Form of Restricted Stock Unit Agreement for restricted stock units granted to executive officers pursuant to the 2015 Equity Incentive Plan

 

THIS RESTRICTED STOCK UNIT AGREEMENT (the “Agreement”), dated as of ________________, is between CULP, INC., a North Carolina corporation (the “Corporation”), and_________________ (“Recipient”).

 

 

The Corporation desires to grant to Recipient Restricted Stock Units (the “Units”) pursuant to the Culp, Inc. 2015 Equity Incentive Plan (the “Plan”).  Capitalized terms used but not defined in this Agreement shall have the meanings given to them in the Plan.

 

 

NOW, THEREFORE, the parties hereby agree as follows:

 

Section 1. Grant of Units.  The Corporation hereby grants to Recipient ______ Units, ______ of which shall vest in accordance with Section 2(a) herein (the “Time-Based Units”) upon a final determination by the Compensation Committee (the “Committee”) of the satisfaction of the vesting conditions set forth herein and the number of Time-Based Units that have vested in connection therewith; and ______ of which shall vest in accordance with Section 2(b) herein (the “Performance-Based Units”) upon a final determination by the Committee of the satisfaction of the vesting conditions set forth herein and the number of Performance-Based Units that have vested in connection therewith.  Each Time-Based Unit shall entitle Recipient to receive, upon vesting thereof in accordance with this Agreement and the Plan, one (1) share of common stock, par value $0.05 per share, of the Corporation (“Common Stock”).  Each Performance-Based Unit shall entitle Recipient to receive, upon vesting thereof in accordance with this Agreement and the Plan, up to ______ shares of Common Stock.  Except as permitted by the Plan, the Units may not be assigned, pledged, hypothecated or transferred in any manner.  Recipient shall not have, with respect to any Units, any rights of a shareholder of the Corporation, including without limitation any right to vote as a shareholder of the Corporation or any right to receive distributions from the Corporation in respect of the Units.

 

Section 2. Vesting.

 

On _______________, 20__        ___________ shares of Common Stock

 

 

For Cumulative Operating Income amounts that are between the levels shown above, a pro rata number of shares will be awarded, calculated on a straight-line basis.

 

[The number of Performance-Based Units vested and shares awarded shall further be subject to the TSR moderator provisions contained in this paragraph.  The number of shares to be awarded as determined above shall be adjusted as follows:  (1)  if the Total Shareholder Return of the Corporation’s Common Stock during the Performance Period is, when compared to the Total Shareholder Returns of each company in the Peer Group Companies during the same period, within the top __% of the Total Shareholder Returns for the Peer Group Companies, the number of shares to be awarded shall be increased by __%; provided, however, that in no event will the provisions of this paragraph result in the issuance of more than ______ shares per Performance-Based Unit; (2) if the Total Shareholder Return of the Corporation’s Common Stock during the Performance Period is, when compared to the Total Shareholder Returns of each company in the Peer Group Companies during the same period, within the bottom __% of the Total Shareholder Returns for the Peer Group Companies, the number of shares to be awarded shall be decreased by ___%; and (3) if the Total Shareholder Return of the Corporation’s Common Stock during the Performance Period is, when compared to the Total Shareholder Returns of each company in the Peer Group Companies during the same period, between the __ and __ percentile of the Total Shareholder Returns for the Peer Group Companies, there shall be no adjustment to the number of shares to be awarded.]¹

 

¹ Applies only to awards for Named Executive Officers (NEOs).

 

(iii) Recipient is employed by the Corporation or an affiliate thereof at the time a Change of Control occurs, and at any time during the three-year period following such Change of Control (provided that the Units granted hereunder and related shares have not otherwise vested),

 

 

Section 3. Definitions.  For purposes of this Agreement, the following terms shall have the meanings indicated below:

 

“Cause” shall mean (i) the commission by Recipient of a felony (or crime involving moral turpitude); (ii) theft, conversion, embezzlement or misappropriation by Recipient of funds or other assets of the Corporation or its Subsidiaries or any other act of fraud with respect to the Corporation or its Subsidiaries (including without limitation the acceptance of bribes or kickbacks or other acts of self-dealing); (iii) intentional, grossly negligent or unlawful misconduct by Recipient that causes significant harm to the Corporation or its Subsidiaries; or (iv) repeated instances of intoxication with alcohol or drugs while conducting business during regular business hours.

 

“Change of Control” shall have the meaning given to such term in the Plan.  In addition, for an award that vests according to Cumulative Operating Income of a Division, “Change of Control” shall be deemed to have occurred upon consummation of a sale of all or substantially all of the assets of such Division by the Corporation to an unaffiliated third party.

 

“Cumulative Operating Income” shall mean the total Operating Income of the Corporation, excluding extraordinary and non-recurring items including restructuring and related charges, goodwill or fixed asset impairment charges, prepayment fees on debt, other extraordinary charges or credits, and the effects of acquisitions, for the [three] fiscal years beginning ____________ and ending ____________ (the “Performance Period”).

 

“Disability” shall have the meaning given to such term in the primary disability benefit plan of the Corporation in which Recipient participates.  In the absence of any such plan, “Disability” shall mean any physical or mental impairment that renders Recipient unable to perform the essential functions of Recipient’s job with the Corporation and its Subsidiaries for a period of at least 120 days, either with or without reasonable accommodation.  At the Corporation’s request, Recipient shall submit to an examination by a duly licensed physician who is mutually acceptable to the Corporation and Recipient for the purpose of ascertaining the existence of a Disability, and shall authorize the physician to release the results of Recipient’s examination to the Corporation.

 

“Good Reason” shall mean, without Employee’s express written consent, the existence of any of the following conditions unless such conditions are fully corrected within thirty days after Employee notifies the Corporation of the existence of such conditions as hereinafter provided:

Employee shall notify the Corporation that he/she believes that one or more of the conditions described above exists, and of his/her intention to terminate employment for Good Reason as a result thereof, within sixty days after the time that he/she gains knowledge of such conditions.  Employee shall not deliver a notice of termination of employment for Good Reason until thirty days after he/she delivers the notice described in the preceding sentence, and Employee may do so only if the conditions described in such notice have not been fully corrected by the Corporation.

 

 

“Performance Period” shall mean the period over which Cumulative Operating Income is measured, as set forth in the definition of Cumulative Operating Income above.

 

[“Peer Group Companies” shall mean the list of peer companies approved and used by the Committee to analyze the Corporation’s pay practices and compensation levels, as in effect as of the date of the Committee’s approval of the grant of Units set forth herein and identified in Exhibit A attached hereto; provided, however, that if any company identified on Exhibit A is no longer used by the Committee as a peer company as of the last day of the Performance Period because such company is no longer a public company at such time, then such company shall be excluded from the Peer Group Companies for purposes of this Agreement.]²

 

[“Total Shareholder Return” (TSR) shall mean the total value at the end of a specified period of a hypothetical $100.00 investment, made at the beginning of the specified period, in a stock or index, including increases in trading value and all dividends paid during the specified period of time.]³

² Applies only to awards for NEOs.

³ Applies only to awards for NEOs.

 

Section 4. Settlement.

 

Section 5. Forfeiture.  All Units that do not vest pursuant to Section 2 shall automatically be cancelled and forfeited by Recipient effective as of the earlier to occur of (a) with respect to the Performance-Based Units, the first day after the end of the Performance Period (to the extent that Cumulative Operating Income for the Corporation is not sufficient to cause such Performance-Based Units to vest pursuant to the terms of this Agreement), (b) the termination by Recipient of his/her employment with the Corporation or its Subsidiaries for any reason or (c) the termination by the Corporation of Recipient’s employment with the Corporation or its Subsidiaries for Cause (each such event being referred to herein as a “Forfeiture Event”).  Upon the occurrence of a Forfeiture Event, all unvested Units shall automatically, without further action by the Corporation or Recipient, be cancelled and forfeited.

 

Section 6. Tax Matters.

 

Section 7. Clawback.  If the Corporation’s reported financial or operating results become subject to a material negative restatement, the Committee may require the Recipient to pay to the Corporation an amount corresponding to each award to the Recipient under this Agreement, or otherwise return such Units or Common Stock, that the Committee determines would not have been vested or paid if the Corporation’s results as originally published had been equal to the Corporation’s results as subsequently restated; provided that any requirement or claim under this Section must be made, if at all, within five years after the date the amount claimed was originally vested or paid, whichever is later.

 

In the alternative, the Committee may require Recipient to repay or return compensation awarded hereunder pursuant to such rules as may be adopted from time to time pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, to the extent applicable.  By acceptance of any award or Units hereunder, Recipient expressly acknowledges and agrees that any and all Units or Common Stock, as well as the equivalent cash value thereof with respect to any and all such Units or Common Stock, that have become vested, exercised, free of restriction or otherwise released to and/or monetized by or for the benefit of the Recipient or any transferee or assignee thereof (collectively, the “Award-Equivalent Value”), are and will be fully subject to the terms of any policy regarding repayment, recoupment or clawback of compensation now or hereafter adopted by the Corporation in response to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, rulemaking of the Securities and Exchange Commission or otherwise.  Recipient acknowledges and agrees that any such policy will apply to any and all Units or Common Stock, and Award-Equivalent Value in accordance with its terms, whether retroactively or prospectively, and agrees to cooperate fully with the Corporation to facilitate the recovery of any Units or Common Stock and/or Award-Equivalent Value that the Committee determines in its sole discretion is required to be recovered pursuant to the terms of such policy.

 

The obligations of Recipient to make payments or return Common Stock under this Section are independent of any involvement by such Recipient in events that led to the restatement.  The provisions of this Section are in addition to, not in lieu of, any remedies that the Corporation may have against any persons whose misconduct caused or contributed to a need to restate the Corporation’s reported results.

 

Section 8. Miscellaneous.

 

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above.

	CULP, INC.,
	a North Carolina corporation
	By:
		Name:
		Title:
	RECIPIENT

 

 

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