<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[(check mark)] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 30, 1995
COMMISSION FILE NUMBER 0-11577
LADD FURNITURE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
North Carolina 56-1311320
(STATE OR OTHER JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
One Plaza Center, Box HP-3, High Point, North Carolina 27261-1500
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
Registrant's telephone number, including area code: 910-889-0333
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock -- $.30 par value
(TITLE OF CLASS)
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 (check mark) No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [(check mark)]
Market value of 6,278,354 shares held by nonaffiliates as of March 5, 1996,
was $75,340,248.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
7,724,259 shares outstanding as of March 5, 1996
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the 1995 Annual Shareholders
Meeting are incorporated by reference into Part III hereof.
1
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PART I
ITEM 1. BUSINESS
GENERAL
LADD Furniture, Inc., incorporated in 1981 under the laws of the State of
North Carolina, is a leading residential furniture manufacturer which sells its
products through diverse retail distribution channels as well as to the
hospitality and health care industries. The Company produces a wide range of
furniture designed to appeal to a spectrum of customers seeking quality, style,
and value. The Company markets its furniture under various brand names,
including American Drew, American of Martinsville, Barclay, Clayton Marcus, Lea,
Pennsylvania House and Pilliod. Based upon industry data published in the trade
publication FURNITURE/TODAY, LADD is currently the fifth largest U.S.
manufacturer of residential furniture. Unless the context otherwise indicates,
"LADD" and "Company" refer to LADD Furniture, Inc., its divisions, and
consolidated subsidiaries. The executive offices of LADD are located in High
Point, North Carolina.
INDUSTRY SEGMENTS
In accordance with the instructions for this item, LADD is deemed to have
been engaged in only one business segment, manufacture and sale of furniture,
for the three years ended December 30, 1995.
SIGNIFICANT DEVELOPMENTS IN 1995
DIVESTITURE OF FOUR OPERATING UNITS -- In order to concentrate on its core
residential casegoods (wood furniture), residential upholstery and contract
sales businesses, the Company recently divested three non-strategic and/or
nonperforming businesses: (i) Brown Jordan, a manufacturer of leisure and
outdoor furniture, which was sold in December 1995 for $26.2 million, (ii) Lea
Lumber & Plywood, a provider of wood materials, which was sold in December 1995
for $5 million, and (iii) Fournier Furniture, a manufacturer of
ready-to-assemble furniture, which was sold in February 1996 for $12 million.
The Company used the net cash proceeds from these sales to reduce debt. In
addition, the Company has entered into a contract to sell Daystrom Furniture, a
kitchen and dinette furniture manufacturer, for $4 million. The transaction is
scheduled to close by the end of March 1996, subject to the purchaser finalizing
financing. Should the sale transaction not close and another purchaser not be
identified, the Company intends to liquidate the Daystrom business.
Collectively, these four businesses, while representing approximately $110
million of sales in 1995 (approximately 18% of 1995 net sales), generated a loss
before interest and income taxes of approximately $2.2 million in 1995.
MANAGEMENT RESTRUCTURING -- In December 1995, the Company completed the
second phase of its restructuring plan by realigning its senior management team
effective January 1, 1996 into three groups consistent with its product and
customer base -- casegoods, upholstery and contract sales. At the same time,
Richard R. Allen, one of LADD's founders and Chairman and Chief Executive
Officer, announced his retirement as Chief Executive Officer. Fred L.
Schuermann, Jr., formerly President and Chief Operating Officer, assumed the
duties of President and Chief Executive Officer, effective January 1, 1996. At
the same time, Kenneth E. Church, president of the Company's Clayton-Marcus
subsidiary, was appointed president of the LADD Upholstery Group; Donald L.
Mitchell, formerly president of a competitor company, was hired to become the
president of the LADD Casegoods Group; and Michael P. Haley continued in his
role as president of LADD Contract Sales. William S. Creekmuir, LADD's Chief
Financial Officer, was promoted to Executive Vice President and assumed
responsibility for the Company's international, corporate marketing and
transportation business. Following the management realignment, the Company
intends to continue to market its products under individually distinct brand
names, but to reduce its administrative overhead structure through better
utilization of existing synergies among its operating companies.
LADD'S BUSINESS GROUPS
The Company has three primary operating groups: (i) residential casegoods,
consisting primarily of bedroom, dining room and living room furniture, wall
units and occasional tables, (ii) residential upholstery, consisting primarily
of sofas, loveseats, recliners and chairs, and (iii) contract sales, consisting
of casegoods and upholstery sold to the hospitality and health care industries,
the U.S. government and educational institutions (collectively, contract sales).
The Company distributes its casegoods and upholstery products directly and
through approximately 300 independent sales representatives to more than 8,000
customers, including leading department stores, furniture retailers, mass
merchandisers, catalog merchandisers, major hotel chains, and various specialty
stores and retail companies. The Company also markets its furniture
internationally to buyers in over 50 countries.
2
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LADD'S CASEGOODS GROUP
American Drew manufactures and sells medium priced wood residential
furniture. The products include various types of bedroom furniture (beds,
dressers, night stands, mirrors, armoires, and dressing tables), dining room
furniture (tables, chairs, buffets, chinas, and serving pieces), and living room
occasional pieces (desks, end tables, coffee tables, entertainment units, wall
units, and secretaries). American Drew products are manufactured in three plants
located in North Wilkesboro, NC and are sold primarily to major independent
furniture retailers, department stores, and regional furniture chains.
Lea Industries manufactures and sells wood furniture for the youth and
adult bedroom markets. Lea Industries' products include beds, dressers, night
stands, mirrors, desks, bookshelves, hutches, armoires, and correlated modular
furniture in a variety of styles, including traditional, contemporary and
colonial. The products are priced in the medium to low-medium price ranges and
are considered high volume, promotional products to major furniture retailers.
The products are marketed under the "Lea Industries," "Charter House," and
"Design Horizons" brand names primarily to national and regional chains,
independent furniture retailers, national general retailers and department
stores. Lea Industries' products are manufactured in four plants located in
Waynesville, NC, Marion, VA, and Morristown, TN.
Pennsylvania House manufactures solid wood residential furniture in
American traditional, country and transitional styles. The Pennsylvania House
product line is priced in the upper-medium price range. Pennsylvania House
created and introduced the in-store gallery concept to the furniture retailing
industry in 1975, and currently has established galleries with approximately 230
independent furniture retailers in the U.S., Japan and Mexico. Pennsylvania
House-Casegoods operates two manufacturing plants located in Lewisburg and White
Deer, PA.
Pilliod Furniture, acquired by LADD on January 31, 1994, manufactures and
markets a wide range of promotionally priced contemporary and traditional wood
residential furniture, including master bedroom products, occasional tables,
entertainment centers, wall systems, and dining room chinas. Pilliod Furniture's
products are marketed under the Pilliod and Symmetry brand names. The Company's
products are sold throughout the United States through large volume customers,
mainly large furniture chains and outlets. Pilliod Furniture operates three
manufacturing facilities in Nichols, SC, Selma, AL, and Swanton, OH.
LADD UPHOLSTERY GROUP
Barclay Furniture manufactures and sells moderately priced upholstered
residential furniture, including sofas, loveseats, chairs, sleepers, and motion
furniture styled in contemporary and traditional patterns. The products are
considered high volume, promotional items and are sold under the Barclay
Furniture name and various private label names. Barclay sells its products
primarily to retail furniture chains, department stores, membership clubs,
rent-to-own stores, catalog retailers, and national general merchandisers.
Barclay operates two manufacturing plants located in Sherman and Myrtle, MS.
Clayton-Marcus manufactures and sells a full line of upholstered household
furniture, including sofas, loveseats, chairs, sleepers, rockers, and other
upholstered living room furniture, which sells in the medium and upper-medium
price ranges. The products are marketed under the "Clayton-Marcus,"
"HickoryMark," "American of Martinsville," and "Clayton House," brand names
primarily to retail furniture chains, independent furniture retailers and
department stores. Clayton-Marcus currently has established galleries with
approximately 150 independent furniture stores in the United States, Canada, and
Mexico. Clayton-Marcus operates three manufacturing plants in Hickory, NC.
Kenbridge Furniture, formed in 1995, manufactures and sells promotionally
priced upholstered residential furniture, including sofas, loveseats, chairs in
leather and leather/vinyl covers. The company's products are sold under the
Kenbridge Furniture brandname throughout the United States through large volume
customers, mainly large retail furniture chains. Kenbridge Furniture's products
are manufactured in one facility in Mississippi.
Pennsylvania House also manufactures a full line of upholstered residential
furniture which sells in the upper-medium price range. Pennsylvania
House-Upholstery operates one manufacturing plant located in Monroe, NC.
LADD CONTRACT SALES
American of Martinsville is a manufacturer of wood and upholstered
commercial furniture which is marketed worldwide to the guest room (hotel/motel)
industry through LADD Contract Sales Corporation. The Contract Sales Group also
sells to the health care furniture market for retirement homes and extended care
facilities, certain agencies of the U.S. government, and university and college
markets. American of Martinsville operates two manufacturing plants located in
Chilhowie and Martinsville, VA and utilizes other LADD manufacturing facilities
to meet capacity constraints.
3
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OTHER
LADD Transportation, Inc. operates a modern fleet of over-the-road tractors
and trailers that are used to provide transportation services to LADD operating
companies to meet the special needs of LADD's customers. Together with fleets
operated by other LADD operating companies, LADD Transportation provides
approximately 19% of LADD's out-bound shipping requirements for finished
products and also hauls a portion of the Company's in-bound raw materials and
supplies. LADD Transportation has received certain contract carrier rights from
the Interstate Commerce Commission and markets its transportation services to
independent customers.
MARKETING AND MAJOR CUSTOMERS
The Company's operating entities generally market under their own trade
names. The general marketing practice followed in the furniture industry and by
the Company is to exhibit products at national and regional furniture markets.
Internationally, the Company markets its products primarily through LADD
International, a corporate marketing unit formed to coordinate the worldwide
marketing efforts of LADD's operating companies.
The Company also sells its furniture products directly and through
approximately 300 independent sales representatives to a broad variety of
customers, including department stores, furniture retailers, mass merchandisers,
catalog merchandisers, major hotel chains, and various specialty stores and
rental companies. The Company currently sells to more than 8,000 furniture
customers. No single customer accounted for more than 5% of net sales in 1995.
The Company's business is not dependent upon a single customer, the loss of
which would have a material effect on the Company.
PRODUCT DESIGN AND DEVELOPMENT
Each operating entity develops and manages its own product lines. New
product groups are introduced at the national or regional furniture markets,
and, based upon their acceptance at the markets, the products are either placed
into production or withdrawn from the market. Consistent with industry practice,
the Company designs and develops new product groups each year, replacing
collections or items that are discontinued.
RAW MATERIALS
The most important raw materials used by the Company are hardwood lumber,
veneers, upholstery fabrics, leather, plywood, particle board, hardware,
finishing materials, glass, steel, steel springs, and high pressure laminates.
The wood species include cherry, oak, maple, white pine, poplar, and other
American species, and imports such as rubberwood, guatambue and mahogany. The
Company believes that its sources of supply for these materials are adequate and
that it is not dependent on any one supplier.
The Company's plants are heated by furnaces using gas, fuel oil, wood
waste, and other scrap material as energy sources. The furnaces located at
casegoods manufacturing plants have been adapted so that they use alternate
energy sources, and the Company has been able to fuel these furnaces principally
by wood wastes. The Company's plants use electrical energy purchased from local
utilities. The Company has not experienced a shortage of energy sources and
believes that adequate energy supplies will be available for the foreseeable
future.
PATENTS AND TRADE NAMES
The trade names of the Company's divisions and subsidiaries represent many
years of continued business, and the Company believes such names are well
recognized and associated with quality in the industry. The Company owns
intellectual properties which are considered to be important to the business and
which do not have a limited duration.
INVENTORY PRACTICES, ORDER BACKLOG AND CREDIT PRACTICES
The Company generally schedules production of its various groups based upon
orders on hand. Manufacturing efficiencies and investment in inventories are,
therefore, directly related to the current volume of orders. The Company, and
the industry generally, honors cancellation of orders made prior to shipment.
The Company's backlog of unshipped orders believed to be firm at 1995 fiscal
year end was approximately $83.1 million, as compared to $85.2 million at 1994
fiscal year end. Generally, orders in the backlog are shipped during the
following 12 months. The Company's businesses as a whole are not subject to
significant seasonal variations. The business of Brown Jordan, the Company's
subsidiary sold in December 1995, however, was heavily seasonal with inventories
being built in the winter months and sales concentrated in the March-June time
frame.
4
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COMPETITION
The residential furniture market is highly competitive and includes a large
number of manufacturers, none of which dominate the market. Industry estimates
indicate that there are over 600 manufacturers of residential furniture in the
United States. Competition within the market for wood, upholstered and metal
furniture occurs principally in the areas of style or design, quality, price,
and service. Some of these include manufacturers of furniture types not
manufactured by the Company.
In recent years, foreign imports of finished furniture and component parts
have increased. Although some of the imported products compete with products
manufactured and marketed by the Company, the Company's Daystrom Furniture
operating division, which is being held for sale, and its Pilliod Furniture
subsidiary are the only operations to have experienced any significant negative
impact. Where appropriate, the Company has capitalized upon the cost advantages
of importing selected component parts and a limited number of finished products
but is not dependent upon any foreign sources. The Company in 1995 imported
approximately $18.4 million of finished furniture and unfinished furniture
parts. Following the above discussed divestitures, the Company anticipates its
import business to decline by approximately 38%.
Following the sale of its Brown Jordan and Fournier subsidiaries, the
Company has no facilities located outside the continental United States.
GOVERNMENTAL REGULATIONS
The Company is subject to a wide-range of federal, state and local laws and
regulations relating to protection of the environment, worker health and safety
and the emission, discharge, storage, treatment and disposal of hazardous
materials. These laws include the Clean Air Act of 1970, as amended, the
Resource Conservation and Recovery Act, the Federal Water Pollution Control Act
and the Comprehensive Environmental, Response, Compensation and Liability Act.
Certain of the Company's operations use glues and coating materials that contain
chemicals that are considered hazardous under various environmental laws.
Accordingly, management closely monitors the Company's environmental performance
at all of its facilities. Management believes that the Company is in substantial
compliance with all environmental laws.
Under the provisions of the Clean Air Act Amendments of 1990, in December
1995, the Environmental Protection Agency (the "EPA") promulgated air emission
standards for the wood furniture industry. These regulations, known as National
Emission Standards for Hazardous Air Pollutants ("NESHAPs"), govern the levels
of emission of certain designated chemicals into the air and will require that
the Company reduce emissions of certain volatile hazardous air pollutants
("VHAPs") by November 1997. Management is investigating and evaluating
techniques to meet these standards at all facilities to which the NESHAPs
standards will apply. While the Company may be required to make capital
investments at some of its facilities to ensure compliance, the Company
believes that it will meet all applicable requirements in a timely fashion and
that the amount of money required to meet the NESHAP requirements will not
materially affect its financial condition or its results of operations.
See "Legal Proceedings" regarding the status of environmental proceedings
in which the Company is involved.
EMPLOYEES
The Company employed approximately 6,600 persons as of March 1, 1996, of
which approximately 300 are employed at the Daystrom Furniture operating
division which is being held for sale. Substantially all of the employees were
employed on a full-time basis.
Employees at five Company plants are represented by various labor unions.
The Company considers its relations with its employees to be good. The union
contract at Daystrom Furniture's South Boston, VA facility expires in April
1996.
EXPORT SALES
In 1995, the Company's export sales decreased to $28.4 million
(approximately 4.6% of 1995 net sales), a decrease of approximately 16.0% from
export sales in 1994 of $33.8 million (approximately 5.7% of 1994 net sales).
The Company's export sales in 1993 were $40.6 million, or approximately 7.8% of
1993 net sales. Excluding the operating companies sold or being held for sale,
1995 export sales would have been 3.7% of net sales. None of the Company's
assets are dedicated solely to export sales.
5
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ITEM 2. PROPERTIES
The following table summarizes the real estate, both owned and leased, used
in the primary business operations of the Company as of March 1, 1996.
LADD FACILITIES
<TABLE>
<CAPTION>
APPROX. OWNED LEASE
FACILITY SIZE OR EXPIRATION
OPERATING GROUP LOCATION USE (SQUARE FEET) LEASED DATE
<S> <C> <C> <C> <C> <C>
Casegoods...................... N. Wilkesboro, NC Manufacturing 335,300 Owned
N. Wilkesboro, NC Manufacturing 398,500 Owned
N. Wilkesboro, NC Manufacturing 122,500 Owned
N. Wilkesboro, NC Warehouse/Office 109,500 Owned
Morristown, TN Warehouse 108,000 Leased 10/31/97
Morristown, TN Manufacturing 285,380 Owned
Morristown, TN Manufacturing/Office 139,200 Owned
Waynesville, NC Manufacturing/Office 448,400 Owned
Morristown, TN Distribution 160,000 Leased 04/01/99
Morristown, TN Distribution 97,500 Leased 10/31/96
Marion, VA Manufacturing 204,900 Owned
Lewisburg, PA Manufacturing/Office/Dist. 676,800 Owned
White Deer, PA Manufacturing 128,000 Owned
Milton, PA Warehouse 120,000 Leased Mo. to Mo.
Selma, AL Manufacturing 277,000 Owned
Nichols, SC Manufacturing 344,000 Owned
Swanton, OH Manufacturing 289,000 Owned
Dillon, SC Warehouse 45,000 Leased Mo. to Mo.
High Point, NC Office 11,100 Leased 04/30/98
Upholstery..................... Sherman, MS Manufacturing/Office 302,650 Owned
Myrtle, MS Manufacturing 81,250 Owned
Pontotoc, MS Warehouse 12,400 Leased 09/15/96
Hickory, NC Manufacturing/Office/Dist. 369,600 Owned
Hickory, NC Manufacturing 121,800 Owned
Hickory, NC Manufacturing 152,900 Owned
Monroe, NC Manufacturing 258,000 Owned
Contract Sales................. Chilhowie, VA Manufacturing/Office 493,625 Owned
Martinsville, VA Manufacturing 801,885 Owned
Martinsville, VA Office 50,000 Leased 05/31/02
Martinsville, VA Warehouse 135,000 Leased 09/30/98
Corporate...................... High Point, NC Office 38,000 Leased 08/31/97
Daystrom Furniture South Boston, VA Manufacturing/Office 463,980 Owned
(held for sale).............. South Boston, VA Warehouse 33,520 Leased Mo. to Mo.
</TABLE>
The Company believes that its manufacturing, warehouse and office space is
well maintained for its intended purposes and adequately insured. Although the
closure of any particular Company facility may be disruptive to that particular
operating entity's business, it would not be materially adverse to the Company's
operations.
The Company normally operates all of its furniture manufacturing facilities
on a one shift per day, five-day week basis. Increasingly, certain departments
and facilities are operated on a multi-shift basis.
The Company also currently maintains showrooms, the majority of which are
leased, in High Point, NC, San Francisco, CA, Sherman and Tupelo, MS,
Minneapolis, MN, Martinsville, VA, and Lewisburg, PA.
The Company owns and leases substantial quantities of woodworking, sewing
and metalworking equipment located in its various plants. The Company considers
its present equipment to be adequate, well-maintained, generally modern, and
adequately insured.
The Company currently owns and leases approximately 130 tractors and 320
trailers.
6
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in routine litigation from time to time in the
regular course of its business. In the opinion of the Company, there are no
material legal proceedings pending or known to be contemplated to which the
Company is a party or of which any of its property is subject.
The Company presently is involved in the following environmental
proceedings:
1. The California manufacturing facility of Brown Jordan Company
("Brown Jordan"), a former subsidiary of the Company, is located in El
Monte, California in the San Gabriel Valley Groundwater Basin. The Basin
has been designated by the United States Environmental Protection Agency
("EPA") and the State of California as a Superfund site. Although no
administrative or judicial enforcement action has been taken by the EPA or
applicable California authorities, the State of California is seeking to
identify potentially responsible parties ("PRPs") and has ordered certain
tests to be conducted by Brown Jordan in connection with their
investigation. In May 1994, the Company joined the Northwest El Monte
Community Task Force, a PRP Group formed to respond to the EPA. In March
1995, the Task Force and the EPA finalized an Administrative Consent Order
pursuant to which the Task Force has begun a remedial investigation and
feasibility study at an approximate cost of $1.3 million. Pursuant to an
interim allocation agreement, Brown Jordan is responsible for 4.86% of all
shared assets of the Task Force.
2. In September 1995, Brown Jordan received a request from the
California Regional Water Quality Board with respect to further assessment
of two areas at the El Monte facility, the Leach Pit Area and the Clarifier
Area. Both of these areas have been the subject of significant previous
investigations (undertaken 1988-1993) which had concluded that it was
unlikely that Brown Jordan was contributing significantly to groundwater
contamination in the area. The Board's investigation program is separate
from the El Monte Superfund group, although both are concerned with whether
Brown Jordan is a source of groundwater contamination. There is some basis
at this time for believing that the Leach Pit and Clarifier Area problems
are limited to soil contamination.
Under the terms of the Asset Purchase Agreement with Maytag Corporation
("Maytag") dated June 1, 1989 ("the Maytag Agreement") under which the Company
acquired Brown Jordan, the Company's liabilities in El Monte matters are limited
to the first $200,000 of costs for off-site liabilities and $1,000,000 of costs
for on-site liabilities. Pursuant to the terms of the Stock Purchase Agreement
between the Company and BJCL, Inc. ("BJCL") dated as of November 7, 1995 under
which BJCL acquired Brown Jordan from the Company, BJCL may assume up to
$400,000 of certain post closing costs relating to Brown Jordan, including
environmental costs relating to the El Monte site. Through fiscal 1995,
approximately $300,000 had been expended by the Company on the El Monte site.
Accordingly, if no other claims are made by BJCL under the Brown Jordan
Agreement, the next $400,000 of costs associated with Brown Jordan environmental
claims will be paid by BJCL.
The Company has also been named as a PRP, along with numerous parties, at
various hazardous waste sites undergoing cleanup or investigation for cleanup.
The Company believes that at each of these sites, it has been improperly named
or will be considered a "de minimis" party. Although the Company believes
adequate accruals have been provided for environmental contingencies, it is
possible, due to uncertainties previously noted, that additional accruals could
be required in the future. However, the ultimate resolution of these
contingencies, to the extent not previously provided for, should not have a
material adverse effect on the Company's financial position.
The Company is cooperating fully with government authorities in each of
these matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No such matters were submitted to security holders of the Company in the
fourth quarter of fiscal year 1995.
7
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
STOCK TRANSFER AGENT:
Wachovia Bank & Trust Company, N.A.
Winston-Salem, NC
Shareholder Account Information: 1-800-635-4236
STOCK LISTING:
The Company's common stock is traded on the Nasdaq Stock Market under the
Nasdaq symbol: LADF. At year end 1995, the Company had approximately 5,000
shareholders based upon approximately 700 shareholders of record at that date
and an estimate of the number of individual shareholders represented by broker
and nominee position listings.
MAJOR MARKET MAKERS:
<TABLE>
<S> <C>
Dillon, Read & Co. Nash Weiss
Herzog, Heine, Geduld Raymond, James & Associates
Huntleigh Securities Corp. Robinson Humphrey
Interstate/Johnson Lane Sherwood Securities Corp.
Jefferies & Company Scott & Stringfellow
Kirkpatrick, Pettis, Smith Southeast Research Partners
Legg Mason Wood Walker Southwest Securities
Mayer & Schweitzer Troster Singer Corp.
Merrill Lynch Wheat First Butcher Singer
</TABLE>
See Item 6, Selected Financial Data, for market and dividend information
regarding the Company's Common Stock.
8
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ITEM 6. SELECTED FINANCIAL DATA
LADD FURNITURE, INC. AND SUBSIDIARIES
SELECTED ANNUAL DATA
DOLLAR AND SHARE DATA IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
FIVE-YEAR
FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL COMPOUND
1990 1991 1992 1993 1994 1995 GROWTH RATES
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA
Net sales...................... $511,911 429,110 496,679 521,200 591,575 614,502 3.7%
Cost of sales.................. 406,039 356,025 401,250 426,921 481,994 515,980 4.9
Gross profit................. 105,872 73,085 95,429 94,279 109,581 98,522 (1.4)
Selling, general and
administrative expenses...... 80,617 79,322 78,493 81,953 93,911 101,345 4.7
Restructuring expense.......... 8,268 -- -- -- -- 25,120 N/M
Operating income (loss)........ 16,987 (6,237) 16,936 12,326 15,670 (27,943) N/M
Other deductions:
Interest expense............. 14,799 10,413 7,502 5,542 8,939 11,798 (4.4)
Other (net).................. 1,584 2,594 1,164 377 1,714 3,685 18.4
Earnings (loss) before income
taxes........................ 604 (19,244) 8,270 6,407 5,017 (43,426) N/M
Income tax expense (benefit)... (426) (6,041) 3,725 2,561 709 (18,236) 112.0
Net earnings (loss)............ $ 1,030 (13,203) 4,545 3,846 4,308 (25,190) N/M
Depreciation................... $ 9,138 8,783 9,151 10,508 14,143 12,671 6.8
Amortization................... 2,952 5,081 2,848 2,554 3,669 3,758 5.0
Cash dividends paid............ 5,274 4,545 -- 2,767 2,771 2,086 (16.9)
Weighted average shares
outstanding.................. 6,279 6,316 7,148 7,686 7,697 7,721 4.2
PER SHARE DATA
Net sales...................... $ 81.53 67.94 69.49 67.81 76.86 79.59 (0.5)
Net earnings (loss)............ 0.16 (2.09) 0.64 0.50 0.56 (3.26) N/M
Cash dividends................. 0.84 0.72 -- 0.36 0.36 0.27 (20.3)
Year-end book value............ 20.28 17.37 19.38 19.52 19.73 16.20 (4.4)
BALANCE SHEET DATA
Net working capital............ $115,960 111,583 117,693 123,004 123,685 79,528 (7.3)
Net property, plant and
equipment.................... 82,758 81,660 83,609 97,497 109,522 82,586 0.0
Total assets................... 320,539 308,980 315,649 335,737 378,816 312,986 (0.5)
Long-term debt................. 124,462 125,304 91,503 105,257 143,584 112,598 (2.0)
Shareholders' equity........... 127,331 110,001 148,724 150,103 151,906 125,197 (0.3)
RATIOS, OTHER
Gross profit margin............ 20.7% 17.0 19.2 18.1 18.5 16.0
Operating profit (loss)
margin....................... 3.3 (1.5) 3.4 2.4 2.6 (4.6)
Return (loss) on sales......... 0.2 (3.1) 0.9 0.7 0.7 (4.1)
Effective income tax rate...... N/M 31.4 45.0 40.0 14.1 42.0
Dividend payout ratio.......... N/M N/M -- 71.9 64.3 N/M
Return (loss) on beginning
assets....................... 0.3 (4.1) 1.5 1.2 1.3 (6.6)
Return (loss) on beginning
equity....................... 0.8 (10.4) 4.1 2.6 2.9 (16.6)
Current ratio.................. 3.2x 3.1 3.1 3.1 3.0 2.3
Inventory turnover............. 4.2 4.0 4.4 4.4 4.3 4.9
Asset turnover................. 1.4 1.4 1.6 1.6 1.7 1.8
Long-term debt to
capitalization............... 46.3% 49.1 35.2 37.9 45.3 45.1
Year-end employees (actual
number)...................... 6,880 6,340 6,940 6,670 7,860 6,880
Sales per employee (000's)..... $ 67.7 66.1 75.4 77.0 77.9 79.0
STOCK DATA
High......................... $ 39.00 38.25 36.00 44.25 35.25 19.88
Low.......................... 12.75 17.25 18.75 22.50 14.63 12.25
Close........................ 18.75 22.50 31.50 30.00 19.50 13.13
P/E ratios:
High...................... N/M N/M 56.3 88.5 62.9 N/M
Low....................... N/M N/M 29.3 45.0 26.1 N/M
Trading volume (shares)...... 4,080 3,873 6,586 8,260 6,473 9,599
<CAPTION>
ONE-YEAR CHANGES
1995 VS. 1994
<S> <C>
OPERATING STATEMENT DATA
Net sales...................... 3.9%
Cost of sales.................. 7.1
Gross profit................. (10.1)
Selling, general and
administrative expenses...... 7.9
Restructuring expense.......... N/M
Operating income (loss)........ N/M
Other deductions:
Interest expense............. 32.0
Other (net).................. 115.0
Earnings (loss) before income
taxes........................ N/M
Income tax expense (benefit)... N/M
Net earnings (loss)............ N/M
Depreciation................... (10.4)
Amortization................... 2.4
Cash dividends paid............ (24.7)
Weighted average shares
outstanding.................. 0.3
PER SHARE DATA
Net sales...................... 3.6
Net earnings (loss)............ N/M
Cash dividends................. (25.0)
Year-end book value............ (17.9)
BALANCE SHEET DATA
Net working capital............ (35.7)
Net property, plant and
equipment.................... (24.6)
Total assets................... (17.4)
Long-term debt................. (21.6)
Shareholders' equity........... (17.6)
</TABLE>
NOTES: Long-term debt excludes current installments. Capitalization defined
as net working capital plus noncurrent assets. Fiscal year 1992
comprised 53 weeks; all other years comprised 52 weeks. P/E ratios
based on yearly net earnings per share. Stock price data for
calendar years. N/M = Not meaningful. Sales per employee based on
monthly employee average. All stock data has been adjusted to
reflect the 1 for 3 reverse stock split effective May 16, 1995.
Fournier Furniture is included in consolidated results from its
acquisition date of July 2, 1992, and Pilliod Furniture from its
acquisition date of January 31, 1994.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS
The table below sets forth the percentage relationship of net sales to
certain items included in the consolidated statements of operations in each of
the last three fiscal years.
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Net sales............................................................................................ 100.0% 100.0% 100.0%
Cost of sales........................................................................................ 81.9 81.5 84.0
Gross profit....................................................................................... 18.1 18.5 16.0
Selling, general and administrative expenses......................................................... 15.7 15.9 16.5
Restructuring expense................................................................................ -- -- 4.1
Operating income (loss)............................................................................ 2.4 2.6 (4.6)
Other deductions, net................................................................................ 1.2 1.8 2.5
Earnings (loss) before income taxes................................................................ 1.2 0.8 (7.1)
Income tax expense (benefit)......................................................................... 0.5 0.1 (3.0)
Net earnings (loss)................................................................................ 0.7% 0.7% (4.1)%
</TABLE>
The following paragraphs provide an analysis of the changes in net sales,
selected cost and expense items, and net earnings (loss) over the three-year
period ended December 30, 1995.
FISCAL 1995 RESTRUCTURING OF THE COMPANY
During the second quarter of 1995, the Company recorded a $25,696,000
non-cash restructuring charge as a result of the Company's plan to divest four
operating companies (Brown Jordan Company, Fournier Furniture, Daystrom
Furniture and Lea Lumber & Plywood), close four company-owned retail stores, and
reorganize the remaining companies to improve operating performance. During the
fourth quarter of 1995, the Company recorded a $2,121,000 net decrease in
restructuring expense as a result of finalizing sales of two of the operating
companies and the revision of the fair value of the remaining two operating
companies. Also, during the fourth quarter of 1995, the Company recorded
additional charges of $1,264,000 for executive severance resulting from the
Company's decision to realign management for its casegoods, upholstery and
contract operations and $281,000 of other miscellaneous expenses. As part of the
1995 restructuring, the Company was reorganized along its three principal
product lines: (i) the Casegoods Group; (ii) the Upholstery Group; and (iii) the
Contract Sales Group.
The net restructuring charge of $25,120,000 for the year ended December 30,
1995 consisted of: (a) $17,379,000 to write-down businesses sold or held for
sale to the estimated fair value, net of disposition expenses; (b) $3,699,000 to
increase reserves for costs associated with closing four retail stores; (c)
$2,614,000 to provide for severance expense and other costs; and (d) $1,428,000
to write-down selected machinery to estimated fair value because of changes in
manufacturing processes.
On December 29, 1995, the Company sold its wholly-owned subsidiary Brown
Jordan Company (Brown Jordan) and certain related intellectual property rights
for $24,000,000 in cash and a 12% interest, on a fully diluted basis, in the
purchaser. The 12% interest in the purchaser is valued at $2,200,000. On
December 29, 1995, the Company also sold substantially all of the assets of its
Lea Lumber & Plywood (LL&P) division for cash of approximately $4,004,000 and a
$1,000,000 subordinated note. The Company used the net cash proceeds from the
above divestitures to pay down its long-term debt. For the businesses held for
sale at December 30, 1995, the estimated fair value of their aggregate net
assets was reported as a separate line item in the Company's consolidated
balance sheet, while their 1995 operating results were consolidated with those
of the Company in the consolidated statement of operations.
During January 1996, definitive sale agreements were signed for Fournier
Furniture and Daystrom Furniture. On February 26, 1996, the Company completed
the sale of Fournier Furniture for cash and a subordinated note totalling
approximately $10.0 million and the purchaser's assumption of approximately $1.9
million of Industrial Revenue Bonds. The amount of the subordinated note is
subject to finalization of a post-closing working capital adjustment.
10
<PAGE>
In addition to the restructuring charge, the Company also recorded a $10.2
million non-cash charge during 1995's second quarter. This charge was incurred
to write off unamortized bank financing fees and, in light of furniture industry
conditions, to increase reserves for slow-moving and discontinued inventories,
provide for potential bad debts and recognize other liabilities.
These 1995 pretax non-cash charges resulted in a substantial loss for the
entire year, on both a pretax and an after-tax basis. Management believes the
actions represented by these charges will reposition the Company to achieve
improved long-term operating performance within the U.S. residential furniture
manufacturing industry.
FISCAL 1995 COMPARED TO 1994
Consolidated net sales for fiscal 1995 rose $22.9 million, or 3.9%, to a
record $614.5 million. On a pro forma basis, assuming Pilliod Furniture had been
acquired at the beginning of fiscal 1994, the fiscal 1995 consolidated net sales
increase would have been 2.5%. The reported increase of $22.9 million consisted
of a $25.5 million, or 5.3%, increase in net sales of the ongoing businesses,
partially offset by a cumulative decline of $2.6 million, or 2.4%, in net sales
of the businesses sold or being held for sale.
Of the $498.7 million in net sales recorded during fiscal 1995 by the
ongoing businesses, approximately $284.4 million represented residential
casegoods volume, approximately $124.5 million represented residential
upholstery volume, and contract volume represented approximately $68.5 million.
The balance of 1995 sales, totalling approximately $21.3 million, represented
"other" business, primarily revenues from the Company's trucking operations and
from the sale of home furnishings accessories. The Company's 1995 sales trends
were in line with the general industry pattern of stronger upholstery sales than
casegoods sales. The Company's total residential upholstery sales for fiscal
1995 rose by $18.1 million, or 17.0%, while total residential casegoods sales
for the year decreased $14.1 million, or 4.7%, from fiscal 1994's level. Total
fiscal 1995 net sales of the Company's contract business, including the sale of
accessories, rose by $13.0 million, or 23.4%, compared to the prior year.
Aggregate international net sales fell by $5.4 million, or 16.0%, from fiscal
1994 levels, primarily due to reduced 1995 exports to Canada and, following the
devaluation of the peso in late 1994, Mexico.
Cost of goods sold increased by $34.0 million, or 7.1%, in fiscal 1995 and
represented 84.0% of net sales in the most recent year, up from 81.5% in fiscal
1994. Materials, labor and overhead costs all increased as a percentage of net
sales in 1995, with the labor component showing the largest year-over-year
growth. The labor increase resulted largely from the casegoods companies
manufacturing parts they had previously purchased and machine setup times not
being fully absorbed due to smaller cut quantities. Materials price increases,
which had been a major negative factor in 1994, moderated to a degree during
1995, particularly in the areas of hardwood lumber and particleboard, although
these costs remain at fairly high levels on a historical basis. Further
negatively impacting 1995 margins was a 7.5% decrease in production to reduce
inventory levels of the casegoods group resulting in unusually high amounts of
unabsorbed fixed overhead costs. An additional depressant on the 1995 gross
margin was the non-cash charge (totalling $5.3 million) taken in the second
quarter to increase reserves for slow-moving and discontinued inventories. As a
result of these factors, the Company's fiscal 1995 gross margin declined to a
historical yearly low of 16.0%, compared to fiscal 1994's 18.5% gross margin.
Selling, general and administrative (SG&A) expenses rose to 16.5% of net
sales, compared to 15.9% in fiscal 1994. This increase was primarily
attributable to the second quarter non-cash charge (totalling $2.3 million) to
increase the Company's bad debt reserves and provide for other miscellaneous
expenses, as well as higher costs associated with the Company's accounts
receivables securitization program, which was in place for all of 1995 and
carried larger average balances and discount rates than in fiscal 1994.
Other deductions increased in the aggregate to 2.5% of fiscal 1995's net
sales from 1.8% of prior year's net sales. Interest expense rose $2.9 million,
despite average outstanding borrowings for fiscal 1995 remaining approximately
the same as in the prior year, due to increases in short-term interest rates and
an amendment to the Company's long-term credit facility (discussed below), which
resulted in a significantly higher borrowing rate for the Company beginning in
August 1995. All other deductions rose to 0.6% of net sales from 0.3% in fiscal
1994, primarily due to establishment of a reserve for a note receivable relating
to a prior divestiture and the write-off of unamortized bank fees.
The principal reasons for the increase in the Company's fiscal 1995
effective tax rate to 42.0% from 14.1% in the previous year were tax benefits
realized from the utilization of capital loss carryforwards during the year (see
note 13) and various beneficial tax credits. The Company's effective income tax
rate for 1996 is expected to approximate the Federal tax rate of 34.0%.
11
<PAGE>
FOURTH QUARTER 1995 RESULTS
Net sales for the fourth quarter of 1995 rose in the aggregate by 4.7% from
1994's fourth quarter level. This overall increase consisted of a 3.8% rise in
net sales of the "ongoing" LADD business units and an 8.5% increase in combined
net sales of the four businesses sold or being held for sale. The fourth quarter
gross profit margin rose to 18.0% in 1995, from 16.4% in 1994. This increase was
primary due to the fact that the 1994 quarter gross margin was depressed by high
materials costs and unabsorbed overhead, and a favorable LIFO adjustment in the
1995 quarter resulting from a lower-than-anticipated rate of inflation and a
significant decrease in 1995 year-end inventory quantities.
SG&A expenses represented 16.9% of 1995's fourth quarter net sales, as
compared to 17.0% a year earlier. Management continues to closely monitor and
control the Company's SG&A expense.
A restructuring credit amounting to 0.4% of 1995 net sales was recorded in
1995's final three months relating to the sale at quarter-end of two of the four
businesses held for sale and the adjustment to fair value of the net assets of
the remaining two businesses, on which definitive sale agreements were executed
during January 1996. This adjustment was offset by expenses representing 0.3% of
net sales, attributable primarily to severance expenses accrued in conjunction
with the further restructuring of the Company's ongoing business units, which
was announced in June 1995 and continued into the year's final quarter.
Total other deductions represented 2.5% of net sales in the fiscal 1995
fourth quarter, compared to 2.4% in the same quarter a year earlier. The
increase was entirely due to higher interest expense incurred in the 1995 period
resulting from an increased bank borrowing rate.
These factors produced a pretax loss of $1.4 million, or 0.9%, of net sales
in 1995's final three months, compared to a $4.4 million pretax net loss (3.0%
of net sales) in the year-earlier quarter. Both periods were adversely affected
by relatively low gross margins, generally weak furniture industry conditions,
competitive pricing pressures and, in the case of the 1994 quarter, the
write-off of unamortized bank fees.
The high 1995 fourth quarter effective tax rate resulted primarily from the
utilization during the quarter of capital loss carryforwards.
FISCAL 1994 COMPARED TO 1993
Net sales increased $70.4 million, or 13.5%, to a record $591.6 million in
1994, compared to $521.2 million in 1993, largely as a result of the January 31,
1994 acquisition of Pilliod Furniture. On a pro forma basis, assuming the
acquisition of Pilliod Furniture had occurred at the beginning of fiscal year
1993, 1994 net sales decreased from prior year levels by 1.4%. The decrease in
the pro forma 1994 net sales was primarily due to the discontinuance of certain
American of Martinsville residential casegoods product lines, a reduction in
export shipments, and a decline in sales of lower-priced upholstery and
higher-priced casegoods products compared to 1993.
Cost of sales as a percentage of net sales decreased to 81.5% in 1994, from
81.9% in 1993, resulting in an increase in the 1994 gross profit margin to 18.5%
from 18.1% in 1993. The 1994 gross margin was positively impacted by Pilliod
Furniture's gross margin and operating efficiencies generated by the Company's
capital investment program, and negatively affected by higher raw material
costs, including particleboard, medium-density fiberboard, cartons and aluminum.
Additionally, 1994's gross margin was reduced by manufacturing disruptions
associated with the Company's Virginia manufacturing realignment started in
1993's second half and plant disruptions resulting from other capital projects
initiated during 1994. Further, selected plant downtime taken in the fourth
quarter to control inventory levels increased 1994's fourth quarter cost of
sales, negatively impacting gross margins.
Selling, general and administrative (SG&A) expenses were 15.9% of net sales
in 1994, compared to 15.7% in 1993. The increase was due to the costs associated
with the Company's accounts receivable securitization program which was
initiated in February 1994.
Other deductions totaled 1.8% of net sales in 1994, compared with 1.2% in
1993. The increase was primarily attributable to higher interest expense
reflecting the use of long-term debt to partially fund the Company's $31.8
million capital spending program and its $54.4 million Pilliod Furniture
acquisition (see note 3) coupled with rising interest rates. Additionally,
amortization expense increased in 1994 as a result of the Pilliod Furniture
acquisition.
The decrease in the Company's effective income tax rate from 40.0% in 1993
to 14.1% in 1994 resulted principally from reductions in income taxes derived
from state tax planning strategies and the utilization of capital loss
carryforwards.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Effective August 14, 1995, the Company's $190.0 million long-term credit
facility with a syndicate of banks was amended (the Amended Facility - see note
9). At December 30, 1995, the Company had $110.1 million outstanding under the
Amended Facility, comprised of a $48.1 million term loan, and short-term and
long-term borrowings totalling $62.0 million under a $115.0 million revolving
credit line. Additionally, the Company had other long-term indebtedness
outstanding at the same date, primarily fixed-rate industrial revenue bonds,
aggregating $5.8 million. In total, long-term and short-term debt (funded
debt) represented 45.8% of the Company's total capitalization at the end of
1995, compared to 46.3% a year earlier. On December 30, 1995, net working
capital totaled $79.5 million and the current ratio was 2.3:1. Both of these
financial measures were significantly below their year-earlier levels, due to
the current assets and liabilities of the two remaining businesses held for sale
being reported as a noncurrent asset in the December 30, 1995 consolidated
balance sheet (see note 2), and the sale of Brown Jordan Company and Lea Lumber
& Plywood effective December 29, 1995, which generated cash in excess of $28.0
million that was used to repay debt.
The Company's Amended Facility provides for the payment of a higher rate of
interest than the original facility and, based on current borrowing levels and
interest rates, would increase the Company's interest cost by approximately
$700,000 in 1996 compared to 1995 borrowing rates. In connection with the
amendment of the credit facility, the Company expensed approximately $525,000 of
unamortized fees from its original bank facility. Borrowings on the Amended
Facility are currently unsecured but will become subject to a lien on
substantially all the personal property assets of the Company effective March
31, 1996.
At December 30, 1995, $36.0 million of cash had been generated through the
Company's trade accounts receivable securitization program (see note 4). The
existing trade accounts receivable securitization program expires on March 30,
1996 and will not be renewed. The cash currently provided by this program will
be replaced by borrowings under the revolving credit line of the Company's
long-term credit facility. Management believes the Company's existing borrowing
capacity under its revolving credit facility ($53.0 million at December 30,
1995) is sufficient to refinance the additional working capital requirement.
During fiscal 1995, the Company generated net cash from operating
activities of $11.1 million, an increase of $8.3 million compared to the prior
year. The $11.1 million net cash from operating activities was generated
partially by cash flows from earnings after adding back depreciation,
amortization and restructuring expense, offset by a decrease in the net deferred
tax liability, which in the aggregate totalled $2.9 million. Additionally, a
decrease in working capital of $4.3 million positively impacted cash flows.
During fiscal 1995, capital spending totaled $11.6 million, down sharply
from the prior year's $31.8 million, as the major capital projects initiated
during fiscal years 1993 and 1994 were completed in early 1995 and a reduced
capital spending program was initiated by management. Capital expenditures
during 1995 and 1994 were funded largely from the operations of the Company and
borrowings under the Company's existing long-term credit facility. The Company
anticipates spending less than $12.0 million for capital improvements during
1996, and believes that the unused long-term credit lines available under its
banking arrangements, as well as cash generated from operations, will be
adequate to fund these planned investments.
Because of the Company's recent operating performance and in light of
current short-term and medium-term interest rates, the Company plans to
refinance its long-term and short-term bank credit facilities and its accounts
receivable securitization program. The Company anticipates that the refinancing
will be in the form of a term loan and revolving credit facility secured by
substantially all of the Company's assets. Borrowings under such a facility will
likely bear interest at rates above the Company's borrowing rate at December 30,
1995. In anticipation of such a refinancing, approximately $750,000 of
unamortized fees will be charged to operations during 1996's first quarter. The
Company anticipates the planned refinancing will be finalized during the second
quarter of 1996.
IMPACT OF INFLATION
Although the effects of inflation on the Company cannot be accurately
determined, in 1995 the impact of inflation affected the Company's manufacturing
costs in the areas of manufacturing overhead and raw materials other than
lumber. The price of lumber, like the prices of other commodities, is affected
more by the interaction of supply and demand than by inflation. Although 1995
margins were impacted by inflation, the Company's gross profit margins during
the past several years have, in general, been impacted more by promotional
selling discounts and plant downtime taken to curtail production
13
<PAGE>
than by inflation. The Company believes it will be able to largely offset the
effects of inflation by improving its manufacturing efficiency, increasing
employee productivity, substituting raw materials, and increasing the selling
prices of its products.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
The management of LADD Furniture, Inc. is responsible for the integrity of
the financial statements of the Company and for ascertaining that the financial
statements accurately reflect the financial position and results of operations
of the Company. The financial statements were prepared in conformity with
generally accepted accounting principles, applying estimates and management's
best judgment, as required. Information presented elsewhere in the Company's
Annual Report on Form 10-K is consistent with the financial statements.
LADD has established and maintains a system of internal controls designed
to provide reasonable assurance, at an appropriate cost, that the Company's
assets are adequately safeguarded and that the accounting records reflect the
transactions of the Company accurately, fairly and in reasonable detail. The
internal control system provides for careful selection and training of
personnel, the delegation of management authority and responsibility, the
dissemination of management control policies and procedures and an internal
audit program.
The board of directors, through its Audit Committee consisting of two
directors who are not officers or employees of the Company, is responsible for
reviewing and monitoring the financial statements and accounting practices of
the Company. The Audit Committee meets periodically, either separately or
jointly, with the independent auditors, representatives of management and the
Company's internal auditors to discuss auditing, accounting and financial
statement matters. To ensure complete independence, representatives of KPMG Peat
Marwick LLP, certified public accountants retained by the Company to audit the
financial statements, have full and free access to meet with the Audit Committee
with or without the presence of management representatives.
<TABLE>
<S> <C>
Fred L. Schuermann, Jr. William S. Creekmuir
President & Chief Executive Officer Executive Vice President & CFO
February 16, 1996 February 16, 1996
</TABLE>
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
LADD FURNITURE, INC.:
We have audited the accompanying consolidated balance sheets of LADD
Furniture, Inc. and subsidiaries as of December 31, 1994 and December 30, 1995,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended December 30,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LADD
Furniture, Inc. and subsidiaries as of December 31, 1994 and December 30, 1995,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 30, 1995 in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Greensboro, North Carolina
February 16, 1996, except for paragraph 4 of Note 2,
which is as of February 26, 1996
15
<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
DOLLAR AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA
Net sales................................................................................... $521,200 591,575 614,502
Cost of sales............................................................................... 426,921 481,994 515,980
Gross profit........................................................................... 94,279 109,581 98,522
Selling, general and administrative expenses................................................ 81,953 93,911 101,345
Restructuring expense -- NOTE 2............................................................. -- -- 25,120
Operating income (loss)................................................................ 12,326 15,670 (27,943)
Other deductions:
Interest expense -- NOTE 9................................................................ 5,542 8,939 11,798
Other, net -- NOTE 9...................................................................... 377 1,714 3,685
5,919 10,653 15,483
Earnings (loss) before income taxes.................................................... 6,407 5,017 (43,426)
Income tax expense (benefit) -- NOTE 13..................................................... 2,561 709 (18,236)
Net earnings (loss).................................................................... $ 3,846 4,308 (25,190)
Net earnings (loss) per common share........................................................ $ 0.50 0.56 (3.26)
Cash dividends per common share............................................................. $ 0.36 0.36 0.27
Weighted average number of common shares outstanding........................................ 7,685,751 7,696,689 7,720,783
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
DOLLAR AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA
ASSETS
Current assets:
Cash........................................................................................... $ 576 1,272
Trade accounts receivable, less allowances for doubtful receivables, discounts, returns
and allowances of $4,294 and $4,057, respectively -- NOTES 4 AND 15......................... 52,735 38,288
Inventories -- NOTE 5.......................................................................... 122,083 89,466
Prepaid expenses and other current assets -- NOTE 13........................................... 10,053 13,663
Total current assets...................................................................... 185,447 142,689
Property, plant and equipment, net -- NOTES 6 AND 14............................................. 109,522 82,586
Businesses held for sale, net -- NOTE 2.......................................................... -- 8,052
Intangible and other assets, net -- NOTES 2 AND 7................................................ 83,847 79,659
$378,816 312,986
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt -- NOTE 9............................................... $ 687 309
Short-term bank borrowings -- NOTE 9........................................................... 5,000 3,037
Trade accounts payable......................................................................... 28,360 28,419
Accrued expenses and other current liabilities -- NOTES 2, 8 AND 13............................ 27,715 31,396
Total current liabilities................................................................. 61,762 63,161
Long-term debt, excluding current installments -- NOTE 9......................................... 143,584 112,598
Deferred compensation and other liabilities -- NOTES 11, 12 AND 14............................... 6,316 6,593
Deferred income taxes -- NOTE 13................................................................. 15,248 5,437
Total liabilities......................................................................... 226,910 187,789
Shareholders' equity -- NOTE 10:
Preferred stock of $100 par value. Authorized 500,000 shares; no shares issued................. -- --
Common stock of $.30 par value. Authorized 50,000,000 shares; issued 7,700,151 shares and
7,726,993 shares, respectively.............................................................. 2,310 2,318
Additional paid-in capital..................................................................... 49,516 49,905
Currency translation adjustment................................................................ (208) --
Retained earnings.............................................................................. 101,105 73,829
152,723 126,052
Less unamortized value of restricted stock..................................................... (817) (855)
Total shareholders' equity................................................................ 151,906 125,197
Commitments and contingencies -- NOTES 14 AND 15
$378,816 312,986
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
DOLLAR AMOUNTS IN THOUSANDS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)......................................................................... $ 3,846 4,308 (25,190)
Adjustments to reconcile net earnings (loss) to net cash provided by operating
activities:
Depreciation of property, plant and equipment............................................. 10,508 14,143 12,671
Amortization.............................................................................. 2,554 3,669 3,758
Restructuring expense..................................................................... -- -- 25,120
Provision for losses on trade accounts receivable......................................... 2,056 1,521 2,898
Gain on sales of property, plant and equipment............................................ (155) (89) (314)
Provision for deferred income taxes....................................................... 214 (1,204) (13,419)
Increase in deferred compensation and other liabilities................................... 1,840 1,388 1,297
Change in assets and liabilities, net of effects from acquisition and divestures and
classification of businesses held for sale:
Increase in trade accounts receivable.................................................. (5,188) (2,517) (7,988)
(Increase) decrease in inventories..................................................... (5,063) (10,709) 8,126
(Increase) decrease in prepaid expenses and other current assets....................... 61 (1,886) (2,084)
Increase (decrease) in trade accounts payable.......................................... 310 (2,496) 3,608
Increase (decrease) in accrued expenses and other current liabilities.................. (2,239) (3,313) 2,607
Total adjustments......................................................................... 4,898 (1,493) 36,280
Net cash provided by operating activities.............................................. 8,744 2,815 11,090
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Pilliod Furniture, net of cash acquired -- NOTE 3.......................... -- (23,847) --
Additions to property, plant and equipment................................................ (24,666) (31,825) (11,560)
Proceeds from sales of property, plant and equipment...................................... 425 962 191
Proceeds from sales of businesses -- NOTE 2............................................... -- -- 28,004
Additions to intangible and other assets.................................................. (724) (1,150) (3,715)
Net cash provided by (used in) investing activities.................................... (24,965) (55,860) 12,920
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings........................................................ 19,654 136,666 330
Proceeds from (repayments of) short-term bank borrowings.................................. -- 5,000 (1,963)
Proceeds from sales of trade accounts receivable.......................................... -- 32,485 3,515
Proceeds from sale leaseback of equipment................................................. -- 14,566 6,691
Proceeds from sale leaseback of other assets.............................................. -- 1,360 --
Principal payments of long-term debt...................................................... (1,155) (135,020) (29,743)
Proceeds from common stock issued......................................................... 94 23 8
Dividends paid............................................................................ (2,767) (2,771) (2,086)
Net cash provided by (used in) financing activities.................................... 15,826 52,309 (23,248)
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................................................... (81) (38) (66)
Net increase (decrease) in cash........................................................... (476) (774) 696
Cash at beginning of year................................................................... 1,826 1,350 576
Cash at end of year......................................................................... $ 1,350 576 1,272
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
UNAMORTIZED
NUMBER ADDITIONAL CURRENCY VALUE OF
OF SHARES COMMON PAID-IN TRANSLATION RETAINED RESTRICTED
ISSUED STOCK CAPITAL ADJUSTMENT EARNINGS STOCK
<S> <C> <C> <C> <C> <C> <C>
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA
BALANCE AT JANUARY 2, 1993...................... 7,674,508 $2,302 48,681 (89) 98,489 (659)
Shares issued in connection with incentive
stock option plan.......................... 3,890 1 90 -- -- --
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 10,321 3 415 -- -- (128)
Currency translation adjustment............... -- -- -- (81) -- --
Net earnings.................................. -- -- -- -- 3,846 --
Dividends paid................................ -- -- -- -- (2,767) --
BALANCE AT JANUARY 1, 1994...................... 7,688,719 2,306 49,186 (170) 99,568 (787)
Shares issued in connection with incentive
stock option plan.......................... 782 -- 19 -- -- --
Repurchase of restricted stock................ (6,142) (1 ) (170) -- -- 170
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 16,792 5 481 -- -- (200)
Currency translation adjustment............... -- -- -- (38) -- --
Net earnings.................................. -- -- -- -- 4,308 --
Dividends paid................................ -- -- -- -- (2,771) --
BALANCE AT DECEMBER 31, 1994.................... 7,700,151 2,310 49,516 (208) 101,105 (817)
Repurchase of restricted stock................ (2,452) (1 ) (68) -- -- 68
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 29,294 9 457 -- -- (106)
Currency translation adjustment............... -- -- -- (66) -- --
Reclassification to businesses held for
sale....................................... -- -- -- 274 -- --
Net loss...................................... -- -- -- -- (25,190) --
Dividends paid................................ -- -- -- -- (2,086) --
BALANCE AT DECEMBER 30, 1995.................... 7,726,993 $2,318 49,905 -- 73,829 (855)
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
(NOTE 10)
<S> <C>
BALANCE AT JANUARY 2, 1993...................... 148,724
Shares issued in connection with incentive
stock option plan.......................... 91
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 290
Currency translation adjustment............... (81)
Net earnings.................................. 3,846
Dividends paid................................ (2,767)
BALANCE AT JANUARY 1, 1994...................... 150,103
Shares issued in connection with incentive
stock option plan.......................... 19
Repurchase of restricted stock................ (1)
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 286
Currency translation adjustment............... (38)
Net earnings.................................. 4,308
Dividends paid................................ (2,771)
BALANCE AT DECEMBER 31, 1994.................... 151,906
Repurchase of restricted stock................ (1)
Shares issued in connection with and
amortization of employee restricted
stock awards............................... 360
Currency translation adjustment............... (66)
Reclassification to businesses held for
sale....................................... 274
Net loss...................................... (25,190)
Dividends paid................................ (2,086)
BALANCE AT DECEMBER 30, 1995.................... 125,197
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Following the completion of the restructuring described in note 2, the
Company continues to be one of the largest residential furniture manufacturers
in the United States with 20 manufacturing facilities in eight states. The
Company's products consist principally of casegoods and upholstery furniture in
a wide range of styles for bedrooms, family rooms, dining rooms and living rooms
in the low-medium to high-medium price ranges for the residential and contract
(principally hotel/motel) markets. Residential casegoods, residential upholstery
and contract products comprised approximately 46%, 20% and 11%, respectively, of
the Company's 1995 net sales. The Company currently sells to more than 8,000
customers, including retail furniture chains, national general retailers,
department stores, independent furniture retailers, major hotel chains and
others located throughout the United States and overseas.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of LADD
Furniture, Inc. and its subsidiaries, all of which are wholly-owned. All
significant intercompany balances and transactions have been eliminated in
consolidation.
FISCAL YEAR
The Company's fiscal year ends on the Saturday nearest the end of December.
Fiscal year 1993 ended January 1, 1994; fiscal year 1994 ended December 31,
1994; and fiscal year 1995 ended December 30, 1995.
INVENTORIES
Approximately 66% in 1994 and 71% in 1995 of the Company's inventories are
valued using the last-in, first-out (LIFO) cost method, which is not in excess
of market. All other inventories in 1994 and 1995 are valued at the lower of
first-in, first-out (FIFO) cost or market (net realizable value).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is provided over the estimated useful lives of the respective assets
on the straight-line method. Estimated useful lives are 10 to 35 years for
buildings and improvements and 3 to 13 years for machinery and equipment.
The Company accounts for any impairment of property, plant and equipment
under the provisions of Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of. This statement requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of those assets may not be recoverable.
REVENUE RECOGNITION
Sales are recognized when products are shipped and invoiced to customers.
Monthly provision is made for doubtful receivables, discounts, returns and
allowances.
Substantially all of the Company's accounts receivable are due from
retailers described above. Management periodically performs credit evaluations
of its customers and generally does not require collateral. The Company has no
concentrated credit risk with any individual customer.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of a foreign subsidiary being held for sale are
translated at year-end rates of exchange, and revenues and expenses are
translated at the average rates of exchange for the year. Gains and losses
resulting from translation were accumulated in a separate component of
shareholders' equity until June 1995, at which time the balance was transferred
to businesses held for sale. Gains and losses resulting from foreign currency
transactions are included in net earnings (loss).
INCOME TAXES
Deferred tax assets and liabilities are recognized for the temporary
differences between the financial statement carrying amounts and the tax bases
of the Company's assets, liabilities, and loss and tax credit carryforwards at
income tax rates
20
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
expected to be in effect when such amounts are realized or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
earnings in the period that includes the enactment date.
EARNINGS PER SHARE
On May 12, 1995, shareholders approved a one-for-three reverse split of the
Company's common stock which became effective May 16, 1995. All share and per
share data presented in the accompanying consolidated financial statements have
been restated for this one-for-three stock split. Earnings per share are
calculated based upon the weighted average number of common shares outstanding
during each fiscal year, as restated for the reverse stock split. The effect of
dilutive stock options on the calculation is insignificant in each of the fiscal
years presented.
INTANGIBLE ASSETS
Intangible assets consist principally of values assigned to patents,
furniture designs, trade names and the excess of cost over the assigned value of
net assets acquired. These assets are being amortized using the straight-line
method over periods of 15 to 40 years. The Company assesses the recoverability
of the excess of cost over the assigned value of net assets acquired by
determining whether the amortization of the balance over its remaining life can
be recovered through undiscounted future operating cash flows of the acquired
operations. The assessment of the recoverability of the excess of cost over the
assigned value of net assets acquired will be impacted if estimated future
operating cash flows are not achieved.
PENSION AND OTHER POSTRETIREMENT PLANS
The Company and several of its subsidiaries have defined benefit pension
plans covering qualified salaried and hourly employees. The benefits are based
on years of service and the employee's final average compensation before
retirement. The cost of these programs is being funded currently.
The Company also provides certain health care benefits for certain retired
employees. The Company measures the costs of its obligation based on its best
estimate. The net periodic costs are recognized as employees render the services
necessary to earn the postretirement benefits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, trade accounts receivable, prepaids and other
current assets, short-term bank borrowings, trade accounts payable and accrued
expenses and other current liabilities approximates fair value because of the
short maturity of these financial instruments.
The fair value of the Company's long-term debt is estimated by discounting
the future cash flows at rates currently offered to the Company for similar debt
instruments of comparable maturities. The fair value of the Company's long-term
debt approximates the face value of the debt due to the variable interest rates
on the majority of long-term debt at December 30, 1995.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
NOTE 2: RESTRUCTURING AND PLANNED DIVESTITURES
During the second quarter of 1995, the Company recorded a $25,696,000
non-cash restructuring charge as a result of the Company's plan to divest four
operating companies (Brown Jordan Company, Fournier Furniture, Daystrom
Furniture and Lea Lumber & Plywood), close four Company-owned retail stores, and
reorganize the remaining companies to improve operating performance. During the
fourth quarter of 1995, the Company recorded a $2,121,000 net decrease in
restructuring expense as a result of finalizing sales of two of the operating
companies and the revision of the fair value of the remaining two operating
companies. Also, during the fourth quarter of 1995, the Company recorded
additional charges of $1,264,000
21
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 2: RESTRUCTURING AND PLANNED DIVESTITURES -- CONTINUED
for executive severance resulting from the Company's decision to realign
management for its casegoods, upholstery and contract operations and $281,000 of
other miscellaneous expenses. The net restructuring charge of $25,120,000 for
the year ended December 30, 1995 consisted of: (a) $17,379,000 to write-down
businesses sold or held for sale to the estimated fair value, net of disposition
expenses; (b) $3,699,000 to increase reserves for costs associated with closing
four retail stores; (c) $2,614,000 to provide for severance expense and other
costs; and (d) $1,428,000 to write-down selected machinery to estimated fair
value because of changes in manufacturing processes.
On December 29, 1995, the Company sold its wholly-owned subsidiary Brown
Jordan Company (Brown Jordan) and certain related intellectual property rights,
for $24,000,000 in cash and a 12% interest, on a fully diluted basis, in the
purchaser. The 12% interest in the purchaser, valued at $2,200,000, is recorded
at the lower of cost or market and is included in intangible and other assets in
the accompanying December 30, 1995 consolidated balance sheet. On December 29,
1995, the Company also sold substantially all of the assets of its Lea Lumber &
Plywood (LL&P) division, for cash of approximately $4,004,000 and a $1,000,000
subordinated note, which is included in intangible and other assets in the
accompanying December 30, 1995 consolidated balance sheet. The Company used the
net cash proceeds from the above divestitures to pay down its long-term debt.
The noncash proceeds were pledged by the Company as partial collateral for
long-term debt payable to its syndicate of banks.
The Company has signed sales contracts for the remaining two operating
companies held for sale which are scheduled to close during the first quarter of
1996. The following information shows the components included in businesses held
for sale:
<TABLE>
<CAPTION>
DECEMBER 30,
1995
<S> <C>
IN THOUSANDS
Trade accounts receivable, net.......................................................... $ 9,114
Inventories, net........................................................................ 10,400
Other current assets.................................................................... 413
Property, plant and equipment, net...................................................... 9,186
Current liabilities..................................................................... (4,454)
Long-term debt.......................................................................... (1,951)
Currency translation adjustment......................................................... 274
Total assets, net....................................................................... 22,982
Less adjustment to write-down businesses held for sale to the estimated fair value...... (14,930)
$ 8,052
</TABLE>
On February 26, 1996, the Company sold its wholly-owned subsidiary Fournier
Furniture, Inc. for cash and a subordinated note totalling approximately $10.0
million and the purchaser's assumption of approximately $1.9 million of
Industrial Revenue Bonds. The amount of the subordinated note is subject to
finalization of a post-closing working capital adjustment.
Businesses held for sale are valued using management's best estimate of the
amounts expected to be realized on the sale of the two operating companies.
However, the amount the Company will ultimately realize could differ materially
from the amounts assumed in arriving at the loss on the write-down to the
estimated fair value.
The following unaudited pro forma information shows consolidated operating
results for the periods presented as though the Company had divested the four
operating companies and closed four company-owned retail stores as of January 2,
1993, excluding the restructuring expense recorded during 1995:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
IN THOUSANDS (UNAUDITED)
Net sales....................................................................... $413,955 475,605 498,747
Earnings (loss) before interest and income taxes................................ 10,331 11,486 (3,973)
</TABLE>
22
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 2: RESTRUCTURING AND PLANNED DIVESTITURES -- CONTINUED
The costs charged against restructuring reserves associated with items (b)
and (c) in the first paragraph of the footnote above include the following:
<TABLE>
<CAPTION>
1995
<S> <C>
IN THOUSANDS
Restructuring reserve, beginning.................................................................... $ 6,313
Write-off of excess of cost over the assigned value of net assets acquired.......................... (1,037)
Write-off of leasehold improvements................................................................. (215)
Lease termination costs............................................................................. (406)
Write-down of equipment............................................................................. (90)
Severance........................................................................................... (184)
Other............................................................................................... (417)
Restructuring reserve, December 30, 1995............................................................ $ 3,964
</TABLE>
NOTE 3: ACQUISITION
On January 31, 1994, the Company acquired The Pilliod Cabinet Company, a
manufacturer of promotionally priced casegoods furniture, by purchasing all of
the common stock of its parent company, Pilliod Holding Company (Pilliod), for
$24,259,000 cash (including acquisition expenses), the repayment of Pilliod debt
of $29,893,000, and the assumption of other long-term debt of $247,000. The
excess of cost over the assigned value of net assets acquired was approximately
$32,826,000 and is being amortized using the straight-line method 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.
NOTE 4: ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM
During fiscal year 1994, the Company entered into a revolving accounts
receivable facility. The facility was revised in March 1995 and provides for the
true sale of a defined pool of trade accounts receivable through a wholly-owned
subsidiary to a third-party purchaser. Under the revised agreement, which
expires in March 1996, 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 December 31, 1994 and December 30, 1995, the defined pool of trade
accounts receivable totaled approximately $42,848,000 and $46,430,000,
respectively, and the purchaser's investment totaled $32,485,000 and
$36,000,000, respectively. The purchaser's average investment for 1994 and 1995
was approximately $28,969,000 and $35,011,000, respectively. The net cash
proceeds from the sales of trade accounts receivable are reported as financing
activities in the accompanying consolidated statements of cash flows for the
years ended December 31, 1994 and December 30, 1995. The purchaser's investment
is reflected as a reduction of trade accounts receivables in the accompanying
consolidated balance sheets. At December 31, 1994 and December 30, 1995, the
Company retained an ownership interest in the receivables pool of approximately
$10,363,000 and $10,430,000, respectively, of which approximately $8,090,000 and
$9,065,000, respectively, was subordinate to that of the purchaser. The Company
maintains reserves which approximate the risk of loss relating to its interest
in the receivables. The Company's ongoing obligations with respect to the
receivables pool are limited to the subordinated portion of its ownership
interest.
A portion of the cost of the accounts receivable securitization program is
based on the purchaser's level of investment and borrowing costs. The total cost
of the program, which aggregated $1,458,000 and $2,585,000 in 1994 and 1995,
respectively, is included in selling, general and administrative expenses in the
accompanying 1994 and 1995 consolidated statements of operations.
23
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 5: INVENTORIES
A summary of inventories follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Inventories on the FIFO cost method:
Finished goods..................................................................... $ 65,046 50,847
Work in process.................................................................... 23,084 17,165
Raw materials and supplies......................................................... 47,997 33,140
Total inventories on FIFO cost method......................................... 136,127 101,152
Less adjustments of certain inventories to the LIFO cost method...................... (14,044) (11,686)
$122,083 89,466
</TABLE>
NOTE 6: PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Land and improvements................................................................ $ 6,592 4,356
Buildings and improvements........................................................... 78,381 70,780
Machinery and equipment.............................................................. 87,480 69,389
Construction in progress............................................................. 8,343 5,173
180,796 149,698
Less accumulated depreciation........................................................ (71,274) (67,112)
$109,522 82,586
</TABLE>
NOTE 7: INTANGIBLE AND OTHER ASSETS
A summary of intangible and other assets follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Excess of cost over the assigned value of net assets acquired........................ $ 57,038 54,879
Trade names.......................................................................... 26,031 21,700
Furniture designs and patents........................................................ 9,750 8,815
Other................................................................................ 3,041 7,460
95,860 92,854
Less accumulated amortization........................................................ (12,013) (13,195)
$ 83,847 79,659
</TABLE>
24
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 8: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
A summary of accrued expenses and other current liabilities follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Payrolls, commissions and employee benefits.......................................... $ 15,291 16,775
Other................................................................................ 12,424 14,621
$ 27,715 31,396
</TABLE>
NOTE 9: SHORT-TERM BANK BORROWINGS AND LONG-TERM DEBT
Short-term bank borrowings under a revolving credit facility with a bank
totaled $5,000,000 and $3,037,000 at December 31, 1994 and December 30, 1995,
respectively. Borrowings under the facility bear interest at a rate based on the
availability of bank funds, and the average borrowing rate in 1994 and 1995 was
4.85% and 6.70%, respectively.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Term loan due at various dates through October 19, 1999.............................. $ 75,000 48,100
Revolving credit loan, due October 19, 1999.......................................... 61,100 59,000
Other indebtedness, primarily fixed-rate industrial revenue bonds, due through
2009............................................................................... 8,171 5,807
Total long-term debt............................................................ 144,271 112,907
Less current installments of long-term debt.......................................... 687 309
Long-term debt, excluding current installments.................................. $143,584 112,598
</TABLE>
On October 19, 1994, the Company entered into an amended and restated
credit agreement with a syndicate of banks which provided a $75,000,000
five-year term loan and a $115,000,000 five-year revolving credit loan. At
December 30, 1995, the Company had available approximately $53,000,000 for
future borrowings under the revolving credit loan. Effective August 14, 1995,
the credit agreement was further amended (the Amended Facility). The term loan
portion of the Amended Facility requires quarterly repayment of $3,607,500
commencing March 1997, with a final payment of the outstanding balance on
October 19, 1999. In connection with amending the credit agreement, the
Company in 1995 charged to operations approximately $525,000 in unamortized
financing fees.
The pricing of the Amended Facility is determined by a ratio of debt levels
to cash flows, as specified. At December 30, 1995, borrowings under the Amended
Facility bear interest at LIBOR (5.625%) plus 2 1/8%, prime (8.50%) plus 1 1/8%,
or at a lesser rate based on the availability of bank funds, and the Company
pays a commitment fee of 1/2% per annum on the unused portion of the revolving
credit loan. However, if prior to April 1, 1996 the Company reduces its term
loan balance by an additional $13,100,000, the interest rate on the Amended
Facility will be reduced by 1/8%. Borrowings under the Amended Facility are
unsecured but will become subject to a lien on substantially all the assets of
the Company effective March 30, 1996 if the term loan component of the facility
has not been reduced to $35,000,000 by that date. The Amended Facility requires
the maintenance of certain ratios pertaining to shareholders' equity and
operating earnings and contains covenants which relate to future borrowings,
liens on assets, specified amounts of consolidated net worth and capital
spending, and the operations of the Company. At December 30, 1995, the Company
was in compliance with all covenants under the Amended Facility.
The industrial revenue bonds are secured by property, plant and equipment
with a depreciated cost of approximately $4,923,000 at December 30, 1995.
25
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 9: SHORT-TERM BANK BORROWINGS AND LONG-TERM DEBT -- CONTINUED
The aggregate annual maturities of long-term debt during each of the five
fiscal years subsequent to December 30, 1995 are approximately as follows:
$309,000 in 1996; $14,678,000 in 1997; $14,742,000 in 1998; $78,330,000 in 1999;
and $4,763,000 in 2000.
Interest paid by the Company in 1993, 1994 and 1995 amounted to
approximately $4,995,000, $8,014,000 and $12,218,000, respectively.
NOTE 10: EMPLOYEE STOCK PLANS
STOCK OPTION PLAN
Under incentive stock option plans, the Company grants nontransferable
stock options to officers, key management employees and nonemployee directors.
Options are generally granted at fair market value on the dates of grant. All
optionees were employees or directors of the Company on the date of grant and
throughout the term of the option except in the case of death, retirement, or
disability.
A total of 788,889 shares were reserved for option under the previous and
current plans. Options granted prior to 1991 are generally exercisable at the
cumulative rate of 20% per year after one year from the date of grant. Options
granted subsequent to 1990 are exercisable at the cumulative rate of 25% per
year after one year from the date of grant. Options expire over a period not to
exceed ten years from the date of grant. Stock option activity during 1993, 1994
and 1995 follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
<S> <C> <C>
Outstanding at January 2, 1993..................................................... 183,218 $18.00 - $68.28
Granted in 1993.................................................................... 45,367 $34.50 - $44.55
Exercised in 1993.................................................................. (3,890 ) $18.00 - $34.89
Cancelled in 1993.................................................................. (27,234 ) $18.00 - $68.28
Outstanding at January 1, 1994..................................................... 197,461 $21.75 - $48.39
Granted in 1994.................................................................... 188,645 $17.25 - $33.00
Exercised in 1994.................................................................. (782 ) $ 24.00
Cancelled in 1994.................................................................. (46,670 ) $17.25 - $43.14
Outstanding at December 31, 1994................................................... 338,654 $17.25 - $48.39
Granted in 1995.................................................................... 40,882 $13.25 - $17.34
Cancelled in 1995.................................................................. (127,358 ) $17.25 - $48.39
Outstanding at December 30, 1995................................................... 252,178 $13.25 - $44.55
Exercisable at December 30, 1995................................................... 98,871 $17.25 - $44.55
</TABLE>
RESTRICTED STOCK AWARDS
The board of directors periodically awards restricted common stock to key
management employees. Vesting of such awards is subject to future service
requirements of five years from the date of each award. The difference between
cash paid by the employee for the awarded shares, generally par value, and the
market value of the shares as of the award date is amortized over the five-year
service requirement periods. During 1993, 1994 and 1995, the board of directors
awarded and issued 10,321, 16,792 and 29,294 shares, respectively.
NOTE 11: EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PENSION PLANS
The Company and several of its subsidiaries have noncontributory defined
benefit pension plans covering qualified salaried and hourly employees. The
plans covering qualified salaried employees provide pension benefits based on
the participant's final average salary before retirement. The plans covering
qualified hourly employees provide pension benefits based on years of service.
The Company's policy is to fund normal costs and amortization of prior service
costs.
26
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 11: EMPLOYEE BENEFIT PLANS -- CONTINUED
In addition to the qualified plans, the Company has a nonqualified
retirement plan covering certain salaried employees. At December 31, 1994 and
December 30, 1995, the Company had approximately $450,000 and $538,000,
respectively, of assets available to fund future obligations of the nonqualified
plan. These assets are included in intangible and other assets, and the related
liability is included in deferred compensation and other liabilities in the
accompanying consolidated balance sheets. The liability for the nonqualified
retirement plan is reflected in the reconciliation of the funded status of the
plans below.
The following sets forth the funded status of the plans:
<TABLE>
<CAPTION>
DECEMBER 30,
DECEMBER 31, 1994 1995
ASSETS EXCEED ACCUMULATED ASSETS EXCEED
ACCUMULATED BENEFITS EXCEED ACCUMULATED
BENEFITS ASSETS BENEFITS
<S> <C> <C> <C>
IN THOUSANDS
Actuarial present value of benefit obligations:
Vested benefit obligation.......................................... $ (30,247) (973) (21,463)
Accumulated benefit obligation..................................... $ (30,819) (1,442) (21,797)
Projected benefit obligation for service rendered to date.......... (36,968) (2,384) (27,958)
Less plan assets at fair value, primarily equity and fixed
income investment funds.......................................... 35,798 -- 25,921
Projected benefit obligation in excess of plan assets.............. (1,170) (2,384) (2,037)
Unrecognized net obligation (asset) at transition being amortized
over 15 years.................................................... (572) -- 73
Unrecognized net (gain) loss....................................... (1,023) 589 (1,214)
Unrecognized prior service cost.................................... 1,933 534 1,396
Adjustment required to recognize minimum liability................. -- (181) --
Pension liability recognized in the consolidated balance
sheets........................................................... $ (832) (1,442) (1,782)
<CAPTION>
ACCUMULATED
BENEFITS EXCEED
ASSETS
<S> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.......................................... (18,623)
Accumulated benefit obligation..................................... (19,037)
Projected benefit obligation for service rendered to date.......... (20,901)
Less plan assets at fair value, primarily equity and fixed
income investment funds.......................................... 17,384
Projected benefit obligation in excess of plan assets.............. (3,517)
Unrecognized net obligation (asset) at transition being amortized
over 15 years.................................................... (568)
Unrecognized net (gain) loss....................................... 2,315
Unrecognized prior service cost.................................... 644
Adjustment required to recognize minimum liability................. (527)
Pension liability recognized in the consolidated balance
sheets........................................................... (1,653)
</TABLE>
Net pension expense for the plans for 1993, 1994 and 1995 included the
following components:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
IN THOUSANDS
Service costs-benefits earned during the period.................................................. $ 1,915 2,374 2,047
Interest cost on projected obligation............................................................ 2,644 3,101 3,186
Return on assets................................................................................. (4,737) (121) (9,036)
Amortization of unrecognized net obligation (asset) at transition and net deferrals.............. 2,166 (2,522) 6,038
Net pension expense.............................................................................. $ 1,988 2,832 2,235
</TABLE>
The Company also recorded in 1995 a net curtailment gain resulting from the
Brown Jordan and LL&P divestitures totalling approximately $692,000. This
curtailment gain was included in determining the restructuring expense in the
1995 consolidated statement of operations.
The projected benefit obligation at December 31, 1994 and December 30, 1995
was determined using an assumed discount rate of 8.50% and 7.25%, respectively.
The salary plans assume a long-term rate of increase in compensation of 4.50% to
age 60, and 3% thereafter. The assumed long-term rate of return on plan assets
is 8.5%.
DEFINED CONTRIBUTION PLANS
The Company has savings plans for certain employees which qualify under
Section 401(k) of the Internal Revenue Code. The plans allow eligible employees
to contribute up to a fixed percentage of their compensation, with the Company
matching a portion of each employee's contributions. Company contributions under
the plans aggregated approximately $687,000 in 1993, $635,000 in 1994, and
$549,000 in 1995.
27
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 12: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has plans which provide for postretirement health care benefits
for certain employees. These benefits include major medical insurance with
deductible and coinsurance provisions. The Company pays all benefits on a
current basis and the plans are not funded.
The components of the net postretirement benefit cost for 1993, 1994 and
1995 are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
IN THOUSANDS
Service costs...................................................................................... $ 439 286 232
Interest costs of benefit obligation............................................................... 1,611 1,132 1,252
Amortization of transition obligation.............................................................. 1,031 759 759
$3,081 2,177 2,243
</TABLE>
The plans' funded status as of December 31, 1994 and 1995 was as follows:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
IN THOUSANDS
Accumulated postretirement benefit obligation:
Retirees.................................................................................. $ (9,758) (10,329)
Active participants eligible to retire.................................................... (3,739) (4,191)
Other active participants................................................................. (1,921) (2,480)
(15,418) (17,000)
Unrecognized net (gain) loss................................................................ (1,078) 338
Unrecognized transition obligation being amortized over 20 years............................ 13,665 12,906
Accrued postretirement benefit cost......................................................... $ (2,831) (3,756)
</TABLE>
During 1994, the Company amended its retiree health care plan to limit the
Company's contributions and to eliminate benefits for certain employees. The
effect of these amendments was to reduce the December 31, 1994 accumulated
postretirement benefit obligation and the unrecognized transition obligation by
approximately $5,163,000. Additionally, the effect of the change was to reduce
the net postretirement cost by approximately $801,000 in both 1994 and 1995.
The postretirement benefit obligation was determined by application of the
terms of the various plans using relevant actuarial assumptions. Health care
costs are projected to increase at annual rates ranging from 8.00% in 1995 down
to 5.50% in 1997 and thereafter. A one percent annual increase in these assumed
cost trend rates would increase the accumulated postretirement benefit
obligation at December 30, 1995 by approximately $788,000 and the service and
interest cost components of the net postretirement benefit cost for 1995 would
be approximately the same. The assumed discount rate used in determining the
accumulated postretirement benefit obligation at December 31, 1994 and December
30, 1995 was 8.50% and 7.25%, respectively.
28
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 13: INCOME TAXES
Components of income tax expense (benefit) for 1993, 1994 and 1995 are as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
IN THOUSANDS
Current:
Federal......................................................................................... $1,855 1,769 (4,650)
State........................................................................................... 492 144 (167)
2,347 1,913 (4,817)
Deferred:
Federal......................................................................................... 199 (1,034) (11,521)
State........................................................................................... 15 (170) (1,898)
214 (1,204) (13,419)
$2,561 709 (18,236)
</TABLE>
The effective income tax rate on earnings (loss) before income taxes for
the years ended January 1, 1994, December 31, 1994 and December 30, 1995 was
40.0%, 14.1% and 42.0%, respectively. The actual income tax expense (benefit)
differs from the "expected" income tax expense (benefit) computed by applying
the Federal income tax rate of 34% to earnings (loss) before income taxes for
the years ended January 1, 1994, December 31, 1994 and December 30, 1995 as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
IN THOUSANDS
Computed "expected" income tax expense (benefit)................................................. $2,178 1,706 (14,765)
Increases (reductions) due to:
Restructuring and reorganization charges....................................................... -- -- (1,664)
State income taxes, net of Federal income tax benefit.......................................... 335 28 53
Amortization of the excess of cost over the assigned value of net assets acquired.............. 250 463 587
Expenses subject to percentage limitations..................................................... 45 130 117
Utilization of capital loss carryforwards to offset income tax expense of realized
capital gains............................................................................... -- (913) (1,655)
Tax credits, net............................................................................... (92) (230) (571)
Donation of appreciated property............................................................... -- (170) --
Foreign trade income exemptions................................................................ (99) (154) (193)
Other.......................................................................................... (56) (151) (145)
Actual income tax expense (benefit).............................................................. $2,561 709 (18,236)
</TABLE>
During 1993, the effect of enacted changes in tax rates was to increase
deferred income tax expense by approximately $469,000.
During the years ended January 1, 1994 and December 31, 1994, the Company
paid income taxes (net of refunds received) amounting to approximately
$1,863,000 and $2,030,000, respectively. During the year ended December 30,
1995, the Company received refunds (net of taxes paid) of approximately
$188,000. The Company expects to receive refunds of income taxes paid in the
three prior years as a result of the allowable carryback of the net operating
loss sustained in 1995.
29
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 13: INCOME TAXES -- CONTINUED
The tax effects of temporary differences and tax loss carryforwards that
give rise to significant portions of deferred tax assets and liabilities consist
of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Deferred tax liabilities:
Inventories........................................................................ $ (7,226) (7,092)
Property, plant and equipment...................................................... (8,315) (10,304)
Intangible and other assets........................................................ (8,420) (7,201)
Other.............................................................................. (2,428) (2,249)
Total deferred tax liabilities.................................................. (26,389) (26,846)
Deferred tax assets:
Accounts receivable................................................................ 1,727 1,854
Inventories........................................................................ 668 3,145
Liabilities and reserves........................................................... 7,212 10,465
Restructuring and reorganization................................................... -- 8,064
Capital loss carryforwards......................................................... 1,674 --
Net operating loss carryforwards................................................... 1,885 1,885
Other.............................................................................. 435 409
Gross deferred tax assets....................................................... 13,601 25,822
Valuation allowances............................................................... (3,540) (1,885)
Total deferred tax assets....................................................... 10,061 23,937
Net deferred tax liability........................................................... $(16,328) (2,909)
</TABLE>
Deferred taxes are classified in the accompanying consolidated balance
sheets as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
<S> <C> <C>
IN THOUSANDS
Prepaid expenses and other current assets............................................ $ -- 2,528
Accrued expenses and other current liabilities....................................... (1,080) --
Deferred income taxes................................................................ (15,248) (5,437)
$(16,328) (2,909)
</TABLE>
A valuation allowance was provided for the deferred tax assets related to
capital loss carryforwards existing as of December 31, 1994. At that date, the
Company had approximately $4,225,000 of capital loss carryforwards available to
offset future capital gains, for which there was a $1,655,000 valuation
allowance. The full amount of the capital loss carryforwards were utilized in
1995 to offset a like amount of realized capital gains, and the full valuation
allowance of $1,655,000 was reduced accordingly.
In 1994, a valuation allowance was also provided for the deferred tax
assets related to acquired subsidiary net operating loss (NOL) carryforwards.
With the purchase of the Pilliod stock in January 1994, the Company recorded a
deferred tax asset of approximately $2,339,000 for Pilliod's NOL carryforwards
along with a valuation allowance of a like amount. NOL carryforwards of
approximately $1,150,000 were utilized later in 1994, and the valuation
allowance was reduced accordingly. The excess of cost over the assigned value of
net assets acquired decreased in 1994 approximately $453,000 in recognition of
the tax benefits resulting from the utilization of the NOL carryforwards. The
remaining NOL's of approximately $4,761,000 may be carried forward up to 13 more
years to offset future earnings, subject to normal annual limitations prescribed
by tax law. A valuation allowance of $1,885,000 remains in deferred taxes for
these unexpired NOL carryforwards. Tax benefits recognized subsequent to 1995
relating to the valuation allowance for deferred tax assets at December 30, 1995
will be applied to reduce the excess of cost over the assigned value of
Pilliod's net assets acquired.
30
<PAGE>
LADD FURNITURE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 13: INCOME TAXES -- CONTINUED
The Company believes that it is more likely than not the results of future
operations will generate sufficient taxable income to realize the remaining
deferred tax assets.
NOTE 14: LEASES
The Company leases manufacturing facilities, various warehouses, sales
offices and showrooms, as well as manufacturing, transportation and data
processing equipment under operating leases which expire at various dates
through 2026. Future minimum lease payments under noncancelable operating leases
as of December 30, 1995 are:
<TABLE>
<CAPTION>
IN THOUSANDS
<S> <C>
Fiscal year:
1996.................................................................................... $ 10,489
1997.................................................................................... 9,298
1998.................................................................................... 7,602
1999.................................................................................... 6,752
2000.................................................................................... 4,474
Thereafter.............................................................................. 3,028
Total.............................................................................. $ 41,643
</TABLE>
In 1994 and 1995, the Company entered into sale leaseback agreements for
certain manufacturing equipment located at several of its manufacturing
facilities. These transactions have been recorded as sales. The cash proceeds
from the sales of approximately $14,566,000 and $6,691,000, respectively, were
used to repay long-term debt. The gains from the sales of approximately $683,000
and $323,000, respectively, have been recorded in the accompanying consolidated
balance sheets as deferred income and are being amortized into operations over
the term of the leases. Under the agreements, the Company will lease the
equipment over 69 months. The Company has the option to purchase the equipment
at the end of the lease terms.
In February 1996, the Company repurchased $4,648,000 of leased equipment
utilizing long-term debt in connection with the divestiture of Fournier
Furniture.
Rental expense for cancelable and noncancelable operating leases charged to
operations was as follows:
<TABLE>
<CAPTION>
IN THOUSANDS
<S> <C>
Fiscal year:
1993.................................................................................... $ 10,275
1994.................................................................................... 11,459
1995.................................................................................... 14,870
</TABLE>
Rental expense includes contingent rentals based upon usage of
transportation equipment under cancelable and noncancelable operating leases
which totaled approximately $650,000 in 1993, $762,000 in 1994, and $618,000 in
1995.
NOTE 15: DEALER FINANCING ARRANGEMENT
The Company has a cancelable financing arrangement whereby certain notes
receivable from furniture dealers are assigned with recourse to a bank. The
terms of the notes receivable, which are collateralized by inventories held by
the furniture dealers, range from 12 to 48 months with interest rates ranging
from 6% to prime plus 1 1/4%. Upon cancellation of the financing arrangement,
the bank retains the previously assigned notes receivable and, as such, the
notes receivable and related obligations under the dealer financing arrangement
are not recorded in the December 31, 1994 and December 30, 1995 consolidated
balance sheets. Total notes receivable assigned during fiscal 1993, 1994 and
1995 were approximately $7,503,000, $4,286,000 and $2,703,000, respectively.
At December 30, 1995, the Company was contingently liable for approximately
$4,336,000 of receivables transferred with recourse to the bank under the dealer
financing arrangement for which the Company maintains a $2,800,000 letter of
credit agreement to fund any liabilities which might arise under the program. In
the opinion of management, adequate provision for potential losses under the
dealer financing arrangement has been included in the allowances for doubtful
receivables, discounts, returns and allowances in the accompanying consolidated
balance sheets.
31
<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
SELECTED QUARTERLY DATA
DOLLAR AND SHARE DATA IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
FISCAL 1994 FISCAL 1995
4TH 3RD 2ND 1ST 4TH 3RD 2ND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA
Net sales................................... $146,172 153,182 153,182 139,039 152,981 159,144 148,989
Cost of sales............................... 122,242 123,640 122,657 113,455 125,379 130,549 133,492
Gross profit.............................. 23,930 29,542 30,525 25,584 27,602 28,595 15,497
Selling, general and administrative
expenses.................................. 24,784 23,562 23,996 21,569 25,792 23,402 28,335
Restructuring expense....................... -- -- -- -- (576 ) -- 25,696
Operating income (loss)................... (854) 5,980 6,529 4,015 2,386 5,193 (38,534)
Other deductions (income):
Interest expense.......................... 2,771 2,328 2,206 1,634 3,152 2,997 2,846
Other (net)............................... 793 445 524 (48 ) 661 163 2,687
Earnings (loss) before income taxes......... (4,418) 3,207 3,799 2,429 (1,427 ) 2,033 (44,067)
Income tax expense (benefit)................ (2,121) 962 1,094 774 (1,645 ) 142 (16,744)
Net earnings (loss)....................... $ (2,297) 2,245 2,705 1,655 218 1,891 (27,323)
Depreciation................................ $ 3,896 3,626 3,476 3,145 2,780 2,677 3,555
Amortization................................ 1,205 864 893 707 804 755 1,304
Cash dividends paid......................... 693 693 692 693 348 348 695
Weighted average shares outstanding......... 7,700 7,700 7,697 7,690 7,729 7,726 7,725
PER SHARE DATA
Net sales................................... $ 18.98 19.89 19.90 18.08 19.79 20.60 19.29
Net earnings (loss)......................... (0.30) 0.29 0.35 0.22 0.03 0.24 (3.54)
Cash dividends.............................. 0.09 0.09 0.09 0.09 0.05 0.05 0.09
Quarter-end book value...................... 19.73 20.11 19.89 19.63 16.20 16.21 16.00
BALANCE SHEET DATA
Net working capital......................... $123,685 92,421 96,349 104,454 79,528 84,929 89,109
Net property, plant and equipment........... 109,522 121,364 117,780 113,580 82,586 82,567 83,826
Total assets................................ 378,816 402,213 394,373 390,716 312,986 336,868 337,075
Long-term debt.............................. 143,584 125,782 126,967 130,635 112,598 140,182 145,287
Shareholders' equity........................ 151,906 154,821 153,138 151,104 125,197 125,224 123,578
RATIOS
Gross profit margin......................... 16.4% 19.3 19.9 18.4 18.0 18.0 10.4
Operating profit (loss) margin.............. (0.6) 3.9 4.3 2.9 1.6 3.3 (25.9)
Return (loss) on sales...................... (1.6) 1.5 1.8 1.2 0.1 1.2 (18.3)
Effective income tax rate................... 48.0 30.0 28.8 31.9 N/M N/M 38.0
Long-term debt to capitalization............ 45.3 42.1 42.5 43.4 45.1 50.7 51.8
STOCK DATA
High........................................ $ 19.50 24.00 27.75 35.25 13.63 14.13 16.88
Low......................................... 14.63 17.63 18.00 24.75 12.88 12.88 12.25
Close....................................... 19.50 18.00 21.00 26.25 13.13 13.00 13.00
Trading volume (shares)..................... 2,859 1,613 778 1,223 1,203 1,423 2,523
<CAPTION>
1ST
QUARTER
<S> <C>
OPERATING STATEMENT DATA
Net sales................................... 153,388
Cost of sales............................... 126,560
Gross profit.............................. 26,828
Selling, general and administrative
expenses.................................. 23,816
Restructuring expense....................... --
Operating income (loss)................... 3,012
Other deductions (income):
Interest expense.......................... 2,803
Other (net)............................... 174
Earnings (loss) before income taxes......... 35
Income tax expense (benefit)................ 11
Net earnings (loss)....................... 24
Depreciation................................ 3,659
Amortization................................ 895
Cash dividends paid......................... 695
Weighted average shares outstanding......... 7,705
PER SHARE DATA
Net sales................................... 19.91
Net earnings (loss)......................... 0.00
Cash dividends.............................. 0.09
Quarter-end book value...................... 19.57
BALANCE SHEET DATA
Net working capital......................... 133,260
Net property, plant and equipment........... 109,014
Total assets................................ 389,056
Long-term debt.............................. 153,102
Shareholders' equity........................ 151,176
RATIOS
Gross profit margin......................... 17.5
Operating profit (loss) margin.............. 2.0
Return (loss) on sales...................... 0.0
Effective income tax rate................... 31.4
Long-term debt to capitalization............ 47.0
STOCK DATA
High........................................ 19.88
Low......................................... 13.88
Close....................................... 14.63
Trading volume (shares)..................... 4,450
</TABLE>
NOTES: Long-term debt excludes current installments. Pilliod Furniture included
in consolidated results from its January 31, 1994 acquisition by LADD.
Stock price and volume data for calendar quarters. N/M = Not Meaningful.
All stock data has been adjusted to reflect the 1 for 3 reverse stock
split effective May 16, 1995.
32
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No changes in accountants or disagreements with accountants on accounting
or financial disclosure occurred in fiscal years 1995 and 1994.
PART III
Part III is omitted as the Company intends to file with the Commission
within 120 days after the end of the Company's fiscal year a definitive proxy
statement pursuant to Regulation 14A which will involve the election of
directors. With the exception of the information specifically required by Items
10, 11, 12 and 13 of this Part III contained in the Company's proxy statement,
the Company's proxy statement is not incorporated by reference nor deemed to be
filed as a part of this report, including without limitation the Board
Compensation Committee Report on Executive Compensation required by Item 402(k)
of Regulation S-K and the Performance Graph required by Item 402(l) of
Regulation S-K.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See reference to definitive proxy statement under Part III. See pages 4-5;
15 in the Company's definitive proxy statement.
ITEM 11. EXECUTIVE COMPENSATION
See reference to definitive proxy statement under Part III. See pages 9-14
in the Company's definitive proxy statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See reference to definitive proxy statement under Part III. See pages 2-3
in the Company's definitive proxy statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See reference to definitive proxy statement under Part III. See pages 13-14
in the Company's definitive proxy statement.
33
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE(S) IN THIS
FORM 10-K
<S> <C> <C> <C>
(a) The following documents are filed as part of this report:
(1) Financial Statements
Consolidated Statements of Operations for the years ended January 1, 1994, December 31, 1994, and
December 30, 1995.................................................................................. 16
Consolidated Balance Sheets as of December 31, 1994 and December 30, 1995.......................... 17
Consolidated Statements of Cash Flows for the years ended January 1, 1994, December 31, 1994, and
December 30, 1995.................................................................................. 18
Consolidated Statements of Shareholders' Equity for the years ended January 1, 1994, December 31,
1994, and December 30, 1995........................................................................ 19
Notes to Consolidated Financial Statements......................................................... 20-31
Independent Auditors' Report....................................................................... 15
(2) Index to Financial Statement Schedule:
Independent Auditors' Report For the years ended January 1, 1994, December 31, 1994, and December
30, 1995........................................................................................... (F-1)
II -- Valuation and Qualifying Accounts and Reserves............................................... (F-2)
All other schedules are omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto.
(3) List of Executive Compensation Plans
LADD Furniture, Inc. 1994 Incentive Stock Option Plan
Employee Restricted Stock Purchase Agreements for the named executive officers of the registrant as
required by Item 402(a)(2) of Regulation S-K
Executive Employment Agreements with each of Richard R. Allen, Fred L. Schuermann, Jr., William S.
Creekmuir, Kenneth E. Church, Donald L. Mitchell, and Michael P. Haley
LADD Furniture, Inc. Supplemental Retirement Income Plan
LADD Furniture, Inc. Long-Term Incentive Plan (1994)
LADD Furniture, Inc. Long-Term Incentive Plan (1995)
LADD Furniture, Inc. Long-Term Incentive Plan (1996)
LADD Furniture, Inc. 1996 Management Incentive Plan
(b) No reports on Form 8-K were filed in the last quarter of fiscal 1995.
(c) Exhibits
3. Articles of Incorporation and Amendments.
(Previously filed as Exhibit 10 to Item 14 of the Company's Annual Report on Form 10-K for the year
ended December 29, 1990, filed with the Commission on March 28, 1991 and as Exhibit 10.1 to Item 6
of the Company's Quarterly Report on Form 10-Q for the quarter ended July 1, 1995, filed with the
Commission on August 15, 1995)
Enclosed as Exhibit 3.1 to this Annual Report on Form 10-K for the year ended December 30, 1995
3.1 Bylaws (as amended March 5, 1996)
10. LADD Furniture, Inc. 1994 Incentive Stock Option Plan
(Previously filed as Exhibit 10.1 to Item 6 of the Company's Quarterly Report on Form 10-Q for the
quarter ended July 2, 1994, filed with the Commission on August 16, 1994)
</TABLE>
34
<PAGE>
<TABLE>
<S> <C> <C> <C>
Employee Restricted Stock Purchase Agreement between the Company and Fred L. Schuermann, Jr. dated
February 25, 1993
Employee Restricted Stock Purchase Agreement between the Company and William S. Creekmuir dated
February 25, 1993
(Previously filed as Exhibit 10 to Item 14 to the Company's Annual Report on Form 10-K for the year
ended January 2, 1993, filed with the Commission on March 30, 1993)
Employee Restricted Stock Purchase Agreement between the Company and Fred L. Schuermann, Jr. dated
February 24, 1994
Employee Restricted Stock Purchase Agreement between the Company and William S. Creekmuir dated
February 24, 1994
(Previously filed as Exhibits 10.3 and 10.4 to the Company's Annual Report on Form 10-K for the
year ended January 1, 1994, filed with the Commission on March 31, 1994)
Employee Restricted Stock Purchase Agreement between the Company and Fred L. Schuermann, Jr. dated
March 2, 1995
Employee Restricted Stock Purchase Agreement between the Company and William S. Creekmuir dated
March 2, 1995
(Previously filed as Exhibits 10.2 and 10.3 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994, filed with the Commission on March 30, 1995.)
Enclosed as Exhibits 10.1 - 10.6 to this Annual Report on Form 10-K for the year ended December 30,
1995
10.1 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
February 28, 1991.
10.2 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
February 25, 1993.
10.3 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
February 24, 1994.
10.4 Employee Restricted Stock Purchase Agreement between the Company and Kenneth E. Church dated
March 2, 1995.
10.5 Employee Restricted Stock Purchase Agreement between the Company and Michael P. Haley dated
June 23, 1994.
10.6 Employee Restricted Stock Purchase Agreement between the Company and Michael P. Haley dated
March 2, 1995.
Executive Employment Agreement between the Company and Fred L. Schuermann, Jr. dated October 28,
1994
(Previously filed as Exhibit 10.2 to Item 6 of the Company's Quarterly Report on Form 10-Q for the
quarter ended October 1, 1994, filed with the Commission on November 15, 1994)
Enclosed as Exhibits 10.7 - 10.10 to this Annual Report on Form 10-K for the year ended December
30, 1995
10.7 Executive Employment Agreement between the Company and William S. Creekmuir dated December 1,
1995.
10.8 Executive Employment Agreement between the Company and Kenneth E. Church dated May 22, 1995.
10.9 Executive Employment Agreement between the Company and Donald L. Mitchell dated January 1,
1996.
10.10 Executive Employment Agreement between the Company and Michael P. Haley dated March 5, 1996.
Asset Purchase Agreement, dated as of June 1, 1989, among the Company, Maytag Corporation, The BJC
Company and The Gunlocke Company
(Previously filed as Exhibit 10(a) to the Company's Current Report on Form 8-K, dated as of June 1,
1989, filed with the Commission on June 2, 1989)
</TABLE>
35
<PAGE>
<TABLE>
<S> <C> <C> <C>
First Amendment and Waiver to Asset Purchase Agreement, dated as of July 7, 1989, by and among the
Company, Pennsylvania House, Inc., The McGuire Furniture Company, The Kittinger Company, Charter
Furniture, Inc., Brown Jordan Company and The Gunlocke Company, a North Carolina corporation, and
Maytag Corporation, The Gunlocke Company, a Delaware corporation, and The BJC Company
(Previously filed as Exhibit 10 to the Company's Current Report on Form 8-K, filed with the
Commission on July 21, 1989, as amended by Form 8 filed with the Commission on September 18, 1989)
LADD Furniture, Inc. Supplemental Retirement Income Plan
(Previously filed as Exhibit 10 to the Company's Annual Report on Form 10-K, for the year ended
December 30, 1989, filed with the Commission on March 30, 1990)
Enclosed as Exhibit 10.11 - 10.13 to this Annual Report on Form 10-K for the year ended December
30, 1995
10.11 LADD Furniture, Inc. Long-Term Incentive Plan (1994)
10.12 LADD Furniture, Inc. Long-Term Incentive Plan (1995)
10.13 LADD Furniture, Inc. Long-Term Incentive Plan (1996)
Amended and Restated Credit Agreement, dated as of October 19, 1994, between the Company,
NationsBank of North Carolina, N.A. as agent, and each of the banks signatory to the Credit
Agreement
(Previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, dated October 19,
1994, filed with the Commission on November 14, 1994)
First Amendment to Amended and Restated Credit Agreement dated as of February 16, 1995, between the
Company, NationsBank, N.A., as agent and each of the banks signatory thereto.
(Previously filed as Exhibit 10.4 to the Company's Report on Form 10-K for the year ended December
31, 1994, filed with the Commission on March 30, 1995).
Second Amendment to Amended and Restated Credit Agreement dated as of March 30, 1995, between the
Company, NationsBank, N.A., as agent, and each of the banks signatory thereto.
(Previously filed as Exhibit 10.4 to Item 6 of the Company's Quarterly Report on Form 10-Q for the
quarter ended April 1, 1995, filed with the Commission on May 10, 1995)
Third Amendment to Amended and Restated Credit Agreement dated as of August 14, 1995, between the
Company, NationsBank, N.A., as agent, and each of the banks signatory thereto.
(Previously filed as Exhibit 10.4 of Item 6 of the Company's Quarterly Report on Form 10-Q for the
quarter ended July 1, 1995, filed with the Commission on August 15, 1995.)
Equipment Leasing Agreement dated as of December 15, 1994 between BOT Financial Corporation and the
Company
Equipment Leasing Agreement dated as of December 15, 1994 between UnionBanc Leasing Corporation and
the Company
(Previously filed as Exhibits 10.1 and 10.2 to Item 7 of the Company's Current Report on Form 8-K,
dated December 28, 1994, filed with the Commission on January 15, 1995)
Amendment No. 1 dated as of June 7, 1995 to the Equipment Leasing Agreement dated as of December
15, 1994 between Unionbanc Leasing Corporation and the Company.
Amendment No. 1 dated as of June 7, 1995 to the Equipment Leasing Agreement dated as of December
15, 1994 between BOT Financial Corporation and the Company.
Amendment No. 1 dated as of June 15, 1995 amending Lease Supplement No. One to the Equipment
Leasing Agreement dated as of December 15, 1994 between BOT Financial Corporation and the Company.
(Previously filed as Exhibits 10.2 - 10.4 to Item 6 of the Company's Quarterly Report on Form 10-Q
for the quarter ended July 1, 1995, filed with the Commission on August 15, 1995)
Transfer and Administration Agreement dated as of March 30, 1995, between Enterprise Funding
Corporation, LADD Funding Corp., and LADD Furniture, Inc.
</TABLE>
36
<PAGE>
<TABLE>
<S> <C> <C> <C>
Receivables Purchase Agreement dated as of March 30, 1995, between LADD Funding Corp. and LADD
Furniture, Inc.
Receivables Purchase Agreement dated as of March 30, 1995, between LADD Furniture, Inc.,
Clayton-Marcus Company, Inc., Barclay Furniture Co., and Pilliod Furniture, Inc.
(Previously filed as Exhibits 10.1 - 10.3 to Item 6 of the Company's Quarterly Report on Form 10-Q
for the quarter ended April 1, 1995, filed with the Commission on May 10, 1995)
Stock Purchase Agreement dated November 7, 1995 between LADD Furniture, Inc. and BJCL, Inc.
First Amendment to Stock Purchase Agreement dated December 29, 1995 among LADD Furniture, Inc.,
BJCL, Inc. and BJ Acquisition Corp.
Agreement of Sale between BJIP, Inc. and Cherry Grove, Inc. dated December 29, 1995.
Asset Purchase Agreement dated November 6, 1995 between LADD Furniture, Inc. and Lea Lumber &
Plywood, L.L.C.
First Amendment to Asset Purchase Agreement dated December 29, 1995 between LADD Furniture, Inc.
and Lea Lumber & Plywood, L.L.C.
(Previously filed as Exhibits 2.1 - 2.5 to the Company's Current Report on Form 8-K dated December
29, 1995 filed with the Commission on January 16, 1996)
Stock Purchase Agreement dated January 5, 1996 among LADD Furniture, Inc., Fournier Furniture, Inc.
and Fournier Acquisition Co.
First Amendment to Stock Purchase Agreement dated February 26, 1996 among LADD Furniture, Inc.,
Fournier Furniture, Inc., Fournier Acquisition Co., and Furniture Acquisition Co.
(Previously filed as Exhibits 2.1 and 2.2 to the Company's Current Report on Form 8-K dated
February 26, 1996, filed with the Commission on March 12, 1996.)
Enclosed as Exhibit 10.14 to this Annual Report on Form 10-K for the year ended December 30, 1995
10.14 1996 Management Incentive Plan
22. Subsidiaries of Registrant
American Drew, Inc., a North Carolina corporation
American Furniture Company, Incorporated, a Virginia corporation
Barclay Furniture Co., a Mississippi corporation
Cherry Grove, Inc., a Delaware corporation (in process of being dissolved)
Clayton-Marcus Company, Inc., a North Carolina corporation
Kenbridge Furniture, Inc., a North Carolina corporation
LFI Capital Management, Inc., a Delaware corporation
LADD Contract Sales Corporation, a North Carolina corporation
LADD Funding Corp., a Delaware corporation
LADD International Sales Corp., a Barbados corporation
LADD Transportation, Inc., a North Carolina corporation
Lea Industries, Inc., a North Carolina corporation
Lea Industries, Inc., a Tennessee corporation
Lea Industries of Virginia, Inc., a Virginia corporation
Lea Lumber and Plywood Co., a Virginia corporation
Pennsylvania House, Inc., a North Carolina corporation
Pilliod Furniture, Inc., a North Carolina corporation
</TABLE>
37
<PAGE>
<TABLE>
<S> <C> <C> <C>
Enclosed as Exhibit 24.1 to this Annual Report on Form 10-K for the year ended December 30, 1995
24.1 Consent of KPMG Peat Marwick LLP
Enclosed as Exhibit 27.1 to this Annual Report on Form 10-K for the year ended December
27.1 Financial Data Schedule (EDGAR version only)
</TABLE>
38
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LADD FURNITURE, INC.
(Registrant)
By: /s/ WILLIAM S. CREEKMUIR 3/28/96
WILLIAM S. CREEKMUIR (DATE)
EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL OFFICER, SECRETARY, AND
TREASURER (PRINCIPAL FINANCIAL
OFFICER)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/S/ DON A. HUNZIKER 3/28/96 /S/ RICHARD R. ALLEN 3/28/96
DON A. HUNZIKER (DATE) RICHARD R. ALLEN (DATE)
DIRECTOR DIRECTOR
/S/ O. WILLIAM FENN, JR. 3/28/96 /S/ DARYL B. ADAMS 3/28/96
O. WILLIAM FENN, JR. (DATE) DARYL B. ADAMS (DATE)
DIRECTOR VICE PRESIDENT, CORPORATE CONTROLLER,
ASSISTANT SECRETARY, AND ASSISTANT
TREASURER (PRINCIPAL ACCOUNTING OFFICER)
/S/ THOMAS F. KELLER 3/28/96 /S/ JAMES H. CORRIGAN, JR. 3/28/96
THOMAS F. KELLER (DATE) JAMES H. CORRIGAN, JR. (DATE)
DIRECTOR DIRECTOR
/S/ WILLIAM B. CASH 3/28/96 /S/ L. GLENN ORR, JR. 3/28/96
WILLIAM B. CASH (DATE) L. GLENN ORR, JR. (DATE)
DIRECTOR DIRECTOR
/S/ FRED L. SCHUERMANN, JR. 3/28/96 /S/ WILLIAM S. CREEKMUIR 3/28/96
FRED L. SCHUERMANN, JR. (DATE) WILLIAM S. CREEKMUIR (DATE)
PRESIDENT, CHIEF EXECUTIVE OFFICER AND EXECUTIVE VICE PRESIDENT, CHIEF
DIRECTOR FINANCIAL OFFICER, SECRETARY, AND TREASURER
(PRINCIPAL FINANCIAL OFFICER)
</TABLE>
39
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED BYLAWS
OF
LADD FURNITURE, INC.
Amended and Restated
February 28, 1991
Amended October 9, 1991
Amended February 25, 1993
Amended March 5, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<CAPTION>
OFFICES
<S> <C> <C>
1. Principal Office . . . . . . . . . . . . . . . . . . . . . . . 1
2. Registered Office . . . . . . . . . . . . . . . . . . . . . . . 1
3. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MEETINGS OF SHAREHOLDERS
1. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . 1
2. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Substitute Annual Meeting . . . . . . . . . . . . . . . . . . . 1
4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . 2
5. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . 2
6. Shareholders List . . . . . . . . . . . . . . . . . . . . . . . 3
7. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
8. Voting of Shares and Voting Groups . . . . . . . . . . . . . . 3
9. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
10. Inspectors of Election . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
DIRECTORS
1. General Powers . . . . . . . . . . . . . . . . . . . . . . . . 5
2. Number, Term, and Qualification . . . . . . . . . . . . . . . . 5
3. Election of Directors . . . . . . . . . . . . . . . . . . . . . 5
4. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 6
8. Executive and Other Committees . . . . . . . . . . . . . . . . 6
ARTICLE IV
MEETINGS OF DIRECTORS
1. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . 8
2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . 8
3. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . 8
4. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
<PAGE>
5. Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . 8
6. Informal Action by Directors . . . . . . . . . . . . . . . . . 9
7. Attendance by Telephone . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V
OFFICERS
1. Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2. Appointment and Term . . . . . . . . . . . . . . . . . . . . . 10
3. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. President . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6. Executive Vice Presidents, Senior Vice Presidents, and Vice
Presidents . . . . . . . . . . . . . . . . . . . . . . . . . 10
7. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9. Assistant Secretaries and Treasurers . . . . . . . . . . . . . 11
10. Corporate Controller and Assistant Controllers . . . . . . . . 12
11. Executive Officers . . . . . . . . . . . . . . . . . . . . . . 12
12. Chairman Emeritus . . . . . . . . . . . . . . . . . . . . . . . 12
13. Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
14. Voting Upon Stocks . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI
CERTIFICATES FOR AND TRANSFER OF SHARES
1. Certificates for Shares . . . . . . . . . . . . . . . . . . . . 12
2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . 13
3. Transfer Agent and Registrar . . . . . . . . . . . . . . . . . 13
4. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . 14
6. Holder of Record . . . . . . . . . . . . . . . . . . . . . . . 14
7. Shares held by Nominees . . . . . . . . . . . . . . . . . . . . 14
8. Acquisition by Corporation of its Own Shares . . . . . . . . . 15
9. Shareholder Protection Act . . . . . . . . . . . . . . . . . . 15
10. Control Share Acquisition Act . . . . . . . . . . . . . . . . . 15
ARTICLE VII
INDEMNIFICATION AND REIMBURSEMENT
OF DIRECTORS AND OFFICERS
1. Indemnification for Expenses and Liabilities . . . . . . . . . 15
2. Advance Payment of Expenses . . . . . . . . . . . . . . . . . . 16
<PAGE>
3. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII
GENERAL PROVISIONS
1. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 17
2. Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4. Effective Date of Notice. . . . . . . . . . . . . . . . . . . . 17
5. Corporate Records . . . . . . . . . . . . . . . . . . . . . . . 17
6. Bylaw Amendments . . . . . . . . . . . . . . . . . . . . . . . 18
7. Amendments to Articles of Incorporation . . . . . . . . . . . . 18
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
LADD FURNITURE, INC.
ARTICLE I
OFFICES
1. Principal Office. The principal office of the Corporation shall be
located in High Point, Guilford County, North Carolina or such other place as is
designated by the Board of Directors.
2. Registered Office. The registered office of the Corporation required by
law to be maintained in the State of North Carolina may be, but need not be,
identical with the principal office.
3. Other Offices. The Corporation may have offices at such other places,
either within or without the State of North Carolina, as the Board of Directors
may from time to time determine or as the affairs of the Corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
(Amended March 5, 1996)
1. Place of Meetings. All meetings of shareholders shall be held at the
principal office of the Corporation or at such other place, either within or
without the State of North Carolina, as shall be designated in the notice of the
meeting or agreed upon by a majority of the shareholders entitled to vote
thereat.
2. Annual Meeting. The annual meeting of the shareholders shall be held at
the principal office of the Corporation or at such other place, either within or
without the State of North Carolina, on such day and at such time during the
second quarter of the Corporation's fiscal year as the Board of Directors shall
from time to time determine, for the purpose of electing Directors of the
Corporation and for the transaction of such other business as may be properly
brought before the meeting.
3. Substitute Annual Meeting. If the annual meeting shall not be held on
the day designated by these Bylaws, a substitute annual meeting may be called in
accordance with the
<PAGE>
provisions of Paragraph 4 of this Article II. A meeting so called shall be
designated and treated for all purposes as the annual meeting.
4. Special Meetings. Special meetings of the shareholders may be called at
any time by the Chairman of the Board, the President, the Secretary, or the
Board of Directors of the Corporation.
5. Notice of Meetings.
(a) Written or printed notice stating the time and place of the meeting
shall be delivered not less than ten nor more than sixty days before the date
thereof, either personally or by telegraph, teletype or other form of wire or
wireless communication, or by facsimile transmission, mail, or by private
carrier, or by any other means permitted by law, by or at the direction of the
Chairman of the Board, Board of Directors, President, Secretary, or other person
calling the meeting, to each shareholder of record entitled to vote at such
meeting, provided that such notice must be given to all shareholders, including
nonvoting shareholders, with respect to any meeting at which a merger, share
exchange, sale of assets other than in the regular course of business, or
voluntary dissolution is to be considered and in such other instances as
required by law. If a new record date for the adjourned meeting is fixed
pursuant to Paragraph 4 of Article VII, notice of the adjourned meeting shall be
given to persons who are shareholders as of the new record date. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the record of
shareholders of the Corporation, with postage thereon prepaid.
(b) In the case of an annual or substitute annual meeting, the notice of
meeting need not specifically state the business to be transacted thereat unless
it is a matter, other than election of Directors, on which the vote of the
shareholders is expressly required by the provisions of the North Carolina
Business Corporation Act or notice of such purpose is otherwise required by law
to be provided. In the case of a special meeting, the notice of meeting shall
specifically state the purpose or purposes for which the meeting is called.
(c) When a meeting is adjourned for more than one hundred twenty days or a
new record date is or must be fixed as required by law, notice of the adjourned
meeting shall be given as in the case of an original meeting. When a meeting is
adjourned for one hundred twenty days or less in any one adjournment, it shall
not be necessary to give any notice of the new date, time and place of the
adjourned meeting or of the business to be transacted thereat other than by
announcement at the meeting at which the adjournment is taken.
(d) A shareholder in a signed writing may waive notice of any meeting
before or after the date and time stated in the notice by delivering such waiver
to the Corporation for inclusion in the minutes. Attendance by a shareholder at
a meeting constitutes a waiver of notice of such meeting, unless at the
beginning of the meeting the shareholder objects to holding the meeting or
transacting business at the meeting, or objects to considering a matter not
within the purpose or purposes described in the meeting notice before it is
voted on.
2
<PAGE>
6. Shareholders List. After fixing the record date for a meeting, the
Secretary of the Corporation shall prepare an alphabetical list of the
shareholders entitled to notice of such meeting or any adjournment thereof,
arranged by voting group, class and series, with the address of and number of
shares held by each. Such list shall be kept on file at the principal office of
the Corporation, or at a place identified in the meeting notice in the city
where the meeting will be held, beginning two business days after notice of such
meeting is given and continuing through the meeting, and on written demand shall
be subject to inspection or copying by any shareholder, his agent or attorney at
any time during regular business hours. This list shall also be produced and
kept open at the time and place of the meeting and shall be subject to
inspection by any shareholder, his agent or attorney during the entire time of
the meeting or any adjournment.
7. Quorum.
(a) Unless otherwise provided by law, a majority of the votes entitled to
be cast on a matter by a separate voting group shall constitute a quorum of such
voting group on that matter at a meeting of shareholders. Abstentions and broker
non-votes shall be counted for purposes of determination of the presence of a
quorum. A separate voting group may only take action on a matter at a meeting if
a quorum of those shares are present with respect to that matter. In the absence
of a quorum at the opening of any meeting of shareholders, such meeting may be
adjourned from time to time by the vote of a majority of the shares voting on
the motion to adjourn, but no other business may be transacted until and unless
a quorum is present. When a quorum is present at any adjourned meeting, any
business may be transacted which might have been transacted at the original
meeting. If a quorum is present at the original meeting, a quorum need not be
present at an adjourned meeting to transact business.
(b) At a meeting at which a quorum is present, a separate voting group may
continue to do business until adjournment, notwithstanding the withdrawal of
sufficient shareholders to leave less than a quorum of the separate voting
group.
8. Voting of Shares and Voting Groups.
(a) Except as otherwise provided by the Articles of Incorporation or by
law, each outstanding share having voting rights shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders. All shares
entitled to vote and be counted together collectively on a matter as provided by
the Articles of Incorporation or by the North Carolina Business Corporation Act
shall constitute a single voting group. Additional required voting groups shall
be determined in accordance with the Articles of Incorporation, the Bylaws, and
the North Carolina Business Corporation Act.
(b) Except in the election of Directors, at a shareholder meeting duly held
and at which a quorum is present, action on a matter by a voting group shall be
approved if the votes cast within the voting group favoring the action exceed
the votes cast opposing the action, unless the vote by a greater number is
required by law or by the Articles of
3
<PAGE>
Incorporation or Bylaws of the Corporation. For such actions, abstentions and
broker non-votes shall not be treated as negative votes and shall only be
counted for purposes of determining whether a quorum is present at the meeting.
Corporate action on such matters shall be taken only when approved by each and
every voting group entitled to vote as a separate voting group on such matter as
provided by the Articles of Incorporation or Bylaws or by the North Carolina
Business Corporation Act.
(c) Voting on all matters except the election of Directors shall be by
voice vote or by a show of hands, unless prior to the voting on any matter, the
chairman of the meeting directs that voting on such matter shall be by ballot.
(d) Absent special circumstances, shares of the Corporation shall not be
entitled to vote if they are owned, directly or indirectly, by another
corporation in which the Corporation owns, directly or indirectly, a majority of
the shares entitled to vote for directors of the second corporation; provided
that this provision does not limit the power of the Corporation to vote its own
shares held by it in a fiduciary capacity.
9. Proxies. Shares may be voted either in person or by one or more agents
authorized by a written proxy executed by the shareholder or by his duly
authorized attorney-in-fact. A proxy shall not be valid after the expiration of
eleven months from the date of its execution, unless the person executing it
specifies therein the length of time for which it is to continue in force, or
limits its use to a particular meeting. Any proxy shall be revocable by the
shareholder unless the written appointment expressly and conspicuously provides
that it is irrevocable and the appointment is coupled with an interest as
required by law. The shareholder may revoke the proxy by filing with the
Secretary of the Corporation either a written instrument of revocation or a duly
executed proxy bearing a later date or by attending the meeting and voting his
shares in person.
10. Inspectors of Election.
(a) Appointment of Inspectors of Election. In advance of any meeting of
shareholders, the Board of Directors may appoint any persons, other than
nominees for office, as inspectors of election to act at such meeting or any
adjournment thereof. If inspectors of election are not so appointed, the
chairman of any such meeting may appoint inspectors of election at the meeting.
The number of inspectors shall be either one or three. In case any person
appointed as inspector fails to appear or fails or refuses to act, the vacancy
may be filled by appointment by the Board of Directors in advance of the meeting
or at the meeting by the person acting as chairman.
(b) Duties of Inspectors. The inspectors of election shall determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, receive votes, ballots or consents, hear and
determine all challenges and questions in any way arising in connection with the
right to vote, count and tabulate all votes or consents, determine the result
and do
4
<PAGE>
such acts as may be proper to conduct the election or vote with fairness to all
shareholders. The inspectors of election shall perform their duties impartially,
in good faith, to the best of their ability and as expeditiously as is
practical.
(c) Vote of Inspectors. If there are three inspectors of election, the
decision, act, or certificate of a majority shall be effective in all respects
as the decision, act, or certificate of all.
(d) Report of Inspectors. On request of the chairman of the meeting, the
inspectors shall make a report in writing of any challenge or question or matter
determined by them and shall execute a certificate of any fact found by them.
Any report or certificate made by them shall be prima facie evidence of the
facts stated therein.
ARTICLE III
DIRECTORS
(Amended February 25, 1993 and March 5, 1996)
1. General Powers. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be managed
by, the Board of Directors or by such committees as the Board of Directors may
establish pursuant to these Bylaws.
2. Number, Term, and Qualification. The number of Directors of the
Corporation shall be not less than three nor more than nine as may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or by the Board of Directors. If the number of Directors so determined within
such range is to be increased or decreased by the Board of Directors, then
notice of the meeting at which such action is proposed to be taken shall be
given, stating that a purpose of the meeting is such increase or decrease; or
all of the Directors then in office shall be present at such meeting; or those
not present at any time shall waive notice thereof in writing. Each Director
shall hold office until his death, resignation, retirement, removal,
disqualification or his successor is elected and qualifies. Directors need not
be residents of the State of North Carolina or shareholders of the Corporation.
3. Election of Directors. Except as provided in Paragraph 5 of this Article
III, Directors shall be elected at the annual meeting of shareholders; and those
persons who receive the highest number of votes at a meeting at which a quorum
is present shall be deemed to have been elected. If any shareholder so demands,
election of Directors shall be by ballot.
4. Removal. Directors may be removed from office with or without cause by a
vote of shareholders at a shareholders' meeting duly held at which a quorum is
present, provided
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the notice of the shareholders' meeting at which such action is to be taken
states that a purpose of the meeting is removal of the director and the number
of votes cast to remove the Director exceeds the number of votes cast not to
remove him. If a Director is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove him. If
any Directors are so removed, new Directors may be elected at the same meeting.
5. Vacancies. A vacancy occurring in the Board of Directors, including,
without limitation, a vacancy created by an increase in the authorized number of
Directors or resulting from the shareholders' failure to elect the full
authorized number of Directors, may be filled by the Board of Directors or, if
the Directors remaining in office constitute less than a quorum of the
Directors, by the affirmative vote of a majority of all remaining Directors or
by the sole remaining Director. If the vacant office was held by a Director
elected by a voting group, only the remaining Director or Directors elected by
that voting group or the holders of shares of that voting group are entitled to
fill the vacancy. A Director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. The shareholders may elect a
Director at any time to fill any vacancy not filled by the Directors.
6. Chairman. The Board of Directors shall elect from their number a
Chairman of the Board at any meeting of the Board of Directors. The position of
Chairman of the Board shall be a non-officer position. The Chairman of the Board
shall preside at all meetings of the Board of Directors and shareholders, and,
in consultation with the President, shall plan and develop the agenda for such
meetings. He shall have the power to call the regular and any special meetings
of the Board of Directors. The Chairman of the Board shall be available to the
President for consultation with respect to the formulation and implementation of
corporate strategic plans and goals. When requested by the Board or the
President, he shall assist in recruiting and appraising compatible companies for
acquisition and mergers which would increase the profitability and growth of the
Corporation. Together with the President, he shall represent the Corporation to
external groups such as shareholders, consumer groups, the business community,
industry organizations, the general public and federal, state and local
governments. He shall assist appropriate committees of the Board in the
evaluation, selection and recruitment of directors.
7. Compensation. The Board of Directors may provide for the compensation of
Directors for their services as such and may provide for the payment of any and
all expenses incurred by the Directors in connection with such services.
8. Executive and Other Committees.
(a) The Board of Directors, by resolution adopted by a majority of the
number of Directors then in office, may designate from among its members an
Executive Committee and one or more other committees, each consisting of two or
more Directors and each of which, to the extent authorized by law or provided in
the resolution, shall have and may exercise all of the authority of the Board of
Directors, except no such committee may:
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(1) authorize distributions; (2) approve or propose to shareholders action that
is required to be approved by shareholders under the North Carolina Business
Corporation Act or any successor to such statutes; (3) fill vacancies on the
Board of Directors or on any of its committees; (4) amend the Articles of
Incorporation; (5) adopt, amend, or repeal these Bylaws; (6) approve a plan of
merger not requiring shareholder approval; (7) authorize or approve
reacquisition of shares, except according to a formula or method prescribed by
the Board of Directors; or (8) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative rights,
preferences, and limitations of a class or series of shares, except that the
Board of Directors may authorize a committee (or a senior executive officer of
the Corporation) to do so within limits specifically prescribed by the Board of
Directors.
(b) Any resolutions adopted or other action taken by any such committee
within the scope of the authority delegated to it by the Board of Directors
shall be deemed for all purposes to be adopted or taken by the Board of
Directors. The designation of any committee and the delegation thereto of
authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility or liability imposed upon it or him by law.
(c) Regular meetings of any such committee may be held without notice at
such time and place as such committee may fix from time to time by resolution.
Special meetings of any such committee may be called by any member thereof upon
not less than one day's notice stating the place, date and hour of such meeting,
which notice may be written or oral and if mailed, shall be deemed to be
delivered when deposited in the United States mail addressed to any member of
the committee at his business address. Any member of any committee may in a
signed writing waive notice of any meeting, and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of
any committee need not state the business proposed to be transacted at the
meeting.
(d) A majority of the members of any such committee shall constitute a
quorum for the transaction of business at any meeting thereof, and actions of
such committee must be authorized by the affirmative vote of a majority of the
members of such committee.
(e) Any member of any such committee may be removed at any time with or
without cause by resolution adopted by a majority of the Board of Directors, and
vacancies in the membership of a committee resulting from death, resignation,
disqualification or removal shall be filled by a majority of the Board of
Directors.
(f) Any such committee shall elect a presiding officer from among its
members and may fix its own rules of procedure which shall not be inconsistent
with these Bylaws. It shall keep regular minutes of its proceedings and report
the same to the Board of Directors for its information at the meeting thereof
held next after the proceedings shall have been taken.
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(g) In the event the Board of Directors desires to establish a committee
composed of outside directors, the term "outside directors" shall be deemed to
mean any director who has never served as an officer of the Corporation.
ARTICLE IV
MEETINGS OF DIRECTORS
(Amended February 25, 1993 and March 5, 1996)
1. Regular Meetings. A regular meeting of the Board of Directors shall be
held immediately after, and at the same place as, the annual meeting of
shareholders. In addition, the Board of Directors may provide, by resolution,
the time and place, either within or without the State of North Carolina, for
the holding of additional regular meetings.
2. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the President, or any
two Directors. Such meetings may be held either within or without the State of
North Carolina.
3. Notice of Meetings.
(a) Regular meetings of the Board of Directors may be held without notice.
(b) The person or persons calling a special meeting of the Board of
Directors shall, at least two days before the meeting, give notice thereof
either personally or by telephone, telegraph, teletype or other form of wire or
wireless communication or by facsimile transmission, mail or private carrier or
by any other means permitted by law. Such notice need not specify the business
to be transacted at, or the purpose of, the meeting that is called. Notice of an
adjourned meeting need not be given if the time and place are fixed at the
meeting adjourning and if the period of adjournment does not exceed ten days in
any one adjournment.
(c) A Director, in a signed writing, may waive notice of any meeting before
or after the date and time stated in the notice. Attendance by a Director at a
meeting shall constitute a waiver of notice of such meeting, except where a
Director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened and does not vote for or assent to action taken at the meeting.
4. Quorum. A majority of the Directors in office immediately before the
meeting shall constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
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5. Manner of Acting.
(a) Except as otherwise provided in this paragraph, the act of a majority
of the Directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors, unless a greater number is required by law, the
Articles of Incorporation, or a Bylaw adopted by the shareholders.
(b) A Director who is present at a meeting of the Board of Directors at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless his contrary vote is recorded or his dissent is
otherwise entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right of dissent shall not apply to a Director
who voted in favor of such action.
(c) The vote of a majority of the number of Directors then in office shall
be required to adopt a resolution constituting an Executive Committee or other
committee of the Board of Directors. The vote of a majority of the Directors
then holding office shall be required to adopt, amend or repeal a Bylaw or to
adopt a resolution dissolving the Corporation without action by the shareholders
in circumstances authorized by law. Vacancies in the Board of Directors may be
filled as provided in Paragraph 5 of Article III of these Bylaws.
6. Informal Action by Directors. Action taken by the Directors or members
of a committee of the Board of Directors without a meeting is nevertheless Board
or committee action if written consent to the action in question is signed by
all of the Directors or members of the committee, as the case may be, and filed
with the minutes of the proceedings of the Board of Directors or committee,
whether done before or after the action so taken. Such action will become
effective when the last Director or committee member signs the consent, unless
the consent specifies a different date. Such consent will have the same force
and effect as a unanimous vote of the Board of Directors or the committee, as
the case may be.
7. Attendance by Telephone. Any one or more Directors or members of a
committee may participate in a meeting of the Board of Directors or committee by
means of a conference telephone or similar communications device which allows
all persons participating in the meeting to hear each other simultaneously, and
such participation in the meeting shall be deemed presence in person at such
meeting.
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ARTICLE V
OFFICERS
(Amended October 9, 1991, February 25, 1993 and March 5, 1996)
1. Number. The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer, and such Executive Vice Presidents, Senior Vice
Presidents, Vice Presidents, Assistant Secretaries, Assistant Treasurers and
other officers as the Board of Directors may from time to time appoint. Any two
or more offices, other than that of President and Secretary, may be held by the
same person. In no event, however, may an officer act in more than one capacity
where action of two or more officers is required.
2. Appointment and Term. The officers of the Corporation shall be appointed
by the Board of Directors. Such appointment may be held at any regular or
special meeting of the Board of Directors. Each officer shall hold office until
his death, resignation, retirement, removal, disqualification, or his successor
is appointed and qualifies. If so authorized by the Board of Directors, the
President may appoint one or more officers or assistant officers as he deems
necessary.
3. Removal. Any officer or agent appointed by the Board of Directors may be
removed by the Board with or without cause; but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
4. Compensation. The compensation of all officers of the Corporation shall
be fixed by the Board of Directors or by an officer designated by the Board of
Directors for such purpose.
5. President. The President shall be the chief executive officer of the
Corporation and, subject to the control of the Board of Directors, shall
supervise and control the management of the Corporation. As chief executive
officer of the Corporation, the President shall be responsible for the overall
sales and profit growth of the Corporation in accordance with the mission,
policies, goals and objectives of the Corporation established by the Board of
Directors. He shall be responsible for the development of corporate strategies
and the goals with respect to the Corporation's operations, personnel, financial
performance and growth. He shall be responsible for the Corporation's
acquisition activities and for communications with the financial community. He,
or any Executive Vice Presidents or Senior Vice Presidents and Vice Presidents
shall sign, with any other proper officer, certificates for shares of the
Corporation and any deeds, mortgages, bonds, contracts, or other instruments
which may be lawfully executed on behalf of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be delegated by the Board of
Directors to some other officer or agent; and, in general, he shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
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6. Executive Vice Presidents, Senior Vice Presidents, and Vice Presidents.
The Executive Vice Presidents and Senior Vice Presidents shall be superior in
authority to all other Vice Presidents and shall have such duties and
responsibilities as may be assigned by the Board of Directors from time to time.
The Executive Vice President or Executive Vice Presidents, if more than one, may
be designated by the Board of Directors as the chief operating officer(s) of
various business groups and/or business functions the Corporation. The Executive
Vice President or Executive Vice Presidents, if more than one, may supervise and
control the day-to-day operation of such business groups and/or business
functions of the Corporation in accordance with the direction of the President
and these Bylaws and shall have such direct responsibility for the supervision
and control of various business groups and/or business functions of the
Corporation as may be designated from time to time by the Board of Directors.
The Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, in
the order of their appointment, unless otherwise determined by the Board of
Directors, shall, in the absence or disability of the President, perform the
duties and exercise the powers of that office and shall have authority to sign,
with any other proper officer, certificates for shares of the Corporation and
any deeds, mortgages, bonds, contracts, or other instruments which may be
lawfully executed on behalf of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be delegated by the Board of Directors to
some other officer or agent. In addition, they shall perform such other duties
and have such other powers as the President or the Board of Directors shall
prescribe. The Board of Directors may designate one or more Vice Presidents to
be responsible for certain functions, including, without limitation, Marketing,
Finance, Manufacturing and Personnel.
7. Secretary. The Secretary shall keep accurate records of the acts and
proceedings of all meetings of shareholders, Directors and committees. He shall
give all notices required by law and by these Bylaws. He shall have general
charge of the corporate books and records and of the corporate seal, and he
shall affix the corporate seal to any lawfully executed instrument requiring it.
He shall have general charge of the stock transfer books of the Corporation and
shall keep, at the registered or principal office of the Corporation, a record
of shareholders showing the name and address of each shareholder and the number
and class of the shares held by each. He shall deliver to the Secretary of State
of North Carolina for filing annual reports as required under the provisions
contained in Section 55-16-22 of the North Carolina Business Corporation Act or
any successor to such statute. He shall sign such instruments as may require his
signature, and, in general, attest the signature or certify the incumbency or
signature of any other officer of the Corporation and shall perform all duties
incident to the office of Secretary and such other duties as may be assigned him
from time to time by the President or by the Board of Directors.
8. Treasurer. The Treasurer shall have custody of all funds and securities
belonging to the Corporation and shall receive, deposit or disburse the same
under the direction of the Board of Directors. He shall keep full and accurate
accounts of the finances of the Corporation in books especially provided for
that purpose, which may be consolidated or combined statements of the
Corporation and one or more of its subsidiaries as appropriate,
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that include a balance sheet as of the end of the fiscal year, an income
statement for that year, and a statement of cash flows for the year unless that
information appears elsewhere in the financial statements. If financial
statements are prepared for the Corporation on the basis of generally accepted
accounting principles, the annual financial statements must also be prepared on
that basis. The Corporation shall mail the annual financial statements, or a
written notice of their availability, to each shareholder within one hundred
twenty days of the close of each fiscal year. The Treasurer shall, in general,
perform all duties incident to his office and such other duties as may be
assigned to him from time to time by the President or by the Board of Directors.
9. Assistant Secretaries and Treasurers. The Assistant Secretaries and
Assistant Treasurers shall, in the absence or disability of the Secretary or the
Treasurer, perform the respective duties and exercise the respective powers of
those offices, and they shall, in general, perform such other duties as shall be
assigned to them by the Secretary or the Treasurer, respectively, or by the
President or by the Board of Directors.
10. Corporate Controller and Assistant Controllers. The Corporate
Controller, if one has been appointed, shall have charge of the accounting
affairs of the Corporation and shall have such other powers and perform such
other duties as the Board of Directors shall designate. Each Assistant
Controller shall have such powers and perform such duties as may be assigned by
the Board of Directors, and the Assistant Controllers shall exercise the powers
of the Corporate Controller during that officer's absence or inability to act.
11. Executive Officers. Except as otherwise designated by the Board of
Directors, the Corporation's executive officers, being those persons in
policy-making functions of the Corporation, shall consist of the President, and
such of the Executive, Senior, and other Vice Presidents responsible for major
corporate functions as the Board of Directors may from time to time specifically
designate as executive officers.
12. Chairman Emeritus. The Board of Directors may, by a resolution duly
adopted, appoint a Chairman Emeritus of the Board of Directors in recognition
for having provided outstanding contributions to the Corporation. Such position
shall be honorary with duties and responsibilities limited to those assigned by
the Board or the President from time to time. The Chairman Emeritus shall advise
and consult with the President as requested from time to time and shall be
entitled to reimbursement for reasonable expenses incurred in connection with
the performance of the duties of this office. The Chairman Emeritus may be, but
is not required to be, an employee of the Corporation.
13. Bonds. The Board of Directors, by resolution, may require any or all
officers, agents and employees of the Corporation to give bond to the
Corporation, with sufficient sureties, conditioned on the faithful performance
of the duties of their respective offices or positions, and to comply with such
other conditions as may from time to time be required by the Board of Directors.
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14. Voting Upon Stocks. Unless otherwise ordered by the Board of Directors,
the President shall have full power and authority on behalf of the Corporation
to attend, act, and vote at meetings of the shareholders of any corporation in
which this Corporation may hold stock, and at such meetings shall possess and
may exercise any and all rights and powers incident to the ownership of such
stock and which, as the owner, the Corporation might have possessed and
exercised if present. The Board of Directors may by resolution from time to time
confer such power and authority upon any other person or persons.
ARTICLE VI
CERTIFICATES FOR AND TRANSFER OF SHARES
(Amended March 5, 1996)
1. Certificates for Shares. Shares of the capital stock of the Corporation
shall be represented by certificates. Such certificates shall be in such form as
required by law and as determined by the Board of Directors and shall be issued
to every shareholder for the fully paid shares owned by him. Each certificate
shall be signed by the President, any Senior or Executive Vice President, and by
the Secretary, Assistant Secretary, Treasurer, or Assistant Treasurer and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of any such officers upon a certificate may be facsimiles or may be engraved or
printed. In case any officer who has signed or whose facsimile or other
signature has been placed upon such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer at the date of its issue. The
certificates shall be consecutively numbered or otherwise identified; and the
name and address of the persons to whom they are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation.
2. Transfer of Shares. Transfer of shares shall be made on the stock
transfer books of the Corporation only upon surrender of the certificates for
the shares sought to be transferred by the record holder thereof or by his duly
authorized agent, transferee, or legal representative. All certificates
surrendered for transfer shall be canceled before new certificates for the
transferred shares shall be issued.
3. Transfer Agent and Registrar. The Board of Directors may appoint one or
more transfer agents and one or more registrars of transfer and may require all
stock certificates to be signed or countersigned by the transfer agent and
registered by the registrar of transfers.
4. Record Date.
(a) For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof or entitled to
receive payment of any dividend or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may fix in
advance a date as the record date for any such
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determination of shareholders, such date in any case not to be more than seventy
days before the meeting or action requiring a determination of shareholders.
(b) If no record date is fixed by the Board of Directors for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders or of shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
(c) When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this paragraph, such determination
shall apply to any adjournment thereof unless the Board of Directors fixes a new
record date, which it shall do if the meeting is adjourned to a date more than
one hundred twenty days after the date fixed for the original meeting.
5. Lost Certificates. The Board of Directors may authorize the issuance of
a new share certificate in place of a certificate claimed to have been lost or
destroyed, upon receipt of an affidavit of such fact from the person claiming
the loss or destruction. When authorizing such issuance of a new certificate,
the Board of Directors may require the claimant to give the Corporation a bond
in such sum as it may direct to indemnify the Corporation against loss from any
claim with respect to the certificate claimed to have been lost or destroyed; or
the Board of Directors may, by resolution reciting that the circumstances
justify such action, authorize the issuance of the new certificate without
requiring such a bond.
6. Holder of Record. Except as otherwise required by law, the Corporation
may treat the person in whose name the shares stand of record on its books as
the absolute owner of the shares and the person exclusively entitled to receive
notification and distributions, to vote, and otherwise to exercise the rights,
powers, and privileges of ownership of such shares.
7. Shares held by Nominees.
(a) The Corporation shall recognize the beneficial owner of shares
registered in the name of a nominee as the owner and shareholder of such shares
for certain purposes if the nominee in whose name such shares are registered
files with the Secretary of the Corporation a written certificate in a form
prescribed by the Corporation, signed by the nominee and indicating the
following: (1) the name, address, and taxpayer identification number of the
nominee; (2) the name, address, and taxpayer identification number of the
beneficial owner; (3) the number and class or series of shares registered in the
name of the nominee as to which the beneficial owner shall be recognized as the
shareholder; and (4) the purposes for which the beneficial owner shall be
recognized as the shareholder.
(b) The purposes for which the Corporation shall recognize a beneficial
owner as the shareholder may include the following: (1) receiving notice of,
voting at and otherwise
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participating in shareholders' meetings; (2) executing consents with respect to
the shares; (3) exercising dissenters' rights under Article 13 of the North
Carolina Business Corporation Act; (4) receiving distributions and share
dividends with respect to the shares; (5) exercising inspection rights; (6)
receiving reports, financial statements, proxy statements, and other
communications from the Corporation; (7) making any demand upon the Corporation
required or permitted by law; and (8) exercising any other rights or receiving
any other benefits of a shareholder with respect to the shares.
(c) The certificate shall be effective ten business days after its receipt
by the Corporation and until it is changed by the nominee, unless the
certificate specifies a later effective time or an earlier termination date.
(d) If the certificate affects less than all of the shares registered in
the name of the nominee, the Corporation may require the shares affected by the
certificate to be registered separately on the books of the Corporation and be
represented by a share certificate that bears a conspicuous legend stating that
there is a nominee certificate in effect with respect to the shares represented
by that share certificate.
8. Acquisition by Corporation of its Own Shares. The Corporation may
acquire its own shares and shares so acquired shall constitute authorized but
unissued shares. Unless otherwise prohibited by the Articles of Incorporation,
the Corporation may reissue such shares. If reissue is prohibited, the Articles
of Incorporation shall be amended to reduce the number of authorized shares by
the number of shares so acquired. Such required amendment may be adopted by the
Board of Directors without shareholder action.
9. Shareholder Protection Act. The provisions of Article 9 of Chapter 55 of
the General Statutes of North Carolina, as such Article may be amended from time
to time, shall not apply to the Corporation.
10. Control Share Acquisition Act. The provisions of Article 9A of Chapter
55 of the General Statutes of North Carolina, as such Article may be amended
from time to time, shall not apply to the Corporation.
ARTICLE VII
INDEMNIFICATION AND REIMBURSEMENT
OF DIRECTORS AND OFFICERS
1. Indemnification for Expenses and Liabilities.
(a) Any person who at any time serves or has served: (1) as a director,
officer, employee or agent of the Corporation, (2) at the request of the
Corporation as a director,
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officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise, or (3) at
the request of the Corporation as a trustee or administrator under an employee
benefit plan, shall have a right to be indemnified by the Corporation to the
fullest extent from time to time permitted by law against Liability and Expenses
in any Proceeding (including without limitation a Proceeding brought by or on
behalf of the Corporation itself) arising out of his status as such or
activities in any of the foregoing capacities or results from him being called
as a witness at a time when he was not a named defendant or respondent to any
Proceeding.
(b) The Board of Directors of the Corporation shall take all such action as
may be necessary and appropriate to authorize the Corporation to pay the
indemnification required by this provision, including, without limitation, to
the extent needed, making a good faith evaluation of the manner in which the
claimant for indemnity acted and of the reasonable amount of indemnity due him.
(c) Any person who at any time serves or has served in any of the aforesaid
capacities for or on behalf of the Corporation shall be deemed to be doing or to
have done so in reliance upon, and as consideration for, the rights provided for
herein. Any repeal or modification of these indemnification provisions shall not
affect any rights or obligations existing at the time of such repeal or
modification. The rights provided for herein shall inure to the benefit of the
legal representatives of any such person and shall not be exclusive of any other
rights to which such person may be entitled apart from this provision.
(d) The rights granted herein shall not be limited by the provisions
contained in Sections 55-8-51 through 55-8-56 of the North Carolina Business
Corporation Act or any successor to such statutes.
2. Advance Payment of Expenses. The Corporation shall (upon receipt of an
undertaking by or on behalf of the Director, officer, employee or agent involved
to repay the Expenses described herein unless it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation against such
Expenses) pay Expenses incurred by such Director, officer, employee or agent in
defending a Proceeding or appearing as a witness at a time when he has not been
named as a defendant or a respondent with respect thereto in advance of the
final disposition of such Proceeding.
3. Insurance. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee, or agent of another domestic
or foreign corporation, partnership, joint venture, trust, or other enterprise
or as a trustee or administrator under an employee benefit plan against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him or her against such liability.
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4. Definitions. The following terms as used in this Article shall have the
following meanings. "Proceeding" means any threatened, pending or completed
action, suit, or proceeding and any appeal therein (and any inquiry or
investigation that could lead to such action, suit, or proceeding), whether
civil, criminal, administrative, investigative or arbitrative and whether formal
or informal. "Expenses" means expenses of every kind, including counsel fees.
"Liability" means the obligation to pay a judgment, settlement, penalty, fine
(including an excise tax assessed with respect to an employee benefit plan),
reasonable expenses incurred with respect to a Proceeding and all reasonable
expenses incurred in enforcing the indemnification rights provided herein.
"Director," "officer," "employee," and "agent" include the estate or personal
representative of a Director, officer, employee, or agent. "Corporation" shall
include any domestic or foreign predecessor of this Corporation in a merger or
other transaction in which the predecessor's existence ceased upon consummation
of the transaction.
ARTICLE VIII
GENERAL PROVISIONS
(Amended February 25, 1993)
1. Distributions. The Board of Directors may from time to time declare, and
the Corporation may pay, distributions and share dividends on its outstanding
shares in the manner and upon the terms and conditions provided by law and by
its Articles of Incorporation.
2. Seal. The corporate seal shall have the name of the Corporation
inscribed thereon and shall be in such form as may be approved from time to time
by the Board of Directors. Such seal may be an impression or stamp and may be
used by the officers of the Corporation by causing it, or a facsimile thereof,
to be impressed or affixed or in any other manner reproduced. In addition to any
form of seal adopted by the Board of Directors, the officers of the Corporation
may use as the corporate seal a seal in the form of a circle containing the name
of the Corporation and the state of its incorporation (or an abbreviation
thereof) on the circumference and the word "Seal" in the center.
3. Fiscal Year. The fiscal year of the Corporation shall be determined by
the Board of Directors.
4. Effective Date of Notice. Except as provided in Paragraph 5(a) of
Article II, written notice shall be effective at the earliest of the following:
(1) when received; (2) five days after its deposit in the United States mail, as
evidenced by the postmark, if mailed with postage thereon prepaid and correctly
addressed; (3) upon confirmation of receipt by answerback code, if sent by
facsimile transmission; (4) upon transmission, if sent by telegraph or teletype;
or (5) on the date shown on the return receipt, if sent by registered or
certified
17
<PAGE>
mail, return receipt requested and the receipt is signed by or on behalf of the
addressee. Oral notice is effective when actually communicated to the person
entitled thereto.
5. Corporate Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account and
minute books, may be kept on or be in the form of punch cards, magnetic tape,
photographs, microphotographs or any other information storage device; provided
that the records so kept can be converted into clearly legible form within a
reasonable time. The Corporation shall so convert any records so kept upon the
request of any person entitled to inspect the same. The Corporation shall
maintain at its principal office the following records: (1) Articles of
Incorporation or Restated Articles of Incorporation and all amendments thereto;
(2) Bylaws or Restated Bylaws and all amendments thereto; (3) resolutions by the
Board of Directors creating classes or series of shares and affixing rights,
preferences or limitations to shares; (4) minutes of all shareholder meetings or
action taken without a meeting for the past three years; (5) all written
communications to shareholders for the past three years, including financial
statements; (6) a list of the names and business addresses of its current
directors and officers; and (7) the Corporation's most recent annual report
filed with the North Carolina Secretary of State.
6. Bylaw Amendments.
(a) Except as otherwise provided herein, these Bylaws may be amended or
repealed and new Bylaws may be adopted by the affirmative vote of a majority of
the Directors present at any regular or special meeting of the Board of
Directors at which a quorum is present or by affirmative vote of a majority of
the shares entitled to vote on the matter represented at any regular or special
meeting of shareholders at which a quorum is present.
(b) The Board of Directors shall have no power to adopt a Bylaw: (1)
changing the statutory requirement for a quorum of Directors or action by
Directors or changing the statutory requirement for a quorum of shareholders or
action by shareholders; (2) providing for the management of the Corporation
otherwise than by the Board of Directors or the committees thereof; (3)
increasing or decreasing the fixed number for the size of the Board of Directors
or range of Directors, or changing from a fixed number to a range, or vice
versa; or (4) classifying and staggering the election of Directors.
(c) No Bylaw adopted, amended or repealed by the shareholders may be
readopted, amended or repealed by the Board of Directors, except to the extent
that the Articles of Incorporation or a Bylaw adopted by the shareholders
authorizes the Board of Directors to adopt, amend or repeal that particular
Bylaw or the Bylaws generally.
7. Amendments to Articles of Incorporation. To the extent permitted by law,
the Board of Directors may amend the Articles of Incorporation without
shareholder approval to (1) delete the initial directors' names and addresses;
(2) change the initial registered agent or office in any state in which it is
qualified to do business, provided such change is on file with
18
<PAGE>
the respective Secretary of State; (3) change each issued and unissued share of
an outstanding class into a greater number of whole shares, provided that class
is the Corporation's only outstanding share class; (4) change the corporate name
by substituting "corporation," "incorporated," "company," "limited," or the
abbreviations therefor for a similar word or abbreviation or by adding, deleting
or changing a geographic designation in the name; (5) make any other change
expressly permitted by the North Carolina Business Corporation Act to be made
without shareholder action. All other amendments to the Articles of
Incorporation must be approved by the appropriate voting group or groups as
required by law.
The foregoing Amended and Restated Bylaws were adopted by the Board of
Directors at a meeting held on February 28, 1991 and further amended on October
9, 1991, February 25, 1993, and March 5, 1996 and ordered attested by the
Secretary and filed as part of the minutes of the meeting.
Secretary
19
</TABLE>
<PAGE>
EXHIBIT 10.1
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 28th day of February, 1991, between LADD Furniture,
Inc., a North Carolina corporation (the "Company"), and Kenneth E. Church (the
"Employee").
For valuable consideration, receipt of which is acknowledged, the parties
agree as follows:
1. Purchase of Shares. The Employee subscribes for and, upon acceptance,
shall purchase, subject to the terms and conditions set forth in this Agreement,
10,000 shares (the "Shares") of common stock ("common stock"), $.10 par value,
of the Company at a purchase price of $.10 per share. The aggregate purchase
price of the Shares shall be paid by the Employee by check, payable to the order
of the Company, or such other method as may be acceptable to the Company. Upon
the Company's receipt of payment for the Shares, the Company shall issue to the
Employee one or more certificates in the name of the Employee for that number of
Shares purchased by the Employee. The Employee agrees that the Shares shall be
subject to the Re-purchase Option set forth in Section 2 of this Agreement and
the restrictions on transfer set forth in Section 4 of this Agreement.
2. Re-purchase Option.
(a) If the Employee ceases 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 (as determined by the Company in its sole
discretion), prior to January 1, 1996 the Company shall have the right and
option (the "Re-purchase Option") to purchase any or all of the Shares from the
Employee at the same price as the Employee paid for the Shares.
(b) For purposes of this Agreement, employment with the Company shall
include employment with a parent or subsidiary of the Company.
<PAGE>
3. Exercise of Re-purchase Option and Closing.
(a) The Company may exercise the Re-purchase Option by delivering or
mailing to the Employee in accordance with Section 14, written notice of
exercise within 60 days after the termination of the employment of the Employee
with the Company or the date upon which the Employee ceases to be employed in an
appropriate executive capacity (as determined by the Company in its sole
discretion). This notice shall specify the number of Shares to be purchased. If
and to the extent the Re-purchase Option is not exercised within the 60-day
period, the Re-purchase Option shall automatically expire, effective upon the
expiration of the 60-day period.
(b) Within 10 days after his receipt of the Company's notice of the
exercise of the Re-purchase Option pursuant to Subsection 3(a), the Employee
shall tender to the Company at its principal offices the certificate or
certificates representing the Shares that the Company has elected to purchase,
duly endorsed in blank by the Employee or with duly endorsed stock powers
attached, all in form suitable for the transfer of the Shares of the Company.
Upon its receipt of these Shares, the Company shall deliver or mail to the
Employee a check in the amount of the aggregate Option Price.
(c) After the time when any Shares are required to be delivered to the
Company for transfer to it pursuant to Subsection 3(b), the Company shall not
pay any dividend to the Employee on account of those Shares, or permit the
employee to exercise any of the privileges or rights of a stockholder with
respect to those shares, but shall, insofar as permitted by law, treat the
Company as the owner of the Shares.
(d) The Option Price may be payable, at the discretion of the company, in
cancellation of all or a portion of any outstanding indebtedness of the Employee
to the Company, or in cash (by check), or both.
2
<PAGE>
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b), the Employee shall
not, during the term of the Re-purchase Option, sell, assign, transfer, pledge,
hypothecate, or otherwise dispose of, by operation of law or otherwise
(collectively "transfer"), any of the Shares, or any interest therein, unless
the Shares are no longer subject to the Re-purchase Option.
(b) Notwithstanding the foregoing, the Employee may transfer Shares to or
for the benefit of any spouse, child or grandchild, or to a trust for their
benefit, provided that those Shares shall remain subject to this Agreement,
including without limitation the restrictions on transfer set forth in this
Section 4 and the Re-purchase Option, and the permitted transferee shall, as a
condition to the transfer, deliver to the Company a written instruction
confirming that the transferee shall be bound by all of the terms and conditions
of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not be required:
(a) To transfer on its books any of the Shares that shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement;
or
(b) To treat as owner of those Shares or to pay dividend to any transferee
to whom any of those Shares shall have been sold or transferred.
3
<PAGE>
6. Restricted Legend. All certificates representing Shares shall have
affixed thereto a legend in substantially the following form, in addition to any
other legends that may be required under federal or state securities laws:
The shares of stock represented by this certificate are
subject to restrictions on transfer and an option to
purchase set forth in a Stock Restriction Agreement
between the corporation and the registered owner of this
certificate (or his predecessor in interest). This
Agreement is available for inspection without charge at
the office of the Secretary of the corporation.
7. Investment Representations. The Employee represents, warrants, and
covenants as follows:
(a) The Employee is purchasing the Shares for his own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to obtain from
representatives of the Company the information necessary to permit him to
evaluate the merits and risks of his investment in the Company.
(c) He has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the purchase of the Shares
and to make an informed investment decision with respect to that purchase.
(d) He can afford a complete loss of the value of the Shares and is able to
bear the economic risk of holding the Shares for an indefinite period.
4
<PAGE>
(e) He understands that:
(i) The Shares have not been registered under the Securities Act and
are "restricted securities" within the meaning of Rule 144 under the
Securities Act;
(ii) The Shares cannot be sold, transferred, or otherwise disposed of
unless they are subsequently registered under the Securities Act or an
exemption from registration is then available;
(iii) In any event, the exemption from registration under Rule 144
will not be available for at least two years and even then will not be
available unless a public market then exists for the Common Stock, adequate
information concerning the Company is then available to the public, and
other terms and conditions of Rule 144 are complied with; and
(iv) The Company has no obligation or current intention to register
the Shares under the Securities Act.
(f) A legend substantially in the following form will be placed on the
certificate representing the Shares:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under the Act or an opinion of counsel satisfactory
to the corporation to the effect that registration is not required.
8. Adjustments. If from time to time during the term of the Re-purchase
Option there is any stock split, stock dividend, stock distribution, or other
reclassification of the Common Stock of the Company, or any merger,
consolidation, or sale of substantially all of the assets of the Company, any
and all new, substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be subject immediately
to: The Re-purchase Option (and be included as "Shares"), the restrictions on
transfer, and other provisions of this Agreement in the same manner and to the
same extent as the Shares, and the Option Price shall be adjusted appropriately.
5
<PAGE>
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the Company has the right to
deduct from payments of any kind otherwise due to the Employee any federal,
state or local taxes of any kind required by law to be withheld with respect to
the purchase of the Shares by the Employee.
(b) If the Employee elects, in accordance with Section 83(b) of the
Internal Revenue Code of 1954, as amended, to recognize ordinary income in the
year of acquisition of the Shares, the Company will require at the time of that
election an additional payment for withholding tax purposes based on the
difference, if any between the purchase price for the Shares and the fair market
value of the Shares as of the day immediately preceding the date of the purchase
of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, and each other provision of this Agreement shall be
severable and enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may be waived, either
generally or in any particular instance, by the Board of Directors of the
Company.
12. Binding Effect. This Agreement shall be binding upon, and inure to the
benefit of, the Company and the Employee and their respective heirs, executors,
administrators, legal representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this Agreement.
13. No Rights to Employment. Nothing contained in this Agreement shall be
construed as giving the Employee any right to be retained, in any position, as
an employee of the Company.
6
<PAGE>
14. Notice. All notices required or permitted hereunder shall be in writing
and deemed effectively given upon personal delivery or upon deposit in the
United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or addresses as either
party shall designate to the other in accordance with this Section 14.
15. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine, or neuter forms.
The singular form of nouns and pronouns shall included the plural, and the
plural form of nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior agreements and understandings
relating to the subject matter of this Agreement.
17. Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
18. Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of North Carolina.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
COMPANY
LADD FURNITURE, INC.
By:__________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP-3
High Point, NC 27261
EMPLOYEE
-------------------------------------
Address:_____________________________
-----------------------------
Social Sec. No._______________________
8
<PAGE>
EXHIBIT 10.2
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 25th day of February, 1993, between LADD Furniture,
Inc., a North Carolina corporation (the "Company"), and Kenneth E. Church (the
"Employee").
For valuable consideration, receipt of which is acknowledged, the parties
agree as follows:
1. Purchase of Shares. The Employee subscribes for and, upon acceptance,
shall purchase, subject to the terms and conditions set forth in this Agreement,
1,759 shares (the "Shares") of common stock ("common stock"), $.10 par value, of
the Company at a purchase price of $.10 per share. The aggregate purchase price
of the Shares shall be paid by the Employee by check, payable to the order of
the Company, or such other method as may be acceptable to the Company. Upon the
Company's receipt of payment for the Shares, the Company shall issue to the
Employee one or more certificates in the name of the Employee for that number of
Shares purchased by the Employee. The Employee agrees that the Shares shall be
subject to the Re-purchase Option set forth in Section 2 of this Agreement and
the restrictions on transfer set forth in Section 4 of this Agreement.
2. Re-purchase Option.
(a) If the Employee ceases 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 (as determined by the Company in its sole
discretion), prior to January 1, 1998 the Company shall have the right and
option (the "Re-purchase Option") to purchase any or all of the Shares from the
Employee at the same price as the Employee paid for the Shares.
(b) For purposes of this Agreement, employment with the Company shall
include employment with a parent or subsidiary of the Company.
<PAGE>
3. Exercise of Re-purchase Option and Closing.
(a) The Company may exercise the Re-purchase Option by delivering or
mailing to the Employee in accordance with Section 14, written notice of
exercise within 60 days after the termination of the employment of the Employee
with the Company or the date upon which the Employee ceases to be employed in an
appropriate executive capacity (as determined by the Company in its sole
discretion). This notice shall specify the number of Shares to be purchased. If
and to the extent the Re-purchase Option is not exercised within the 60-day
period, the Re-purchase Option shall automatically expire, effective upon the
expiration of the 60-day period.
(b) Within 10 days after his receipt of the Company's notice of the
exercise of the Re-purchase Option pursuant to Subsection 3(a), the Employee
shall tender to the Company at its principal offices the certificate or
certificates representing the Shares that the Company has elected to purchase,
duly endorsed in blank by the Employee or with duly endorsed stock powers
attached, all in form suitable for the transfer of the Shares of the Company.
Upon its receipt of these Shares, the Company shall deliver or mail to the
Employee a check in the amount of the aggregate Option Price.
(c) After the time when any Shares are required to be delivered to the
Company for transfer to it pursuant to Subsection 3(b), the Company shall not
pay any dividend to the Employee on account of those Shares, or permit the
employee to exercise any of the privileges or rights of a stockholder with
respect to those shares, but shall, insofar as permitted by law, treat the
Company as the owner of the Shares.
(d) The Option Price may be payable, at the discretion of the company, in
cancellation of all or a portion of any outstanding indebtedness of the Employee
to the Company, or in cash (by check), or both.
2
<PAGE>
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b), the Employee shall
not, during the term of the Re-purchase Option, sell, assign, transfer, pledge,
hypothecate, or otherwise dispose of, by operation of law or otherwise
(collectively "transfer"), any of the Shares, or any interest therein, unless
the Shares are no longer subject to the Re-purchase Option.
(b) Notwithstanding the foregoing, the Employee may transfer Shares to or
for the benefit of any spouse, child or grandchild, or to a trust for their
benefit, provided that those Shares shall remain subject to this Agreement,
including without limitation the restrictions on transfer set forth in this
Section 4 and the Re-purchase Option, and the permitted transferee shall, as a
condition to the transfer, deliver to the Company a written instruction
confirming that the transferee shall be bound by all of the terms and conditions
of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not be required:
(a) To transfer on its books any of the Shares that shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement;
or
(b) To treat as owner of those Shares or to pay dividend to any transferee
to whom any of those Shares shall have been sold or transferred.
3
<PAGE>
6. Restricted Legend. All certificates representing Shares shall have
affixed thereto a legend in substantially the following form, in addition to any
other legends that may be required under federal or state securities laws:
The shares of stock represented by this certificate are
subject to restrictions on transfer and an option to
purchase set forth in a Stock Restriction Agreement
between the corporation and the registered owner of this
certificate (or his predecessor in interest). This
Agreement is available for inspection without charge at
the office of the Secretary of the corporation.
7. Investment Representations. The Employee represents, warrants, and
covenants as follows:
(a) The Employee is purchasing the Shares for his own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to obtain from
representatives of the Company the information necessary to permit him to
evaluate the merits and risks of his investment in the Company.
(c) He has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the purchase of the Shares
and to make an informed investment decision with respect to that purchase.
(d) He can afford a complete loss of the value of the Shares and is able to
bear the economic risk of holding the Shares for an indefinite period.
4
<PAGE>
(e) He understands that:
(i) The Shares have not been registered under the Securities Act and are
"restricted securities" within the meaning of Rule 144 under the
Securities Act;
(ii) The Shares cannot be sold, transferred, or otherwise disposed of
unless they are subsequently registered under the Securities Act or an
exemption from registration is then available;
(iii) In any event, the exemption from registration under Rule 144 will not
be available for at least two years and even then will not be
available unless a public market then exists for the Common Stock,
adequate information concerning the Company is then available to the
public, and other terms and conditions of Rule 144 are complied with;
and
(iv) The Company has no obligation or current intention to register the
Shares under the Securities Act.
(f) A legend substantially in the following form will be placed on the
certificate representing the Shares:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be sold, transferred or otherwise disposed
of in the absence of an effective registration statement
under the Act or an opinion of counsel satisfactory to
the corporation to the effect that registration is not
required.
8. Adjustments. If from time to time during the term of the Re-purchase
Option there is any stock split, stock dividend, stock distribution, or other
reclassification of the Common Stock of the Company, or any merger,
consolidation, or sale of substantially all of the assets of the Company, any
and all new, substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be subject immediately
to: The Re-purchase Option (and be included as "Shares"), the restrictions on
transfer, and other provisions of this Agreement in the same manner and to the
same extent as the Shares, and the Option Price shall be adjusted appropriately.
5
<PAGE>
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the Company has the right to
deduct from payments of any kind otherwise due to the Employee any federal,
state or local taxes of any kind required by law to be withheld with respect to
the purchase of the Shares by the Employee.
(b) If the Employee elects, in accordance with Section 83(b) of the
Internal Revenue Code of 1954, as amended, to recognize ordinary income in the
year of acquisition of the Shares, the Company will require at the time of that
election an additional payment for withholding tax purposes based on the
difference, if any between the purchase price for the Shares and the fair market
value of the Shares as of the day immediately preceding the date of the purchase
of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, and each other provision of this Agreement shall be
severable and enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may be waived, either
generally or in any particular instance, by the Board of Directors of the
Company.
12. Binding Effect. This Agreement shall be binding upon, and inure to the
benefit of, the Company and the Employee and their respective heirs, executors,
administrators, legal representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this Agreement.
13. No Rights to Employment. Nothing contained in this Agreement shall be
construed as giving the Employee any right to be retained, in any position, as
an employee of the Company.
6
<PAGE>
14. Notice. All notices required or permitted hereunder shall be in writing
and deemed effectively given upon personal delivery or upon deposit in the
United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or addresses as either
party shall designate to the other in accordance with this Section 14.
15. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine, or neuter forms.
The singular form of nouns and pronouns shall included the plural, and the
plural form of nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior agreements and understandings
relating to the subject matter of this Agreement.
17. Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
18. Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of North Carolina.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP-3
High Point, NC 27261
EMPLOYEE
---------------------------------------
Address:________________________________
--------------------------------
Social Sec. No.___________________________
8
<PAGE>
EXHIBIT 10.3
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 24th day of February, 1994, between LADD Furniture,
Inc., a North Carolina corporation (the "Company"), and Kenneth E. Church (the
"Employee").
For valuable consideration, receipt of which is acknowledged, the parties
agree as follows:
1. Purchase of Shares. The Employee subscribes for and, upon acceptance,
shall purchase, subject to the terms and conditions set forth in this Agreement,
2,500 shares (the "Shares") of common stock ("common stock"), $.10 par value, of
the Company at a purchase price of $.10 per share. The aggregate purchase price
of the Shares shall be paid by the Employee by check, payable to the order of
the Company, or such other method as may be acceptable to the Company. Upon the
Company's receipt of payment for the Shares, the Company shall issue to the
Employee one or more certificates in the name of the Employee for that number of
Shares purchased by the Employee. The Employee agrees that the Shares shall be
subject to the Re-purchase Option set forth in Section 2 of this Agreement and
the restrictions on transfer set forth in Section 4 of this Agreement.
2. Re-purchase Option.
(a) If the Employee ceases 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 (as determined by the Company in its sole
discretion), prior to January 1, 1999 the Company shall have the right and
option (the "Re-purchase Option") to purchase any or all of the Shares from the
Employee at the same price as the Employee paid for the Shares.
1
<PAGE>
(b) For purposes of this Agreement, employment with the Company shall
include employment with a parent or subsidiary of the Company.
3. Exercise of Re-purchase Option and Closing.
(a) The Company may exercise the Re-purchase Option by delivering or
mailing to the Employee in accordance with Section 14, written notice of
exercise within 60 days after the termination of the employment of the Employee
with the Company or the date upon which the Employee ceases to be employed in an
appropriate executive capacity (as determined by the Company in its sole
discretion). This notice shall specify the number of Shares to be purchased. If
and to the extent the Re-purchase Option is not exercised within the 60-day
period, the Re-purchase Option shall automatically expire, effective upon the
expiration of the 60-day period.
(b) Within 10 days after his receipt of the Company's notice of the
exercise of the Re-purchase Option pursuant to Subsection 3(a), the Employee
shall tender to the Company at its principal offices the certificate or
certificates representing the Shares that the Company has elected to purchase,
duly endorsed in blank by the Employee or with duly endorsed stock powers
attached, all in form suitable for the transfer of the Shares of the Company.
Upon its receipt of these Shares, the Company shall deliver or mail to the
Employee a check in the amount of the aggregate Option Price.
(c) After the time when any Shares are required to be delivered to the
Company for transfer to it pursuant to Subsection 3(b), the Company shall not
pay any dividend to the Employee on account of those Shares, or permit the
employee to exercise any of the privileges or rights of a stockholder with
respect to those shares, but shall, insofar as permitted by law, treat the
Company as the owner of the Shares.
(d) The Option Price may be payable, at the discretion of the company, in
cancellation of all or a portion of any outstanding indebtedness of the Employee
to the Company, or in cash (by check), or both.
<PAGE>
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b), the Employee shall
not, during the term of the Re-purchase Option, sell, assign, transfer, pledge,
hypothecate, or otherwise dispose of, by operation of law or otherwise
(collectively "transfer"), any of the Shares, or any interest therein, unless
the Shares are no longer subject to the Re-purchase Option.
(b) Notwithstanding the foregoing, the Employee may transfer Shares to or
for the benefit of any spouse, child or grandchild, or to a trust for their
benefit, provided that those Shares shall remain subject to this Agreement,
including without limitation the restrictions on transfer set forth in this
Section 4 and the Re-purchase Option, and the permitted transferee shall, as a
condition to the transfer, deliver to the Company a written instruction
confirming that the transferee shall be bound by all of the terms and conditions
of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not be required:
(a) To transfer on its books any of the Shares that shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement;
or
(b) To treat as owner of those Shares or to pay dividend to any transferee
to whom any of those Shares shall have been sold or transferred.
3
<PAGE>
6. Restricted Legend. All certificates representing Shares shall have
affixed thereto a legend in substantially the following form, in addition to any
other legends that may be required under federal or state securities laws:
The shares of stock represented by this certificate are
subject to restrictions on transfer and an option to
purchase set forth in a Stock Restriction Agreement
between the corporation and the registered owner of this
certificate (or his predecessor in interest). This
Agreement is available for inspection without charge at
the office of the Secretary of the corporation.
7. Investment Representations. The Employee represents, warrants, and
covenants as follows:
(a) The Employee is purchasing the Shares for his own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to obtain from
representatives of the Company the information necessary to permit him to
evaluate the merits and risks of his investment in the Company.
(c) He has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the purchase of the Shares
and to make an informed investment decision with respect to that purchase.
(d) He can afford a complete loss of the value of the Shares and is able to
bear the economic risk of holding the Shares for an indefinite period.
4
<PAGE>
(e) He understands that:
(i) The Shares have not been registered under the Securities Act and
are "restricted securities" within the meaning of Rule 144 under the
Securities Act;
(ii) The Shares cannot be sold, transferred, or otherwise disposed of
unless they are subsequently registered under the Securities Act or an
exemption from registration is then available;
(iii) In any event, the exemption from registration under Rule 144
will not be available for at least two years and even then will not be
available unless a public market then exists for the Common Stock, adequate
information concerning the Company is then available to the public, and
other terms and conditions of Rule 144 are complied with; and
(iv) The Company has no obligation or current intention to register
the Shares under the Securities Act.
(f) A legend substantially in the following form will be placed on the
certificate representing the Shares:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be sold, transferred or otherwise disposed
of in the absence of an effective registration statement
under the Act or an opinion of counsel satisfactory to
the corporation to the effect that registration is not
required.
8. Adjustments. If from time to time during the term of the Re-purchase
Option there is any stock split, stock dividend, stock distribution, or other
reclassification of the Common Stock of the Company, or any merger,
consolidation, or sale of substantially all of the assets of the Company, any
and all new, substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be subject immediately
to: The Re-purchase Option (and be included as "Shares"), the restrictions on
transfer, and other provisions of this Agreement in the same manner and to the
same extent as the Shares, and the Option Price shall be adjusted appropriately.
5
<PAGE>
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the Company has the right to
deduct from payments of any kind otherwise due to the Employee any federal,
state or local taxes of any kind required by law to be withheld with respect to
the purchase of the Shares by the Employee.
(b) If the Employee elects, in accordance with Section 83(b) of the
Internal Revenue Code of 1954, as amended, to recognize ordinary income in the
year of acquisition of the Shares, the Company will require at the time of that
election an additional payment for withholding tax purposes based on the
difference, if any between the purchase price for the Shares and the fair market
value of the Shares as of the day immediately preceding the date of the purchase
of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, and each other provision of this Agreement shall be
severable and enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may be waived, either
generally or in any particular instance, by the Board of Directors of the
Company.
12. Binding Effect. This Agreement shall be binding upon, and inure to the
benefit of, the Company and the Employee and their respective heirs, executors,
administrators, legal representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this Agreement.
13. No Rights to Employment. Nothing contained in this Agreement shall be
construed as giving the Employee any right to be retained, in any position, as
an employee of the Company.
6
<PAGE>
14. Notice. All notices required or permitted hereunder shall be in writing
and deemed effectively given upon personal delivery or upon deposit in the
United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or addresses as either
party shall designate to the other in accordance with this Section 14.
15. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine, or neuter forms.
The singular form of nouns and pronouns shall included the plural, and the
plural form of nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior agreements and understandings
relating to the subject matter of this Agreement.
17. Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
18. Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of North Carolina.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP-3
High Point, NC 27261
EMPLOYEE
---------------------------------------
Address:________________________________
--------------------------------
Social Sec. No.___________________________
8
<PAGE>
EXHIBIT 10.4
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 2nd day of March, 1995, between LADD Furniture, Inc.,
a North Carolina corporation (the "Company"), and Kenneth E. Church (the
"Employee").
For valuable consideration, receipt of which is acknowledged, the parties
agree as follows:
1. Purchase of Shares. The Employee subscribes for and, upon acceptance,
shall purchase, subject to the terms and conditions set forth in this
Agreement, 4,884 shares (the "Shares") of common stock ("common stock"), $.10
par value, of the Company at a purchase price of $.10 per share. The aggregate
purchase price of the Shares shall be paid by the Employee by check, payable to
the order of the Company, or such other method as may be acceptable to the
Company. Upon the Company's receipt of payment for the Shares, the Company shall
issue to the Employee one or more certificates in the name of the Employee for
that number of Shares purchased by the Employee. The Employee agrees that the
Shares shall be subject to the Re-purchase Option set forth in Section 2 of this
Agreement and the restrictions on transfer set forth in Section 4 of this
Agreement.
2. Re-purchase Option.
(a) If the Employee ceases 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 (as determined by the Company in its sole
discretion), prior to March 1, 2000 the Company shall have the right and option
(the "Re-purchase Option") to purchase any or all of the Shares from the
Employee at the same price as the Employee paid for the Shares.
(b) For purposes of this Agreement, employment with the Company shall
include employment with a parent or subsidiary of the Company.
<PAGE>
3. Exercise of Re-purchase Option and Closing.
(a) The Company may exercise the Re-purchase Option by delivering or
mailing to the Employee in accordance with Section 14, written notice of
exercise within 60 days after the termination of the employment of the Employee
with the Company or the date upon which the Employee ceases to be employed in an
appropriate executive capacity (as determined by the Company in its sole
discretion). This notice shall specify the number of Shares to be purchased. If
and to the extent the Re-purchase Option is not exercised within the 60-day
period, the Re-purchase Option shall automatically expire, effective upon the
expiration of the 60-day period.
(b) Within 10 days after his receipt of the Company's notice of the
exercise of the Re-purchase Option pursuant to Subsection 3(a), the Employee
shall tender to the Company at its principal offices the certificate or
certificates representing the Shares that the Company has elected to purchase,
duly endorsed in blank by the Employee or with duly endorsed stock powers
attached, all in form suitable for the transfer of the Shares of the Company.
Upon its receipt of these Shares, the Company shall deliver or mail to the
Employee a check in the amount of the aggregate Option Price.
(c) After the time when any Shares are required to be delivered to the
Company for transfer to it pursuant to Subsection 3(b), the Company shall not
pay any dividend to the Employee on account of those Shares, or permit the
employee to exercise any of the privileges or rights of a stockholder with
respect to those shares, but shall, insofar as permitted by law, treat the
Company as the owner of the Shares.
(d) The Option Price may be payable, at the discretion of the company, in
cancellation of all or a portion of any outstanding indebtedness of the Employee
to the Company, or in cash (by check), or both.
2
<PAGE>
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b), the Employee shall
not, during the term of the Re-purchase Option, sell, assign, transfer, pledge,
hypothecate, or otherwise dispose of, by operation of law or otherwise
(collectively "transfer"), any of the Shares, or any interest therein, unless
the Shares are no longer subject to the Re-purchase Option.
(b) Notwithstanding the foregoing, the Employee may transfer Shares to or
for the benefit of any spouse, child or grandchild, or to a trust for their
benefit, provided that those Shares shall remain subject to this Agreement,
including without limitation the restrictions on transfer set forth in this
Section 4 and the Re-purchase Option, and the permitted transferee shall, as a
condition to the transfer, deliver to the Company a written instruction
confirming that the transferee shall be bound by all of the terms and conditions
of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not be required:
(a) To transfer on its books any of the Shares that shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement;
or
(b) To treat as owner of those Shares or to pay dividend to any transferee
to whom any of those Shares shall have been sold or transferred.
6. Restricted Legend. All certificates representing Shares shall have
affixed thereto a legend in substantially the following form, in addition to any
other legends that may be required under federal or state securities laws:
The shares of stock represented by this certificate are
subject to restrictions on transfer and an option to
purchase set forth in a Stock Restriction Agreement
between the corporation and the registered owner of this
certificate (or his predecessor in
3
<PAGE>
interest). This Agreement is available for inspection
without charge at the office of the Secretary of
the corporation.
7. Investment Representations. The Employee represents, warrants, and
covenants as follows:
(a) The Employee is purchasing the Shares for his own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to obtain from
representatives of the Company the information necessary to permit him to
evaluate the merits and risks of his investment in the Company.
(c) He has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the purchase of the Shares
and to make an informed investment decision with respect to that purchase.
(d) He can afford a complete loss of the value of the Shares and is able to
bear the economic risk of holding the Shares for an indefinite period.
(e) He understands that:
(i) The Shares have not been registered under the Securities Act and
are "restricted securities" within the meaning of Rule 144 under the
Securities Act;
(ii) The Shares cannot be sold, transferred, or otherwise disposed of
unless they are subsequently registered under the Securities Act or an
exemption from registration is then available;
(iii) In any event, the exemption from registration under Rule 144
will not be available for at least two years and even
4
<PAGE>
then will not be available unless a public market then exists for the
Common Stock, adequate information concerning the Company is then
available to the public, and other terms and conditions of Rule 144
are complied with; and
(iv) The Company has no obligation or current intention to register the
Shares under the Securities Act.
(f) A legend substantially in the following form will be placed on the
certificate representing the Shares:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be sold, transferred or otherwise disposed
of in the absence of an effective registration statement
under the Act or an opinion of counsel satisfactory to
the corporation to the effect that registration is not
required.
8. Adjustments. If from time to time during the term of the Re-purchase
Option there is any stock split, stock dividend, stock distribution, or other
reclassification of the Common Stock of the Company, or any merger,
consolidation, or sale of substantially all of the assets of the Company, any
and all new, substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be subject immediately
to: The Re-purchase Option (and be included as "Shares"), the restrictions on
transfer, and other provisions of this Agreement in the same manner and to the
same extent as the Shares, and the Option Price shall be adjusted appropriately.
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the Company has the right to
deduct from payments of any kind otherwise due to the Employee any federal,
state or local taxes of any kind required by law to be withheld with respect to
the purchase of the Shares by the Employee.
5
<PAGE>
(b) If the Employee elects, in accordance with Section 83(b) of the
Internal Revenue Code of 1954, as amended, to recognize ordinary income in the
year of acquisition of the Shares, the Company will require at the time of that
election an additional payment for withholding tax purposes based on the
difference, if any between the purchase price for the Shares and the fair market
value of the Shares as of the day immediately preceding the date of the purchase
of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, and each other provision of this Agreement shall be
severable and enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may be waived, either
generally or in any particular instance, by the Board of Directors of the
Company.
12. Binding Effect. This Agreement shall be binding upon, and inure to the
benefit of, the Company and the Employee and their respective heirs, executors,
administrators, legal representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this Agreement.
13. No Rights to Employment. Nothing contained in this Agreement shall be
construed as giving the Employee any right to be retained, in any position, as
an employee of the Company.
14. Notice. All notices required or permitted hereunder shall be in writing
and deemed effectively given upon personal delivery or upon deposit in the
United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or addresses as either
party shall designate to the other in accordance with this Section 14.
6
<PAGE>
15. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine, or neuter forms.
The singular form of nouns and pronouns shall included the plural, and the
plural form of nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior agreements and understandings
relating to the subject matter of this Agreement.
17. Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
18. Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of North Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP-3
High Point, NC 27261
EMPLOYEE
---------------------------------------
Address:________________________________
--------------------------------
Social Sec. No.___________________________
7
<PAGE>
EXHIBIT 10.5
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 23rd day of June, 1994, between LADD Furniture, Inc.,
a North Carolina corporation (the "Company"), and Michael P. Haley (the
"Employee").
For valuable consideration, receipt of which is acknowledged, the parties
agree as follows:
1. Purchase of Shares. The Employee subscribes for and, upon acceptance,
shall purchase, subject to the terms and conditions set forth in this
Agreement,3,000 shares (the "Shares") of common stock ("common stock"), $.10 par
value, of the Company at a purchase price of $.10 per share. The aggregate
purchase price of the Shares shall be paid by the Employee by check, payable to
the order of the Company, or such other method as may be acceptable to the
Company. Upon the Company's receipt of payment for the Shares, the Company shall
issue to the Employee one or more certificates in the name of the Employee for
that number of Shares purchased by the Employee. The Employee agrees that the
Shares shall be subject to the Re-purchase Option set forth in Section 2 of this
Agreement and the restrictions on transfer set forth in Section 4 of this
Agreement.
2. Re-purchase Option.
(a) If the Employee ceases 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 (as determined by the Company in its sole
discretion), prior to July 1, 1999 the Company shall have the right and option
(the "Re-purchase Option") to purchase any or all of the Shares from the
Employee at the same price as the Employee paid for the Shares.
(b) For purposes of this Agreement, employment with the Company shall
include employment with a parent or subsidiary of the Company.
<PAGE>
3. Exercise of Re-purchase Option and Closing.
(a) The Company may exercise the Re-purchase Option by delivering or
mailing to the Employee in accordance with Section 14, written notice of
exercise within 60 days after the termination of the employment of the Employee
with the Company or the date upon which the Employee ceases to be employed in an
appropriate executive capacity (as determined by the Company in its sole
discretion). This notice shall specify the number of Shares to be purchased. If
and to the extent the Re-purchase Option is not exercised within the 60-day
period, the Re-purchase Option shall automatically expire, effective upon the
expiration of the 60-day period.
(b) Within 10 days after his receipt of the Company's notice of the
exercise of the Re-purchase Option pursuant to Subsection 3(a), the Employee
shall tender to the Company at its principal offices the certificate or
certificates representing the Shares that the Company has elected to purchase,
duly endorsed in blank by the Employee or with duly endorsed stock powers
attached, all in form suitable for the transfer of the Shares of the Company.
Upon its receipt of these Shares, the Company shall deliver or mail to the
Employee a check in the amount of the aggregate Option Price.
(c) After the time when any Shares are required to be delivered to the
Company for transfer to it pursuant to Subsection 3(b), the Company shall not
pay any dividend to the Employee on account of those Shares, or permit the
employee to exercise any of the privileges or rights of a stockholder with
respect to those shares, but shall, insofar as permitted by law, treat the
Company as the owner of the Shares.
(d) The Option Price may be payable, at the discretion of the company, in
cancellation of all or a portion of any outstanding indebtedness of the Employee
to the Company, or in cash (by check), or both.
2
<PAGE>
4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b), the Employee shall
not, during the term of the Re-purchase Option, sell, assign, transfer, pledge,
hypothecate, or otherwise dispose of, by operation of law or otherwise
(collectively "transfer"), any of the Shares, or any interest therein, unless
the Shares are no longer subject to the Re-purchase Option.
(b) Notwithstanding the foregoing, the Employee may transfer Shares to or
for the benefit of any spouse, child or grandchild, or to a trust for their
benefit, provided that those Shares shall remain subject to this Agreement,
including without limitation the restrictions on transfer set forth in this
Section 4 and the Re-purchase Option, and the permitted transferee shall, as a
condition to the transfer, deliver to the Company a written instruction
confirming that the transferee shall be bound by all of the terms and conditions
of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not be required:
(a) To transfer on its books any of the Shares that shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement;
or
(b) To treat as owner of those Shares or to pay dividend to any transferee
to whom any of those Shares shall have been sold or transferred.
6. Restricted Legend. All certificates representing Shares shall have
affixed thereto a legend in substantially the following form, in addition to any
other legends that may be required under federal or state securities laws:
The shares of stock represented by this certificate are
subject to restrictions on transfer and an option to
purchase set forth in a Stock Restriction Agreement
between the corporation and the
3
<PAGE>
registered owner of this certificate (or his predecessor
in interest). This Agreement is available for inspection
without charge atthe office ofthe Secretary ofthe
corporation.
7. Investment Representations. The Employee represents, warrants, and
covenants as follows:
(a) The Employee is purchasing the Shares for his own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to obtain from
representatives of the Company the information necessary to permit him to
evaluate the merits and risks of his investment in the Company.
(c) He has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the purchase of the Shares
and to make an informed investment decision with respect to that purchase.
(d) He can afford a complete loss of the value of the Shares and is able to
bear the economic risk of holding the Shares for an indefinite period.
(e) He understands that:
(i) The Shares have not been registered under the Securities Act and
are "restricted securities" within the meaning of Rule 144 under the
Securities Act;
(ii) The Shares cannot be sold, transferred, or otherwise disposed of
unless they are subsequently registered under the Securities Act or an
exemption from registration is then available;
4
<PAGE>
(iii) In any event, the exemption from registration under Rule 144
will not be available for at least two years and even then will not be
available unless a public market then exists for the Common Stock, adequate
information concerning the Company is then available to the public, and
other terms and conditions of Rule 144 are complied with; and
(iv) The Company has no obligation or current intention to register
the Shares under the Securities Act.
(f) A legend substantially in the following form will be placed on the
certificate representing the Shares:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be sold, transferred or otherwise disposed
of in the absence of an effective registration statement
under the Act or an opinion of counsel satisfactory to
the corporation to the effect that registration is not
required.
8. Adjustments. If from time to time during the term of the Re-purchase
Option there is any stock split, stock dividend, stock distribution, or other
reclassification of the Common Stock of the Company, or any merger,
consolidation, or sale of substantially all of the assets of the Company, any
and all new, substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be subject immediately
to: The Re-purchase Option (and be included as "Shares"), the restrictions on
transfer, and other provisions of this Agreement in the same manner and to the
same extent as the Shares, and the Option Price shall be adjusted appropriately.
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the Company has the right to
deduct from payments of any kind otherwise due to the Employee any federal,
state or local taxes of any kind required by law to be withheld with respect to
the purchase of the Shares by the Employee.
5
<PAGE>
(b) If the Employee elects, in accordance with Section 83(b) of the
Internal Revenue Code of 1954, as amended, to recognize ordinary income in the
year of acquisition of the Shares, the Company will require at the time of
that election an additional payment for withholding tax purposes based on the
difference, if any between the purchase price for the Shares and the fair market
value of the Shares as of the day immediately preceding the date of the purchase
of the Shares by the Employee.
10. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, and each other provision of this Agreement shall be
severable and enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may be waived, either
generally or in any particular instance, by the Board of Directors of the
Company.
12. Binding Effect. This Agreement shall be binding upon, and inure to the
benefit of, the Company and the Employee and their respective heirs, executors,
administrators, legal representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this Agreement.
13. No Rights to Employment. Nothing contained in this Agreement shall be
construed as giving the Employee any right to be retained, in any position, as
an employee of the Company.
14. Notice. All notices required or permitted hereunder shall be in writing
and deemed effectively given upon personal delivery or upon deposit in the
United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or addresses as either
party shall designate to the other in accordance with this Section 14.
6
<PAGE>
15. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine, or neuter forms.
The singular form of nouns and pronouns shall included the plural, and the
plural form of nouns and pronouns shall include the singular.
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior agreements and understandings
relating to the subject matter of this Agreement.
17. Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
18. Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of North Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP-3
High Point, NC 27261
EMPLOYEE
---------------------------------------
Address:________________________________
--------------------------------
Social Sec. No.___________________________
7
<PAGE>
<PAGE>
EXHIBIT 10.6
EMPLOYEE RESTRICTED STOCK
PURCHASE AGREEMENT
Agreement, made this 2nd day of March 1995, between LADD Furniture, Inc., a
North Carolina corporation (the "Company"), and Michael P. Haley (the
"Employee").
For valuable consideration, receipt of which is acknowledged, the parties
agree as follows:
1. Purchase of Shares. The Employee subscribes for and, upon acceptance,
shall purchase, subject to the terms and conditions set forth in this Agreement,
4,302 shares (the "Shares") of common stock ("common stock"), $.10 par value, of
the Company at a purchase price of $.10 per share. The aggregate purchase price
of the Shares shall be paid by the Employee by check, payable to the order of
the Company, or such other method as may be acceptable to the Company. Upon the
Company's receipt of payment for the Shares, the Company shall issue to the
Employee one or more certificates in the name of the Employee for that number of
Shares purchased by the Employee. The Employee agrees that the Shares shall be
subject to the Re-purchase Option set forth in Section 2 of this Agreement and
the restrictions on transfer set forth in Section 4 of this Agreement.
2. Re-purchase Option.
(a) If the Employee ceases 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 (as determined by the Company in its sole
discretion), prior to March 1, 2000, the Company shall have the right and option
(the "Re-purchase Option") to purchase any or all of the Shares from the
Employee at the same price as the Employee paid for the Shares.
(b) For purposes of this Agreement, employment with the Company shall
include employment with a parent or subsidiary of the Company.
<PAGE>
3. Exercise of Re-purchase Option and Closing.
(a) The Company may exercise the Re-purchase Option by delivering or
mailing to the Employee in accordance with Section 14, written notice of
exercise within 60 days after the termination of the employment of the Employee
with the Company or the date upon which the Employee ceases to be employed in an
appropriate executive capacity (as determined by the Company in its sole
discretion). This notice shall specify the number of Shares to be purchased. If
and to the extent the Re-purchase Option is not exercised within the 60-day
period, the Re-purchase Option shall automatically expire, effective upon the
expiration of the 60-day period.
(b) Within 10 days after his receipt of the Company's notice of the
exercise of the Re-purchase Option pursuant to Subsection 3(a), the Employee
shall tender to the Company at its principal offices the certificate or
certificates representing the Shares that the Company has elected to purchase,
duly endorsed in blank by the Employee or with duly endorsed stock powers
attached, all in form suitable for the transfer of the Shares of the Company.
Upon its receipt of these Shares, the Company shall deliver or mail to the
Employee a check in the amount of the aggregate Option Price.
(c) After the time when any Shares are required to be delivered to the
Company for transfer to it pursuant to Subsection 3(b), the Company shall not
pay any dividend to the Employee on account of those Shares, or permit the
employee to exercise any of the privileges or rights of a stockholder with
respect to those shares, but shall, insofar as permitted by law, treat the
Company as the owner of the Shares.
(d) The Option Price may be payable, at the discretion of the company, in
cancellation of all or a portion of any outstanding indebtedness of the Employee
to the Company, or in cash (by check), or both.
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4. Restrictions on Transfer:
(a) Except as otherwise provided in Subsection 4(b), the Employee shall
not, during the term of the Re-purchase Option, sell, assign, transfer, pledge,
hypothecate, or otherwise dispose of, by operation of law or otherwise
(collectively "transfer"), any of the Shares, or any interest therein, unless
the Shares are no longer subject to the Re-purchase Option.
(b) Notwithstanding the foregoing, the Employee may transfer Shares to or
for the benefit of any spouse, child or grandchild, or to a trust for their
benefit, provided that those Shares shall remain subject to this Agreement,
including without limitation the restrictions on transfer set forth in this
Section 4 and the Re-purchase Option, and the permitted transferee shall, as a
condition to the transfer, deliver to the Company a written instruction
confirming that the transferee shall be bound by all of the terms and conditions
of this Agreement.
5. Effect of Prohibited Transfer. The Company shall not be required:
(a) To transfer on its books any of the Shares that shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement;
or
(b) To treat as owner of those Shares or to pay dividend to any transferee
to whom any of those Shares shall have been sold or transferred.
6. Restricted Legend. All certificates representing Shares shall have
affixed thereto a legend in substantially the following form, in addition to any
other legends that may be required under federal or state securities laws:
The shares of stock represented by this certificate are subject to
restrictions on transfer and an option to purchase set forth in a Stock
Restriction Agreement between the corporation and the registered owner of this
certificate (or his predecessor in interest).This Agreement is available for
inspection without charge at the office of the Secretary of the corporation.
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7. Investment Representations. The Employee represents, warrants,
and covenants as follows:
(a) The Employee is purchasing the Shares for his own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under the Securities Act.
(b) He has had an opportunity he deems adequate to obtain from
representatives of the Company the information necessary to permit him to
evaluate the merits and risks of his investment in the Company.
(c) He has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the purchase of the Shares
and to make an informed investment decision with respect to that purchase.
(d) He can afford a complete loss of the value of the Shares and is able to
bear the economic risk of holding the Shares for an indefinite period.
(e) He understands that:
(i) The Shares have not been registered under the Securities Act and
are "restricted securities" within the meaning of Rule 144 under the
Securities Act;
(ii) The Shares cannot be sold, transferred, or otherwise disposed of
unless they are subsequently registered under the Securities Act or an
exemption from registration is then available;
(iii) In any event, the exemption from registration under Rule 144
will not be available for at least two years and even then will not be
available unless a public market then exists for the Common Stock, adequate
information concerning the Company is then available to the public, and
other terms and conditions of Rule 144 are complied with; and
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(iv) The Company has no obligation or current intention to register
the Shares under the Securities Act.
(f) A legend substantially in the following form will be placed on the
certificate representing the Shares:
The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, and may not be sold, transferred or
otherwise disposed of in the absence of an effective registration statement
under the Act or an opinion of counsel satisfactory to the corporation to the
effect that registration is not required.
8. Adjustments. If from time to time during the term of the Re-purchase
Option there is any stock split, stock dividend, stock distribution, or other
reclassification of the Common Stock of the Company, or any merger,
consolidation, or sale of substantially all of the assets of the Company, any
and all new, substituted, or additional securities to which the Employee is
entitled by reason of his ownership of the Shares shall be subject immediately
to: The Re-purchase Option (and be included as "Shares"), the restrictions on
transfer, and other provisions of this Agreement in the same manner and to the
same extent as the Shares, and the Option Price shall be adjusted appropriately.
9. Withholding Taxes.
(a) The Employee acknowledges and agrees that the Company has the right to
deduct from payments of any kind otherwise due to the Employee any federal,
state or local taxes of any kind required by law to be withheld with respect to
the purchase of the Shares by the Employee.
(b) If the Employee elects, in accordance with Section 83(b) of the
Internal Revenue Code of 1954, as amended, to recognize ordinary income in the
year of acquisition of the Shares, the Company will require at the time of that
election an additional payment for
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withholding tax purposes based on the difference, if any between the
purchase price for the Shares and the fair market value of the Shares as of the
day immediately preceding the date of the purchase of the Shares by the
Employee.
10. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, and each other provision of this Agreement shall be
severable and enforceable to the extent permitted by law.
11. Waiver. Any provision contained in this Agreement may be waived, either
generally or in any particular instance, by the Board of Directors of the
Company.
12. Binding Effect. This Agreement shall be binding upon, and inure to the
benefit of, the Company and the Employee and their respective heirs, executors,
administrators, legal representatives, successors, and assigns, subject to the
restrictions on transfer set forth in Section 4 of this Agreement.
13. No Rights to Employment. Nothing contained in this Agreement shall be
construed as giving the Employee any right to be retained, in any position, as
an employee of the Company.
14. Notice. All notices required or permitted hereunder shall be in writing
and deemed effectively given upon personal delivery or upon deposit in the
United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party at the address shown beneath his or its respective
signature to this Agreement, or at such other address or addresses as either
party shall designate to the other in accordance with this Section 14.
15. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine, or neuter forms.
The singular
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form of nouns and pronouns shall included the
plural, and the plural form of nouns and pronouns shall include the
singular.
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior agreements and understandings
relating to the subject matter of this Agreement.
17. Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Employee.
18. Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of North Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
COMPANY
LADD FURNITURE, INC.
By:____________________________________
Chairman and Chief Executive Officer
Address: P. O. Box HP-3
High Point, NC 27261
EMPLOYEE
---------------------------------------
Address:________________________________
--------------------------------
Social Sec. No.___________________________
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EXHIBIT 10.7
NORTH CAROLINA )
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the 1st day of December, 1995, and
effective as of December 1, 1995, by and between LADD Furniture, Inc., a North
Carolina corporation ("Company"), and William S. Creekmuir, an individual
resident of North Carolina ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and sale of
furniture; and
WHEREAS, Company desires to employ Executive as its Senior Vice President
and Executive desires to accept such employment on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive hereby
accepts employment and agrees to remain in the employ of the company during the
term of this Agreement, on the terms and conditions hereinafter set forth.
2. Term of Employment. Subject to the provisions in Section 9 below, the
term of this Agreement shall be for a two-year period beginning on the date
hereof and terminating on November 30, 1997, unless otherwise terminated as
provided herein.
3. Nature of Employment. Executive is employed as Senior Vice President of
Company. Consistent with such position, Executive shall, subject to the
direction of the Chief Executive Officer and the Board of Directors of Company,
direct and manage the affairs of the Company as assigned. Executive shall report
to and be responsible to the Chief Executive Officer. During the term of this
Agreement and any extensions or renewals thereof, Executive shall have no other
employment of any nature whatsoever without the prior consent of Company.
Accordingly, unless otherwise approved by Company, Executive agrees to devote
his full working time to the business of Company; provided, however, nothing
herein contained shall restrict or prevent Executive from personally and for his
own account owning and dealing in stocks, bonds, securities, real estate,
commodities, or other investment properties for his own benefit or the benefit
of his family. Further, nothing herein contained shall restrict or prevent
Executive from serving on the Board of Directors of any entity which does not
directly of indirectly compete with Company.
<PAGE>
4. Compensation.
(a) Base Salary. Compensation to Executive for the services rendered on
behalf of Company during the term of this Agreement shall be no less than Two
Hundred Thousand Dollars $200,000.00) per year, payable in equal monthly
installments. From time to time during the term of this Agreement, Executive's
compensation may be increased if approved by the Board of Directors of Company,
but shall in no event be decreased from the amount of the base salary in effect
at that time. Company shall review Executive's compensation hereunder at least
on an annual basis.
(b) Incentive Compensation. In addition to Executive's base salary,
Executive shall be entitled to participate in incentive compensation plans and
programs generally available to executives of the Company, provided that
performance goals and award targets used in the computation of awards to the
Executive hereunder shall be no less favorable than those which are used in the
computation of awards to other executives of the Company and shall recognize the
level of responsibility of the Executive. The annual incentive opportunity shall
have a maximum no less than one hundred percent (100%) of Executive's then
current base salary.
5. Expenses. Executive is authorized to incur reason able expenses in
connection with the business of Company, including expenses for travel and
similar items. Company will reimburse Executive for all such expenses upon the
presentation by Executive, from time to time, of an itemized account of
expenditures.
6. Vacation. Executive shall be entitled to paid vacations during each
calendar year of the term of this Agreement at such times and for such duration
as may be determined by the Chief Executive Officer of the Company, taking into
consideration the needs and requirements of Company for Executive's services;
provided, however, the minimum paid vacation to which Executive shall be
entitled in any calendar year is four (4) weeks.
7. Death During Employment. If Executive dies during the term of this
Agreement, Company shall pay to the estate of Executive the compensation to
which he would otherwise be entitled through the end of the month in which death
occurs in accordance with Section 4(a) above, plus the sum of Five Thousand
Dollars ($5,000.00) as an additional death benefit. Company shall also pay to
the estate of Executive an amount equal to any bonus or other incentive payments
which would otherwise have been due to Executive had Executive been employed as
of fiscal year end, pro-rated to date of death. This Agreement shall thereupon
terminate, and Company shall have no further obligation to the estate of
Executive.
8. Permanent Disability During Employment. If Executive becomes permanently
disabled during the term of this Agreement, Company shall pay to Executive the
compensation, in accordance with Section 4(a) above, to which he would otherwise
be entitled to the end of the month in which such permanent disability occurs.
Thereafter, the Executive shall continue to receive his then base salary, minus
any payments provided by the Company's benefit plans and by any government
sponsored program, for a twenty-four (24) month period from the
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date of permanent disability. This Agreement shall thereupon terminate and
Company shall have no further obligation to Executive except as may be provided
under Company's short-term and long-term disability plans during the term of
such disability and any prorata portion of any bonus or incentive plan.
Permanent disability for purposes of this Agreement shall mean a physical or
mental condition of Executive that renders Executive incapable of performing the
essential duties of his job and which condition shall be medically determined to
be of permanent duration as same is construed under Company's disability plans.
9. Renewal. Executive's term of employment shall be automatically extended
upon the same terms and conditions contained herein for successive one-year
periods unless a written notice of termination is given by either party at least
90 days before the end of the term of employment or any renewals or extensions
thereof. In the event the Company gives timely notice to terminate this
Agreement, the severance provision of Section 11 pertaining to termination
without cause shall become effective.
10. Termination for Cause. Company may terminate Executive's employment at
any time "for cause". The term "for cause" shall mean (i) a material default or
other breach by Executive of his obligations under this Agreement, (ii) material
failure by Executive to diligently and competently perform his duties under this
Agreement, which shall be determined by Company's Board of Directors in its
reasonable discretion, (iii) insubordination or other act or acts by Executive
detrimental to Company or damaging to Company's relationships with customers,
suppliers or employees or (iv) fraud, dishonesty, misappropriation of Company's
assets, or conviction of a felony. Upon the occurrence of (i), (ii) or (iii)
above, Company shall be entitled to terminate the employment relationship
hereunder upon thirty (30) days prior written notice to Executive, which notice
shall state the reason for such termination and shall provide Executive an
opportunity to remedy or cure such cause during such period. If such cause is
not remedied or cured during such period, Company may terminate Executive's
employment immediately. In the event of a termination for cause, Company shall
have no obligation or liability to Executive under this Agreement except for the
compensation to which he is entitled through the end of the month of termination
in accordance with Section 4(a) above.
11. Termination Without Cause. Company shall be entitled to terminate the
employment relationship hereunder without cause at any time upon thirty (30)
days prior written notice to Executive. In such event, Executive, if requested
by Company, shall continue to render his services up to the date of termination
and shall be paid the compensation to which he is entitled through the end of
the month of termination in accordance with Section 4(a) above. In addition, if
Company terminates this Agreement for any reason other than for cause, as
specified in Section 10 above, the Executive shall be entitled to receive in
twenty-four (24) equal monthly payments in an amount equal to two times the sum
of (i) his then current base salary in accordance with Section 4(a) above and
(ii) the average annual incentive payments to the Executive during the preceding
three (3) years less earned income received during the 24-month severance
period. Further, Executive shall be deemed to be One Hundred Percent (100%)
vested in the Supplemental Retirement Income Plan for Salaried Employees of LADD
Furniture, Inc.("SERP"). Payments under this Section 11 are in addition to and
not in lieu of any benefits
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under the SERP or other benefit programs of the Company. The Company shall
thereafter have no other obligation or liability to Executive under this
Agreement.
12. Termination upon Change of Control. In the event of a "change in
control" of the Company (as hereinafter defined), the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events during the twelve (12)
months immediately preceding or following the effective date of a change in
control of the Company:
(a) a material change in the scope of the Executive's
assigned duties and responsibilities from those in
effect immediately prior to a change in control of the
Company or the assignment of duties or responsibilities
that are inconsistent with the Executive's status in the
Company;
(b) a reduction by the Company in the Executive's base
salary or incentive compensation as in effect on the
date of a change in control;
(c) the Company's requirement that the Executive be
based anywhere other than the Company's office at which
he was based prior to the change in control of the
Company; or
(d) the failure by the Company to continue to provide
the Executive with benefits substantially similar to
those specified in Section 14 of this Agreement.
If the Executive shall terminate his employment for Good Reason, then the
Company shall pay him a lump sum severance payment in an amount equal to two
times the sum of (i) his then current base salary and (ii) the average annual
incentive payments to the Executive during the preceding three (3) years.
Further, upon termination for Good Reason, the Executive shall immediately
become 100% vested in the SERP, all outstanding stock options shall become
immediately exercisable and all restrictions under Restricted Stock Agreements
shall be eliminated.
For purposes of this Agreement, a "change in control" shall be deemed to
have occurred when (i) any person, corporation, or group of associated persons,
excluding affiliates of the Company, acquires a beneficial ownership of an
aggregate of more than fifty percent (50%) of the then outstanding shares of
voting stock of the Company or (ii) a merger or consolidation to which the
Company is a party and where the Company is not a surviving or continuing entity
has been completed.
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13. Property of Company. Executive agrees that upon the termination of his
employment he will turn over to Company all property of Company which has come
into his possession while an Executive of Company.
14. Additional Benefits. During the term of this Agreement and any renewals
or extensions thereof, Company shall keep and maintain, for the benefit of
Executive, life insurance having a death benefit of not less one hundred percent
(100%) of base pay (not to exceed $300,000) and disability insurance that will
provide Executive a benefit of not less than sixty-percent (60%) of base pay per
month during the term of any disability. Executive and, as applicable, the
Executive's family shall also have the right to participate in any Executive
benefit plans or other fringe benefits adopted by Company for its officers
and/or other key management employees or as a part of Company's regular
compensation structure for its employees, including any group hospitalization,
medical, dental, accidental death and disability and long-term disability income
replacement insurance plans and any retirement income and capital accumulation
plans. All such benefits shall be in addition to the compensation payments
provided by this Agreement.
15. Covenants by Executive.
(a) Non-competition. During the term of employment under this Agreement
including any renewals or extensions thereof, and for a period of two (2) years
thereafter, Executive shall not, without the prior written approval of Company,
directly or indirectly, as employer, employee, partner, stockholder, joint
venturer or otherwise, enter into or in any manner take part in any business or
other endeavor which would be in competition with Company in the continental
United States as such business is conducted at the time of termination.
(b) Respect for Economic Relationships. Executive will not, during the term
of his employment under this Agreement including any renewals or extensions
thereof, and for a period of two (2) years thereafter, in any fashion, form, or
manner, either directly or indirectly, solicit, interfere with, or endeavor to
entice away from Company any customer or person, firm or corporation, regularly
dealing with Company or directly or indirectly interfere with, entice away, or
cause any other entity to employ any other employee of Company.
(c) Validity of Covenants. Executive agrees that the covenants contained in
this Section are reasonably necessary to protect the legitimate interests of
Company, are reasonable with respect to time, territory and scope, and do not
interfere with the interests of the public. Executive further agrees that the
descriptions of the covenants contained in this Section are sufficiently
accurate and definite to inform Executive of the scope of such covenants.
Executive acknowledges that prior to entering into this Agreement he was
employed "at will", and agrees that the term of employment and termination
provisions contained in Sections 2, 9, 10 and 11 above constitute fully adequate
and sufficient consideration for the covenants contained in Sections 15 and 17
of this Agreement.
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(d) Specific Performance. Executive agrees that a breach or violation of
any of the covenants under this Section will result in immediate and irreparable
harm to Company in an amount which will be impossible to ascertain at the time
of the breach or violation and that the award of monetary damages will not be
adequate relief to Company. Therefore, the failure on the part of Executive to
perform all of the covenants established by this Section shall give rise to a
right to Company to obtain enforcement of this Section in a court of equity by a
decree of specific performance or other injunctive relief. This remedy, however,
shall be cumulative and in addition to any other remedy Company may have.
16. Patent, Trade Dress and Trademark Assignment. Executive agrees without
additional compensation to assign promptly to Company all rights, title, and
interest in and to any and all trade secrets, inventions, letters patent,
applications for letters patent, trade dress, and trademarks whether or not
subject to state or federal trademark during the term of employment hereunder if
related to the then current products and activities of Company, such activities
to include, without limitation, product development by Company, or if developed
or made with the use of its facilities, equipment, materials, personnel, or
trade secrets, or result directly from any work performed by Executive for
Company. Executive further agrees to disclose promptly to Company any such trade
secrets, inventions, letters patent, applications for letters patent, trade
dress, and trademarks, and, at the request and expense of Company, to apply for
letters patent or registration thereon in every jurisdiction designated by
Company.
17. Confidential Information. Executive agrees both during the term of this
Agreement and thereafter to keep secret and confidential all information labeled
confidential or not generally known which is heretofore or hereafter acquired
concerning the business and affairs of Company, including without limitation,
information regarding trade secrets, trade dress, proprietary processes,
confidential business plans, market research data and financial data, and
further agrees not to disclose any such information to any person, firm, or
corporation or use the same in any manner other than in furtherance of the
business or affairs of Company or unless such information shall become public
knowledge by other means. Executive agrees that such information is a valuable,
special, and unique asset of Company. Upon the termination of Executive's
employment with Company, Executive shall immediately return to Company all
documents, records, notebooks, and similar repositories of information relating
to confidential information of Company and/or the development of any inventions.
18. Waiver of Breach. The waiver by Company or Executive of any breach of a
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by the parties.
19. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
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(a) If to Company, to:
LADD Furniture, Inc.
One Plaza Center
P. O. Box HP-3
High Point, NC 27261
Attn: Chief Executive Officer
b) If to Executive, to:
William S. Creekmuir
11 Heathrow Court
Greensboro, NC 27410
20. Entire Agreement. This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between the parties
hereto with respect to the subject matter hereof and constitutes the sole and
only agreement between the parties with respect to said subject matter. Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party or by
anyone acting on behalf of any party, which are not embodied herein, and that no
agreement, statement, or promise not contained in this Agreement shall be valid
or binding or of any force or effect. No change or modification of this
Agreement shall be valid or binding upon the parties hereto unless such change
or modification is in writing and is signed by the parties hereto.
21. Severability. If any one or more of the provisions contained in this
Agreement shall be held by a court of competent jurisdiction to be invalid,
illegal, or unenforceable in any respect for any reason, that invalidity,
illegality, or unenforceability shall not affect any other provisions hereof,
and this Agreement shall be construed as if that invalid, illegal, or
unenforceable provision had never been contained herein.
22. Parties Bound. The terms, promises, covenants, and agreements contained
in this Agreement shall apply to, be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that this Agreement may not be assigned by Company or Executive without
the prior written consent of the other party.
23. Consolidation, Merger or Sale of Assets. Nothing in this Agreement
shall preclude the Company from consolidating or merging into, or with, or
transferring all or substantially all of its assets to another corporation which
assumes this Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation or merger, the use of the word "Company"
herein shall mean such other corporation, and this Agreement shall continue in
full force and effect.
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24. Survival. The provisions of Sections 15 and 17 of this Agreement shall
survive the termination of this Agreement and shall continue for the terms set
forth in Sections 15 and 17.
25. Captions. Captions to the Sections of this Agreement are inserted
solely for the convenience of the parties, are not a part of this Agreement, and
in no way define, limit, extend or describe the scope thereof or the intent of
any of the provisions.
26. Applicable Law. This Agreement shall be construed and the legal
relationship between the parties determined in accordance with the laws of the
State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the day and year first above written, the corporate party acting
through duly authorized officers.
ATTEST: LADD Furniture, Inc.
___________________________ By:_______________________________
Secretary Chairman of the Board and
Chief Executive Officer
(Corporate Seal)
___________________________ ____________________________(SEAL)
(Witness) William S. Creekmuir
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<PAGE>
EXHIBIT 10.8
NORTH CAROLINA )
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the 22nd day of May, 1995, and
effective as of May 1, 1995, by and between LADD Furniture, Inc., a North
Carolina corporation ("Company"), and Kenneth E. Church, an individual resident
of North Carolina ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and sale of
furniture; and
WHEREAS, Company desires to employ Executive as its Vice President and
Executive desires to accept such employment on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive hereby
accepts employment and agrees to remain in the employ of the company during the
term of this Agreement, on the terms and conditions hereinafter set forth.
2. Term of Employment. Subject to the provisions in Section 9 below, the
term of this Agreement shall be for a two-year period beginning on the effective
date hereof and terminating on April 30, 1997, unless otherwise terminated as
provided herein.
3. Nature of Employment. Executive is employed as Vice President of Company
and President of the Company's wholly-owned subsidiary, Clayton Marcus Company,
Inc. ("Clayton Marcus"). Consistent with such position, Executive shall, subject
to the direction of the Chairman and Chief Executive Officer of the Company,
President and Chief Operating Officer of the Company and the Board of Directors
of Clayton Marcus, direct and manage the affairs of Clayton Marcus and the
Company as assigned. Executive shall report to and be responsible to the Chief
Operating Officer of the Company. During the term of this Agreement and any
extensions or renewals thereof, Executive shall have no other employment of any
nature whatsoever without the prior consent of Company. Accordingly, unless
otherwise approved by Company, Executive agrees to devote his full working time
to the business of Company; provided, however, nothing herein contained shall
restrict or prevent Executive from personally and for his own account owning and
dealing in stocks, bonds, securities, real estate, commodities, or other
investment properties for his own benefit or the benefit of his family. Further,
nothing herein contained shall restrict or prevent Executive from serving on the
Board of Directors of any entity which does not directly or indirectly compete
with Company.
<PAGE>
4. Compensation.
(a) Base Salary. Compensation to Executive for the services rendered on
behalf of Company during the term of this Agreement shall be no less than Two
Hundred Ten Thousand Dollars ($ 210,000.00) per year, payable in equal monthly
installments. From time to time during the term of this Agreement, Executive's
compensation may be increased if approved by the Board of Directors of Company,
but shall in no event be decreased from the amount of the base salary in effect
at that time. Company shall review Executive's compensation hereunder at least
on an annual basis.
(b) Incentive Compensation. In addition to Executive's base salary,
Executive shall be entitled to participate in incentive compensation plans and
programs generally available to executives of the Company, provided that
performance goals and award targets used in the computation of awards to the
Executive hereunder shall be no less favorable than those which are used in the
computation of awards to other comparably placed executives of the Company and
shall recognize the level of responsibility of the Executive. The annual
incentive opportunity shall have a maximum no less than eighty percent (80%) of
Executive's then current base salary.
5. Expenses. Executive is authorized to incur reasonable expenses in
connection with the business of Company, including expenses for travel and
similar items. Company will reimburse Executive for all such expenses upon the
presentation by Executive, from time to time, of an itemized account of
expenditures.
6. Vacation. Executive shall be entitled to paid vacations during each
calendar year of the term of this Agreement at such times and for such duration
as may be determined by the Chief Executive Officer of the Company, taking into
consideration the needs and requirements of Company for Executive's services;
provided, however, the minimum paid vacation to which Executive shall be
entitled in any calendar year is three (3) weeks.
7. Death During Employment. If Executive dies during the term of this
Agreement, Company shall pay to the estate of Executive the compensation to
which he would otherwise be entitled through the end of the month in which death
occurs in accordance with Section 4(a) above, plus the sum of Five Thousand
Dollars ($5,000.00) as an additional death benefit. Company shall also pay to
the estate of Executive an amount equal to any bonus or other incentive payments
which would otherwise have been due to Executive had Executive been employed as
of fiscal year end, pro-rated to date of death. This Agreement shall thereupon
terminate, and Company shall have no further obligation to the estate of
Executive.
8. Permanent Disability During Employment. If Executive becomes permanently
disabled during the term of this Agreement, Company shall pay to Executive the
compensation, in accordance with Section 4(a) above, to which he would otherwise
be entitled to the end of the month in which such permanent disability occurs.
Thereafter, the Executive shall continue to receive his then base salary, minus
any payments provided by the Company's benefit
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<PAGE>
plans and by any government sponsored program, for a twenty-four (24) month
period from the date of permanent disability. This Agreement shall thereupon
terminate and Company shall have no further obligation to Executive except as
may be provided under Company's short-term and long-term disability plans during
the term of such disability and any prorata portion of any bonus or incentive
plan. Permanent disability for purposes of this Agreement shall mean a physical
or mental condition of Executive that renders Executive incapable of performing
the essential duties of his job and which condition shall be medically
determined to be of permanent duration as same is construed under Company's
disability plans.
9. Renewal. Executive's term of employment shall be automatically extended
upon the same terms and conditions contained herein for successive one-year
periods unless a written notice of termination is given by either party at least
90 days before the end of the term of employment or any renewals or extensions
thereof. In the event the Company gives timely notice to terminate this
Agreement, the severance provision of Section 11 pertaining to termination
without cause shall become effective.
10. Termination for Cause. Company may terminate Executive's employment at
any time "for cause". The term "for cause" shall mean (i) a material default or
other breach by Executive of his obligations under this Agreement, (ii) material
failure by Executive to diligently and competently perform his duties under this
Agreement, which shall be determined by Company's Board of Directors in its
reasonable discretion, (iii) insubordination or other act or acts by Executive
detrimental to Company or damaging to Company's relationships with customers,
suppliers or employees or (iv) fraud, dishonesty, misappropriation of Company's
assets, or conviction of a felony. Upon the occurrence of (i), (ii) or (iii)
above, Company shall be entitled to terminate the employment relationship
hereunder upon thirty (30) days prior written notice to Executive, which notice
shall state the reason for such termination and shall provide Executive an
opportunity to remedy or cure such cause during such period. If such cause is
not remedied or cured during such period, Company may terminate Executive's
employment immediately. In the event of a termination for cause, Company shall
have no obligation or liability to Executive under this Agreement except for the
compensation to which he is entitled through the end of the month of termination
in accordance with Section 4(a) above.
11. Termination Without Cause. Company shall be entitled to terminate the
employment relationship hereunder without cause at any time upon thirty (30)
days prior written notice to Executive. In such event, Executive, if requested
by Company, shall continue to render his services up to the date of termination
and shall be paid the compensation to which he is entitled through the end of
the month of termination in accordance with Section 4(a) above. In addition, if
Company terminates this Agreement for any reason other than for cause, as
specified in Section 10 above, the Executive shall be entitled to receive in
twenty-four (24) equal monthly payments in an amount equal to two times the sum
of (i) his then current base salary in accordance with Section 4(a) above and
(ii) the average annual incentive payments to the Executive during the preceding
three (3) years less earned income received during the 24-month severance
period. Further, Executive shall be deemed to be One Hundred Percent (100%)
vested in the Supplemental Retirement Income Plan for Salaried Employees of LADD
Furniture,
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Inc.("SERP"). Payments under this Section 11 are in addition to and not in
lieu of any benefits under the SERP or other benefit programs of the Company.
The Company shall thereafter have no other obligation or liability to Executive
under this Agreement.
12. Termination upon Change of Control. In the event of a "change in
control" of the Company (as hereinafter defined), the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events during the twelve (12)
months immediately preceding or following the effective date of a change in
control of the Company:
(a) a material change in the scope of the Executive's assigned duties and
responsibilities from those in effect immediately prior to a change in control
of the Company or the assignment of duties or responsibilities that are
inconsistent with the Executive's status in the Company;
(b) a reduction by the Company in the Executive's base salary or incentive
compensation as in effect on the date of a change in control;
(c) the Company's requirement that the Executive be based anywhere other
than the Company's office at which he was based prior to the change in control
of the Company; or
(d) the failure by the Company to continue to provide the Executive with
benefits substantially similar to those specified in Section 14 of this
Agreement.
If the Executive shall terminate his employment for Good Reason, then the
Company shall pay him a lump sum severance payment in an amount equal to two
times the sum of (i) his then current base salary and (ii) the average annual
incentive payments to the Executive during the preceding three (3) years.
Further, upon termination for Good Reason, the Executive shall immediately
become 100% vested in the SERP, all outstanding stock options shall become
immediately exercisable and all restrictions under Restricted Stock Agreements
shall be eliminated.
For purposes of this Agreement, a "change in control" shall be deemed to
have occurred when (i) any person, corporation, or group of associated persons,
excluding affiliates of the Company, acquires a beneficial ownership of an
aggregate of more than fifty percent (50%) of the then outstanding shares of
voting stock of the Company or (ii) a merger or consolidation to which the
Company is a party and where the Company is not a surviving or continuing entity
has been completed.
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13. Property of Company. Executive agrees that upon the termination of his
employment he will turn over to Company all property of Company which has come
into his possession while an Executive of Company.
14. Additional Benefits. During the term of this Agreement and any renewals
or extensions thereof, Company shall keep and maintain, for the benefit of
Executive, life insurance having a death benefit of not less one hundred percent
(100%) of base pay (not to exceed $300,000) and disability insurance that will
provide Executive a benefit of not less than sixty-percent (60%) of base pay per
month during the term of any disability. Executive and, as applicable, the
Executive's family shall also have the right to participate in any Executive
benefit plans or other fringe benefits adopted by Company for its officers
and/or other key management employees or as a part of Company's regular
compensation structure for its employees, including any group hospitalization,
medical, dental, accidental death and disability and long-term disability income
replacement insurance plans and any retirement income and capital accumulation
plans. All such benefits shall be in addition to the compensation payments
provided by this Agreement.
15. Covenants by Executive.
(a) Non-competition. During the term of employment under this Agreement
including any renewals or extensions thereof, and for a period of two (2) years
thereafter, Executive shall not, without the prior written approval of Company,
directly or indirectly, as employer, employee, partner, stockholder, joint
venturer or otherwise, enter into or in any manner take part in any business or
other endeavor which would be in competition with Company in the continental
United States as such business is conducted at the time of termination.
(b) Respect for Economic Relationships. Executive will not, during the term
of his employment under this Agreement including any renewals or extensions
thereof, and for a period of two (2) years thereafter, in any fashion, form, or
manner, either directly or indirectly, solicit, interfere with, or endeavor to
entice away from Company any customer or person, firm or corporation, regularly
dealing with Company or directly or indirectly interfere with, entice away, or
cause any other entity to employ any other employee of Company.
(c) Validity of Covenants. Executive agrees that the covenants contained in
this Section are reasonably necessary to protect the legitimate interests of
Company, are reasonable with respect to time, territory and scope, and do not
interfere with the interests of the public. Executive further agrees that the
descriptions of the covenants contained in this Section are sufficiently
accurate and definite to inform Executive of the scope of such covenants.
Executive acknowledges that prior to entering into this Agreement he was
employed "at will", and agrees that the term of employment and termination
provisions contained in Sections 2, 9, 10 and 11 above constitute fully adequate
and sufficient consideration for the covenants contained in Sections 15 and 17
of this Agreement.
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(d) Specific Performance. Executive agrees that a breach or violation of
any of the covenants under this Section will result in immediate and irreparable
harm to Company in an amount which will be impossible to ascertain at the time
of the breach or violation and that the award of monetary damages will not be
adequate relief to Company. Therefore, the failure on the part of Executive to
perform all of the covenants established by this Section shall give rise to a
right to Company to obtain enforcement of this Section in a court of equity by a
decree of specific performance or other injunctive relief. This remedy, however,
shall be cumulative and in addition to any other remedy Company may have.
16. Patent, Trade Dress and Trademark Assignment. Executive agrees without
additional compensation to assign promptly to Company all rights, title, and
interest in and to any and all trade secrets, inventions, letters patent,
applications for letters patent, trade dress, and trademarks whether or not
subject to state or federal trademark during the term of employment hereunder if
related to the then current products and activities of Company, such activities
to include, without limitation, product development by Company, or if developed
or made with the use of its facilities, equipment, materials, personnel, or
trade secrets, or result directly from any work performed by Executive for
Company. Executive further agrees to disclose promptly to Company any such trade
secrets, inventions, letters patent, applications for letters patent, trade
dress, and trademarks, and, at the request and expense of Company, to apply for
letters patent or registration thereon in every jurisdiction designated by
Company.
17. Confidential Information. Executive agrees both during the term of this
Agreement and thereafter to keep secret and confidential all information labeled
confidential or not generally known which is heretofore or hereafter acquired
concerning the business and affairs of Company, including without limitation,
information regarding trade secrets, trade dress, proprietary processes,
confidential business plans, market research data and financial data, and
further agrees not to disclose any such information to any person, firm, or
corporation or use the same in any manner other than in furtherance of the
business or affairs of Company or unless such information shall become public
knowledge by other means. Executive agrees that such information is a valuable,
special, and unique asset of Company. Upon the termination of Executive's
employment with Company, Executive shall immediately return to Company all
documents, records, notebooks, and similar repositories of information relating
to confidential information of Company and/or the development of any inventions.
18. Waiver of Breach. The waiver by Company or Executive of any breach of a
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by the parties.
19. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
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(a) If to Company, to:
LADD Furniture, Inc.
One Plaza Center
P. O. Box HP-3
High Point, NC 27261
Attn: Chief Executive Officer
b) If to Executive, to:
Kenneth E. Church
26 W. Highland Avenue
Granite Falls, NC 28630
20. Entire Agreement. This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between the parties
hereto with respect to the subject matter hereof and constitutes the sole and
only agreement between the parties with respect to said subject matter. Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party or by
anyone acting on behalf of any party, which are not embodied herein, and that no
agreement, statement, or promise not contained in this Agreement shall be valid
or binding or of any force or effect. No change or modification of this
Agreement shall be valid or binding upon the parties hereto unless such change
or modification is in writing and is signed by the parties hereto.
21. Severability. If any one or more of the provisions contained in this
Agreement shall be held by a court of competent jurisdiction to be invalid,
illegal, or unenforceable in any respect for any reason, that invalidity,
illegality, or unenforceability shall not affect any other provisions hereof,
and this Agreement shall be construed as if that invalid, illegal, or
unenforceable provision had never been contained herein.
22. Parties Bound. The terms, promises, covenants, and agreements contained
in this Agreement shall apply to, be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that this Agreement may not be assigned by Company or Executive without
the prior written consent of the other party.
23. Consolidation, Merger or Sale of Assets. Nothing in this Agreement
shall preclude the Company from consolidating or merging into, or with, or
transferring all or substantially all of its assets to another corporation which
assumes this Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation or merger, the use of the word "Company"
herein shall mean such other corporation, and this Agreement shall continue in
full force and effect.
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24. Survival. The provisions of Sections 15 and 17 of this Agreement shall
survive the termination of this Agreement and shall continue for the terms set
forth in Sections 15 and 17.
25. Captions. Captions to the Sections of this Agreement are inserted
solely for the convenience of the parties, are not a part of this Agreement, and
in no way define, limit, extend or describe the scope thereof or the intent of
any of the provisions.
26. Applicable Law. This Agreement shall be construed and the legal
relationship between the parties determined in accordance with the laws of the
State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the day and year first above written, the corporate party acting
through duly authorized officers.
ATTEST: LADD Furniture, Inc.
- --------------------------------
By:___________________________
Secretary Chairman of the Board and
Chief Executive Officer
(Corporate Seal)
--------------------------------
_________________________________ (SEAL)
(Witness) Kenneth E. Church
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EXHIBIT 10.9
NORTH CAROLINA )
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the 1st day of January, 1996, and
effective as of January 1, 1996, by and between LADD Furniture, Inc., a North
Carolina corporation ("Company"), and Donald L. Mitchell, an individual resident
of North Carolina ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and sale of
furniture; and
WHEREAS, Company desires to employ Executive as its Executive Vice
President and Executive desires to accept such employment on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive hereby
accepts employment and agrees to remain in the employ of the company during the
term of this Agreement, on the terms and conditions hereinafter set forth.
2. Term of Employment. Subject to the provisions in Section 9 below, the
term of this Agreement shall be for a two-year period beginning on the date
hereof and terminating on January 1, 1998, unless otherwise terminated as
provided herein.
3. Nature of Employment. Executive is employed as Vice President of
Company. Consistent with such position, Executive shall, subject to the
direction of the Chief Executive Officer and the Board of Directors of Company,
direct and manage the affairs of the Company as assigned. Executive shall report
to and be responsible to the Chief Executive Officer. During the term of this
Agreement and any extensions or renewals thereof, Executive shall have no other
employment of any nature whatsoever without the prior consent of Company.
Accordingly, unless otherwise approved by Company, Executive agrees to devote
his full working time to the business of Company; provided, however, nothing
herein contained shall restrict or prevent Executive from personally and for his
own account owning and dealing in stocks, bonds, securities, real estate,
commodities, or other investment properties for his own benefit or the benefit
of his family. Further, nothing herein contained shall restrict or prevent
Executive from serving on the Board of Directors of any entity which does not
directly of indirectly compete with Company.
<PAGE>
4. Compensation.
(a) Base Salary. Compensation to Executive for the services rendered on
behalf of Company during the term of this Agreement shall be no less than Two
Hundred Seventy-Five Thousand Dollars ($ 275,000.00) per year, payable in equal
monthly installments. From time to time during the term of this Agreement,
Executive's compensation may be increased if approved by the Board of Directors
of Company, but shall in no event be decreased from the amount of the base
salary in effect at that time. Company shall review Executive's compensation
hereunder at least on an annual basis.
(b) Incentive Compensation. In addition to Executive's base salary,
Executive shall be entitled to participate in incentive compensation plans and
programs generally available to executives of the Company, provided that
performance goals and award targets used in the computation of awards to the
Executive hereunder shall be no less favorable than those which are used in the
computation of awards to other executives of the Company and shall recognize the
level of responsibility of the Executive. The annual incentive opportunity shall
have a maximum no less than eighty hundred percent (80%) of Executive's then
current base salary.
5. Expenses. Executive is authorized to incur reason able expenses in
connection with the business of Company, including expenses for travel and
similar items. Company will reimburse Executive for all such expenses upon the
presentation by Executive, from time to time, of an itemized account of
expenditures.
6. Vacation. Executive shall be entitled to paid vacations during each
calendar year of the term of this Agreement at such times and for such duration
as may be determined by the Chief Executive Officer of the Company, taking into
consideration the needs and requirements of Company for Executive's services;
provided, however, the minimum paid vacation to which Executive shall be
entitled in any calendar year is four (4) weeks.
7. Death During Employment. If Executive dies during the term of this
Agreement, Company shall pay to the estate of Executive the compensation to
which he would otherwise be entitled through the end of the month in which death
occurs in accordance with Section 4(a) above, plus the sum of Five Thousand
Dollars ($5,000.00) as an additional death benefit. Company shall also pay to
the estate of Executive an amount equal to any bonus or other incentive payments
which would otherwise have been due to Executive had Executive been employed as
of fiscal year end, pro-rated to date of death. This Agreement shall thereupon
terminate, and Company shall have no further obligation to the estate of
Executive.
8. Permanent Disability During Employment. If Executive becomes permanently
disabled during the term of this Agreement, Company shall pay to Executive the
compensation, in accordance with Section 4(a) above, to which he would otherwise
be entitled to the end of the month in which such permanent disability occurs.
Thereafter, the Executive shall continue to receive his then base salary, minus
any payments provided by the Company's benefit plans and by any government
sponsored program, for a twenty-four (24) month period from the
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<PAGE>
date of permanent disability. This Agreement shall thereupon terminate and
Company shall have no further obligation to Executive except as may be provided
under Company's short-term and long-term disability plans during the term of
such disability and any prorata portion of any bonus or incentive plan.
Permanent disability for purposes of this Agreement shall mean a physical or
mental condition of Executive that renders Executive incapable of performing the
essential duties of his job and which condition shall be medically determined to
be of permanent duration as same is construed under Company's disability plans.
9. Renewal. Executive's term of employment shall be automatically extended
upon the same terms and conditions contained herein for successive one-year
periods unless a written notice of termination is given by either party at least
90 days before the end of the term of employment or any renewals or extensions
thereof. In the event the Company gives timely notice to terminate this
Agreement, the severance provision of Section 11 pertaining to termination
without cause shall become effective.
10. Termination for Cause. Company may terminate Executive's employment at
any time "for cause". The term "for cause" shall mean (i) a material default or
other breach by Executive of his obligations under this Agreement, (ii) material
failure by Executive to diligently and competently perform his duties under this
Agreement, which shall be determined by Company's Board of Directors in its
reasonable discretion, (iii) insubordination or other act or acts by Executive
detrimental to Company or damaging to Company's relationships with customers,
suppliers or employees or (iv) fraud, dishonesty, misappropriation of Company's
assets, or conviction of a felony. Upon the occurrence of (i), (ii) or (iii)
above, Company shall be entitled to terminate the employment relationship
hereunder upon thirty (30) days prior written notice to Executive, which notice
shall state the reason for such termination and shall provide Executive an
opportunity to remedy or cure such cause during such period. If such cause is
not remedied or cured during such period, Company may terminate Executive's
employment immediately. In the event of a termination for cause, Company shall
have no obligation or liability to Executive under this Agreement except for the
compensation to which he is entitled through the end of the month of termination
in accordance with Section 4(a) above.
11. Termination Without Cause. Company shall be entitled to terminate the
employment relationship hereunder without cause at any time upon thirty (30)
days prior written notice to Executive. In such event, Executive, if requested
by Company, shall continue to render his services up to the date of termination
and shall be paid the compensation to which he is entitled through the end of
the month of termination in accordance with Section 4(a) above. In addition, if
Company terminates this Agreement for any reason other than for cause, as
specified in Section 10 above, the Executive shall be entitled to receive in
twenty-four (24) equal monthly payments in an amount equal to two times the sum
of (i) his then current base salary in accordance with Section 4(a) above and
(ii) the average annual incentive payments to the Executive during the preceding
three (3) years less earned income received during the 24-month severance
period.The Company shall thereafter have no other obligation or liability to
Executive under this Agreement.
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<PAGE>
12. Termination upon Change of Control. In the event of a "change in
control" of the Company (as hereinafter defined), the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events during the twelve (12)
months immediately preceding or following the effective date of a change in
control of the Company:
(a) a material change in the scope of the Executive's assigned duties and
responsibilities from those in effect immediately prior to a change in control
of the Company or the assignment of duties or responsibilities that are
inconsistent with the Executive's status in the Company;
(b) a reduction by the Company in the Executive's base salary or incentive
compensation as in effect on the date of a change in control;
(c) the Company's requirement that the Executive be based anywhere other
than the Company's office at which he was based prior to the change in control
of the Company; or
(d) the failure by the Company to continue to provide the Executive with
benefits substantially similar to those specified in Section 14 of this
Agreement.
If the Executive shall terminate his employment for Good Reason, then the
Company shall pay him a lump sum severance payment in an amount equal to two
times the sum of (i) his then current base salary and (ii) the average annual
incentive payments to the Executive during the preceding three (3) years.
Further, upon termination for Good Reason, all outstanding stock options shall
become immediately exercisable.
For purposes of this Agreement, a "change in control" shall be deemed to
have occurred when (i) any person, corporation, or group of associated persons,
excluding affiliates of the Company, acquires a beneficial ownership of an
aggregate of more than fifty percent (50%) of the then outstanding shares of
voting stock of the Company or (ii) a merger or consolidation to which the
Company is a party and where the Company is not a surviving or continuing entity
has been completed.
13. Property of Company. Executive agrees that upon the termination
of his employment he will turn over to Company all property of
Company which has come into his possession while an Executive of Company.
14. Additional Benefits. During the term of this Agreement and any renewals
or extensions thereof, Company shall keep and maintain, for the benefit of
Executive, life insurance having a death benefit of not less one hundred percent
(100%) of base pay (not to
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<PAGE>
exceed $300,000) and disability insurance that will provide Executive a
benefit of not less than sixty-percent (60%) of base pay per month during the
term of any disability. Executive and, as applicable, the Executive's family
shall also have the right to participate in any Executive benefit plans or other
fringe benefits adopted by Company for its officers and/or other key management
employees or as a part of Company's regular compensation structure for its
employees, including any group hospitalization, medical, dental, accidental
death and disability and long-term disability income replacement insurance plans
and any retirement income and capital accumulation plans. All such benefits
shall be in addition to the compensation payments provided by this Agreement.
15. Covenants by Executive.
(a) Non-competition. During the term of employment under this Agreement
including any renewals or extensions thereof, and for a period of two (2) years
thereafter, Executive shall not, without the prior written approval of Company,
directly or indirectly, as employer, employee, partner, stockholder, joint
venturer or otherwise, enter into or in any manner take part in any business or
other endeavor which would be in competition with Company in the continental
United States as such business is conducted at the time of termination.
(b) Respect for Economic Relationships. Executive will not, during the term
of his employment under this Agreement including any renewals or extensions
thereof, and for a period of two (2) years thereafter, in any fashion, form, or
manner, either directly or indirectly, solicit, interfere with, or endeavor to
entice away from Company any customer or person, firm or corporation, regularly
dealing with Company or directly or indirectly interfere with, entice away, or
cause any other entity to employ any other employee of Company.
(c) Validity of Covenants. Executive agrees that the covenants contained in
this Section are reasonably necessary to protect the legitimate interests of
Company, are reasonable with respect to time, territory and scope, and do not
interfere with the interests of the public. Executive further agrees that the
descriptions of the covenants contained in this Section are sufficiently
accurate and definite to inform Executive of the scope of such covenants.
Executive acknowledges that prior to entering into this Agreement he was
employed "at will", and agrees that the term of employment and termination
provisions contained in Sections 2, 9, 10 and 11 above constitute fully adequate
and sufficient consideration for the covenants contained in Sections 15 and 17
of this Agreement.
(d) Specific Performance. Executive agrees that a breach or violation
of any of the covenants under this Section will result in immediate and
irreparable harm to Company in an amount which will be impossible to
ascertain at the time of the breach or violation and that the award of monetary
damages will not be adequate relief to Company. Therefore, the failure on the
part of Executive to perform all of the covenants established by this Section
shall give rise to a right
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<PAGE>
to Company to obtain enforcement of this Section in a court of equity by a
decree of specific performance or other injunctive relief. This remedy, however,
shall be cumulative and in addition to any other remedy Company may have.
16. Patent, Trade Dress and Trademark Assignment. Executive agrees without
additional compensation to assign promptly to Company all rights, title, and
interest in and to any and all trade secrets, inventions, letters patent,
applications for letters patent, trade dress, and trademarks whether or not
subject to state or federal trademark during the term of employment hereunder if
related to the then current products and activities of Company, such activities
to include, without limitation, product development by Company, or if developed
or made with the use of its facilities, equipment, materials, personnel, or
trade secrets, or result directly from any work performed by Executive for
Company. Executive further agrees to disclose promptly to Company any such trade
secrets, inventions, letters patent, applications for letters patent, trade
dress, and trademarks, and, at the request and expense of Company, to apply for
letters patent or registration thereon in every jurisdiction designated by
Company.
17. Confidential Information. Executive agrees both during the term of this
Agreement and thereafter to keep secret and confidential all information labeled
confidential or not generally known which is heretofore or hereafter acquired
concerning the business and affairs of Company, including without limitation,
information regarding trade secrets, trade dress, proprietary processes,
confidential business plans, market research data and financial data, and
further agrees not to disclose any such information to any person, firm, or
corporation or use the same in any manner other than in furtherance of the
business or affairs of Company or unless such information shall become public
knowledge by other means. Executive agrees that such information is a valuable,
special, and unique asset of Company. Upon the termination of Executive's
employment with Company, Executive shall immediately return to Company all
documents, records, notebooks, and similar repositories of information relating
to confidential information of Company and/or the development of any inventions.
18. Waiver of Breach. The waiver by Company or Executive of any breach of a
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by the parties.
19. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
6
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(a) If to Company, to:
LADD Furniture, Inc.
One Plaza Center
P. O. Box HP-3
High Point, NC 27261
Attn: Chief Executive Officer
b) If to Executive, to:
Donald L. Mitchell
2228 Setliff Dr.
High Point, NC 27265
20. Entire Agreement. This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between the parties
hereto with respect to the subject matter hereof and constitutes the sole and
only agreement between the parties with respect to said subject matter. Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party or by
anyone acting on behalf of any party, which are not embodied herein, and that no
agreement, statement, or promise not contained in this Agreement shall be valid
or binding or of any force or effect. No change or modification of this
Agreement shall be valid or binding upon the parties hereto unless such change
or modification is in writing and is signed by the parties hereto.
21. Severability. If any one or more of the provisions contained in this
Agreement shall be held by a court of competent jurisdiction to be invalid,
illegal, or unenforceable in any respect for any reason, that invalidity,
illegality, or unenforceability shall not affect any other provisions hereof,
and this Agreement shall be construed as if that invalid, illegal, or
unenforceable provision had never been contained herein.
22. Parties Bound. The terms, promises, covenants, and agreements contained
in this Agreement shall apply to, be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that this Agreement may not be assigned by Company or Executive without
the prior written consent of the other party.
23. Consolidation, Merger or Sale of Assets. Nothing in this Agreement
shall preclude the Company from consolidating or merging into, or with, or
transferring all or substantially all of its assets to another corporation which
assumes this Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation or merger, the use of the word "Company"
herein shall mean such other corporation, and this Agreement shall continue in
full force and effect.
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<PAGE>
24. Survival. The provisions of Sections 15 and 17 of this Agreement shall
survive the termination of this Agreement and shall continue for the terms set
forth in Sections 15 and 17.
25. Captions. Captions to the Sections of this Agreement are inserted
solely for the convenience of the parties, are not a part of this Agreement, and
in no way define, limit, extend or describe the scope thereof or the intent of
any of the provisions.
26. Applicable Law. This Agreement shall be construed and the legal
relationship between the parties determined in accordance with the laws of the
State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the day and year first above written, the corporate party acting
through duly authorized officers.
ATTEST: LADD Furniture, Inc.
___________________________ By:_______________________________
Secretary President
(Corporate Seal)
___________________________ ____________________________(SEAL)
(Witness) Donald L. Mitchell
8
<PAGE>
EXHIBIT 10.10
NORTH CAROLINA )
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the 5th day of March, 1996, and
effective as of March 5, 1996, by and between LADD Furniture, Inc., a North
Carolina corporation ("Company"), and Michael P. Haley, an individual resident
of Virginia ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and sale of
furniture; and
WHEREAS, Company desires to employ Executive as its Executive Vice
President and Executive desires to accept such employment on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive hereby
accepts employment and agrees to remain in the employ of the company during the
term of this Agreement, on the terms and conditions hereinafter set forth.
2. Term of Employment. Subject to the provisions in Section 9 below, the
term of this Agreement shall be for a two-year period beginning on the date
hereof and terminating on January 1, 1998, unless otherwise terminated as
provided herein.
3. Nature of Employment. Executive is employed as Executive Vice President
of Company. Consistent with such position, Executive shall, subject to the
direction of the Chief Executive Officer and the Board of Directors of Company,
direct and manage the affairs of the Company as assigned. Executive shall report
to and be responsible to the Chief Executive Officer. During the term of this
Agreement and any extensions or renewals thereof, Executive shall have no other
employment of any nature whatsoever without the prior consent of Company.
Accordingly, unless otherwise approved by Company, Executive agrees to devote
his full working time to the business of Company; provided, however, nothing
herein contained shall restrict or prevent Executive from personally and for his
own account owning and dealing in stocks, bonds, securities, real estate,
commodities, or other investment properties for his own benefit or the benefit
of his family. Further, nothing herein contained shall restrict or prevent
Executive from serving on the Board of Directors of any entity which does not
directly of indirectly compete with Company.
<PAGE>
4. Compensation.
(a) Base Salary. Compensation to Executive for the services rendered on
behalf of Company during the term of this Agreement shall be no less than two
hundred twenty-five dollars ($225,000) per year, payable in equal monthly
installments. From time to time during the term of this Agreement, Executive's
compensation may be increased if approved by the Board of Directors of Company,
but shall in no event be decreased from the amount of the base salary in effect
at that time. Company shall review Executive's compensation hereunder at least
on an annual basis.
(b) Incentive Compensation. In addition to Executive's base salary,
Executive shall be entitled to participate in incentive compensation plans and
programs generally available to executives of the Company, provided that
performance goals and award targets used in the computation of awards to the
Executive hereunder shall be no less favorable than those which are used in the
computation of awards to other executives of the Company and shall recognize the
level of responsibility of the Executive. The annual incentive opportunity shall
have a maximum no less than eighty hundred percent (80%) of Executive's then
current base salary.
5. Expenses. Executive is authorized to incur reason able expenses in
connection with the business of Company, including expenses for travel and
similar items. Company will reimburse Executive for all such expenses upon the
presentation by Executive, from time to time, of an itemized account of
expenditures.
6. Vacation. Executive shall be entitled to paid vacations during each
calendar year of the term of this Agreement at such times and for such duration
as may be determined by the Chief Executive Officer of the Company, taking into
consideration the needs and requirements of Company for Executive's services;
provided, however, the minimum paid vacation to which Executive shall be
entitled in any calendar year is four (4) weeks.
7. Death During Employment. If Executive dies during the term of this
Agreement, Company shall pay to the estate of Executive the compensation to
which he would otherwise be entitled through the end of the month in which death
occurs in accordance with Section 4(a) above, plus the sum of Five Thousand
Dollars ($5,000.00) as an additional death benefit. Company shall also pay to
the estate of Executive an amount equal to any bonus or other incentive payments
which would otherwise have been due to Executive had Executive been employed as
of fiscal year end, pro-rated to date of death. This Agreement shall thereupon
terminate, and Company shall have no further obligation to the estate of
Executive.
8. Permanent Disability During Employment. If Executive becomes permanently
disabled during the term of this Agreement, Company shall pay to Executive the
compensation, in accordance with Section 4(a) above, to which he would otherwise
be entitled to the end of the month in which such permanent disability occurs.
Thereafter, the Executive shall continue to receive his then base salary, minus
any payments provided by the Company's benefit plans and by any government
sponsored program, for a twenty-four (24) month period from the
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<PAGE>
date of permanent disability. This Agreement shall thereupon terminate and
Company shall have no further obligation to Executive except as may be provided
under Company's short-term and long-term disability plans during the term of
such disability and any prorata portion of any bonus or incentive plan.
Permanent disability for purposes of this Agreement shall mean a physical or
mental condition of Executive that renders Executive incapable of performing the
essential duties of his job and which condition shall be medically determined to
be of permanent duration as same is construed under Company's disability plans.
9. Renewal. Executive's term of employment shall be automatically extended
upon the same terms and conditions contained herein for successive one-year
periods unless a written notice of termination is given by either party at least
90 days before the end of the term of employment or any renewals or extensions
thereof. In the event the Company gives timely notice to terminate this
Agreement, the severance provision of Section 11 pertaining to termination
without cause shall become effective.
10. Termination for Cause. Company may terminate Executive's employment at
any time "for cause". The term "for cause" shall mean (i) a material default or
other breach by Executive of his obligations under this Agreement, (ii) material
failure by Executive to diligently and competently perform his duties under this
Agreement, which shall be determined by Company's Board of Directors in its
reasonable discretion, (iii) insubordination or other act or acts by Executive
detrimental to Company or damaging to Company's relationships with customers,
suppliers or employees or (iv) fraud, dishonesty, misappropriation of Company's
assets, or conviction of a felony. Upon the occurrence of (i), (ii) or (iii)
above, Company shall be entitled to terminate the employment relationship
hereunder upon thirty (30) days prior written notice to Executive, which notice
shall state the reason for such termination and shall provide Executive an
opportunity to remedy or cure such cause during such period. If such cause is
not remedied or cured during such period, Company may terminate Executive's
employment immediately. In the event of a termination for cause, Company shall
have no obligation or liability to Executive under this Agreement except for the
compensation to which he is entitled through the end of the month of termination
in accordance with Section 4(a) above.
11. Termination Without Cause. Company shall be entitled to terminate the
employment relationship hereunder without cause at any time upon thirty (30)
days prior written notice to Executive. In such event, Executive, if requested
by Company, shall continue to render his services up to the date of termination
and shall be paid the compensation to which he is entitled through the end of
the month of termination in accordance with Section 4(a) above. In addition, if
Company terminates this Agreement for any reason other than for cause, as
specified in Section 10 above, the Executive shall be entitled to receive in
twenty-four (24) equal monthly payments in an amount equal to two times the sum
of (i) his then current base salary in accordance with Section 4(a) above and
(ii) the average annual incentive payments to the Executive during the preceding
three (3) years less earned income received during the 24-month severance
period. The Company shall thereafter have no other obligation or liability to
Executive under this Agreement.
3
<PAGE>
12. Termination upon Change of Control. In the event of a "change in
control" of the Company (as hereinafter defined), the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events during the twelve (12)
months immediately preceding or following the effective date of a change in
control of the Company:
(a) a material change in the scope of the Executive's assigned duties and
responsibilities from those in effect immediately prior to a change in control
of the Company or the assignment of duties or responsibilities that are
inconsistent with the Executive's status in the Company;
(b) a reduction by the Company in the Executive's base salary or incentive
compensation as in effect on the date of a change in control;
(c) the Company's requirement that the Executive be based anywhere other
than the Company's office at which he was based prior to the change in control
of the Company; or
(d) the failure by the Company to continue to provide the Executive with
benefits substantially similar to those specified in Section 14 of this
Agreement.
If the Executive shall terminate his employment for Good Reason, then the
Company shall pay him a lump sum severance payment in an amount equal to two
times the sum of (i) his then current base salary and (ii) the average annual
incentive payments to the Executive during the preceding three (3) years.
Further, upon termination for Good Reason, all outstanding stock options shall
become immediately exercisable.
For purposes of this Agreement, a "change in control" shall be deemed to
have occurred when (i) any person, corporation, or group of associated persons,
excluding affiliates of the Company, acquires a beneficial ownership of an
aggregate of more than fifty percent (50%) of the then outstanding shares of
voting stock of the Company or (ii) a merger or consolidation to which the
Company is a party and where the Company is not a surviving or continuing entity
has been completed.
13. Property of Company. Executive agrees that upon the termination of his
employment he will turn over to Company all property of Company which has come
into his possession while an Executive of Company.
14. Additional Benefits. During the term of this Agreement and any renewals
or extensions thereof, Company shall keep and maintain, for the benefit of
Executive, life insurance having a death benefit of not less one hundred percent
(100%) of base pay (not to
4
<PAGE>
exceed $300,000) and disability insurance that will provide Executive a
benefit of not less than sixty-percent (60%) of base pay per month during the
term of any disability. Executive and, as applicable, the Executive's family
shall also have the right to participate in any Executive benefit plans or other
fringe benefits adopted by Company for its officers and/or other key management
employees or as a part of Company's regular compensation structure for its
employees, including any group hospitalization, medical, dental, accidental
death and disability and long-term disability income replacement insurance plans
and any retirement income and capital accumulation plans. All such benefits
shall be in addition to the compensation payments provided by this Agreement.
15. Covenants by Executive.
(a) Non-competition. During the term of employment under this Agreement
including any renewals or extensions thereof, and for a period of two (2) years
thereafter, Executive shall not, without the prior written approval of Company,
directly or indirectly, as employer, employee, partner, stockholder, joint
venturer or otherwise, enter into or in any manner take part in any business or
other endeavor which would be in competition with Company in the continental
United States as such business is conducted at the time of termination.
(b) Respect for Economic Relationships. Executive will not, during the term
of his employment under this Agreement including any renewals or extensions
thereof, and for a period of two (2) years thereafter, in any fashion, form, or
manner, either directly or indirectly, solicit, interfere with, or endeavor to
entice away from Company any customer or person, firm or corporation, regularly
dealing with Company or directly or indirectly interfere with, entice away, or
cause any other entity to employ any other employee of Company.
(c) Validity of Covenants. Executive agrees that the covenants contained in
this Section are reasonably necessary to protect the legitimate interests of
Company, are reasonable with respect to time, territory and scope, and do not
interfere with the interests of the public. Executive further agrees that the
descriptions of the covenants contained in this Section are sufficiently
accurate and definite to inform Executive of the scope of such covenants.
Executive acknowledges that prior to entering into this Agreement he was
employed "at will", and agrees that the term of employment and termination
provisions contained in Sections 2, 9, 10 and 11 above constitute fully adequate
and sufficient consideration for the covenants contained in Sections 15 and 17
of this Agreement.
(d) Specific Performance. Executive agrees that a breach or violation of
any of the covenants under this Section will result in immediate and irreparable
harm to Company in an amount which will be impossible to ascertain at the time
of the breach or violation and that the award of monetary damages will not be
adequate relief to Company. Therefore, the failure on the part of Executive to
perform all of the covenants established by this Section shall give rise to a
right
5
<PAGE>
to Company to obtain enforcement of this Section in a court of equity by a
decree of specific performance or other injunctive relief. This remedy, however,
shall be cumulative and in addition to any other remedy Company may have.
16. Patent, Trade Dress and Trademark Assignment. Executive agrees without
additional compensation to assign promptly to Company all rights, title, and
interest in and to any and all trade secrets, inventions, letters patent,
applications for letters patent, trade dress, and trademarks whether or not
subject to state or federal trademark during the term of employment hereunder if
related to the then current products and activities of Company, such activities
to include, without limitation, product development by Company, or if developed
or made with the use of its facilities, equipment, materials, personnel, or
trade secrets, or result directly from any work performed by Executive for
Company. Executive further agrees to disclose promptly to Company any such trade
secrets, inventions, letters patent, applications for letters patent, trade
dress, and trademarks, and, at the request and expense of Company, to apply for
letters patent or registration thereon in every jurisdiction designated by
Company.
17. Confidential Information. Executive agrees both during the term of this
Agreement and thereafter to keep secret and confidential all information labeled
confidential or not generally known which is heretofore or hereafter acquired
concerning the business and affairs of Company, including without limitation,
information regarding trade secrets, trade dress, proprietary processes,
confidential business plans, market research data and financial data, and
further agrees not to disclose any such information to any person, firm, or
corporation or use the same in any manner other than in furtherance of the
business or affairs of Company or unless such information shall become public
knowledge by other means. Executive agrees that such information is a valuable,
special, and unique asset of Company. Upon the termination of Executive's
employment with Company, Executive shall immediately return to Company all
documents, records, notebooks, and similar repositories of information relating
to confidential information of Company and/or the development of any inventions.
18. Waiver of Breach. The waiver by Company or Executive of any breach of a
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by the parties.
19. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
6
<PAGE>
(a) If to Company, to:
LADD Furniture, Inc.
One Plaza Center
P. O. Box HP-3
High Point, NC 27261
Attn: Chief Executive Officer
b) If to Executive, to:
Michael P. Haley
928 Mulberry Rd.
Martinsville, VA 24112
20. Entire Agreement. This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between the parties
hereto with respect to the subject matter hereof and constitutes the sole and
only agreement between the parties with respect to said subject matter. Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party or by
anyone acting on behalf of any party, which are not embodied herein, and that no
agreement, statement, or promise not contained in this Agreement shall be valid
or binding or of any force or effect. No change or modification of this
Agreement shall be valid or binding upon the parties hereto unless such change
or modification is in writing and is signed by the parties hereto.
21. Severability. If any one or more of the provisions contained in this
Agreement shall be held by a court of competent jurisdiction to be invalid,
illegal, or unenforceable in any respect for any reason, that invalidity,
illegality, or unenforceability shall not affect any other provisions hereof,
and this Agreement shall be construed as if that invalid, illegal, or
unenforceable provision had never been contained herein.
22. Parties Bound. The terms, promises, covenants, and agreements contained
in this Agreement shall apply to, be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that this Agreement may not be assigned by Company or Executive without
the prior written consent of the other party.
23. Consolidation, Merger or Sale of Assets. Nothing in this Agreement
shall preclude the Company from consolidating or merging into, or with, or
transferring all or substantially all of its assets to another corporation which
assumes this Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation or merger, the use of the word "Company"
herein shall mean such other corporation, and this Agreement shall continue in
full force and effect.
7
<PAGE>
24. Survival. The provisions of Sections 15 and 17 of this Agreement shall
survive the termination of this Agreement and shall continue for the terms set
forth in Sections 15 and 17.
25. Captions. Captions to the Sections of this Agreement are inserted
solely for the convenience of the parties, are not a part of this Agreement, and
in no way define, limit, extend or describe the scope thereof or the intent of
any of the provisions.
26. Applicable Law. This Agreement shall be construed and the legal
relationship between the parties determined in accordance with the laws of the
State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the day and year first above written, the corporate party acting
through duly authorized officers.
ATTEST: LADD Furniture, Inc.
___________________________ By:_______________________________
Secretary President
(Corporate Seal)
___________________________ ____________________________(SEAL)
(Witness) Michael P. Haley
8
<PAGE>
EXHIBIT 10.11
LADD FURNITURE, INC.
1994 LONG-TERM INCENTIVE PLAN
PLAN HIGHLIGHTS
1. The Long-Term Incentive Plan consists of an annual award of the
following three elements:
- Incentive Stock Options
- Restricted Stock Grants
- Performance Units convertible to cash at the end of a 3-year
planning period; par value is $100 per unit
2. Award levels are based on a percentage of the participant's base salary
in effect at the beginning of the planning period as follows:
a) Chairman, Vice Chairman and Executive Vice President
% of Salary
Incentive Stock Options 30.0%
Restricted Stock Grants 18.8%
Performance Units 18.7%
Total 67.5%
b) Division Presidents, Chief Financial Officer, VP Human Resources,
VP Market Development
% of Salary
Incentive Stock Options 12.5%
Restricted Stock Grants 12.5%
Performance Units 25.0%
Total 50.0%
<PAGE>
c) Selected Division & Corporate Key Management
% of Salary
Incentive Stock Options 10.0%
Restricted Stock Grants 10.0%
Performance Units 20.0%
Total 40.0%
3. Performance Unit payments will be based on the achievement of sales
growth and return on investment goals as follows:
a) For Corporate Participants
LADD 3-Year Average ROE 55%
LADD 3-Year Sales Growth 45%
Total 100%
b) For Division Participants
Divisional 3-Year Average ROIC 55%
Divisional 3-Year Sales Growth 45%
Total 100%
4. Valuation of Performance Units at the end of the 3-year planning period
will be based on the following performance levels:
ROE ROIC Sales Growth
Minimum Incentive 8% 12% Industry Growth Rate*
Target Incentive 12% 16% Industry Growth Rate* + 1.5%
Maximum Incentive 15% 20% Industry Growth Rate* + 3%
*Industry Growth Rate defined to be U.S. Commerce Department Furniture
Growth Index. The Board reserves the right to change or modify the index if
experience shows the index not to be a good measure of the Industry's
performance.
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<PAGE>
5. Payout per Performance Unit will be on a graduated scale with a value of
$50 to $150 per unit. Minimum performance levels are required to receive any
payment.
- Minimum incentive - $50 per unit
- Target incentive - $100 per unit
- Maximum incentive - $150 per unit
Payments of Performance Units earned for 1994 - 1996 will be
made by June 1, 1997.
6. Incentive Stock Options will be granted at market price on the day of
the grant, and, as long as the participant remains an employee of LADD, will be
vested as follows:
After 1 Year 25%
After 2 Years 50%
After 3 Years 75%
After 4 Years 100%
7. Restricted Stock Grants will permit a participant to purchase LADD
shares for $.10 per share. The shares may be repurchased by LADD at the same
price if the participant ceases to be an employee of LADD before 5 years have
elapsed.
8. The participant must be an employee at the end of the planning period to
receive any payment for the Performance Units. If the participant changes LADD
business units during the planning period, a pro-rata share of the earned
Performance Units will be granted for the period the individual participated in
the Long-Term Incentive Plan in the respective business units.
9. Participants who enter the plan other than at the beginning of the
planning period will receive stock options, restricted stock and performance
units as recommended by management and approved by the Compensation Committee
and the Board of Directors.
10. When a plan participant retires (minimum age 55), dies or becomes
disabled during a three-year plan period, the Compensation Committee and the
Board of Directors will determine the amount and terms of payment of performance
units earned and the amount of stock to be repurchased.
February 24, 1994
3
<PAGE>
EXHIBIT 10.12
LADD FURNITURE, INC.
1995 LONG-TERM INCENTIVE PROGRAM
PLAN HIGHLIGHTS
1. The Long-Term Incentive Program consists of an annual award of the
following three elements:
- Incentive Stock Options
- Restricted Stock Grants
- Performance Units convertible to cash at the end of a 3-year
planning period (1995-1997); par value is $100 per unit
2. Award levels are based on a percentage of the participant's base salary
in effect when the award is granted as follows:
a) LADD Chief Executive Officer and Chief Operating Officer
% of Salary
Incentive Stock Options 30.0%
Restricted Stock Grants 18.8%
Performance Units 18.7%
Total 67.5%
b) Operating Company Presidents & LADD Chief Financial Officer, VP
Human Resources, VP Market Development, VP Manufacturing Services
% of Salary
Incentive Stock Options 12.5%
Restricted Stock Grants 12.5%
Performance Units 25.0%
Total 50.0%
3. Performance Unit payments will be based on the achievement of sales
growth and return on investment goals as follows:
<PAGE>
a) For Corporate Participants
3-Year Average ROE for LADD 55%
3-Year Sales Growth for LADD 45%
Total 100%
b) For Operating Company Participants
3-Year Average ROIC for Operating Company 55%
3-Year Sales Growth for Operating Company 45%
Total 100%
4. Valuation of Performance Units at the end of the 3-year planning period
will be based on the following performance criteria:
ROE ROIC Sales Growth
Minimum Incentive 8% 12% Industry Growth Rate*
Target Incentive 12% 16% Industry Growth Rate*+1.5%
Maximum Incentive 15% 20% Industry Growth Rate*+3%
*Industry Growth Rate defined to be U.S. Commerce Department Furniture
Growth Index. The Board reserves the right to change or modify the
index if experience shows the index not to be a good measure of the
Industry's performance.
5. Each Performance Unit will be valued at the end of the performance
period using a graduated scale ranging between $50 and $150 per unit. Minimum
performance levels are required to receive any payment.
- Minimum incentive - $50 per unit
- Target incentive - $100 per unit
- Maximum incentive - $150 per unit
Payments for Performance Units earned for 1995 - 1997
performance period will be made in cash by June 1, 1998.
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<PAGE>
6. Incentive Stock Options will be granted at market price on the day of
the grant, and, as long as the participant remains an employee of LADD, will be
vested as follows:
After 1 Year 25%
After 2 Years 50%
After 3 Years 75%
After 4 Years 100%
7. Restricted Stock Grants will permit a participant to purchase LADD
shares for $.10 per share. The shares may be repurchased by LADD at the same
price if the participant ceases to be an employee of LADD before 5 years have
elapsed.
8. The participant must be an employee at the end of the planning period to
receive any payment for the Performance Units. If the participant changes LADD
business units during the planning period, a pro-rata share of the earned
Performance Units will be granted for the period the individual participated in
the Long-Term Incentive Program in the respective business units.
9. Participants who enter the plan other than at the beginning of the
planning period will receive stock options, restricted stock and performance
units as recommended by management and approved by the Compensation Committee
and the Board of Directors.
10. When a plan participant retires (minimum age 55), dies or becomes
disabled during a three-year plan period, the Compensation Committee and the
Board of Directors will determine the amount and terms of payment of performance
units earned and the amount of stock to be repurchased.
March 2, 1995
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<PAGE>
EXHIBIT 10.13
PROPOSED
LADD FURNITURE, INC.
1996 LONG-TERM INCENTIVE PROGRAM
PLAN HIGHLIGHTS
1. The Long-Term Incentive Program consists of an annual award of the
following two elements:
- Stock Option Grants
- Performance Bonus payable in cash and stock at the
end of a 3- year planning period (1996-1998).
2. Award levels are based on a percentage of the participant's base salary
in effect when the award is granted as follows:
a) LADD President (CEO) and Executive Vice Presidents
% of Salary
Stock Options 40.0%
Performance Bonus 25.0%
Total 65.0%
b) Operating Company Presidents, VP Human Resources, VP
Market Development
% of Salary
Stock Options 25.0%
Performance Bonus 25.0%
Total 50.0%
3. Valuation of Performance Bonus at the end of the 3-year planning period
will be based on the following performance criteria achieved by LADD Furniture,
Inc.
<PAGE>
AGGREGATE EPS FOR 1997 AND 1998
Minimum Incentive $ 1.80
Target Incentive $ 2.45
Maximum Incentive $ 2.90
4. The Performance Bonus will be valued at the end of the performance
period using a graduated scale ranging between 12.5% and 37.5% of base salary.
Minimum performance levels are required to receive any payment.
Minimum Incentive - 12.5% of Base Salary
Target Incentive - 25.0% of Base Salary
Maximum incentive - 37.5% of Base Salary
Payments for Performance Bonus earned will be made by June 1,
1999. Payments will be made 50% in cash and 50% in shares of LADD
stock.
5. Stock Options will be granted at market price on the day of the grant,
and, as long as the participant remains an employee of LADD, will be vested as
follows:
After 1 Year 25%
After 2 Years 50%
After 3 Years 75%
After 4 Years 100%
6. The participant must be an employee at the end of the planning period to
receive any payment for the Performance Bonus. If the participant changes LADD
business units during the planning period, a pro-rata share of the earned
Performance Bonus will be granted for the period the individual participated in
the Long-Term Incentive Program in the respective business units.
7. Participants who enter the plan other than at the beginning of the
planning period will receive stock options and performance bonus as recommended
by management and approved by the Compensation Committee and the Board of
Directors.
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8. When a plan participant retires (minimum age 55), dies or becomes
disabled during a three-year plan period, the Compensation Committee and the
Board of Directors will determine the amount and terms of payment of performance
bonus earned.
9. The company has the sole right to exclude from the operating profits of
each organizational unit items such as, but not limited to, extraordinary income
from the sale of assets, litigation recoveries, income or expenses attributable
to changes in accounting methods, bad debt charges and inventory valuations and
similar items. Such determinations will be made without recourse by an Incentive
Plan participant as to the effect, if any, on the incentive payment amount.
10. The earned performance bonus paid in stock will be restricted from
sale for a period of 2 years from issue date.
March 4, 1996
3
<PAGE>
EXHIBIT 10.14
LADD FURNITURE, INC.
1996 MANAGEMENT INCENTIVE PLAN
PLAN HIGHLIGHTS
1. Incentive payments based on financial performance and individual
performance as follows:
For Corporate Participants
achievement of PAT target
achievement of ROAE target (selected management)
achievement of individual objectives
For Operating Company Participants
achievement of PBT targets
achievement of ROIC targets (presidents only)
achievement of individual objectives
2. No incentive payments will be made to any individual if the operating
unit to which the individual is assigned does not achieve minimum PBT or PAT
targets. Incentive payment expense will be accrued in results before calculation
of profit.
3. Total of 172 officers and key managers to participate in the plan
(Exhibit I). Maximum incentives range from 10% to 100% of January 1, 1996 base
salary. Incentive payments are based on achieving performance criteria
established by senior management.
4. Program includes $50,000 discretionary incentive pool for extraordinary
performance by LADD employees not covered by the Management Incentive Plan.
5. Estimated incentive payout at planned performance levels is $1.4
million.
6. Incentives earned in 1996 will be paid in cash after completion of
annual audit (not later than March 31, 1997).
7. In the event of a transfer of a participant during the fiscal year to an
operating unit other than the unit in which originally a Plan participant, an
appropriate adjustment will be made in Incentive Plan eligibility pro-rata for
the time worked in each unit.
8. In the event of a promotion of a participant within the same operating
unit, an appropriate adjustment will be made in Incentive Plan eligibility
pro-rata. In the event of a demotion which would place participants in a
position substantially different from that in which they were nominated as a
participant, an appropriate adjustment may be made as to the amount of incentive
payment for
<PAGE>
which they are eligible as determined by the Compensation Committee of the
Board of Directors.
9. Participants will forfeit all income from plan if employment is
terminated prior to January 1, 1997 for any reason other than death, disability
or retirement (over 55).
10. The 1996 Management Incentive Plan only applies to fiscal year 1996.
<PAGE>
EXHIBIT 24.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
LADD Furniture, Inc.:
We consent to incorporation by reference in the Registration
Statement (No. 33-53341) on Form S-8 of LADD Furniture, Inc. of our
reports dated February 16, 1996, except for paragraph 4 of Note 2,
which is as of February 26, 1996, relating to the consolidated
balance sheets of LADD Furniture, Inc. and subsidiaries as of
December 30, 1995 and December 31, 1994, and the related
consolidated statements of operations, shareholders equity and cash
flows and related schedule for each of the years in the three-year
period ended December 30, 1995 which reports appear in the December
30, 1995 annual report on Form 10-K of LADD Furniture, Inc.
contained in the Appendix to the Proxy Statement for the 1996
Annual Shareholders Meeting.
KPMG Peat Marwick LLP
Greensboro, North Carolina
March 28, 1996
<PAGE>
F-1
INDEPENDENT AUDITORS REPORT
The Board of Directors
LADD Furniture, Inc.:
Under date of February 16, 1996, except for paragraph 4 of Note 2,
which is as of February 26, 1996, we reported on the consolidated
balance sheets of LADD Furniture, Inc. and subsidiaries as of
December 30, 1995 and December 31, 1994 and the related
consolidated statements of operations, shareholders equity and cash
flows for each of the years in the three-year period ended December
30, 1995, as contained in the Appendix to the Proxy Statement for
the 1996 Annual Shareholders Meeting. These consolidated financial
statements and our report thereon are included in the annual report
on Form 10-K for the year ended December 30, 1995, also contained
in the Appendix to the Proxy Statement for the 1996 Annual
Shareholders Meeting. In connection with our audits of the
aforementioned consolidated financial statements, we also have
audited the related financial statement schedule as listed in the
accompanying index. This financial statement schedule is the
responsibility of the company s management. Our responsibility is
to express an opinion on this financial statement schedule based on
our audits.
In our opinion, such financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information
set forth therein.
KPMG Peat Marwick LLP
Greensboro, North Carolina
February 16, 1996, except for paragraph 4 of Note 2,
which is as of February 26, 1996
<PAGE>
F-2
Schedule II
LADD FURNITURE, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
(dollar amounts in thousands)
<TABLE>
<CAPTION>
Charged
Balance at (credited) Balance at
beginning of to costs and Charged to Deductions end of
Description year expenses other accounts (c) year
---------------- ----------------- ---------------------------------- -------------
<S> <C> <C> <C> <C> <C>
Year ended December 30, 1995
Doubtful receivables $2,831 2,898 (1,085) (a) (2,091) 2,553
Discounts 0 123 (d) - - 123
Returns and allowances 1,462 (36) (d) (45) (a) - 1,381
================ ================= ============= ================ =============
$4,293 2,985 (1,130) (2,091) 4,057
================ ================= ============= ================ =============
Year ended December 31, 1994
Doubtful receivables $3,316 1,521 338 (b) (2,344) 2,831
Returns and allowances 862 294 (d) 306 (b) - 1,462
================ ================= ============= ================ =============
$4,178 1,815 644 (2,344) 4,293
================ ================= ============= ================ =============
Year ended January 1, 1994
Doubtful receivables $2,763 2,056 - (1,503) 3,316
Discounts 23 - (d) - (23) 0
Returns and allowances 731 131 (d) - - 862
================ ================= ============= ================ =============
$3,517 2,187 - (1,526) 4,178
================ ================= ============= ================ =============
</TABLE>
Notes
(a)Represents businessess divested or reclassified to businesses held for
sale.
(b)Represents initial reserves of acquired business.
(c)Represents uncollectible receivables written-off, net of recoveries.
(d)Represent net increase (decrease) in required reserve.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 1,272
<SECURITIES> 0
<RECEIVABLES> 38,288
<ALLOWANCES> 4,057
<INVENTORY> 89,466
<CURRENT-ASSETS> 142,689
<PP&E> 82,586
<DEPRECIATION> 67,112
<TOTAL-ASSETS> 312,986
<CURRENT-LIABILITIES> 63,161
<BONDS> 112,598
0
0
<COMMON> 2,318
<OTHER-SE> 122,879
<TOTAL-LIABILITY-AND-EQUITY> 312,986
<SALES> 614,502
<TOTAL-REVENUES> 614,502
<CGS> 515,980
<TOTAL-COSTS> 515,980
<OTHER-EXPENSES> 141,948
<LOSS-PROVISION> 2,898
<INTEREST-EXPENSE> 11,798
<INCOME-PRETAX> (43,426)
<INCOME-TAX> (18,236)
<INCOME-CONTINUING> (25,190)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,190)
<EPS-PRIMARY> (3.26)
<EPS-DILUTED> (3.26)
</TABLE>
