<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
LADD FURNITURE, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
<TABLE>
<S> <C>
Payment of filing fee (Check the appropriate box): $125.00 FILING FEE PAID WITH FILING OF PRELIMINARY PROXY
MATERIALS
</TABLE>
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act rule 0-11:
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE>
LADD
LADD Furniture, Inc.
One Plaza Center, Box HP-3
High Point, North Carolina 27261-1500
(919) 889-0333
April 4, 1994
Dear Shareholder:
The Board of Directors cordially invites you to attend LADD's Annual
Meeting of Shareholders to be held on Thursday, April 28, 1994, in High Point,
North Carolina. In the following pages, you will find information about the
meeting plus a Proxy Statement.
During the business session, we will review LADD's past year and look at
our plans and prospects for the future. Shareholders will also have the
opportunity to discuss their company with the directors and officers of LADD.
If you cannot be with us in person, please be sure to vote your shares by
proxy. Just mark, sign and date the enclosed proxy card and return it in the
postage-paid envelope. Your prompt return of the card will help LADD avoid
additional solicitation costs. In person or by proxy, your vote is important.
I hope you can join us at the Annual Meeting.
Sincerely,
(Signature of Richard R. Allen)
Richard R. Allen
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Lea Industries (Bullet) American Drew (Bullet) Daystrom (Bullet) Clayton
Marcus (Bullet) Barclay (Bullet) American of Martinsville
Design Horizons (Bullet) Brown Jordan (Bullet) Pennsylvania
House (Bullet) Fournier (Bullet) Pilliod
LADD Furniture, Inc. companies
<PAGE>
LADD Furniture, Inc.
NOTICE OF 1994 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF
LADD FURNITURE, INC.
The annual meeting of the shareholders of LADD Furniture, Inc. will be held
at the Radisson Hotel, 135 S. Main Street, High Point, North Carolina, on April
28, 1994, at 10:00 a.m., for the purpose of considering and acting upon the
following:
1. The election of eight directors;
2. Approval of the LADD Furniture, Inc. 1994 Incentive Stock Option Plan;
3. Ratification of the appointment of KPMG Peat Marwick as independent
auditors for the 1994 fiscal year; and
4. All other business as may properly come before the meeting.
Only shareholders of record as of the close of business on March 4, 1994,
will be entitled to notice of, and to vote at, this meeting or at any
adjournment thereof. A copy of the Company's Annual Report for the fiscal year
ended January 1, 1994, is enclosed. It is not to be considered part of the proxy
soliciting material. Shareholders are requested to date, sign and return the
enclosed proxy. An envelope is provided requiring no postage for mailing in the
United States. Your prompt response will be appreciated.
WILLIAM S. CREEKMUIR
SECRETARY
April 4, 1994
LADD Furniture, Inc.
One Plaza Center, Box HP-3
High Point, North Carolina 27261-1500
<PAGE>
LADD Furniture, Inc.
One Plaza Center, Box HP-3
High Point, North Carolina 27261-1500
PROXY STATEMENT
GENERAL
This Proxy Statement and form of proxy (the "Proxy") is solicited by and on
behalf of the Board of Directors of LADD Furniture, Inc. (the "Company") for use
at the 1994 Annual Meeting of Shareholders to be held at the Radisson Hotel, 135
S. Main Street, High Point, North Carolina, on April 28, 1994, at 10:00 a.m. and
at any subsequent time which may be made necessary by its adjournment. This
Proxy Statement and Proxy were mailed to shareholders on or about April 4, 1994.
Only shareholders of record at the close of business on March 4, 1994, will
be entitled to notice of, and to vote at the meeting. There were 23,082,996
shares of common stock outstanding on March 4, 1994.
If the accompanying Proxy is properly signed and returned, the shares
represented thereby will be voted. Where a choice is specified on any Proxy as
to the vote on any matter to come before the meeting, the Proxy will be voted in
accordance with such specification. If no choice is specified in a Proxy that is
properly executed and returned, the Proxy will be voted FOR the nominees for
directors named herein and FOR Items 2 and 3 of the accompanying Notice. Any
shareholder giving the solicited Proxy may revoke it at any time before it is
exercised, and any shareholder who has executed a Proxy and attends the meeting
may elect to vote in person rather than by proxy. The Proxy may be revoked by
the shareholder filing with the Secretary of the Company either a written
instrument of revocation or a duly executed proxy bearing a later date.
VOTING SECURITIES
The laws of North Carolina under which the Company is incorporated provide
that each shareholder present or represented and entitled to vote on a matter at
the meeting or any adjournment thereof, including with respect to the election
of directors, will be entitled to one vote on such matter for each share held by
him at the close of business on the record date. Other than the election of
directors, which requires a plurality of the votes cast, each matter to be
submitted to the shareholders requires the affirmative vote of a majority of the
votes cast at the meeting. For purposes of determining the numbers of votes cast
with respect to any voting matter (except with respect to the vote on Item 2,
approval of the 1994 Incentive Stock Option Plan), only those cast "for" or
"against" are included. Abstentions and broker non-votes are counted only for
purposes of determining whether a quorum is present at the meeting, except with
respect to the vote on Item 2, approval of the 1994 Incentive Stock Option Plan,
as to which abstentions are counted as a vote "against."
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth in the table below are all persons known by management to own
beneficially five percent or more of the Company's outstanding common stock as
of March 4, 1994. The persons have sole voting and investment power except as
noted:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING SHARES
<S> <C> <C>
Richard R. Allen
ONE PLAZA CENTER, BOX HP-3
HIGH POINT, NC 27261 2,555,117(1) 11.1%
Brinson Partners, Inc.
THREE FIRST NATIONAL PLAZA
CHICAGO, IL 60602 2,148,300(2) 9.3%
The Equitable Life Assurance
Society of the United States
787 SEVENTH AVENUE
NEW YORK, NEW YORK 10019 1,574,000(3) 6.8%
FMR Corp.
82 DEVONSHIRE STREET
BOSTON, MASS. 02109 2,986,700(4) 12.9%
</TABLE>
(1) Includes currently exercisable options as to 21,287 shares and 23,698 shares
of restricted stock. Does not include 40,000 shares owned by Mr. Allen's
wife and 28,664 shares held by Mr. Allen's wife as custodian or trustee for
their children, as to such shares Mr. Allen disclaims beneficial ownership.
(2) Includes 496,600 shares owned by Brinson Trust Company, a wholly-owned
subsidiary of Brinson Partners, Inc.
(3) Includes 2,000 shares owned with shared dispositive power.
(4) Includes 2,413,700 shares owned by various funds as to which Fidelity
Management & Research Company ("Fidelity"), a wholly-owned subsidiary of FMR
Corp., acts as investment advisor. As to these shares, Fidelity carries out
the voting of the shares under written guidelines established by the funds'
boards of trustees.
2
<PAGE>
The following table shows the number of shares of the Company's common
stock beneficially owned at March 4, 1994 by each director and each nominee for
election to the Board of Directors of the Company and all named executive
officers of the Company in addition to Mr. Richard R. Allen named in the table
above who is a director, nominee and executive officer. Also shown is
information as to the beneficial ownership of all directors and executive
officers as a group. The persons have sole voting and investment power except as
noted:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
NAME BENEFICIALLY OWNED OUTSTANDING SHARES
<S> <C> <C>
Daryl B. Adams 3,950(1) --(11)
William B. Cash 20,498(2) --(11)
James H. Corrigan, Jr. 20,596(3) --(11)
William S. Creekmuir 6,292(4) --(11)
O. William Fenn, Jr. 990,117(5) 4.3%
Gerald R. Grubbs 61,412(6) --(11)
Don A. Hunziker 724,381(7) 3.1%
Thomas F. Keller 21,798(8) --(11)
Fred L. Schuermann, Jr. 30,789(9) --(11)
All executive officers and directors as a
group (10 persons) 4,434,950(10) 19.2
</TABLE>
(1) Includes currently exercisable options as to 3,950 shares.
(2) Includes currently exercisable options as to 4,500 shares. Excludes 1,332
shares owned by Mr. Cash's wife, as to such shares Mr. Cash disclaims
beneficial ownership.
(3) Includes 266 shares owned jointly by Mr. and Mrs. Corrigan and currently
exercisable options as to 4,500 shares.
(4) Includes currently exercisable options as to 1,847 shares and 3,345 shares
of restricted stock.
(5) Does not include 26,666 shares held by Mr. Fenn's wife, as to such shares
Mr. Fenn disclaims beneficial ownership. Includes 11,953 shares of
restricted stock.
(6) Includes currently exercisable options as to 16,700 shares and 16,926 shares
of restricted stock.
(7) Does not include 58,666 shares held by Mr. Hunziker's wife, as to such
shares Mr. Hunziker disclaims beneficial ownership. Includes 23,118 of
restricted stock.
(8) Includes currently exercisable options as to 4,500 shares.
(9) Includes currently exercisable options as to 15,152 shares and 15,637 shares
of restricted stock.
(10) Includes currently exercisable options as to 72,436 shares and 94,677
shares of restricted stock.
(11) Less than 1%.
3
<PAGE>
NOMINEES FOR ELECTION OF DIRECTORS
(Proposal numbered (1) in the accompanying Notice)
At the 1994 Annual Meeting, eight directors will be elected to hold office
until the 1995 Annual Meeting or until their successors have been elected and
qualified. It is proposed to nominate the eight persons listed below with brief
statements of their principal occupations and other biographical information.
All of the nominees are current directors. It is intended that the Proxyholders
named in the Proxy will vote for the persons listed in the table below. Should
any nominee named become unable to serve as a director, the shares represented
by valid proxies will be voted for the election of such other person as the
Board of Directors may recommend in his place, or the Board may recommend the
nomination of only the remaining nominees.
<TABLE>
<CAPTION>
DIRECTOR BUSINESS EXPERIENCE DURING PAST FIVE YEARS, DIRECTORSHIPS
NAME AGE SINCE IN PUBLIC COMPANIES AND FAMILY RELATIONS
<S> <C> <C> <C>
Richard R. Allen 53 1981 Chairman of the Board of Directors, President, and Chief Executive Officer
since October 1991; Vice Chairman of the Board of Directors from January 1990
to October 1991; Secretary from 1981 to July 1990; Executive Vice President and
Chief Financial Officer and Treasurer of the Company from 1981 to January 1990;
currently a director of Lighthouse Financial Corporation and the American
Furniture Manufacturers Association.
William B. Cash(2) 79 1983 Retired; chairman of board of directors of Turnpike Properties, Inc. from 1980
to June 1985.
James H. Corrigan, Jr.(1) 68 1984 Chairman of the Board of Directors and chief executive officer of Mebane
Packaging Corporation since 1980; currently a director of Piedmont BancShares
Corp.
O. William Fenn, Jr.(1) 67 1982 Vice Chairman of the Board of Directors from January 1990 to March 1992;
President and Chief Operating Officer of the Company from 1982 to January 1990;
since October 1993, Director, Furniture Export Office, International Trade
Division, N.C. Department of Commerce; currently a director of the American
Furniture Hall of Fame, International Home Furnishings Marketing Association,
BB&T Financial Corporation, and Branch Banking and Trust Company.
Gerald R. Grubbs 46 1991 Vice Chairman of the Board of Directors since October 1991; Executive Vice
President of the Company from January 1991 to October 1991; Vice President of
the Company and President of Daystrom Furniture, a division of the Company,
from 1983 to January 1991.
Don A. Hunziker(2) 66 1981 Chairman Emeritus of the Board of Directors from October 1991 to September
1992; Chairman of the Board of Directors and Chief Executive Officer of the
Company from 1982 to October 1991; currently Chairman of the Board of High
Point Regional Hospital, Inc.
Thomas F. Keller(1)(2) 62 1983 Dean and R. J. Reynolds Industries Professor, Fuqua School of Business, Duke
University, from 1974 to present; currently a director of Hatteras Income
Securities, Inc., Cambridge Investment Trust, Nations Funds, Inc., Nations
Funds Trust, American Business Products, Monk-Austin, Inc., Mentor Growth Fund,
Inc., Wendy's International, and Mebane Packaging Corporation.
Fred L. Schuermann, Jr. 48 1991 Executive Vice President since October 1991; Chief Financial Officer, Secretary
and Treasurer from January 1990 to July 1992; Senior Vice President from
January 1990 to October 1991; president of American Furniture Company, Inc., a
wholly owned subsidiary of the Company, from April 1987 to January 1990.
</TABLE>
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
4
<PAGE>
In addition to Messrs. Richard R. Allen, Gerald R. Grubbs, and Fred L.
Schuermann, Jr., listed above under "Nominees for Election of Directors," the
Company has the following executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
<S> <C> <C>
Daryl B. Adams 47 Vice President since January 1994; Corporate Controller, Assistant Secretary,
and Assistant Treasurer of the Company since January 1988.
William S. Creekmuir 38 Senior Vice President, Chief Financial Officer, Secretary and Treasurer since
July 1992; partner with KPMG Peat Marwick from July 1987 to July 1992.
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership (Form 3) and
reports of changes in ownership (Forms 4 and 5) of Common Stock of the Company.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended January 1, 1994, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were met.
EXECUTIVE CASH COMPENSATION AND RELATED INFORMATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives generally are made by
the three-member Compensation Committee of the Board. Each member of the
Compensation Committee is a non-employee director. Recommendations on
compensation for the Company's Senior Executives (as defined below) are made to
the Compensation Committee by Richard R. Allen, Chairman of the Board, President
and Chief Executive Officer. All decisions by the Compensation Committee
relating to the compensation of the Company's executive officers are reviewed by
the full Board, except for decisions about awards under certain of the Company's
incentive stock option plan, which must be made solely by the Committee in order
for the grants under such plan to satisfy Exchange Act Rule 16b-3. Set forth
below is a report prepared by Messrs. Cash and Hunziker and Dr. Keller in their
capacity as the Board's Compensation Committee addressing the Company's
compensation policies for 1993 as they affected Mr. Allen, Chairman of the
Board, President and Chief Executive Officer, and Messrs. Grubbs, Schuermann,
and Creekmuir and Ms. Adams, the four executive officers other than Mr. Allen
who, for 1993, were the Company's most highly paid executives (collectively with
Mr. Allen, the "Senior Executives").
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Compensation Committee's executive policies are designed to provide
competitive levels of compensation that integrate pay with the Company's annual
and long-term performance goals, reward above average corporate performance,
recognize individual initiative and achievements, and assist the Company in
attracting and retaining qualified executives. In that regard, the Compensation
Committee has adopted the following Policy on Executive Compensation:
IT SHALL BE THE POLICY OF LADD FURNITURE, INC. TO MAINTAIN AN
EXECUTIVE COMPENSATION PROGRAM THAT WILL:
(BULLET) SUPPORT A PAY-FOR-PERFORMANCE POLICY THAT DIFFERENTIATES THE
AMOUNT OF COMPENSATION ON THE BASIS OF CORPORATE, BUSINESS
UNIT AND INDIVIDUAL PERFORMANCE;
(BULLET) MOTIVATE SENIOR OFFICERS TO ACHIEVE STRATEGIC BUSINESS
INITIATIVES AND GOALS AND REWARD THEM FOR THEIR ACHIEVEMENT;
(BULLET) PROVIDE COMPENSATION OPPORTUNITIES WHICH ARE COMPARABLE TO
THOSE OFFERED BY OTHER LEADING COMPANIES, THUS ALLOWING THE
COMPANY TO COMPETE FOR AND RETAIN TALENTED EXECUTIVES WHO ARE
CRITICAL TO THE COMPANY'S LONG-TERM SUCCESS; AND
(BULLET) ALIGN THE INTERESTS OF EXECUTIVES WITH THE LONG-TERM
INTERESTS OF SHAREHOLDERS THROUGH AWARD OPPORTUNITIES THAT
CAN RESULT IN OWNERSHIP OF LADD COMMON STOCK.
5
<PAGE>
THE LADD EXECUTIVE COMPENSATION PROGRAM SHALL BE COMPRISED OF BASE
SALARY, ANNUAL CASH INCENTIVE OPPORTUNITIES, LONG-TERM INCENTIVE
OPPORTUNITIES IN THE FORM OF STOCK OPTIONS, RESTRICTED STOCK AND CASH
INCENTIVES, AND OTHER BENEFITS TYPICALLY OFFERED TO EXECUTIVES BY MAJOR
CORPORATIONS.
AS AN EXECUTIVE'S LEVEL OF RESPONSIBILITY INCREASES, A GREATER PORTION
OF HIS OR HER POTENTIAL TOTAL COMPENSATION OPPORTUNITY SHALL BE BASED ON
PERFORMANCE INCENTIVES AND LESS ON SALARY AND EMPLOYEE BENEFITS, CAUSING
GREATER VARIABILITY IN THE INDIVIDUAL'S ABSOLUTE COMPENSATION LEVEL FROM
YEAR-TO-YEAR. IN ADDITION, THE HIGHER ONE RISES IN THE LADD FURNITURE
ORGANIZATION, THE GREATER THE COMPENSATION MIX SHIFTS TO RELY ON THE VALUE
OF LADD'S COMMON STOCK THROUGH STOCK-BASED AWARDS.
SUMMARY OF INCENTIVE COMPENSATION PLANS
While not required by the SEC disclosure rules, the Compensation Committee
believes a brief description of each of the Company's incentive compensation
plans will enable shareholders to understand better the information presented
below.
MANAGEMENT INCENTIVE PLAN. The Company maintains a Management Incentive
Plan designed to compensate officers and key managers for accomplishment of
divisional and Company annual profit plans, subject to the Company achieving
certain specified after-tax earnings levels and the participant achieving
specific individual performance objectives. All amounts paid for fiscal 1992 and
1993 to the Senior Executives have been included in the "Bonus" column in the
Summary Compensation Table. No amounts were paid to the Senior Executives for
fiscal 1991. For fiscal 1994, depending upon an individual's assigned incentive
category, participants can earn incentive compensation payments up to a maximum
of 10% to 100% of their annual salaries. Payments under the plan, if any, will
be made following completion of the annual audit and after evaluation of the
Company's and participants' performances. The awards will be paid in cash.
LONG-TERM INCENTIVE PLAN. On February 28, 1991, the Board of Directors
approved a Long-Term Incentive Plan for certain executive officers and operating
officers. The plan was effective January 1, 1991, and was amended effective
January 3, 1993. This plan was designed to compensate officers for
accomplishment of divisional and Company long-range (3-year) objectives of
specified levels of return on average shareholders' equity, return on average
divisional invested capital, and sales growth. The weighting of each factor is
55% for return on average shareholders' equity or return on average divisional
invested capital (depending on whether the participant is a corporate or
divisional officer) and 45% for sales growth. For the first three-year
(1991-1993) plan, depending upon an individual's assigned incentive category,
participants could earn cash compensation incentive payments up to a maximum of
56% to 75% of beginning base salary for the three-year performance cycle,
payable in two equal annual installments. No cash incentive payments were paid
for 1991, 1992 or 1993 to the Senior Executives. For the second three year
(1993-1995) plan pursuant to which grants were made in February 1993, depending
upon an individual's assigned incentive category, participants could earn cash
compensation incentive payments up to a maximum of 28% to 38% of beginning base
salary. In conjunction with the plan, restricted stock has been issued and
incentive stock option grants under the Company's incentive stock option plan
have been made to certain participants, including the Senior Executives. The
restricted stock agreements provide that if the employee should cease to be
employed by the Company for any reason other than death or disability or ceases
to be employed by the Company in an appropriate executive capacity prior to five
years from the date of the agreement, the Company may repurchase the shares for
$.10 per share. The employee may not sell, assign, or transfer the shares in any
way (except to a spouse or child, and then the shares are still subject to the
Company's right of repurchase) so long as the shares are subject to the
Company's right of repurchase. All issuances of restricted stock and incentive
stock options to the Senior Executives during 1991, 1992 and 1993 have been
shown under the "Restricted Stock Award" and "Option" columns in the Summary
Compensation Table.
1994 INCENTIVE STOCK OPTION PLAN. On February 24, 1994, the Company adopted
the LADD Furniture, Inc. 1994 Incentive Stock Option Plan (the "Plan"). Pursuant
to the Plan, 1,200,000 shares (subject to adjustments in the event of stock
dividends, stock splits and certain other events) of the Company's common stock
have been reserved for the issuance of stock options under the Plan. Incentive
stock options are issued by the Administrative Committee of the Plan (the
Compensation Committee of the Board of Directors) at current fair market prices
(based upon the closing price of the Company's common stock on the
over-the-counter market on the date of grant). Only key employees (as determined
by the Administrative Committee) are eligible to receive options. The Committee
does not consider a participant's current stock ownership or prior stock option
or restricted stock grants when making new stock option grants. The Committee
does consider, however, beneficial ownership of Company common stock when
setting the price of incentive stock options for optionees, such as Mr. Allen,
who own more than 10% of the Company's common stock. For these individuals, the
6
<PAGE>
option price is 110% of fair market value on the date of grant. The Plan also
provides for the granting of nonqualified stock options as to 2,000 shares of
the Company's common stock to nonemployee directors of the Company upon their
initial election to the Board and additional nonqualified stock options as to
1,500 shares each year thereafter so long as the nonemployee director remains
eligible under the terms of the Plan. The Plan also provides for the granting of
nonqualified stock options to eligible employees at option prices less than fair
market value. Options granted under the Plan are typically for a term of ten
years, first becoming exercisable in 25% increments over a four year period
beginning one year after the date of grant. The Plan replaces the Company's
Amended and Restated 1983 Incentive Stock Option Plan which expired in June
1993, pursuant to which options were granted to eligible employees, including
the Senior Executives, and directors upon terms and conditions substantially the
same as contained in the Plan.
RELATIONSHIP OF COMPANY PERFORMANCE TO SENIOR EXECUTIVE 1993 COMPENSATION.
Compensation paid the Company's executive officers in 1993, as reflected in
the following tables as to the Senior Executives, consisted of the following
elements: base salary, annual bonus for 1993, and various payments associated
with employee benefits provided to Senior Executives. The Compensation
Committee's emphasis on tying pay to performance criteria is reflected by the
fact that six percent of the amount paid the Senior Executives for 1993 arose
from performance-based compensation arrangements. The 1993 percentage
relationship is lower than the corresponding percentage of 24% for 1992
reflecting the Company's performance being below annual performance targets.
The measures of performance that are utilized under the Company's
compensation plans are as follows: (1) actual versus targeted annual profit
performance, (2) return on average shareholders' equity, both annually and over
a three-year period, and (3) sales growth over a three-year period. A portion of
the annual incentive opportunity is also based on specific individual
performance objectives established for each Senior Executive. Subjective
considerations of individual performance are considered only in establishing
base salaries.
ACTUAL VERSUS TARGETED PROFIT PERFORMANCE. Actual versus targeted profit
performance and, with the exception of Mr. Allen, performance against specific
individual objectives are the criteria utilized to determine the extent to which
targeted annual bonuses will be paid to the Company's Senior Executives. The
actual versus target profit performance bonus opportunity represented 25% to 50%
of the Senior Executives' beginning base salary for 1993. Target annual profits
utilized for purposes of evaluating annual bonuses are based on business plans
developed by the management teams of the individual operating companies and the
senior management team of the Company, and are approved by the Company's Board
of Directors.
RETURN ON AVERAGE SHAREHOLDERS' EQUITY. Return on average shareholders'
equity is an important component of the annual bonus for all Senior Executives
(with the exception of Ms. Adams) and is also a performance measurement
criterion under the Company's Long-Term Incentive Plan. For 1993, the Company's
average return on shareholders' equity was below the established bonus threshold
and, therefore, there were no payouts based upon this performance criterion. The
return on average equity target is set such that if it is achieved, the Company
would be recognized as a top performer in the furniture industry. The return on
average equity component of the 1993 bonus opportunity represented 25% to 50% of
the Senior Executives' beginning base salary for 1993 under the Management
Incentive Plan.
Under the cash portion of the Long-Term Incentive Plan (as amended in
1993), Senior Executives participating in the plan at the beginning of each
three-year performance cycle can earn a maximum of 15% to 21% of their beginning
base salary for the three-year performance cycle by exceeding target goals tied
to the Company's three-year average return on shareholders' equity. The first
three-year performance cycle under the Long-Term Incentive Plan was completed in
1993. No payouts based upon return on average shareholders' equity were made to
Senior Executives in 1993 under the Long-Term Incentive Plan because the
Company's performance was below the return on average shareholders' equity
target.
SALES GROWTH. Under the cash portion of the Long-Term Incentive Plan (as
amended in 1993), Senior Executives participating in the plan at the beginning
of each three-year performance cycle can earn a maximum of 13% to 17% of their
beginning base salary for the three-year performance cycle by exceeding target
goals tied to the Company's sales growth relative to the furniture industry as
measured by the U.S. Commerce Department Furniture Growth Index. No bonuses
based upon sales growth will be paid unless the Company's sales growth rate is
at least equal to the industry growth rate. The first three-year performance
cycle under the Long-Term Incentive Plan was completed in 1993. No payouts based
upon three year sales growth were made in 1993 under the Long-Term Incentive
Plan because the Company's performance was below the furniture industry growth
rate.
7
<PAGE>
INDIVIDUAL PERFORMANCE OBJECTIVES. Under the 1993 Management Incentive Plan
a bonus opportunity of 25% to 30% of beginning base salary is also based on
specific individual performance objectives ("IPOs") established for each Senior
Executive, with the exception of Mr. Allen. Mr. Allen's incentive compensation
under the Management Incentive Plan is based entirely upon attaining
profitability and return on average shareholders' equity objectives. At the
beginning of each year, IPOs specific to each Senior Executives' areas of
responsibility are established in consultation with Mr. Allen. Such IPOs may
include sales growth, cost control, balance sheet management, and quality
improvement. The Senior Executives' satisfaction of their respective IPOs during
1993 was evaluated by Mr. Allen and were approved by the Compensation Committee.
Payouts in 1993 based upon attaining IPOs have been included under the "Bonus"
column in the Summary Compensation Table.
OTHER COMPENSATION PLANS. At various times in the past, the Company has
adopted certain broad-based employee benefit plans in which Senior Executives,
once eligible, have been permitted to participate and has adopted certain
executive officer retirement, life and health insurance plans. The benefits
under these plans are not directly or indirectly tied to a company performance.
CHIEF EXECUTIVE OFFICER'S 1993 COMPENSATION
Mr. Richard R. Allen, Chairman of the Board, President, and Chief Executive
Officer of the Company, is eligible to participate in the same executive
compensation plans available to other Senior Executives. The Compensation
Committee's general approach to setting Mr. Allen's target annual compensation
is to seek to be competitive with other companies in the furniture industry, but
have a large percentage of his target compensation based upon objective
short-term and long-term performance criteria. While this may result in some
fluctuations in the actual level of Mr. Allen's annual compensation, the
Compensation Committee believes its objectives appropriately motivate the
Company's chief executive officer toward clearly defined long-term goals, while
acknowledging the importance to Mr. Allen of his having some certainty in the
level of his compensation through its non-performance based elements. Mr.
Allen's base salary is designed to be competitive with base salaries paid other
chief executive officers of public companies in the furniture industry and other
corporations of similar size. In 1993, Mr. Allen received a 4.4% increase in his
base compensation.
In December 1992, the Compensation Committee established Mr. Allen's target
annual bonus for 1993 after giving consideration to the Company's performance in
1992, the then present furniture manufacturing and retail sales environment, as
well as emphasis which the Compensation Committee places on compensation being
paid under the long-term incentive arrangements provided by the Long-Term
Incentive Plan. Fifty percent of Mr. Allen's incentive opportunity under the
annual bonus program is based upon profit performance and the other 50% is based
upon return on average shareholders' equity of the Company - both based upon
incentive target ranges. In 1993, Mr. Allen did not qualify for a bonus as the
Company did not satisfy either of the performance criteria.
In February 1993, the Compensation Committee established target payout
levels and target performance levels for the 1993 through 1995 performance cycle
under the Company's Long-Term Incentive Plan following a review of Mr. Allen's
pay relative to others in similar corporations, expected trends in executive
pay, and the Company's performance goals. The performance criteria utilized by
the Committee as criteria for Mr. Allen under the Long-Term Incentive
Plan -- sales growth and return on average shareholders' equity -- are designed
to strike a reasonable balance between measuring performance based upon growth
of the Company and upon the performance of the Company in terms of return on
average shareholders' equity. The Compensation Committee believes these criteria
are consistent with the financial objectives of the Company, the primary goal of
which is to significantly increase the value of shareholders' investment in the
Company. The Compensation Committee believes that Company performance at these
levels will indicate that the Company is an industry leader.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS:
William B. Cash Thomas F. Keller Don A. Hunziker
8
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The Summary Compensation Table below indicates the Cash Compensation paid
by the Company as well as other compensation paid or accrued to the Chief
Executive Officer and the next four highest compensated executive officers at
the end of fiscal 1993 (the "Senior Executives") for services rendered in all
capacities during fiscal years 1993, 1992, and 1991, respectively.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION RESTRICTED SECURITIES PAYOUT
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(2) ($)(3) (#) ($) ($)(4)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard R. Allen 1993 $361,625 $ -0- -0- $ 48,253 7,778 $ -0- $400
CHAIRMAN OF THE BOARD, 1992 $329,125 $77,738 -0- -0- -0- -0- $400
PRESIDENT AND CHIEF EXECUTIVE 1991 $262,667 -0- -0- $ 94,429 19,125 -0- $400
OFFICER
Gerald R. Grubbs 1993 $232,500 $ -0- -0- $ 31,017 5,000 $ -0- $400
VICE CHAIRMAN 1992 $218,750 $86,755 -0- -0- -0- -0- $400
1991 $200,000 -0- -0- $ 74,062 15,000 -0- $400
Fred L. Schuermann, Jr. 1993 $232,500 $11,250 -0- $ 31,017 5,000 $ -0- $400
EXECUTIVE VICE PRESIDENT 1992 $218,750 $56,255 -0- -0- -0- -0- $400
1991 $179,375 -0- -0- $ 63,879 12,938 -0- $400
William S. Creekmuir(1) 1993 $153,250 $37,350 -0- $ 13,752 1,389 $ -0- $400
SENIOR VICE PRESIDENT, CHIEF 1992 $ 73,269 $33,439 -0- -0- 6,000 -0- -0-
FINANCIAL OFFICER, SECRETARY AND
TREASURER
Daryl B. Adams 1993 $ 88,150 $14,868 -0- -0- 1,200 $ -0- $400
VICE PRESIDENT AND 1992 $ 80,600 $30,960 -0- -0- -0- -0- $400
CORPORATE CONTROLLER, 1991 $ 74,600 -0- -0- -0- 1,000 -0- $400
ASSISTANT SECRETARY
AND ASSISTANT TREASURER
</TABLE>
(1) Mr. Creekmuir joined the Company as Senior Vice President, Chief Financial
Officer, Secretary and Treasurer in July 1992. Prior to that date he was a
partner with KPMG Peat Marwick. Accordingly, all 1992 compensation numbers
for Mr. Creekmuir relate to the six-month period July 6, 1992 through
January 2, 1993.
(2) Perquisites and other personal benefits paid to each of the named executive
officers were less than 10% of the total of their respective annual salary
and bonus in each of 1991, 1992 and 1993.
(3) Dividends are paid on restricted stock awards at the same rate as paid to
all shareholders. See the discussion under "Long-Term Incentive Plan"
included in the preceding Compensation Committee Report on Executive
Compensation for the general terms and conditions of the restricted stock
grants. On January 1, 1994, the above named executive officers held the
number of restricted shares having a then current market value as follows:
Allen (16,827/$166,587); Grubbs (12,508/$123,829); Schuermann
(11,219/$111,068); Creekmuir (1,389/$13,751); and Adams (0/$0).
(4) The amounts disclosed represent the Company's annual contribution on behalf
of each of the named executives to match pre-tax elective deferral
contributions (included under Salary) made by each under the Company's
401(k) Savings Plan for Salaried Employees.
9
<PAGE>
STOCK OPTIONS
The following table sets forth information with regard to grants of stock
options during the fiscal year ended January 1, 1994, to each of the named
Senior Executives. All such grants were made under the Amended and Restated 1983
Incentive Stock Option Plan, which plan expired in June 1993 and is proposed to
be replaced by the Company's 1994 Incentive Stock Option Plan (see Item 2 of
this Proxy Statement). Additionally, the values assigned to each reported option
are shown assuming five percent and ten percent compounded annual growth rates
in the market value of the Company's common stock. In assessing these values it
should be kept in mind that no matter what theoretical value is placed on a
stock option on the date of grant, its ultimate value will be dependent on the
market value of the Company's stock at a future date.
STOCK OPTION GRANTS IN 1993
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE
AT
ASSUMED
ANNUAL
RATES
OF
STOCK
PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR
NUMBER OF % OF TOTAL OPTION
SECURITIES OPTIONS GRANTED EXERCISE OR TERM
UNDERLYING TO EMPLOYEES IN BASE PRICE EXPIRATION (3)
NAME OPTIONS (#)(1) FISCAL YEAR (2) ($/SH) DATE 5% ($)
<S> <C> <C> <C> <C> <C>
Richard R. Allen 7,778 6% $ 14.85 02/25/98 $18,512
Gerald R. Grubbs 5,000 4% $ 13.50 02/24/03 $42,450
Fred L. Schuermann, Jr. 5,000 4% $ 13.50 02/24/03 $42,450
William S. Creekmuir 1,389 1% $ 13.50 02/24/03 $11,793
Daryl B. Adams 1,200 1% $ 13.50 02/24/03 $10,188
<CAPTION>
NAME 10% ($)
<S> <C>
Richard R. Allen $ 53,590
Gerald R. Grubbs $107,600
Fred L. Schuermann, Jr. $107,600
William S. Creekmuir $ 29,891
Daryl B. Adams $ 25,824
</TABLE>
(1) The options are for a term of ten years (except for grants to Mr. Allen
which are for a term of five years), first becoming exercisable in 25%
increments over a four-year period beginning one year after the date of
grant.
(2) In fiscal 1993, 128,601 options were granted to all employees as a group.
(3) Potential realizable value is based on an assumption that the stock price of
the common stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the option term. These numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price growth.
The following table sets forth information with regard to exercises of
stock options during the fiscal year ended January 1, 1994, by each of the named
Senior Executives and the 1993 fiscal year end value of all unexercised options
held by such individuals.
AGGREGATED OPTION EXERCISES IN FISCAL 1993
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF SECURITIES OPTIONS
UNDERLYING UNEXERCISED AT FY-END
SHARES ACQUIRED VALUE OPTIONS AT FY-END (#) ($)(1)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE
<S> <C> <C> <C> <C> <C>
Richard R. Allen -0- -0- 14,562 17,341 $11,474
Gerald R. Grubbs -0- -0- 11,700 13,300 $15,000
Fred L. Schuermann, Jr. -0- -0- 10,668 12,270 $12,936
William S. Creekmuir -0- -0- 1,500 5,889 $ 2,625
Daryl B. Adams -0- -0- 3,400 2,300 $ 125
<CAPTION>
NAME UNEXERCISABLE
<S> <C>
Richard R. Allen $11,476
Gerald R. Grubbs $15,000
Fred L. Schuermann, Jr. $12,940
William S. Creekmuir $ 7,875
Daryl B. Adams $ 125
</TABLE>
(1) Closing price of Company common stock at December 31, 1993 was $10.00.
10
<PAGE>
DEFINED BENEFIT PLANS
SALARIED PLAN
The Salaried Plan covers eligible exempt and nonexempt employees who
receive compensation from the Company and certain subsidiaries on a salaried
basis. The benefit formula for the Salaried Plan, as amended effective January
1, 1989, is .65% of "Average Final Compensation" for each year of service, plus
.65% of Average Final Compensation in excess of Covered Compensation for each of
the first 35 Years of Service; provided, however, no participant will receive
benefits under the amended plan less than the sum of the benefits that would
have been payable under the plan prior to its amendment, plus benefits accrued
after December 31, 1988 under the new formula. Average Final Compensation under
the amended plan is defined as the average of annual compensation during the
five consecutive years of service which produces the highest average.
The following table shows estimated annual benefits payable upon retirement
at age 65 to salaried employees at the specified remuneration and in various
years of service classifications:
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE FINAL COMPENSATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 50,000............................................................... $ 7,380 $ 9,839 $12,299 $14,759 $17,219
100,000............................................................... 17,130 22,839 28,549 34,259 39,969
200,000............................................................... 36,630 48,839 61,049 73,259 85,469
300,000............................................................... 43,618 58,158 72,697 87,237 101,776
400,000............................................................... 43,618 58,158 72,697 87,237 101,776
</TABLE>
* Maximum compensation taken into account was $235,840 in 1993 and is $150,000
in 1994. The estimated annual benefits in the foregoing table assumes
retirement on January 1, 1994.
The years of credited service as of January 1, 1994 and Average Final
Compensation under the Salaried Plan for each of Messrs. Allen, Grubbs,
Schuermann, Creekmuir and Ms. Adams are as follows:
<TABLE>
<CAPTION>
AVERAGE
YEARS FINAL
OFFICER/DIRECTOR OF SERVICE COMPENSATION
<S> <C> <C>
Richard R. Allen 13.17 230,398
Gerald R. Grubbs 20.20 195,336
Fred L. Schuermann, Jr. 6.00 188,267
William S. Creekmuir 1.52 129,912
Daryl B. Adams 5.99 83,980
</TABLE>
NONQUALIFIED SUPPLEMENTAL RETIREMENT PLAN
Effective January 1, 1990, the Company established a nonqualified
supplemental retirement plan known as the LADD Furniture, Inc. Supplemental
Retirement Income Plan (the "SERP") for certain of its salaried employees. The
SERP has a three-fold purpose: (1) to provide "make-up" benefits to salaried
employees whose benefits under the Salaried Plan were reduced as a result of
bringing the Salaried Plan into compliance with the Tax Reform Act of 1986 (
"Category One Participants"); (2) to provide supplemental retirement income for
key executive officers ("Category Two Participants"); and (3) to provide the
Company with the necessary flexibility for designing an effective compensation
package to attract new executives ( "Category Three Participants"). The SERP
also provides supplemental survivor benefits for the designated beneficiary of
each participant. Messrs. Allen, Grubbs, and Schuermann are Category Two
Participants under the SERP. Mr. Creekmuir and Ms. Adams are not currently
participants under the SERP. The supplemental retirement benefit payable to a
Category Two Participant in the form of a 10-year certain annuity is a monthly
amount equal to the difference between (a) and (b) below:
(a) Two percent (2%) of Average Final Compensation (defined as the
average of annual compensation during the three consecutive years of
service which produces the highest average), multiplied by a Participant's
Years of Service (subject to maximum of 25);
11
<PAGE>
LESS
(b) The sum of a Participant's:
(i) Qualified Plan Retirement Benefit;
(ii) Primary Social Security Benefit;
(iii) Nonqualified Deferred Compensation Agreement Benefit; and
(iv) Category One Benefit received under the SERP.
The following table shows estimated annual benefits payable upon retirement
to Category Two Participants in the SERP at the specified remuneration in the
various Years of Service classifications:
EXECUTIVE CASH COMPENSATION
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE FINAL COMPENSATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$100,000......................................................... $ 648 $ 5,452 $10,256 $ 5,060 $ 0
200,000......................................................... 12,903 21,792 30,681 19,570 8,459
300,000......................................................... 36,543 53,312 70,081 56,851 43,620
400,000......................................................... 66,543 93,312 120,081 106,851 93,620
</TABLE>
The years of credited service and Average Final Compensation as of January
1, 1994 for Messrs. Allen, Grubbs, and Schuermann are as follows:
<TABLE>
<CAPTION>
AVERAGE
YEARS OF FINAL
EXECUTIVE OFFICER SERVICE COMPENSATION
<S> <C> <C>
Richard R. Allen 13.17 $384,245
Gerald R. Grubbs 20.20 269,002
Fred L. Schuermann, Jr. 16.56 253,752
</TABLE>
Since the SERP is a nonqualified deferred compensation plan, it is not
subject to the discrimination requirements or the annual benefit limits of the
Internal Revenue Code and the Employee Retirement Income Security Act of 1974.
Although the SERP is, technically speaking, an unfunded plan, the Company
established a "Rabbi Trust " to provide participants with increased security
with respect to benefits due them from the SERP. In 1991, the Company funded the
Rabbi Trust with a $500,000 contribution and in 1993 made an additional $100,000
contribution.
OTHER COMPENSATION
Beginning in April 1993, the Company compensated each director who is not
an employee an annual fee of $14,000, plus $800 for each meeting of the Board
and $400 for each committee meeting which he attends on the same day as a Board
meeting or $800 for each committee meeting he attends if it is held on a day
other than a day of a Board meeting. Directors are compensated $200 for
telephonic meetings. Prior to April 1993, the Company's corresponding annual
compensation and compensation for meetings for directors who are not employees
was $10,000, $600, $300 and $600, respectively. Directors were not previously
compensated for telephonic meetings. In addition to such fees, the Company
reimburses each director for travel and other related expenses incurred by him
in attending the meetings.
12
<PAGE>
COMPARATIVE COMPANY PERFORMANCE
The following line graph compares cumulative total shareholder return for
the Company with a performance indicator of the overall stock market, the NASDAQ
Composite Index, and an industry index, the Household Furniture Index, for the
preceding five fiscal years.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG LADD FURNITURE, INC.
NASDAQ COMPOSITE INDEX AND PEER INDUSTRY INDEX
(Comparison Graph appears here--see appendix)
ASSUMES $100 INVESTED ON DECEMBER 31, 1988 IN COMPANY
COMMON STOCK, NASDAQ COMPOSITE INDEX(1), AND HOUSEHOLD FURNITURE INDUSTRY
INDEX(2)
ASSUMES REINVESTMENT OF DIVIDENDS
(1) NASDAQ Total Return Index for U.S. Companies prepared for NASDAQ by the
Center for Research in Securities Prices at the University of Chicago.
(2) SIC Code 251 Household Furniture Index as prepared by Media General
Financial Services, Inc., which index includes Ameriwood Industries, Bassett
Furniture, Bush Industries, Chromcraft Revington, Craftmatic Industries, DMI
Furniture, Ethan Allen Interiors, Flexsteel Industries, Industrie Natuzzi,
Interco, La-Z-Boy Chair, LADD Furniture, Leggett & Platt, Pulaski Furniture,
River Oaks Furniture, Rowe Furniture, Stanley Furniture, Wellington Hall and
Winston Furniture. The returns of each company have been weighted according
to each company's market capitalization.
13
<PAGE>
THE BOARD OF DIRECTORS
COMMITTEES AND MEETINGS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has established a Compensation Committee consisting
of Messrs. Cash and Hunziker and Dr. Keller. Mr. Hunziker was Chairman Emeritus
of the Board of Directors of the Company from October 1991 to September 1992,
and was Chairman of the Board of Directors and Chief Executive Officer of the
Company from 1982 to October 1991. The Compensation Committee acts to review and
recommend major changes in policy of various compensation or benefits programs
and salary levels for top management positions. During 1993, the Compensation
Committee met four times.
AUDIT COMMITTEE
The Board of Directors has also established an Audit Committee. It provides
general oversight of financial reporting and of the adequacy of the internal
controls of the Company. The Audit Committee functions by meeting with the
independent auditors and by informal meetings and contact with members of
management concerned with financial and control functions. The Audit Committee
met three times in 1993. The current members of the Audit Committee are Messrs.
Fenn and Corrigan and Dr. Keller.
BOARD ATTENDANCE
The Board of Directors held six meetings in person and one telephonic
meeting during 1993. All directors attended at least 75% of the Board and
committee meetings they were responsible for attending. The Board has not
established a nominating committee.
APPROVAL OF LADD FURNITURE, INC. 1994 INCENTIVE STOCK OPTION PLAN
(Proposal numbered (2) in the accompanying Notice)
GENERAL
At a special meeting of the Board of Directors held on February 24, 1994,
the Board adopted, subject to shareholder approval, the LADD Furniture, Inc.
1994 Incentive Stock Option Plan (the "Plan"), pursuant to which 1,200,000
shares of common stock of the Company have been reserved for issuance of stock
options under the Plan. For the reasons more fully discussed below, the Board of
Directors is recommending to the shareholders the adoption and approval of the
Plan. Management and the members of the Board of Directors intend to vote FOR
the Plan.
In 1983, the Company adopted the LADD Furniture, Inc. 1983 Incentive Stock
Option Plan (the "1983 Plan"), which was amended and restated in 1985, 1987 and
1988 to comply with the changing tax laws and to increase the number of shares
reserved for issuance under the 1983 Plan. The 1983 Plan terminated by its terms
on June 7, 1993. Options as to 591,884 shares are currently outstanding under
the 1983 Plan. In order for the Board to be able to continue to provide equity
based incentives for management and other key employees, the Board decided on
February 24, 1994 to adopt the new Plan, subject to shareholder approval. In
connection with the adoption of the Plan, the Board reserved 1,200,000 shares of
the Company's common stock for issuance of stock options under the Plan (subject
to adjustments in the event of stock splits, stock dividends and certain other
events), which represents five percent of the Company's issued and outstanding
common stock as of March 4, 1994. Based on the closing price of the Company's
common stock on March 4, 1994, the aggregate market value of the 1,200,000
shares subject to the Plan is $11,100,000.
SUMMARY OF THE PLAN
The Plan is briefly described below. Copies of the Plan may be obtained
from the Company and will also be available for inspection at the Annual
Meeting.
PURPOSES. The Plan is designed to encourage and create significant
ownership of common stock by key officers, employees and directors of the
Company. Additional purposes of the Plan include providing a meaningful
incentive to participants to make substantial contributions to the Company's
future success, enhancing the Company's ability to attract and retain persons
who will make such contributions, and ensuring that the Company has competitive
compensation opportunities for its key officers and employees. By meeting these
objectives, the Plan is intended to benefit the interests of shareholders.
14
<PAGE>
ADMINISTRATION. The Plan will be administered by a committee of the Board
of Directors composed of nonemployee, independent directors (the "Administrative
Committee"). The Compensation Committee of the Board of Directors, currently
consisting of Messrs. Cash and Hunziker and Dr. Keller, serves as the
Administrative Committee. Except as described below, the Administrative
Committee will have full authority to determine the specific individuals to whom
awards may be made under the Plan, to determine the provisions of such awards
(including the number of shares of common stock subject to each award), to
interpret the terms of the Plan and awards made under the Plan, and to adopt,
amend and rescind rules and guidelines for the administration of the Plan. In
making awards under the Plan, the Administrative Committee will consider the
participant's level of responsibility and past contributions to the Company and
the participant's contributions to the future success of the Company. No
determination has been made as to the persons to whom awards may be made in the
future or the number of shares which may be covered by any such awards.
ELIGIBILITY. Eligibility to receive awards under the Plan will be limited
to officers and employees of the Company who, in the opinion of the
Administrative Committee, are in a position to have a significant effect upon
the Company's business and operations. It is estimated that approximately 150
individuals are currently eligible to participate in the Plan. In addition,
nonemployee directors will be entitled to receive automatic annual grants of
options under the terms of the Plan so long as they are directors.
SHARES SUBJECT TO THE AMENDED PLAN. The maximum number of shares of common
stock which may be issued under the Plan is 1,200,000 shares, subject to
adjustment in the event of a stock dividend, stock split or other change in
corporate structure or capitalization affecting the common stock. If any award
made pursuant to the Plan terminates, expires or is forfeited for any reason,
any shares of common stock subject to the award so surrendered will remain
available for issuance under the Plan.
EFFECTIVE DATE AND TERM. The Plan will become effective upon its approval
by shareholders. No awards may be made under the Plan after February 24, 2004,
but awards granted before then may extend beyond that date.
OPTIONS. Options granted to employees under the Plan may be either
incentive stock options (within the meaning of Section 422 of the Code) or
nonqualified stock options. The Administrative Committee will determine the
frequency of granting options and the number of shares of Common Stock subject
to options granted under the Plan. The aggregate fair market value (determined
as of date of grant) of common stock with respect to which incentive stock
options are exercisable for the first time by an employee during any calendar
year cannot exceed $100,000.
GRANTS TO NONEMPLOYEE DIRECTORS. The Plan provides for the grant of
nonqualified stock options to acquire common stock to each person who is a
member of the Board of Directors but is not also an employee of the Company or
its subsidiaries (an "Eligible Director"). If the plan is approved by the
shareholders, each Eligible Director will automatically receive on the date of
the annual meeting of shareholders a grant of nonqualified options to purchase
1,500 shares of Common Stock at an exercise price equal to fair market value on
the date of grant ("Director Options"). Eligible Directors shall automatically
receive a grant of Director Options as to 1,500 shares of Common Stock each year
following their election to the Board of Directors. Upon a nonemployee
director's initial election or appointment to the Board of Directors, such
director shall receive a grant of nonqualified options to purchase 2,000 shares
of common stock at an exercise price equal to the fair market value of the
common stock on the date of grant. The Administrative Committee shall have no
discretion with respect to the number of shares subject to Director Options, the
date of grant of Director Options, or the exercise price thereof.
TERM OF OPTION. Options granted under the Plan will not be exercisable
after the expiration of ten years from the date of grant, except that any
incentive stock option granted to an employee who owns more than 10% of the
outstanding common stock will be for a term not in excess of five years from
date of grant. Each option will generally become exercisable in cumulative
installments as established by the Administrative Committee at the time of
grant. Such installments are subject to acceleration at any time by the
Administrative Committee as well as under certain circumstances described in the
Plan, including the purchase of common stock pursuant to a tender offer or
exchange offer, or a merger in which the Company does not survive as an
independent corporation.
PRICE. Shares of common stock purchased on the exercise of an option will
be paid for by the participant at the time of such exercise in cash or, to the
extent permitted by the Administrative Committee, by delivery of shares of
common stock or such other lawful consideration as the Administrative Committee
may determine. The proceeds received by the Company upon the exercise of options
granted under the Plan will be used for general corporate purposes. The exercise
price of any incentive stock option granted to an employee will be equal to the
fair market value of the common stock at the date of grant, except the exercise
price of any incentive stock option granted to an employee who owns more than
10%
15
<PAGE>
of the outstanding common stock must be at least 110% of the fair market value
of the common stock at the time the incentive stock option is granted. With
respect to nonqualified stock options, the option price may be less than the
fair market value of the common stock on the date of grant. The exercise price
of any Director Option will be equal to the fair market value of the common
stock on the date of grant.
EXERCISABILITY. If a participant's employment terminates by reason of
death, retirement or disability, certain post-termination exercise periods
generally will apply. If a participant's employment terminates for any other
reason, options will be exercisable only to the extent, if any, approved by the
Administrative Committee and will cause them to be treated as nonstatutory stock
options.
CASHLESS EXERCISE. Under the plan, an option may provide for a "cashless
exercise" by allowing the optionee to direct an immediate market sale or margin
loan respecting the shares under the option pursuant to an extension of credit
by the Company. Pursuant to this procedure, the optionee would direct the
delivery of the shares under the option from the Company to a brokerage firm and
the delivery of the option price from the sale or margin loan proceeds from the
brokerage firm to the Company.
TRANSFERABILITY OF AWARDS. No option awarded under the Plan may be
transferred by a participant otherwise than by will or by the laws of descent
and distribution, and during the participant's lifetime, such awards may be
exercised only by the participant or by his or her guardian or legal
representative.
AMENDMENT OR TERMINATION. The Plan may be amended or terminated at any time
by the Board of Directors. The Administrative Committee may make non-material
amendments to the Plan. The Administrative Committee may amend, modify,
terminate or waive any condition or provision of any outstanding award under the
Plan, except that it generally may not increase the number of shares subject to
any outstanding award or decrease the option or exercise price of the award. The
participant's consent to any such action may be required to the extent provided
in the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
associated with awards under the Plan. It does not describe all federal income
tax consequences under the Plan, nor does it describe foreign, state or local
income tax consequences.
INCENTIVE STOCK OPTIONS. The grant of an incentive stock option does not
produce ordinary income to the recipient or a deduction to the Company.
Generally a participant will not recognize ordinary taxable income at the time
of exercise of an incentive stock option, and no deduction will be available to
the participant's employer, provided the option is exercised while the
participant is an employee or within certain time periods in the case of
termination of employment by reason of disability or death. If an incentive
stock option granted under the Plan is exercised after these periods, the
exercise will be treated for tax purposes as the exercise of a nonstatutory
stock option. Also, incentive stock options granted under the Plan will be
treated as nonstatutory stock options to the extent they first become
exercisable in any calendar year for shares having a fair market value,
determined as of the date of grant, in excess of $100,000.
If shares acquired upon exercise of an incentive stock option are sold or
exchanged more than one year after the date of exercise and more than two years
from the date of grant of the option, any gain or loss will be a long-term
capital gain or loss. If shares acquired upon exercise of an incentive stock
option are disposed of prior to the expiration of these one-year or two-year
holding periods (a "disqualifying disposition"), the participant will recognize
ordinary income at time of disposition, and the employer will be able to claim a
deduction, in an amount equal to the excess of the fair market value of the
shares at date of exercise over the exercise price. Any additional gain will be
treated as capital gain, long-term or short-term depending on how long the
shares have been held. Where shares are sold or exchanged (other than in certain
related party transactions) for an amount less than their fair market value at
date of exercise, any ordinary income recognized in connection with the
disqualifying disposition will be limited to the amount of gain, if any,
recognized in the sale or exchange, and any loss will be a long-term or
short-term capital loss, depending on how long the shares have been held.
Although the exercise of an incentive stock option as described above will
not produce ordinary taxable income to the participant, it may produce an
increase in the participant's alternative minimum taxable income and may result
in an alternative minimum tax liability. The excess of the fair market value of
the shares at the date of exercise over the exercise price is included in the
calculation of the participant's alternative minimum taxable income.
NONSTATUTORY STOCK OPTIONS. Upon the exercise of a nonstatutory stock
option (including Director Options) the participant will recognize ordinary
taxable income equal to the excess of the fair market value of the shares at the
time
16
<PAGE>
over the exercise price. The employer will be able to claim a deduction in an
equivalent amount provided it satisfies withholding requirements. Any gain or
loss upon a subsequent sale or exchange of the shares will be a capital gain or
loss, long-term or short-term depending on the holding period for the shares.
PAYMENT OF WITHHOLDING TAXES. The Company may withhold, or require a
participant to remit to the Company, an amount sufficient to satisfy any
federal, state or local withholding tax requirements associated with awards
under the Plan.
IN GENERAL. Where already owned shares are used to exercise a stock option,
special rules will apply in determining the tax basis of the shares received
upon exercise.
FEDERAL SECURITIES LAW
It is the Board of Director's intention to register the shares reserved for
issuance under the Plan with the Securities and Exchange Commission immediately
following shareholder approval of the Plan. Accordingly, upon effectiveness of
the registration statement shares acquired through the exercise of the options
granted pursuant to the Plan will be registered shares within the meaning of the
Securities Act of 1933 (the "Act").
PROPOSED AWARDS UNDER THE PLAN
On February 24, 1994, the Administrative Committee granted incentive stock
options to purchase an aggregate of 78,428 shares of common stock under the
Plan, subject to shareholder approval of the Plan. The exercise price for all
such options is $10.00 per share (fair market value on February 24, 1994, except
for options granted to Mr. Allen, which exercise price was $11.00), and each
option will expire 10 years after the date of grant (except for grants to Mr.
Allen which will expire five years from date of grant). All of such options
first become exercisable in 25% increments over a four-year period beginning one
year after date of grant. All such options are subject to the exercisability
requirements of the Plan, all as generally described above.
As discussed in the preceding paragraphs of this section, the terms and
conditions of future option grants are subject to the discretion of the
Administrative Committee and need not be identical to those option agreements
described above.
The following table shows certain information with respect to stock options
which were granted on February 24, 1994, subject to shareholder approval of the
Plan.
NEW PLAN BENEFITS
1994 INCENTIVE STOCK OPTION PLAN
<TABLE>
<CAPTION>
NAME DOLLAR VALUE (1) OPTIONS GRANTED
<S> <C> <C>
Richard R. Allen $109,650 10,965
Gerald R. Grubbs $ 70,500 7,050
Fred L. Schuermann, Jr. $ 70,500 7,050
William S. Creekmuir $ 19,560 1,956
Daryl B. Adams -0- -0-
All Executive Officers as a Group $270,210 27,021
All Directors who are not executive officers as a group. * 7,500
All employees as a group (excluding executive officers). $514,070 51,407
</TABLE>
(1) Based on $10.00 per share, the fair market value of the Company's common
stock on February 24, 1994.
* If the Plan is approved by shareholders at the annual meeting of Board of
Directors on April 28, 1994, each of the five nonemployee directors will
receive a grant of Director Options as to 1,500 shares of common stock, with
an exercise price equal to fair market value of the Company's common stock on
April 28, 1994.
SHAREHOLDER VOTE
While North Carolina corporate law does not require shareholder approval of
the Plan, shareholder approval is necessary under the terms of the Plan, federal
tax law, and the federal securities regulations in order to preserve the Plan's
exemption from the Section 16(b) insider trading provisions of the Act for the
granting of options to officers, directors,
17
<PAGE>
and 10% shareholders. Accordingly, the Board of Directors submits the Plan to
shareholders for their approval. An affirmative vote of a majority of the shares
present, or represented, and entitled to vote at the meeting is necessary for
shareholder approval of the LADD Furniture, Inc. 1994 Incentive Stock Option
Plan. Management and the members of the Board of Directors intend to vote FOR
approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE LADD
FURNITURE, INC. 1994 INCENTIVE STOCK OPTION PLAN.
RATIFICATION OF INDEPENDENT AUDITORS
(Proposal numbered (3) in the accompanying Notice)
Subject to shareholder approval, the principal accountants appointed by the
Board of Directors for fiscal year 1994 are KPMG Peat Marwick of Greensboro,
North Carolina. This is the same accounting firm which audited the consolidated
financial statements of the Company for the year ended January 1, 1994. In the
event of a negative vote by at least 50% of the Company's outstanding shares of
common stock represented at the meeting, the Board will reconsider its
appointment of KPMG Peat Marwick. A representative of KPMG Peat Marwick is
expected to be present at the 1994 Annual Meeting of shareholders. This
representative will have the opportunity to make a statement at the meeting if
he desires to do so and will be available to respond to appropriate questions.
A favorable vote by the holders of a majority of the Company's outstanding
shares of common stock represented at the meeting is required for ratification
of the appointment of independent auditors. Management and the members of the
Board of Directors intend to vote FOR the ratification of the independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
INDEPENDENT AUDITORS.
DATE FOR THE RECEIPT OF PROPOSALS
In order for shareholder proposals to be included in the proxy materials
for the 1995 Annual Meeting, any such proposal must be received by the Company
at its executive offices not later than November 30, 1994 and meet all other
applicable requirements for inclusion therein.
OTHER BUSINESS
The Company does not intend to bring any business before the meeting other
than that stated above in this Proxy Statement. However, if any other matters
properly come before the meeting, the Proxyholders named in the enclosed Proxy
will vote on such matters pursuant to the Proxy in accordance with their best
judgment or as instructed by the Board of Directors.
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION FORM 10-K ANNUAL REPORT WILL BE PROVIDED
FREE OF CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST DIRECTED TO: LADD FURNITURE,
INC., ONE PLAZA CENTER, BOX HP-3, HIGH POINT, NORTH CAROLINA 27261-1500,
ATTENTION: WILLIAM S. CREEKMUIR, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER.
18
<PAGE>
METHOD AND EXPENSE OF SOLICITATION
The Company expects to solicit proxies primarily by mail. Proxies may be
solicited personally and by telephone by regular employees of the Company. The
only expenses anticipated are those which are ordinarily incurred in connection
with preparing, assembling and mailing the proxy material, including charges and
expenses of communicating with shareholders. The total amount of such expenses
will be borne by the Company.
If you cannot be present at the meeting, you are requested to SIGN, DATE,
and RETURN the accompanying Proxy in the enclosed envelope.
WILLIAM S. CREEKMUIR
SECRETARY
19
<PAGE>
LADD FURNITURE, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard R. Allen, Gerald R. Grubbs, and Fred
L. Schuermann, Jr., or either of them, as Proxyholders, each with the power to
appoint his substitute, and hereby authorizes them to represent and to vote, as
designated below, all the shares of common stock of LADD Furniture, Inc. held of
record by the undersigned on March 4, 1994, at the annual meeting of
shareholders to be held on April 28, 1994 at 10:00 a.m. at the Radisson Hotel,
135 S. Main Street, High Point, N.C. or any adjournment thereof.
1. ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
<S> <C>
FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote [ ]
(except as marked to the contrary below) for all nominees listed below
</TABLE>
Richard R. Allen, William B. Cash, James H. Corrigan, Jr., O. William Fenn,
Jr., Gerald R. Grubbs, Don A. Hunziker, Thomas F. Keller, and Fred L.
Schuermann, Jr.
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY NOMINEE, WRITE THAT NOMINEE'S NAME
BELOW.
<TABLE>
<CAPTION>
FOR AGAINST
<S> <C> <C>
2. Approval of the LADD Furniture, Inc. 1994 Incentive Stock Option Plan [ ] [ ]
3. Ratification of the appointment of KPMG Peat Marwick as the independent auditors for the 1994 fiscal year. [ ] [ ]
4. In their discretion, the Proxy holders are authorized to vote upon such other business as may properly come
before the meeting.
<CAPTION>
ABSTAIN
<S> <C>
2. Approval of the LADD Furniture, Inc. 1994 Incentive Stock Option Plan [ ]
3. Ratification of the appointment of KPMG Peat Marwick as the independent auditors for the 1994 fiscal year. [ ]
4. In their discretion, the Proxy holders are authorized to vote upon such other business as may properly come
before the meeting.
</TABLE>
IF NO DIRECTION IS MADE, THIS PROXY, IF EXECUTED AND RETURNED, WILL BE VOTED FOR
PROPOSALS 1, 2, AND 3.
<PAGE>
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officers. If a
partnership, please sign in partnership name by authorized person.
Dated: , 1994
(Be sure to date Proxy)
Signature
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE
****************************************************************************
APPENDIX
On the Dear Shareholder letter a signature of Richard R. Allen
appears where noted.
On Page 13 the Performance Graph appears where noted. The plot points
are listed as follows:
CRSP MEDIA GEN'L
NASDAQ PEER LADD
Dec-88.................... 100.00 100.00 100.00
Dec-89.................... 121.24 99.68 84.58
Dec-90.................... 102.96 75.23 48.07
Dec-91.................... 165.21 105.51 59.20
Dec-92.................... 192.10 145.37 82.88
Dec-93.................... 219.21 192.21 79.81
