<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended July 2, 1994 Commission File No. 0-11577
LADD FURNITURE, INC.
(Exact name of registrant as specified in charter)
North Carolina 56-1311320
(State or other juris- (I.R.S. Employer
diction of incorpora- Identification No.)
tion or organization)
One Plaza Center, Box HP-3, High Point, North Carolina 27261-1500
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (910) 889-0333
_____________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
______________________
As of August 11, 1994 there were 23,096,557 shares of Common
Stock ($.10 par value) of the registrant outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the thirteen weeks and twenty-six weeks
ended July 2, 1994 and July 3, 1993
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $ 153,182 133,840 292,221 269,968
Cost of sales 122,657 107,328 236,112 218,572
Gross profit 30,525 26,512 56,109 51,396
Selling, general and
administrative expenses 23,996 21,252 45,565 41,858
Operating income 6,529 5,260 10,544 9,538
Other deductions (income):
Interest expense 2,206 1,374 3,840 2,765
Other, net 524 (79) 476 (151)
2,730 1,295 4,316 2,614
Earnings before income taxes 3,799 3,965 6,228 6,924
Income tax expense 1,094 1,615 1,868 2,824
Net earnings $ 2,705 2,350 4,360 4,100
Net earnings per common share $ 0.12 0.10 0.19 0.18
Weighted average number of
common shares outstanding 23,087 23,060 23,077 23,047
</TABLE>
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<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
July 2, 1994 and January 1, 1994
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
July 2,
1994 January 1,
(Unaudited) 1994 *
<S> <C> <C>
Current assets:
Cash $ 1,436 1,350
Trade accounts receivable, less allowances
for doubtful receivables, discounts,
returns and allowances of $4,397 and $4,178,
respectively (Note 4) 57,259 72,975
Inventories (Note 2) 121,766 100,639
Prepaid expenses and other current assets 11,164 6,110
Total current assets 191,625 181,074
Property, plant and equipment, net 117,780 97,497
Intangible and other assets, net 84,968 57,166
$ 394,373 335,737
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 7,704 5,815
Short-term bank borrowings (Note 5) 22,650 -
Trade accounts payable 29,445 23,414
Accrued expenses and other current liabilities 35,477 28,841
Total current liabilities 95,276 58,070
Long-term debt, excluding current installments 126,967 105,257
Deferred compensation and other liabilities 2,739 3,405
Deferred income taxes 16,253 18,902
Total liabilities 241,235 185,634
Shareholders' equity:
Preferred stock of $100 par value. Authorized
500,000 shares; no shares issued - -
Common stock of $.10 par value. Authorized
50,000,000 shares; issued 23,093,557 and
23,062,262 shares, respectively 2,309 2,306
Additional paid-in capital 49,495 49,186
Currency translation adjustment (232) (170)
Retained earnings 102,543 99,568
154,115 150,890
Less unamortized value of restricted stock (977) (787)
Total shareholders' equity 153,138 150,103
$ 394,373 335,737
</TABLE>
* Derived from the Company's 1993 Annual Report.
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<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the thirteen weeks ended July 2, 1994 and July 3, 1993
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks Ended
July 2, July 3,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,360 4,100
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation of property, plant and equipment 6,621 4,881
Amortization 1,600 1,263
Provision for losses on trade accounts receivable 1,473 861
Gain on sales of property, plant and equipment (155) (172)
Provision for deferred income taxes (199) (438)
Increase (decrease) in deferred compensation and
other liabilities (667) 1,009
Change in assets and liabilities, net of effects
from purchase of Pilliod Furniture in 1994
Increase in trade accounts receivable (5,508) (9,434)
Increase in inventories (9,803) (7,712)
(Increase) decrease in prepaid expenses and
other current assets (3,052) 73
Decrease in trade accounts payable (1,411) (3,742)
Increase in accrued expenses and other
current liabilities 4,531 584
Total adjustments (6,570) (12,827)
Net cash used in operating activities (2,210) (8,727)
Cash flows from investing activities:
Acquisition of Pilliod Furniture, net of cash
acquired (Note 3) (23,847) -
Additions to property, plant and equipment (17,817) (11,359)
Proceeds from sales of property, plant and equipment 295 239
Additions to other assets (606) (660)
Net cash used in investing activities (41,975) (11,780)
Cash flows from financing activities:
Proceeds from long-term borrowings 27,217 21,650
Proceeds from short-term bank borrowings 22,650 -
Proceeds from sales of trade accounts receivable 31,000 -
Principal payments of long-term debt (35,171) (848)
Proceeds from common stock issued 22 83
Dividends paid (1,385) (1,383)
Net cash provided by financing activities 44,333 19,502
Effect of exchange rate changes on cash (62) 10
Net increase (decrease) in cash 86 (995)
Cash at beginning of period 1,350 1,826
Cash at end of period $ 1,436 831
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 3,703 2,011
Cash paid during the period for income taxes 1,367 1,860
</TABLE>
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<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Currency Unamortized
Number Additional trans- value of Total
of shares Common paid-in lation Retained restricted shareholders'
issued stock capital adjustment earnings stock equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 2, 1993 23,019,631 $ 2,302 48,681 (89) 98,489 (659) 148,724
Shares issued in connection
with incentive stock
option plan 11,668 1 90 - - - 91
Shares issued in connection
with and amortization of
employee restricted
stock awards 30,963 3 415 - - (128) 290
Currency translation
adjustment - - - (81) - - (81)
Net earnings - - - - 3,846 - 3,846
Dividends paid - - - - (2,767) - (2,767)
BALANCE AT JANUARY 1, 1994 23,062,262 2,306 49,186 (170) 99,568 (787) 150,103
Shares issued in connection
with incentive stock
option plan 2,344 - 19 - - - 19
Repurchase of restricted
stock (18,424) (1) (170) - - 170 (1)
Shares issued in connection
with and amortization of
employee restricted
stock awards 47,375 4 460 - - (360) 104
Currency translation
adjustment - - - (62) - - (62)
Net earnings - - - - 4,360 - 4,360
Dividends paid - - - - (1,385) - (1,385)
BALANCE AT JULY 2, 1994
(UNAUDITED) 23,093,557 $ 2,309 49,495 (232) 102,543 (977) 153,138
</TABLE>
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<PAGE>
Notes:
(1) Quarterly Financial Data
The quarterly consolidated financial data are unaudited but
include, in the opinion of management, all adjustments
necessary for a fair statement of the operating results for
the interim periods indicated. All such adjustments are of a
normal recurring nature.
(2) Inventories
A summary of inventories follows (in thousands):
July 2, January 1,
1994 1994
Inventories on the FIFO
cost method:
Finished goods $ 69,369 55,881
Work in process 21,612 19,277
Raw materials and supplies 45,472 37,183
Total inventories on
the FIFO cost method 136,453 112,341
Less adjustments of certain inven-
tories to the LIFO cost method (14,687) (11,702)
$ 121,766 100,639
(3) Acquisition of Pilliod Furniture
On January 31, 1994, the Company acquired The Pilliod
Cabinet Company, a manufacturer of promotional priced
casegoods furniture, by purchasing all of the common stock
of its parent company, Pilliod Holding Company (Pilliod),
for $24,257,000 million cash (including acquisition
expenses), the repayment of Pilliod debt of $29,893,000
million, and the assumption of other long-term debt of
$247,000. The excess of cost over fair value of the net
assets acquired was approximately $32,629,000 and will be
amortized on a straight-line basis over 40 years. The
acquisition was accounted for as a purchase and accordingly,
the net assets and operations of Pilliod have been included
in the Company's consolidated financial statements beginning
on the acquisition date. Valuations assigned are
preliminary and subject to change.
The following unaudited pro forma data presents the combined
second quarter and six months 1994 and 1993 results of
operations of the Company and Pilliod as though the
acquisition had occurred on January 3, 1993, giving effect
to depreciation and amortization of assets on the accounting
basis recognized in recording the purchase,
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<PAGE>
the interest on funds used to effect the purchase, and excluding
certain non-recurring expenses of Pilliod during 1993 (in thousands,
except per share data).
13 Weeks Ended 26 Weeks Ended
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
Net sales $153,182 154,635 299,881 312,424
Net earnings 2,705 3,107 4,639 5,645
Net earnings per
common share $ 0.12 0.13 0.20 0.24
During the second quarter of 1994, management of the Company
became aware of a potential error in the inventory balances
of Pilliod. An internal review of Pilliod's inventories is
in progress which management believes will be completed during
the third quarter of 1994. Information currently available indicates
that the error also existed in the inventory balances included in
the January 31, 1994 audited consolidated financial statements of
Pilliod and that inventory balances may have been overstated by
approximately $1.4 million. Accordingly, management currently
believes an adjustment reducing inventory and increasing excess of cost
over fair value of the net assets acquired will ultimately be required.
The effect of this adjustment would not have a material
impact on the 1994 consolidated statements of operations of
the Company. Additionally, the net earnings and net
earnings per common share included in the unaudited pro
forma combined financial data of the Company and Pilliod for
the prior year thirteen and twenty-six week periods ended July 3,
1993 may ultimately be reduced should it be determined that the
inventory error arose during either of those periods.
(4) Accounts Receivable Securitization Program
On January 31, 1994, the Company sold ownership interest in
a defined pool of trade accounts receivable for $20,000,000,
the proceeds of which were used to partially finance the
Pilliod acquisition - see Note 3. Under the agreement (as
amended on May 11, 1994) which expires in January 1995, the
maximum amount of the purchaser's investment can be
$40,000,000 and is subject to change based on the level of
eligible receivables and concentrations of receivables. At
July 2, 1994 the pool of trade accounts receivable which met
specified eligibility requirements for sale totaled
approximately $43,951,000 and the purchaser's investment
totaled $31,000,000. The net cash proceeds are reported as
financing activities in the accompanying consolidated
statement of cash flows for the twenty-six weeks ended July
2, 1994. The purchaser's investment is reflected as a
reduction of trade accounts receivables in the accompanying
July 2, 1994 consolidated balance sheet. The Company
retains substantially the same risk of credit loss as if the
receivables had not been sold and has made allowance for
such loss. The total cost of the program is included in
selling, general and
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<PAGE>
administrative expense in the
accompanying 1994 second quarter and six months consolidated
statements of operations. A portion of the cost of the
accounts receivable sale program is based on the purchaser's
level of investment and borrowing costs.
(5) Short-term Bank Borrowings
During the first quarter of 1994, the Company established
unsecured short-term bank credit lines aggregating
$35,000,000, of which $22,650,000 was outstanding at July 2,
1994. These short-term bank credit lines expire on January
27, 1995 and February 28, 1995. The credit lines bear
interest at rates selected by the Company of LIBOR (4.94% at
July 2, 1994) plus 1 1/8%, prime (7.25% at July 2, 1994) or
at a lesser rate based on availability of bank funds. The
Company pays commitment fees ranging from 0.25% to 0.375% on
the unused portion of the short-term bank credit lines.
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<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The following table sets forth the percentage relationship of net
sales to certain items included in the Consolidated Statements of
Operations:
13 Weeks Ended 26 Weeks Ended
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 80.1 80.2 80.8 81.0
Gross profit 19.9 19.8 19.2 19.0
Selling, general and
administrative expenses 15.6 15.9 15.6 15.5
Operating income 4.3 3.9 3.6 3.5
Other deductions
Interest expense 1.4 1.0 1.3 1.0
Other, net .4 - .2 -
1.8 1.0 1.5 1.0
Earnings before income
taxes 2.5 2.9 2.1 2.5
Income tax expense .7 1.2 .6 1.0
Net earnings 1.8% 1.7% 1.5% 1.5%
The Company's 1994 second quarter and six months operating
results were influenced by the acquisition of Pilliod on January 31,
1994. Pilliod's results of operations are included in the Company's
consolidated financial statements from the date of acquisition - see
Note 3.
Net sales for the second quarter and first six months of 1994
were $153.2 million and $292.2 million, respectively, compared with
$133.8 million and $270.0 million during the comparable 1993 periods.
Net sales in 1994 increased from prior year levels by 14.5% for the
second quarter and 8.2% for the year-to-date. On a pro forma basis
assuming the acquisition of Pilliod took place at the beginning of
fiscal year 1993, net sales in 1994 would have decreased from prior
year levels by 0.9% for the second quarter and by 4.0% for the year-
to-date. The decrease in pro forma six months 1994 net sales was
primarily due to the discontinuance of certain American of
Martinsville residential casegoods product lines during the second
half of 1993; declines in 1994 export sales to Canada attributable to
weakness in the Canadian dollar against the U.S. dollar; shipments
under a large export contract to the Mideast in 1993 which did not
reoccur in the first half of 1994; and a decline in 1994 sales of
lower-priced upholstery products.
-9-
Cost of sales as a percentage of net sales decreased slightly to
80.1% for the second quarter of 1994 and to 80.8% for the year-to-
date, compared to 80.2% and 81.0%, respectively, in 1993. This
decrease resulted in an increase in the gross profit margins to 19.9%
for the second quarter and 19.2% for the year to date, from 19.8% and
19.0%, respectively, in 1993. Gross margins, however, continue to
be negatively impacted by high prices for hardwood lumber and increased
particleboard prices, as well as promotional discounting of sales
prices.
Selling, general and administrative (SG&A) expenses remained
comparable with prior periods. SG&A expenses were 15.6% of net sales
for the second quarter of 1994 from 15.9% for the same period in
1993, while first half SG&A expenses increased to 15.6% of net sales
in 1994 as compared to 15.5% in 1993.
Other deductions were 1.8% of net sales for the second quarter
and 1.5% for the first six months of 1994, compared to 1.0% for the
same periods in 1993. The increase in other deductions was primarily
attributable to an increase in interest expense due to the partial
funding of the $54.0 million Pilliod acquisition with long and short-
term bank borrowings (see Note 3), coupled with an increase in
interest rates. Additionally, amortization expense increased as a
result of the Pilliod acquisition.
The decrease in the Company's effective income tax rate from
40.8% in 1993's first six months to 30.0% in the first six months of
1994 was in part due to tax planning strategies implemented late in
1993 to reduce the Company's state income taxes. Additionally, the
effective income tax rate was favorably impacted by utilizing a
portion of both Pilliod's net operating loss carryforwards and the
Company's capital loss carryforwards.
Net earnings were $2.7 million, or $.12 per share, for the
second quarter of 1994, compared with $2.3 million, or $.10 per share
for the same quarter of 1993. First half net earnings were $4.4
million, or $.19 per share for 1994, compared with $4.1 million, or
$.18 per share, for 1993.
Liquidity and Capital Resources
The Company's current ratio at July 2, 1994 was 2.0 to 1
compared to 3.1 to 1 at January 1, 1994. Net working capital totaled
$96.3 million at July 2, 1994 compared to $123.0 million at January
1, 1994. The decline in the current ratio and the decrease in net
working capital were primarily attributable to an increase in short-
term bank borrowings of $22.7 million and the sale of $31.0 million
of trade accounts receivables through the Company's accounts
receivable securitization program (see Notes 4 and 5). The proceeds
of these transactions were both used principally to finance the
Pilliod acquisition.
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<PAGE>
During the first six months of 1994, the Company generated cash
from net earnings plus depreciation and amortization of $12.6 million
compared to $10.2 million in 1993. The cash generated in 1994 and
1993's first half of the year was utilized to partially fund
increases in working capital of $15.2 million and $20.2 million,
respectively.
During the first six months of 1994, capital spending totaled a
record $17.8 million compared to $11.4 million during the same period
in 1993. Capital expenditures were funded largely from operations
and borrowings under the Company's long-term and short-term revolving
credit lines. A majority of the capital spending during the first
six months of 1994 was to complete capital projects initiated in 1993
and early 1994.
During the first six months of 1994, the Company increased long-
term borrowings by $27.2 million. These incremental borrowings were
used principally to fund the Pilliod acquisition and the first six
month's capital expenditures. The Company had outstanding long-term
borrowings of $127.0 million at July 2, 1994, representing 42.5% of
total capitalization, compared to $105.3 million or 37.9% at January
1, 1994. At July 2, 1994, the Company had $12.3 million in unused
and available short-term revolving bank credit lines to meet future
cash requirements.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held
in High Point, North Carolina on April 28, 1994. Of the
23,082,996 shares of common stock outstanding on the record
date, 19,596,012 shares were present in person or by proxy.
Those shares were voted on the following matters as set
forth below:
A. Election of Directors:
Richard R. Allen Gerald R. Grubbs
For: 19,563,857 For: 19,563,957
Abstentions/ Abstentions/
Withhold Authority: 32,155 Withhold Authority: 32,055
Broker Non-Votes: 0 Broker Non-Votes: 0
William B. Cash Don A. Hunziker
For: 19,341,825 For: 19,563,757
Abstentions/ Abstentions/
Withhold Authority: 254,187 Withhold Authority: 32,255
Broker Non-Votes: 0 Broker Non-Votes: 0
James H. Corrigan, Jr. Thomas F. Keller
For: 19,564,257 For: 19,563,457
Abstentions/ Abstentions/
Withhold Authority: 31,755 Withhold Authority: 32,555
Broker Non-Votes: 0 Broker Non-Votes: 0
O. William Fenn, Jr Fred L. Schuermann, Jr.
For: 19,563,457 For: 19,564,057
Abstentions/ Abstentions/
Withhold Authority: 32,555 Withhold Authority: 31,955
Broker Non-Votes: 0 Broker Non-Votes: 0
B. Proposal to ratify the election of KPMG Peat Marwick as
independent auditors of the Company for 1994:
For: 19,553,112
Against: 12,963
Abstentions: 29,937
Broker Non-votes: 0
C. Proposal to approve the LADD Furniture, Inc. 1994
Incentive Stock Option Plan:
For: 16,775,881
Against: 1,393,021
Abstentions: 63,344
Broker Non-votes: 1,363,766
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 LADD Furniture, Inc. 1994 Incentive Stock Option
Plan
10.2 Amendment Number 2 to Transfer and Administration
Agreement dated as of May 11, 1994, between
Enterprise Funding Corporation, LADD Furniture,
Inc., and Clayton-Marcus Company, Inc., Barclay
Furniture, Co., LADD Transportation, Inc., and
Pilliod Furniture, Inc., as designated
subsidiaries
10.3 Amendment Number 1 to Receivables Purchase
Agreement dated as of May 11, 1994, between LADD
Furniture, Inc., Clayton-Marcus Company, Inc.,
Barclay Furniture, Co., LADD Transportation, Inc.,
and Pilliod Furniture, Inc.
10.4 Form of Amendment dated as of July 1, 1994 to the
Credit Agreement, dated as of January 15, 1993,
between the Company, The Chase Manhattan Bank
(National Association) as agent, and each of the
banks signatory to the Credit Agreement
(b) Reports on Form 8-K
During the quarter, the Company filed a Form 8-K/A-1
dated April 8, 1994 amending the Form 8-K report dated
February 14, 1994 which reported under Item 2 the Company's
acquisition of all of the outstanding stock of Pilliod
Holding Company. The Form 8-K/A-1 included the audited
financial statements for Pilliod Holding Company for
the nine months ended January 31, 1994 and pro forma
financial data reflecting the combination of the
Company and Pilliod as if the acquisition had occurred
January 3, 1993.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
LADD Furniture, Inc.
Date: August 16, 1994 By: s/William S. Creekmuir
William S. Creekmuir
Senior Vice President
and Chief Financial Officer
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<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
Section 1. Purpose . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Administration . . . . . . . . . . . . . . . . . . . . 1
Section 3. Stock Available for Options . . . . . . . . . . . . . 2
Section 4. Eligibility . . . . . . . . . . . . . . . . . . . . . 2
Section 5. Option Price . . . . . . . . . . . . . . . . . . . . . 3
Section 6. Director Options . . . . . . . . . . . . . . . . . . . 4
Section 7. Expiration of Options . . . . . . . . . . . . . . . . 4
Section 8. Terms and Conditions of Options . . . . . . . . . . . 4
Section 9. Exercise of Options . . . . . . . . . . . . . . . . . 5
Section 10. Termination of Employment - Except by Death or
Retirement . . . . . . . . . . . . . . . . . . . . . 6
Section 11. Termination of Employment - Retirement . . . . . . . . 6
Section 12. Termination of Employment - Death . . . . . . . . . . . 6
Section 13. Restrictions on Transfer . . . . . . . . . . . . . . . 7
Section 14. Capital Adjustments Affecting Common Stock . . . . . . 7
Section 15. Application of Funds . . . . . . . . . . . . . . . . . 8
Section 16. No Obligation to Exercise Option . . . . . . . . . . . 8
Section 17. Term of Plan . . . . . . . . . . . . . . . . . . . . . 8
Section 18. Effective Date of Plan . . . . . . . . . . . . . . . . 8
Section 19. Time of Granting of Options . . . . . . . . . . . . . . 8
<PAGE>
Section 20. Termination and Amendment . . . . . . . . . . . . . . . 8
Section 21. Other Provisions . . . . . . . . . . . . . . . . . . . 9
<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 ap-
pointed 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.
<PAGE>
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 reac-
quired 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.
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 indi-
vidual 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 collec-
tion 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 employ-
ees" shall be considered to be those employees who, in the
judgment of the Committee, are in a position materially to affect
the operations
2
<PAGE>
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
3
<PAGE>
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.
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.
4
<PAGE>
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 exer-
cisable 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
5
<PAGE>
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 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.
6
<PAGE>
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 sub-
stantially 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 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 remain-
ing 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
7
<PAGE>
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.
8
<PAGE>
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.
9
AMENDMENT NUMBER 2 TO
TRANSFER AND ADMINISTRATION AGREEMENT
AMENDMENT NUMBER 2 TO TRANSFER AND ADMINISTRA-
TION AGREEMENT (this "Amendment"), dated as of May 11,
1994, between LADD FURNITURE, INC., a North Carolina
corporation, as transferor (in such capacity, the "Trans-
feror") and as collection agent (in such capacity, the
"Collection Agent"), CLAYTON-MARCUS COMPANY, INC., a
North Carolina corporation, BARCLAY FURNITURE CO., a
Mississippi corporation, LADD TRANSPORTATION, INC., a
North Carolina corporation (together, the "Designated
Subsidiaries"), PILLIOD FURNITURE, INC., a North Carolina
corporation ("Pilliod") and ENTERPRISE FUNDING CORPORA-
TION, a Delaware corporation (the "Company") amending
that certain Transfer and Administration Agreement dated
as of January 28, 1994 among the Transferor, the Desig-
nated Subsidiaries and the Company, as amended or supple-
mented to the date hereof (the "Transfer and Administra-
tion Agreement").
WHEREAS, the Transferor has requested that the
Company agree to add Pilliod as a "Designated Subsidiary"
under and as defined in the Transfer and Administration
Agreement;
WHEREAS, the Transferor has requested that the
Company agree to an increase in the Maximum Net Invest-
ment; and
WHEREAS, on the terms and conditions set forth
herein, the Company is willing to amend the Transfer and
Administration Agreement to provide for the addition of
Pilliod as a "Designated Subsidiary" under and as defined
in the Transfer and Administration Agreement and to
increase the Maximum Net Investment.
NOW, THEREFORE, the parties hereby agree as
follows:
SECTION 1. Defined Terms. As used in this
Amendment capitalized terms have the same meanings as-
signed thereto in the Transfer and Administration Agree-
ment.
<PAGE>
SECTION 2. Addition of Pilliod as a Designat-
ed Subsidiary. The Transfer and Administration Agreement
is hereby amended to add Pilliod as a party thereto as a
Designated Subsidiary. Pilliod agrees to perform each
and every obligation under the Transfer and Administra-
tion Agreement required to be performed thereunder by a
Designated Subsidiary, either individually or jointly and
severally, whether such obligations relate to Pilliod as
a Designated Subsidiary per se or to Receivables origi-
nated by Pilliod. The Company hereby consents to the
addition of Pilliod as a Designated Subsidiary.
SECTION 3. Increase of Maximum Net Investment.
The Maximum Net Investment is hereby increased to
$40,000,000.
SECTION 4. Representations and Warranties.
The Transferor hereby makes to the Company, on and as of
the date hereof, all of the representations and warran-
ties set forth in Section 3.1 of the Transfer and Admin-
istration Agreement.
SECTION 5. Conditions Precedent. This amend-
ment shall not become effective until the Company shall
have received the following:
(a) a copy of a fully executed
amendment to the Purchase Agreement adding Pilliod
as a Designated Subsidiary thereunder;
(b) a copy of the resolutions of the
Board of Directors of Pilliod, certified by its
Secretary, approving this Amendment and the other
documents to be delivered by it hereunder;
(c) the charter of Pilliod, certi-
fied by the Secretary of State or other similar
official of its jurisdiction of incorporation.
(d) a Good Standing Certificate for
Pilliod, issued by the Secretary of State of its
jurisdiction of incorporation and certificates of
qualification as a foreign corporation issued by the
Secretaries of State or other similar officials of
each jurisdiction where such qualification is mate-
rial to the transaction contemplated by the Transfer
and Administration Agreement;
(e) Copies of proper financing
statements (Form UCC-1), dated a date reasonably
near to the date of this Amendment naming Pilliod as
debtor and the Transferor as secured party and show-
ing the Company as assignee of the secured party or
other similar instruments or documents as may be
necessary or in the reasonable opinion of the Compa-
ny desirable under the UCC of all appropriate juris-
dictions or any comparable law to perfect the Trans-
feror's ownership interest in all Receivables origi-
nated by Pilliod;
<PAGE>
(f) a Certificate of the Secretary
of Pilliod, certifying, among other things, (i) the
names and signatures of the officers authorized on
its behalf to execute this Amendment and any other
documents to be delivered by it hereunder (on which
Certificate the Company may conclusively rely until
such time as the Company shall receive from Pilliod
a revised Certificate meeting the requirements of
this clause (f)(i)) and (ii) a copy of Pilliod's By-
Laws;
(g) An opinion of counsel to each of
the Transferor, each Designated Subsidiary and
Pilliod with respect to certain corporate matters
and the enforceability of the Agreement as amended
hereby in form and substance acceptable to the
Company;
(h) A computer tape setting forth
all Receivables originated by Pilliod and the Out-
standing Balances thereon as of the close of busi-
ness on May 9, 1994 and such other information as
the Administrative Agent may reasonably request; and
(i) Receipt by the Administrative
Agent of the upfront commitment fee described in the
Fee Letter.
SECTION 6. Post Closing Conditions. (a)
Within 30 days of the date hereof, the Transferor shall
deliver to the Company, with respect to Pilliod, either
(i) a certificate of qualification as a foreign corpora-
tion issued by the Secretary of State or other similar
official of Illinois or (ii) a legal opinion, reasonably
acceptable to the Company, of counsel admitted to prac-
tice in such state substantially to the effect that such
qualification is not required.
(b) Within 16 days of the date hereof,
the Transferor shall deliver to the Company certified
copies of request for information or copies (Form UCC-11)
(or a similar search report certified by parties accept-
able to the Company) dated a date reasonably near the
date of this Amendment listing all effective financing
statements which name Pilliod (under its present name and
any previous name) as debtor and which are filed in
jurisdictions in which the filings were made pursuant to
item (e) of Section 5 above together with copies of such
financing statements. In the event that any of such
financing statements shall cover any Receivables origi-
nated by Pilliod, the date such request for information
or similar report is delivered or, if such Request or
report is not delivered by the opening of business on the
17th day after the date hereof, on such 17th day, the Net
Receivable Balance shall be automatically reduced by the
aggregate Outstanding Balance of the Receivables origi-
nated by Pilliod, and the Transferor shall, on such date,
pay to the Company an amount equal to the reduction in
the Net Investment required in order to cause the Per-
centage Factor to be equal to 95% after giving effect to
such payment. If such financing statement (and any lien
or interest evidenced thereby) is released or terminated
and the Receivables originated by Pilliod are otherwise
eligible to be included in the Net Receivable balance
thereafter, such Receivables may be included in the Net
Receivable Balance.
<PAGE>
SECTION 7. Ratios and Reserves. Loss, dilu-
tion and delinquency data with respect to Receivables
originated by Pilliod with respect to periods prior to
May 1, 1994 will not be included, and from and after May
1, 1994 will be included, in the calculation of the Dilu-
tion Reserve or the Loss Reserve under the Transfer and
Administration Agreement or taken into account in deter-
mining whether a Termination Event under Section 7.1(l)
(Dilution Ratio), 7.1(m) (Loss to Liquidation Ratio) or
7.1(n) (Delinquency Ratio) of the Transfer and Adminis-
tration Agreement has occurred.
SECTION 8. Accuracy of Information. Pilliod
and the Transferor, jointly and severally, hereby repre-
sent and warrant to the Company that all information
heretofore furnished by the Transferor or Pilliod to the
Company or the Administrative Agent for purposes of or in
connection with this Amendment, the Receivables originat-
ed by Pilliod, Pilliod's credit and collection policies
or any transaction contemplated hereby is true and accu-
rate in every material respect on and as of the date such
information is stated or certified.
SECTION 9. Costs and Expenses. The Transferor
shall pay all of the Company's and the Administrative
Agent's cost and expenses (including out of pocket ex-
penses and reasonable attorneys fees and disbursements)
incurred by them in connection with the preparation,
execution and delivery of this Amendment, not to exceed
$4,000.
SECTION 10. Governing Law. THIS AMENDMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NORTH CAROLINA.
SECTION 11. Severability; Counterparts. This
Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an
original and all of which when taken together shall
constitute one and the same instrument. Any provisions
of this Amendment which are prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenfo-
rceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unen-
forceable such provision in any other jurisdiction.
SECTION 12. Captions. The captions in this
Amendment are for convenience of reference only and shall
not define or limit any of the terms or provisions here-
of.
SECTION 13. Ratification. Except as expressly
affected by the provisions hereof, the Transfer and
Administration Agreement as amended shall remain in full
force and effect in accordance with its terms and rati-
fied and confirmed by the parties hereto. On and after
the date hereof, each reference in the Transfer and
Administration Agreement to "this Agreement", "hereun-
der", "herein" or words of like import shall mean and be
a reference to the Transfer and Administration Agreement
as amended by this Amendment.
<PAGE>
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Amendment as of the date
first written above.
ENTERPRISE FUNDING CORPORATION,
as Company
By:
Name:
Title:
LADD FURNITURE, INC.,
as Transferor and Collection
Agent
By:
Name:
Title:
CLAYTON-MARCUS COMPANY, INC.
By:
Name:
Title:
BARCLAY FURNITURE CO.
By:________________________
Name:
Title:
<PAGE>
LADD TRANSPORTATION, INC.
By:
Name:
Title:
PILLIOD FURNITURE, INC.
By:
Name:
Title:
AMENDMENT NUMBER 1 TO
RECEIVABLES PURCHASE AGREEMENT
AMENDMENT NUMBER 1 TO RECEIVABLES PURCHASE
AGREEMENT (this "Amendment"), dated as of May 11, 1994,
between LADD FURNITURE, INC., a North Carolina corpora-
tion, as buyer (in such capacity, the "Buyer"), and
CLAYTON-MARCUS COMPANY, INC., a North Carolina corporation,
BARCLAY FURNITURE CO., a Mississippi corporation, LADD
TRANSPORTATION, INC., a North Carolina corporation (each
a "Designated Subsidiary" or "Seller") and PILLIOD
FURNITURE, INC., a North Carolina corporation ("Pilliod")
amending that certain Receivables Purchase Agreement
dated as of January 28, 1994 among the Buyer and the
Designated Subsidiaries (the "Receivables Purchase Agree-
ment").
WHEREAS, Pilliod has requested that the Buyer
agree to add Pilliod as a "Designated Subsidiary" under
and as defined in the Receivables Purchase Agreement;
WHEREAS, Pilliod is a wholly-owned subsidiary
of the Buyer; and
WHEREAS, on the terms and conditions set forth
herein, the Buyer is willing to amend the Receivables
Purchase Agreement to provide for the addition of Pilliod
as a "Designated Subsidiary" under and as defined in the
Receivables Purchase Agreement.
NOW, THEREFORE, the parties hereby agree as
follows:
SECTION 1. Defined Terms. As used in this
Amendment capitalized terms have the same meanings as-
signed thereto in the Receivables Purchase Agreement.
SECTION 2. Addition of Pilliod as a Designated
Subsidiary and Seller. The Receivables Purchase Agree-
ment is hereby amended to add Pilliod as a party thereto
as a Designated Subsidiary and as a Seller. Pilliod
agrees to perform each and every obligation under the
Receivables Purchase Agreement required to be performed
thereunder by a Designated Subsidiary or a Seller, either
individually or jointly and severally, whether such
obligations relate to Pilliod as a Designated Subsidiary
or Seller per se or to Receivables originated by Pilliod.
The Buyer hereby consents to the addition of Pilliod as a
Designated Subsidiary and as a Seller.
SECTION 3. Representations and Warranties.
Pilliod hereby makes to the Buyer, on and as of the date
hereof, each representation and warranty set forth in
Section 4.1 of the Receivables Purchase Agreement, with
the following modifications:
(a) With respect to Section 4.1(i) of the
Receivables Purchase Agreement, the chief place of busi-
ness and chief executive office of Pilliod as of the date
hereof and for at least the last 4 years is and has been
1403 Eastchester Drive, High Point, North Carolina 27265;
and
(b) With respect to Section 4.1(m) of the
Receivables Purchase Agreement, as of the close of busi-
ness on May 10, 1994 the aggregate Outstanding Balance of
the Receivables owned by Pilliod was $11,852,800.01.
<PAGE>
SECTION 4. Credit and Collection Policy. From
and after May 1, 1994 Pilliod has originated and will
continue to originate Receivables in accordance with the
Credit and Collection Policy attached to the Transfer
Agreement as Exhibit B thereto, as from time to time
amended in accordance with such agreement.
SECTION 5. Conditions Precedent. This amend-
ment shall not become effective until the Buyer shall
have received the following:
(a) Copies of proper financing
statements (Form UCC-1), dated a date reasonably
near to the date of this Amendment naming Pilliod as
debtor and the Buyer as secured party and showing
Enterprise as assignee of the secured party or other
similar instruments or documents as may be necessary
or in the reasonable opinion of the Buyer desirable
under the UCC of all appropriate jurisdictions or
any comparable law to perfect the Buyer's ownership
interest in all Receivables originated by Pilliod;
and
(b) All corporate and legal proceed-
ings and all instruments in connection with the
transactions contemplated by this Amendment shall be
in form and substance satisfactory to the Buyer, and
the Buyer shall have received from each Seller and
Pilliod copies of all documents (including, without
limitation, records of corporate proceedings) rele-
vant to the transactions herein contemplated as the
Buyer may have reasonably requested.
SECTION 6. Governing Law. THIS AMENDMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NORTH CAROLINA.
SECTION 7. Severability; Counterparts. This
Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an
original and all of which when taken together shall
constitute one and the same instrument. Any provisions
of this Amendment which are prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenfor-
ceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unen-
forceable such provision in any other jurisdiction.
SECTION 8. Captions. The captions in this
Amendment are for convenience of reference only and shall
not define or limit any of the terms or provisions here-
of.
SECTION 9. Ratification. Except as expressly
affected by the provisions hereof, the Receivables Pur-
chase Agreement as amended shall remain in full force and
effect in accordance with its terms and ratified and
confirmed by the parties hereto. On and after the date
hereof, each reference in the Receivables Purchase Agree-
ment to "this Agreement", "hereunder", "herein" or words
of like import shall mean and be a reference to the
Receivables Purchase Agreement as amended by this Amend-
ment.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Amendment as of the date
first written above.
LADD FURNITURE, INC.,
as Buyer
By:_______________________
Name:
Title:
CLAYTON-MARCUS COMPANY, INC.,
as Seller
By:
Name:
Title:
BARCLAY FURNITURE CO.,
as Seller
By:________________________
Name:
Title:
LADD TRANSPORTATION, INC.,
as Seller
By:
Name:
Title:
PILLIOD FURNITURE, INC.
By:
Name:
Title:
3
<PAGE>
AMENDMENT dated as of July 1, 1994 (this "Amendment") between LADD Furniture,
Inc., a North Carolina corporation (the "Company"), the Guarantors (as such
term is defined below) party hereto, the Banks (as such term is defined below)
party hereto and The Chase Manhattan Bank (National Association), as agent
for the Banks (together with its successors in such capacity, the "Agent").
The Company, as borrower, Pennsylvania House, Inc., Brown Jordan Company,
Clayton-Marcus Company, Inc., LADD Contract Sales Corporation, Fournier
Furniture, Inc., Barclay Furniture Co., American Furniture Company,
Incorporated, Pilliod Furniture, Inc. and Lea Industries, Inc., as guarantors
(collectively, the "Guarantors" and, together with the Company, the "Obligors"),
certain banks (the "Banks") and the Agent are party to a Credit Agreement
dated as of January 15, 1993 (as amended, supplemented and otherwise modified
and in effect to but excluding the date hereof, the "Credit Agreement").
The Obligors have requested that the Banks agree, and the Banks party hereto
are willing, to modify the covenant set forth in Section 8.12 of the Credit
Agreement relating to the ratio of current assets of the Company and its
Consolidated Subsidiaries to current liabilities of the Company and its
Consolidated Subsidiaries, all on the terms and conditions of this Amendment.
Accordingly, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Terms used but not defined herein shall have the
respective meanings ascribed to such terms in the Credit Agreement.
Section 2. Amendment. Subject to the execution of this Amendment by each
of the Obligors and the Majority Banks, but with effect on and after the
date hereof, the Credit Agreement shall be amended as follows:
The first sentence of Section 8.12 of the Credit Agreement shall be
amended by replacing "2 to 1" with "1.5 to 1".
Section 3. Representations and Warranties. Each Obligor represents and
warrants to the Banks and the Agent that (a) this Amendment has been duly and
validly executed and delivered by such Obligor and constitutes such Obligor's
legal, valid and binding obligation, enforceable against such Obligor in
accordance with its terms and (b) after giving effect to this Amendment, (i)
no Default shall have occurred and be continuing and (ii)
Amendment
<PAGE>
-2-
the representations and warranties made by such Obligor in Section 7 of
the Credit Agreement are true and correct on and as of the date hereof with
the same force and effect as if made on and as of such date (or, if any
such representation or warranty is expressly stated to have been made
as of a specific date, as of such specific date). It shall be an Event of
Default for all purposes of the Credit Agreement, as amended hereby, if
any representation, warranty or certification made by an Obligor in this
Amendment, or in any certificate or other writing furnished to any Bank
or the Agent pursuant to this Amendment, shall prove to have been false
or misleading as of the time made or furnished in any material respect.
Section 4. Documents Otherwise Unchanged. Except as herein provided,
the Credit Agreement shall remain unchanged and in full force and effect, and
each reference to the Credit Agreement and words of similar import in the
Credit Agreement, as amended hereby, and the Notes shall be a reference to
the Credit Agreement as amended hereby and as the same may be further amended,
supplemented and otherwise modified and in effect from time to time.
Section 5. Miscellaneous. This Amendment may be executed in any number
of counterparts, each of which shall be identical and all of which, when taken
together, shall constitute one and the same instrument, and any of the parties
hereto may execute this Amendment by signing any such counterpart. This
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. This Amendment shall be governed
by, and construed in accordance with, the law of the State of New York.
Section 6. Expenses. Without limiting its obligations under Section 12.03
of the Credit Agreement, the Company agrees to pay, on demand, all reasonable
out-of-pocket costs and expenses of the Agent and the Banks (including the
fees and disbursements of Vedder, Price, Kaufman, Kammholz & Day, special New
York counsel to the Agent, not to exceed, in the case of fees, an amount
separately agreed) incurred in connection with the negotiation, preparation,
execution and delivery of this Amendment.
Amendment
<PAGE>
- 3 -
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the day and year first above written.
LADD FURNITURE, INC.
By
Senior Vice President and
Chief Financial Officer
THE GUARANTORS:
PENNSYLVANIA HOUSE, INC.
BROWN JORDAN COMPANY
CLAYTON-MARCUS COMPANY, INC.
LADD CONTRACT SALES CORPORATION
FOURNIER FURNITURE, INC.
BARCLAY FURNITURE CO.
AMERICAN FURNITURE COMPANY,
INCORPORATED
PILLIOD FURNITURE, INC.
LEA INDUSTRIES, INC.
By
Vice President
Amendment
<PAGE>
- 4 -
THE BANKS:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By
Title:
CHEMICAL BANK
By
Title:
CIBC, INC.
By
Title:
NATIONSBANK OF NORTH CAROLINA, N.A.
By
Title:
THE BANK OF NEW YORK
By
Title:
Amendment
<PAGE>
- 5 -
CREDITANSTALT-BANKVEREIN
By
Title:
By
Title:
WACHOVIA BANK OF NORTH
CAROLINA, N.A.
By
Title:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By
Title:
Amendment
