FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended October 1, 1994 Commission File No. 0-11577
LADD FURNITURE, INC.
(Exact name of registrant as specified in charter)
North Carolina 56-1311320
(State or other juris- (I.R.S. Employer
diction of incorpora- Identification No.)
tion or organization)
One Plaza Center, Box HP-3, High Point, North Carolina 27261-1500
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (910) 889-0333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes x No
As of November 11, 1994 there were 23,096,557 shares of Common Stock
($.10 par value) of the registrant outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the thirteen weeks and thirty-nine weeks ended Oct. 1, 1994 and Oct. 2,
1993
(Amounts in thousands, except per share data)
(Unaudited)
13 Weeks Ended 39 Weeks Ended
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
1994 1993 1994 1993
Net sales $ 153,182 127,297 445,403 397,265
Cost of sales 123,640 104,905 359,752 323,477
Gross profit 29,542 22,392 85,651 73,788
Selling, general and
administrative expenses 23,562 19,907 69,127 61,765
Operating income 5,980 2,485 16,524 12,023
Other deductions (income):
Interest expense 2,328 1,379 6,168 4,144
Other, net 445 (34) 921 (185)
2,773 1,345 7,089 3,959
Earnings before income taxes 3,207 1,140 9,435 8,064
Income tax expense 962 709 2,830 3,533
Net earnings $ 2,245 431 6,605 4,531
Net earnings per common share $ 0.10 0.02 0.29 0.20
Weighted average number of
common shares outstanding 23,096 23,060 23,083 23,051
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LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
October 1, 1994 and January 1, 1994
(Amounts in thousands, except share data)
ASSETS
October 1,
1994 January 1,
(Unaudited) 1994 *
Current assets:
Cash $ 3,646 1,350
Trade accounts receivable, less allowances
for doubtful receivables, discounts,
returns and allowances of $4,389 and $4,178,
respectively (Note 4) 59,857 72,975
Inventories (Note 2) 120,168 100,639
Prepaid expenses and other current assets 12,322 6,110
Total current assets 195,993 181,074
Property, plant and equipment, net 121,364 97,497
Intangible and other assets, net 84,856 57,166
$ 402,213 335,737
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 9,009 5,815
Short-term bank borrowings (Note 5) 25,600 -
Trade accounts payable 31,953 23,414
Accrued expenses and other current liabilities 37,010 28,841
Total current liabilities 103,572 58,070
Long-term debt, excluding current installments 125,782 105,257
Deferred compensation and other liabilities 2,989 3,405
Deferred income taxes 15,049 18,902
Total liabilities 247,392 185,634
Shareholders' equity:
Preferred stock of $100 par value. Authorized
500,000 shares; no shares issued - -
Common stock of $.10 par value. Authorized
50,000,000 shares; issued 23,096,557 and
23,062,262 shares, respectively 2,310 2,306
Additional paid-in capital 49,516 49,186
Currency translation adjustment (192) (170)
Retained earnings 104,095 99,568
155,729 150,890
Less unamortized value of restricted stock (908) (787)
Total shareholders' equity 154,821 150,103
$ 402,213 335,737
* Derived from the Company's 1993 Annual Report.
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LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the thirty-nine weeks ended Oct. 1, 1994 and Oct. 2, 1993
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
39 Weeks Ended
Oct. 1, Oct 2,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 6,605 4,531
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation of property, plant and equipment 10,247 7,603
Amortization 2,176 1,899
Provision for losses on trade accounts receivable 2,332 1,629
Gain on sales of property, plant and equipment (171) (178)
Provision for deferred income taxes (199) (467)
Increase (decrease) in deferred compensation and
other liabilities (416) 1,610
Change in assets and liabilities, net of effects
from purchase of Pilliod Furniture in 1994
Increase in trade accounts receivable (11,965) (7,935)
Increase in inventories (8,794) (4,602)
(Increase) decrease in prepaid expenses and
other current assets (4,063) 38
Increase (decrease) in trade accounts payable 1,097 (4,905)
Increase in accrued expenses and other
current liabilities 4,861 225
Total adjustments (4,895) (5,083)
Net cash provided by (used in) operating activities 1,710 (552)
Cash flows from investing activities:
Acquisition of Pilliod Furniture, net of cash
acquired (Note 3) (23,847) -
Additions to property, plant and equipment (25,776) (16,551)
Proceeds from sales of property, plant and equipment 914 300
Additions to other assets (394) (860)
Net cash used in investing activities (49,103) (17,111)
Cash flows from financing activities:
Proceeds from long-term borrowings 27,511 20,000
Proceeds from short-term bank borrowings 25,600 -
Proceeds from sales of trade accounts receivable 34,000 -
Principal payments of long-term debt (35,345) (999)
Proceeds from common stock issued 23 83
Dividends paid (2,078) (2,075)
Net cash provided by financing activities 49,711 17,009
Effect of exchange rate changes on cash (22) (60)
Net increase (decrease) in cash 2,296 (714)
Cash at beginning of period 1,350 1,826
Cash at end of period $ 3,646 1,112
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 5,242 3,267
Cash paid during the period for income taxes 1,999 2,169
</TABLE>
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<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Currency Unamortized
Number Additional trans- value of Total
of shares Common paid-in lation Retained restricted shareholders'
issued stock capital adjustment earnings stock equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 2, 1993 23,019,631 $ 2,302 48,681 (89) 98,489 (659) 148,724
Shares issued in connection
with incentive stock
option plan 11,668 1 90 - - - 91
Shares issued in connection
with and amortization of
employee restricted
stock awards 30,963 3 415 - - (128) 290
Currency translation
adjustment - - - (81) - - (81)
Net earnings - - - - 3,846 - 3,846
Dividends paid - - - - (2,767) - (2,767)
BALANCE AT JANUARY 1, 1994 23,062,262 2,306 49,186 (170) 99,568 (787) 150,103
Shares issued in connection
with incentive stock
option plan 2,344 - 19 - - - 19
Repurchase of restricted
stock (18,424) (1) (170) - - 170 (1)
Shares issued in connection
with and amortization of
employee restricted
stock awards 50,375 5 481 - - (291) 195
Currency translation
adjustment - - - (22) - - (22)
Net earnings - - - - 6,605 - 6,605
Dividends paid - - - - (2,078) - (2,078)
BALANCE AT OCTOBER 1, 1994
(UNAUDITED) 23,096,557 $ 2,310 49,516 (192) 104,095 (908) 154,821
</TABLE>
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<PAGE>
Notes:
(1) Quarterly Financial Data
The quarterly consolidated financial data are unaudited but
include, in the opinion of management, all adjustments necessary
for a fair statement of the operating results for the interim
periods indicated. All such adjustments are of a normal recurring
nature.
Certain items in the January 1, 1994 consolidated balance sheet
have been reclassified to conform with the presentation adopted in
the current year. The reclassification did not impact the results
from operations as previously reported.
(2) Inventories
A summary of inventories follows (in thousands):
October 1, January 1,
1994 1994
Inventories on the FIFO
cost method:
Finished goods $ 67,077 55,881
Work in process 22,672 21,513
Raw materials and supplies 45,143 34,947
Total inventories on
the FIFO cost method 134,892 112,341
Less adjustments of certain inven-
tories to the LIFO cost method (14,724) (11,702)
$ 120,168 100,639
(3) Acquisition of Pilliod Furniture
On January 31, 1994, the Company acquired The Pilliod Cabinet
Company, a manufacturer of promotional priced casegoods furniture,
by purchasing all of the common stock of its parent company,
Pilliod Holding Company (Pilliod), for $24,257,000 million cash
(including acquisition expenses), the repayment of Pilliod debt of
$29,893,000 million, and the assumption of other long-term debt of
$247,000. The excess of cost over fair value of the net assets
acquired was approximately $33,219,000 and will be amortized on a
straight-line basis over 40 years. The acquisition was accounted
for as a purchase and accordingly, the net assets and operations
of Pilliod have been included in the Company's consolidated
financial statements beginning on the acquisition date.
Valuations assigned are preliminary and subject to change.
During the second quarter of 1994, management of the Company
became aware of a potential error in the inventory balances of
Pilliod. A
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<PAGE>
review of Pilliod's inventories is being performed by
the Company and Pilliod's former external auditors. Based upon
the review to date, the Company has concluded that inventory
balances included in the January 31, 1994 audited consolidated
financial statements of Pilliod were overstated by approximately
$1.4 million. Accordingly, a $1.4 million adjustment reducing
inventory and increasing the excess cost over fair value of the
net assets acquired has been recorded. The effect of this
adjustment did not have a material impact on the 1994 consolidated
statements of operations of the Company.
Additionally, the review revealed that approximately $1.1 million
of the $1.4 million inventory overstatement existed at May 1,
1993, the previous audited balance sheet date. The impact of the
errors was to overstate Pilliod's pre-tax net earnings for the
year ended May 1, 1993 and the nine months ended January 31, 1994
by approximately $1,087,000 and $327,000, respectively.
The following unaudited pro forma data presents the combined third
quarter and nine months 1994 and 1993 results of operations of the
Company and Pilliod as though the acquisition had occurred on
January 3, 1993, giving effect to depreciation and amortization of
assets on the accounting basis recognized in recording the
purchase, the interest on funds used to effect the purchase, and
excluding certain non-recurring expenses of Pilliod during 1993.
The following unaudited pro forma data also gives effect to the
above mentioned inventory adjustments (in thousands, except per
share data):
13 Weeks Ended 39 Weeks Ended
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
1994 1993 1994 1993
Net sales $153,182 148,958 453,062 461,382
Net earnings 2,245 1,131 6,883 6,602
Net earnings per
common share $ 0.10 0.05 0.30 0.29
(4) Accounts Receivable Securitization Program
On January 31, 1994, the Company sold ownership interest in a
defined pool of trade accounts receivable for $20,000,000, the
proceeds of which were used to partially finance the Pilliod
acquisition - see Note 3. Under the agreement which expires in
January 1995, the maximum amount of the purchaser's investment can
be $40,000,000 and is subject to change based on the level of
eligible receivables and concentrations of receivables. At
October 1, 1994 the defined pool of trade accounts receivable
totaled approximately $49,478,000 and the purchaser's investment
totaled $34,000,000. The net cash proceeds are reported as
financing activities in the accompanying consolidated statement of
cash flows for the thirty-nine weeks ended October 1, 1994. The
purchaser's investment is reflected as a reduction of trade
accounts receivables
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<PAGE>
in the accompanying October 1, 1994 consolidated balance
sheet. At October 1, 1994 the Company retained an
ownership interest in the receivable pool of approximately
$15,478,000, of which approximately $9,198,000 was subordinate
to that of the purchaser. The Company maintains
reserves which approximate the risk of loss relating to its
interest in the receivables. The Company's ongoing obligations
with respect to the receivables pool are limited to the
subordinated portion of its ownership interest. The total cost of
the program is included in selling, general and administrative
expenses in the accompanying 1994 third quarter and nine months
consolidated statements of operations. A portion of the cost of
the accounts receivable sale program is based on the purchaser's
level of investment and borrowing costs.
(5) Short-term Bank Borrowings
During the first quarter of 1994, the Company established
unsecured committed short-term bank credit lines aggregating
$35,000,000, of which $25,600,000 was outstanding at October 1,
1994. The credit lines bear interest at rates selected by the
Company of LIBOR (5.44% at October 1, 1994) plus 1 1/8% to 1 3/8%,
prime (7.75% at October 1, 1994), or at a lesser rate based on
availability of bank funds. At October 1, 1994, the Company's
interest rate for borrowings under these facilities was
approximately 5.63%. The Company pays commitment fees ranging
from 0.25% to 0.375% on the unused portion of the short-term bank
credit lines. The short-term bank borrowings were repaid October
24, 1994 utilizing funds from the Company's amended and restated
long-term credit facility and the related credit lines were
terminated on that date - see Note 6.
(6) Subsequent Event
On October 19, 1994, the Company entered into an amended and
restated credit agreement (the Amended Facility) with a syndicate
of banks which provides a $75,000,000 five-year term loan and an
$115,000,000 five-year revolving credit loan. Borrowings under
the Amended Facility are unsecured. The term loan is payable in
quarterly installments commencing March 1997 of $3,750,000 each
with a final payment of the outstanding balance on October 19,
1999. Borrowings under the Amended Facility bear interest at
rates selected periodically by the Company of LIBOR (5.56% at
October 19, 1994) plus 7/8%, prime (7.75% at October 19, 1994) or
at a lesser rate based on the availability of bank funds. Under
the Amended Facility, the Company pays a commitment fee of 1/4%
per annum on the unused portion of the revolving credit loan.
The Amended Facility requires the maintenance of certain ratios
pertaining to shareholders' equity and operating earnings and
contains covenants which relate to future borrowings, liens on
assets, specified amounts of consolidated net worth, and the
operations of the Company.
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The following table sets forth the percentage relationship of net
sales to certain items included in the Consolidated Statements of
Operations:
13 Weeks Ended 39 Weeks Ended
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
1994 1993 1994 1993
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 80.7 82.4 80.8 81.4
Gross profit 19.3 17.6 19.2 18.6
Selling, general and
administrative expenses 15.4 15.6 15.5 15.6
Operating income 3.9 2.0 3.7 3.0
Other deductions
Interest expense 1.5 1.1 1.4 1.0
Other, net .3 - .2 -
1.8 1.1 1.6 1.0
Earnings before income
taxes 2.1 .9 2.1 2.0
Income tax expense .6 .6 .6 .9
Net earnings 1.5% .3% 1.5% 1.1%
The Company's 1994 third quarter and nine months operating results
were influenced by the acquisition of Pilliod on January 31, 1994.
Pilliod's results of operations are included in the Company's
consolidated financial statements from the date of acquisition - see
Note 3.
Net sales for the third quarter and first nine months of 1994 were
$153.2 million and $445.4 million, respectively, compared with $127.3
million and $397.3 million during the same periods of 1993. Net sales
for 1994 increased over prior year levels by 20.3% for the third
quarter and 12.0% for the year-to-date. On a pro forma basis, assuming
the acquisition of Pilliod had occurred at the beginning of fiscal year
1993, 1994 net sales would have increased from prior year levels by
2.8% for the third quarter and decreased from prior year levels by 3.5%
for the year-to-date. The increase in the quarter's pro forma 1994 net
sales is attributed to sales increases in medium-priced upholstery,
lower-priced casegoods and ready-to-assemble furniture. The decrease
in the year-to-date pro forma 1994 net sales was primarily due to the
discontinuance of certain American of Martinsville residential
casegoods product lines, a reduction in export shipments of contract
furniture, and a decline in sales of lower-priced upholstery products.
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<PAGE>
Cost of sales as a percentage of net sales decreased to 80.7% for
the third quarter of 1994 and 80.8% for the year-to-date, compared to
82.4% and 81.4%, respectively, in 1993. These decreases resulted in a
increase in the gross profit margins to 19.3% for the third quarter and
19.2% for the year to date, from 17.6% and 18.6%, respectively, for the
same periods of 1993. The 1994 gross margins were positively impacted
by decreases in sales discounts and allowances, Pilliod Furniture's
gross margin, and operating efficiencies generated by the Company's
capital investment program. However, 1994 gross margins have been
negatively impacted by increased prices for particleboard and medium-
density fiberboard. Additionally, 1993's third quarter gross margins
were negatively impacted by plant disruptions resulting from the
initiation of a redeployment of manufacturing assets between three of
LADD's casegoods operating companies, as well as by discounts
associated with the liquidation of discontinued American of
Martinsville residential casegoods product lines.
Selling, general and administrative (SG&A) expenses were 15.4% of
net sales for 1994's third quarter and 15.5% for the first nine months,
compared with 15.6% for both corresponding periods of 1993. The costs
associated with the accounts receivable securitization program
increased SG&A expenses as a percentage of net sales by 0.3% for the
third quarter of 1994 and by 0.2% for the 1994 year-to-date.
Other deductions were 1.8% of net sales for the third quarter of
1994 and 1.6% for the first nine months of 1994, compared to 1.1% and
1.0% for the same periods in 1993. The increase was primarily
attributable to higher interest expense due to the partial funding of
the $54.0 million Pilliod acquisition with long and short-term bank
borrowings - see Note 2, coupled with an increase in interest rates.
Additionally, amortization expense increased in the 1994 periods as a
result of the Pilliod acquisition.
The decrease in the Company's effective income tax rate from 43.8%
in 1993's first nine months to 30.0% in the first nine months of 1994
resulted from reductions in state income taxes derived from tax
planning strategies implemented in late 1993 and the partial
utilization of net operating and capital loss carryforwards.
Net earnings were $2.2 million, or $.10 per share, for the third
quarter of 1994, compared with $.4 million, or $.02 per share for the
same quarter of 1993. Nine-month net earnings were $6.6 million, or
$.29 per share for 1994, compared with $4.5 million, or $.20 per share,
for 1993.
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<PAGE>
Liquidity and Capital Resources
The Company's current ratio at October 1, 1994 was 1.9 to 1 as
compared to 3.1 to 1 at January 1, 1994. Net working capital declined
to $92.4 million at October 1, 1994 from $123.0 million at January 1,
1994. These reductions were primarily attributable to an increase in
short-term bank borrowings of $25.6 million, the majority of which was
used to finance the Pilliod acquisition, and a decrease in trade
receivables resulting from the Company's accounts receivable
securitization program - see Notes 4, 5 and 6.
During the first nine months of 1994, the Company generated cash
from net earnings plus depreciation and amortization of $19.0 million
compared to $14.0 million in 1993. The cash generated in the first nine
months of 1994 and 1993 was utilized to partially fund working capital
needs.
During the first nine months of 1994, capital spending totaled
$25.8 million compared to $16.6 million during the same period in 1993.
Capital expenditures were funded from operations and borrowings under
the Company's long and short-term revolving credit lines. The capital
expenditures have been mainly directed towards enhancing productivity,
modernizing the Company's existing facilities, and complying with
regulatory requirements.
During the first nine months of 1994, the Company increased long-
term borrowings by $27.5 million. These incremental borrowings were
used to fund the Pilliod acquisition and the first nine month's capital
expenditures. The Company had outstanding long-term borrowings of
$125.8 million at October 1, 1994, representing 42.1% of total
capitalization, compared to $105.3 million or 37.9% of capitalization
at January 1, 1994. At October 1, 1994, the Company had $9.4 million
in unused short-term revolving bank credit lines.
On October 19, 1994, the Company entered into an amended and
restated credit agreement (the Amended Facility - see Note 6). The
Amended Facility consists of a $75.0 million five-year term loan and an
$115.0 million five-year revolving credit line. The Amended Facility
also provides the Company with increased financial flexibility and,
based upon current borrowing levels, almost $40.0 million of unused
debt capacity to fund future working capital needs and capital
expenditures. Additionally, the Amended Facility provides a lower rate
of interest which, based on current borrowing levels, will save the
Company more than $600,000 in annual interest expense.
On October 14, 1994 the Company's stock price declined significantly
below book value in response to a high volume of selling activity. As a
result of this event, the Board of Directors on October 27, 1994
authorized the repurchase of up to 1,000,000 shares of the Company's
common stock in the open market. The Company will, from time to time,
take advantage of opportunities to buy shares for corporate purposes at
prices deemed attractive for its shareholders. The Company believes
that cash flows from operating earnings and active balance sheet
management will be sufficient to fund the stock repurchase program and
does not intend to significantly increase the Company's debt levels.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Executive Employment Agreement between the
Company and Richard R. Allen dated October 28,
1994
10.2 Executive Employment Agreement between the
Company and Fred L. Schuermann, Jr. dated October
28, 1994
10.3 Executive Employment Agreement between the
Company and Gerald R. Grubbs dated October 28,
1994
(b) Reports on Form 8-K
None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
LADD Furniture, Inc.
Date: November 15, 1994 By: s/William S. Creekmuir
William S. Creekmuir
Senior Vice President
and Chief Financial Officer
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Exhibit 10.1
NORTH CAROLINA )
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the 28th day of October,
1994, and effective as of September 1, 1994, by and between LADD Furniture,
Inc., a North Carolina corporation ("Company"), and Richard R. Allen, an
individual resident of North Carolina ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and
sale of furniture; and
WHEREAS, Company desires to employ Executive as its Chairman,
Chief Executive Officer and President and Executive desires to accept such
employment on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive
hereby accepts employment and agrees to remain in the employ of the company
during the term of this Agreement, on the terms and conditions hereinafter set
forth.
2. Term of Employment. Subject to the provisions in Section 9
below, the term of this Agreement shall be for a two-year period beginning on
the date hereof and terminating on August 31, 1996, unless otherwise
terminated as provided herein.
3. Nature of Employment. Executive is employed as Chairman of
the Board, Chief Executive Officer and President of Company. Consistent with
such position, Executive shall, subject to the direction of the Board of
Directors of Company, direct and manage the affairs of the Company. During
the term of this Agreement and any extensions or renewals thereof, Executive
shall have no other employment of any nature whatsoever without the prior
consent of Company. Accordingly, unless otherwise approved by Company,
Executive agrees to devote his full working time to the business of Company;
provided, however, nothing herein contained shall restrict or prevent
Executive from personally and for his own
<PAGE>
account owning and dealing in stocks, bonds, securities, real estate,
commodities, or other investment properties for his own benefit or the
benefit of his family. Further, nothing herein contained shall restrict or
prevent Executive from serving on the Board of Directors of any entity which
does not directly of indirectly compete with Company.
4. Compensation.
(a) Base Salary. Compensation to Executive for the services
rendered on behalf of Company during the term of this Agreement shall be no
less than Three Hundred Sixty-Five Thousand Dollars ($ 365,000.00) per year,
payable in equal monthly installments. From time to time during the term of
this Agreement, Executive's compensation may be increased if approved by the
Board of Directors of Company, but shall in no event be decreased from the
amount of the base salary in effect at that time. Company shall review
Executive's compensation hereunder at least on an annual basis.
(b) Incentive Compensation. In addition to Executive's base
salary, Executive shall be entitled to participate in incentive compensation
plans and programs generally available to executives of the Company, provided
that performance goals and award targets used in the computation of awards to
the Executive hereunder shall be no less favorable than those which are used
in the computation of awards to other executives of the Company and shall
recognize the level of responsibility of the Executive. The annual incentive
opportunity shall have a maximum no less than one hundred percent (100%) of
Executive's then current base salary.
5. Expenses. Executive is authorized to incur reasonable
expenses in connection with the business of Company, including expenses for
travel and similar items. Company will reimburse Executive for all such
expenses upon the presentation by Executive, from time to time, of an itemized
account of expenditures.
6. Vacation. Executive shall be entitled to paid vacations
during each calendar year of the term of this Agreement at such times and for
such duration as may be determined by the Board of Directors of the Company,
t a king into consideration the needs and requirements of Company for
Executive's services; provided, however, the minimum paid vacation to which
Executive shall be entitled in any calendar year is four (4) weeks.
2
<PAGE>
7. Death During Employment. If Executive dies during the term
of this Agreement, Company shall pay to the estate of Executive the
compensation to which he would otherwise be entitled through the end of the
month in which death occurs in accordance with Section 4(a) above, plus the
sum of Five Thousand Dollars ($5,000.00) as an additional death benefit.
Company shall also pay to the estate of Executive an amount equal to any bonus
or other incentive payments which would otherwise have been due to Executive
had Executive been employed as of fiscal year end, pro-rated to date of death.
This Agreement shall thereupon terminate, and Company shall have no further
obligation to the estate of Executive.
8. Permanent Disability During Employment. If Executive
becomes permanently disabled during the term of this Agreement, Company shall
pay to Executive the compensation, in accordance with Section 4(a) above, to
which he would otherwise be entitled to the end of the month in which such
permanent disability occurs. Thereafter, the Executive shall continue to
receive his then base salary, minus any payments provided by the Company's
benefit plans and by any government sponsored program, for a twenty-four (24)
month period from the date of permanent disability. This Agreement shall
thereupon terminate and Company shall have no further obligation to Executive
except as may be provided under Company's short-term and long-term disability
plans during the term of such disability and any prorata portion of any bonus
or incentive plan. Permanent disability for purposes of this Agreement shall
mean a physical or mental condition of Executive that renders Executive
incapable of performing the essential duties of his job and which condition
shall be medically determined to be of permanent duration as same is construed
under Company's disability plans.
9. Renewal. Executive's term of employment shall be auto-
matically extended upon the same terms and conditions contained herein for
successive one-year periods unless a written notice of termination is given by
either party at least 90 days before the end of the term of employment or any
renewals or extensions thereof. In the event that the Company gives timely
notice to terminate this agreement, the severance provision of Section 11
pertaining to termination without cause shall become effective.
10. Termination for Cause. Company may terminate Executive's
employment at any time "for cause". The term "for
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<PAGE>
cause" shall mean (i) a material default or other breach by Executive of
his obligations under this Agreement, (ii) material failure by Executive
to diligently and competently perform his duties under this Agreement,
which shall be determined by Company's Board of Directors in its
reasonable discretion, (iii) insubordination or other act or acts by
Executive detrimental to Company or damaging to Company's relationships with
customers, suppliers or employees or (iv) fraud, dishonesty, misappropriation
of Company's assets, or conviction of a felony. Upon the occurrence of (i),
(ii) or (iii) above, Company shall be entitled to terminate the employment
relationship hereunder upon thirty (30) days prior written notice to
Executive, which notice shall state the reason for such termination
and shall provide Executive an opportunity to remedy or cure such
cause during such period. If such cause is not remedied or cured
during such period, Company may terminate Executive's employment immediately.
In the event of a termination for cause, Company shall have no obligation or
liability to Executive under this Agreement except for the compensation to
which he is entitled through the end of the month of termination in accordance
with Section 4(a) above.
11. Termination Without Cause. Company shall be entitled to
terminate the employment relationship hereunder without cause at any time upon
thirty (30) days prior written notice to Executive. In such event, Executive,
if requested by Company, shall continue to render his services up to the date
of termination and shall be paid the compensation to which he is entitled
through the end of the month of termination in accordance with Section 4(a)
above. In addition, if Company terminates this Agreement for any reason other
than for cause, as specified in Section 10 above, the Executive shall be
entitled to receive in twenty-four (24) equal monthly payments in an amount
equal to two times the sum of (i) his then current base salary in accordance
with Section 4(a) above and (ii) the average annual incentive payments to the
Executive during the preceding three (3) years less earned income received
during the 24-month severance period. Further, Executive shall be deemed to
be One Hundred Percent (100%) vested in the Supplemental Retirement Income
Plan for Salaried Employees of LADD Furniture, Inc.("SERP"). Payments under
this Section 11 are in addition to and not in lieu of any benefits under the
SERP or other benefit programs of the Company. The Company shall thereafter
have no other obligation or liability to Executive under this Agreement.
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12. Termination upon Change of Control. In the event of a
"change in control" of the Company (as hereinafter defined), the Executive may
terminate his employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean the occurrence of any of the following events during
the twelve (12) months immediately preceding or following the effective date
of a change in control of the Company:
(a) a material change in the scope of the Executive's
assigned duties and responsibilities from those in
effect immediately prior to a change in control of the
Company or the assignment of duties or
responsibilities that are inconsistent with the
Executive's status in the Company;
(b) a reduction by the Company in the Executive's base
salary or incentive compensation as in effect on the
date of a change in control;
(c) the Company's requirement that the Executive be
based anywhere other than the Company's office at
which he was based prior to the change in control of
the Company; or
(d) the failure by the Company to continue to provide
the Executive with benefits substantially similar to
those specified in Section 14 of this Agreement.
If the Executive shall terminate his employment for Good Reason,
then the Company shall pay him a lump sum severance payment in an amount equal
to two times the sum of (i) his then current base salary and (ii) the average
annual incentive payments to the Executive during the preceding three (3)
years. Further, upon termination for Good Reason, the Executive shall
immediately become 100% vested in the SERP, all outstanding stock options
shall become immediately exercisable and all restrictions under Restricted
Stock Agreements shall be eliminated.
For purposes of this Agreement, a "change in control" shall be
deemed to have occurred when (i) any person, corporation, or group of
associated persons, excluding affiliates of the
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Company, acquires a beneficial ownership of an aggregate of more than
fifty percent (50%) of the then outstanding shares of voting stock of
the Company or (ii) a merger or consolidation to which the Company is a
party and where the Company is not a surviving or continuing entity has been
completed.
13. Property of Company. Executive agrees that upon the
termination of his employment he will turn over to Company all property of
Company which has come into his possession while an Executive of Company.
14. Additional Benefits. During the term of this Agreement and
any renewals or extensions thereof, Company shall keep and maintain, for the
benefit of Executive, life insurance having a death benefit of not less than
one hundred percent (100%) of base pay (not to exceed $300,000) and disability
insurance that will provide Executive a benefit of not less than sixty-percent
(60%) of base pay per month during the term of any disability. Executive and,
as applicable, the Executive's family shall also have the right to participate
in any Executive benefit plans or other fringe benefits adopted by Company for
its officers and/or other key management employees or as a part of Company's
regular compensation structure for its employees, including any group
hospitalization, medical, dental, accidental death and disability and long-
term disability income replacement insurance plans and any retirement income
and capital accumulation plans. All such benefits shall be in addition to the
compensation payments provided by this Agreement.
15. Covenants by Executive.
(a) Non-competition. During the term of employment under
this Agreement including any renewals or extensions thereof, and
for a period of two (2) years thereafter, Executive shall not,
without the prior written approval of Company, directly or
indirectly, as employer, employee, partner, stockholder, joint
venturer or otherwise, enter into or in any manner take part in
any business or other endeavor which would be in competition with
Company in the continental United States as such business is
conducted at the time of termination.
(b) Respect for Economic Relationships. Executive will
not, during the term of his employment under this
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Agreement including any renewals or extensions thereof, and for a
period of two (2) years thereafter, in any fashion, form, or manner,
either directly or indirectly, solicit, interfere with, or endeavor
to entice away from Company any customer or person, firm or
corporation, regularly dealing with Company or directly or
indirectly interfere with, entice away, or cause any other entity
to employ any other employee of Company.
(c) Validity of Covenants. Executive agrees that the
covenants contained in this Section are reasonably necessary to
protect the legitimate interests of Company, are reasonable with
respect to time, territory and scope, and do not interfere with
the interests of the public. Executive further agrees that the
descriptions of the covenants contained in this Section are
sufficiently accurate and definite to inform Executive of the
scope of such covenants. Executive acknowledges that prior to
entering into this Agreement he was employed "at will", and agrees
that the term of employment and termination provisions contained
in Sections 2, 9, 10 and 11 above constitute fully adequate and
sufficient consideration for the covenants contained in Sections
15 and 17 of this Agreement.
(d) Specific Performance. Executive agrees that a breach
or violation of any of the covenants under this Section will
result in immediate and irreparable harm to Company in an amount
which will be impossible to ascertain at the time of the breach or
violation and that the award of monetary damages will not be
adequate relief to Company. Therefore, the failure on the part of
Executive to perform all of the covenants established by this Sec-
tion shall give rise to a right to Company to obtain enforcement
of this Section in a court of equity by a decree of specific
performance or other injunctive relief. This remedy, however,
shall be cumulative and in addition to any other remedy Company
may have.
16. Patent, Trade Dress and Trademark Assignment. Executive
agrees without additional compensation to assign promptly to Company all
rights, title, and interest in and to any and all trade secrets, inventions,
letters patent, applications for letters patent, trade dress, and trademarks
whether or not subject to state
7
<PAGE>
or federal trademark during the term of employment hereunder if related to
the then current products and activities of Company, such activities to
include, without limitation, product development by Company, or if developed
or made with the use of its facilities, equipment, materials, personnel, or
trade secrets, or result directly from any work performed by Executive
for Company. Executive further agrees to disclose promptly to Company
any such trade secrets, inventions, letters patent, applications for
letters patent, trade dress, and trademarks, and, at the request and
expense of Company, to apply for letters patent or registration thereon in
every jurisdiction designated by Company.
17. Confidential Information. Executive agrees both during the
term of this Agreement and thereafter to keep secret and confidential all
information labeled confidential or not generally known which is heretofore or
hereafter acquired concerning the business and affairs of Company, including
without limitation, information regarding trade secrets, trade dress,
proprietary processes, confidential business plans, market research data and
financial data, and further agrees not to disclose any such information to any
person, firm, or corporation or use the same in any manner other than in
furtherance of the business or affairs of Company or unless such information
shall become public knowledge by other means. Executive agrees that such
information is a valuable, special, and unique asset of Company. Upon the
termination of Executive's employment with Company, Executive shall
immediately return to Company all documents, records, notebooks, and similar
repositories of information relating to confidential information of Company
and/or the development of any inventions.
18. Waiver of Breach. The waiver by Company or Executive of any
breach of a provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by the parties.
19. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
8
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(a) If to Company, to:
LADD Furniture, Inc.
One Plaza Center
P. O. Box HP-3
High Point, NC 27261
Attn: Chief Financial Officer
b) If to Executive, to:
Richard R. Allen
2815 Lake Forest Drive
Greensboro, NC 27408
20. Entire Agreement. This Agreement supersedes any and all
other understandings and agreements, either oral or in writing, between the
parties hereto with respect to the subject matter hereof and constitutes the
sole and only agreement between the parties with respect to said subject
matter. Each party to this Agreement acknowledges that no representations,
inducements, promises, or agreements, oral or otherwise, have been made by any
party or by anyone acting on behalf of any party, which are not embodied here-
in, and that no agreement, statement, or promise not contained in this
Agreement shall be valid or binding or of any force or effect. No change or
modification of this Agreement shall be valid or binding upon the parties
hereto unless such change or modification is in writing and is signed by the
parties hereto.
21. Severability. If any one or more of the provisions
contained in this Agreement shall be held by a court of competent jurisdiction
to be invalid, illegal, or unenforceable in any respect for any reason, that
invalidity, illegality, or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if that invalid,
illegal, or unenforceable provision had never been contained herein.
22. Parties Bound. The terms, promises, covenants, and
agreements contained in this Agreement shall apply to, be binding upon, and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement may not be assigned by Company
or Executive without the prior written consent of the other party.
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<PAGE>
23. Consolidation, Merger or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into, or
with, or transferring all or substantially all of its assets to another
corporation which assumes this Agreement and all obligations and undertakings
of the Company hereunder. Upon such a consolidation or merger, the use of the
word "Company" herein shall mean such other corporation, and this Agreement
shall continue in full force and effect.
24. Survival. The provisions of Sections 15 and 17 of this
Agreement shall survive the termination of this Agreement and shall continue
for the terms set forth in Sections 15 and 17.
25. Captions. Captions to the Sections of this Agreement are
inserted solely for the convenience of the parties, are not a part of this
Agreement, and in no way define, limit, extend or describe the scope thereof
or the intent of any of the provisions.
26. Applicable Law. This Agreement shall be construed and the
legal relationship between the parties determined in accordance with the laws
of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals as of the day and year first above written, the corporate
party acting through duly authorized officers.
ATTEST: LADD Furniture, Inc.
___________________________ By:_______________________________
Secretary Vice Chairman
(Corporate Seal)
___________________________ s/Richard R. Allen (SEAL)
(Witness) Richard R. Allen
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Exhibit 10.2
NORTH CAROLINA )
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the 28th day of October,
1994, and effective as of September 1, 1994, by and between LADD Furniture,
Inc., a North Carolina corporation ("Company"), and Frederick L. Schuermann,
Jr., an individual resident of North Carolina ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and
sale of furniture; and
WHEREAS, Company desires to employ Executive as its Executive Vice
President and Executive desires to accept such employment on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive
hereby accepts employment and agrees to remain in the employ of the company
during the term of this Agreement, on the terms and conditions hereinafter set
forth.
2. Term of Employment. Subject to the provisions in Section 9
below, the term of this Agreement shall be for a two-year period beginning on
the date hereof and terminating on August 31, 1996, unless otherwise
terminated as provided herein.
3. Nature of Employment. Executive is employed as Executive
Vice President of Company. Consistent with such position, Executive shall,
subject to the direction of the Chief Executive Officer and the Board of
Directors of Company, direct and manage the affairs of the Company as
assigned. Executive shall report to and be responsible to the Chief Executive
Officer. During the term of this Agreement and any extensions or renewals
thereof, Executive shall have no other employment of any nature whatsoever
without the prior consent of Company. Accordingly, unless otherwise approved
by Company, Executive agrees to devote his full working time to the business
of Company; provided, however, nothing herein contained shall restrict or
prevent
<PAGE>
Executive from personally and for his own account owning and dealing
in stocks, bonds, securities, real estate, commodities, or other investment
properties for his own benefit or the benefit of his family. Further, nothing
herein contained shall restrict or prevent Executive from serving on the Board
of Directors of any entity which does not directly of indirectly compete with
Company.
4. Compensation.
(a) Base Salary. Compensation to Executive for the services
rendered on behalf of Company during the term of this Agreement shall be no
less than Two Hundred Thirty-Five Thousand Dollars ($ 235,000.00) per year,
payable in equal monthly installments. From time to time during the term of
this Agreement, Executive's compensation may be increased if approved by the
Board of Directors of Company, but shall in no event be decreased from the
amount of the base salary in effect at that time. Company shall review
Executive's compensation hereunder at least on an annual basis.
(b) Incentive Compensation. In addition to Executive's base
salary, Executive shall be entitled to participate in incentive compensation
plans and programs generally available to executives of the Company, provided
that performance goals and award targets used in the computation of awards to
the Executive hereunder shall be no less favorable than those which are used
in the computation of awards to other executives of the Company and shall
recognize the level of responsibility of the Executive. The annual incentive
opportunity shall have a maximum no less than one hundred percent (100%) of
Executive's then current base salary.
5. Expenses. Executive is authorized to incur reasonable
expenses in connection with the business of Company, including expenses for
travel and similar items. Company will reimburse Executive for all such
expenses upon the presentation by Executive, from time to time, of an itemized
account of expenditures.
6. Vacation. Executive shall be entitled to paid vacations
during each calendar year of the term of this Agreement at such times and for
such duration as may be determined by the Chief Executive Officer of the
Company, taking into consideration the needs and requirements of Company for
Executive's services; provided, however, the minimum paid vacation to which
Executive shall be entitled in any calendar year is four (4) weeks.
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<PAGE>
7. Death During Employment. If Executive dies during the term
of this Agreement, Company shall pay to the estate of Executive the
compensation to which he would otherwise be entitled through the end of the
month in which death occurs in accordance with Section 4(a) above, plus the
sum of Five Thousand Dollars ($5,000.00) as an additional death benefit.
Company shall also pay to the estate of Executive an amount equal to any bonus
or other incentive payments which would otherwise have been due to Executive
had Executive been employed as of fiscal year end, pro-rated to date of death.
This Agreement shall thereupon terminate, and Company shall have no further
obligation to the estate of Executive.
8. Permanent Disability During Employment. If Executive
becomes permanently disabled during the term of this Agreement, Company shall
pay to Executive the compensation, in accordance with Section 4(a) above, to
which he would otherwise be entitled to the end of the month in which such
permanent disability occurs. Thereafter, the Executive shall continue to
receive his then base salary, minus any payments provided by the Company's
benefit plans and by any government sponsored program, for a twenty-four (24)
month period from the date of permanent disability. This Agreement shall
thereupon terminate and Company shall have no further obligation to Executive
except as may be provided under Company's short-term and long-term disability
plans during the term of such disability and any prorata portion of any bonus
or incentive plan. Permanent disability for purposes of this Agreement shall
mean a physical or mental condition of Executive that renders Executive
incapable of performing the essential duties of his job and which condition
shall be medically determined to be of permanent duration as same is construed
under Company's disability plans.
9. Renewal. Executive's term of employment shall be auto-
matically extended upon the same terms and conditions contained herein for
successive one-year periods unless a written notice of termination is given by
either party at least 90 days before the end of the term of employment or any
renewals or extensions thereof. In the event the Company gives timely notice
to terminate this Agreement, the severance provison of Section 11 pertaining
to termination without cause shall become effective.
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<PAGE>
10. Termination for Cause. Company may terminate Executive's
employment at any time "for cause". The term "for cause" shall mean (i) a
material default or other breach by Executive of his obligations under this
Agreement, (ii) material failure by Executive to diligently and competently
perform his duties under this Agreement, which shall be determined by
Company's Board of Directors in its reasonable discretion, (iii)
insubordination or other act or acts by Executive detrimental to Company or
damaging to Company's relationships with customers, suppliers or employees or
(iv) fraud, dishonesty, misappropriation of Company's assets, or conviction of
a felony. Upon the occurrence of (i), (ii) or (iii) above, Company shall be
entitled to terminate the employment relationship hereunder upon thirty (30)
days prior written notice to Executive, which notice shall state the reason
for such termination and shall provide Executive an opportunity to remedy or
cure such cause during such period. If such cause is not remedied or cured
during such period, Company may terminate Executive's employment immediately.
In the event of a termination for cause, Company shall have no obligation or
liability to Executive under this Agreement except for the compensation to
which he is entitled through the end of the month of termination in accordance
with Section 4(a) above.
11. Termination Without Cause. Company shall be entitled to
terminate the employment relationship hereunder without cause at any time upon
thirty (30) days prior written notice to Executive. In such event, Executive,
if requested by Company, shall continue to render his services up to the date
of termination and shall be paid the compensation to which he is entitled
through the end of the month of termination in accordance with Section 4(a)
above. In addition, if Company terminates this Agreement for any reason other
than for cause, as specified in Section 10 above, the Executive shall be
entitled to receive in twenty-four (24) equal monthly payments in an amount
equal to two times the sum of (i) his then current base salary in accordance
with Section 4(a) above and (ii) the average annual incentive payments to the
Executive during the preceding three (3) years less earned income received
during the 24-month severance period. Further, Executive shall be deemed to
be One Hundred Percent (100%) vested in the Supplemental Retirement Income
Plan for Salaried Employees of LADD Furniture, Inc.("SERP"). Payments under
this Section 11 are in addition to and not in lieu of any benefits under the
SERP or other benefit
4
<PAGE>
programs of the Company. The Company shall thereafter have no other
obligation or liability to Executive under this Agreement.
12. Termination upon Change of Control. In the event of a
"change in control" of the Company (as hereinafter defined), the Executive may
terminate his employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean the occurrence of any of the following events during
the twelve (12) months immediately preceding or following the effective date
of a change in control of the Company:
(a) a material change in the scope of the Executive's
assigned duties and responsibilities from those in
effect immediately prior to a change in control of the
Company or the assignment of duties or
responsibilities that are inconsistent with the
Executive's status in the Company;
(b) a reduction by the Company in the Executive's base
salary or incentive compensation as in effect on the
date of a change in control;
(c) the Company's requirement that the Executive be
based anywhere other than the Company's office at
which he was based prior to the change in control of
the Company; or
(d) the failure by the Company to continue to provide
the Executive with benefits substantially similar to
those specified in Section 14 of this Agreement.
If the Executive shall terminate his employment for Good Reason,
then the Company shall pay him a lump sum severance payment in an amount equal
to two times the sum of (i) his then current base salary and (ii) the average
annual incentive payments to the Executive during the preceding three (3)
years. Further, upon termination for Good Reason, the Executive shall
immediately become 100% vested in the SERP, all outstanding stock options
shall become immediately exercisable and all restrictions under Restricted
Stock Agreements shall be eliminated.
5
<PAGE>
For purposes of this Agreement, a "change in control" shall be
deemed to have occurred when (i) any person, corporation, or group of
associated persons, excluding affiliates of the Company, acquires a beneficial
ownership of an aggregate of more than fifty percent (50%) of the then
outstanding shares of voting stock of the Company or (ii) a merger or
consolidation to which the Company is a party and where the Company is not a
surviving or continuing entity has been completed.
13. Property of Company. Executive agrees that upon the
termination of his employment he will turn over to Company all property of
Company which has come into his possession while an Executive of Company.
14. Additional Benefits. During the term of this Agreement and
any renewals or extensions thereof, Company shall keep and maintain, for the
benefit of Executive, life insurance having a death benefit of not less one
hundred percent (100%) of base pay (not to exceed $300,000) and disability
insurance that will provide Executive a benefit of not less than sixty-percent
(60%) of base pay per month during the term of any disability. Executive and,
as applicable, the Executive's family shall also have the right to participate
in any Executive benefit plans or other fringe benefits adopted by Company for
its officers and/or other key management employees or as a part of Company's
regular compensation structure for its employees, including any group
hospitalization, medical, dental, accidental death and disability and long-
term disability income replacement insurance plans and any retirement income
and capital accumulation plans. All such benefits shall be in addition to the
compensation payments provided by this Agreement.
15. Covenants by Executive.
(a) Non-competition. During the term of employment under
this Agreement including any renewals or extensions thereof, and
for a period of two (2) years thereafter, Executive shall not,
without the prior written approval of Company, directly or
indirectly, as employer, employee, partner, stockholder, joint
venturer or otherwise, enter into or in any manner take part in
any business or other endeavor which would be in competition with
Company in the continental United States as such business is
conducted at the time of termination.
6
<PAGE>
(b) Respect for Economic Relationships. Executive will
not, during the term of his employment under this Agreement
including any renewals or extensions thereof, and for a period of
two (2) years thereafter, in any fashion, form, or manner, either
directly or indirectly, solicit, interfere with, or endeavor to
entice away from Company any customer or person, firm or
corporation, regularly dealing with Company or directly or
indirectly interfere with, entice away, or cause any other entity
to employ any other employee of Company.
(c) Validity of Covenants. Executive agrees that the
covenants contained in this Section are reasonably necessary to
protect the legitimate interests of Company, are reasonable with
respect to time, territory and scope, and do not interfere with
the interests of the public. Executive further agrees that the
descriptions of the covenants contained in this Section are
sufficiently accurate and definite to inform Executive of the
scope of such covenants. Executive acknowledges that prior to
entering into this Agreement he was employed "at will", and agrees
that the term of employment and termination provisions contained
in Sections 2, 9, 10 and 11 above constitute fully adequate and
sufficient consideration for the covenants contained in Sections
15 and 17 of this Agreement.
(d) Specific Performance. Executive agrees that a breach
or violation of any of the covenants under this Section will
result in immediate and irreparable harm to Company in an amount
which will be impossible to ascertain at the time of the breach or
violation and that the award of monetary damages will not be
adequate relief to Company. Therefore, the failure on the part of
Executive to perform all of the covenants established by this Sec-
tion shall give rise to a right to Company to obtain enforcement
of this Section in a court of equity by a decree of specific
performance or other injunctive relief. This remedy, however,
shall be cumulative and in addition to any other remedy Company
may have.
16. Patent, Trade Dress and Trademark Assignment. Executive
agrees without additional compensation to assign promptly
7
<PAGE>
to Company all rights, title, and interest in and to any and all trade
secrets, inventions, letters patent, applications for letters patent, trade
dress, and trademarks whether or not subject to state or federal
trademark during the term of employment hereunder if related to the then
current products and activities of Company, such activities to include,
without limitation, product development by Company, or if developed or made
with the use of its facilities, equipment, materials, personnel, or trade
secrets, or result directly from any work performed by Executive for
Company. Executive further agrees to disclose promptly to Company any
such trade secrets, inventions, letters patent, applications for letters
patent, trade dress, and trademarks, and, at the request and expense of
Company, to apply for letters patent or registration thereon in every
jurisdiction designated by Company.
17. Confidential Information. Executive agrees both during the
term of this Agreement and thereafter to keep secret and confidential all
information labeled confidential or not generally known which is heretofore or
hereafter acquired concerning the business and affairs of Company, including
without limitation, information regarding trade secrets, trade dress,
proprietary processes, confidential business plans, market research data and
financial data, and further agrees not to disclose any such information to any
person, firm, or corporation or use the same in any manner other than in
furtherance of the business or affairs of Company or unless such information
shall become public knowledge by other means. Executive agrees that such
information is a valuable, special, and unique asset of Company. Upon the
termination of Executive's employment with Company, Executive shall
immediately return to Company all documents, records, notebooks, and similar
repositories of information relating to confidential information of Company
and/or the development of any inventions.
18. Waiver of Breach. The waiver by Company or Executive of any
breach of a provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by the parties.
19. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
8
<PAGE>
(a) If to Company, to:
LADD Furniture, Inc.
One Plaza Center
P. O. Box HP-3
High Point, NC 27261
Attn: Chief Executive Officer
b) If to Executive, to:
Frederick L. Schuermann, Jr.
2106 San Fernando Dr.
High Point, NC 27265
20. Entire Agreement. This Agreement supersedes any and all
other understandings and agreements, either oral or in writing, between the
parties hereto with respect to the subject matter hereof and constitutes the
sole and only agreement between the parties with respect to said subject
matter. Each party to this Agreement acknowledges that no representations,
inducements, promises, or agreements, oral or otherwise, have been made by any
party or by anyone acting on behalf of any party, which are not embodied here-
in, and that no agreement, statement, or promise not contained in this
Agreement shall be valid or binding or of any force or effect. No change or
modification of this Agreement shall be valid or binding upon the parties
hereto unless such change or modification is in writing and is signed by the
parties hereto.
21. Severability. If any one or more of the provisions
contained in this Agreement shall be held by a court of competent jurisdiction
to be invalid, illegal, or unenforceable in any respect for any reason, that
invalidity, illegality, or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if that invalid,
illegal, or unenforceable provision had never been contained herein.
22. Parties Bound. The terms, promises, covenants, and
agreements contained in this Agreement shall apply to, be binding upon, and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement may not be assigned by Company
or Executive without the prior written consent of the other party.
9
<PAGE>
23. Consolidation, Merger or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into, or
with, or transferring all or substantially all of its assets to another
corporation which assumes this Agreement and all obligations and undertakings
of the Company hereunder. Upon such a consolidation or merger, the use of the
word "Company" herein shall mean such other corporation, and this Agreement
shall continue in full force and effect.
24. Survival. The provisions of Sections 15 and 17 of this
Agreement shall survive the termination of this Agreement and shall continue
for the terms set forth in Sections 15 and 17.
25. Captions. Captions to the Sections of this Agreement are
inserted solely for the convenience of the parties, are not a part of this
Agreement, and in no way define, limit, extend or describe the scope thereof
or the intent of any of the provisions.
26. Applicable Law. This Agreement shall be construed and the
legal relationship between the parties determined in accordance with the laws
of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals as of the day and year first above written, the corporate
party acting through duly authorized officers.
ATTEST: LADD Furniture, Inc.
___________________________ By:_______________________________
Secretary Chairman of the Board and
Chief Executive Officer
(Corporate Seal)
___________________________ s/Frederick L. Schuermann, Jr. (SEAL)
(Witness) Frederick L. Schuermann, Jr.
10
Exhibit 10.3
NORTH CAROLINA )
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the 28th day of October,
1994, and effective as of September 1, 1994, by and between LADD Furniture,
Inc., a North Carolina corporation ("Company"), and Gerald R. Grubbs, an
individual resident of Virginia ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and
sale of furniture; and
WHEREAS, Company desires to employ Executive as its Vice Chairman
and Executive desires to accept such employment on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive
hereby accepts employment and agrees to remain in the employ of the company
during the term of this Agreement, on the terms and conditions hereinafter set
forth.
2. Term of Employment. Subject to the provisions in Section 9
below, the term of this Agreement shall be for a two-year period beginning on
the date hereof and terminating on August 31, 1996, unless otherwise
terminated as provided herein.
3. Nature of Employment. Executive is employed as Vice
Chairman of Company. Consistent with such position, Executive shall, subject
to the direction of the Chief Executive Officer and the Board of Directors of
Company, direct and manage the affairs of the Company as assigned. Executive
shall report to and be responsible to the Chief Executive Officer. During the
term of this Agreement and any extensions or renewals thereof, Executive shall
have no other employment of any nature whatsoever without the prior consent of
Company. Accordingly, unless otherwise approved by Company, Executive agrees
to devote his full working time to the business of Company; provided, however,
nothing herein contained shall restrict or prevent Executive from personally
and for his own
<PAGE>
account owning and dealing in stocks, bonds, securities, real estate,
commodities, or other investment properties for his own benefit or the
benefit of his family. Further, nothing herein contained shall restrict or
prevent Executive from serving on the Board of Directors of any entity which
does not directly of indirectly compete with Company.
4. Compensation.
(a) Base Salary. Compensation to Executive for the services
rendered on behalf of Company during the term of this Agreement shall be no
less than Two Hundred Thirty-Five Thousand Dollars ($ 235,000.00) per year,
payable in equal monthly installments. From time to time during the term of
this Agreement, Executive's compensation may be increased if approved by the
Board of Directors of Company, but shall in no event be decreased from the
amount of the base salary in effect at that time. Company shall review
Executive's compensation hereunder at least on an annual basis.
(b) Incentive Compensation. In addition to Executive's base
salary, Executive shall be entitled to participate in incentive compensation
plans and programs generally available to executives of the Company, provided
that performance goals and award targets used in the computation of awards to
the Executive hereunder shall be no less favorable than those which are used
in the computation of awards to other executives of the Company and shall
recognize the level of responsibility of the Executive. The annual incentive
opportunity shall have a maximum no less than one hundred percent (100%) of
Executive's then current base salary.
5. Expenses. Executive is authorized to incur reasonable
expenses in connection with the business of Company, including expenses for
travel and similar items. Company will reimburse Executive for all such
expenses upon the presentation by Executive, from time to time, of an itemized
account of expenditures.
6. Vacation. Executive shall be entitled to paid vacations
during each calendar year of the term of this Agreement at such times and for
such duration as may be determined by the Chief Executive Officer of the
Company, taking into consideration the needs and requirements of Company for
Executive's services; provided, however, the minimum paid vacation to which
Executive shall be entitled in any calendar year is four (4) weeks.
2
<PAGE>
7. Death During Employment. If Executive dies during the term
of this Agreement, Company shall pay to the estate of Executive the
compensation to which he would otherwise be entitled through the end of the
month in which death occurs in accordance with Section 4(a) above, plus the
sum of Five Thousand Dollars ($5,000.00) as an additional death benefit.
Company shall also pay to the estate of Executive an amount equal to any bonus
or other incentive payments which would otherwise have been due to Executive
had Executive been employed as of fiscal year end, pro-rated to date of death.
This Agreement shall thereupon terminate, and Company shall have no further
obligation to the estate of Executive.
8. Permanent Disability During Employment. If Executive
becomes permanently disabled during the term of this Agreement, Company shall
pay to Executive the compensation, in accordance with Section 4(a) above, to
which he would otherwise be entitled to the end of the month in which such
permanent disability occurs. Thereafter, the Executive shall continue to
receive his then base salary, minus any payments provided by the Company's
benefit plans and by any government sponsored program, for a twenty-four (24)
month period from the date of permanent disability. This Agreement shall
thereupon terminate and Company shall have no further obligation to Executive
except as may be provided under Company's short-term and long-term disability
plans during the term of such disability and any prorata portion of any bonus
or incentive plan. Permanent disability for purposes of this Agreement shall
mean a physical or mental condition of Executive that renders Executive
incapable of performing the essential duties of his job and which condition
shall be medically determined to be of permanent duration as same is construed
under Company's disability plans.
9. Renewal. Executive's term of employment shall be auto-
matically extended upon the same terms and conditions contained herein for
successive one-year periods unless a written notice of termination is given by
either party at least 90 days before the end of the term of employment or any
renewals or extensions thereof. In the event that the Company gives timely
notice to terminate this Agreement, the severance provision of Section 11
pertaining to termination without cause shall become effective.
10. Termination for Cause. Company may terminate Executive's
employment at any time "for cause". The term "for
3
<PAGE>
cause" shall mean (i) a material default or other breach by Executive of his
obligations under this Agreement, (ii) material failure by Executive to
diligently and competently perform his duties under this Agreement,
which shall be determined by Company's Board of Directors in
its reasonable discretion, (iii) insubordination or other act or acts by
Executive detrimental to Company or damaging to Company's relationships with
customers, suppliers or employees or (iv) fraud, dishonesty, misappropriation
of Company's assets, or conviction of a felony. Upon the occurrence of
(i), (ii) or (iii) above, Company shall be entitled to terminate the
employment relationship hereunder upon thirty (30) days prior written
notice to Executive, which notice shall state the reason for such
termination and shall provide Executive an opportunity to remedy or
cure such cause during such period. If such cause is not remedied or cured
during such period, Company may terminate Executive's employment immediately.
In the event of a termination for cause, Company shall have no obligation or
liability to Executive under this Agreement except for the compensation to
which he is entitled through the end of the month of termination in accordance
with Section 4(a) above.
11. Termination Without Cause. Company shall be entitled to
terminate the employment relationship hereunder without cause at any time upon
thirty (30) days prior written notice to Executive. In such event, Executive,
if requested by Company, shall continue to render his services up to the date
of termination and shall be paid the compensation to which he is entitled
through the end of the month of termination in accordance with Section 4(a)
above. In addition, if Company terminates this Agreement for any reason other
than for cause, as specified in Section 10 above, the Executive shall be
entitled to receive in twenty-four (24) equal monthly payments in an amount
equal to two times the sum of (i) his then current base salary in accordance
with Section 4(a) above and (ii) the average annual incentive payments to the
Executive during the preceding three (3) years less earned income received
during the 24-month severance period. Further, Executive shall be deemed to
be One Hundred Percent (100%) vested in the Supplemental Retirement Income
Plan for Salaried Employees of LADD Furniture, Inc.("SERP"). Payments under
this Section 11 are in addition to and not in lieu of any benefits under the
SERP or other benefit programs of the Company. The Company shall thereafter
have no other obligation or liability to Executive under this Agreement.
4
<PAGE>
12. Termination upon Change of Control. In the event of a
"change in control" of the Company (as hereinafter defined), the Executive may
terminate his employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean the occurrence of any of the following events during
the twelve (12) months immediately preceding or following the effective date
of a change in control of the Company:
(a) a material change in the scope of the Executive's
assigned duties and responsibilities from those in
effect immediately prior to a change in control of the
Company or the assignment of duties or
responsibilities that are inconsistent with the
Executive's status in the Company;
(b) a reduction by the Company in the Executive's base
salary or incentive compensation as in effect on the
date of a change in control;
(c) the Company's requirement that the Executive be
based anywhere other than the Company's office at
which he was based prior to the change in control of
the Company; or
(d) the failure by the Company to continue to provide
the Executive with benefits substantially similar to
those specified in Section 14 of this Agreement.
If the Executive shall terminate his employment for Good Reason,
then the Company shall pay him a lump sum severance payment in an amount equal
to two times the sum of (i) his then current base salary and (ii) the average
annual incentive payments to the Executive during the preceding three (3)
years. Further, upon termination for Good Reason, the Executive shall
immediately become 100% vested in the SERP, all outstanding stock options
shall become immediately exercisable and all restrictions under Restricted
Stock Agreements shall be eliminated.
For purposes of this Agreement, a "change in control" shall be
deemed to have occurred when (i) any person, corporation, or group of
associated persons, excluding affiliates of the
5
<PAGE>
Company, acquires a beneficial ownership of an aggregate of more than
fifty percent (50%) of the then outstanding shares of voting stock of
the Company or (ii) a merger or consolidation to which the Company is
a party and where the Company is not a surviving or continuing entity has
been completed.
13. Property of Company. Executive agrees that upon the
termination of his employment he will turn over to Company all property of
Company which has come into his possession while an Executive of Company.
14. Additional Benefits. During the term of this Agreement and
any renewals or extensions thereof, Company shall keep and maintain, for the
benefit of Executive, life insurance having a death benefit of not less than
one hundred percent (100%) of base pay (not to exceed $300,000) and disability
insurance that will provide Executive a benefit of not less than sixty-percent
(60%) of base pay per month during the term of any disability. Executive and,
as applicable, the Executive's family shall also have the right to participate
in any Executive benefit plans or other fringe benefits adopted by Company for
its officers and/or other key management employees or as a part of Company's
regular compensation structure for its employees, including any group
hospitalization, medical, dental, accidental death and disability and long-
term disability income replacement insurance plans and any retirement income
and capital accumulation plans. All such benefits shall be in addition to the
compensation payments provided by this Agreement.
15. Covenants by Executive.
(a) Non-competition. During the term of employment under
this Agreement including any renewals or extensions thereof, and
for a period of two (2) years thereafter, Executive shall not,
without the prior written approval of Company, directly or
indirectly, as employer, employee, partner, stockholder, joint
venturer or otherwise, enter into or in any manner take part in
any business or other endeavor which would be in competition with
Company in the continental United States as such business is
conducted at the time of termination.
(b) Respect for Economic Relationships. Executive will
not, during the term of his employment under this
6
<PAGE>
Agreement including any renewals or extensions thereof, and for a
period of two (2) years thereafter, in any fashion, form, or manner,
either directly or indirectly, solicit, interfere with, or endeavor
to entice away from Company any customer or person, firm or
corporation, regularly dealing with Company or directly or
indirectly interfere with, entice away, or cause any other entity
to employ any other employee of Company.
(c) Validity of Covenants. Executive agrees that the
covenants contained in this Section are reasonably necessary to
protect the legitimate interests of Company, are reasonable with
respect to time, territory and scope, and do not interfere with
the interests of the public. Executive further agrees that the
descriptions of the covenants contained in this Section are
sufficiently accurate and definite to inform Executive of the
scope of such covenants. Executive acknowledges that prior to
entering into this Agreement he was employed "at will", and agrees
that the term of employment and termination provisions contained
in Sections 2, 9, 10 and 11 above constitute fully adequate and
sufficient consideration for the covenants contained in Sections
15 and 17 of this Agreement.
(d) Specific Performance. Executive agrees that a breach
or violation of any of the covenants under this Section will
result in immediate and irreparable harm to Company in an amount
which will be impossible to ascertain at the time of the breach or
violation and that the award of monetary damages will not be
adequate relief to Company. Therefore, the failure on the part of
Executive to perform all of the covenants established by this Sec-
tion shall give rise to a right to Company to obtain enforcement
of this Section in a court of equity by a decree of specific
performance or other injunctive relief. This remedy, however,
shall be cumulative and in addition to any other remedy Company
may have.
16. Patent, Trade Dress and Trademark Assignment. Executive
agrees without additional compensation to assign promptly to Company all
rights, title, and interest in and to any and all trade secrets, inventions,
letters patent, applications for letters patent, trade dress, and trademarks
whether or not subject to state
7
<PAGE>
or federal trademark during the term of employment hereunder if related to
the then current products and activities of Company, such activities to
include, without limitation, product development by Company, or if developed
or made with the use of its facilities, equipment, materials, personnel,
or trade secrets, or result directly from any work performed by
Executive for Company. Executive further agrees to disclose promptly
to Company any such trade secrets, inventions, letters patent,
applications for letters patent, trade dress, and trademarks, and, at the
request and expense of Company, to apply for letters patent or registration
thereon in every jurisdiction designated by Company.
17. Confidential Information. Executive agrees both during the
term of this Agreement and thereafter to keep secret and confidential all
information labeled confidential or not generally known which is heretofore or
hereafter acquired concerning the business and affairs of Company, including
without limitation, information regarding trade secrets, trade dress,
proprietary processes, confidential business plans, market research data and
financial data, and further agrees not to disclose any such information to any
person, firm, or corporation or use the same in any manner other than in
furtherance of the business or affairs of Company or unless such information
shall become public knowledge by other means. Executive agrees that such
information is a valuable, special, and unique asset of Company. Upon the
termination of Executive's employment with Company, Executive shall
immediately return to Company all documents, records, notebooks, and similar
repositories of information relating to confidential information of Company
and/or the development of any inventions.
18. Waiver of Breach. The waiver by Company or Executive of any
breach of a provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by the parties.
19. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
8
<PAGE>
(a) If to Company, to:
LADD Furniture, Inc.
One Plaza Center
P. O. Box HP-3
High Point, NC 27261
Attn: Chief Financial Officer
b) If to Executive, to:
Gerald R. Grubbs
504 Forest Drive
South Boston, VA 24592
20. Entire Agreement. This Agreement supersedes any and all
other understandings and agreements, either oral or in writing, between the
parties hereto with respect to the subject matter hereof and constitutes the
sole and only agreement between the parties with respect to said subject
matter. Each party to this Agreement acknowledges that no representations,
inducements, promises, or agreements, oral or otherwise, have been made by any
party or by anyone acting on behalf of any party, which are not embodied here-
in, and that no agreement, statement, or promise not contained in this
Agreement shall be valid or binding or of any force or effect. No change or
modification of this Agreement shall be valid or binding upon the parties
hereto unless such change or modification is in writing and is signed by the
parties hereto.
21. Severability. If any one or more of the provisions
contained in this Agreement shall be held by a court of competent jurisdiction
to be invalid, illegal, or unenforceable in any respect for any reason, that
invalidity, illegality, or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if that invalid,
illegal, or unenforceable provision had never been contained herein.
22. Parties Bound. The terms, promises, covenants, and
agreements contained in this Agreement shall apply to, be binding upon, and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement may not be assigned by Company
or Executive without the prior written consent of the other party.
9
<PAGE>
23. Consolidation, Merger or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into, or
with, or transferring all or substantially all of its assets to another
corporation which assumes this Agreement and all obligations and undertakings
of the Company hereunder. Upon such a consolidation or merger, the use of the
word "Company" herein shall mean such other corporation, and this Agreement
shall continue in full force and effect.
24. Survival. The provisions of Sections 15 and 17 of this
Agreement shall survive the termination of this Agreement and shall continue
for the terms set forth in Sections 15 and 17.
25. Captions. Captions to the Sections of this Agreement are
inserted solely for the convenience of the parties, are not a part of this
Agreement, and in no way define, limit, extend or describe the scope thereof
or the intent of any of the provisions.
26. Applicable Law. This Agreement shall be construed and the
legal relationship between the parties determined in accordance with the laws
of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals as of the day and year first above written, the corporate
party acting through duly authorized officers.
ATTEST: LADD Furniture, Inc.
___________________________ By:_______________________________
Secretary Chairman of the Board and
Chief Executive Officer
(Corporate Seal)
___________________________ s/Gerald R. Grubbs (SEAL)
(Witness) Gerald R. Grubbs
10
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