant
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$20,000
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CORPORATE GOVERNANCE
|
Director
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Fees Earned or Paid in Cash ($)
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Stock Awards
($)(1)
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Total ($)
|
|||||||||
Allison Dukes
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$
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—
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$
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101,000
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$
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101,000
|
||||||
John Glover(2)
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39,000
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74,000
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113,000
|
|||||||||
Tom Hough
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27,000
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74,000
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101,000
|
|||||||||
Mylle Mangum
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37,000
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74,000
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111,000
|
|||||||||
Vicki Palmer
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27,000
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74,000
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101,000
|
|||||||||
Derek Schiller(3)
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18,000
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36,000
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54,000
|
|||||||||
Al Trujillo
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37,000
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74,000
|
111,000
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(1)
|
Represents the aggregate grant date total fair value of stock awards determined in accordance with FASB ASC Topic 718. The awards reflected in this column
consist of fully-vested awards granted to non-employee directors on May 14, 2020 as the annual grant made at the end of the board year, and awards on May 15, 2020 as part of the annual retainer paid at the beginning of the board year. The
grant date fair values were $14.31 and $14.86, respectively, which was the closing price of the company’s common stock on the grant date. Ms. Dukes elected to receive 100% of her annual retainer fee in shares of common stock under the
Deferred Plan. The award to Mr. Schiller represents the stock component of his retainer paid on September 15, 2020 and the grant date fair value was $21.88.
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(2)
|
Mr. Glover retires from the Board as of the May 10, 2021 shareholder meeting.
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(3)
|
Mr. Schiller joined the Board as of September 15, 2020.
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CORPORATE GOVERNANCE
|
CORPORATE GOVERNANCE
|
CORPORATE GOVERNANCE
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Introduction
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WHERE TO FIND IT:
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Role of the NCG Committee
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12
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Recap of 2020 NEO Compensation Program
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13
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Executive Compensation Framework
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14
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Executive Compensation Components
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15
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How We Make Compensation Decisions
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18
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Impact of COVID-19
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✔
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Conducted an annual review of our compensation philosophy to ensure that it remains appropriate given strategic objectives;
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✔
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Reviewed results from an annual review of compensation data related to our peers;
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✔
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Reviewed and approved all compensation components for our chief executive officer, chief financial officer, and other NEOs;
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✔
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Performed an annual evaluation of the execution of our pay-for-performance philosophy, to ensure that the actual award decisions resulted in alignment of relative pay and relative performance compared to the compensation peer group;
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✔
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Scheduled an executive session, without members of management, for the purpose of discussing decisions related to the chief executive officer’s performance, goal-setting, compensation level and other items deemed important by the NCG
Committee; and
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✔
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Reviewed succession planning with the CEO and in executive session of the board.
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COMPENSATION DISCUSSION AND ANALYSIS
|
Base Salary
(Fixed Pay)
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Key Features
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• Fixed annual cash amount.
• Base pay increases considered on a calendar year basis or at time of promotion to align with the median range of our peer
group (as described on page 15 of this CD&A). Actual positioning varies to reflect each executive’s skills, experience and contribution to our success.
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Purpose
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• Provide a fixed amount of cash compensation to attract and retain talented executives.
• Differentiate scope and complexity of executives’ positions as well as individual performance over time.
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2020 Actions
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• Base salaries were increased in January 2020 by 1.5% for Mr. Smith and 2.6% or 2.7% for the other NEOs. Salaries for the
NEOs were last increased in 2018, except for Mr. Gill who received an increase in 2019 due to his promotion.
• In light of the pandemic, base salaries were reduced by 40% for Mr. Smith and 25% for our other NEOs effective April 1,
2020. Base salaries were restored effective July 1, 2020, in connection with the pace of business subsequent to the reopening of our stores on May 1, 2020.
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Cash Awards Under Management Incentive Plans
(Variable “At Risk” Compensation)
|
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Key Features
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• Individual MIP opportunities are expressed as a percent of base salary and can vary for executives based on their
positions. Target MIP award opportunities are generally established so that total annual cash compensation (base salary plus target MIPs) approximates the median of our peer group.
• Performance-based cash incentive pay is comprised of two plans: MIP-I is tied to the company achieving certain pre-tax
earnings levels during the year (80% of total target cash incentive pay) and MIP-II is based on successfully meeting individual goals (20% of total target cash incentive pay).
• The range of potential payout for actual results relative to these goals is zero to 175% of target.
• MIP amounts are earned based on the results achieved as determined by the Committee after evaluating company and individual
performance against pre-established goals.
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Purpose
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• Motivate and reward achieving or exceeding company and individual performance objectives, reinforcing pay-for-performance.
• Align performance measures for NEOs on key business objectives to lead the organization to achieve short-term financial and operational goals.
• Ensure alignment of short-term and long-term strategies of the company.
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2020 Actions
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• 2020 performance resulted in total MIP-I earned at 157.3% of its target and MIP-II earned at 100% of its target for the
NEOs. The Committee evaluated the impact of the pandemic on our business results and determined that these payouts appropriately reflected our strong performance and financial results achieved during 2020.
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Long-Term Equity Incentive Compensation
(Variable “At Risk” Compensation)
|
|
Key Features
|
• Awards granted annually with consideration of competitive market grant levels.
• Awards to NEOs are in the form of performance restricted stock units (PRSU) based on EBITDA or Sales and in the form of time-based restricted
stock units.
• Vesting: The PRSUs granted in 2020 that are earned will cliff vest in February 2023 and are forfeitable upon termination of
employment, except in the cases of death, disability or normal retirement. The restricted stock units vest in equal increments over a three-year period. These grants are forfeitable upon termination of employment, except in the cases of
death or disability.
|
Purpose
|
• Stock-based compensation links executive compensation directly to stockholder interests.
• PRSUs provide a direct connection to company performance and executives’ goals.
• Multi-year vesting creates a retention mechanism and provides incentives for long-term creation of stockholder value.
|
2020 Actions
|
• 80% of our CEO’s and 70% of our other NEO’s equity awards were granted as PRSUs, with 80% of PRSUs tied to EBITDA and 20%
tied to Sales. Award sizes were determined in consideration of market levels, internal equity, and historical practices.
• 2020 performance-based awards tied to EBITDA were earned at 175% of target and awards tied to Sales were earned at 120% of
target. These performance-based awards will vest in February 2023.
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COMPENSATION DISCUSSION AND ANALYSIS
|
Executive Compensation Framework
|
What We Do:
|
||
✔
|
Pay-for-performance. A significant percentage of targeted annual compensation is delivered in the form of variable compensation that is
connected to actual performance. For 2020, variable compensation comprised approximately 69% of the targeted annual compensation for the chief executive officer and, on average, 56% of the targeted annual compensation for the other
named executive officers.
|
|
✔
|
Provide competitive target pay opportunities. We annually evaluate our target and actual compensation levels and relative proportions of the
types of compensation against our peer group. We use informed judgment in order to offer the compensation appropriate to motivate and attract highly talented individuals to enable our long-term growth.
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✔
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Align performance measures to a mix of key strategic and operating objectives. Performance measures for incentive compensation are linked to
both strategic and operating objectives designed to create long-term stockholder value and to hold executives accountable for their individual performance and the performance of the company.
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✔
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Link compensation to future stock performance. In 2020, all of the long-term incentive awards delivered to our named executive officers were in
the form of equity-based compensation. For 2020, long-term equity compensation comprised approximately 37% of the targeted annual compensation for the chief executive officer and 27% to 30% of the targeted annual compensation for the
other named executive officers.
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✔
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Retain an outside compensation consultant. The NCG Committee retains an independent compensation consultant to review the company’s executive
compensation program and practices.
|
|
✔
|
Establish maximum payout caps for annual cash incentive compensation and Performance Restricted Stock Units (PRSUs).
|
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✔
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Maintain a “Clawback” Policy. The company may recover incentive compensation paid to an executive officer that was calculated based upon any
financial result or performance metric impacted by fraud or misconduct of the executive officer.
|
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✔
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Require meaningful stock ownership. Per our stock ownership guidelines, our chief executive officer is required to have qualified holdings
equal to the lesser of a multiple of three times his base salary or 85,000 shares. Our CEO’s qualified holdings were 194,648 shares at March 12, 2021. The other named executive officers are also subject to ownership guidelines. Their
qualified holdings ranged from 29,482 to 60,650 shares at March 12, 2021. New officers have three years to meet required ownership guidelines.
|
|
✔
|
Mitigate undue risk-taking in compensation programs. Our compensation programs for our executive officers contain features that are designed
to mitigate undue risk-taking by our executives.
|
|
✔
|
Require a “double trigger” for change-in-control severance benefits to be payable.
|
What We Don’t Do:
|
||
x
|
No repricing or buyout of underwater stock options. Our equity plan does not permit the repricing or buyout of underwater stock options or
stock appreciation rights without stockholder approval, except in connection with certain corporate transactions involving the company.
|
|
x
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Prohibition against margin loans, pledging, and hedging or similar transactions of company securities by senior executives and directors.
|
|
x
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No dividends or dividend equivalents are accrued or paid on unvested and/or unexercised awards.
|
|
x |
No change-in-control tax gross ups. We do not provide change-in-control tax gross ups.
|
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No significant perquisites. We do not provide our employees, including our NEOs, with significant perquisites.
|
COMPENSATION DISCUSSION AND ANALYSIS
|
COMPENSATION DISCUSSION AND ANALYSIS
|
Q-1
|
Q-2
|
Q-3
|
Q-4
|
Annual
|
||||||||||||||
$
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6,200,000
|
$
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6,700,000
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$
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11,005,000
|
$
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13,100,000
|
$
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37,005,000
|
COMPENSATION DISCUSSION AND ANALYSIS
|
COMPENSATION DISCUSSION AND ANALYSIS
|
How We Make Compensation Decisions
|
PEER GROUP
|
|||||
American Woodmark Corporation
|
Ethan Allen Interiors Inc.
|
La-Z-Boy Incorporated
|
|||
At Home Group Inc.
|
Flexsteel Industries, Inc.
|
Oxford Industries, Inc.
|
|||
Bassett Furniture Industries Inc.
|
Hibbett Sports, Inc.
|
Sleep Number Corporation
|
|||
Big 5 Sporting Goods Corporation
|
Hooker Furniture
|
Vera Bradley, Inc.
|
|||
Conn’s, Inc.
|
Kimball International, Inc.
|
||||
Culp, Inc.
|
Knoll, Inc.
|
COMPENSATION DISCUSSION AND ANALYSIS
|
Consideration of Last Year’s Advisory Stockholder Vote on Executive Compensation
|
Pension Benefits and Retirement Plans
|
Tax Deductibility of Compensation
|
Stock Ownership Guidelines
|
Position
|
Guidelines
|
|
Chief Executive Officer
|
3.0x salary or 85,000 shares
|
|
Executive Vice President
|
2.0x salary or 40,000 shares
|
|
Senior Vice President
|
1.0x salary or 25,000 shares
|
The NCG Committee oversees Havertys’ compensation program on behalf of the board and operates under a written charter adopted by the board.
The NCG Committee, the members of which are listed below, is responsible for establishing and administering the executive compensation programs of Havertys. The NCG Committee has reviewed and
discussed the Compensation Discussion and Analysis with management and based on such review and discussions, the NCG Committee recommended to the board that the Compensation Discussion and Analysis be included in this proxy statement.
The Nominating, Compensation and Governance Committee
Mylle H. Mangum, Chair
Allison Dukes
John T. Glover
Derek G. Schiller
Al Trujillo
|
Name and Principal Position
|
Year
|
Salary
|
Non-Equity Incentive Plan Compensation
(1)
|
Stock
Awards
(2)
|
Change in Pension Value (3)
|
All Other Compensation
(4)
|
Total
|
|||||||||||||||||||||
Clarence H. Smith
|
2020
|
$
|
601,938
|
$
|
954,737
|
$
|
816,800
|
$
|
17,567
|
$
|
45,966
|
$
|
2,437,008
|
|||||||||||||||
CEO(a)
|
2019
|
660,000
|
311,568
|
590,730
|
26,964
|
50,738
|
1,640,000
|
|||||||||||||||||||||
2018
|
660,000
|
474,434
|
592,110
|
—
|
49,009
|
1,775,553
|
||||||||||||||||||||||
Steven G. Burdette
|
2020
|
365,165
|
341,247
|
278,733
|
56,387
|
29,634
|
1,071,166
|
|||||||||||||||||||||
|
President(a)
|
2019
|
380,000
|
118,711
|
270,921
|
63,542
|
31,385
|
864,559
|
||||||||||||||||||||
2018
|
380,000
|
180,355
|
259,335
|
—
|
27,409
|
847,099
|
||||||||||||||||||||||
Richard B. Hare
|
2020
|
365,165
|
341,247
|
278,733
|
—
|
24,228
|
1,009,373
|
|||||||||||||||||||||
EVP and CFO
|
2019
|
380,000
|
119,081
|
270,921
|
—
|
24,449
|
794,451
|
|||||||||||||||||||||
2018
|
380,000
|
193,162
|
259,335
|
—
|
118,788
|
951,285
|
||||||||||||||||||||||
J. Edward Clary
|
2020
|
351,088
|
328,122
|
229,725
|
84,039
|
21,955
|
1,014,929
|
|||||||||||||||||||||
EVP and CIO
|
2019
|
365,000
|
121,680
|
234,255
|
90,142
|
33,737
|
844,814
|
|||||||||||||||||||||
2018
|
365,000
|
187,839
|
234,090
|
—
|
31,124
|
818,053
|
||||||||||||||||||||||
John L. Gill(5)
|
2020
|
351,088
|
328,122
|
229,725
|
28,502
|
21,692
|
959,129
|
|||||||||||||||||||||
EVP, Merchandising
|
2019
|
331,666
|
84,037
|
173,145
|
30,065
|
21,278
|
640,191
|
(a)
|
Mr. Smith served as President and CEO and Mr. Burdette served as EVP, Operations during 2020. Mr. Burdette was promoted to President on March 1, 2021.
|
Summary Compensation Table Footnotes
|
(1)
|
Non-Equity Incentive Plan Compensation: Amounts for the cash earned under the annual incentive plans. For a description of the plans see “Compensation Discussion and Analysis.” The aggregate awards
earned for 2020 were between 142% and 146% of each NEO’s combined MIP target levels. The table below includes the amount of the total award to each named executive officer and the portion of the award attributable to each component.
|
Corporate Performance ($)
|
Individual Performance ($)
|
Total Annual
Incentive Award ($)
|
|||||||||||
Smith
|
$
|
843,074
|
$
|
111,662
|
$
|
954,737
|
|||||||
Burdette
|
294,447
|
46,800
|
341,247
|
||||||||||
Hare
|
294,447
|
46,800
|
341,247
|
||||||||||
Clary
|
283,122
|
45,000
|
328,122
|
||||||||||
Gill
|
283,122
|
45,000
|
328,122
|
EXECUTIVE COMPENSATION
|
(2)
|
Stock Awards: These amounts are the full value of the grants on January 23, 2020, the date the grants were made, as determined in accordance with ASC Topic 718. The full grant date value is
calculated using the number of awards multiplied by $20.42, the closing price of our stock on the date of grant. Awards containing a performance-based vesting condition are included based on achieving target performance. The amounts
reported for these awards may not represent the amounts the individuals will actually realize, as the number of shares earned, if any, will depend on actual performance versus goals and the change in our stock price over time.
The table below sets forth the details of the components that make up the 2020 equity awards. The value of the performance shares shown as earned was calculated using the number of shares earned under the EBITDA grant multiplied by the
share price on the date of grant. The EBITDA and Sales performance grants were earned at the maximum thresholds.
|
Components of Annual Stock Awards
|
Additional Information
|
|||||||||||||||||||||||
Value of
Time-based shares ($)
|
Value of Performance Shares - Target ($)
|
Total
|
Value of Performance Shares – at Maximum and Earned($)
|
|||||||||||||||||||||
EBITDA
|
Sales
|
EBITDA
|
Sales
|
|||||||||||||||||||||
Smith
|
$
|
163,360
|
$
|
522,752
|
$
|
130,688
|
$
|
816,800
|
$
|
914,816
|
$
|
156,826
|
||||||||||||
Burdette
|
83,620
|
156,090
|
39,023
|
278,733
|
273,158
|
46,827
|
||||||||||||||||||
Hare
|
83,620
|
156,090
|
39,023
|
278,733
|
273,158
|
46,827
|
||||||||||||||||||
Clary
|
68,918
|
128,646
|
32,162
|
229,725
|
225,131
|
38,594
|
||||||||||||||||||
Gill
|
68,918
|
128,646
|
32,162
|
229,725
|
225,131
|
38,594
|
(3)
|
Change in Pension Value: Represents the aggregate change in the actuarial present value of accumulated benefits under the SERP for the applicable year. These amounts were determined using interest
rate and mortality rate assumptions consistent with those used in Note 10 Benefit Plans to our 2020 consolidated financial statements, which are included in our Form 10-K for the year ended December
31, 2020.
|
(4)
|
All Other Compensation: These amounts are comprised of items as noted in the following table:
|
401(k)
Plan Match(a)
|
Deferred Compensation Plan Contribution(b)
|
Other(c)
|
Total
|
|||||||||||||
Smith
|
$
|
11,400
|
$
|
18,918
|
$
|
15,648
|
$
|
45,966
|
||||||||
Burdette
|
11,400
|
5,991
|
12,243
|
29,634
|
||||||||||||
Hare
|
11,400
|
—
|
12,828
|
24,228
|
||||||||||||
Clary
|
760
|
5,658
|
15,537
|
21,955
|
||||||||||||
Gill
|
11,400
|
—
|
10,292
|
21,692
|
(a)
|
The maximum 401(k) match for calendar year 2020 was $11,400.
|
(b)
|
Company contributions to the Deferred Compensation Plan are based on participants’ compensation and contributions.
|
(c)
|
Includes: premium costs for covering a portion of medical insurance coverage, additional life insurance, long-term disability coverage and health examinations.
|
(5)
|
Mr. Gill became an NEO in 2019.
|
EXECUTIVE COMPENSATION
|
Name
|
Award Type(1)
|
Grant and NCG Committee Approval Date
|
Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards ($)(2)
|
Estimated Possible Payouts
Under Equity
Incentive Plan Awards (#)(3)(4)
|
All Other Stock
Awards:
Number of
Shares of
Stock
(#)
|
Exercise
or
Base Price of Awards
$/Share(5)
|
Grant Date
Fair
Value of
Stock
Award
$(6)
|
|||||||||||
Threshold
|
Target
|
Maximum
|
Threshold
|
Target
|
Maximum
|
|||||||||||||
Smith
|
ACMIP-I
|
1/23/2020
|
$15,008
|
$536,000
|
$938,000
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||
ACMIP-II
|
1/23/2020
|
—
|
134,000
|
134,000
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||
PRSU
|
1/23/2020
|
—
|
—
|
—
|
10,240
|
25,600
|
44,800
|
—
|
$20.42
|
$522,752
|
||||||||
PRSU.1
|
1/23/2020
|
—
|
—
|
—
|
2,560
|
6,400
|
7,680
|
—
|
20.42
|
130,688
|
||||||||
RSU
|
1/23/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
8,000
|
20.42
|
163,360
|
||||||||
Burdette
|
ACMIP-I
|
1/23/2020
|
5,242
|
187,200
|
327,600
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||
ACMIP-II
|
1/23/2020
|
—
|
46,800
|
46,800
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||
PRSU
|
1/23/2020
|
—
|
—
|
—
|
3,058
|
7,644
|
13,377
|
—
|
20.42
|
156,090
|
||||||||
PRSU.1
|
1/23/2020
|
—
|
—
|
—
|
764
|
1,911
|
2,293
|
—
|
20.42
|
39,023
|
||||||||
RSU
|
1/23/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
4,095
|
20.42
|
83,620
|
||||||||
Hare
|
ACMIP-I
|
1/23/2020
|
5,242
|
187,200
|
327,600
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||
ACMIP-II
|
1/23/2020
|
—
|
46,800
|
46,800
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||
PRSU
|
1/23/2020
|
—
|
—
|
—
|
3,058
|
7,644
|
13,377
|
—
|
20.42
|
156,090
|
||||||||
PRSU.1
|
1/23/2020
|
—
|
—
|
—
|
764
|
1,911
|
2,293
|
—
|
20.42
|
39,023
|
||||||||
RSU
|
1/23/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
4,095
|
20.42
|
83,620
|
||||||||
Clary
|
ACMIP-I
|
1/23/2020
|
5,040
|
180,000
|
315,000
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||
ACMIP-II
|
1/23/2020
|
—
|
45,000
|
45,000
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||
PRSU
|
1/23/2020
|
—
|
—
|
—
|
2,520
|
6,300
|
11,025
|
—
|
20.42
|
128,646
|
||||||||
PRSU.1
|
1/23/2020
|
—
|
—
|
—
|
630
|
1,575
|
1,890
|
—
|
20.42
|
32,162
|
||||||||
RSU
|
1/23/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
3,375
|
20.42
|
68,918
|
||||||||
Gill
|
ACMIP-I
|
1/23/2020
|
5,040
|
180,000
|
315,000
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||
ACMIP-II
|
1/23/2020
|
—
|
45,000
|
45,000
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||
PRSU
|
1/23/2020
|
—
|
—
|
—
|
2,520
|
6,300
|
11,025
|
—
|
20.42
|
128,646
|
||||||||
PRSU.1
|
1/23/2020
|
—
|
—
|
—
|
630
|
1,575
|
1,890
|
—
|
20.42
|
32,162
|
||||||||
RSU
|
1/23/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
3,375
|
20.42
|
68,918
|
(1)
|
Award Type:
|
ACMIP-I = Annual Cash Management Incentive Plan Compensation based on company performance
ACMIP-II = Annual Cash Management Incentive Plan Compensation based on individual performance
PRSU = Performance Restricted Stock Units contingent - EBITDA
PRSU.1 = Performance Restricted Stock Units contingent - Sales
RSU = Restricted Stock Unit
|
(2)
|
The 2020 Non-Equity Incentive Plans as discussed above provided for a target payout for 100% attainment of the goals and decreased to the payout threshold and increased to the maximum payout noted above.
|
|
(3)
|
The PRSU grant is based on 2020 adjusted EBITDA as discussed above. The number of shares actually achieved were 175% of the target and are shown as outstanding awards on page 24.
|
|
(4)
|
The PRSU.1 grant is based on a sales target for 2020. The number of shares actually achieved were 120% of the target and are shown as outstanding awards on page 24.
|
|
(5)
|
The base price for the PRSUs and RSUs is the closing price of our stock on the date of grant.
|
|
(6)
|
The fair value for the PRSUs and RSUs was determined using the target number of shares granted multiplied by the closing stock price on the grant date, in accordance with ASC Topic 718.
|
EXECUTIVE COMPENSATION
|
Stock Awards
|
||||||
Name
|
Date Awarded
|
Number of Shares of Stock That Have Not Vested(#)
|
Market Value of Shares of Stock that Have Not Vested ($)
|
Equity Incentive Plan Awards:
Number of Unearned Shares That Have Not Vested(#)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested($)
|
|
Smith
|
1/30/17(3)
|
—
|
—
|
—
|
—
|
|
1/30/18(4)
|
14,352
|
$ 397,120
|
||||
1/30/18(1)
|
1,290
|
35,694
|
||||
1/30/19(5)
|
8,477
|
234,559
|
||||
1/30/19(1)
|
2,175
|
60,182
|
||||
1/23/20(6)
|
44,800
|
1,239,616
|
||||
1/23/20(7)
|
7,680
|
212,506
|
||||
1/23/20(2)
|
8,000
|
221,360
|
||||
Burdette
|
1/30/17(1)
|
1,312
|
36,303
|
|||
1/30/18(4)
|
4,889
|
135,279
|
||||
1/30/18(1)
|
1,695
|
46,901
|
||||
1/31/19(5)
|
3,024
|
83,674
|
||||
1/31/19(1)
|
2,992
|
82,789
|
||||
1/23/20(6)
|
13,377
|
370,142
|
||||
1/23/20(7)
|
2,293
|
63,447
|
||||
1/23/20(2)
|
4,095
|
113,309
|
||||
Hare
|
5/04/17(1)
|
1,099
|
30,409
|
|||
1/30/18(4)
|
4,889
|
135,279
|
||||
1/30/18(1)
|
1,695
|
46,901
|
||||
1/31/19(5)
|
3,024
|
83,674
|
||||
1/31/19(1)
|
2,992
|
82,789
|
||||
1/23/20(6)
|
13,377
|
370,142
|
||||
1/23/20(7)
|
2,293
|
63,447
|
||||
1/23/20(2)
|
4,095
|
113,309
|
||||
Clary
|
1/30/17(1)
|
1,250
|
34,588
|
|||
1/30/18(4)
|
4,413
|
122,108
|
||||
1/30/18(1)
|
1,530
|
42,335
|
||||
1/31/19(5)
|
2,615
|
72,357
|
||||
1/31/19(1)
|
2,587
|
71,582
|
||||
1/23/20(6)
|
11,025
|
305,062
|
||||
1/23/20(7)
|
1,890
|
52,296
|
||||
1/23/20(2)
|
3,375
|
93,386
|
||||
Gill
|
1/30/17(1)
|
500
|
13,835
|
|||
1/30/17(4)
|
1,854
|
51,300
|
||||
1/30/18(1)
|
1,000
|
27,670
|
||||
1/31/19(5)
|
1,656
|
45,822
|
||||
1/31/19(1)
|
2,550
|
70,559
|
||||
1/23/20(6)
|
11,025
|
305,062
|
||||
1/23/20(7)
|
1,890
|
52,296
|
||||
1/23/20(2)
|
3,375
|
93,386
|
EXECUTIVE COMPENSATION
|
Award Information
|
Vesting Rate
|
Vesting Dates
|
Conditions
|
|
(1)
|
Restricted Stock Units
|
25% per year
|
May 8 each year beginning year following grant date
|
Continued employment through vesting date.
|
(2)
|
Restricted Stock Units
|
one-third per year
|
May 8 each year beginning year following grant date
|
Continued employment through vesting date.
|
(3)
|
Performance Restricted Stock Units
|
25% per year
|
May 8 each year beginning year following grant date
|
Contingent upon achieving certain level of
annual net sales in each of four years. No shares were earned.
|
(4)
|
Performance Restricted Stock Units
|
100%
|
February 28, 2021
|
Based on 2018 EBITDA, shares achieved at 88.3% of target.
|
(5)
|
Performance Restricted Stock Units
|
100%
|
February 28, 2022
|
Based on 2019 EBITDA, shares achieved at
46.4% of target.
|
(6)
|
Performance Restricted Stock Units
|
100%
|
February 28, 2023
|
Based on 2020 EBITDA, shares achieved at 175% of target.
|
(7)
|
Performance Restricted Stock Units
|
100%
|
February 28, 2023
|
Based on 2020 comparable store sales, shares achieved at 120% of target.
|
|
Option and SSARs Awards
|
Stock Awards
|
||||||||||||||
Name
|
Number of Shares Acquired on Exercise (#)(1)
|
Value Realized on Exercise ($)(2)
|
Number of Shares
Acquired
on Vesting (#)(1)
|
Value
Realized on
Vesting ($)(2)
|
||||||||||||
Clarence Smith
|
15,754
|
$
|
260,119
|
|||||||||||||
Steve Burdette
|
—
|
—
|
9,390
|
142,011
|
||||||||||||
Richard Hare
|
—
|
—
|
7,050
|
108,130
|
||||||||||||
Ed Clary
|
8,823
|
133,660
|
||||||||||||||
John Gill
|
—
|
—
|
4,238
|
62,870
|
(1)
|
The number of shares acquired on exercise or vesting is the gross number, including shares surrendered to us for the payment of the exercise and/or withholding taxes. The following table
outlines the net number of shares received by the NEOs.
|
(2)
|
The value realized reflects the taxable value to the named executive officer as of the date of the vesting of restricted stock units. The actual value ultimately realized by the NEO may be
more or less than the value realized calculated in the above table depending on whether and when the NEO held or sold the stock associated with the vesting occurrence.
|
Name
|
Net Shares Received (#)
|
|||
Smith
|
8,685
|
|||
Burdette
|
5,360
|
|||
Hare
|
3,887
|
|||
Clary
|
5,038
|
|||
Gill
|
2,400
|
EXECUTIVE COMPENSATION
|
Name
|
Aggregate
Earnings (Loss)
in 2020 ($)
|
Aggregate Withdrawals/Distributions in 2020 ($)
|
Aggregate
Balance at Last
FYE ($)
|
|||||||||
Clarence Smith
|
$
|
122,325
|
$
|
525,298
|
$
|
721,320
|
||||||
Ed Clary
|
29,812
|
—
|
483,085
|
Name
|
Executive Contributions in 2020 ($)(1)
|
Company Contributions
for 2020 ($)(2)
|
Aggregate Earnings (Loss) in 2020 ($)(3)
|
Aggregate
Withdrawals/
Distributions
in 2020 ($)
|
Aggregate Balance at Last FYE ($)(4)
|
|||||||||||||||
Clarence Smith
|
$
|
67,813
|
$
|
18,918
|
$
|
421,908
|
$
|
—
|
$
|
3,531,990
|
||||||||||
Steve Burdette
|
82,642
|
5,991
|
11,818
|
47,448
|
187,232
|
|||||||||||||||
Richard Hare
|
—
|
—
|
26,415
|
—
|
226,978
|
|||||||||||||||
Ed Clary
|
116,982
|
5,658
|
78,756
|
—
|
519,363
|
(1)
|
Amounts included in this column have been included in the “Salary” and “Non-Equity Incentive Plan Compensation” columns in the Summary Compensation Table on page 21.
|
(2)
|
Amounts included in this column have been reported in the "All Other Compensation" column of the Summary Compensation Table on page 21.
|
(3)
|
Amounts included in this column do not constitute above-market or preferential earnings and accordingly such amounts are not reported in the “Change in Pension Value and Nonqualified Deferred Compensation
Earnings” column of the Summary Compensation Table on page 21.
|
(4)
|
All amounts included in this column have been reported in the current or prior years as either salary, non-equity incentive compensation or all other compensation in the summary compensation tables or as earnings
or withdrawals in the deferred compensation tables.
|
EXECUTIVE COMPENSATION
|
Name
|
Plan Name
|
Number of Years
Credited
Service (#)
|
Present Value
of Accumulated
Benefit ($)
|
Payments during last fiscal year ($)
|
||||||||||
Clarence Smith
|
SERP
|
40
|
$
|
498,910
|
—
|
|||||||||
Steve Burdette
|
SERP
|
32
|
368,806
|
—
|
||||||||||
Ed Clary
|
SERP
|
25
|
568,087
|
—
|
||||||||||
John Gill
|
SERP
|
15
|
167,802
|
—
|
EXECUTIVE COMPENSATION
|
•
|
Severance payments – calculated as equal to two times the sum of: (1) the higher of the individual’s annual base salary or the average annual base salary for the three years immediately prior to the event upon
which the notice of termination is based and (2) the higher of the amount paid as annual non-equity incentive compensation or the average amount paid in the three years preceding that in which the date of termination occurs.
|
•
|
Final year bonus – a pro-rata amount for the annual incentive plan performance period in which the date of termination occurs, the calculation and payment of which depend on when the date of termination occurs.
|
•
|
Reimbursement for medical and life insurance premiums – payments for a period of 24 months after the date of termination.
|
•
|
Acceleration of vesting on then-outstanding stock options and restricted stock awards; then-outstanding performance shares would be governed by the plan under which they were awarded. See “Accelerated Vesting of
Long-Term Incentives” below for additional details on the outstanding awards.
|
EXECUTIVE COMPENSATION
|
2020 Potential Payments Upon Termination or Change in Control
|
Name
|
Voluntary
|
Involuntary
Not for Cause
|
For
Cause
|
Change in Control
No
Termination
|
Involuntary
for Good Reason/Not for Cause (CIC)
|
Death
|
Disability
|
|||||||||||||||||||||
Clarence Smith
|
||||||||||||||||||||||||||||
Severance
|
—
|
—
|
—
|
—
|
$
|
3,229,474
|
—
|
—
|
||||||||||||||||||||
Healthcare and Other
|
—
|
—
|
—
|
—
|
38,040
|
—
|
—
|
|||||||||||||||||||||
Long-Term Incentive
|
—
|
(2)
|
—
|
—
|
$
|
2,401,037
|
2,401,037
|
$
|
2,401,037
|
(3)
|
$
|
2,401,037
|
(3)
|
|||||||||||||||
Retirement Plans(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||
Steve Burdette
|
||||||||||||||||||||||||||||
Severance
|
—
|
—
|
—
|
—
|
1,442,494
|
—
|
—
|
|||||||||||||||||||||
Healthcare and Other
|
—
|
—
|
—
|
—
|
19,800
|
—
|
—
|
|||||||||||||||||||||
Long-Term Incentive
|
—
|
—
|
—
|
931,843
|
931,843
|
931,843
|
(3)
|
931,843
|
(3)
|
|||||||||||||||||||
Retirement Plans(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||
Richard Hare
|
||||||||||||||||||||||||||||
Severance
|
—
|
—
|
—
|
—
|
1,442,494
|
—
|
—
|
|||||||||||||||||||||
Healthcare and Other
|
—
|
—
|
—
|
—
|
57,228
|
—
|
—
|
|||||||||||||||||||||
Long-Term Incentive
|
—
|
—
|
—
|
925,949
|
925,949
|
925,949
|
(3)
|
925,949
|
(3)
|
|||||||||||||||||||
Retirement Plans(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||
Ed Clary
|
||||||||||||||||||||||||||||
Severance
|
—
|
—
|
—
|
—
|
1,386,244
|
—
|
—
|
|||||||||||||||||||||
Healthcare and Other
|
—
|
—
|
—
|
—
|
38,040
|
—
|
—
|
|||||||||||||||||||||
Long-Term Incentive
|
—
|
—
|
—
|
793,714
|
793,714
|
793,714
|
(3)
|
793,714
|
(3)
|
|||||||||||||||||||
Retirement Plans(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||
John Gill
|
||||||||||||||||||||||||||||
Severance
|
—
|
—
|
—
|
—
|
1,386,244
|
—
|
—
|
|||||||||||||||||||||
Healthcare and Other
|
—
|
—
|
—
|
—
|
57,768
|
—
|
—
|
|||||||||||||||||||||
Long-Term Incentive
|
—
|
—
|
—
|
659,930
|
659,930
|
659,930
|
(3)
|
659,930
|
(3)
|
|||||||||||||||||||
Retirement Plans(1)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(1)
|
We disclose the amounts related to the SERP plan and the plans in which each NEO participates in the Pension Benefits, the Top Hat Mutual Fund Option Plan and the Deferred Compensation Plan tables.
|
(2)
|
Mr. Smith was at full retirement age at December 31, 2020. If he had retired on such date, his outstanding awards would not have automatically vested. Therefore, we report zero value in the table above. However,
some of his awards would continue to vest following his retirement through the end of the respective vesting periods. The values of such awards at December 31, 2020 were $2,083,800.
|
(3)
|
Time-based RSUs vest in full upon an NEO’s termination of employment by reason of death or disability. Similarly, performance vested RSUs generally vest upon an NEO’s termination of employment by reason of death
or disability based on actual performance through the date of death or disability, which for purposes of this table is assumed to be December 31, 2020.
|
EXECUTIVE COMPENSATION
|
Our Board of Directors recommends that stockholders vote "FOR" this Proposal.
|
Our Board of Directors recommends that you vote for the option of “1 Year” for future advisory votes on Executive Compensation.
|
2014 Plan
|
||||
Total shares underlying time-based outstanding unvested full value awards
|
353,649
|
|||
Total shares underlying performance-based outstanding unvested full value awards (at maximum)
|
382,967
|
|||
Total shares currently available for grant
|
42,698
|
|||
Common Stock and Class A Common Stock outstanding as of March 1, 2021
|
18,246,090
|
Key Equity Metrics
|
2020 (%)
|
2019 (%)
|
2018 (%)
|
|||||||||
Burn Rate (1)
|
1.41
|
%
|
1.24
|
%
|
1.15
|
%
|
||||||
Overhang (2)
|
4.59
|
%
|
5.28
|
%
|
5.60
|
%
|
||||||
Dilution (3)
|
2.91
|
%
|
2.35
|
%
|
2.23
|
%
|
(1)
|
Burn rate is calculated by dividing the number of shares subject to equity awards granted during the applicable fiscal period by the total weighted- average number of shares
of common stock and Class A common stock outstanding during the applicable fiscal period.
|
(2)
|
Overhang is calculated by dividing (a) the sum of (x) the number of shares subject to equity awards outstanding at the end of the year and (y) the number of shares available
for future grants, by (b) the number of shares of common stock and Class A common stock outstanding at the end of the year.
|
(3)
|
Dilution is calculated by dividing the number of shares subject to equity awards outstanding at the end of the fiscal year by the number of shares of common stock and Class
A common stock outstanding at the end of the fiscal year.
|
•
|
No evergreen provision. The 2021 Plan does not contain an “evergreen” feature pursuant to which the shares authorized for issuance under the 2021 Plan can be automatically replenished.
|
•
|
No repricing of stock options or stock appreciation rights. Without the prior approval of the company’s stockholders, outstanding stock options and stock
appreciation rights cannot be repriced, directly or indirectly, nor may stock options or stock appreciation rights be cancelled in exchange for stock options or stock appreciation rights with an exercise price or base price that is less
than the exercise price or base price of the original award. In addition, the company may not, without the prior approval of stockholders, repurchase an option or stock appreciation right for value from a participant if the current market
value of the underlying stock is lower than the exercise price or base price per share of the option or stock appreciation right, respectively.
|
•
|
No discounted stock options or stock appreciation rights. Stock options and stock appreciation rights may not be granted with exercise prices or base prices lower than the fair market value of the
underlying shares on the grant date.
|
•
|
No liberal share recycling provisions. Shares retained by or delivered to the company to pay the exercise price of a stock option or to satisfy tax
withholding obligations in connection with the exercise, vesting or settlement of an award will count against the number of shares remaining available under the 2021 Plan.
|
•
|
No liberal change-in-control definition. The change-in-control definition contained in the 2021 Plan is not a “liberal” definition that would be activated on stockholder approval of a transaction.
|
•
|
No single-trigger change of control vesting. If awards granted under the 2021 Plan are assumed by the successor entity in connection with a change of control of the company, such awards will not
automatically vest and pay out upon the change of control.
|
•
|
Minimum vesting requirements. No more than five percent (5%) of the shares available for issuance under the 2021 Plan may be granted pursuant to awards with a vesting period of less than one
(1) year.
|
•
|
No dividends on unearned awards or appreciation awards. The 2021 Plan prohibits the current payment of dividends or dividend equivalent rights on unearned
awards. In addition, no dividends will accrue on options or stock appreciation rights.
|
Our Board of Directors recommends a vote “FOR” the
Approval of the 2021 Long-Term Incentive Plan.
|
Plan Category
|
Number of Securities
To be issued upon
exercise of outstanding
equity awards
(a)
|
Weighted-average
exercise price of
outstanding options and stock-settled stock appreciation rights (SSARs)
(b)
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column (a))
(c)
|
|||||||||
Equity compensation plans
approved by stockholders:
|
||||||||||||
Long-Term Incentive Plans(1)
|
528,791
|
(2)
|
$
|
20.84
|
42,698
|
(3)
|
||||||
Director Compensation Plan
|
130,398
|
(4)
|
—
|
111,253
|
(5)
|
|||||||
Equity compensation plans not
approved by stockholders
|
—
|
—
|
—
|
|||||||||
Total
|
659,189
|
$
|
20.84
|
153,951
|
(1)
|
Shares issuable pursuant to outstanding equity awards under our 2014 Long-Term Incentive Plan.
|
(2)
|
This number is comprised entirely of full value restricted units.
|
(3)
|
Any shares which are forfeited, expired, or cancelled are made available for use under the 2014 Long-Term Incentive Plan.
|
(4)
|
Shares deferred under the Directors’ Deferred Compensation Plan. Shares are issued from those held in the company’s treasury.
|
(5)
|
Shares remaining under the Directors Compensation Plan. Shares are issued from those held in the company’s treasury.
|
Common Stock
|
Class A Common Stock
|
||||||||||||||||
Amount and Nature of Beneficial Ownership (1)
|
Percent
of Class(2)
|
Shares
Beneficially
Owned
|
Percent of
Class(3)
|
||||||||||||||
Steven G. Burdette
|
7,462
|
*
|
28,530
|
2.11
|
%
|
||||||||||||
J. Edward Clary
|
40,233
|
*
|
—
|
—
|
|||||||||||||
L. Allison Dukes
|
19,395
|
*
|
—
|
—
|
|||||||||||||
John L. Gill
|
10,207
|
*
|
7,500
|
*
|
|||||||||||||
Richard B. Hare
|
8,226
|
*
|
—
|
—
|
|||||||||||||
Rawson Haverty, Jr.
|
11,315
|
*
|
205,255
|
(4)5)
|
15.20
|
%
|
|||||||||||
G. Thomas Hough
|
18,953
|
*
|
—
|
—
|
|||||||||||||
Mylle H. Mangum
|
50,513
|
*
|
—
|
—
|
|||||||||||||
Vicki R. Palmer
|
49,560
|
*
|
—
|
—
|
|||||||||||||
Derek G. Schiller
|
1,645
|
*
|
—
|
—
|
|||||||||||||
Clarence H. Smith
|
67,159
|
(6)(7)
|
*
|
717,483
|
(8)(9)
|
53.15
|
%
|
||||||||||
Al Trujillo
|
46,562
|
*
|
—
|
—
|
|||||||||||||
Directors and Executive Officers as a group (16 persons)
|
396,150
|
2.2
|
%
|
958,768
|
71.02
|
%
|
(1)
|
This column also includes shares of common stock beneficially owned under our directors’ Deferred Plan for the following individuals: Ms. Dukes – 14,157; Mr. Hough – 6,807; Ms. Mangum – 50,513; Mr. Smith – 4,719;
and Mr. Trujillo – 37,256.
|
(2)
|
Based on 16,896,106 shares of our common stock outstanding on March 5, 2021.
|
(3)
|
Based on 1,349,984 shares of our Class A common stock outstanding on March 5, 2021.
|
(4)
|
Mr. Haverty has direct ownership of 84,074 shares of Class A common stock. The beneficial ownership disclosed also includes 65,140 shares of Class A common stock held by a limited liability company for which Mr.
Haverty is the manager and 12,024 shares of Class A common stock held in trust for the benefit of Mr. Haverty’s children for which he is co-trustee, as to which he disclaims beneficial ownership.
|
(5)
|
This amount also includes 44,017 shares of Class A common stock held by the Mary E. Haverty Foundation, a charitable organization, for which Mr. Haverty has sole voting power through a revocable proxy granted to him
by the Foundation. Mr. Haverty has no pecuniary interest in the shares of the Foundation and disclaims any beneficial ownership in the Foundation’s shares.
|
(6)
|
Mr. Smith has direct ownership of 24,901 shares of common stock. The beneficial ownership disclosed includes 29,689 shares of common stock held by Mr. Smith’s wife, as to which he disclaims beneficial ownership.
|
(7)
|
This amount includes 7,850 shares of common stock held by a Georgia limited partnership in which Mr. Smith is a partner. Mr. Smith disclaims beneficial ownership of these shares except to the extent of his pecuniary
interest in the partnership.
|
(8)
|
Mr. Smith has direct ownership of 112,036 shares of Class A common stock. The beneficial ownership disclosed includes 1,950 shares of Class A common stock held by Mr. Smith’s wife, as to which he disclaims
beneficial ownership.
|
(9)
|
The amount also includes shares held by a partnership. According to a Schedule 13D filed on January 3, 2018, Villa Clare Partners, L.P. holds shared voting and dispositive power over 603,497 shares of Class A common
stock. Mr. Smith is the manager of the Partnership’s general partner, West Wesley Associates, LLC. Mr. Smith disclaims beneficial ownership of these shares except to the extent of his partnership interest.
|
Common Stock
|
Class A Common Stock
|
|||||||||||||||
Name and address of Beneficial Holder
|
Amount and Nature of Beneficial Ownership
|
Percent
of Class(1)
|
Amount and Nature of Beneficial Ownership
|
Percent
of Class(2)
|
||||||||||||
BlackRock, Inc.
55 East 52nd Street, New York, NY
|
2,719,428
|
(3)
|
16.09
|
%
|
—
|
—
|
||||||||||
Dimensional Fund Advisors LP
6300 Bee Cave Road, Building One, Austin, TX
|
1,308,089
|
(4)
|
7.74
|
%
|
—
|
—
|
||||||||||
The Burton Partnership, LP
614 W. Bay Street, Tampa, FL
|
1,228,255
|
(5)
|
7.27
|
%
|
—
|
—
|
||||||||||
Renaissance Technologies LLC
800 Third Avenue, New York, NY
|
1,204,006
|
(6)
|
7.13
|
%
|
—
|
—
|
||||||||||
The Vanguard Group
100 Vanguard Blvd., Malvern, PA
|
1,092,964
|
(7)
|
6.47
|
%
|
—
|
—
|
||||||||||
LSV Asset Management,
155 N. Wacker Drive, Suite 4600, Chicago, IL
|
930,916
|
(8)
|
5.51
|
%
|
—
|
—
|
||||||||||
Villa Clare Partners, L.P.
158 West Wesley Road, Atlanta, GA
|
—
|
*
|
603,497
|
(9)
|
44.70
|
%
|
||||||||||
Rawson Haverty, Jr.
780 Johnson Ferry Road, NE, Atlanta, GA
|
11,315
|
*
|
205,255
|
(10)(11)
|
15.20
|
%
|
||||||||||
Clarence H. Smith
780 Johnson Ferry Road, NE, Atlanta, GA
|
67,159
|
(12)(13)
|
*
|
113,986
|
(14)
|
8.44
|
%
|
(1)
|
Based on 16,896,106 shares of our common stock outstanding on March 5, 2021.
|
||||||||
(2)
|
Based on 1,349,983 shares of our Class A common stock outstanding on March 5, 2021.
|
||||||||
(3)
|
According to a Schedule 13G filed on January 25, 2021, BlackRock, Inc. holds sole voting power over 2,680,834 shares and sole dispositive power over 2,719,428 shares of common stock.
|
||||||||
(4)
|
According to a Schedule 13G/A filed on February 12, 2021, Dimensional Fund Advisors LP (“Dimensional”) holds sole voting power over 1,260,616 shares and sole dispositive power over 1,308,089 shares of common
stock. Dimensional is an investment advisor registered under Section 203 of the Investment Advisors Act of 1940 and furnishes investment advice to four investment companies registered under the Investment Company Act of 1940 and serves as
investment manager or sub-advisor to certain other commingled funds, group trusts and separate accounts (the “Funds”). The shares reported above are owned by the Funds. Dimensional possesses investment and/or voting power over the shares
held by the Funds. Dimensional disclaims beneficial ownership of these securities.
|
||||||||
(5)
|
According to a Schedule 13G filed on June 1, 2016, The Burton Partnership, LP, The Burton Partnership (QP), LP and
Donald W. Burton, General Partner hold sole voting and dispositive power over 1,228,255 shares of common stock.
|
||||||||
(6)
|
According to a Schedule 13G/A filed on February 11, 2021, Renaissance Technologies LLC (“RTC”) holds sole voting power over 1,202,506 shares of common stock, and sole dispositive power over 1,204,006 shares of
common stock.
|
||||||||
(7)
|
According to a Schedule 13G/A filed on February 10, 2021, The Vanguard Group holds shared voting power over 18,686 shares and sole dispositive power over 1,055,161 shares and shared dispositive power over 37,803
shares of common stock.
|
||||||||
(8)
|
According to a Schedule 13G filed on February 11, 2021, LSV Asset Management holds sole voting power over 513,200 shares and sole dispositive power over 930,916 shares of common stock.
|
||||||||
(9)
|
According to a Schedule 13D/A filed on January 3, 2018, Villa Clare Partners, L.P. holds shared voting and dispositive power over 603,497 shares of Class A common stock. Clarence H. Smith is the manager of the
Partnership’s general partner, West Wesley Associates, LLC. Mr. Smith disclaims beneficial ownership of these shares except to the extent of his partnership interest.
|
||||||||
(10)
|
Mr. Haverty has direct ownership of 84,074 shares of Class A common stock and sole dispositive and voting power over 65,140 shares of Class A common stock held by a limited liability company for which Mr. Haverty
is the manager. The beneficial ownership disclosed also includes 12,024 shares of Class A common stock held in trust for the benefit of Mr. Haverty’s children for which he is co-trustee, as to which he disclaims beneficial ownership.
|
||||||||
(11)
|
This amount also includes 44,017 shares of Class A common stock held by the Mary E. Haverty Foundation, a charitable organization, for which Mr. Haverty has sole voting power through a revocable proxy granted to
him by the Foundation. Mr. Haverty has no pecuniary interest in the shares of the Foundation and disclaims any beneficial ownership in the Foundation’s shares.
|
||||||||
(12)
|
Mr. Smith has direct ownership of 24,901 shares of common stock. The beneficial ownership disclosed includes 29,689 shares of common stock held by Mr. Smith’s wife, as to which he disclaims beneficial ownership.
Mr. Smith also has 4,719 shares beneficially owned under Havertys’ directors’ Deferred Plan.
|
||||||||
(13)
|
This amount includes 7,850 shares of common stock held by a Georgia limited partnership in which Mr. Smith is a partner. Mr. Smith disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in the partnership.
|
||||||||
(14)
|
Mr. Smith has direct ownership of 112,036 shares of Class A common stock. The beneficial ownership disclosed includes 1,950 shares of Class A common stock held by Mr. Smith’s wife, as to which he disclaims
beneficial ownership.
|
AUDIT COMMITTEE REPORT (continued)
|
The Audit Committee further discussed with representatives of Grant Thornton the matters required to be discussed with audit committees by the applicable requirements of the Public Company
Accounting Oversight Board's standards and the SEC. The Committee also received the written disclosures and the letter from Grant Thornton required by the applicable requirements of the Public Company Accounting Oversight Board regarding
Grant Thornton’s communications with the Committee concerning independence and discussed with representatives of Grant Thornton the independence of that firm.
The Audit Committee also reviewed and discussed together with management and Grant Thornton Havertys’ audited financial statements for the year ended December 31, 2020, and the results of
management's assessments of the effectiveness of the company’s internal control over financial reporting and Grant Thornton’s audit of internal control over financial reporting.
Based on these reviews and discussions, the Audit Committee recommended to the Board that the audited financial statements be included in Havertys’ Annual Report on Form 10-K for the year
ended December 31, 2020.
The Audit Committee
Al Trujillo, Chair
John T. Glover
G. Thomas Hough
Vicki R. Palmer
This report shall not be deemed to be “soliciting material” or to be “filed” with the SEC nor shall this report be incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under such acts.
|
AUDIT MATTERS
|
|
December 31,
|
|||||||
2020
|
2019
|
|||||||
Audit Fees
|
$
|
655,055
|
$
|
609,820
|
||||
Audit-related Fees
|
—
|
—
|
||||||
Tax Fees
|
—
|
—
|
||||||
All Other Fees
|
—
|
—
|
||||||
Total
|
$
|
655,055
|
$
|
609,820
|
What am I voting on?
|
✔ Ratification of the appointment of our independent registered public accounting firm for 2021
|
Voting recommendation:
|
✔ Our board of directors recommends a vote “For” the appointment of Grant Thornton LLP as our
independent registered public accounting firm for 2021.
|
INFORMATION ABOUT OUR ANNUAL MEETING
|
Proposals
|
Board Voting Recommendation
|
Votes Required
For Approval
|
Abstentions
|
Uninstructed shares
|
Election of Directors –
Class A Common Stockholders
Common Stockholders
|
FOR
FOR
|
Plurality of votes cast in person or by proxy – the most affirmative votes
|
No effect
|
No effect
|
Advisory Vote on Executive Compensation
|
FOR
|
Combined majority of votes cast in person or by proxy
|
Counts as a vote against
|
No effect
|
Advisory Vote on the Frequency of the Stockholder Vote on Executive Compensation
|
ONE YEAR
|
Combined majority of votes cast in person or by proxy
|
Counts as a vote against
|
No effect
|
Approval of 2021 Long-Term Incentive Plan
|
FOR
|
Combined majority of votes cast in person or by proxy
|
Counts as a vote against
|
No effect
|
Ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2021
|
FOR
|
Combined majority of votes cast in person or by proxy
|
Counts as a vote against
|
No effect
Discretionary voting by broker permitted
|
INFORMATION ABOUT OUR ANNUAL MEETING
|
Stockholders Sharing the Same Address
|
Reconciliation of as Reported Pre-Tax Earnings to Adjusted Pre-Tax Earnings (unaudited)
|
(in thousands)
|
Year Ended
December 30, 2020
|
|||
Income before income taxes, as reported(1)
|
$
|
76,731
|
||
Adjustments:
|
||||
Gain from sale-leaseback transaction and related property sales(2)
|
(34,254
|
)
|
||
Restoration of losses during store closures(3)
|
21,445
|
|||
Pre-tax earnings, as adjusted
|
$
|
64,022
|
(1)
|
These amounts are included in our Form 10-K for the year ended December 31, 2020.
|
(2)
|
The gain from the sale-leaseback transaction of three distribution facilities was $31.6 million as reported in our Form 10-K for the year ended December 31, 2020. We also sold properties adjacent to these facilities
and those gains are included in this amount.
|
(3)
|
These changes represent only those amounts included in determination of adjusted pre-tax earnings used by the NCG Committee in approving the MIP-I cash incentive and does not represent the full estimated impact of
the losses during our operational pause due to COVID-19.
|
Reconciliation of EBITDA to Adjusted EBITDA (unaudited)
|
(in thousands)
|
Year Ended
December 30, 2020
|
|||
Income before income taxes, as reported(1)
|
$
|
76,731
|
||
Interest (income), net(1)
|
(126
|
)
|
||
Depreciation(1)
|
18,207
|
|||
EBITDA
|
94,812
|
|||
Adjustments:
|
||||
Gain from sale-leaseback transaction and related property sales(2)
|
(34,254
|
)
|
||
Restoration of losses during store closures(3)
|
21,445
|
|||
Adjusted EBITDA
|
$
|
82,003
|
(1)
|
These amounts are included in our Form 10-K for the year ended December 31, 2020.
|
(2)
|
The gain from the sale-leaseback transaction of three distribution facilities was $31.6 million as reported in our Form 10-K for the year ended December 31, 2020. We also sold properties adjacent to these facilities
and those gains are included in this amount.
|
(3)
|
These changes represent only those amounts included in determination of adjusted pre-tax earnings used by the NCG Committee in approving the MIP-I cash incentive and does not represent the full estimated impact of
the losses during our operational pause due to COVID-19.
|
TABLE OF CONTENTS
|
||
SECTION 1 - PURPOSE
|
1
|
|
SECTION 2 - DEFINITIONS
|
1
|
|
SECTION 3 - ADMINISTRATION
|
4
|
|
SECTION 4 - SHARES AVAILABLE FOR AWARDS
|
5
|
|
SECTION 5 - ELIGIBILITY
|
6
|
|
SECTION 6 - STOCK OPTIONS
|
6
|
|
SECTION 7 - STOCK APPRECIATION RIGHTS
|
8
|
|
SECTION 8 - RESTRICTED STOCK AND RESTRICTED STOCK UNITS
|
9
|
|
SECTION 9 - DEFERRED SHARES AND DEFERRED STOCK UNITS
|
10
|
|
SECTION 10 - PERFORMANCE AWARDS
|
12
|
|
SECTION 11 - NON-EMPLOYEE DIRECTOR AWARDS
|
13
|
|
SECTION 12 - MINIMUM VESTING REQUIREMENTS
|
13
|
|
SECTION 13 - TERMINATION OF EMPLOYMENT
|
14
|
|
SECTION 14 - CHANGE IN CONTROL
|
14
|
|
SECTION 15 - AMENDMENT, SUSPENSION AND TERMINATION
|
15
|
|
SECTION 16 - GENERAL PROVISIONS
|
15
|
|
SECTION 17 - TERM OF THE PLAN
|
18
|
SECTION 1 -
|
Purpose
|
SECTION 2 -
|
Definitions
|
(i)
|
any “Person” (for purposes of this “Change in Control” definition, as defined under Section 3(a)(9) of the Exchange Act and as modified and used in Section 13(d) or Section 14(d) of the Exchange Act), excluding Rawson Haverty, Mrs. Betty
Haverty Smith, Frank S. McGaughey, Jr., their spouses, lineal descendants, heirs, administrators or representatives or any Person controlled (directly or indirectly) by any of them is or becomes a
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company
or its affiliates, as such term is defined in the rules and regulations of the Securities and Exchange Commission) that together with equity securities held by such Persons represent more than 50% of the combined voting power of the
Company's then outstanding securities;
|
(ii)
|
any “Person” (for purposes of this definition only, as defined under Section 3(a)(9) of the Exchange Act and as modified and used in Section 13(d) or Section 14(d) of the Exchange Act), excluding Rawson Haverty, Mrs. Betty Haverty Smith,
Frank S. McGaughey, Jr., their spouses, lineal descendants, heirs, administrators or representatives or any Person controlled (directly or indirectly) by any of them acquire (or have acquired during the 12‑month period ending on the date of
the most recent acquisition by such Persons) ownership of equity securities of the Company possessing 30% or more of the combined voting power of the equity securities of the Company;
|
(iii)
|
during any period of one year (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person
who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii) or (iv) of this “Change in Control” definition) whose election by the Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason
to constitute a majority thereof; or
|
(iv)
|
the approval by shareholders of the Company and consummation of a plan of complete liquidation or dissolution of the Company or a sale of all or substantially all of the Company's assets.
|
SECTION 3 -
|
Administration
|
(A)
|
Authority of Committee. Except as provided by Section 11 hereof, the Plan shall be administered by the Committee, it being understood that the Board retains the right, at its option, to make Awards under the Plan. Subject to the
terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority in its discretion to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards;
(iv) determine the timing, terms, and conditions of any Award; (v) accelerate the time at which all or any part of an Award may be settled or exercised; (vi) determine whether, to what extent, and under what circumstances Awards may be
settled or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited, or suspended, and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vii)
determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards,
|
|
property, and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (viii) interpret and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; (ix) subject to the provisions of Sections 6(B), 7(B) and 15(B) hereof, amend or modify the terms of any Award after grant; (x) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan
subject to the exclusive authority of the Board under Section 15 hereunder to amend, suspend or terminate the Plan.
|
(B)
|
Committee Discretion Binding. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole
discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including any Employer, any Participant, any holder or beneficiary of any Award, any Employee, and any Non-Employee Director.
|
(C)
|
Delegation. Subject to the terms of the Plan, the Board or the Committee may, to the extent permitted by law, delegate to (i) a subcommittee of the Committee, (ii) one or more officers or managers of an Employer or (iii) a
committee of such officers or managers, the authority, subject to such terms and limitations as the Board or the Committee shall determine, to grant Awards to, or to cancel, modify or waive rights with respect to, or to alter, discontinue,
suspend, or terminate, Awards. Notwithstanding the foregoing, the Committee may not delegate any such authority with respect to Participants who are officers or directors of the Company for purposes of Section 16 or are otherwise subject
to such Section.
|
(D)
|
Indemnification. No member of the Board or the Committee or any Employee (each such person a “Covered Person”) shall have any liability to any person (including any grantee) for any action taken or omitted to be taken in the
performance of his or her duties with respect to the Plan or any Award, for a purpose reasonably believed by the Covered Person to be in the interest of the participants and beneficiaries of the Plan, and any such action taken or omitted to
be taken shall be deemed to be for a purpose which is not opposed to the best interests of the Company. Each Covered Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or reasonable
expense (including attorneys’ fees) that may be imposed upon or incurred by such Covered Person in connection with or resulting from any bona fide claim, action, suit or proceeding to which such Covered Person may be a party or in which
such Covered Person may be involved by reason of any action taken or omitted to be taken by him or her under the Plan or any Award Agreement in his or her capacity as a member of the Board or the Committee or as an Employee and against and
from any and all amounts paid by such Covered Person, with the Company’s approval, in settlement thereof, or paid by such Covered Person in satisfaction of any judgment in any such action, suit or proceeding against such Covered Person,
provided that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and, once the Company gives notice of its intent to assume the defense, the Company shall have sole control over
such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to a Covered Person to the extent that a court of competent jurisdiction in a final judgment or other final adjudication, in
either case, not subject to further appeal, determines that the acts or omissions of such Covered Person giving rise to the indemnification claim resulted from such Covered Person’s bad faith, fraud or willful misconduct. The foregoing
right of indemnification shall not be exclusive of any other rights of indemnification to which Covered Persons may be entitled under the Company’s Restated Charter or Bylaws, as a matter of law, or otherwise, or any other power that the
Company may have to indemnify such persons or hold them harmless.
|
SECTION 4 -
|
Shares Available for Awards
|
(A)
|
Shares Available. Subject to adjustment as provided in Section 4(B), the aggregate number of Shares reserved and available for issuance pursuant to Awards granted under the Plan shall be
|
(B)
|
Mandatory Adjustments. The number of Shares covered by each outstanding Award, the number of Shares available for Awards, the number of Shares that may be subject to Awards to any one Participant, and the price per Share covered
by each such outstanding Award shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination or
reclassification of the Shares, and may be proportionately adjusted, as determined in the sole discretion of the Board, for any other increase or decrease in the number of issued Shares effected without receipt of consideration by the
Company or to reflect any distributions to holders of Shares other than regular cash dividends. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award. After any adjustment made pursuant to this paragraph, the number of Shares subject to each
outstanding Award shall be rounded to the nearest whole number.
|
(C)
|
Discretionary Adjustments. Upon the occurrence or in anticipation of any corporate event or transaction involving the Company (including, without limitation, any merger, reorganization, recapitalization, combination or exchange of
shares, or any transaction described in Section 4(B), the Committee may, in its sole discretion, provide (i) that Awards will be settled in cash rather than Stock, (ii) that Awards will become immediately vested and non-forfeitable and
exercisable (in whole or in part) and will expire after a designated period of time to the extent not then exercised, (iii) that Awards will be assumed by another party to a transaction or otherwise be equitably converted or substituted in
connection with such transaction, (iv) that outstanding Awards may be settled by payment in cash or cash equivalents equal to the excess of the fair market value of the underlying Stock, as of a specified date associated with the
transaction (or the per-shares transaction price), over the exercise or base price of the Award, (v) that performance targets and performance periods for Performance Awards will be modified, or (vi) any combination of the foregoing. The
Committee’s determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated. Any discretionary adjustments made pursuant to this Section 4(C) shall be subject to the
provisions of Section 15(B).
|
(D)
|
Substitute Awards. To the extent permitted by applicable law, any Shares issued by the Company as Substitute Awards shall not reduce the Shares available for Awards under the Plan.
|
(E)
|
Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of issued Shares which have been reacquired by the Company.
|
SECTION 5 -
|
Eligibility
|
SECTION 6 -
|
Stock Options
|
(A)
|
Grant. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Options shall be granted, the number of Shares subject to each Award, the exercise price and
the conditions and limitations applicable to the exercise of an Option. A person who has been granted an Option under this Plan may be granted additional Options under the Plan if the Committee shall so determine. Options granted under this
Plan may be
|
|
Incentive Stock Options, Non-Qualified Stock Options or a combination of the foregoing, provided that Incentive Stock Options may be granted only to Employees. Each grant shall specify whether (or the extent to which) the Option is an
Incentive Stock Option or a Non-Qualified Stock Option. Notwithstanding any such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are
exercisable for the first time by a Participant during any calendar year (under all Plans of the Company) exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options.
|
(B)
|
Option Price. The Committee, in its sole discretion, shall establish the Option Price at the time each Option is granted. Except in the case of Substitute Awards, the Option Price of an Option may not be less than 100% of the
Fair Market Value of the Shares with respect to which the Option is granted on the date of grant of the Award (the “Grant Date”). If an Employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of
the Code) more than 10% of the combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation (within the meaning of Section 424(e) of the Code), and an Incentive Stock Option is granted to such
Employee, the Option Price shall be no less than 110% of the Fair Market Value of the Shares on the Grant Date. Notwithstanding the foregoing and except as provided by the provisions of Sections 4(B) and 15(C) hereof, without the prior
approval of shareholders of the Company, the Committee shall not have the power to (i) amend the terms of previously granted Options to reduce, directly or indirectly, the Option Price of such Options, (ii) cancel Options and grant
substitute Options, Stock Appreciation Rights or other Awards with a lower Option Price or Base Price than the cancelled Options, (iii) cancel, or have a Participant surrender, an Option in exchange for other Awards if the current Fair
Market Value of the Shares underlying the Option is lower than the Option Price of the Option, or (iv) cancel, or have a Participant surrender, an Option for value (in cash or otherwise) if the current Fair Market Value of the Shares
underlying the Option is lower than the Option Price of the Option.
|
(C)
|
Term. Subject to the Committee’s authority under Section 3(A) hereof, each Option and all rights and obligations thereunder shall expire on the date determined by the Committee and specified in the Award Agreement. The Committee
shall be under no duty to provide terms of like duration for Options granted under the Plan. Notwithstanding the foregoing, no Option shall be exercisable after the expiration of ten (10) years from
the date such Option was granted; provided, however, that if an Incentive Stock Option is granted to an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Subsidiary or Parent Corporation (within the meaning of Section 424(e) of the Code), the term of such Incentive Stock Option shall be no more than five years from the date of grant.
|
(D)
|
Exercise; Terms and Conditions.
|
(i)
|
Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter. The Committee shall have full and complete
authority to determine whether an Option will be exercisable in full at any time or from time to time during the term of the Option, or to provide for the exercise thereof in such installments, upon the occurrence of such events and at such
times during the term of the Option as the Committee may determine.
|
(ii)
|
The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any relating to the application of federal, state or foreign securities laws or the Code, as it may deem necessary or
advisable.
|
(iii)
|
An Option may be exercised in whole or in part at any time, with respect to whole Shares only, within the period permitted thereunder for the exercise thereof and in accordance with the procedures established by the Company or its
designated third-party administrator.
|
(iv)
|
Payment of the Option Price shall be made in cash or cash equivalents, or, at the discretion of the Committee, (i) by tendering, either by way of actual delivery of Shares or attestation, whole Shares, valued at the Fair Market Value of
such Shares on the date of exercise, together with any applicable withholding taxes, (ii) by a combination of such cash (or cash equivalents) and such Shares or (iii) by such other method of exercise as may be permitted from time to time by
the Committee. Subject to applicable securities laws and at the discretion of the Committee, an Option may also be exercised by (i) delivering a notice of exercise of the Option and simultaneously selling the Shares thereby acquired
pursuant to a brokerage or similar agreement or program or (ii) through a reduction in the number of Shares received through the exercise of the Option. Until the optionee has been issued the Shares subject to such exercise, he or she shall
possess no rights as a shareholder with respect to such Shares and shall not be entitled to any dividend or distribution the record date of which is prior to the date of issuance of such Shares.
|
(v)
|
Notwithstanding anything in this Plan to the contrary, a Participant shall be required to pay to the Company an amount equal to the spread realized in connection with the Participant’s exercise of an Option within six months prior to
such Participant’s termination of employment by resignation in the event that such Participant, within six months following such Participant’s termination of employment by resignation, engages directly or indirectly in any activity
determined by the Committee, in its sole discretion, to be competitive with any activity of the Company or any of its Subsidiaries. This subsection (v) shall be void and of no legal effect upon a Change in Control.
|
(vi)
|
No Option shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the Option.
|
(vii)
|
No Option shall provide for Dividend Equivalents.
|
SECTION 7 -
|
Stock Appreciation Rights
|
(A)
|
Grant. Subject to the provisions of the Plan, Committee may also authorize grants to Participants of Stock Appreciation Rights. A Stock Appreciation Right provides a Participant the right to receive from the Company an amount,
which shall be determined by the Committee and shall be expressed as a percentage (not exceeding 100 percent) of the Spread at the time of the exercise of such right.
|
(B)
|
Base Price. Each grant of a Stock Appreciation Right shall specify in respect of each Stock Appreciation Right a Base Price per Share, which shall be equal to or greater than the Fair Market Value of the Shares on the Grant Date.
Except as provided by the provisions of Sections 4(B) and 15(C) hereof, without the prior approval of shareholders of the Company, the Committee shall not have the power to (i) amend the terms of previously granted Stock Appreciation Rights
to reduce, directly or indirectly, the Base Price of such Stock Appreciation Rights, (ii) cancel Stock Appreciation Rights and grant substitute Stock Appreciation Rights, Options or other Awards with a lower Base Price or Option Price than
the cancelled Stock Appreciation Rights, (iii) cancel, or have a Participant surrender, a Stock Appreciation Right in exchange for other Awards if the current Fair Market Value of the Shares underlying the Stock Appreciation Right is lower
than the Base Price of the Stock Appreciation Right, or (iv) cancel, or have a Participant surrender, a Stock Appreciation Right for value (in cash or otherwise) if the current Fair Market Value of the Shares underlying the Stock
Appreciation Right is lower than the Base Price of the Stock Appreciation Right.
|
(C)
|
Term. No Stock Appreciation Right granted under this Plan may be exercised more than ten (10) years from the Grant Date.
|
(D)
|
Exercise; Terms and Conditions. Any grant of Stock Appreciation Rights under this Plan shall be upon such terms and conditions as the Committee may determine in accordance with the following provisions:
|
(i)
|
Any grant may specify that the amount payable upon the exercise of a Stock Appreciation Right may be paid by the Company in cash, Shares, or any combination thereof and may preclude the right of the Participant to receive and the Company
to issue Shares or other equity securities in lieu of cash;
|
(ii)
|
Any grant may specify that the amount payable upon the exercise of a Stock Appreciation Right shall not exceed a maximum specified by the Committee on the Grant Date;
|
(iii)
|
Any grant may specify (i) a waiting period or periods before Stock Appreciation Rights shall become exercisable and (ii) permissible dates or periods on or during which Stock Appreciation Rights shall be exercisable;
|
(iv)
|
Any grant may specify that a Stock Appreciation Right may be exercised only in the event of a Change in Control of the Company or other similar transaction or event;
|
(v)
|
Each grant shall be evidenced by an agreement executed on behalf of the Company by any officer thereof and delivered to and accepted by the Optionee, which shall describe the subject Stock Appreciation Rights, identify any related
Options, state that the Stock Appreciation Rights are subject to all of the terms and conditions of this Plan and contain such other terms and provisions as the Committee may determine consistent with this Plan;
|
(vi)
|
No Stock Appreciation Right shall provide for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the SAR.
|
(vii)
|
No Stock Appreciation Right shall provide for Dividend Equivalents.
|
(viii)
|
Successive grants of Stock Appreciation Rights may be made to the same Participant regardless of whether any Stock Appreciation Rights previously granted to such Participant remain unexercised. Each grant shall specify the period or
periods of continuous employment of the Participant by the Company or any Subsidiary that are necessary before the Stock Appreciation Rights or installments thereof shall become exercisable, and any grants may provide for the earlier
exercise of such rights in the event of a Change in Control of the Company or other similar transaction or event.
|
SECTION 8 -
|
Restricted Stock and Restricted Stock Units
|
(A)
|
Grant.
|
(i)
|
Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Restricted Stock and Restricted Stock Units shall be granted, the number of shares of Restricted Stock or
the number of Restricted Stock Units to be granted to each Participant, the duration of the period during which, and the conditions under which, the Restricted Stock and Restricted Stock Units may be forfeited to the Company, and the other
terms and conditions of such Awards. The Restricted Stock and Restricted Stock Unit Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time approve, which agreements shall comply with and be
subject to the terms and conditions provided hereunder and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan.
|
(ii)
|
Each Restricted Stock or Restricted Stock Unit Award made under the Plan shall be for such number of Shares as shall be determined by the Committee and set forth in the agreement
|
|
containing the terms of such Restricted Stock or Restricted Stock Unit Award. Such agreement may set forth (i) a period of time during which the grantee must remain in the continuous employment of one or more Employers in order for any
applicable forfeiture and transfer restrictions to lapse and (ii) performance or other conditions the satisfaction of which will result in the lapsing of any applicable forfeiture and transfer restrictions. If the Committee so determines,
the restrictions may lapse during the period in which such time and performance conditions apply (the “Restricted Period”) in installments with respect to specified portions of the Shares covered by the Restricted Stock or Restricted Stock
Unit Award. The Committee may, at its discretion and in accordance with Section 16(A) hereof, waive all or any part of the restrictions applicable to any or all outstanding Restricted Stock and Restricted Stock Unit Awards.
|
(B)
|
Delivery of Shares. The Company shall implement the grant of a Restricted Stock Award by book-entry issuance of Shares to the Participant in an account maintained by the Company at its transfer agent. Unless otherwise determined
by the Committee and provided in the Award Agreement, the grantee shall have all rights of a shareholder with respect to the shares of Restricted Stock, including the right to receive dividends and the right to vote such Shares, provided,
that, except as otherwise determined by the Committee and provided in the Award Agreement, all of the Shares shall be forfeited and all rights of the grantee to such Shares shall terminate, without further obligation on the part of the
Company, unless the grantee remains in the continuous employment of one or more Employers for the entire Restricted Period in relation to which such Shares were granted and unless any other restrictive conditions relating to the Restricted
Stock Award are met. Any dividends (including cash dividends) granted with respect to Restricted Stock shall be subject to the same restrictions that apply to the underlying Shares.
|
(C)
|
Termination of Restrictions. At the end of the Restricted Period and provided that any other restrictive conditions of the Restricted Stock Award are met, or at such earlier time as is determined by the Committee in accordance
with Section 16(A) hereof, all restrictions set forth in the Award Agreement relating to the Restricted Stock Award or in the Plan shall lapse as to the Restricted Shares subject thereto.
|
(D)
|
Payment of Restricted Stock Units. Each Restricted Stock Unit shall have a value equal to the Fair Market Value of a Share. Restricted Stock Units shall be paid in cash, Shares, other securities or other property, as determined in
the sole discretion of the Committee, upon the lapse of the restrictions applicable thereto, or otherwise in accordance with the applicable Award Agreement. Except as otherwise provided in the applicable Award Agreement, Participants shall
not be credited with Dividend Equivalents on any Restricted Stock Units. If Dividend Equivalents are credited, the amount of any such Dividend Equivalents shall equal the amount that would have been payable to the Participant as a
shareholder in respect of a number of Shares equal to the number of Restricted Stock Units then credited to him. Any such Dividend Equivalents shall be credited to the Participant’s account as of the date on which such dividend would have
been payable and shall be converted into additional Restricted Stock Units based upon the Fair Market Value of a Share on the date of such crediting. Except as otherwise determined by the Committee and provided in the Award Agreement, all
Restricted Stock Units and all rights of the grantee to such Restricted Stock Units shall terminate, without further obligation on the part of the Company, unless the grantee remains in continuous employment of one or more Employers for the
entire Restricted Period in relation to which such Restricted Stock Units were granted and unless any other restrictive conditions relating to the Restricted Stock Unit Award are met. Any Dividend Equivalents granted with respect to
Restricted Stock Units shall be subject to the same restrictions that apply to the underlying Shares.
|
SECTION 9 -
|
Deferred Shares and Deferred Stock Units
|
(A)
|
Grant.
|
(i)
|
Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Deferred Shares or Deferred Stock Units shall be
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|
granted, the number of shares of Deferred Shares or Deferred Stock Units to be granted to each Participant, the duration of the period during which, and the conditions under which, the Deferred Shares or Deferred Stock Units may be
forfeited to the Company, and the other terms and conditions of such Awards. The Deferred Shares and Deferred Stock Unit Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time approve, which
agreements shall comply with and be subject to the terms and conditions provided hereunder and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan.
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(ii)
|
Each Deferred Share or Deferred Stock Unit Award made under the Plan shall be for such number of Shares as shall be determined by the Committee and set forth in the agreement containing the terms of such Deferred Share or Deferred Stock
Unit Award. Such agreement may set forth (i) a period of time during which the grantee must remain in the continuous employment of one or more Employers in order for the forfeiture and transfer restrictions to lapse and (ii) performance or
other conditions the satisfaction of which will result in the lapsing of any applicable forfeiture and transfer restrictions. If the Committee so determines, the restrictions may lapse during the period in which such time and performance
conditions apply (the “Deferral Period”) in installments with respect to specified portions of the Shares covered by the Deferred Share or Deferred Stock Unit Award. The Committee may, at its discretion and in accordance with Section 16(A)
hereof, waive all or any part of the restrictions applicable to any or all outstanding Deferred Shares or Deferred Stock Unit Awards.
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(iii)
|
Each grant shall provide that the Deferral Period shall be fixed by the Committee on the Grant Date, and any grant may provide for the earlier termination of such period in the event of a Change in Control of the Company or other similar
transaction or event.
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(iv)
|
During the Deferral Period, the Participant shall not have any rights of ownership in the Deferred Shares and shall not have any right to vote such Shares, but the Committee may on or after the Grant Date authorize the payment of
Dividend Equivalents on such Shares in cash or additional Shares. Any Dividend Equivalents granted with respect to Deferred Shares shall be subject to the same restrictions that apply to the underlying Shares.
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(v)
|
Any grant or the Vesting of Deferred Share or Deferred Stock Units Awards may be further conditioned upon the attainment of performance goals established by the Committee in accordance with the applicable provisions of Section 10 of the
Plan regarding Performance Awards. Except as otherwise determined by the Committee, all Deferred Shares or Deferred Stock Units and all rights of the Participant to such Deferred Shares or Deferred Stock Units shall terminate, without
further obligation on the part of the Company, unless the Participant remains in continuous employment of one or more Employers for the entire Deferral Period in relation to which such Deferred Shares or Deferred Stock Units were granted
and unless any other restrictive conditions relating to the Deferred Shares or Deferred Stock Units are met.
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(B)
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Payment of Deferred Stock Units. Each Deferred Stock Unit shall have a value equal to the Fair Market Value of a Share. Deferred Stock Units shall be paid in Shares at the end of the designated Deferral Period and the lapse of the
restrictions applicable thereto, or otherwise in accordance with the applicable Award Agreement. Except as otherwise provided in the applicable Award Agreement, Participants shall not be credited with Dividend Equivalents on any Deferred
Stock Units. If Dividend Equivalents are credited, the amount of any such Dividend Equivalents shall equal the amount that would have been payable to the Participant as a shareholder in respect of a number of Shares equal to the number of
Deferred Stock Units then credited to the Participant. Any such Dividend Equivalents shall be credited to the Participant’s account as of the date on which such dividend would have been payable and shall be converted into additional
Deferred Stock Units based upon the Fair Market Value of a Share on the date of such crediting. Any Dividend Equivalents granted with
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respect to Deferred Stock Units shall be subject to the same restrictions that apply to the underlying Shares.
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SECTION 10 -
|
Performance Awards
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(A)
|
Grant. The Committee shall have sole and complete authority to determine the Participants who shall receive a Performance Award, which shall consist of a right that is (i) denominated in cash or Shares, (ii) valued, as determined
by the Committee, in accordance with the achievement of such performance goals during such performance periods as the Committee shall establish, and (iii) payable at such time and in such form as the Committee shall determine.
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(B)
|
Terms and Conditions. Subject to the terms of the Plan, the Committee shall determine the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award
and the amount and kind of any payment or transfer to be made pursuant to any Performance Award, and may change specific provisions of the Performance Award, provided, however, that such change may not adversely affect existing Performance
Awards made within a performance period commencing prior to implementation of the change. Performance goals for Performance Awards may be based on any performance criteria selected by the Committee, including but not limited to any of the
following:
|
(i)
|
Financial Return Metrics:
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(a)
|
Return on equity
|
(b)
|
Return on capital
|
(c)
|
Return on assets
|
(d)
|
Return on investment
|
(e)
|
Return on invested capital
|
(ii)
|
Earnings Metrics:
|
(a)
|
Earnings per share (including variants such as diluted earnings per share)
|
(b)
|
Total earnings
|
(c)
|
Earnings growth
|
(d)
|
Earnings before taxes
|
(e)
|
Earnings before interest and taxes
|
(f)
|
Earnings before interest, taxes, depreciation and amortization
|
(g)
|
Operating profit
|
(h)
|
Net earnings
|
(iii)
|
Sales Metrics:
|
(i)
|
Sales
|
(j)
|
Sales growth
|
(k)
|
Comparable store sales
|
(l)
|
Sales per retail square foot
|
(m)
|
Average ticket sales
|
(n)
|
Sales per employee
|
(o)
|
Sales per operating store
|
(iv)
|
Stock Price Metrics:
|
(p)
|
Increase in the fair market value of the shares
|
(q)
|
Share price (including but not limited to growth measures and total shareholder return)
|
(v)
|
Cash Flow Metrics:
|
(r)
|
Cash flow (including but not limited to operating cash flow and free cash flow)
|
(s)
|
Cash flow return on investment (which equals net cash flow divided by total capital)
|
(vi)
|
Balance Sheet Metrics:
|
(t)
|
Inventory
|
(u)
|
Inventory turns
|
(v)
|
Internal rate of return
|
(vii)
|
Other Strategic Metrics:
|
(w)
|
Gross margin
|
(x)
|
Gross margin return on investment
|
(y)
|
Economic value added (EVA)
|
(z)
|
Operating cost management targets
|
(aa)
|
Customer satisfaction surveys
|
(bb)
|
Attrition improvements
|
(cc)
|
Safety record goals
|
(dd)
|
Timely and successful completion of key corporate projects
|
(ee)
|
Productivity improvements
|
(C)
|
Payment of Performance Awards. Performance Awards may be paid in a lump sum or in installments following the close of the performance period or, in accordance with the procedures established by the Committee, on a deferred basis.
If a Participant ceases to be employed by any Employer during a performance period because of death, Disability, Retirement or other circumstance in which the Committee in its discretion finds that a waiver would be appropriate, that
Participant, as determined by the Committee, may be entitled to a payment of a Performance Award, or a portion thereof, at the end of the performance period; provided, however, that the Committee may provide for an earlier payment in
settlement of such Performance Award in such amount and under such terms and conditions as the Committee deems appropriate or desirable. Unless otherwise determined by the Committee, Termination of Employment prior to the end of any
performance period will result in the forfeiture of the Performance Award, and no payments will be made.
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SECTION 11 -
|
Non-Employee Director Awards
|
SECTION 12 -
|
Minimum Vesting Requirements
|
SECTION 13 -
|
Termination of Employment
|
SECTION 14 -
|
Change in Control
|
(A)
|
Awards Assumed or Substituted by Surviving Entity. With respect to Awards assumed by the surviving entity in a Change in Control or otherwise equitably converted or substituted in connection with a Change in Control: if within two
years after the effective date of the Change in Control, a Participant has a Termination of Employment without Cause, then (i) all of that Participant’s outstanding Options, Stock Appreciation Rights and other Awards in the nature of rights
that may be exercised shall become fully exercisable, (ii) all time-based vesting restrictions on his or her outstanding Awards shall lapse, and (iii) the payout level under all of that Participant’s Performance Awards that were outstanding
immediately prior to effective time of the Change in Control shall be determined and deemed to have been earned as of the date of termination based upon (A) an assumed achievement of all relevant performance goals at the “target” level if
the date of termination occurs during the first half of the applicable performance period, or (B) the actual level of achievement of all relevant performance goals against target (measured as of the end of the calendar quarter immediately
preceding the date of termination), if the date of termination occurs during the second half of the applicable performance period, and, in either such case, there shall be a pro rata payout to such Participant within sixty (60) days
following the date of Termination of Employment, based upon the length of time within the performance period that has elapsed prior to the date of Termination of Employment. Any Awards shall thereafter continue or lapse in accordance with
the other provisions of the Plan and the Award Agreement. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be
Non-Qualified Stock Options.
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(B)
|
Awards not Assumed or Substituted by Surviving Entity. Upon the occurrence of a Change in Control, and except with respect to any Awards assumed by the Surviving Entity or otherwise equitably converted or substituted in connection
with the Change in Control in a manner approved by the Committee or the Board: (i) outstanding Options, Stock Appreciation Rights, and other Awards in the nature of rights that may be exercised shall become fully exercisable, (ii)
time-based vesting restrictions on outstanding Awards shall lapse, and (iii) the target payout opportunities attainable under outstanding performance-based Awards shall be deemed to have been fully earned as of the effective date of the
Change in Control based upon (A) an assumed achievement of all relevant performance goals at the “target” level if the Change in Control occurs during the first half of the applicable performance period, or (B) the actual level of
achievement of all relevant performance goals against target measured as of the date of the Change in Control, if the Change in Control occurs during the second half of the applicable performance period, and, in either such case, there
shall be a pro rata payout to Participants within sixty (60) days following the Change in Control, based upon the length of time within the performance period that has elapsed prior to the Change in Control. Any Awards shall thereafter
continue or lapse in accordance with the other provisions of the Plan and the Award Agreement. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Code Section 422(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
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SECTION 15 -
|
Amendment, Suspension and Termination
|
(A)
|
Termination, Suspension or Amendment of the Plan. The Board may amend, alter, modify, suspend, discontinue, or terminate the Plan or any portion thereof at any time, subject to all applicable laws and to the rules and regulations
of the SEC and the New York Stock Exchange (or any successor organizations) respecting shareholder approval or other requirements; provided that, without shareholder approval the Board may not (i) increase the maximum number of Shares
available for issuance under the Plan (other than increases due to changes in capitalization referred to in Section 4(B) hereof), or (ii) change the class of Employees eligible for Incentive Stock Options. No such amendment, alteration,
modification, suspension, discontinuation or termination shall materially and adversely affect any right acquired by any Participant or beneficiary of a Participant under the terms of an Award granted before the date of such amendment,
alteration, modification, suspension, discontinuation or termination, unless such Participant or beneficiary shall consent.
|
(B)
|
Termination, Suspension or Amendment of Awards. Subject to the restrictions of Section 6(B) hereof, the Committee may waive any conditions or rights under, amend any terms of, or modify, alter, suspend, discontinue, cancel or
terminate, any Award theretofore granted, prospectively or retroactively; provided that any such waiver, amendment, modification, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect
the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder, or beneficiary; provided, however, that it shall be
conclusively presumed that any adjustment for changes in capitalization as provided in Section 4 hereof does not materially and adversely affect any such rights.
|
(C)
|
Adjustments of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of
unusual or nonrecurring events (including, without limitation, the events described in Section 4(B) hereof) affecting the Company, any Subsidiary, or the financial statements of the Company or any Subsidiary, or of changes in applicable
laws, regulations, or accounting principles, whenever the Committee is required to make such adjustments pursuant to Section 4(B) hereof or whenever the Board, in its sole discretion, determines that such adjustments are appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.
|
SECTION 16 -
|
General Provisions
|
(A)
|
Section 409A Compliance. Each Award is intended either to be exempt from the requirements of Code Section 409A and the regulations and other binding guidance issued thereunder (the “409A Guidance”) or to satisfy the requirements
of Code Section 409A and the 409A Guidance (in form and operation) so that compensation deferred under such Award (and applicable earnings) shall not be included in income under Code Section 409A, and the Plan will be construed to that
effect. If an Award is subject to Code Section 409A and the 409A Guidance, the Award Agreement will incorporate and satisfy the written documentation requirement of Code Section 409A and the 409A Guidance either directly or by reference to
other documents and no termination, amendment, modification of or adjustment under the Plan or such Award shall cause the Award to fail to satisfy Code Section 409A and the 409A Guidance. Nevertheless, the tax treatment of the benefits
provided under the Plan or any Award is not warranted or guaranteed. Neither the Company, its Subsidiaries nor their respective directors, officers, employees or advisers (other than in his or her capacity as a Participant) shall be held
liable for any taxes, interest, penalties or other monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any Award. Notwithstanding anything in the Plan or in any Award Agreement to the contrary, if any
amount or benefit that would constitute non-exempt deferred compensation would otherwise be payable or distributable under this Plan or any Award Agreement by reason of a Participant’s separation from service during a period in which the
Participant is a “Specified Employee” (as defined in Code Section 409A), then, subject to any permissible acceleration of payment by the Committee under Treas. Reg. Section 1.409A-3(j)(4)(ii)
|
(B)
|
Dividends and Dividend Equivalents. In the sole and complete discretion of the Committee, an Award (other than an Option or a Stock Appreciation Right) may provide the Participant with dividends or Dividend Equivalents, payable in
cash, Shares, other securities or other property on a current or deferred basis. All dividends or Dividend Equivalents that are not paid currently may, at the Committee’s discretion, accrue interest, be reinvested into additional Shares,
or, in the case of dividends or Dividend Equivalents credited in connection with Performance Awards, be credited as additional Performance Awards, and such dividends and Dividend Equivalents shall be paid to the Participant if and when, and
to the extent that, payment is made pursuant to such Award.
|
(C)
|
No Rights to Awards. No Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Employees or Non‑Employee Directors or holders or beneficiaries of Awards. The terms and
conditions of Awards need not be the same with respect to each recipient.
|
(D)
|
Book-Entry. As soon as practicable after the Grant Date of an Award, the Company shall cause its transfer agent to maintain a book entry account in the Participant’s name reflecting the Award, which shall be subject to applicable
stop transfer instructions.
|
(E)
|
Withholding. A Participant may be required to pay to an Employer, and each Employer shall have the right and is hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan
or from any compensation or other amount owing to a Participant, the amount (in cash, Shares, other securities, other Awards or other property) required by law or regulation to be withheld to satisfy federal, state, and local taxes, foreign
or domestic, with respect to an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of
such taxes. The Committee may provide for additional cash payments to holders of Awards to defray or offset any tax arising from the grant, Vesting, exercise, or payment of any Award. Unless otherwise determined by the Committee at the time
the Award is granted or thereafter, any such withholding requirement may be satisfied, in whole or in part, by withholding from the Award Shares having a Fair Market Value on the date of withholding equal to the amount required to be
withheld in accordance with applicable tax requirements, all in accordance with such procedures as the Committee approves (which procedures may permit withholding up to the maximum individual statutory rate in the applicable jurisdiction as
may be permitted under then-current accounting principles to qualify for equity classification). All such elections shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
|
(F)
|
Award Agreements Each Award hereunder shall be evidenced by an Award Agreement that shall specify the terms and conditions of the Award and any rules applicable thereto. An Award shall be effective only upon delivery to a
Participant, either electronically or by paper means, of an Award Agreement. In the event of a conflict between the terms of the Plan and any Award Agreement, the terms of the Plan shall prevail.
|
(G)
|
No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Subsidiary from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the
grant of Options, Restricted Stock, Shares and other types of Awards provided for hereunder (subject to shareholder approval as such approval is required), and such arrangements may be either generally applicable or applicable only in
specific cases.
|
(H)
|
No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of any Employer. Further, an Employer may at any time dismiss a Participant from employment, free
from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.
|
(I)
|
No Rights as Shareholder. Subject to the provisions of the applicable Award, no Participant or holder or beneficiary of any Award shall have any rights as a shareholder with respect to any Shares to be distributed under the Plan
until such Shares are issued to such Participant, holder or beneficiary and such Participant, holder or beneficiary shall not be entitled to any dividend or distribution the record date of which is prior to the date of such issuance.
|
(J)
|
Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Maryland without giving
effect to the conflict of law principles thereof.
|
(K)
|
Severability. If any provision of the Plan or any Award is, or becomes, or is deemed to be, invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any
law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
|
(L)
|
Other Laws. The Committee may refuse to issue or transfer any Shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance or transfer of such Shares or such other consideration
might violate any applicable law or regulation (including applicable non-U.S. laws or regulations) or entitle the Company to recover the same under Section 16(b) of the Exchange Act, and any payment tendered to the Company by a Participant,
other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder, or beneficiary. Without limiting the generality of the foregoing, no Award granted hereunder shall be
construed as an offer to sell securities of the Company, and no such offer shall be outstanding, unless and until the Committee in its sole discretion has determined that any such offer, if made, would be in compliance with all applicable
requirements of the U.S. federal or non-U.S. securities laws and any other laws to which such offer, if made, would be subject.
|
(M)
|
No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Subsidiary and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from the Company or any Subsidiary pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any
Subsidiary.
|
(N)
|
No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of
any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.
|
(O)
|
Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
|
(P)
|
Binding Effect. The terms of the Plan shall be binding upon the Company and its successors and assigns and the Participants and their legal representatives and shall bind any successor of the Company (whether direct or indirect,
by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Company would be obligated under this Plan if no
|
(Q)
|
No Third-Party Beneficiaries. Except as expressly provided herein or therein, neither the Plan nor any Award Agreement shall confer on any person other than the Company and the grantee of any Award any rights or remedies hereunder
or thereunder. The exculpation and indemnification provisions of Section 3(D) shall inure to the benefit of a Covered Person’s estate and beneficiaries and legatees.
|
(R)
|
Award Transfer Restrictions. Except as otherwise provided in the applicable Award Agreement for Awards other than Incentive Stock Options, no Award may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution. No transfer of an Award by a grantee by will or by laws of descent and distribution shall be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and an authenticated copy of the will and such other evidence as the Committee may deem necessary to establish the validity of the transfer. Notwithstanding the foregoing, the Committee may in its
discretion permit the transfer of Non-Qualified Stock Options by a Participant to or for the benefit of the Participant’s Immediate Family, subject to such limits as the Committee may establish, and the transferee shall remain subject to
all the terms and conditions applicable to the Non-Qualified Stock Options prior to such transfer. The foregoing transfer shall apply to the right to consent to amendments to any Award Agreement evidencing such Option and, in the discretion
of the Committee, shall also apply to the right to transfer ancillary rights associated with such Option. For purposes of this paragraph, the term “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father -in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant’s household
(other than a tenant or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these
persons (or the Participant) own more than 50% of the voting interests.
|
(S)
|
Incapacity. Options and SARs shall be exercisable during a Participant’s lifetime only by the Participant; provided, however, that in the event a Participant is incapacitated and unable to exercise his or her Options or SARs, such
Awards may be exercised by the Participant’s legal guardian, legal representative or other representative if the Committee deems such representative appropriate based on applicable facts and circumstances. The determination of incapacity
of a Participant and the determination of an incapacitated Participant’s appropriate representative shall be made by the Committee in its sole discretion.
|
(T)
|
Recoupment Policy. Awards under the Plan shall be subject to any compensation recoupment policy that the Company may adopt from time to time that is applicable by its terms to the Participant.
|
SECTION 17 -
|
Term of the Plan
|
(A)
|
Effective Date. The Plan shall be effective as of the date it has been approved by the Company’s shareholders (the “Effective Date”).
|
(B)
|
Expiration Date. No new Awards shall be granted under the Plan after the tenth (10th) anniversary of the Effective Date. Unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award granted
hereunder may, and the authority of the Board or the Committee to amend, alter, modify, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under any such Award shall, continue after the authority
for grant of new Awards hereunder has been exhausted.
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