<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
Form 10-Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended October 3, 1998
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Commission File No. 0-11577
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LADD Furniture, Inc.
(Exact name of registrant as specified in its charter)
North Carolina 56-1311320
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Post Office Box 26777
4620 Grandover Parkway
Greensboro, North Carolina 27417-6777
(Address of principal executive offices) (Zip Code)
(336) 294-5233
(Registrants' telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of November 6, 1998 there were 7,831,080 shares of Common Stock ($.30 par
value) of the registrant outstanding.
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<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For the thirteen weeks and thirty-nine weeks ended
Sept. 27, 1997 and Oct. 3, 1998
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
-------------------------- -------------------------
Sept. 27, Oct. 3, Sept. 27, Oct. 3,
1997 1998 1997 1998
--------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 129,935 142,896 378,875 425,810
Cost of sales 106,791 115,160 309,621 344,066
--------- ------- ------- -------
Gross profit 23,144 27,736 69,254 81,744
Selling, general and administrative expenses 17,794 19,932 53,907 60,229
--------- ------- ------- -------
Operating income 5,350 7,804 15,347 21,515
--------- ------- ------- -------
Other deductions:
Interest expense 2,701 2,220 8,425 7,175
Other expense, net (199) 148 516 332
--------- ------- ------- -------
2,502 2,368 8,941 7,507
--------- ------- ------- -------
Earnings before income taxes 2,848 5,436 6,406 14,008
Income tax expense 1,110 2,117 2,498 5,460
--------- ------- ------- -------
Net earnings $ 1,738 3,319 3,908 8,548
========= ======= ======= =======
Net earnings per common share - basic $ 0.22 0.42 0.51 1.10
========= ======= ======= =======
Net earnings per common share - diluted $ 0.22 0.41 0.50 1.06
========= ======= ======= =======
Weighted average number of
common shares outstanding - basic 7,758 7,831 7,738 7,801
========= ======= ======= =======
Weighted average number of
common shares outstanding - diluted 7,867 8,034 7,826 8,074
========= ======= ======= =======
</TABLE>
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<PAGE> 3
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
January 3, 1998 and October 3, 1998
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
October 3,
January 3, 1998
1998* (Unaudited)
---------- -----------
<S> <C> <C>
Current assets:
Cash $ 75 156
Trade accounts receivable, less allowances for
doubtful receivables, discounts, returns and
allowances of $2,735 and $3,051, respectively 83,297 94,861
Inventories 93,189 103,353
Prepaid expenses and other current assets 8,016 7,124
-------- -------
Total current assets 184,577 205,494
-------- -------
Property, plant and equipment, net 67,530 66,189
Intangible and other assets, net 77,083 73,836
-------- -------
$329,190 345,519
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 6,807 6,590
Trade accounts payable 29,488 36,982
Accrued expenses and other current liabilities 31,952 38,617
-------- -------
Total current liabilities 68,247 82,189
-------- -------
Long-term debt, excluding current installments 118,586 109,540
Deferred and other liabilities 11,432 13,067
-------- -------
Total liabilities 198,265 204,796
-------- -------
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 7,759,683 shares
and 7,831,080 shares, respectively 2,328 2,349
Additional paid-in capital 50,102 51,331
Retained earnings 78,495 87,043
-------- -------
130,925 140,723
-------- -------
$329,190 345,519
======== =======
</TABLE>
* Derived from the Company's 1997 audited Consolidated Financial Statements.
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<PAGE> 4
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the thirty-nine weeks ended Sept. 27, 1997 and Oct. 3, 1998
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
39 Weeks Ended
---------------------------
Sept. 27, Oct. 3,
1997 1998
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,908 8,548
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation of property, plant and equipment 7,580 7,640
Amortization 3,115 2,832
Provision for losses on trade accounts receivable 593 955
Gain on sales of assets (145) (165)
Provision for deferred income taxes 773 269
Forgiveness of debt -- (217)
Increase in deferred and other liabilities 131 606
Change in assets and liabilities:
Increase in trade accounts receivable (17,728) (12,519)
Increase in inventories (8,899) (10,164)
Decrease in prepaid expenses and other
current assets 2,206 892
Increase in trade accounts payable 2,722 7,494
Increase in accrued expenses and other
current liabilities 6,703 7,818
-------- -------
Total adjustments (2,949) 5,441
-------- -------
Net cash provided by operating activities 959 13,989
-------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (4,129) (6,335)
Proceeds from sales of property, plant and equipment 16 69
Reductions in intangible and other assets 601 484
-------- -------
Net cash used in investing activities (3,512) (5,782)
-------- -------
Cash flows from financing activities:
Proceeds from borrowings 12,464 1,005
Principal payments on borrowings (14,886) (10,051)
Other 5,165 920
-------- -------
Net cash provided by (used in) financing activities 2,743 (8,126)
-------- -------
Net increase in cash 190 81
Cash at beginning of period 469 75
-------- -------
Cash at end of period $ 659 156
======== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 8,601 7,144
Cash paid (net of refunds received) during the period for income taxes (4,587) 2,561
======== =======
</TABLE>
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<PAGE> 5
LADD FURNITURE, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Number Additional Total
of shares Common paid-in Retained shareholders'
issued stock capital earnings equity
---------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 28, 1996 7,719,567 $ 2,316 49,401 72,183 123,900
Purchase of restricted
stock (3,273) (1) -- -- (1)
Shares issued in connection
with incentive stock
option plan 4,500 2 51 -- 53
Shares issued in connection
with employee defined
contribution plan 38,889 11 536 -- 547
Amortization of employee
restricted stock awards -- -- 114 -- 114
Net earnings -- -- -- 6,312 6,312
---------- ------- ------- ------ --------
BALANCE AT JANUARY 3, 1998 7,759,683 2,328 50,102 78,495 130,925
Shares issued in connection
with incentive stock
option plan 75,747 22 977 -- 999
Retirement of stock and purchase
of restricted stock (4,350) (1) (86) -- (87)
Amortization of employee
restricted stock awards -- -- 50 -- 50
Non-qualified stock options -- -- 261 -- 261
Net earnings -- -- -- 5,229 5,229
---------- ------- ------- ------ --------
BALANCE AT OCTOBER 3, 1998
(UNAUDITED) 7,831,080 $ 2,349 51,304 83,724 137,377
========== ======= ======= ====== ========
</TABLE>
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Notes:
(1) Quarterly Financial Statements
The quarterly consolidated financial statements of LADD Furniture,
Inc. and its subsidiaries (referred to as "LADD" or the "Company")
are unaudited and have been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission ("SEC").
In the opinion of management, these statements include all
adjustments necessary for a fair statement of the operating results
for the interim periods indicated. All such adjustments are of a
normal recurring nature. Certain information and footnote
disclosures prepared in accordance with generally accepted
accounting principles have been either condensed or omitted pursuant
to SEC rules and regulations. However, management believes that the
disclosures made are adequate for a fair presentation of results of
operations and financial position. It is suggested that these
financial statements be read in conjunction with the financial
statements and accompanying notes included in the Company's latest
Annual Report on Form 10-K.
(2) Inventories
A summary of inventories follows (in thousands):
<TABLE>
<CAPTION>
January 3, October 3,
1998 1998
--------- --------
<S> <C> <C>
Inventories on the FIFO cost method:
Finished goods $ 49,329 56,642
Work in process 15,697 15,105
Raw materials and supplies 38,170 42,642
--------- --------
Total inventories on the FIFO cost method 103,196 114,389
Less adjustments of certain inventories to the
LIFO cost method (10,007) (11,036)
--------- --------
$ 93,189 103,353
========= ========
</TABLE>
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<PAGE> 7
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 Earnings:
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
Sept. 27, Oct. 3, Sept. 27, Oct. 3,
1997 1998 1997 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 82.2 80.6 81.7 80.8
------ ------ ------ ------
Gross profit 17.8 19.4 18.3 19.2
Selling, general and administrative expenses 13.7 13.9 14.2 14.1
------ ------ ------ ------
Operating income 4.1 5.5 4.1 5.1
------ ------ ------ ------
Other deductions
Interest expense 2.1 1.6 2.2 1.7
Other expense, net (0.2) 0.1 0.2 0.1
------ ------ ------ ------
1.9 1.7 2.4 1.8
------ ------ ------ ------
Earnings before income taxes 2.2 3.8 1.7 3.3
Income tax expense 0.9 1.5 0.7 1.3
------ ------ ------ ------
Net earnings 1.3 % 2.3 % 1.0 % 2.0 %
====== ====== ====== ======
</TABLE>
Total net sales for the third quarter of 1998 increased 10.0%, to $142.9
million, as compared to $129.9 million in the third quarter of 1997. The
following table compares net sales for the third quarter by operating group:
<TABLE>
<CAPTION>
Sept. 27, Oct. 3, Percent
1997 1998 Increase Change
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Residential Casegoods $ 72,068 80,348 8,280 11.5 %
Residential Upholstery 28,017 31,483 3,466 12.4 %
Contract Sales 29,850 31,065 1,215 4.1 %
-------- ------- ------ ------
$129,935 142,896 12,961 10.0 %
======== ======= ====== ======
</TABLE>
Total net sales for the first nine months of 1998 increased 12.4%, to
$425.8 million, as compared to $378.9 million in the first nine months of 1997.
The following table compares net sales for the first nine months by operating
group:
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<PAGE> 8
<TABLE>
<CAPTION>
Sept. 27, Oct. 3, Percent
1997 1998 Increase Change
--------- ------- -------- -------
<S> <C> <C> <C> <C>
Residential Casegoods $208,240 234,608 26,368 12.7 %
Residential Upholstery 88,731 95,388 6,657 7.5 %
Contract Sales 81,904 95,814 13,910 17.0 %
-------- ------- ------ ------
$378,875 425,810 46,935 12.4 %
======== ======= ====== ======
</TABLE>
The increased net sales of residential casegoods and upholstery for the
third quarter and first nine month's of 1998 compared to the same periods of
1997 were due largely to an improved overall industry conditions at retail, as
well as the Company's recent successful new product introductions. The contract
sales growth in both 1998 periods was due primarily to continued hotel expansion
and refurbishment, a trend which the Company anticipates will continue for the
balance of 1998 and into 1999. However, because of the very strong growth rate
in contract sales since the 1997 fourth quarter, the comparative year-over-year
growth rate decelerated during the third quarter of 1998. The Company believes
that production capacity available either at its own casegoods manufacturing
facilities or through outside contractors will be sufficient to accommodate
anticipated contract sales growth over the remainder of 1998. The Company's
order backlog increased 11% during the third quarter, to $105.5 million.
Cost of sales as a percentage of net sales decreased to 80.6% for the
third quarter of 1998 and 80.8% for the year-to-date, from 82.2% and 81.7%,
respectively, in 1997. This decrease resulted in an increase in gross profit
margins to 19.4% for the 1998 third quarter and 19.2% for the year-to-date, from
17.8% and 18.3%, respectively, in 1997. Although the gross profit percent for
the first nine months of 1998 increased 0.9%, the 1998 first nine months gross
margin was negatively impacted by higher raw material costs (primarily lumber),
an approximate $1.4 million increase in the Company's LIFO charges, and price
discounts offered to customers to liquidate discontinued products. The increase
in the third quarter gross profit percent of 1.6% was a result of improved
manufacturing efficiencies, along with the production and shipment of a number
of recent new product introductions having higher margins.
Selling, general and administrative (SG&A) expenses increased to 13.9% of
net sales for the third quarter of 1998 from 13.7% for the same period in 1997,
while the first nine months SG&A expenses decreased to 14.1% from 14.2% in 1997.
The Company believes that its SG&A expense as a percent of net sales will
continue at an annualized rate approximating 14.0% over the remainder of 1998.
Other deductions (principally interest expense) represented 1.7% of net
sales for the third quarter and 1.8% for the first nine months of 1998, down
from 1.9% and 2.4%, respectively, in 1997. Average outstanding borrowings
declined approximately $6.9 million for the third quarter and $3.7 million for
the first nine months of 1998 compared to the same periods of 1997. In addition,
the overall effective interest rate was approximately 1.1% lower for both 1998
periods. As a result, interest expense declined by $481,000, or 17.8%, in the
third quarter and by $1.3 million, or 14.8%, for the first nine months of 1998.
The decline in the effective interest rate was primarily due to improved
operating performance, which, as provided in the Company's bank credit facility,
reduced the Company's interest rate margin on its bank debt by 0.25% as of April
21, 1998 and 0.25% as of July 21, 1998. Also, the Company's loan agreement was
amended effective May 15, 1998 to reduce its interest rate margin an additional
0.25% due to continued improvement in the
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<PAGE> 9
Company's operating performance. Further, the reduction of the base prime
lending rate by 0.25% on September 30, 1998 and another 0.25% on October 16,
1998 should also have a favorable impact on the Company's interest expense in
the fourth quarter of 1998. Based upon borrowing levels at October 3, 1998, such
decreases could reduce interest expense by approximately $580,000 on an annual
basis. "Other expense, net" decreased for the first nine months of 1998 as
compared to 1997, due to increased profits from the Company's transportation
operations, and a $217,000 forgiveness of debt during 1998 from a state
Industrial Development Authority under the terms of the financing.
The Company's estimated annual effective income tax rate was 39% for the
first nine months of both 1998 and 1997. The Company anticipates that its
combined effective Federal and state tax rate will continue to approximate 39%
over the remainder of 1998. For the first nine months of 1998, the Company's net
earnings totaled $8.5 million, compared to $3.9 million in the year-earlier
period. For the fiscal third quarter ended October 3, 1998, the Company's net
earnings totaled $3.3 million, compared to $1.7 million in the comparable 1997
quarter. The 1998 third quarter net earnings represented the Company's highest
third quarter profit since 1988.
Liquidity and Capital Resources
The Company's current ratio was 2.5 to 1 at October 3, 1998 and 2.7 to 1
at January 3, 1998. Net working capital totaled $123.3 million at October 3,
1998, compared to $116.3 million at January 3, 1998. As a result of the
Company's sales growth and increased backlog, trade accounts receivable and
inventories have increased over the 1997 fiscal year end amounts. The increase
in inventories was largely due to production scheduled during the third quarter
to satisfy current sales demands. In addition, the Company's trade accounts
payable and accrued expenses also increased during the first nine months of
1998, largely due to the Company's increased production levels.
During the first nine months of 1998, the Company generated $14.0 million
in cash from operating activities, compared to $1.0 million in the 1997 period.
The increase in cash provided by operations is attributable to higher cash
earnings, offset to some extent by increased working capital needs.
During the first nine months of 1998, capital spending totaled $6.3
million, compared to $4.1 million during the year-earlier period. The Company's
total capital expenditures for all of 1998 are expected to approximate $8.5
million, as compared to $7.5 million for all of 1997.
The total debt ratio (total debt as a percentage of total debt plus
shareholders' equity) was 45.2% at October 3, 1998, compared to 48.9% at January
3, 1998. The decrease resulted from improved operating performance, which
allowed the Company to repay debt while simultaneously increasing its equity
base. At October 3, 1998, $30.9 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> 10
Year 2000 Compliance
The Company continues to address actively the business issues associated
with the expected impact of the Year 2000 ("Y2K") on information technology
systems and non-information technology systems (i.e., embedded technology) both
internally and in relation to the Company's external customers and suppliers.
Factors involved in assessing such business issues include the evaluation and
testing of the Company's systems; evaluation, upgrading and certifying of
automated plant machinery and equipment; and assessing the compliance strategies
of significant customers and vendors and monitoring the status of those
strategies (including electronic commerce with those companies).
The Company has created a corporate-wide Y2K Steering Committee with
subcommittees located at each of the Company's business units for the purpose of
directing the Company's compliance efforts and identifying and addressing the
impact on information technology systems and non-information technology systems
in the event of non-compliance. An inventory of all the Company's equipment
containing date sensitive embedded technology has been completed, and at the
present time only a small portion of this equipment has not been either tested
or deemed to be Y2K compliant. Since the fourth quarter of 1994, the Company has
been upgrading its information systems technology with Y2K compliant software to
support its manufacturing, sales and order entry, and financial reporting
systems. As a result, a significant portion of the Company's systems were Y2K
compliant prior to 1998 and the remainder of the critical systems are expected
to be compliant by the end of the current fiscal year. The Company does not
believe any material exposures or contingencies exist with respect to its
internal information systems, as the installation of remaining software changes
is anticipated to be completed in the necessary time frame. At the present time,
the Company believes it has completed over 90% of the necessary internal
software and hardware implementation required for Y2K compliance and, therefore,
has not yet developed a contingency plan. If by the end of fiscal 1998 the
Company's critical systems are not Y2K compliant, a contingency plan will be
formulated at that time.
The Company is currently requesting assurances from its major suppliers
and business partners that they will be Y2K compliant so that there will be no
disruption of their products or services as the new century begins. The Company
is assessing the risk of each of its significant suppliers and business partners
to determine the possible impact of their non-compliance, if that should occur.
Where appropriate, contingency plans and alternative suppliers are being
developed or investigated. Although the Company is presently not aware of any
material exposures or contingencies related to the Y2K compliance efforts of its
significant vendors and business partners, if a significant vendor or business
partner should be non-compliant there can be no assurance such an event will not
have a material adverse effect on the Company's consolidated financial position,
results of operations and cash flows. The Company believes the actions it is
taking (including the continued monitoring of third-party compliance and the
development of appropriate contingency plans) will minimize these risks and
believes it is taking responsible steps to prevent any major disruptions of its
business units.
The Company believes the actions it has taken since late 1994 have
minimized the costs and expenses incurred in 1998, and estimates that a majority
of the expenditures have already been incurred by the Company. Anticipated
expenditures relating to the Y2K compliance are expected to be less than
$500,000 in total for both 1998 and 1999. However, new developments may
subsequently occur that could affect the Company's estimates of the costs for
Y2K compliance.
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<PAGE> 11
Forward-Looking Statements
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. These statements can be identified by the use of
forward-looking terminology such as "believes", "expects", "may", "should", or
"anticipates." The Company cautions readers that these forward-looking
statements, including without limitation, those relating to sales, operating
costs, working capital, liquidity, capital needs, interest costs and Y2K
compliance, are subject to certain risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward-looking
statements. This is due to several important factors herein identified,
including without limitation: anticipated growth in sales; success of new
product introductions; increased cash flow from operations; anticipated selling,
general and administrative expenses; projected capital spending; decreased
interest expense; Y2K readiness (particularly with respect to third-party vendor
compliance); and other risks and factors identified from time to time in the
Company's reports filed with the Securities and Exchange Commission.
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<PAGE> 12
PART II. OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10-1 Amendment No. 7 and Consent 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 Supplement No. 1 to Amendment No. 7 and Consent 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.
10-3 Supplemental Retirement Income Plan for Salaried Employees of
LADD Furniture, Inc., as amended and restated effective
January 1, 1994, and as further amended effective January 1,
1997, and October 22, 1998.
10-4 LADD Furniture, Inc. Executive Retirement Plan effective
January 1, 1998.
27-1 (edgar version only)
(b) Reports on Form 8-K
On July 21, 1998, the Company filed with the Commission a Form 8-K
dated July 21, 1998 which reported under Item 5 the Press Release
dated July 20, 1998 reporting the Company's second quarter 1998
results of operations.
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<PAGE> 13
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 13, 1998 By: s/William S. Creekmuir
------------------------------
William S. Creekmuir
Executive Vice President
and Chief Financial Officer
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<PAGE> 1
EXHIBIT 10.1
[EXECUTION COPY]
AMENDMENT NO. 7 and CONSENT
to
LOAN AND SECURITY AGREEMENT
dated as of July 12, 1996
THIS AMENDMENT NO. 7 AND CONSENT dated as of August 28, 1998 (this
"Amendment") 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, Amendment
No. 4 dated as of July 24, 1997, Amendment No. 5 dated as of October 1, 1997 and
Amendment No. 6 dated as of May 15, 1998 (said Agreement, as so amended, the
"Loan Agreement"; terms defined therein and not otherwise defined herein being
used herein as therein defined).
The Borrowers have 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 consent to (i) the merger of Barclay with and
into Clayton-Marcus, with Clayton-Marcus as the surviving entity (the "Merger")
and (ii) the $5,000,000 industrial development authority bond financing to be
entered into between American and the Industrial Development Authority of Smyth,
County Virginia (the "Chilhowie IRBs") for the purpose of financing building
renovations and the purchase of equipment for American's Chilhowie, Virginia
facility, and to modify certain provisions of the Loan Agreement as hereinafter
set forth in order to accommodate said merger and bond transaction.
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
<PAGE> 2
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 3 hereof, by
(a) amending Section 1.1 Definitions by
(i) amending the definition "Barclay" in its entirety to read as
follows:
"Barclay" means Clayton-Marcus.
(ii) amending the definition "Borrower" by deleting therefrom
"Barclay,"
(iii) amending the definition "Clayton-Marcus" by inserting before the
period at the end thereof the phrase "and the surviving corporation of
the merger with Barclay Furniture Co., a Mississippi corporation," and
(iv) inserting the following definitions in the appropriate
alphabetical order to read in its entirety as follows:
"Chilhowie IRBs" means Industrial Revenue Bonds to be issued
by the Industrial Development Authority of Smyth County, Virginia in
the original principal amount of up to $5,000,000, pursuant to the
Chilhowie IRB Documents, in connection with the renovation of certain
facilities of American in Chilhowie, Smyth County, Virginia and the
purchase of the Chilhowie IRB Equipment. Repayment of the loan made to
American from the proceeds of the Chilhowie IRBs will be repayable over
not less than 10 years (except as provided in the Chilhowie IRB
Documents), will be guaranteed by LADD, and will be secured by a letter
of credit issued by Wachovia Bank, N.A. and a Lien on the Chilhowie IRB
Equipment in favor of the issuer of the Chilhowie IRBs and/or the
issuer of the letter of credit.
"Chilhowie IRB Documents" means the loan agreement, trust
indenture, and any other agreement, document, certificate or instrument
to be delivered in connection with the issuance of the Chilhowie IRBs.
"Chilhowie IRB Equipment" means the Equipment acquired by
American with the proceeds of the Chilhowie IRBs and located at
American's premises in Smyth County, Virginia.
"Chilhowie IRB Transaction" means, collectively, the
transactions contemplated by the Chilhowie IRB Documents.
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<PAGE> 3
(b) amending Section 12.2 Debt by amending clause (c) in its entirety
to read as follows:
(c) Permitted Purchase Money Debt and Capitalized Lease
Obligations incurred after the Agreement Date and Debt represented by
the Chilhowie IRBs, not to exceed $10,000,000 at any time outstanding,
(c) amending Section 12.9 Liens by inserting the phrase "and the Lien
on the Chilhowie IRB Equipment securing the Debt represented by the Chilhowie
IRBs and/or American's reimbursement obligations in respect of the Wachovia
Bank, N.A.-issued letter of credit securing the Chilhowie IRBs, as the case may
be," immediately before the period at the end thereof.
(d) deleting Schedules 7.1(a), 7.1(b), 7.1(c), 7.1(e), 7.1(f), 7.1(h),
7.1(i), 7.1(t), 7.1(u), 7.1(v), 7.1(w), 7.1(bb) and 7.1(dd) to the Loan
Agreement delivered by the Borrowers as of March 15, 1998, and substituting
therefor the Schedules attached hereto as Exhibit A.
Section 2. Consent. The Lenders hereby consent, subject to the
provisions of Section 3, (i) to the Merger and waive compliance and the effect
of non-compliance by the Borrowers with the provisions of Sections 12.4, 12.7
and 12.8 to the extent any thereof would be breached by consummation of the
Merger, (ii) to the Chilhowie IRB Transaction (as such term and other
capitalized terms used herein are defined in the Loan Agreement as amended by
this Amendment), and (iii) to the subordination of the Security Interest in the
Chilhowie IRB Equipment to the Lien of the holders of the Chilhowie IRBs (the
"IRB Holders") or to Wachovia Bank, N.A. ("Wachovia"), as issuer of the letter
of credit securing the Chilhowie IRBs, as the case may be, on the Chilhowie IRB
Equipment, on terms acceptable to the Administrative Agent in its reasonable
business judgment.
Section 3. Effectiveness of Amendment. This Amendment shall become
effective on the date (the "Amendment Effective Date") on which the
Administrative Agent shall have received the following, each in form and
substance acceptable to the Administrative Agent and in sufficient copies for
each Lender:
(a) this Amendment duly executed and delivered by each Borrower and
each Lender;
(b) 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 (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), having
attached thereto a copy of the corporate action of Clayton-Marcus and the other
relevant Borrowers authorizing the Merger, and to the further effect that the
incumbency
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<PAGE> 4
certificate and corporate action delivered in connection with the occurrence of
the Effective Date remain in effect, unchanged, or certifying any changes
thereto;
(c) a certificate of the President or Executive Vice President of LADD
and of the President or a Vice President of each other Borrower stating that, to
the best of his knowledge and based on an examination sufficient to enable him
to make an informed statement, after giving effect to this Amendment,
(i) all of the representations and warranties made or deemed
to be made under the Loan Agreement are true and correct in all
material respects as of the Amendment Effective Date, having attached
thereto any revised Schedules necessary to permit such certification,
including but not limited to Schedules 7.1(a), 7.1(b), 7.1(c), 7.1(e),
7.1(f), 7.1(h), 7.1(i), 7.1(t), 7.1(u), 7.1(v), 7.1(w), 7.1(bb) and
7.1(dd) to the Loan Agreement, and
(ii) no Default or Event of Default exists,
and such statements shall be true;
(d) such additional Financing Statements as are necessary or desirable
to maintain the Security Interest in compliance with the provision of Article 8
of the Loan Agreement, or as the Administrative Agent may request, duly executed
and delivered by the relevant Borrower(s), and evidence satisfactory to the
Administrative Agent that the said Financing Statements have been filed in each
jurisdiction where such filing may be necessary or appropriate; and
(e) such other documents, agreements, certificates or other instruments
in connection with this Amendment as the Administrative Agent may reasonably
request.
Section 4. Effect of Amendment. From and after the effectiveness of
this Amendment,
(a) Barclay Furniture Co., a Mississippi corporation, shall no longer
be a "Borrower." Each of the Borrowers expressly acknowledges, consistent with
the provisions of Sections 5.19, 5.20 and 5.21 of the Loan Agreement, that the
merger of Barclay with and into Clayton-Marcus does not impair or otherwise
affect such Borrower's liability in respect of the Secured Obligations, and
(b) 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.
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<PAGE> 5
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 5. Representations, Warranties and Covenants.
(a) Representations and Warranties. The Borrowers each hereby represent
and warrant to the Lenders that each of the representations and warranties set
forth in the Loan Documents is true and correct in all material respects as of
the date hereof both before and after giving effect to this Amendment, and shall
survive the delivery of this Amendment.
(b) Covenants. The Borrowers each hereby covenant with the Lenders,
which covenant shall survive the delivery of this Amendment, that the Borrowers
shall deliver to the Administrative Agent:
(i) as soon as possible and in no event later than thirty days
after the Amendment Effective Date evidence satisfactory to the
Administrative Agent that (A) the Merger has been consummated in
accordance with the Agreement and Plan of Merger of Barclay Furniture
Co. and Clayton-Marcus Company, Inc. dated July 23, 1998, furnished to
the Administrative Agent by LADD, and (B) fee title to the Sherman and
Myrtle, Mississippi plants is held by a Borrower, that such Real Estate
continues to be subject to the Lien of the Mortgage affecting such Real
Estate and to no other Lien or exception to title that the
Administrative Agent has not approved in writing, with priority from
the original date of recording of the relevant Mortgage, which evidence
may include paid endorsements (or commitments to issue the same,
satisfactory to the Administrative Agent in its sole discretion) to the
existing policies of mortgagee title insurance in respect of such Real
Estate; and
(ii) evidence satisfactory to the Administrative Agent of the
consummation of the Chilhowie IRB Transaction within thirty days of
such consummation, including (A) certified executed copies of Chilhowie
IRB Documents (defined herein as defined in the Loan Agreement as
amended by this Amendment) and any other documents, agreements,
certificates or other instruments executed in connection with the
Chilhowie IRB Transaction, (B) a certificate of the President or
Executive Vice President of LADD and of the President or a Vice
President of each other Borrower that each of the representations and
warranties set forth in the Loan Documents is true and correct in all
material respects and that no Default or Event of Default exists, in
each case as of the date of consummation of the Chilhowie IRB
Transaction, (C) a reliance letter entitling the Lenders to rely upon
the opinion of Kilpatrick Stockton LLP delivered in connection
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<PAGE> 6
with the Chilhowie IRB Transaction, and (D) such other documents,
agreements, certificates or other instruments as the Administrative
Agent may reasonably request.
(c) Year 2000 Compliance. The Borrowers each hereby (i) represent and
warrant to the Lenders, which representations and warranties shall survive the
delivery of this Amendment, that such Borrower has (A) initiated a review and
assessment of all areas within its and each of its Subsidiaries' business and
operations (including those affected by suppliers, vendors and customers) that
could be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by the Borrowers or any of their Subsidiaries (or
suppliers, vendors and customers) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (B) developed a plan and timeline for addressing the
Year 2000 Problem on a timely basis, and (C) to date, implemented that plan in
accordance with that timetable, and (ii) covenanted with the Lenders, which
covenant shall survive the delivery of this Amendment, that LADD will promptly
notify the Administrative Agent in the event LADD discovers or determines that
any computer application (including those of its suppliers, vendors and
customers) that is material to its or any other Borrower's business and
operations, on a consolidated basis, will not be Year 2000 Compliant (as
hereinafter defined). Based on the foregoing, each Borrower believes that all
computer applications (including those of suppliers, vendors (other than the
Lenders) and customers) that are material to the business and operations of LADD
and each other Borrower, on a consolidated basis, are reasonably expected on a
timely basis to be able to perform properly date-sensitive functions for all
dates before and after January 1, 2000 (that is, be "Year 2000 Compliant").
Section 6. 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.
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<PAGE> 7
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
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<PAGE> 8
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
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<PAGE> 9
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:
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<PAGE> 10
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:
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<PAGE> 1
EXHIBIT 10.2
[EXECUTION COPY]
SUPPLEMENT NO. 1
to
AMENDMENT NO. 7 and CONSENT
to
LOAN AND SECURITY AGREEMENT
dated as of July 12, 1996
THIS SUPPLEMENT NO. 1 TO AMENDMENT NO. 7 AND CONSENT dated
September ___, 1998 (this "Supplement") is made by LADD FURNITURE, INC., a North
Carolina corporation, AMERICAN FURNITURE COMPANY, INCORPORATED, a Virginia
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, Amendment No. 4 dated as of July 24, 1997, Amendment No. 5
dated as of October 1, 1997, Amendment No. 6 dated as of May 15, 1998 and
Amendment No. 7 dated as of August 28, 1998 (said Agreement, as so amended, the
"Loan Agreement"; terms defined therein and not otherwise defined herein being
used herein as therein defined).
In order to accommodate a change in the collateral to be
pledged to Wachovia Bank, N.A. as security for American's reimbursement
obligations in respect of the letter of credit supporting the Chilhowie IRBs,
the Borrowers have 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 supplement the aforesaid Amendment No. 7 to the Loan Agreement
("Amendment No. 7") as hereinafter set forth.
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:
<PAGE> 2
Section 1. Supplement to Amendment. Amendment No. 7 is hereby
amended, subject to the provisions of Section 3 hereof, by
(a) amending Section 1. Amendments to Loan Agreement by
(i) amending subsection (a)(iv) thereof by
(A) amending the definition "Chilhowie IRBs"
appearing therein in its entirety to read as follows:
"Chilhowie IRBs" means Industrial Revenue Bonds to be issued
by the Industrial Development Authority of Smyth County,
Virginia in the original principal amount of up to $5,000,000,
pursuant to the Chilhowie IRB Documents, in connection with
the renovation of certain facilities of American in Chilhowie,
Smyth County, Virginia and the purchase of the Chilhowie IRB
Collateral. Repayment of the loan made to American from the
proceeds of the Chilhowie IRBs will be repayable over not less
than 10 years (except as provided in the Chilhowie IRB
Documents), will be guaranteed by LADD, and will be secured by
a letter of credit issued by Wachovia Bank, N.A. and a Lien on
the Chilhowie IRB Collateral in favor of the issuer of the
Chilhowie IRBs and/or the issuer of the letter of credit.
(B) inserting the following definition in appropriate
alphabetical order to read in its entirety as follows:
"Chilhowie IRB Collateral" means the Chilhowie IRB
Equipment, any Chilhowie IRBs tendered and not remarketed,
held by American or LADD, and any account(s) and deposit(s)
therein established pursuant to Section 7.3(b) of the
Reimbursement and Security Agreement dated as of October 1,
1998 between American and Wachovia Bank, National Association
(being one of the Chilhowie IRB Documents) and representing
sinking fund payments made thereunder.
(ii) amending subsection (c) thereof by deleting the phrase
"Chilhowie IRB Equipment" appearing therein and substituting therefor
the phrase "Chilhowie IRB Collateral," and
(b) amending Section 2. Consent by amending subsection (iii) thereof by
deleting the phrase "Chilhowie IRB Equipment" each time it appears therein and
substituting therefor the phrase "Chilhowie IRB Collateral."
Section 2. Effectiveness of Supplement. This Supplement shall
become effective as of August 28, 1998 on the date on which the Administrative
Agent shall have
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<PAGE> 3
received copies of this Supplement duly executed by each Borrower and each
Lender, in sufficient number for each Lender.
Section 3. Effect of Amendment. From and after the
effectiveness of this Supplement, all references in Amendment No. 7 to "this
Amendment," "the Amendment," "hereunder," "hereof" and words of like import
referring to Amendment No. 7, shall mean and be references to Amendment No. 7 as
amended by this Supplement. Except as expressly amended hereby, Amendment No. 7
and 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 Supplement 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 either Amendment No. 7 or the Loan Agreement,
nor constitute a waiver of any provision of either Amendment No. 7 or the Loan
Agreement.
Section 6. Counterpart Execution; Governing Law.
(a) Execution in Counterparts. This Supplement 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 Supplement shall be governed by and
construed in accordance with the laws of the State of Georgia.
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<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Supplement 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
CLAYTON-MARCUS COMPANY, INC.
By:___________________________
William S. Creekmuir
Vice President
LADD CONTRACT SALES CORP.
By:___________________________
William S. Creekmuir
Vice President
PENNSYLVANIA HOUSE, INC.
By:___________________________
William S. Creekmuir
Vice President
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<PAGE> 5
PILLIOD FURNITURE, INC.
By:___________________________
William S. Creekmuir
Vice President
LADD TRANSPORTATION, INC.
By:___________________________
William S. Creekmuir
Vice President
LADD INTERNATIONAL SALES CORP.
By:___________________________
William S. Creekmuir
President
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<PAGE> 6
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:
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<PAGE> 7
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:
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<PAGE> 1
EXHIBIT 10.3
SUPPLEMENTAL RETIREMENT INCOME PLAN
FOR SALARIED EMPLOYEES OF
LADD FURNITURE, INC.
The Supplemental Retirement Income Plan for Salaried Employees of LADD
Furniture, Inc. (the "Plan" or the "SERP") was originally adopted effective
January 1, 1990 by LADD Furniture, Inc. for the purpose of providing benefits
for certain of its salaried employees. The Plan has been amended from time to
time. Effective October 22, 1998, LADD Furniture, Inc. hereby amends and
restates the Plan in its entirety pursuant to the terms and provisions set forth
below:
ARTICLE 1
DEFINITIONS
Wherever used herein the following terms shall have the meanings
hereinafter set forth:
1.1 "Actuarial Equivalent" means a benefit that is equal in value to
the aggregate amounts expected to be received under the normal form of benefit
payment under Section 3.2 of the Plan. Such equality in value shall be based on
assumptions as to the occurrence of future events. The future events to be taken
into account are mortality for Participants, mortality for Beneficiaries, and an
interest discount for the time value of money. For this Plan, the actuarial
assumptions are as follows:
(a) For benefits other than benefits to be paid in a lump sum,
actuarial equivalency will be based on the 1984 Unisex Mortality Table with a 7
percent interest assumption adjusted for a 20 percent female content in the
participant group and an 80 percent female content in the beneficiary group.
<PAGE> 2
(b) For benefits to be paid as a lump sum, actuarial
equivalency will be based upon the GAM 1983 Mortality Table and based on an
interest rate assumption equal to the annual rate of interest on 30-year
Treasury securities in effect as of the month that is two months before the date
benefit payments commence.
1.2 "Average Final Compensation" means a Participant's average total
gross compensation (including only gross base salary and gross incentive pay
under the Management Incentive Plan and the Long-Term Incentive Plan and
excluding compensation from stock options, restricted stock and any other
benefit or compensation program) during the three consecutive calendar Years of
Service resulting in the highest such average. If a participant has less than
three Years of Service, "Average Final Compensation" shall mean the
Participant's average total compensation, computed on an annual basis, for all
of his completed months of service as an Employee.
Notwithstanding the above paragraph, Average Final
Compensation for any Participant shall not be less than the average total
compensation of the Participant during the two consecutive Years of Service
prior to 1994 resulting in the highest such average.
1.3 "Change in Control" means the date on which the earlier of the
following events occur:
(a) The acquisition by any entity, person or group of
beneficial ownership, as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, of more than 30% of the outstanding capital stock of the
Company entitled to vote for the election of directors ("Voting Stock");
(b) The merger or consolidation of the Company with one or
more corporations as a result of which the holders of the outstanding Voting
Stock of the Company immediately prior to such a merger or consolidation hold
less than 60% of the Voting Stock of the surviving or resulting corporation;
2
<PAGE> 3
(c) The transfer of substantially all of the property of the
Company other than to an entity of which the Company owns at least 80% of the
Voting Stock; or
(d) The election to the Board of Directors of the Company of
three directors without the recommendation or approval of the incumbent Board of
Directors of the Company.
1.4 "Committee" means the Compensation Committee of the Board of
Directors of the Company.
1.5 "Company" means LADD Furniture, Inc., a North Carolina corporation,
or, to the extent provided in Section 8.9 below, any successor corporation or
other entity resulting from a merger or consolidation into or with the Company
or a transfer or sale of substantially all of the assets of the Company.
1.6 "Designated Beneficiary" means the individual or entity designated
by a Participant to receive a Survivor Benefit pursuant to Article 4. If a
Participant does not designate a beneficiary in writing, his Designated
Beneficiary shall be (a) his spouse, if any; (b) if there is no surviving
spouse, his children, per stirpes; or (c) if none, his estate.
1.7 "Normal Retirement Date" means the date a Participant attains age
65.
1.8 "Participant" means a salaried employee or former employee of the
Company who is designated by the Committee as being eligible to participate in
the Plan.
1.9 "Plan" or "SERP" means the Supplemental Retirement Income Plan for
Salaried Employees of LADD Furniture, Inc.
1.10 "Primary Social Security Benefit" means an amount that is the
monthly old-age benefit to which a Participant is or would be entitled
commencing immediately following his Normal Retirement Date, or his actual
retirement date, if later. Such amount shall be estimated
3
<PAGE> 4
based on the compensation records of the Company and shall be based on the
provisions of the Social Security Act in effect on the December 31 immediately
preceding, or coincident with, the Participant's separation from service with
the Company. If a Participant retires after his Normal Retirement Date, the
amount of the Primary Social Security Benefit shall reflect those increases, if
any, authorized under such Act because of increases in the wage base or benefit
levels occurring after his Normal Retirement Date, but shall not reflect any
increase authorized under such Act resulting from the delayed commencement of
Social Security benefits beyond age 65. If it is necessary to estimate earnings
for years for which no wage history is available, it will be assumed that an
employee received a six percent increase in wages each year. If a Participant
separates from service prior to his Normal Retirement Date, the Participant's
Primary Social Security Benefit shall be determined by assuming that the
Participant's Compensation continues unchanged until his Normal Retirement Date.
Notwithstanding the above, a Participant may provide the
Company with an actual earnings history, prepared by the Social Security
Administration. If such a history is provided, the Primary Social Security
Benefit shall be calculated using the actual earnings for any years for which
actual wage history was previously unavailable. If the use of actual wage
history results in a lower Primary Social Security Benefit, it shall be used.
The actual wage history must be supplied within 180 days after a Participant's
separation from service, or the date of notification of this right, if later.
1.11 "Qualified Plan" means the Retirement Plan for Employees of LADD
Furniture, Inc. and all predecessor plans.
1.12 "Qualified Plan Retirement Benefit" means the aggregate benefit
that would have been payable to a Participant from the Qualified Plan and all
annuities purchased for the Participant under the Qualified Plan (whether or not
a Qualified Plan is terminated) by reason of the Participant's termination of
employment with the Company for any reason other than death. Such calculation
shall be made based on the assumption that benefits continue to accrue under the
Qualified Plan after the freezing of benefits effective December 31, 1996, and
the subsequent
4
<PAGE> 5
termination of the Qualified Plan until the Participant's termination of
employment. Such benefit shall be calculated as a ten-year certain and life
thereafter annuity payable at age 65, in the amount set forth on the attached
Appendix A.
1.13 "Retirement Benefit" means the benefit payable to a Participant
pursuant to the Plan by reason of his termination of employment with the Company
and all affiliates for any reason other than death.
1.14 "Survivor Benefit" means the benefit payable to a Designated
Beneficiary pursuant to the Plan.
1.15 "Surviving Spouse" means a person who is married to a Participant
at the date of his death and for at least one year prior thereto.
1.16 "Year of Service" means a calendar year in which a Participant is
employed on a full-time basis by the Company or by a predecessor employer that
is acquired by the Company. Participants shall be given credit for partial Years
of Service on a pro rata basis.
1.17 Words in the masculine gender shall include the feminine and the
singular shall include the plural, and vice versa, unless qualified by the
context. Any headings used herein are included for ease of reference only, and
are not to be construed so as to alter the terms hereof.
ARTICLE 2
ELIGIBILITY
2.1 Selection of Participants. All individuals who are Participants in
the SERP on October 21, 1998, and who are not selected by the Committee to
participate in the LADD Furniture, Inc. Executive Retirement Plan, shall
continue to be Participants in the Plan. A Participant shall be eligible to
receive the Retirement Benefit provided for in Article 3. The Designated
Beneficiary of a Participant who dies prior to complete payment of his
Retirement
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<PAGE> 6
Benefit shall be eligible to receive the Survivor Benefit provided for in
Article 4. The list of Participants is set forth on Appendix A.
2.2 Inactive Participants. If an Employee who has previously been
designated by the Committee as a Participant ceases to serve the Company in an
executive capacity that would normally result in the Employee being a
Participant in the Plan, but the Employee remains employed by the Company, the
Committee shall designate the Employee as an "Inactive Participant." The
determination of whether a Participant should be designated an Inactive
Participant shall be made by the Committee in its sole discretion. Any
Participant designated by the Committee as an Inactive Participant pursuant to
this paragraph shall have his Retirement Benefit and Survivor Benefit provided
for under the Plan computed in accordance with Article 3 and, particularly,
Section 3.5
ARTICLE 3
RETIREMENT BENEFITS
3.1 Benefit Amount. The Retirement Benefit payable to Participant in
the form of a ten-year certain and life thereafter annuity commencing on his
Normal Retirement Date, shall be a monthly amount equal to the difference
between (a) and (b) below:
(a) two percent (2%) of Average Final Compensation, multiplied
by a Participant's Years of Service (maximum 25 years of service);
LESS
(b) the sum of a Participant's:
(i) Qualified Plan Retirement Benefit; and
(ii) Primary Social Security benefit.
The accrued benefit at any date of determination for a Participant
shall equal the benefit calculated as if the Participant had reached his Normal
Retirement Date on the date of determination, multiplied by the ratio of the
Participant's Years of Service at the date of
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<PAGE> 7
determination to his Years of Service at his Normal Retirement Date. Years of
Service shall include all years of employment with the Company or with a
predecessor employer who is acquired by the Company and shall include a fraction
of a year for each month worked.
3.2 Form of Retirement Benefit. The Retirement Benefit earned by a
Participant normally shall be paid in the form of a ten-year certain and life
thereafter annuity. A Participant may elect one of the following alternate
methods of annuity payment no later than one year prior to when the Participant
becomes entitled to receive his Retirement Benefit:
(a) straight life annuity
(b) 50% joint and spousal survivor annuity
(c) 75% joint and spousal survivor annuity
(d) 100% joint and spousal survivor annuity
A Retirement Benefit which is payable to a Participant in any form other than a
ten-year certain and life thereafter annuity shall be the Actuarial Equivalent
of the Retirement Benefit set forth in Section 3.1. above.
3.3 Commencement of Retirement Benefit Payments. Payment of the
Retirement Benefit to a Participant shall commence on the first day of the
calendar quarter beginning after the later of the Participant's (a) termination
of employment; or (b) attainment of age 55. Notwithstanding this general rule,
a Participant may elect to defer the commencement of benefit payments to a date
not later than the first day of the month following the later of his (a)
termination of employment; or (b) his attainment of age 65. Such deferral
election must be made before the earlier of the amendment and restatement of
this Plan or one year before the Participant becomes entitled to receive his
Retirement Benefit pursuant to the preceding sentence.
3.4 Early Retirement Benefit. If a Participant terminates employment
and begins receiving Retirement Benefits prior to his Normal Retirement Date,
the amount of his Retirement Benefit shall be reduced in accordance with the
following schedule:
7
<PAGE> 8
Early Percentage of
Retirement Retirement Benefit
---------- ------------------
55 40%
56 46%
57 52%
58 58%
59 64%
60 70%
61 76%
62 82%
63 88%
64 94%
65 100%
3.5 Inactive Participants. If a Participant is designated as an
Inactive Participant by the Committee pursuant to Article 2, such Participant
shall cease to accrue additional benefits under the Plan. The Retirement Benefit
for an Inactive Participant shall be computed based on the Years of Service
credited to such Participant as of the date he became an Inactive Participant.
An Inactive Participant shall continue to be subject to all of the remaining
provisions of the Plan, including, without limitation, the vesting provisions of
Article 5.
3.6 Category One Participants and Participants in Pay Status.
Notwithstanding any other provision of the Plan, any Participant identified as a
"Category One Participant" under the prior version of the Plan and any "Category
Two Participant" who has begun receiving benefits under the Plan prior to
October 22, 1998, shall continue to receive retirement benefit payments in
accordance with the terms of the Plan in effect on October 21, 1998.
3.7 Effect of Change in Control. If a Change in Control occurs, the
Actuarial Equivalent of all benefits accrued under the Plan and not yet
distributed shall become immediately due and payable to each Participant in a
lump sum; provided that such Actuarial Equivalent shall be computed without any
reduction by reason of payment being made before a Participant attains his
Normal Retirement Date.
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ARTICLE 4
SURVIVOR BENEFITS
4.1 Pre-Retirement Survivor Benefit. If a Participant dies prior to the
commencement of Retirement Benefit payments, his Designated Beneficiary shall be
entitled to receive a Survivor Benefit equal to 100% of the Actuarial Equivalent
of the Retirement Benefit accrued at the date of death. Such benefit shall be
paid in the form of level installment payments over a ten-year period.
4.2 Post-Retirement Survivor Benefit. If a Participant dies after the
commencement of Retirement Benefit payments, the right of his Designated
Beneficiary to receive a Survivor Benefit shall depend on the form in which
Retirement Benefits were being paid to the Participant pursuant to Section 3.2.
ARTICLE 5
VESTING
5.1 Normal Vesting. A Participant shall become vested in his Retirement
Benefit upon completion of ten Years of Service and attainment of age 55, death
prior to termination of employment, or termination of employment by reason of
disability, as determined by the Committee. A Participant who terminates
employment prior to satisfying the vesting requirements set forth in this
Section 5.1 shall not be entitled to any Retirement Benefit under the Plan.
5.2 Vesting Upon Change in Control. Notwithstanding the other
provisions of Section 5.1, all Participants shall become 100% vested upon a
Change in Control.
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ARTICLE 6
ADMINISTRATION OF THE PLAN
6.1 Administration by the Company. The Company shall be responsible for
the general operation and administration of the Plan and for carrying out the
provisions thereof.
6.2 General Powers of Administration. All provisions set forth in the
Qualified Plan with respect to the administrative powers and duties of the
Company, expenses of administration, and procedures for filing claims shall also
be applicable with respect to the Plan. The Company shall be entitled to rely
conclusively upon all tables, valuations, certificates, opinions and reports
furnished by any actuary, accountant, controller, counsel or other person
employed or engaged by the Company with respect to the Plan.
ARTICLE 7
AMENDMENT OR TERMINATION
7.1 Amendment or Termination. The Company intends the Plan to be
permanent but reserves the right to amend or terminate the Plan when, in the
sole opinion of the Company, such amendment or termination is advisable. Any
such amendment or termination shall be made pursuant to a resolution of the
Board and shall be effective as of the date of such resolution.
7.2 Effect of Amendment or Termination. No amendment or termination of
the Plan shall directly or indirectly deprive any current or former Participant
or Surviving Spouse of all or any portion of any Retirement Benefit or Survivor
Benefit which has been accrued under Section 3.1 as of the date of such
amendment or termination. If the Plan is terminated, Retirement Benefits and
Survivor Benefits accrued as of the date the Plan is terminated shall be paid to
Participants and Surviving Spouses in accordance with the terms of the Plan in
effect immediately prior to the termination of the Plan.
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ARTICLE 8
GENERAL PROVISIONS
8.1 Funding. The Plan at all times shall be entirely unfunded as such
term is defined for purposes of the Employee Retirement Income Security Act
("ERISA"). The Committee may, however, in its sole discretion at any time make
provision for segregating assets of the Company for payment of any benefits
hereunder and establishing a trust to hold such assets. No Participant,
Surviving Spouse or any other person shall have any interest in any particular
assets of the Company by reason of the right to receive a benefit under the Plan
and any such Participant, Surviving Spouse or other person shall have only the
rights of a general unsecured creditor of the Company with respect to any rights
under the Plan.
8.2 General Conditions. Except as otherwise expressly provided herein,
all terms and conditions of the Qualified Plan applicable to a Qualified Plan
Retirement Benefit or a Qualified Plan Survivor Benefit shall also be applicable
to a Retirement Benefit or a Survivor Benefit payable hereunder. Any Qualified
Plan Retirement Benefit or Qualified Plan Survivor Benefit, or any other benefit
payable under the Qualified Plan, shall be paid solely in accordance with the
terms and conditions of the Qualified Plan and nothing in this Plan shall
operate or be construed in any way to modify, amend or affect the terms and
provisions of the Qualified Plan.
8.3 No Guaranty of Benefits. Nothing contained in the Plan shall
constitute a guaranty by the Company or any other entity or person that the
assets of the Company will be sufficient to pay any benefit hereunder.
8.4 No Enlargement of Employee Rights. No Participant or Surviving
Spouse shall have any right to a benefit under the Plan except in accordance
with the terms of the Plan. Establishment of the Plan shall not be construed to
give any Participant the right to be retained in the service of the Company.
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<PAGE> 12
8.5 Spendthrift Provision. No interest of any person or entity in, or
right to receive a benefit under, the Plan shall be subject in any manner to
sale, transfer, assignment, pledge, attachment, garnishment, or other alienation
or encumbrance of any kind; nor may such interest or right to receive a benefit
be taken, either voluntarily or involuntarily, for the satisfaction of the debts
of, or other obligations or claims against, such person or entity, including
claims for alimony, support, separate maintenance and claims in bankruptcy
proceedings.
8.6 Arbitration of Disputes. Any controversy or claim arising out of,
or in any way relating to this Plan shall be settled by arbitration in the city
of Greensboro, North Carolina, in accordance with the rules then in force of the
American Arbitration Association.
8.7 Small Benefits. If the actuarial value of any Retirement Benefit or
Survivor Benefit is less than $50,000, the Company may in its sole discretion
pay the actuarial value of such Benefit to the Participant or Surviving Spouse
in a single lump sum in lieu of any further benefit payments hereunder.
8.8 Incapacity of Recipient. If any person entitled to a benefit
payment under the Plan is deemed by the Company to be incapable of personally
receiving and giving a valid receipt for such payment, then, unless and until
claim therefor shall have been made by a duly appointed guardian or other legal
representative of such person, the Company may provide for such payment or any
part thereof to be made to any other person or institution then contributing
toward or providing for the care and maintenance of such person. Any such
payment shall be a payment for the account of such person and a complete
discharge of any liability of the Company and the Plan therefor.
8.9 Corporate Successors. The Plan shall not be automatically
terminated by a transfer or sale of assets of the Company or by the merger or
consolidation of the Company into or with any other corporation or other entity,
but the Plan shall be continued after such sale, merger or consolidation only if
and to the extent that the transferee, purchaser or successor entity agrees to
12
<PAGE> 13
continue the Plan. In the event that the Plan is not continued by the
transferee, purchaser or successor entity, then the Plan shall terminate subject
to the provisions of Sections 7.2 and 7.3.
8.10 Unclaimed Benefit. Each Participant shall keep the Company
informed of his current address and the current address of his spouse. The
Company shall not be obligated to search for the whereabouts of any person. If
the location of a Participant is not made known to the Company within three (3)
years after the date on which payment of the Participant's Retirement Benefit
may first be made, payment may be made as though the Participant had died at the
end of the three-year period. If, within one additional year after such
three-year period has elapsed, or, within three years after the actual death of
a Participant, the Company is unable to locate any Surviving Spouse of the
Participant, then the Company shall have no further obligation to pay any
benefit hereunder to such Participant or Surviving Spouse or any other person
and such benefit shall be irrevocable forfeited.
8.11 Discharge of Obligations. Any payment made under this Plan in good
faith by the Company shall completely discharge the Company of any liability to
any other individual who asserts a claim to such payment.
8.12 Limitations on Liability. Notwithstanding any of the preceding
provisions of the Plan, neither the Company nor any individual acting as an
employee or agent of the Company shall be liable to any Participant, former
Participant, Surviving Spouse or any other person for any claim, loss, liability
or expense incurred in connection with the Plan.
8.13 Applicable Law. The Plan shall be construed and administered under
the laws of the State of North Carolina.
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IN WITNESS WHEREOF, this Plan has been executed this the _____ day of
__________________, 19___.
LADD FURNITURE, INC.
By:_________________________________
Chairman of the Board and
Chief Executive Officer
ATTEST:
___________________________
Secretary
[CORPORATE SEAL]
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<PAGE> 15
APPENDIX A
Participant Qualified Plan Benefit
----------- ----------------------
15
<PAGE> 1
EXHIBIT 10.4
LADD FURNITURE, INC.
EXECUTIVE RETIREMENT PLAN
Effective January 1, 1998, LADD Furniture, Inc. hereby establishes the
LADD Furniture, Inc. Executive Retirement Plan (the "Plan" or the "ERP")
pursuant to the terms and provisions set forth below to provide retirement
benefits to eligible executives of the Company. This Plan replaces the
Supplemental Retirement Income Plan for Salaried Employees of LADD Furniture,
Inc. originally adopted effective January 1, 1990, for all executives covered
under this Plan.
ARTICLE 1
DEFINITIONS
Wherever used herein the following terms shall have the meanings
hereinafter set forth:
1.1 "Actuarial Equivalent" means a benefit that is equal in value to
the aggregate amounts expected to be received under the normal form of benefit
payment under Section 3.2 of the Plan. Such equality in value shall be based on
assumptions as to the occurrence of future events. The future events to be taken
into account are mortality for Participants, mortality for Beneficiaries, and an
interest discount for the time value of money. For this Plan, the actuarial
assumptions are as follows:
(a) For benefits other than benefits to be paid in a lump sum,
actuarial equivalency will be based on the 1984 Unisex Mortality Table with a 7
percent interest assumption adjusted for a 20 percent female content in the
participant group and an 80 percent female content in the beneficiary group.
<PAGE> 2
(b) For benefits to be paid as a lump sum, actuarial
equivalency will be based upon the GAM 1983 Mortality Table and based on an
interest rate assumption equal to the annual rate of interest on 30-year
Treasury securities in effect as of the month that is two months before the date
benefit payments commence.
1.2 "Average Final Compensation" means a Participant's average total
gross compensation (including only gross base salary and gross incentive pay
under the Management Incentive Plan and the Long-Term Incentive Plan and
excluding compensation from stock options, restricted stock and any other
benefit or compensation program) during the three consecutive calendar Years of
Service resulting in the highest such average. If a participant has less than
three Years of Service, "Average Final Compensation" shall mean the
Participant's average total compensation, computed on an annual basis, for all
of his completed months of service as an Employee.
1.3 "Change in Control" means the date on which the earlier of the
following events occur:
(a) The acquisition by any entity, person or group of
beneficial ownership, as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, of more than 30% of the outstanding capital stock of the
Company entitled to vote for the election of directors ("Voting Stock");
(b) The merger or consolidation of the Company with one or
more corporations as a result of which the holders of the outstanding Voting
Stock of the Company immediately prior to such a merger or consolidation hold
less than 60% of the Voting Stock of the surviving or resulting corporation;
(c) The transfer of substantially all of the property of the
Company other than to an entity of which the Company owns at least 80% of the
Voting Stock; or
2
<PAGE> 3
(d) The election to the Board of Directors of the Company of
three directors without the recommendation or approval of the incumbent Board of
Directors of the Company.
1.4 "Committee" means the Compensation Committee of the Board of
Directors of the Company.
1.5 "Company" means LADD Furniture, Inc., a North Carolina corporation,
or, to the extent provided in Section 8.9 below, any successor corporation or
other entity resulting from a merger or consolidation into or with the Company
or a transfer or sale of substantially all of the assets of the Company.
1.6 "Designated Beneficiary" means the individual or entity designated
by a Participant to receive a Survivor Benefit pursuant to Article 4. If a
Participant does not designate a beneficiary in writing, his Designated
Beneficiary shall be (a) his spouse, if any; (b) if there is no surviving
spouse, his children, per stirpes; or (c) if none, his estate.
1.7 "Normal Retirement Date" means the date a Participant attains age
65.
1.8 "Participant" means a salaried employee or former employee of the
Company who is designated by the Committee as being eligible to participate in
the Plan.
1.9 "Plan" or "ERP" means the LADD Furniture, Inc. Executive Retirement
Plan.
1.10 "Primary Social Security Benefit" means an amount that is the
monthly old-age benefit to which a Participant is or would be entitled
commencing immediately following his Normal Retirement Date, or his actual
retirement date, if later. Such amount shall be estimated based on the
compensation records of the Company and shall be based on the provisions of the
Social Security Act in effect on the December 31 immediately preceding, or
coincident with, the Participant's separation from service with the Company. If
a Participant retires after his Normal Retirement Date, the amount of the
Primary Social Security Benefit shall reflect those increases,
3
<PAGE> 4
if any, authorized under such Act because of increases in the wage base or
benefit levels occurring after his Normal Retirement Date, but shall not reflect
any increase authorized under such Act resulting from the delayed commencement
of Social Security benefits beyond age 65. If it is necessary to estimate
earnings for years for which no wage history is available, it will be assumed
that an employee received a six percent increase in wages each year. If a
Participant separates from service prior to his Normal Retirement Date, the
Participant's Primary Social Security Benefit shall be determined by assuming
that the Participant's Compensation continues unchanged until his Normal
Retirement Date.
Notwithstanding the above, a Participant may provide the
Company with an actual earnings history, prepared by the Social Security
Administration. If such a history is provided, the Primary Social Security
Benefit shall be calculated using the actual earnings for any years for which
actual wage history was previously unavailable. If the use of actual wage
history results in a lower Primary Social Security Benefit, it shall be used.
The actual wage history must be supplied within 180 days after a Participant's
separation from service, or the date of notification of this right, if later.
1.11 "Qualified Plan" means the Retirement Plan for Employees of LADD
Furniture, Inc.
1.12 "Qualified Plan Retirement Benefit" means the total benefit
(including a Participant's share of surplus assets) earned by a Participant
under the Qualified Plan and all predecessor plans, calculated as a ten-year
certain and life thereafter annuity payable at age 65, in the amount set forth
on the attached Appendix A.
1.13 "Retirement Benefit" means the benefit payable to a Participant
pursuant to the Plan by reason of his termination of employment with the Company
and all affiliates for any reason other than death.
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<PAGE> 5
1.14 "Survivor Benefit" means the benefit payable to a Designated
Beneficiary pursuant to the Plan.
1.15 "Surviving Spouse" means a person who is married to a Participant
at the date of his death and for at least one year prior thereto.
1.16 "Year of Service" means a calendar year in which a Participant is
employed on a full-time basis by the Company or by a predecessor employer
acquired by the Company. Participants shall be given credit for partial Years of
Service on a pro rata basis.
1.17 Words in the masculine gender shall include the feminine and the
singular shall include the plural, and vice versa, unless qualified by the
context. Any headings used herein are included for ease of reference only, and
are not to be construed so as to alter the terms hereof.
ARTICLE 2
ELIGIBILITY
2.1 Selection of Participants. The Committee shall select certain
executives of the Company who have contributed to the success of the Company in
an extraordinary way to be Participants in the Plan. A Participant shall be
eligible to receive the Retirement Benefit provided for in Article 3. The
Designated Beneficiary of a Participant who dies prior to complete payment of
his Retirement Benefit shall be eligible to receive the Survivor Benefit
provided for in Article 4. The list of Participants is set forth on Appendix A.
2.2 Inactive Participants. If an Employee who has previously been
designated by the Committee as a Participant ceases to serve the Company in an
executive capacity that would normally result in the Employee being a
Participant in the Plan, but the Employee remains employed by the Company, the
Committee shall designate the Employee as an "Inactive Participant." The
determination of whether a Participant should be designated an Inactive
Participant shall be made by the Committee in its sole discretion. Any
Participant designated by
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<PAGE> 6
the Committee as an Inactive Participant pursuant to this paragraph shall have
his Retirement Benefit and Survivor Benefit provided for under the Plan computed
in accordance with Article 3 and, particularly, Section 3.3.
ARTICLE 3
RETIREMENT BENEFITS
3.1 Benefit Amount. The Retirement Benefit payable to Participant in
the form of a ten-year certain and life thereafter annuity commencing on his
Normal Retirement Date, shall be a monthly amount equal to the difference
between (a) and (b) below:
(a) two percent (2%) of Average Final Compensation,
multiplied by a Participant's Years of Service
(maximum 25 years of service);
LESS
(b) the sum of a Participant's:
(i) Qualified Plan Retirement Benefit; and
(ii) Primary Social Security benefit.
3.2 Form of Retirement Benefit. The Retirement Benefit earned by a
Participant normally shall be paid in the form of a ten-year certain and life
thereafter annuity. A Participant may elect one of the following alternate
methods of annuity payment no later than one year prior to when the Participant
becomes entitled to receive his Retirement Benefit:
(a) straight life annuity
(b) 50% joint and spousal survivor annuity
(c) 75% joint and spousal survivor annuity
(d) 100% joint and spousal survivor annuity
A Retirement Benefit which is payable to a Participant in any form other than a
ten-year certain and life thereafter annuity shall be the Actuarial Equivalent
of the Retirement Benefit set forth in Section 3.1. above.
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<PAGE> 7
3.3 Commencement of Retirement Benefit Payments. Payment of the
Retirement Benefit to a Participant shall commence on the first day of the
calendar quarter beginning after the later of the Participant's (a) termination
of employment; or (b) attainment of age 55. Notwithstanding this general rule,
a Participant may elect to defer the commencement of benefit payments to a date
not later than the first day of the month following the later of his (a)
termination of employment; or (b) his attainment of age 65. Such deferral
election must be made at least one year before the Participant becomes entitled
to receive his Retirement Benefit pursuant to the preceding sentence.
3.4 Early Retirement Benefit. If a Participant terminates employment
and begins receiving Retirement Benefits prior to his Normal Retirement Date,
the amount of his Retirement Benefit shall be reduced in accordance with the
following schedule:
Early Percentage of
Retirement Retirement Benefit
---------- ------------------
55 40%
56 46%
57 52%
58 58%
59 64%
60 70%
61 76%
62 82%
63 88%
64 94%
65 100%
3.5 Inactive Participants. If a Participant is designated as an
Inactive Participant by the Committee pursuant to Article 2, such Participant
shall cease to accrue additional benefits under the Plan. The Retirement Benefit
for an Inactive Participant shall be computed based on the Years of Service
credited to such Participant as of the date he became an Inactive Participant.
An Inactive Participant shall continue to be subject to all of the remaining
provisions of the Plan, including, without limitation, the vesting provisions of
Article 5.
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<PAGE> 8
3.6 Participants in Prior Plan. Any employee who was a participant in
the Supplemental Retirement Income Plan for Salaried Employees of LADD
Furniture, Inc. (the "Prior Plan") and who is not a Participant in this Plan
shall receive retirement benefit payments in accordance with the terms of the
Prior Plan.
3.7 Effect of Change in Control. If a Change in Control occurs, the
Actuarial Equivalent of all benefits accrued under the Plan and not yet
distributed shall become immediately due and payable to each Participant in a
lump sum; provided that such Actuarial Equivalent shall be computed without any
reduction by reason of payment being made before a Participant attains his
Normal Retirement Date.
ARTICLE 4
SURVIVOR BENEFITS
4.1 Pre-Retirement Survivor Benefit. If a Participant dies prior to the
commencement of Retirement Benefit payments, his Designated Beneficiary shall be
entitled to receive a Survivor Benefit equal to 100% of the Actuarial Equivalent
of the Retirement Benefit accrued at the date of death. Such benefit shall be
paid in the form of level installment payments over a ten-year period.
4.2 Post-Retirement Survivor Benefit. If a Participant dies after the
commencement of Retirement Benefit payments, the right of his Designated
Beneficiary to receive a Survivor Benefit shall depend on the form in which
Retirement Benefits were being paid to the Participant pursuant to Section 3.2.
ARTICLE 5
VESTING
5.1 Normal Vesting. A Participant shall become vested in his Retirement
Benefit upon completion of ten Years of Service and attainment of age 55, death
prior to termination of
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<PAGE> 9
employment, or termination of employment by reason of disability, as determined
by the Committee. A Participant who terminates employment prior to satisfying
the vesting requirements set forth in this Section 5.1 shall not be entitled to
any Retirement Benefit under the Plan.
5.2 Vesting Upon Change in Control. Notwithstanding the other
provisions of Section 5.1, all Participants shall become 100% vested upon a
Change in Control.
ARTICLE 6
ADMINISTRATION OF THE PLAN
6.1 Administration by the Company. The Company shall be responsible for
the general operation and administration of the Plan and for carrying out the
provisions thereof.
6.2 General Powers of Administration. All provisions set forth in the
Qualified Plan with respect to the administrative powers and duties of the
Company, expenses of administration, and procedures for filing claims shall also
be applicable with respect to the Plan. The Company shall be entitled to rely
conclusively upon all tables, valuations, certificates, opinions and reports
furnished by any actuary, accountant, controller, counsel or other person
employed or engaged by the Company with respect to the Plan.
ARTICLE 7
AMENDMENT OR TERMINATION
7.1 Amendment or Termination. The Company intends the Plan to be
permanent but reserves the right to amend or terminate the Plan when, in the
sole opinion of the Company, such amendment or termination is advisable. Any
such amendment or termination shall be made pursuant to a resolution of the
Board and shall be effective as of the date of such resolution.
7.2 Effect of Amendment or Termination. No amendment or termination of
the Plan shall directly or indirectly deprive any current or former Participant
or Surviving Spouse of all or
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<PAGE> 10
any portion of any Retirement Benefit or Survivor Benefit which has been accrued
under Section 3.1 as of the date of such amendment or termination. If the Plan
is terminated, Retirement Benefits and Survivor Benefits accrued as of the date
the Plan is terminated shall be paid to Participants and Surviving Spouses in
accordance with the terms of the Plan in effect immediately prior to the
termination of the Plan.
ARTICLE 8
GENERAL PROVISIONS
8.1 Funding. The Plan at all times shall be entirely unfunded as such
term is defined for purposes of the Employee Retirement Income Security Act
("ERISA"). The Committee may, however, in its sole discretion at any time make
provision for segregating assets of the Company for payment of any benefits
hereunder and establishing a trust to hold such assets. No Participant,
Surviving Spouse or any other person shall have any interest in any particular
assets of the Company by reason of the right to receive a benefit under the Plan
and any such Participant, Surviving Spouse or other person shall have only the
rights of a general unsecured creditor of the Company with respect to any rights
under the Plan.
8.2 Qualified Plan Retirement Benefit. Any Qualified Plan Retirement
Benefit or any other benefit payable under the Qualified Plan, shall be paid
solely in accordance with the terms and conditions of the Qualified Plan and
nothing in this Plan shall operate or be construed in any way to modify, amend
or affect the terms and provisions of the Qualified Plan.
8.3 No Guaranty of Benefits. Nothing contained in the Plan shall
constitute a guaranty by the Company or any other entity or person that the
assets of the Company will be sufficient to pay any benefit hereunder.
8.4 No Enlargement of Employee Rights. No Participant or Surviving
Spouse shall have any right to a benefit under the Plan except in accordance
with the terms of the Plan.
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<PAGE> 11
Establishment of the Plan shall not be construed to give any Participant the
right to be retained in the service of the Company.
8.5 Spendthrift Provision. No interest of any person or entity in, or
right to receive a benefit under, the Plan shall be subject in any manner to
sale, transfer, assignment, pledge, attachment, garnishment, or other alienation
or encumbrance of any kind; nor may such interest or right to receive a benefit
be taken, either voluntarily or involuntarily, for the satisfaction of the debts
of, or other obligations or claims against, such person or entity, including
claims for alimony, support, separate maintenance and claims in bankruptcy
proceedings.
8.6 Arbitration of Disputes. Any controversy or claim arising out of,
or in any way relating to this Plan shall be settled by arbitration in the city
of Greensboro, North Carolina, in accordance with the rules then in force of the
American Arbitration Association.
8.7 Small Benefits. If the actuarial value of any Retirement Benefit or
Survivor Benefit is less than $50,000, the Company may in its sole discretion
pay the actuarial value of such Benefit to the Participant or Surviving Spouse
in a single lump sum in lieu of any further benefit payments hereunder.
8.8 Incapacity of Recipient. If any person entitled to a benefit
payment under the Plan is deemed by the Company to be incapable of personally
receiving and giving a valid receipt for such payment, then, unless and until
claim therefor shall have been made by a duly appointed guardian or other legal
representative of such person, the Company may provide for such payment or any
part thereof to be made to any other person or institution then contributing
toward or providing for the care and maintenance of such person. Any such
payment shall be a payment for the account of such person and a complete
discharge of any liability of the Company and the Plan therefor.
8.9 Corporate Successors. The Plan shall not be automatically
terminated by a transfer or sale of assets of the Company or by the merger or
consolidation of the Company into or with any
11
<PAGE> 12
other corporation or other entity, but the Plan shall be continued after such
sale, merger or consolidation only if and to the extent that the transferee,
purchaser or successor entity agrees to continue the Plan. In the event that the
Plan is not continued by the transferee, purchaser or successor entity, then the
Plan shall terminate subject to the provisions of Sections 7.2 and 7.3.
8.10 Unclaimed Benefit. Each Participant shall keep the Company
informed of his current address and the current address of his spouse. The
Company shall not be obligated to search for the whereabouts of any person. If
the location of a Participant is not made known to the Company within three (3)
years after the date on which payment of the Participant's Retirement Benefit
may first be made, payment may be made as though the Participant had died at the
end of the three-year period. If, within one additional year after such
three-year period has elapsed, or, within three years after the actual death of
a Participant, the Company is unable to locate any Surviving Spouse of the
Participant, then the Company shall have no further obligation to pay any
benefit hereunder to such Participant or Surviving Spouse or any other person
and such benefit shall be irrevocable forfeited.
8.11 Discharge of Obligations. Any payment made under this Plan in good
faith by the Company shall completely discharge the Company of any liability to
any other individual who asserts a claim to such payment.
8.12 Limitations on Liability. Notwithstanding any of the preceding
provisions of the Plan, neither the Company nor any individual acting as an
employee or agent of the Company shall be liable to any Participant, former
Participant, Surviving Spouse or any other person for any claim, loss, liability
or expense incurred in connection with the Plan.
8.13 Applicable Law. The Plan shall be construed and administered under
the laws of the State of North Carolina.
12
<PAGE> 13
IN WITNESS WHEREOF, this Plan has been executed this the _____ day of
______________________, 19_____.
LADD FURNITURE, INC.
By:________________________________
Chairman of the Board and
Chief Executive Officer
ATTEST:
________________________________
Secretary
[CORPORATE SEAL]
13
<PAGE> 14
APPENDIX A
Participant Qualified Plan Benefit
----------- ----------------------
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> OCT-03-1998
<CASH> 156
<SECURITIES> 0
<RECEIVABLES> 94,861
<ALLOWANCES> 3,051
<INVENTORY> 103,353
<CURRENT-ASSETS> 205,494
<PP&E> 66,189
<DEPRECIATION> 0
<TOTAL-ASSETS> 345,519
<CURRENT-LIABILITIES> 82,189
<BONDS> 109,540
0
0
<COMMON> 2,349
<OTHER-SE> 138,374
<TOTAL-LIABILITY-AND-EQUITY> 345,519
<SALES> 425,810
<TOTAL-REVENUES> 425,810
<CGS> 344,066
<TOTAL-COSTS> 344,066
<OTHER-EXPENSES> 60,561
<LOSS-PROVISION> 955
<INTEREST-EXPENSE> 7,175
<INCOME-PRETAX> 14,008
<INCOME-TAX> 5,460
<INCOME-CONTINUING> 8,548
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,548
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.06
</TABLE>
