<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:
(x) Preliminary proxy statement
( ) 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
March , 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,
NC. 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--see appendix)
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
March , 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 March , 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
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) 19.1
</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) ($)(3) (POUND) ($) ($)(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/$0).
(4) The amounts disclosed represent the Company's annual contribution on behalf
of each of the named executives to match pre-tax elective deferral
contributions (included under Salary) made by each under the Company's
401(k) Savings Plan for Salaried Employees.
9
<PAGE>
STOCK OPTIONS
The following table sets forth information with regard to grants of stock
options during the fiscal year ended January 1, 1994, to each of the named
Senior Executives. All such grants were made under the Amended and Restated 1983
Incentive Stock Option Plan, which plan expired in June 1993 and is proposed to
be replaced by the Company's 1994 Incentive Stock Option Plan (see Item 2 of
this Proxy Statement). Additionally, the values assigned to each reported option
are shown assuming five percent and ten percent compounded annual growth rates
in the market value of the Company's Common Stock. In assessing these values it
should be kept in mind that no matter what theoretical value is placed on a
stock option on the date of grant, its ultimate value will be dependent on the
market value of the Company's stock at a future date.
STOCK OPTION GRANTS IN 1993
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE
AT
ASSUMED
ANNUAL
RATES
OF
STOCK
PRICE
INDIVIDUAL GRANTS APPRECIATION
NUMBER OF FOR
SECURITIES % OF TOTAL OPTION
UNDERLYING OPTIONS GRANTED EXERCISE OR TERM
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION (3)
NAME (POUND)(1) FISCAL YEAR (2) ($/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
SHARES ACQUIRED UNDERLYING UNEXERCISED AT FY-END
ON EXERCISE VALUE OPTIONS AT FY-END (POUND) ($)(1)
NAME (POUND) REALIZED ($) 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 $ .
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.
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<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.
1994 INCENTIVE STOCK OPTION PLAN
EFFECTIVE FEBRUARY 24, 1994
<PAGE>
LADD FURNITURE, INC.
1994 INCENTIVE STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1. Purpose........................................................................................................ 1
Section 2. Administration................................................................................................. 1
Section 3. Stock Available for Options.................................................................................... 1
Section 4. Eligibility.................................................................................................... 2
Section 5. Option Price................................................................................................... 2
Section 6. Director Options............................................................................................... 3
Section 7. Expiration of Options.......................................................................................... 3
Section 8. Terms and Conditions of Options................................................................................ 3
Section 9. Exercise of Options............................................................................................ 3
Section 10. Termination of Employment -- Except by Death or Retirement.................................................... 4
Section 11. Termination of Employment -- Retirement....................................................................... 4
Section 12. Termination of Employment -- Death............................................................................ 4
Section 13. Restrictions on Transfer...................................................................................... 4
Section 14. Capital Adjustments Affecting Common Stock.................................................................... 4
Section 15. Application of Funds.......................................................................................... 5
Section 16. No Obligation to Exercise Option.............................................................................. 5
Section 17. Term of Plan.................................................................................................. 5
Section 18. Effective Date of Plan........................................................................................ 5
Section 19. Time of Granting of Options................................................................................... 5
Section 20. Termination and Amendment..................................................................................... 5
Section 21. Other Provisions.............................................................................................. 5
</TABLE>
<PAGE>
LADD FURNITURE, INC.
1994 INCENTIVE STOCK OPTION PLAN
THIS IS THE 1994 INCENTIVE STOCK OPTION PLAN (Plan) of LADD Furniture, Inc.
(LADD), a North Carolina corporation, with its principal office in High Point,
Guilford County, North Carolina, effective on February 24, 1994, under which
options may be granted from time to time to eligible employees and directors of
LADD and LADD's divisions and subsidiaries to purchase shares of common stock of
LADD, subject to the provisions set forth as follows:
SECTION 1. PURPOSE
The purpose of this Plan is to aid LADD in attracting capable executives
and directors and to provide a long range inducement for key employees and
directors to remain in the management of LADD, to perform at increasing levels
of effectiveness and to acquire a permanent stake in LADD with the interest and
outlook of an owner. These objectives will be promoted through the granting to
key employees and directors of options to acquire shares of common stock of LADD
pursuant to the terms of this Plan.
SECTION 2. ADMINISTRATION
The Plan shall be administered by a committee to be appointed from time to
time by the Board of Directors of LADD and shall serve at the pleasure of the
directors (the Committee). Any or all of the members of the Committee may be
members of the Board of Directors. The Committee shall consist of not less than
three (3) persons, all of whom shall be disinterested persons within the meaning
of Rule 16b-3 of the Securities Exchange Act of 1934, as amended from time to
time. The Committee, from time to time, may adopt rules and regulations for
carrying out the Plan.
Subject to the provisions of the Plan, the determinations or the
interpretation and construction of any provision of the Plan by the Committee
shall be final and conclusive upon all persons affected thereby. By way of
illustration and not of limitation, the Committee shall have the discretion (a)
to construe and interpret the Plan and all options granted hereunder and to
determine the terms and provisions (and amendments thereof) of the options
granted under the Plan (which need not be identical); (b) to define the terms
used in the Plan and in the options granted hereunder; (c) to prescribe, amend
and rescind rules and regulations relating to the Plan; (d) to determine the
individuals to whom and the time or times at which such options shall be
granted, the number of shares to be subject to each option, the option price,
the manner of exercise of the options, and the determination of leaves of
absence which may be granted to participants without constituting a termination
of their employment for the purposes of the Plan; (e) to correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any option
granted under the Plan; and (f) to make all other determinations necessary or
advisable for the administration of the Plan.
It shall be in the discretion of the Committee to grant options which
qualify as incentive stock options (as that term is defined in Section 422 of
the Internal Revenue Code of 1986, as amended) or which will be given tax
treatment as nonqualified stock options (herein referred to collectively as
options; however, whenever reference is specifically made only to incentive
stock options or nonqualified stock options, such reference shall be deemed to
be made to the exclusion of the other). Nonqualified stock options granted to
nonemployee directors pursuant to the terms of the Plan shall be referred to as
Director Options.
Any action of the Committee with respect to the Plan shall be taken by a
majority vote at a meeting of the Committee or by written consent of all of the
members of the Committee without a meeting.
SECTION 3. STOCK AVAILABLE FOR OPTIONS
The stock to be subject to options under the Plan shall be authorized but
unissued shares of common stock of LADD or, in the discretion of the Committee,
issued shares which have been reacquired by LADD. The total amount of stock for
which options may be granted under the Plan shall not exceed One Million Two
Hundred Thousand (1,200,000) shares. Such number of shares is subject to any
capital adjustments as provided in Section 14. In the event that an option
granted under the Plan expires or is terminated unexercised as to any shares
covered thereby, such shares thereafter shall be available for the granting of
options under the Plan; however, if the expiration or termination date of an
option is beyond the term of existence of the Plan as described in Section 17,
then any shares covered by unexercised or terminated options shall not
reactivate the existence of this Plan and therefore may not be available for
additional grants under the Plan.
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<PAGE>
SECTION 4. ELIGIBILITY
Options shall be granted only to individuals who meet the following
eligibility requirements:
(a) Such individual must be an employee of LADD or a division or subsidiary
of LADD or a director of LADD. An individual shall be considered to be an
employee only if there exists between LADD or a division or subsidiary of LADD
and the individual the legal and bona fide relationship of employer and
employee. In determining whether such relationship exists, the regulations of
the United States Treasury Department relating to the determination of such
relationship for the purpose of collection of income tax at the source on wages
shall be applied.
(b) Such employees must be key employees of LADD or a division or
subsidiary of LADD. For this purpose, key employees shall be considered to be
those employees who, in the judgment of the Committee, are in a position
materially to affect the operations and profitability of LADD or a division or
subsidiary of LADD by reason of the nature and extent of their duties and
responsibilities.
(c) A director of LADD who is not also an employee of LADD is eligible for
an automatic grant of options pursuant to Section 6 hereof. A director of LADD
who is not also an employee of LADD will not be eligible to receive incentive
stock options and will only be eligible to receive Director Options.
(d) Such individual, being otherwise eligible under this Section 4, shall
have been selected by the Committee as a person to whom an option shall be
granted under the Plan.
(e) In determining the individuals to whom options shall be granted and the
number of shares to be covered by each option, the Committee shall take into
account the nature of the services rendered by the respective individuals, their
present and potential contributions to the success of LADD and such other
factors as the Committee shall deem relevant. An employee who has been granted
an option under the Plan may be granted an additional option or options under
the Plan if the Committee shall so determine.
SECTION 5. OPTION PRICE
(a) (i) Except in the case where incentive stock options are granted to an
individual who owns stock possessing more than 10 percent (10%) of the total
combined voting power of all classes of stock of LADD or its subsidiary
corporations (ten percent shareholder), the option price of each incentive stock
option granted under the Plan shall be not less than one hundred percent (100%)
of the market value of the stock on the date of grant of the incentive stock
option. In the case of incentive stock options granted to a ten percent
shareholder, the option price of each incentive stock option granted under the
Plan shall not be less than one hundred ten percent (110%) of the market value
of the stock on the date of grant of the incentive stock option. Market value
shall be determined by taking the closing price of the stock on the
over-the-counter market on that date. The option price is subject to any capital
adjustment as provided in Section 14.
(ii) The option price for nonqualified stock options granted to employees
shall be established by the Committee in its discretion and may be less than
market value of the stock on date of grant.
(iii) The option price for Director Options shall be not less than the
market value of the stock on date of grant. Market value shall be determined as
set forth in Section 5(a)(i) above.
(b) The option price shall be payable to LADD either (i) in cash or by
check, bank draft or money order payable to the order of LADD, or (ii) at the
discretion of the Committee, through the delivery of shares of the common stock
of LADD owned by the optionee with a value equal to the option price, or (iii)
at the discretion of the Committee by a combination of (i) and (ii) above. An
option agreement may, in the discretion of the Committee, provide for a cashless
exercise of an incentive stock option or a nonqualified stock option by
establishing procedures whereby the optionee, by a properly executed written
notice, directs (1) an immediate market sale or margin loan respecting all or a
part of the shares of common stock to which he is entitled upon exercise
pursuant to an extension of credit by LADD to the optionee of the option price,
(2) delivery of the shares of common stock from LADD directly to a brokerage
firm and (3) the delivery of the option price from sale or margin loan proceeds
from the brokerage firm directly to LADD. Except as provided in the preceding
sentence, no shares shall be delivered until full payment has been made. The
Committee may not approve a reduction of such purchase price in any such option,
or the cancellation of any such option and the regranting thereof to the same
optionee at a lower purchase price, at a time when the market value of the
shares is lower than it was when such option was granted.
2
<PAGE>
SECTION 6. DIRECTOR OPTIONS
All eligible nonemployee directors of LADD will automatically receive
without any action required on the part of the Committee the following grants of
options (Director Options): 1) upon initial election to office, nonqualified
stock options to purchase two thousand (2,000) shares of LADD common stock and
2) upon subsequent elections to office each year, first beginning with the
election of directors at the 1994 Annual Meeting of Shareholders, nonqualified
stock options to purchase fifteen hundred (1,500) shares of LADD common stock.
All characteristics of the Director Options, including option price, shall be
established as provided in the Plan. The Committee shall exercise no discretion
with respect to the granting of Director Options.
SECTION 7. EXPIRATION OF OPTIONS
The Committee shall determine the expiration date or dates of each option,
but such expiration date shall be not later than ten (10) years after the date
such option is granted; provided, however, that in the case where incentive
stock options are granted to a ten percent shareholder, as defined in Section
5(a)(i) hereof, such expiration date shall be not later than five (5) years
after the date such option is granted. The Committee, in its discretion, may
extend the expiration date or dates of an option after such date was originally
set; however, such expiration date may not exceed the maximum expiration date
described above. Notwithstanding the foregoing, all Director Options shall be
for a term of six (6) years, and such term may not be extended or modified by
the Committee.
SECTION 8. TERMS AND CONDITIONS OF OPTIONS
(a) All options must be granted within ten (10) years of the Effective Date
of this Plan as provided in Section 18.
(b) The grant of options shall be evidenced by a written instrument
containing terms and conditions established by the Committee consistent with the
provisions of this Plan.
(c) Not less than one hundred (100) shares may be purchased at any one time
unless the number purchased is the total number at that time purchasable under
the Plan.
(d) The Committee may grant an option or options and stipulate that a
portion of such option expires or becomes exercisable at a stated interval or
that portions of such option expire or become exercisable at several stated
intervals. Director Options shall be exercisable in installments of twenty
percent (20%) per year, cumulative, beginning one year after the date of grant.
(e) An optionee shall have no rights as a stockholder with respect to any
shares covered by his option until payment in full by him for the shares being
purchased. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock is fully paid for,
except as provided in Section 14 hereof.
(f) Notwithstanding any other provision of the Plan, the aggregate fair
market value (determined at the time the option is granted) of the stock with
respect to which incentive stock options are exercisable for the first time by
an optionee during any calendar year (including incentive stock options granted
under all option plans of LADD or any of its subsidiary corporations) shall not
exceed $100,000.
(g) Notwithstanding any other provision of the Plan, the total number of
shares of common stock of LADD with respect to which incentive stock options,
nonqualifying options and Director Options are granted to an optionee during any
calendar year shall not exceed ten percent (10%) of the total number of shares
reserved for grant under the Plan as provided in Section 3.
SECTION 9. EXERCISE OF OPTIONS
(a) An optionee must have been continuously employed by LADD or a division
or subsidiary of LADD or be a director of LADD for 12 months before the right to
exercise any part of the option granted to such optionee shall accrue. Each
option granted under the Plan shall be exercisable in such annual installments
as may be determined by the Committee at the time of the grant, or with respect
to Director Options as provided in the Plan. The right to exercise options in
annual installments may be cumulative. Except as provided in Sections 11 and 12,
no option may be exercised at any time unless the holder thereof is then an
employee of LADD or a division or subsidiary of LADD or a director of LADD. The
exercise of any stock option must be evidenced by written notice to LADD that
the optionee intends to exercise his
3
<PAGE>
option. In no event shall an option granted pursuant to the terms of the Plan as
amended be exercised until the Plan, as amended, has been approved by the
shareholders of LADD.
(b) No option may be exercised and no shares may be acquired under the Plan
prior to the timely filing by both the optionee and LADD of all appropriate
documents that may be required by applicable federal and state securities laws
and state corporate laws.
SECTION 10. TERMINATION OF EMPLOYMENT -- EXCEPT BY DEATH OR RETIREMENT
If any optionee ceases to be employed by LADD or a division or subsidiary
of LADD or ceases to be a director of LADD for any reason other than his death
(Section 12), disability retirement (Section 11), or normal retirement (Section
11), his option shall immediately terminate. Whether a leave of absence shall
constitute a termination of employment or termination of the directorship shall
be determined by the Committee, whose decision shall be final and conclusive.
SECTION 11. TERMINATION OF EMPLOYMENT -- RETIREMENT
If any optionee ceases to be employed by LADD or a division or subsidiary
of LADD or ceases to be a director of LADD due to his retirement upon attaining
normal retirement age (age 65) or he ceases to be employed prior to age 65 due
to early retirement and such early retirement is acceptable to the Committee for
the purposes of this Section 11, he may, at any time within three (3) months
after his date of retirement, but not later than the date of expiration of the
option, exercise the option to the extent he was entitled to do so on his date
of retirement. If any optionee ceases to be employed by LADD or a division or
subsidiary of LADD or ceases to be a director of LADD due to his becoming
disabled for purposes of LADD's Disability Plan, he may, at any time within
twelve (12) months after his date of disability retirement, but not later than
the date of expiration of the option, exercise the option to the same extent he
was entitled to do so on his date of disability retirement. Any options or
portions of options of retired optionees not so exercised shall terminate.
SECTION 12. TERMINATION OF EMPLOYMENT -- DEATH
If an optionee dies while in the employment of LADD or a division or
subsidiary of LADD or while serving as a director of LADD, the person or persons
to whom the option is transferred by will or by the laws of descent and
distribution may exercise the same option to the same extent and upon the same
terms and conditions the optionee would have been entitled to do so had he lived
until the term of the option had expired. Any options or portions of options of
deceased optionees not so exercised shall terminate.
SECTION 13. RESTRICTIONS ON TRANSFER
An option granted under this Plan may not be transferred except by will or
the laws of descent and distribution and, during the lifetime of the optionee to
whom it was granted, may be exercised only by such optionee.
SECTION 14. CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK
(a) If the outstanding shares of the common stock of LADD are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of LADD or shares of a different par value or without par value
through recapitalization, reclassification, stock dividend, stock split,
amendment to LADD's Articles of Incorporation or reverse stock split, an
appropriate adjustment shall be made in the number and/or kind of securities
allocated to the options previously and subsequently granted under the Plan,
without change in the aggregate purchase price applicable to the unexercised
portion of the outstanding options but with a corresponding adjustment in the
price for each share or other unit of any security covered by the options.
(b) Upon the effective date of the dissolution or liquidation of LADD, or
of a reorganization, merger or consolidation of LADD with one or more
corporations in which LADD is not the surviving corporation, or of a transfer of
substantially all the property or more than eighty percent (80%) of the then
outstanding shares of LADD to another corporation, the Plan and any option
previously granted hereunder shall terminate unless provision is made in writing
in connection with such transaction for the continuance of the Plan and for the
assumption of options previously granted, or the substitution for such options
of new options covering the shares of a successor employer corporation, or of a
parent or subsidiary thereof, with appropriate adjustments as to number and kind
of shares and prices in which event the Plan and the options previously granted
or the new options substituted therefor, shall continue in the manner and under
the terms so provided. Nevertheless, in the event of such dissolution,
liquidation, reorganization, merger, consolidation, transfer of assets or
4
<PAGE>
transfer of shares, and if provision is not made in such transaction for the
continuance of the Plan and for the assumption of options previously granted or
for the substitution of such options or new options covering the shares of a
successor employer corporation or a parent or subsidiary thereof, then such
optionee under the Plan shall be entitled, prior to the effective date of any
such transaction, to purchase the full number of shares under his option which
he would otherwise have been entitled to purchase during the remaining term of
such option.
(c) To the extent that the foregoing adjustments relate to particular stock
or securities of LADD subject to option under this Plan, such adjustments shall
be made by the Committee, whose determination in that respect shall be final and
conclusive.
(d) The grant of an option pursuant to this Plan shall not affect in any
way the right or power of LADD to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(e) No fractional shares of stock shall be issued under the Plan for any
such adjustment.
SECTION 15. APPLICATION OF FUNDS
The proceeds received by LADD from the sale of common stock pursuant to
options will be used for general corporate purposes.
SECTION 16. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee to
exercise such option.
SECTION 17. TERM OF PLAN
Options may be granted pursuant to this Plan from time to time within a
period of ten (10) years from February 24, 1994.
SECTION 18. EFFECTIVE DATE OF PLAN
This Plan is effective February 24, 1994, following approval thereof by the
Board of Directors and shareholders.
SECTION 19. TIME OF GRANTING OF OPTIONS
Nothing contained in the Plan or in any resolution adopted or to be adopted
by the Committee or the shareholders of LADD and no action taken by the
Committee shall constitute the granting of any option hereunder. The granting of
an option pursuant to the Plan shall take place only when a written option
agreement shall have been duly executed and delivered by and on behalf of LADD.
SECTION 20. TERMINATION AND AMENDMENT
The Committee may at any time alter, suspend, terminate or discontinue the
Plan, but may not, without the consent of the holder of an option previously
granted, make any alteration which would deprive him of his rights with respect
thereto or, without the approval of the stockholders, make any alteration which
would (a) increase the number of aggregate shares subject to the option under
this Plan or decrease the minimum option price except as provided in Section 14;
or (b) extend the term of this Plan as provided in Section 17 or the maximum
period during which any option may be exercised as provided in Section 7.
SECTION 21. OTHER PROVISIONS
The option agreements authorized under this Plan shall contain such other
provisions not inconsistent with the foregoing, including, without limitation,
increased restrictions upon the exercise of the option, as the Committee may
deem advisable.
5
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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
