<PAGE>
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
----------------------
For the Quarter Ended September 27, 1997 Commission File No. 0-11577
LADD FURNITURE, INC.
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(Exact name of registrant as specified in charter)
North Carolina 56-1311320
(State or other juris- (I.R.S. Employer
diction of incorpora- Identification No.)
tion or organization)
One Plaza Center, Box HP-3, High Point, North Carolina 27261-1500
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (910) 889-0333
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __x__ No______
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As of November 10, 1997 there were 7,760,853 shares of Common Stock ($.30 par
value) of the registrant outstanding.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LADD FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the thirteen weeks and thirty-nine weeks ended Sept. 28, 1996
and Sept. 27, 1997
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
------------------------------ -----------------------------
Sept. 28, Sept. 27, Sept. 28, Sept. 27,
1996 1997 1996 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 120,447 129,935 379,190 378,875
Cost of sales 99,369 106,791 315,627 309,621
-------------- -------------- -------------- --------------
Gross profit 21,078 23,144 63,563 69,254
Selling, general and
administrative expenses 16,852 17,794 57,750 53,907
Restructuring expense (892) - 3,978 -
-------------- -------------- -------------- --------------
Operating income 5,118 5,350 1,835 15,347
-------------- -------------- -------------- --------------
Other deductions:
Interest expense 3,182 2,701 8,900 8,425
Other expense (income) (1,343) (199) 258 516
-------------- -------------- -------------- --------------
1,839 2,502 9,158 8,941
-------------- -------------- -------------- --------------
Earnings (loss) before income taxes 3,279 2,848 (7,323) 6,406
Income tax expense (benefit) 1,477 1,110 (3,295) 2,498
-------------- -------------- -------------- --------------
Net earnings (loss) $ 1,802 1,738 (4,028) 3,908
============== ============== ============== ==============
Net earnings (loss) per common share $ 0.23 0.22 (0.52) 0.50
============== ============== ============== ==============
Weighted average number of
common shares outstanding 7,721 7,758 7,723 7,738
============== ============== ============== ==============
</TABLE>
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<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 28, 1996 and September 27, 1997
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
December 28, September 27,
1996 * 1997
(Restated) (Unaudited)
------------------ --------------------
<S> <C> <C>
Current assets:
Cash $ 469 659
Trade accounts receivable, less allowances
for doubtful receivables, discounts,
returns and allowances of $3,005 and $2,179,
respectively 66,730 83,865
Inventories 85,920 94,819
Prepaid expenses and other current assets 5,768 6,923
------------------ --------------------
Total current assets 158,887 186,266
------------------ --------------------
Property, plant and equipment, net 74,729 66,708
Intangible and other assets, net 81,415 77,796
------------------ --------------------
$ 315,031 330,770
================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 5,093 4,965
Trade accounts payable 24,358 27,080
Accrued expenses and other current liabilities 30,696 36,203
------------------ --------------------
Total current liabilities 60,147 68,248
------------------ --------------------
Long-term debt, excluding current installments 125,859 123,565
Deferred and other liabilities 5,125 10,481
------------------ --------------------
Total liabilities 191,131 202,294
------------------ --------------------
Shareholders' equity:
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 7,719,567 shares
and 7,758,903 shares, respectively 2,316 2,327
Additional paid-in capital 49,736 50,263
Retained earnings 72,183 76,091
------------------ --------------------
124,235 128,681
Less unamortized value of restricted stock (335) (205)
------------------ --------------------
Total shareholders' equity 123,900 128,476
------------------ --------------------
$ 315,031 330,770
================== ====================
</TABLE>
* Derived from the Company's 1996 audited Consolidated Financial Statements.
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<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the thirty-nine weeks ended September 28, 1996 and September 27, 1997
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
39 Weeks Ended
-----------------------------------
Sept. 28, Sept. 27,
1996 1997
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (4,028) 3,908
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation of property, plant and equipment 8,137 7,580
Amortization 3,363 3,115
Restructuring expense 3,978 -
Provision for losses on trade accounts receivable 3,296 593
Gain on sales of assets (115) (145)
Provision for deferred income taxes 538 773
Increase (decrease) in deferred and other liabilities (2,753) 131
Change in assets and liabilities, net of effects from divestitures:
Increase in trade accounts receivable (3,258) (17,728)
(Increase) decrease in inventories 3,473 (8,899)
Decrease in prepaid expenses and other
current assets 3,567 2,206
Increase (decrease) in trade accounts payable (330) 2,722
Increase (decrease) in accrued expenses and other
current liabilities (1,423) 6,703
---------------- ----------------
Total adjustments 18,473 (2,949)
---------------- ----------------
Net cash provided by operating activities 14,445 959
---------------- ----------------
Cash flows from investing activities:
Additions to property, plant and equipment (6,877) (4,129)
Purchase leased manufacturing equipment (4,648) -
Proceeds from sales of property, plant and equipment 235 16
Proceeds from sale of business, net of transaction expenses 5,284 -
Proceeds from sale of idle assets 1,250 -
Additions to (reductions in) other assets (3,088) 601
---------------- ----------------
Net cash used in investing activities (7,844) (3,512)
---------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings 137,837 12,464
Repayments of sales of trade accounts receivable (36,000) -
Proceeds from sale leaseback of assets 2,614 5,141
Principal payments on borrowings (110,430) (14,886)
Other (171) 24
---------------- ----------------
Net cash provided by (used in) financing activites (6,150) 2,743
---------------- ----------------
Effect of exchange rate changes on cash (10) -
---------------- ----------------
Net increase in cash 441 190
Cash at beginning of period 1,272 469
---------------- ----------------
Cash at end of period $ 1,713 659
================ ================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 8,906 8,601
Cash refunds received for income taxes (7,418) (4,587)
================ ================
</TABLE>
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<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Unamortized
Number Additional value of Total
of shares Common paid-in Retained restricted shareholders'
issued stock capital earnings stock equity
---------------- -------- ------------- ------------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 30, 1995
(RESTATED) 7,726,993 $ 2,318 49,905 74,618 (855) 125,986
Purchase of restricted
stock (7,426) (2) (169) - 169 (2)
Amortization of employee
restricted stock awards - - - - 351 351
Net loss - - - (2,435) - (2,435)
---------------- -------- ------------- ------------- -------------- ------------------
BALANCE AT DECEMBER 28, 1996
(RESTATED) 7,719,567 2,316 49,736 72,183 (335) 123,900
Purchase of restricted
stock (1,603) (1) (33) - 33 (1)
Shares issued in connection
with incentive stock
option plan 2,050 1 24 - - 25
Shares issued in connection
with employee defined
contribution plan 38,889 11 536 - - 547
Amortization of employee
restricted stock awards - - - - 97 97
Net earnings - - - 3,908 - 3,908
---------------- -------- ------------- ------------- -------------- ------------------
BALANCE AT SEPTEMBER 27, 1997
(UNAUDITED) 7,758,903 $ 2,327 50,263 76,091 (205) 128,476
================= ======== ============= ============= ============== ==================
</TABLE>
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<PAGE>
Notes:
(1) Quarterly Financial Data
The quarterly consolidated financial data are unaudited but include, in
the opinion of management, all adjustments necessary for a fair
statement of the operating results for the interim periods indicated.
All such adjustments are of a normal recurring nature.
(2) Inventories
A summary of inventories follows (in thousands):
<TABLE>
<CAPTION>
December 28,
1996 September 27,
(Restated) 1997
<S> <C> <C>
Inventories on the FIFO cost method:
Finished goods $ 45,459 53,171
Work in process 14,093 15,413
Raw materials and supplies 35,613 35,214
------------ ------------
Total inventories on
the FIFO cost method 95,165 103,798
Less adjustments of certain inven-
tories to the LIFO cost method (9,245) (8,979)
------------ ------------
$ 85,920 94,819
============ ============
</TABLE>
During the second quarter of fiscal 1997, the Company changed its method of
accounting for inventory from the last-in, first-out (LIFO) method to the
first-in, first-out (FIFO) method for one of its upholstery operations in order
to align all companies in the upholstery group under the same inventory
valuation method. Management believes that the FIFO method provides a better
current period matching of revenue and expense due to historically low inflation
and quick inventory turns in its upholstery operations. The Company has also
notified the Internal Revenue Service of its intent to change to the FIFO method
of inventory valuation for income tax reporting purposes for the upholstery
company.
As required by generally accepted accounting principles, the Company has
retroactively adjusted the financial statements for prior years for this change.
The effect of the restatement was to increase retained earnings at December 28,
1996 by $824,000. The effect on the consolidated statements of operations was
not material for the periods presented.
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<PAGE>
(3) Sale/Leaseback - Monroe, NC Facility
Effective March 19, 1997, the Company sold its Monroe, NC upholstery
manufacturing facility to a private partnership for $5.3 million. At
the same time, the Company entered into a seven-year agreement to lease
the facility back, with options existing to renew the lease at the end
of its term for up to eight additional years. The net proceeds from the
sale of $5.1 million were utilized to reduce the Company's outstanding
long-term debt. A deferred gain totalling $580,000 is being amortized
into operations over the life of the lease.
(4) New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, "Earnings per
Share" effective for financial statements issued for interim and
annual periods ending after December 15, 1997. The new standard
specifies the computation, presentation and disclosure requirements
for earnings per share for entities with publicly held common stock,
and early adoption of the standard is prohibited. The Company believes
the adoption of this accounting standard will not have a material
impact on earnings per share.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of net sales
to certain items included in the Consolidated Statements of Operations:
13 Weeks Ended 39 Weeks Ended
------------------ -----------------
Sept 28, Sept 27, Sept 28, Sept 27,
1996 1997 1996 1997
-------- -------- ------- -------
Net sales .................... 100.0% 100.0% 100.0% 100.0%
Cost of sales ................ 82.5 82.2 83.2 81.7
----- ----- ----- -----
Gross profit ......... 17.5 17.8 16.8 18.3
Selling, general and
administrative expenses ... 14.0 13.7 15.2 14.2
Restructuring expense ........ (0.7) -- 1.1 --
----- ----- ----- -----
Operating income ..... 4.2 4.1 0.5 4.1
----- ----- ----- -----
Other deductions:
Interest expense .......... 2.6 2.1 2.3 2.2
Other, net ................ (1.1) (0.2) 0.1 0.2
----- ----- ----- -----
1.5 1.9 2.4 2.4
----- ----- ----- -----
Earnings (loss) before
income taxes ....... 2.7 2.2 (1.9) 1.7
Income tax expense (benefit) . 1.2 0.9 (0.8) 0.7
----- ----- ----- -----
Net earnings (loss) .. 1.5% 1.3% (1.1)% 1.0%
===== ===== ===== =====
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature are
intended to be, and are hereby identified as, "forward-looking statements" for
purposes of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934, as amended. The Company cautions readers that these forward-looking
statements, including without limitation, those relating principally to
anticipated sales growth, anticipated selling, general and administrative
expenses, projected capital spending levels, projected cash to be generated from
operations, the estimated effective income tax rate, and decreased interest
expense are subject to certain risks and uncertainties that could cause actual
results to differ materially from those indicated in the forward-looking
statements, due to several important factors herein identified and other risks
and factors identified from time to time in the Company's reports filed with the
Securities and Exchange Commission.
Net sales for the third quarter and first nine months of 1997 were
$129.9 million and $378.9 million, respectively, compared with $120.4 million
and $379.2 million during the comparable 1996 periods. On a pro forma basis,
assuming the 1996 divestitures of Fournier Furniture and Daystrom Furniture had
occurred at the beginning of fiscal 1996, 1997 third
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<PAGE>
quarter net sales would have increased from prior year levels by 8.1%, and 1997
first nine months net sales would have increased from prior year levels by 4.2%.
The following table illustrates the comparison of net sales by business
group for the third quarter:
<TABLE>
<CAPTION>
(IN THOUSANDS)
Sept. 28, Sept. 27, Increase Percent
1996 1997 (Decrease) Change
------------------------------------------------
<S> <C> <C> <C> <C>
Casegoods $ 71,449 72,068 619 0.9 %
Upholstery 30,049 28,017 (2,032) (6.8)%
Contract 18,692 29,850 11,158 59.7%
Divestiture companies 257 -- (257) N/M
------------------------------------------------
Total $120,447 129,935 9,488 7.9%
================================================
</TABLE>
The following table illustrates the comparison of net sales by business group
for the first nine months:
<TABLE>
<CAPTION>
(IN THOUSANDS)
Sept. 28, Sept. 27, Increase Percent
1996 1997 (Decrease) Change
------------------------------------------------
<S> <C> <C> <C> <C>
Casegoods $211,195 208,240 (2,955) (1.4)%
Upholstery 95,429 88,731 (6,698) (7.0)%
Contract 57,020 81,904 24,884 43.6 %
Divestiture companies 15,546 -- (15,546) N/M
------------------------------------------------
Total $379,190 378,875 (315) 0.1 %
================================================
</TABLE>
The decrease in 1997 residential casegoods and residential upholstery
net sales compared to 1996 amounts was primarily due to the Company's decision
during 1996 to significantly reduce shipments to a major furniture retailer
because profit margins were not considered to be acceptable, and the decision
during the third quarter of 1997 to reduce shipments to
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<PAGE>
another major furniture retailer due to their weakening credit position. The
decrease in the aggregate net sales of the two large retailers in comparison to
the prior periods was $4.8 million for the third quarter and $8.5 million for
the first nine months. The growth in contract sales in both periods relates
principally to continued U.S. hotel expansion and refurbishment. In addition,
the contract group has experienced double digit sales growth in its
assisted-living and government divisions. The Company anticipates that this
trend in contract sales will extend into 1998 and believes that production
capacity available at its casegoods group manufacturing facilities, as well as
from a recently-announced expansion of the contract group's upholstery
operations will be sufficient to accommodate anticipated contract sales growth
for the foreseeable future. The Company's backlog increased by $10.0 million
from the end of June 1997 to the end of September 1997, principally due to the
strong September orders received in the casegoods and contract business groups.
Cost of sales as a percentage of net sales decreased to 82.2% for the
third quarter of 1997 and 81.7% for the year-to-date, from 82.5% and 83.2%,
respectively, in 1996. As a result, gross profit margins increased to 17.8% for
the third quarter and 18.3% for the year-to-date, from 17.5% and 16.8%,
respectively, in 1996. The increase in gross margin for the 1997 nine months was
achieved in spite of a $3.7 million non-cash credit to operations in 1996
resulting from the Company's curtailment of retiree health care benefits, which
favorably impacted the 1996 margin. This credit to operations was somewhat
offset during the second quarter of 1996 by additional reserves recorded for
discontinued products, along with depressed gross margins relating to the
liquidation of Daystrom Furniture's inventory. The improved 1997 margins are
largely attributable to the Company's increased production levels at most
locations. Additionally, the Company's 1997 results were positively impacted
by the above-mentioned curtailment of retiree health care benefits and the
Company's December 1996 decision to terminate its defined benefit plans.
Selling, general and administrative (SG&A) expenses remained relatively
flat for the 1997 third quarter as compared to the prior year, while SG&A
expenses for the first nine months decreased to 14.2% from 15.2% in 1996. The
bankruptcy filings of Montgomery Ward and Levitz Furniture on August 7, 1997 and
September 5, 1997, respectively, did not have a significant impact on the
Company. The total bad debt write-off in the aggregate was less than $350,000 as
a result of a planned reduction in credit exposure. The Company anticipates that
its SG&A expenses will be in the range of 14.0% to 14.5% of net sales for the
fourth quarter of 1997.
During the first nine months of 1996, a net non-cash restructuring
charge of $4.0 million was recorded as a result of: (i) the Company's
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<PAGE>
decision to liquidate Daystrom Furniture; (ii) a shortfall in actual versus
anticipated net proceeds from selling Fournier Furniture; and (iii) additional
severance expense relating to the continued restructuring of the Company's
remaining businesses.
Other deductions represented 1.9% of net sales for the third quarter and
2.4% for the first nine months of 1997, compared to 1.5% and 2.4%, respectively,
in 1996. Other deductions in the third quarter of 1996 included $1.7 million of
income relating to the settlement of an insurance claim, offset by increased
amortization and interest expenses. Although the Company's effective nine-month
interest rate rose approximately 0.25% over the prior year period, interest
expense for the first nine months of 1997 decreased approximately $500,000
compared to the first nine months of 1996. The decrease was attributable to a
reduction of approximately $11.5 million in average outstanding borrowings
between the two periods. Effective October 1, 1997, the Company received an
interest rate margin reduction of 0.25% in both its prime and LIBOR rate
matrices from its bank group (See Item 5).
For the first nine months of 1997, the Company's net earnings were $3.9
million, compared with a net loss of $4.0 million in the same period of 1996.
The Company's estimated annual effective income tax rate for the first nine
months of 1997 is 39%, as compared to a 45% estimated annual rate for the first
nine months of 1996. The difference in the tax rates for the respective periods
results from various permanent taxable income, deductions, or credit items that
increase or decrease the normal U.S. Federal tax rate of 34% when applied to the
Company's estimated annualized pre-tax income or loss during each interim
period, or actual annual pre-tax income or loss in the case of each fiscal year
end.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current ratio increased to 2.7 to 1 at September 27, 1997
from 2.6 to 1 at December 28, 1996, as net working capital increased to $118.0
million at September 27, 1997 from $98.7 million at December 28, 1996. The
increase in working capital was primarily attributable to a planned increase in
inventories and trade accounts receivable to support the strong September order
rate, principally in the Company's casegoods and contract business groups.
During the first nine months of 1997, the Company generated net cash
from operating activities of $1.0 million, compared to $14.4 million in the 1996
period. The cash generated during the first nine months of 1997 from net
earnings plus depreciation and amortization was offset by the increase in
working capital. The Company believes that the above-mentioned increase in
working capital will significantly increase cash generated from operations
during the fourth quarter.
During the first nine months of 1997, capital spending totaled $4.1
million, down from $6.9 million during the same period in 1996. The Company's
full year 1997 capital expenditures are expected to be well
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<PAGE>
below the current annual depreciation rate of approximately $10.3 million.
At September 27, 1997, the Company had $126.0 of outstanding bank
borrowings, comprised of a $53.4 million secured term loan and a $72.6 million
secured revolving credit loan. Additionally, the Company had approximately $2.5
million outstanding at September 27, 1997 in other long-term indebtedness,
primarily consisting of fixed-rate industrial revenue bonds. The Company's total
debt ratio (total debt as a percentage of total debt plus shareholders' equity)
was 50.0% at September 27, 1997 compared to 51.4% at December 28, 1996. At
September 27, 1997, $30.6 million was available for future borrowings under the
Company's revolving credit loan. Management believes that unused credit lines
available under the Company's revolving credit loan, in addition to cash
generated from operations, will be adequate to fund the Company's future
operations and planned capital expenditures.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Effective October 1, 1997, the Company received an interest
rate margin reduction of 0.25% in both its prime and LIBOR
rate matrices from its bank group. See Exhibit 10.3 to this
quarterly report on Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amendment No. 4 to Loan and Security
Agreement dated as of July 12, 1996 among
LADD Furniture, Inc., certain of its
subsidiaries, the financial institutions
party thereto from time to time as the
lenders, NationsBank, N.A. (South) and Fleet
Capital Corporation as the "Co-Agents," and
NationsBank, N.A. (South), as agent for the
lenders.
10.2 Factoring Agreement dated August 1, 1997
entered into by and between LADD Furniture,
Inc. and NationsBanc Commercial Corporation.
10.3 Amendment No. 5 to Loan and Security
Agreement dated as of July 12, 1996 among
LADD Furniture, Inc., certain of its
subsidiaries, the financial institutions
party thereto from time to time as the
lenders, NationsBank, N.A. (South) and Fleet
Capital Corporation as the "Co-Agents," and
NationsBank, N.A. (South), as agent for the
lenders.
27.1 Restated Financial Date Schedule (EDGAR
version only). The schedule is restated to
reflect the reclassification of the revenues
and direct operating expenses of the
transportation operation to other deductions
(income), net and the change in inventory
accounting from the LIFO method to the FIFO
method of one of the Company's business
units.
(b) Reports on Form 8-K
On July 22, 1997, the Company filed with the
Commission a Form 8-K dated July 17, 1997 which
reported under Item 5 the Company's Press Release
dated July 17, 1997 reporting the second quarter
earnings of the Company.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LADD Furniture, Inc.
Date: November 12, 1997 By: s/William S. Creekmuir
----------------------
William S. Creekmuir
Executive Vice President
and Chief Financial Officer
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<PAGE>
AMENDMENT NO. 4
to
LOAN AND SECURITY AGREEMENT
dated as of July 12, 1996
THIS AMENDMENT NO. 4 dated as of July 24, 1997 is made by LADD
FURNITURE, INC., a North Carolina corporation, AMERICAN FURNITURE COMPANY,
INCORPORATED, a Virginia corporation, BARCLAY FURNITURE CO., a Mississippi
corporation, CLAYTON-MARCUS COMPANY, INC., a North Carolina corporation, LADD
CONTRACT SALES CORPORATION, a North Carolina corporation, LADD INTERNATIONAL
SALES CORP., a Barbados corporation, LADD TRANSPORTATION, INC., a North Carolina
corporation, PENNSYLVANIA HOUSE, INC., a North Carolina corporation, PILLIOD
FURNITURE, INC., a North Carolina corporation (the "Borrowers"), NATIONSBANK,
N.A. (successor to NationsBank, N.A.(South), a national banking association
("NationsBank")), FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Fleet"
and together with NationsBank, the "Co-Agents"), the financial institutions
parties to the Loan Agreement (as hereinafter defined) from time to time (the
"Lenders"), and NATIONSBANK as administrative agent for the Lenders (the
"Administrative Agent").
Preliminary Statements
The Borrowers, the Lenders, the Co-Agents and the
Administrative Agent are parties to a Loan and Security Agreement dated as of
July 12, 1996, as amended by Amendment No. 1 dated as of August 15, 1996,
Amendment No. 2 dated as of October 10, 1996 and Amendment No. 3 dated as of
December 23, 1996 (said Agreement, as so amended, the "Loan Agreement"; terms
defined therein and not otherwise defined herein being used herein as therein
defined).
LADD proposes to enter into a factoring agreement with
NationsBanc Commercial Corporation and the Borrowers have requested certain
modifications to the Loan Agreement in connection therewith. The Lenders, the
Co-Agents and the Administrative Agent have agreed to such requests, upon and
subject to all of the terms, conditions and provisions of this Amendment.
Accordingly, in consideration of the Loan Agreement, the Loans
made by the Lenders and outstanding thereunder, the mutual promises hereinafter
set forth and other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Amendments to Loan Agreement. The Loan Agreement is
hereby amended, subject to the provisions of Section 2 hereof, by
(a) amending Section 1.1 Definitions thereof by
(i) amending the definition "Borrowing Base" by redesignating
subsection (b)(ii) thereof as subsection (b)(iii); redesignating
subsection (b)(iii) thereof as subsection (b)(iv), and inserting a new
subsection (b)(ii) to read as follows:
<PAGE>
(ii) THE LESSER OF (x) $2,000,000 and (y) 85% (or
such lesser percentage as the Administrative Agent may in its
reasonable credit judgment determine from time to time) of the
Factoring Credit Balance due and owing by the Factor at such
time, PLUS
(ii) amending clause (e) of the definition "Eligible
Receivable" by inserting before the semicolon at the end thereof the
following: "PROVIDED FURTHER, HOWEVER, that no such Receivable shall
have been "charged back" by the Factor after acceptance under the
Factoring Agreement at its credit risk";
(iii) amending the definition "Permitted Liens" by
redesignating subsection (g) thereof as subsection (h) and inserting
between the last comma therein and the word "and" a new subsection (g)
to read as follows:
(g) Liens in favor of the Factor, arising under the
Factoring Agreement,
(b) further amending Section 1.1 Definitions by adding thereto
in appropriate alphabetical order the following new definitions:
"Assignment of Factoring Proceeds" means the Assignment of
Factoring Proceeds (No Advances or Ledger Debt) dated as of July ___,
1997, between LADD, the Factor and the Administrative Agent.
"Factor" means NationsBanc Commercial Corporation.
"Factoring Agreement" means the Factoring Agreement (Export
Receivables) dated as of July ___, 1997, between the Factor and LADD.
"Factoring Credit Balance" means the net amount payable by the
Factor to LADD at any time for accounts receivable factored (at the
Factor's credit risk) under the Factoring Agreement, after accounting
for customer disputes and other deductions.
(c) amending Article 12 Negative Covenants by adding
------------------
thereto a new Section 12.16 to read as follows:
SECTION 12.16 Factored Receivables. Submit for factoring under
the Factoring Agreement any Receivable unless the Account Debtor
thereon is located outside of the United States and Puerto Rico, accept
any loan or advance from the Factor, or provide any security or
collateral (other than as expressly provided for in the Factoring
Agreement) to the Factor.
(d) amending Section 15.1 Appointment of Agent by replacing
the reference to clause "(b)(iii)(C)" therein with "(b)(iv)(C),"
(e) amending Section 16.11 Amendments thereof by redesignating
subsection (b)(v) thereof as subsection (b)(vi), and inserting between the last
comma therein and the word "and" a new subsection (b)(v) to read as follows:
(v) amend, assign or agree thereunder to any amendment of
Factoring
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<PAGE>
Agreement that is adverse to the interests of the
Administrative Agent and the Lenders in the Factoring Credit Balance,
(f) further amending the Loan Agreement by substituting for
Exhibit C thereto a new Exhibit C -- Form of Borrowing Base Certificate in the
form attached hereto as ANNEX A.
Section 2. Effectiveness of Amendment. This Amendment shall
become effective on the date (the "Amendment Effective Date") on which the
Administrative Agent shall have received each of the following documents (in
sufficient copies for each Lender):
(a) this Amendment duly executed and delivered by each
Borrower and each Lender;
(b) the Assignment of Factoring Proceeds duly executed and
delivered by LADD, the Factor and the Administrative Agent on behalf of the
Lenders;
(c) a certificate of the Secretary of each Borrower having
attached thereto the articles or certificate of incorporation and bylaws of such
Borrower as in effect on the Amendment Effective Date attached thereto (or
containing the certification of such Secretary that no amendment or modification
of such articles or certificate or bylaws has become effective since the last
date on which such documents were delivered to the Administrative Agent pursuant
to the Loan Agreement), and to the further effect that the incumbency
certificate and corporate action delivered in connection with the occurrence of
the Effective Date remain in effect, unchanged;
(d) a certificate of the President or Financial Officer of
LADD to the effect that
(i) the representations and warranties of the Borrowers
contained in the Loan Documents are true and correct in all material
respects on and as of the Amendment Effective Date as if made on and as
of such date, and
(ii) no Default or Event of Default has occurred and is
continuing, and such statements shall be true;
(e) a certified copy of the Factoring Agreement (as defined in
the Loan Agreement as amended by this Amendment); and
(f) such other documents, certificates and instruments in
connection with the effectiveness of this Amendment as the Administrative Agent
or any Lender may reasonably request.
Section 3. Effect of Amendment. From and after the
effectiveness of this Amendment, all references in the Loan Agreement and in any
other Loan Document to "this Agreement," "the Loan Agreement," "hereunder,"
"hereof" and words of like import referring to the Loan Agreement, shall mean
and be references to the Loan Agreement as amended by this Amendment. Except as
expressly amended hereby, the Loan Agreement and all terms, conditions and
provisions thereof remain in full force and effect and are hereby ratified and
confirmed. The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Administrative Agent under any of the Loan
Documents, nor constitute a waiver of any provision of any of the
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<PAGE>
Loan Documents.
Section 4. Counterpart Execution; Governing Law.
(a) Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement.
(b) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Georgia.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
BORROWERS:
LADD FURNITURE, INC.
By:___________________________
William S. Creekmuir
Executive Vice President
AMERICAN FURNITURE COMPANY, INCORPORATED
By:___________________________
William S. Creekmuir
Vice President
BARCLAY FURNITURE CO.
By:___________________________
William S. Creekmuir
Vice President
CLAYTON-MARCUS COMPANY, INC.
By:___________________________
William S. Creekmuir
Vice President
LADD CONTRACT SALES CORP.
By:___________________________
William S. Creekmuir
Vice President
<PAGE>
PENNSYLVANIA HOUSE, INC.
By:___________________________
William S. Creekmuir
Vice President
PILLIOD FURNITURE, INC.
By:___________________________
William S. Creekmuir
Vice President
LADD TRANSPORTATION, INC.
By:___________________________
William S. Creekmuir
President
LADD INTERNATIONAL SALES CORP.
By:___________________________
William S. Creekmuir
Vice President
<PAGE>
AGENTS/LENDERS:
NATIONSBANK, N.A., as Administrative Agent,
a Co-Agent and
as a Lender
By:___________________________
David J. Sapp
Vice President
FLEET CAPITAL CORPORATION, as a Co-Agent and
as a Lender
By: _________________________
Name:
Title:
BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By:___________________________
Name:
Title:
THE CIT GROUP/BUSINESS CREDIT,
INC., as a Lender
By:___________________________
Name:
Title:
SANWA BUSINESS CREDIT CORPORATION,
as a Lender
By:___________________________
Name:
Title:
<PAGE>
BANKBOSTON, N.A., as a Lender
By:___________________________
Name:
Title:
CREDITANSTALT CORPORATE FINANCE, INC.,
as a Lender
By:___________________________
Name:
Title:
BRANCH BANKING AND TRUST COMPANY, as a Lender
By:___________________________
Name:
Title:
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<PAGE>
FACTORING AGREEMENT
Entered into
by and between
LADD Furniture, Inc.
High Point, North Carolina
and
NationsBanc Commercial Corporation
<PAGE>
FACTORING AGREEMENT
(EXPORT RECEIVABLES)
NationsBanc Commercial Corporation
P. O. Box 4095
Atlanta, Georgia 30302-4095
Gentlemen:
We are pleased to confirm the following agreement by which you are to
act as sole factor for certain sales made by us:
SECTION 1. DEFINITIONS
1.1 "Banking Day" shall mean a day for dealings by and between banks,
excluding Saturday, Sunday and any day which shall be a legal holiday in the
City of Atlanta, Georgia, and any other day on which banking institutions are
authorized to close in the City of Atlanta, Georgia.
1.2 "Credit Risk" shall mean the risk of loss resulting solely and
exclusively from a Customer's failure to pay at maturity because of its
financial inability.
1.3 "Customer Dispute" shall mean any cause for nonpayment of
Receivables, other than the financial inability of the Customer, including,
without limitation, any alleged defense, offset, or counterclaim.
1.4 "Customers" shall mean the account debtors obligated on the
Receivables.
1.5 "Default" shall mean the occurrence of any of the following events:
(a) nonpayment when due of any amount payable on any of the Obligations or
failure to perform any agreement or meet any obligation of ours contained herein
or in any agreement out of which any of the Obligations arose; (b) default by us
in repayment when due of any indebtedness now or hereafter owed for monies
borrowed from anyone other than you in excess of Two Million Dollars
($2,000,000.00) in the aggregate; (c) any material statement, representation, or
warranty of ours made orally or in writing herein or in any other writing or
statement at any time furnished or made by us to you is untrue in any material
respect as of the date furnished or made; (d) an Event of Default or default
shall occur under the "LSA"; or (e) any amendment or
<PAGE>
modification to, or waiver of any provision of, the "LSA" which adversely
impacts NCC in its reasonable judgment in the event that NationsBank no longer
serves as Agent under the "LSA".
1.6 "Import Factor" shall mean, with respect to a particular
Receivable, the factor with whom you have an interfactor agreement pursuant to
which such factor has agreed to collect the Receivable and/or to assume the
Credit Risk.
1.7 "Net Amount" of Receivables shall mean the gross amount of
Receivables, less maximum discounts, less returns, less credits or allowances of
any nature at any time issued, owing, granted or outstanding, and less also your
commission as set forth herein.
1.8 "Obligations" shall mean all of our obligations to you hereunder,
including without limitation advances of the purchase price of Receivables, all
obligations of ours to you under any note, contract of surety, guaranty, or
accommodation, or with respect to letters of credit or acceptances, and all
other obligations of ours to you, however and whenever created, arising or
evidenced, whether direct or indirect, through assignment from third parties in
the ordinary course of your business, absolute, contingent or otherwise, now or
hereafter existing or due or to become due.
1.9 "Obligor" shall mean us and each other party primarily or
secondarily, directly or indirectly liable on any of the Obligations.
1.10 "Payment Date" shall mean: (a) for each credit-approved Receivable
for which you retain the Credit Risk, the date of deposit of Import Factor
payment by you plus two (2) Banking Days for collection and clearance of checks
or, if such Receivable is not paid, ninety (90) days after the due date of the
Receivable or if such day is not a Banking Day, the next Banking Day; and (b)
for each Receivable for which you do not bear the Credit Risk, the date of
deposit of Import Factor payment by you plus two (2) Banking Days for collection
and clearance of checks. Payment Date may be delayed to the Banking Day
following the day of application of remittances to Receivables.
1.11 "Prime Rate" shall mean the rate of interest announced by
NationsBank, N.A. (South) and its successors and assigns from time to time as
its Prime Rate.
1.12 "Receivables" shall mean all accounts, instruments, contract
rights, chattel paper, documents, and general intangibles arising from our
Sales, and the proceeds thereof, and all security and guaranties therefor,
whether now existing or hereafter created.
1.13 "Sales" shall mean the sale of goods and/or the rendition of
services by us in the ordinary course of our business to Customers in countries
other than the
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<PAGE>
United States of America and Puerto Rico, provided that "Sales" shall not
include any sale or rendition, payment of the purchase price of which is made by
cash in advance or assured by an outstanding letter of credit or third party
bond or guaranty.
1.14 "LSA" shall mean that certain Loan and Security Agreement dated as
of July 12, 1996 among LADD Furniture, Inc. and certain of its subsidiaries, the
financial institutions parties thereto from time to time, NationsBank, N.A.
(South) and Fleet Capital Corporation as Co-Agents and NationsBank, N.A. (South)
as Administrative Agent as it may be amended, modified, restated or replaced
from time to time.
SECTION 2. SALE AND APPROVAL; PURCHASE PRICE; COMMISSION;
ADVANCES; RESERVE
2.1 We hereby assign and sell to you as absolute owner, without
recourse, except as hereinafter set forth, our entire interest in all of our
present and future Receivables specifically assigned by us to you.
2.2 Notwithstanding any other provision of this Agreement, each of our
Receivables in a gross amount of One Hundred Dollars ($100) or less is assigned
and sold to you under this Agreement with full recourse.
2.3 All orders for Sales shall be submitted to you for credit approval
prior to shipment of the goods or rendition of the services so ordered, and each
approved Sale shall be made only in accordance with such approval. All credit
approvals must be in writing. Receivables arising from orders not so approved by
you, in whole or in part, shall be with full recourse to us to the extent and in
the respects not so approved. A credit approval shall not be effective if (a)
the approved terms of sale are changed; (b) delivery of the goods to the
Customer is not made by us within forty-five (45) days after the shipping date
specified in our request for credit approval, or, if no such date is specified,
within forty-five (45) days after the date of the credit approval; or (c)
delivery to you or to the Import Factor of the invoices and other documents as
required by subsection 2.4 is not made within the specified time, or if no time
is specified without undue delay. Credit approval may be by credit line. While a
credit line remains in force, Receivables (or parts thereof) in excess of such
line will succeed amounts within the line which are paid by or credited to the
Customer; the succession of Receivables (or parts thereof) shall take place in
the order of maturity and shall be limited to amounts then so paid or credited.
The right of succession ceases when the line is cancelled. On all
credit-approved Sales you assume the Credit Risk up to the amount so approved
and will bear the credit loss on the amount of the uncollected Receivables if a
Customer, after delivery/rendition and acceptance of the goods/services, fails
on due date to pay in full solely because of financial inability, but you are
not to be responsible where nonpayment results from any Customer Dispute, acts
of God, war,
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<PAGE>
civil strife, currency restrictions, or foreign political impediments, because
we assume all other risks. Credit approvals once granted may be withdrawn by you
prior to shipment/rendition of the goods/services. With regard to Sales without
credit approval or in excess of any approved amount of credit, as to any given
Customer, we agree that any payments or credits on any Receivables owing from
such Customer may be applied first to any credit-approved Receivables which may
at any time be unpaid, regardless of the respective dates such Sales occurred
and regardless of any notations on payment items, or may be applied in such
other manner as you in your sole discretion shall deem appropriate.
2.4 We will provide you and/or the Import Factor with listings of
Receivables in form satisfactory to you, together with Customers' invoices,
shipping documents, and such other documents and proof of delivery/rendition as
you or the Import Factor may at any time require. In addition, with respect to
each Receivable, we shall provide you with whatever proof of assignment or other
documents confirming assignment that may be required by the Import Factor
involved no later than five (5) business days after receipt of a request
therefor.
Billing on invoices by whomever done shall be conclusive
evidence of assignment and sale hereunder of such Receivables whether or not we
execute any other instrument with regard thereto. All invoices to Customers
shall state plainly on the face thereof that the Receivables represented by such
invoices have been assigned, sold, and are payable to the Import Factor only.
All remittances obtained by us against Receivables will be received in trust for
you and the Import Factor, and we will turn over to you the identical
remittances as speedily as possible; provided, however, that nothing herein
authorizes us to collect Receivables.
2.5 The purchase price of Receivables is to be the Net Amount thereof,
which, less any charges and reserves, will be due and payable on Payment Date.
We will pay to you a commission in an amount equal to one and one-quarter of one
percent (1.25%) of the gross amount of such Receivables for the first ninety
(90) day term or part thereof, plus one-quarter of one percent (0.25%) of such
gross amount for each additional thirty (30) day term or part thereof; provided,
however, that the minimum commission for any Receivable shall be Five Dollars
($5.00). We shall also pay to you a handling charge of Five Dollars ($5.00) per
invoice. You may retain from sums payable to us a reserve, which reserve may be
revised from time to time at your discretion, in order to provide for Customer
Disputes, possible credit losses on unapproved Receivables, and the Obligations.
A discount, credit, or allowance after issuance or granting may not be claimed
by us, but may be claimed solely by the Customer; no third party beneficiary
rights are created hereby.
2.6 We shall pay to you on demand any advances or charges at any time
outstanding in our account.
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<PAGE>
2.7 You will render a statement of account monthly, and such statement
shall be binding upon us except as to specific matters for which you are
notified in writing to the contrary within sixty (60) days after the date of
such statement.
SECTION 3. INTEREST
Interest shall be charged for the number of days that advances or other
charges to our account remain outstanding at the rate of three-quarters of one
percent (0.75%) per annum plus the Prime Rate; except, however, that the
interest rate shall in no event be less than six percent (6.0%) per annum.
Interest shall be computed on the basis of a year of three hundred sixty (360)
days, for actual days elapsed. Changes in the rate shall be effected monthly to
reflect changes in the Prime Rate, as follows: the rate shall be adjusted on the
first day of each month based on the Prime Rate in effect at the close of
business on the last Banking Day of the immediately preceding month. After
termination, we shall pay interest on our obligations hereunder at the rate of
two percent (2.0%) per annum plus the Prime Rate, with changes to such rate of
interest to take effect as hereinbefore provided. For the purpose of interest
calculation, commissions earned during each month shall be deemed charged to our
account on the fifteenth (15th) day of each month.
SECTION 4. POWER OF ATTORNEY
We hereby appoint you and the Import Factor, jointly and severally, as
our attorneys-in-fact to receive, open, and dispose of all mail addressed to us
pertaining to Receivables; to endorse our name upon any notes, acceptances,
checks, drafts, money orders, and other evidences of payment of Receivables that
may come into your possession and to deposit or otherwise collect the same; and
to do all other acts and things necessary to carry out the terms of this
Agreement. This power, being coupled with an interest, is irrevocable while any
Receivable shall remain unpaid. Neither you nor the Import Factor, as
attorney-in-fact, shall be liable for any errors of judgment or mistake of fact.
Notwithstanding anything herein to the contrary, prior to an Event of Default or
default hereunder, you shall not file UCC financing statements without our prior
consent, which consent shall not be unreasonably withheld.
SECTION 5. SECURITY INTEREST
We hereby grant you a security interest in all of our present and
future Receivables (specifically assigned to you) and all returned, repossessed,
and reclaimed goods, and books and records relating thereto, to secure all of
the
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<PAGE>
Obligations. We further sell and assign to you all our title and/or interest
in the goods (unless released by you) represented by Receivables (specifically
assigned to you) as well as goods returned by or repossessed from Customers, all
of our rights as an unpaid vendor or lienor, all of our rights of stoppage in
transit, replevin and reclamation relating thereto, and all of our rights
against third parties with respect thereto; we will cooperate with you and the
Import Factor in exercising any rights with respect to the goods. In addition,
we hereby grant to you a security interest in the reserve established pursuant
to Section 2.5 hereof, to secure all of the Obligations.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 We represent and warrant that we are fully authorized to enter into
this Agreement and perform hereunder and covenant that we will continue to be so
for the duration of this Agreement.
6.2 We represent and warrant that we are solvent.
6.3 We represent and warrant that our Receivables are, and covenant
that they shall be, at the time of their creation, bona fide and existing
obligations of our Customers arising out of our Sales, free and clear of all
security interests, liens, and claims whatsoever except as provided in the LSA.
6.4 We covenant that we will not permit inventory to become encumbered
without your prior written consent except as provided in the LSA.
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<PAGE>
6.5 We represent and warrant that with respect to each Receivable as it
arises:
(a) We will have made delivery of the goods or will have
rendered the services ordered;
(b) The Customer will accept the goods and/or services;
(c) No Customer Dispute will exist in any respect;
(d) We will have preserved and will continue to preserve any
liens and any rights to liens available by virtue of Sales;
(e) The Customer will not be our affiliate;
(f) The original and each copy of each invoice will bear
notice that the Receivable to which it relates has been assigned and is payable
only to the Import Factor involved as its owner, such notice being in the form
prescribed by you;
(g) We have the unqualified right to assign and transfer to
you and the Import Factor involved full ownership of each such Receivable,
including any interest and other cost relating to such Receivable and which are
recoverable from the Customer; and
(h) The currency of payment of each Receivable will be U.S.
Dollars.
6.6 We covenant that so long as any credit-approved Receivable of our
Customer remains unpaid, all Sales to such Customer shall be submitted to you.
6.7 We covenant that we will insure or cause to be insured all goods
shipped by us to our Customers, until your interest and the interest of the
Import Factor therein are terminated, against all risks to which such goods are
exposed, including, without limitation, marine, war, or other hazards of
transit, loss, damage, fire, theft and all other risks, in such amounts and with
such companies under such policies and in such form as shall be satisfactory to
you and the Import Factor, which policies shall provide that loss thereunder
shall be payable to you and the Import Factor as your interests may appear, and
you and the Import Factor may apply any proceeds of such insurance which may be
received by you or the Import Factor for payment of the Obligations, whether or
not due, in such order of application as you and the Import Factor may
determine, and such policies or certificates thereon or duplicates thereof shall
immediately be deposited with you and the Import Factor.
-8-
<PAGE>
SECTION 7. CUSTOMER DISPUTES, CHARGEBACKS AND RETURNS
We will notify you promptly and will settle all Customer Disputes, but
you and the Import Factor have the right at all times to do so directly and to
compromise, adjust, or litigate all such Customer Disputes. If a Customer
Dispute exists or is asserted with regard to any Receivable, or if we breach any
warranty or covenant with respect to any Receivable, you may charge back to our
account the Net Amount of such Receivable, as well as all other Receivables
owing by the same Customer. You may charge back to our account at any time any
unapproved Receivable, whether before or after its due date. A chargeback shall
not be deemed a reassignment of the Receivable, and title thereto and to the
goods represented thereby shall remain in you until you execute a reassignment.
All returned, replevied, and reclaimed goods coming into our possession shall be
held in trust by us for you and the Import Factor.
SECTION 8. BOOKS AND RECORDS; FINANCIAL STATEMENTS
You and your representatives shall at all reasonable times have the
right to examine all of our books and records. We agree to prepare and furnish
you financial statements as set forth in Section 11.1 of the LSA except for
monthly statements required thereunder.
SECTION 9. INDEMNITY
We shall indemnify you and the Import Factor for all reasonable costs
and expenses incurred by you or the Import Factor in connection with Receivables
for which credit approval has not been given and in connection with Receivables
which are unpaid at maturity for reasons other than financial inability.
Further, we shall indemnify you and the Import Factor for any liability for
duties, forwarder's fees, storage, shipping charges, sales or excise taxes or
other expenses in connection with the Receivables and for any losses occasioned
by claims of Customers under Receivables. We shall also indemnify you and the
Import Factor for reasonable expenses incurred in connection with rendering the
assignment of each Receivable to the Import Factor enforceable against third
parties to the maximum extent possible under applicable law. We shall indemnify
you for the amount of any bank or wire transfer charges imposed by the Import
Factor or its transferring bank. These indemnities shall survive the termination
of this Agreement.
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<PAGE>
SECTION 10. APPLICABLE LAW
This Agreement shall be governed by, construed, and enforced according
to the laws of the State of Georgia.
SECTION 11. EFFECTIVE DATE; TERMINATION; BINDING EFFECT
If accepted by you, this Agreement shall be effective on August 1,
1997, and shall continue in full force and effect until: (a) one (1) year from
such effective date and from year to year thereafter until terminated (on any
such anniversary date) by our giving to you not less than sixty (60) days prior
written notice; or (b) terminated by you at any time by giving to us not less
than sixty (60) days prior written notice. This Agreement may be terminated at
any time by you without notice to us should any Default occur. This Agreement
shall automatically terminate if the LSA is terminated for any reason. Upon
termination, we will pay all of our Obligations to you, and in any event we will
remain liable to you for any deficiency remaining after determination of our
liability hereunder and liquidation of any collateral. Also, upon termination
you may withhold any payment to us unless supplied with an indemnity
satisfactory to you. This Agreement shall bind us, our successors and assigns
and shall inure to the benefit of you, your successors and assigns; we agree
that you may delegate your duties hereunder.
SECTION 12. EXPENSES; ATTORNEYS' FEES; NO WAIVER; SEVERABILITY;
HEADINGS
We shall pay all reasonable expenses incurred by you in connection with
this Agreement, including expenses incurred in connection with the filing of
financing statements, continuation statements, record searches and reasonable
attorneys' fees. We shall also pay you such wire transfer and similar fees as
you charge from time to time. Upon liquidation of any collateral, settlement or
prosecution of Customer Disputes, or enforcement of any obligation of ours
hereunder, you may charge to our account all costs and expenses incurred
including reasonable attorneys' fees, if collection is by or through an attorney
and such costs, expenses and fees actually incurred shall constitute obligations
hereunder. No delay or failure on your part in exercising any right, privilege,
or option hereunder shall operate as a waiver of such or of any other right,
privilege, or option, and no waiver, amendment, or modification of any provision
of this Agreement shall be valid unless in writing signed by you and then only
to the extent therein stated. Should any provision of this Agreement be
prohibited by or invalid under applicable law, the validity of the remaining
provisions shall not be affected thereby. Any notices, requests, demands or
other communications given by you under this Agreement may be sent by mail,
telex, telegraph, delivery or telecopy to
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<PAGE>
our most current address as reflected in your records. The headings used herein
are intended to be for convenience of reference only and shall not define or
limit the scope, extent or intent or otherwise affect the meaning of any portion
hereof.
SECTION 13. ENTIRE AGREEMENT; WAIVER OF JURY TRIAL
This Agreement embodies our entire agreement as to the subject matter
and supersedes all prior agreements as to the subject matter. EACH OF US HEREBY
WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO
TRANSACTIONS UNDER THIS AGREEMENT.
SECTION 14. TRADE STYLES
Receivables under this Agreement shall include those created by our
doing business under the following trade styles, all of which have been duly and
properly registered:
SECTION 15. SPECIAL STIPULATIONS
LADD FURNITURE, INC.
By: ____________________________________
(Title)
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<PAGE>
ACCEPTANCE
The foregoing Factoring Agreement is accepted in Atlanta, Georgia as of
the _____ day of _______________, 19__.
NATIONSBANC COMMERCIAL CORPORATION
By:______________________________________
(Title)
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<PAGE>
[EXECUTION COPY]
AMENDMENT NO. 5
to
LOAN AND SECURITY AGREEMENT
dated as of July 12, 1996
THIS AMENDMENT NO. 5 dated as of October 1, 1997 is made by
LADD FURNITURE, INC., a North Carolina corporation, AMERICAN FURNITURE COMPANY,
INCORPORATED, a Virginia corporation, BARCLAY FURNITURE CO., a Mississippi
corporation, CLAYTON-MARCUS COMPANY, INC., a North Carolina corporation, LADD
CONTRACT SALES CORPORATION, a North Carolina corporation, LADD INTERNATIONAL
SALES CORP., a Barbados corporation, LADD TRANSPORTATION, INC., a North Carolina
corporation, PENNSYLVANIA HOUSE, INC., a North Carolina corporation, PILLIOD
FURNITURE, INC., a North Carolina corporation (the "Borrowers"), NATIONSBANK,
N.A., a national banking association ("NationsBank")), FLEET CAPITAL
CORPORATION, a Rhode Island corporation ("Fleet" and together with NationsBank,
the "Co-Agents"), the financial institutions parties to the Loan Agreement (as
hereinafter defined) from time to time (the "Lenders"), and NATIONSBANK as
administrative agent for the Lenders (the "Administrative Agent").
Preliminary Statements
The Borrowers, the Lenders, the Co-Agents and the
Administrative Agent are parties to a Loan and Security Agreement dated as of
July 12, 1996, as amended by Amendment No. 1 dated as of August 15, 1996,
Amendment No. 2 dated as of October 10, 1996, Amendment No. 3 dated as of
December 23, 1996 and Amendment No. 4 dated as of July 24, 1997 (said Agreement,
as so amended, the "Loan Agreement"; terms defined therein and not otherwise
defined herein being used herein as therein defined).
LADD has requested, and the Lenders and the Administrative
Agent have agreed, upon and subject to all of the terms, conditions and
provisions of this Amendment, to reduce all Applicable Margins set forth in the
Loan Agreement.
Accordingly, in consideration of the Loan Agreement, the Loans
made by the Lenders and outstanding thereunder, the mutual promises hereinafter
set forth and other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Amendments to Loan Agreement. The Loan Agreement is
hereby amended, subject to the provisions of Section 2 hereof, by deleting
therefrom Annex B attached thereto and substituting therefor a new Annex B in
the form attached hereto as Exhibit 1.
<PAGE>
Section 2. Effectiveness of Amendment. This Amendment shall
become effective as of the date hereof, on the date on which the Administrative
Agent shall have received this Amendment duly executed and delivered by each
Borrower and each Lender.
Section 3. Effect of Amendment. From and after the
effectiveness of this Amendment, all references in the Loan Agreement and in any
other Loan Document to "this Agreement," "the Loan Agreement," "hereunder,"
"hereof" and words of like import referring to the Loan Agreement, shall mean
and be references to the Loan Agreement as amended by this Amendment. Except as
expressly amended hereby, the Loan Agreement and all terms, conditions and
provisions thereof remain in full force and effect and are hereby ratified and
confirmed. The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Administrative Agent under any of the Loan
Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
Section 4. Counterpart Execution; Governing Law.
(a) Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement.
(b) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Georgia.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
BORROWERS:
LADD FURNITURE, INC.
By:___________________________
William S. Creekmuir
Executive Vice President
AMERICAN FURNITURE COMPANY, INCORPORATED
By:___________________________
William S. Creekmuir
Vice President
BARCLAY FURNITURE CO.
By:___________________________
William S. Creekmuir
Vice President
CLAYTON-MARCUS COMPANY, INC.
By:___________________________
William S. Creekmuir
Vice President
LADD CONTRACT SALES CORP.
By:___________________________
William S. Creekmuir
Vice President
3
<PAGE>
PENNSYLVANIA HOUSE, INC.
By:___________________________
William S. Creekmuir
Vice President
PILLIOD FURNITURE, INC.
By:___________________________
William S. Creekmuir
Vice President
LADD TRANSPORTATION, INC.
By:___________________________
William S. Creekmuir
President
LADD INTERNATIONAL SALES CORP.
By:___________________________
William S. Creekmuir
Vice President
<PAGE>
AGENTS/LENDERS:
NATIONSBANK, N.A., as Administrative Agent,
a Co-Agent and as a Lender
By:___________________________
Arthur R. Cordwell, Jr.
Vice President
FLEET CAPITAL CORPORATION, as a Co-Agent and
as a Lender
By: _________________________
Name:
Title:
BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By:___________________________
Name:
Title:
THE CIT GROUP/BUSINESS CREDIT,
INC., as a Lender
By:___________________________
Name:
Title:
SANWA BUSINESS CREDIT CORPORATION,
as a Lender
By:___________________________
Name:
Title:
5
<PAGE>
BANKBOSTON, N.A., as a Lender
By:___________________________
Name:
Title:
CREDITANSTALT CORPORATE FINANCE, INC.,
as a Lender
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
BRANCH BANKING AND TRUST COMPANY,
as a Lender
By:___________________________
Name:
Title:
6
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