<PAGE> 1
================================================================================
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 2, 1999
------------
Commission File No. 0-11577
------------
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 Identification Number)
incorporation or organization)
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 October 27, 1999 there were 7,833,518 shares of Common Stock ($.30 par
value) of the registrant outstanding.
================================================================================
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LADD FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the thirteen and thirty-nine weeks ended October 2, 1999 and October 3, 1998
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
--------------------- ----------------------
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
1999 1998 1999 1998
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $150,651 142,896 460,810 425,810
Cost of sales 120,751 115,160 369,767 344,066
-------- ------- -------- -------
Gross profit 29,900 27,736 91,043 81,744
Selling, general and administrative expenses 20,973 19,932 65,812 60,229
-------- ------- -------- -------
Operating income 8,927 7,804 25,231 21,515
-------- ------- -------- -------
Other deductions:
Interest expense 1,695 2,220 5,570 7,175
Other expense (income), net 113 148 (19) 332
-------- ------- -------- -------
1,808 2,368 5,551 7,507
-------- ------- -------- -------
Earnings before income taxes 7,119 5,436 19,680 14,008
Income tax expense 2,634 2,117 7,282 5,460
-------- ------- -------- -------
Net earnings $ 4,485 3,319 12,398 8,548
======== ======= ======== =======
Net earnings per common share - basic $ 0.57 0.42 1.58 1.10
======== ======= ======== =======
Net earnings per common share - diluted $ 0.56 0.41 1.55 1.06
======== ======= ======== =======
Weighted average number of
common shares outstanding - basic 7,831 7,831 7,834 7,801
======== ======= ======== =======
Weighted average number of
common shares outstanding - diluted 8,000 8,034 7,979 8,074
======== ======= ======== =======
</TABLE>
-2-
<PAGE> 3
LADD FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 2, 1999 and January 2, 1999
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
October 2,
1999 January 2,
(Unaudited) 1999*
----------- ----------
<S> <C> <C>
Current assets:
Cash $ 137 110
Trade accounts receivable, less allowances for
doubtful receivables, discounts, returns and
allowances of $2,540 and $2,482, respectively 96,113 90,286
Inventories 106,400 98,798
Prepaid expenses and other current assets 9,609 8,771
-------- -------
Total current assets 212,259 197,965
-------- -------
Property, plant and equipment, net 66,828 66,297
Intangible and other assets, net 71,231 72,703
-------- -------
$350,318 336,965
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 6,590 6,590
Trade accounts payable 36,202 31,296
Accrued expenses and other current liabilities 42,679 37,384
-------- -------
Total current liabilities 85,471 75,270
-------- -------
Long-term debt, excluding current installments 95,365 104,585
Deferred and other liabilities 12,521 12,589
-------- -------
Total liabilities 193,357 192,444
-------- -------
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 7,833,518 shares
and 7,831,080 shares, respectively 2,350 2,349
Additional paid-in capital 51,459 51,418
Retained earnings 103,152 90,754
-------- -------
156,961 144,521
-------- -------
$350,318 336,965
======== =======
</TABLE>
* Derived from the Company's 1998 audited Consolidated Financial Statements.
-3-
<PAGE> 4
LADD FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the thirty-nine weeks ended October 2, 1999 and October 3, 1998
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
39 Weeks Ended
--------------------------
October 2, October 3,
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 12,398 8,548
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation of property, plant and equipment 7,786 7,640
Amortization 2,763 2,832
Provision for losses on trade accounts receivable 835 955
Gain on sales of assets (405) (165)
Provision for deferred income taxes (1,176) 269
Forgiveness of debt -- (217)
Increase in deferred and other liabilities 1,254 606
Change in assets and liabilities:
Increase in trade accounts receivable (6,662) (12,519)
Increase in inventories (7,602) (10,164)
(Increase) decrease in prepaid expenses and other
current assets (838) 892
Increase in trade accounts payable 4,906 7,494
Increase in accrued expenses and other
current liabilities 5,536 7,818
-------- -------
Total adjustments 6,397 5,441
-------- -------
Net cash provided by operating activities 18,795 13,989
-------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (8,368) (6,335)
Proceeds from sales of assets 2,532 69
(Additions to) reductions in intangible and other assets (3,446) 484
-------- -------
Net cash used in investing activities (9,282) (5,782)
-------- -------
Cash flows from financing activities:
Proceeds from borrowings 2,020 1,005
Principal payments on borrowings (11,240) (10,051)
Purchase of common stock (449) --
Other 183 920
-------- -------
Net cash used in financing activities (9,486) (8,126)
-------- -------
Net increase in cash 27 81
Cash at beginning of period 110 75
-------- -------
Cash at end of period $ 137 156
======== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 5,396 7,144
Cash paid (net of refunds received) during the period for income taxes 5,655 2,561
======== =======
</TABLE>
-4-
<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 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 22 985 -- 1,007
Retirement of stock and purchase
of restricted stock (4,350) (1) (86) -- (87)
Amortization of employee
restricted stock awards -- -- 87 -- 87
Tax benefit from exercise of stock options -- -- 330 -- 330
Net earnings -- -- -- 12,259 12,259
--------- ------- ------- -------- -------
BALANCE AT JANUARY 2, 1999 7,831,080 2,349 51,418 90,754 144,521
Shares issued in connection
with incentive stock
option plan 13,772 4 179 -- 183
Shares issued in connection
with long-term incentive plan 15,666 5 250 -- 255
Purchase and retirement of stock (27,000) (8) (441) -- (449)
Amortization of employee
restricted stock awards -- -- 53 -- 53
Net earnings -- -- -- 12,398 12,398
--------- ------- ------- ------- --------
BALANCE AT OCTOBER 2, 1999
(UNAUDITED) 7,833,518 $ 2,350 51,459 103,152 156,961
========= ======= ======= ======= ========
</TABLE>
-5-
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
(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 presentation 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 thereto included in the Company's latest Annual Report.
(2) INVENTORIES
A summary of inventories follows (amounts in thousands):
<TABLE>
<CAPTION>
October 2, January 2,
1999 1999
---------- ----------
<S> <C> <C>
Inventories on the FIFO cost method:
Finished goods $ 57,916 51,414
Work in process 16,237 15,708
Raw materials and supplies 42,773 42,374
--------- --------
Total inventories on the FIFO cost method 116,926 109,496
Less adjustments of certain inventories to the
LIFO cost method (10,526) (10,698)
--------- --------
$ 106,400 98,798
========= ========
</TABLE>
(3) PURCHASE OF COMMON STOCK
On December 10, 1998, the Company's Board of Directors authorized the
repurchase of up to 600,000 shares of the Company's common stock over
the next 24 months, not to exceed $10,000,000. During the first
quarter of 1999, the Company purchased 17,000 shares for approximately
$271,000 and immediately retired the stock. During the second quarter
of 1999, the Company purchased 10,000 shares for approximately
$178,000 and immediately retired the stock.
(4) INTEREST RATE SWAP AGREEMENT
On March 30, 1999, the Company entered into a five-year interest rate
swap agreement having a notional amount of $25,000,000 in order to
reduce the impact of changes in interest rates on its floating rate
long-
-6-
<PAGE> 7
term debt. The swap agreement commenced on April 19, 1999 and was to
expire on April 19, 2004 with a fixed LIBOR rate of 5.635% per annum.
Effective September 27, 1999, the swap agreement was terminated for
cash at its fair market value resulting in a gain of approximately
$672,000. The gain will be amortized against interest expense over the
remaining term of the Loan and Security Agreement, which expires on
July 12, 2001.
(5) SEGMENT INFORMATION
The Company manufactures and markets casegoods and upholstered
furniture for two business segments - the residential furniture market
and the contract furniture market. The residential furniture segment
principally manufactures and sells to various retailers at wholesale
prices. The contract furniture segment principally manufactures and
sells to hospitality, government and assisted-living facilities at
retail prices. The products in both segments consist of casegoods,
upholstery, and accessories. The Company has no operations located
outside the United States and has no sales to foreign countries that
are individually material.
Profit by business segment represents net sales, less operating
expenses, less interest expense. A portion of corporate expenses is
included in each segment. Unallocated corporate expenses are included
below in "Corporate". The following tables show net sales and profit
by business segment for the thirteen and thirty-nine weeks ended
October 2, 1999 and October 3, 1998:
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
----------------------------- ----------------------------
Net Sales Oct. 2, 1999 Oct. 3, 1998 Oct. 2, 1999 Oct. 3, 1998
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Residential $115,764 111,831 349,169 329,996
Contract 34,887 31,065 111,641 95,814
-------- ------- ------- -------
Consolidated $150,651 142,896 460,810 425,810
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
----------------------------- ----------------------------
Profit Oct. 2, 1999 Oct. 3, 1998 Oct. 2, 1999 Oct. 3, 1998
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Residential $ 4,127 4,267 12,979 10,665
Contract 3,955 2,609 10,638 7,707
Corporate (963) (1,440) (3,937) (4,364)
-------- ------- ------- -------
Consolidated $ 7,119 5,436 19,680 14,008
======== ======= ======= =======
</TABLE>
(6) LADD AND LA-Z-BOY MERGER
On September 28, 1999, the Company entered into an Agreement and Plan
of Merger with La-Z-Boy Incorporated (La-Z-Boy). Under the terms of
the agreement, each share of LADD common stock will be converted into
1.18 shares of La-Z-Boy common stock, and LADD will become a
wholly-owned subsidiary of La-Z-Boy. Following the merger, former LADD
shareholders will own approximately 15 percent of La-Z-Boy. The merger
is subject to shareholder and regulatory approval.
-7-
<PAGE> 8
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
--------------------- -------------------
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 80.2 80.6 80.2 80.8
----- ----- ----- -----
Gross profit 19.8 19.4 19.8 19.2
Selling, general and administrative expenses 13.9 13.9 14.3 14.1
----- ----- ----- -----
Operating income 5.9 5.5 5.5 5.1
----- ----- ----- -----
Other deductions:
Interest expense 1.1 1.6 1.2 1.7
Other expense (income), net 0.1 0.1 0.0 0.1
----- ----- ----- -----
1.2 1.7 1.2 1.8
----- ----- ----- -----
Earnings before income taxes 4.7 3.8 4.3 3.3
Income tax expense 1.7 1.5 1.6 1.3
----- ----- ----- -----
Net earnings 3.0% 2.3% 2.7% 2.0%
===== ===== ===== =====
</TABLE>
Total net sales for the third quarter of 1999 increased 5.4%, to
$150.7 million, as compared to $142.9 million in the third quarter of 1998. The
following table compares third quarter net sales by segment:
<TABLE>
<CAPTION>
Oct. 2, Oct. 3, Percent
1999 1998 Increase Change
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Residential $115,764 111,831 3,933 3.5%
Contract 34,887 31,065 3,822 12.3%
-------- ------- ----- ----
$150,651 142,896 7,755 5.4%
======== ======= ===== ====
</TABLE>
Total net sales for the first nine months of 1999 increased 8.2%, to
$460.8 million, as compared to $425.8 million in the same period of 1998. The
following table compares first nine months net sales by segment:
-8-
<PAGE> 9
<TABLE>
<CAPTION>
Oct. 2, Oct. 3, Percent
1999 1998 Increase Change
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Residential $349,169 329,996 19,173 5.8%
Contract 111,641 95,814 15,827 16.5%
-------- ------- ------ ----
$460,810 425,810 35,000 8.2%
======== ======= ====== ====
</TABLE>
The Company's order backlog increased 3.8% during the third quarter
and rose 7.8% for the first nine months of 1999. Residential and contract
backlogs increased 6.7% and 0.3%, respectively, for the third quarter and 12.5%
and 2.2%, respectively, for the first nine months. The increased net sales of
the residential segment for the third quarter and first nine months of 1999
were due largely to the success of recent residential product introductions, as
well as improved retail furniture sales for the industry overall. The third
quarter sales growth for the residential segment was negatively impacted by the
flooded highways and weather-related plant downtime resulting from the two
hurricanes that battered the eastern United States during September. The
contract segment sales growth in the 1999 periods was due primarily to
continued hotel refurbishment and expansion and increased sales to
assisted-living facilities, trends that the Company anticipates will continue
into the year 2000. The Company believes that its capacity will be sufficient
to accommodate the contract sales growth anticipated for the foreseeable future
through: (i) existing production capacity; (ii) the addition of a new contract
manufacturing facility which will commence operations in the fourth quarter of
1999; and (iii) production from other LADD manufacturing plants and/or outside
contractors.
Cost of sales as a percentage of net sales was 80.2% for the third
quarter of 1999, compared to 80.6% for the third quarter of 1998, which
resulted in a gross margin of 19.8% and 19.4%, respectively. For the first nine
months of 1999, cost of sales as a percentage of net sales was 80.2%, down from
80.8% for the comparable 1998 period. The resulting increase in gross margin to
19.8% for the first nine months of 1999, from 19.2% in 1998, was due to
improved manufacturing efficiencies, along with the production and shipment of
new products with higher margins. In addition, improved 1999 margins were due
to aggressive price discounting in the 1998 first nine months, principally for
the sales of discontinued product, which did not recur in 1999. Gross margins
were negatively impacted during the most recent quarter due to weather-related
plant downtime and delayed shipments resulting from the above-mentioned
hurricanes. Although recent reductions in hardwood lumber prices (except for
cherry species) have been beneficial to the Company, price increases in certain
other raw materials have somewhat offset these savings.
Selling, general and administrative (SG&A) expenses as a percent of
net sales for the third quarter of 1999 were the same as in the third quarter
of 1998, while first nine months SG&A expenses increased slightly to 14.3% from
14.1% in 1998. The Company believes that its SG&A expense as a percentage of
net sales will be in the range of 14.0% to 14.5% for all of 1999.
Other deductions (principally interest expense) represented 1.2% of
net sales for both the 1999 third quarter and first nine months, down from 1.7%
and 1.8%, respectively, in 1998. Average outstanding borrowings were $17.6
million less for the third quarter of 1999 and $14.2 million less for the first
nine months of 1999, than in the year-earlier periods, and the overall
effective interest rate was approximately 0.75% and 1.00% lower for the
respective 1999 periods. As a result, interest expense in the 1999 third
quarter
-9-
<PAGE> 10
and first nine months declined by $525,000 and $1.6 million, respectively, or
23.6% and 22.4%, as compared to the same periods of 1998. The decline in the
effective interest rate was primarily due to reductions in the Company's
interest rate margin, as provided for in the Company's bank credit facility,
resulting from improved operating performance. As a result of the improved 1999
first quarter operating results, effective April 15, 1999, the Company's
interest rate margin was reduced 0.125% by its bank lending group. Effective
July 1, 1999 and August 25, 1999, the Federal Reserve Board raised short-term
U.S. interest rates 0.25%, which resulted in comparable increases in the
Company's prime and LIBOR bank lending rates. Based on outstanding borrowings
at October 2, 1999, these rate increases will raise the Company's interest
expense by approximately $500,000 on an annual basis. As discussed further in
footnote 4, the Company terminated its interest rate swap agreement effective
September 27, 1999 for a gain of $672,000, which will be amortized against
interest expense over the remaining term of its bank lending arrangement.
The Company's estimated annual effective income tax rate was 37.0% for
the third quarter and first nine months of 1999, compared to 39% for the
comparable 1998 periods. The decrease in the effective income tax rate resulted
from the implementation of state tax planning strategies and state tax
incentive projects, and the successful conclusion of an IRS audit covering the
years 1993-1996, with no adjustments affecting financial statement earnings.
The Company anticipates that its combined effective Federal and state income
tax rate will continue to approximate 37% over the remainder of 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current ratio was 2.5 to 1 at October 2, 1999, compared
to 2.6 to 1 at January 2, 1999. Net working capital totaled $126.8 million at
October 2, 1999 and $122.7 million at January 2, 1999. As a result of the
Company's continued sales growth and increased backlog, inventories increased
$7.6 million and trade accounts receivable increased $5.8 million from January
2, 1999 levels. The increase in inventories was due to production demands in
the first nine months of 1999 to service the increased order backlog. In
addition, the Company's trade accounts payable and accrued expenses also
increased during the first nine months of 1999, largely due to higher
production levels.
The Company generated $18.8 million in cash from operating activities
during the first nine months of 1999, compared to $14.0 million in the 1998
period. This increase was largely attributable to higher net earnings.
During this year's first nine months, capital spending totaled $8.4
million, compared to $6.3 million during the year-earlier period. Total capital
expenditures for all of 1999 are expected to approximate $11.0 million, as
compared to $9.1 million for all of 1998. The increase in the Company's
anticipated capital expenditures is due in part to capacity expansions planned
at its contract manufacturing facilities. In addition to the capital
expenditures noted above, a significant quantity of machinery and equipment
acquisitions is being financed through the Company's existing operating lease
lines.
The Company's total debt ratio (total debt as a percentage of total
debt plus shareholders' equity) was 39.4% at October 2, 1999, compared to 43.5%
at January 2, 1999. The decrease resulted from improved operating performance,
which allowed the Company to continue repaying debt while simultaneously
increasing its equity base.
-10-
<PAGE> 11
On March 26, 1999, the Company purchased and retired 17,000 shares of
its common stock for approximately $271,000. Additionally, on May 12, 1999, the
Company purchased and retired 10,000 shares of its common stock for
approximately $178,000. The stock purchases were authorized by the Company's
Board of Directors and financed through the Company's revolving credit line.
(See footnote 3).
At October 2, 1999, $41.2 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, planned capital expenditures and lease commitments, and any
future purchases of the Company's common stock.
On September 28, 1999, the Company entered into an Agreement and Plan
of Merger with La-Z-Boy. Under the terms of the agreement, each share of LADD
common stock will be converted into 1.18 shares of La-Z-Boy common stock, and
LADD will become a wholly-owned subsidiary of La-Z-Boy. Following the merger,
former LADD shareholders will own approximately 15 percent of La-Z-Boy. The
merger is subject to shareholder and regulatory approval.
YEAR 2000 COMPLIANCE
The Company is substantially complete in its effort to ensure Year
2000 ("Y2K") compliancy. The Company continues to monitor and address the
business issues associated with the expected impact of the Year 2000 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.
The Company 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 of non-compliance on information technology systems and
non-information technology systems. An inventory of all the Company's equipment
containing date sensitive embedded technology has been completed, and at the
present time, substantially all of this equipment has been either tested and/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 information
technology systems were Y2K compliant prior to 1998. At the present time, the
Company believes it has substantially completed all of the necessary internal
software and hardware implementation required for Y2K compliance. The Company
does not believe any material exposures or contingencies exist with respect to
its internal information systems.
The Company has received Y2K compliancy assurances from its major
suppliers and business partners. Based on these assurances, the Company
believes that all material third-party suppliers and business partners will be
sufficiently prepared for the Year 2000. Although the Company is currently
unaware 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
-11-
<PAGE> 12
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 with
regard to Y2K issues have minimized Y2K related capital costs and expenses
incurred to date and estimates that it has already incurred a majority of the
required Y2K compliance expenditures. These amounts exclude funds invested in
the purchase and lease of personal computers and the implementation of other
computer system upgrades. While such investments were made primarily to resolve
technological obsolescence and capacity constraints, they also resulted in the
new equipment and upgraded systems being Y2K compliant. Anticipated
expenditures and lease commitments relating the Y2K compliance are expected to
be less than $100,000 for the remainder of 1999. However, new developments may
subsequently occur that could affect the Company's estimates of the costs for
Y2K compliance.
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,"
"forecasts," "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 uncertainty 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, including lease commitments; decreased interest expense; the
completion of the planned merger into La-Z-Boy Incorporated, Y2K preparedness
(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.
-12-
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10-1 LADD Furniture, Inc. Amended and Restated Executive
Retirement Plan effective as of September 28, 1999.
10-2 Amended and Restated Executive Employment Agreement between
the Company and Fred L. Schuermann, Jr. dated September 28,
1999.
10-3 Amended and Restated Executive Employment Agreement between
the Company and William S. Creekmuir dated September 28,
1999.
10-4 Amended and Restated Executive Employment Agreement between
the Company and Donald L. Mitchell dated September 28, 1999.
10-5 Amended and Restated Executive Employment Agreement between
the Company and Kenneth E. Church dated September 28, 1999.
10-6 Amended and Restated Executive Employment Agreement between
the Company and Michael P. Haley dated September 28, 1999.
10-7 First Amendment to the LADD Furniture, Inc. 1997 Long-Term
Incentive Plan effective September 1, 1999.
10-8 First Amendment to the LADD Furniture, Inc. 1998 Long-Term
Incentive Plan effective September 1, 1999.
10-9 First Amendment to the LADD Furniture, Inc. 1999 Long-Term
Incentive Plan effective September 1, 1999.
10-10 First Amendment to the LADD Furniture, Inc. 1999 Management
Incentive Plan effective September 1, 1999.
10-11 Sixth Amendment to the LADD Furniture, Inc. 1994 Incentive
Stock Option Plan effective September 1, 1999.
27-1 (EDGAR version only)
(b) Reports on Form 8-K
On July 15, 1999, the Company filed with the Commission a Form 8-K
dated July 14, 1999 which reported under Item 5 the Press Release
dated July 14, 1999 reporting the Company's 1999 second quarter
operating results.
On September 29, 1999, the Company filed with the Commission a Form
8-K dated September 28, 1999 which reported under Item 5 the Company
entering into an Agreement and Plan of Merger with La-Z-Boy
Incorporated dated September 28, 1999.
-13-
<PAGE> 14
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 5, 1999 By: s/William S. Creekmuir
---------------------------------
William S. Creekmuir
Executive Vice President
and Chief Financial Officer
14
<PAGE> 1
EXHIBIT 10.1
LADD FURNITURE, INC.
AMENDED AND RESTATED
EXECUTIVE RETIREMENT PLAN
Effective January 1, 1998, LADD Furniture, Inc. established the LADD
Furniture, Inc. Executive Retirement Plan (the "Plan" or the "ERP") to provide
retirement benefits to eligible executives of the Company. This Plan replaced
the Supplemental Retirement Income Plan for Salaried Employees of LADD
Furniture, Inc. originally adopted effective January 1, 1990, for all
executives covered under the ERP. The Board of Directors approved the First
Amendment to the Plan on March 10, 1999, and the subsequent amendment and
restatement of the Plan on August 19, 1999, to reflect the incorporation of the
First Amendment into the Plan. The Plan is now amended and restated in its
entirety pursuant to the terms and provisions set forth below, as approved by
the Board of Directors on September 28, 1999.
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.
(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.
<PAGE> 2
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
(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.
Notwithstanding the above, for purposes of Section 3.7 below only, a
Change in Control shall not be considered to have occurred if the event that
would otherwise have constituted a Change in Control involves the acquisition,
merger, or sale of the assets of LADD Furniture, Inc. to, with or into La-Z-Boy
Incorporated or an entity controlled by La-Z-Boy Incorporated.
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 stock or
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 retires
or reaches age 55, whichever occurs later.
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.
2
<PAGE> 3
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, 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.
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.
3
<PAGE> 4
Participants shall be given credit for partial Years of Service on a pro rata
basis. If a Participant's employment is terminated by the Company without cause
or if the Participant terminates employment with "good reason" under the
provisions of Section 12 of a Participant's employment agreement with the
Company before the Participant attains age 55, the determination of how many
Years of Service the Participant has for purposes of calculating the benefit
due the Participant under Section 3.1 shall be made by assuming that the
Participant remained employed and continued to earn Years of Service credit
until his 55th birthday.
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 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);
4
<PAGE> 5
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.
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.
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 not be reduced.
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 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
5
<PAGE> 6
Normal Retirement Date. This means that the Actuarial Equivalent shall be
computed by determining the present value of an immediate annuity commencing as
of the Participant's age as of the date of the Change in Control and continuing
for the life expectancy of the Participant.
If a Change in Control occurs, the three consecutive Years of
Service used to calculate a Participant's Average Final Compensation under
Section 1.2 may, at a Participant's election, include the Plan Year in which
the Change in Control occurs. The Participant's compensation for the Plan Year
in which a Change in Control occurs shall be equal to (1) the gross base salary
that would have been paid to the Participant during the Plan Year had the
Participant been employed for the full Plan Year at the base salary rate in
effect as of the Change in Control, plus (2) the gross incentive pay under the
Management Incentive Plan and the Long-Term Incentive Plan actually paid to the
Participant in the Plan Year in which the Change in Control occurs.
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
Each Participant shall always be 100% vested in his Retirement Benefit
under the Plan.
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.
6
<PAGE> 7
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; provided,
however, that no such amendment or termination shall be effective with respect
to a Participant unless the Participant has given his written consent to such
amendment or termination.
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.
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 will make provision for segregating assets of the
Company for payment of all benefits hereunder and shall establish a "Rabbi
Trust" to hold such assets. No later than January 1, 2002, the Company shall
contribute sufficient assets to such trust as are necessary to enable the trust
to pay 100% of the Retirement Benefits due under the Plan and shall continue to
make supplemental contributions as are necessary to maintain the 100% funding
level annually thereafter. 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.
7
<PAGE> 8
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 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 3.7 and 7.2.
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
<PAGE> 9
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.
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]
9
<PAGE> 10
APPENDIX A
<TABLE>
<CAPTION>
PARTICIPANT QUALIFIED PLAN BENEFIT
----------- ----------------------
<S> <C>
Kenneth Church 19,949.52
William Creekmuir 8,597.64
Victor Dyer 24,724.08
Michael Haley 6,418.08
Donald Mitchell 1,788.96
David Ogren 26,013.36
Fred Schuermann 20,445.12
</TABLE>
10
<PAGE> 1
EXHIBIT 10.2
NORTH CAROLINA ) AMENDED AND RESTATED
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the _____ day of
_______________, 1999, and effective as of September 28, 1999, by and between
LADD Furniture, Inc., a North Carolina corporation ("Company"), and Fred L.
Schuermann, Jr., an individual resident of North Carolina ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and sale
of furniture; and
WHEREAS, the Company has previously entered into an employment
agreement with Executive dated October 28, 1994; and
WHEREAS, due to changes that have occurred in the compensation
arrangements with the Company's executives and the possibility of a merger
between the Company and a subsidiary of La-Z-Boy Incorporated, further
amendments to the employment agreement are appropriate; and
WHEREAS, Company desires to continue to employ Executive as its
President and Chief Executive Officer and Executive desires to accept such
continued employment on the terms and conditions hereinafter set forth; and
WHEREAS, the retention of the Executive is critical to the success of
the negotiation and consummation of the proposed merger with a subsidiary of
La-Z-Boy Incorporated; and
WHEREAS, the amendment of the agreement will induce the Executive to
continue his employment relationship with the Company;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive
hereby accepts employment and agrees to remain in the employ of the Company
during the term of this Agreement, on the terms and conditions hereinafter set
forth.
2. Term of Employment. Subject to the provisions in Section 10
below, the term of this Agreement shall be for a one-year period beginning on
the date hereof and terminating on September 30, 2000, unless otherwise
terminated as provided herein.
<PAGE> 2
3. Nature of Employment. Executive is employed as President and
Chief Executive Officer of Company. Consistent with such position, Executive
shall, subject to the direction of the Board of Directors of Company, direct
and manage the affairs of the Company as assigned. Executive shall report to
and be responsible to the Board of Directors. During the term of this Agreement
and any extensions or renewals thereof, Executive shall have no other
employment of any nature whatsoever without the prior consent of Company.
Accordingly, unless otherwise approved by Company, Executive agrees to devote
his full working time to the business of Company; provided, however, nothing
herein contained shall restrict or prevent Executive from personally and for
his own account owning and dealing in stocks, bonds, securities, real estate,
commodities, or other investment properties for his own benefit or the benefit
of his family. Further, nothing herein contained shall restrict or prevent
Executive from serving on the Board of Directors of any entity which does not
directly or indirectly compete with Company.
4. Compensation.
(a) Base Salary. Compensation to Executive for the services
rendered on behalf of Company during the term of this Agreement shall be no
less than Four Hundred Forty-Five Thousand Dollars ($445,000) per year, payable
in equal monthly installments. From time to time during the term of this
Agreement, Executive's compensation may be increased, but shall in no event be
decreased from the amount of the base salary in effect at that time. Company
shall review Executive's compensation hereunder at least on an annual basis.
(b) Incentive Compensation. In addition to Executive's base
salary, Executive shall be entitled to participate in incentive compensation
plans and programs generally available to executives of the Company, provided
that performance goals and award targets used in the computation of awards to
the Executive hereunder shall be no less favorable than those which are used in
the computation of awards to other executives of the Company and shall
recognize the level of responsibility of the Executive.
5. Expenses. Executive is authorized to incur reasonable expenses
in connection with the business of Company, including expenses for travel and
similar items. Company will reimburse Executive for all such expenses upon the
presentation by Executive, from time to time, of an itemized account of
expenditures.
6. Vacation. Executive shall be entitled to paid vacations during
each calendar year of the term of this Agreement at such times and for such
duration as may be determined by the Board of Directors of the Company, taking
into consideration the needs and requirements of Company for Executive's
services; provided, however, the minimum paid vacation to which Executive shall
be entitled in any calendar year is four (4) weeks.
7. Additional Benefits. During the term of this Agreement and any
renewals or extensions thereof, Company shall keep and maintain, for the
benefit of Executive, life insurance having a death benefit of not less than
one hundred percent (100%) of base pay (not to exceed $500,000) and disability
insurance that will provide Executive a benefit of not less than
2
<PAGE> 3
sixty-percent (60%) of base pay per month during the term of any disability.
Executive and, as applicable, the Executive's family shall also have the right
to participate in any Executive benefit plans or other fringe benefits adopted
by Company for its officers and/or other key management employees or as a part
of Company's regular compensation structure for its employees, including any
group hospitalization, medical, dental, accidental death and disability and
long-term disability income replacement insurance plans and any retirement
income and capital accumulation plans. All such benefits shall be in addition
to the compensation payments provided by this Agreement.
8. Death During Employment. If Executive dies during the term of
this Agreement, Company shall pay to the estate of Executive the compensation
to which he would otherwise be entitled through the end of the month in which
death occurs in accordance with Section 4(a) above. Company shall also pay to
the estate of Executive an amount equal to any bonus or other incentive
payments which would otherwise have been due to Executive had Executive been
employed as of fiscal year end, pro-rated to date of death. This Agreement
shall thereupon terminate, and Company shall have no further obligation to the
estate of Executive.
9. Permanent Disability During Employment. If Executive becomes
permanently disabled during the term of this Agreement, Company shall pay to
Executive the compensation, in accordance with Section 4(a) above, to which he
would otherwise be entitled to the end of the month in which such permanent
disability occurs. Thereafter, the Executive shall continue to receive his then
base salary, minus any payments provided by the Company's benefit plans
(including disability benefits paid pursuant to Section 7 above) and by any
government sponsored program, for a twenty-four (24) month period from the date
of permanent disability. This Agreement shall thereupon terminate and Company
shall have no further obligation to Executive except as may be provided under
Company's short-term and long-term disability plans during the term of such
disability and any pro rata portion of any bonus or incentive plan. Permanent
disability for purposes of this Agreement shall mean a physical or mental
condition of Executive that renders Executive incapable of performing the
essential duties of his job and which condition shall be medically determined
to be of permanent duration as same is construed under Company's disability
plans.
10. Renewal. Executive's term of employment shall be automatically
extended upon the same terms and conditions contained herein for successive
one-year periods unless a written notice of termination is given by either
party at least 90 days before the end of the term of employment or any renewals
or extensions thereof. In the event the Company gives timely notice to
terminate this Agreement, the severance provision of Section 12 pertaining to
termination without cause shall become effective.
11. Termination for Cause. Company may terminate Executive's
employment at any time "for cause". The term "for cause" shall mean (i) a
material default or other breach by Executive of his obligations under this
Agreement, (ii) material failure by Executive to diligently and competently
perform his duties under this Agreement, which shall be determined by Company's
Board of Directors in its reasonable discretion, (iii) insubordination or other
act or acts by Executive detrimental to Company or damaging to Company's
relationships with
3
<PAGE> 4
customers, suppliers or employees or (iv) fraud, dishonesty, misappropriation
of Company's assets, or conviction of a felony. Upon the occurrence of (i),
(ii) or (iii) above, Company shall be entitled to terminate the employment
relationship hereunder upon thirty (30) days prior written notice to Executive,
which notice shall state the reason for such termination and shall provide
Executive an opportunity to remedy or cure such cause during such period. If
such cause is not remedied or cured during such period, Company may terminate
Executive's employment immediately. In the event of a termination for cause,
Company shall have no obligation or liability to Executive under this Agreement
except for the compensation to which he is entitled through the end of the
month of termination in accordance with Section 4(a) above.
12. Termination Without Cause. Company shall be entitled to
terminate the employment relationship hereunder without cause at any time upon
thirty (30) days prior written notice to Executive. In such event, Executive,
if requested by Company, shall continue to render his services up to the date
of termination and shall be paid the compensation to which he is entitled
through the end of the month of termination in accordance with Section 4(a)
above. In addition, if Company terminates this Agreement for any reason other
than for cause, as specified in Section 11 above, the Executive shall be
entitled to receive in twenty-four (24) equal monthly payments an amount equal
to two times the sum of (i) his then current base salary in accordance with
Section 4(a) above and (ii) the average annual incentive payments to the
Executive during the preceding three (3) years. The Executive shall not be
obligated in any way to mitigate the Company's obligations to him under this
Section 12 and any amounts earned by the Executive subsequent to his
termination of employment shall not serve as an offset to the severance
payments due him by the Company under this Section. Further, Executive shall be
deemed to be One Hundred Percent (100%) vested in the LADD Furniture, Inc.
Executive Retirement Plan (the "ERP"). Payments under this Section 12 are in
addition to and not in lieu of any benefits under the ERP or other benefit
programs of the Company. The Company shall thereafter have no other obligation
or liability to Executive under this Agreement.
If the Company willfully and materially breaches this Agreement and
the Executive terminates employment on account of such breach, the Company
shall be deemed to have terminated the Executive's employment without cause.
Accordingly, the Executive shall be entitled to receive all payments and
benefits due the Executive in the event of termination without cause, as set
forth in this Section 12.
13. Termination For Good Reason. In the event of a "Change in
Control" of the Company (as hereinafter defined), the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events during the twelve (12)
months immediately preceding or following the effective date of a Change in
Control of the Company:
(a) a material change in the scope of the Executive's
assigned duties and responsibilities from those in effect immediately prior to
a Change in Control of the Company or the assignment of duties or
responsibilities that are inconsistent with the Executive's status in the
Company; provided that (i) the Executive's failure to be elected to or to
remain on the board of directors of the Company or any of its subsidiaries;
(ii) a change in the Executive's status or the
4
<PAGE> 5
scope of his assigned duties and responsibilities resulting from the Company's
ceasing to be a "reporting company" under the provisions of the Securities
Exchange Act of 1934; and (iii) as long as there is no material change in the
scope of the personnel or operations reporting to the Executive, the insertion
of an additional layer of management or a change in the individuals (but not
constituting the insertion of more than one additional layer of management) to
whom the Executive reports shall not constitute a material change in scope of
the Executive's assigned duties and responsibilities or be inconsistent with
the Executive's status in the Company;
(b) a reduction by the Company in the Executive's base salary
or incentive compensation as in effect on the date of a Change in Control;
provided that no reduction in incentive compensation shall be deemed to occur
if Executive is offered the same incentive compensation offered to similarly
situated senior executive officers of the subsidiaries of La-Z-Boy with
comparable duties and responsibilities of Executive;
(c) the Company's requirement that the Executive be based
anywhere other than the Company's office at which he was based prior to the
Change in Control of the Company; or
(d) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those specified in Section 14
of this Agreement unless La-Z-Boy or the Company deem it necessary to change
such benefits in order to conform with applicable law.
For purposes of this Section 13, the "Merger" means the merger of a
wholly-owned first-tier subsidiary of La-Z-Boy with and into the Company in
accordance with the requirements of the laws of the States of North Carolina
and Michigan, whereupon the separate existence of such subsidiary shall cease,
and the Company shall be the surviving corporation of such merger.
For purposes of Section 13(c) above, the Company shall be deemed to
have required the Executive to be based somewhere other than the Company's
office at which he was based prior to the Change in Control if the Executive is
required to spend more than two days per week on a regular basis at a business
location not within 50 miles of the Executive's primary business location as of
the Change in Control.
If the Executive shall terminate his employment for Good Reason, then
the Company shall pay him severance pay in twenty-four (24) equal monthly
payments an amount equal to two times the sum of (i) his then current base
salary in accordance with Section 4(a) above, and (ii) the average annual
incentive payments to the Executive during the preceding three (3) years. The
Executive shall not be obligated in any way to mitigate the Company's
obligations to him under this Section 13 and any amounts earned by the
Executive subsequent to his termination of employment shall not serve as an
offset to the severance payments due him by the Company under this Section.
For purposes of this Agreement, a "Change in Control" means the date
on which the earlier of the following events occur:
5
<PAGE> 6
(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 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
(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.
14. Change in Control Benefits.
(a) Upon a Change in Control, as defined above in Section 13,
all outstanding stock options shall become 100% vested and immediately
exercisable, regardless of whether Executive terminates employment or not.
(b) If the Executive is terminated without cause or
terminates employment with Good Reason within twelve (12) months of a Change in
Control, to the extent permitted by law, the Company shall continue the
medical, disability and life insurance benefits which Executive was receiving
at the time of termination for a period of 36 months after termination of
employment or, if earlier, until Executive has commenced employment elsewhere
and becomes eligible for participation in the medical, disability and life
insurance programs, if any, of his successor employer. Coverage under
Employer's medical, disability and life insurance programs shall cease with
respect to each such program as Executive becomes eligible for the medical,
disability and life insurance programs, if any, of his successor employer.
15. Property of Company. Executive agrees that upon the
termination of his employment he will turn over to Company all property of
Company which has come into his possession while an Executive of Company.
16. Covenants by Executive.
(a) Non-competition. During the term of employment under this
Agreement including any renewals or extensions thereof, and for a period of two
(2) years thereafter, Executive shall not, without the prior written approval
of Company, directly or indirectly, engage in any competitive activity as
employer, employee, partner, stockholder, joint venturer or otherwise, enter
into or in any manner take part in any business or other endeavor which would
6
<PAGE> 7
be in competition with Company in the continental United States as such
business is conducted at the time of termination.
(b) Respect for Economic Relationships. Executive will not,
during the term of his employment under this Agreement including any renewals
or extensions thereof, and for a period of two (2) years thereafter, in any
fashion, form, or manner, either directly or indirectly, solicit, interfere
with, or endeavor to entice away from Company any customer or person, firm or
corporation, regularly dealing with Company or directly or indirectly interfere
with, entice away, or cause any other entity to employ any other employee of
Company.
(c) Validity of Covenants. Executive agrees that the
covenants contained in this Section are reasonably necessary to protect the
legitimate interests of Company, are reasonable with respect to time, territory
and scope, and do not interfere with the interests of the public. Executive
further agrees that the descriptions of the covenants contained in this Section
are sufficiently accurate and definite to inform Executive of the scope of such
covenants. Executive acknowledges that prior to entering into this Agreement he
was employed "at will", and agrees that the term of employment and termination
provisions contained in Sections 2, 10, 11, 12 and 13 above constitute fully
adequate and sufficient consideration for the covenants contained in Sections
16 and 18 of this Agreement.
(d) Specific Performance. Executive agrees that a breach or
violation of any of the covenants under this Section will result in immediate
and irreparable harm to Company in an amount which will be impossible to
ascertain at the time of the breach or violation and that the award of monetary
damages will not be adequate relief to Company. Therefore, the failure on the
part of Executive to perform all of the covenants established by this Section
shall give rise to a right to Company to obtain enforcement of this Section in
a court of equity by a decree of specific performance or other injunctive
relief. This remedy, however, shall be cumulative and in addition to any other
remedy Company may have.
17. Patent, Trade Dress and Trademark Assignment. Executive agrees
without additional compensation to assign promptly to Company all rights,
title, and interest in and to any and all trade secrets, inventions, letters
patent, applications for letters patent, trade dress, and trademarks whether or
not subject to state or federal trademark during the term of employment
hereunder if related to the then current products and activities of Company,
such activities to include, without limitation, product development by Company,
or if developed or made with the use of its facilities, equipment, materials,
personnel, or trade secrets, or result directly from any work performed by
Executive for Company. Executive further agrees to disclose promptly to Company
any such trade secrets, inventions, letters patent, applications for letters
patent, trade dress, and trademarks, and, at the request and expense of
Company, to apply for letters patent or registration thereon in every
jurisdiction designated by Company.
18. Confidential Information. Executive agrees both during the
term of this Agreement and thereafter to keep secret and confidential all
information labeled confidential or not generally known which is heretofore or
hereafter acquired concerning the business and affairs of Company, including
without limitation, information regarding trade secrets, trade dress,
7
<PAGE> 8
proprietary processes, confidential business plans, market research data and
financial data, and further agrees not to disclose any such information to any
person, firm, or corporation or use the same in any manner other than in
furtherance of the business or affairs of Company or unless such information
shall become public knowledge by other means. Executive agrees that such
information is a valuable, special, and unique asset of Company. Upon the
termination of Executive's employment with Company, Executive shall immediately
return to Company all documents, records, notebooks, and similar repositories
of information relating to confidential information of Company and/or the
development of any inventions.
19. Waiver of Breach. The waiver by Company or Executive of any
breach of a provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by the parties.
20. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
(a) If to Company, to:
LADD Furniture, Inc.
4620 Grandover Parkway
Greensboro, NC 27407
Attn: Board of Directors
b) If to Executive, to:
Fred L. Schuermann, Jr
2106 San Fernando Drive
High Point, NC 27265
21. Entire Agreement. This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between the parties
hereto with respect to the subject matter hereof and constitutes the sole and
only agreement between the parties with respect to said subject matter. Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party or by
anyone acting on behalf of any party, which are not embodied herein, and that
no agreement, statement, or promise not contained in this Agreement shall be
valid or binding or of any force or effect. No change or modification of this
Agreement shall be valid or binding upon the parties hereto unless such change
or modification is in writing and is signed by the parties hereto.
22. Severability. If any one or more of the provisions contained
in this Agreement shall be held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect for any reason, that
invalidity, illegality, or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if that invalid,
illegal, or unenforceable provision had never been contained herein.
8
<PAGE> 9
23. Parties Bound. The terms, promises, covenants, and agreements
contained in this Agreement shall apply to, be binding upon, and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement may not be assigned by Company or
Executive without the prior written consent of the other party.
24. Consolidation, Merger or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into, or
with, or transferring all or substantially all of its assets to another
corporation which assumes this Agreement and all obligations and undertakings
of the Company hereunder. Upon such a consolidation or merger, the use of the
word "Company" herein shall mean such other corporation, and this Agreement
shall continue in full force and effect.
25. Survival. The provisions of Sections 16 and 18 of this
Agreement shall survive the termination of this Agreement and shall continue
for the terms set forth in Sections 16 and 18.
26. Captions. Captions to the Sections of this Agreement are
inserted solely for the convenience of the parties, are not a part of this
Agreement, and in no way define, limit, extend or describe the scope thereof or
the intent of any of the provisions.
27. Applicable Law. This Agreement shall be construed and the
legal relationship between the parties determined in accordance with the laws
of the State of North Carolina.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written, the corporate party
acting through duly authorized officers.
ATTEST: LADD Furniture, Inc.
By:
- --------------------------- -------------------------------
Secretary Executive Vice President
(Corporate Seal)
(SEAL)
- --------------------------- ----------------------------------
(Witness) Fred L. Schuermann, Jr
10
<PAGE> 1
EXHIBIT 10.3
NORTH CAROLINA ) AMENDED AND RESTATED
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the _____ day of
_______________, 1999, and effective as of September 28, 1999, by and between
LADD Furniture, Inc., a North Carolina corporation ("Company"), and William S.
Creekmuir, an individual resident of North Carolina ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and sale
of furniture; and
WHEREAS, the Company has previously entered into an employment
agreement with Executive dated December 1, 1995; and
WHEREAS, due to changes that have occurred in the compensation
arrangements with the Company's executives and the possibility of a merger
between the Company and a subsidiary of La-Z-Boy Incorporated, further
amendments to the employment agreement are appropriate; and
WHEREAS, Company desires to continue to employ Executive as its
Executive Vice President, Chief Financial Officer, Secretary and Treasurer, and
Executive desires to accept such continued employment on the terms and
conditions hereinafter set forth; and
WHEREAS, the retention of the Executive is critical to the success of
the negotiation and consummation of the proposed merger with a subsidiary of
La-Z-Boy Incorporated; and
WHEREAS, the amendment of the agreement will induce the Executive to
continue his employment relationship with the Company;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive
hereby accepts employment and agrees to remain in the employ of the Company
during the term of this Agreement, on the terms and conditions hereinafter set
forth.
2. Term of Employment. Subject to the provisions in Section 10
below, the term of this Agreement shall be for a one-year period beginning on
the date hereof and terminating on September 30, 2000, unless otherwise
terminated as provided herein.
<PAGE> 2
3. Nature of Employment. Executive is employed as Executive Vice
President, Chief Financial Officer, Secretary and Treasurer of Company.
Consistent with such position, Executive shall, subject to the direction of the
Chief Executive Officer and the Board of Directors of Company, direct and
manage the affairs of the Company as assigned. Executive shall report to and be
responsible to the Chief Executive Officer. During the term of this Agreement
and any extensions or renewals thereof, Executive shall have no other
employment of any nature whatsoever without the prior consent of Company.
Accordingly, unless otherwise approved by Company, Executive agrees to devote
his full working time to the business of Company; provided, however, nothing
herein contained shall restrict or prevent Executive from personally and for
his own account owning and dealing in stocks, bonds, securities, real estate,
commodities, or other investment properties for his own benefit or the benefit
of his family. Further, nothing herein contained shall restrict or prevent
Executive from serving on the Board of Directors of any entity which does not
directly or indirectly compete with Company.
4. Compensation.
(a) Base Salary. Compensation to Executive for the services
rendered on behalf of Company during the term of this Agreement shall be no
less than Two Hundred Fifty-Five Thousand Dollars ($255,000) per year, payable
in equal monthly installments. From time to time during the term of this
Agreement, Executive's compensation may be increased, but shall in no event be
decreased from the amount of the base salary in effect at that time. Company
shall review Executive's compensation hereunder at least on an annual basis.
(b) Incentive Compensation. In addition to Executive's base
salary, Executive shall be entitled to participate in incentive compensation
plans and programs generally available to executives of the Company, provided
that performance goals and award targets used in the computation of awards to
the Executive hereunder shall be no less favorable than those which are used in
the computation of awards to other executives of the Company and shall
recognize the level of responsibility of the Executive.
5. Expenses. Executive is authorized to incur reasonable expenses
in connection with the business of Company, including expenses for travel and
similar items. Company will reimburse Executive for all such expenses upon the
presentation by Executive, from time to time, of an itemized account of
expenditures.
6. Vacation. Executive shall be entitled to paid vacations during
each calendar year of the term of this Agreement at such times and for such
duration as may be determined by the Chief Executive Officer of the Company,
taking into consideration the needs and requirements of Company for Executive's
services; provided, however, the minimum paid vacation to which Executive shall
be entitled in any calendar year is four (4) weeks.
7. Additional Benefits. During the term of this Agreement and any
renewals or extensions thereof, Company shall keep and maintain, for the
benefit of Executive, life insurance having a death benefit of not less than
one hundred percent (100%) of base pay (not to exceed
2
<PAGE> 3
$500,000) and disability insurance that will provide Executive a benefit of not
less than sixty-percent (60%) of base pay per month during the term of any
disability. Executive and, as applicable, the Executive's family shall also
have the right to participate in any Executive benefit plans or other fringe
benefits adopted by Company for its officers and/or other key management
employees or as a part of Company's regular compensation structure for its
employees, including any group hospitalization, medical, dental, accidental
death and disability and long-term disability income replacement insurance
plans and any retirement income and capital accumulation plans. All such
benefits shall be in addition to the compensation payments provided by this
Agreement.
8. Death During Employment. If Executive dies during the term of
this Agreement, Company shall pay to the estate of Executive the compensation
to which he would otherwise be entitled through the end of the month in which
death occurs in accordance with Section 4(a) above. Company shall also pay to
the estate of Executive an amount equal to any bonus or other incentive
payments which would otherwise have been due to Executive had Executive been
employed as of fiscal year end, pro-rated to date of death. This Agreement
shall thereupon terminate, and Company shall have no further obligation to the
estate of Executive.
9. Permanent Disability During Employment. If Executive becomes
permanently disabled during the term of this Agreement, Company shall pay to
Executive the compensation, in accordance with Section 4(a) above, to which he
would otherwise be entitled to the end of the month in which such permanent
disability occurs. Thereafter, the Executive shall continue to receive his then
base salary, minus any payments provided by the Company's benefit plans
(including disability benefits paid pursuant to Section 7 above) and by any
government sponsored program, for a twenty-four (24) month period from the date
of permanent disability. This Agreement shall thereupon terminate and Company
shall have no further obligation to Executive except as may be provided under
Company's short-term and long-term disability plans during the term of such
disability and any pro rata portion of any bonus or incentive plan. Permanent
disability for purposes of this Agreement shall mean a physical or mental
condition of Executive that renders Executive incapable of performing the
essential duties of his job and which condition shall be medically determined
to be of permanent duration as same is construed under Company's disability
plans.
10. Renewal. Executive's term of employment shall be automatically
extended upon the same terms and conditions contained herein for successive
one-year periods unless a written notice of termination is given by either
party at least 90 days before the end of the term of employment or any renewals
or extensions thereof. In the event the Company gives timely notice to
terminate this Agreement, the severance provision of Section 12 pertaining to
termination without cause shall become effective.
11. Termination for Cause. Company may terminate Executive's
employment at any time "for cause". The term "for cause" shall mean (i) a
material default or other breach by Executive of his obligations under this
Agreement, (ii) material failure by Executive to diligently and competently
perform his duties under this Agreement, which shall be determined by Company's
Board of Directors in its reasonable discretion, (iii) insubordination or other
act or
3
<PAGE> 4
acts by Executive detrimental to Company or damaging to Company's relationships
with customers, suppliers or employees or (iv) fraud, dishonesty,
misappropriation of Company's assets, or conviction of a felony. Upon the
occurrence of (i), (ii) or (iii) above, Company shall be entitled to terminate
the employment relationship hereunder upon thirty (30) days prior written
notice to Executive, which notice shall state the reason for such termination
and shall provide Executive an opportunity to remedy or cure such cause during
such period. If such cause is not remedied or cured during such period, Company
may terminate Executive's employment immediately. In the event of a termination
for cause, Company shall have no obligation or liability to Executive under
this Agreement except for the compensation to which he is entitled through the
end of the month of termination in accordance with Section 4(a) above.
12. Termination Without Cause. Company shall be entitled to
terminate the employment relationship hereunder without cause at any time upon
thirty (30) days prior written notice to Executive. In such event, Executive,
if requested by Company, shall continue to render his services up to the date
of termination and shall be paid the compensation to which he is entitled
through the end of the month of termination in accordance with Section 4(a)
above. In addition, if Company terminates this Agreement for any reason other
than for cause, as specified in Section 11 above, the Executive shall be
entitled to receive in twenty-four (24) equal monthly payments an amount equal
to two times the sum of (i) his then current base salary in accordance with
Section 4(a) above and (ii) the average annual incentive payments to the
Executive during the preceding three (3) years. The Executive shall not be
obligated in any way to mitigate the Company's obligations to him under this
Section 12 and any amounts earned by the Executive subsequent to his
termination of employment shall not serve as an offset to the severance
payments due him by the Company under this Section. Further, Executive shall be
deemed to be One Hundred Percent (100%) vested in the LADD Furniture, Inc.
Executive Retirement Plan (the "ERP"). Payments under this Section 12 are in
addition to and not in lieu of any benefits under the ERP or other benefit
programs of the Company. The Company shall thereafter have no other obligation
or liability to Executive under this Agreement.
If the Company willfully and materially breaches this Agreement and
the Executive terminates employment on account of such breach, the Company
shall be deemed to have terminated the Executive's employment without cause.
Accordingly, the Executive shall be entitled to receive all payments and
benefits due the Executive in the event of termination without cause, as set
forth in this Section 12.
13. Termination For Good Reason. In the event of a "Change in
Control" of the Company (as hereinafter defined), the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events during the twelve (12)
months immediately preceding or following the effective date of a Change in
Control of the Company:
(a) a material change in the scope of the Executive's
assigned duties and responsibilities from those in effect immediately prior to
a Change in Control of the Company or the assignment of duties or
responsibilities that are inconsistent with the Executive's status in the
Company; provided that (i) the Executive's failure to be elected to or to
remain on the board of
4
<PAGE> 5
directors of the Company or any of its subsidiaries; (ii) a change in the
Executive's status or the scope of his assigned duties and responsibilities
resulting from the Company's ceasing to be a "reporting company" under the
provisions of the Securities Exchange Act of 1934; and (iii) as long as there
is no material change in the scope of the personnel or operations reporting to
the Executive, the insertion of an additional layer of management or a change
in the individuals (but not constituting the insertion of more than one
additional layer of management) to whom the Executive reports shall not
constitute a material change in scope of the Executive's assigned duties and
responsibilities or be inconsistent with the Executive's status in the Company;
(b) a reduction by the Company in the Executive's base salary
or incentive compensation as in effect on the date of a Change in Control;
provided that no reduction in incentive compensation shall be deemed to occur
if Executive is offered the same incentive compensation offered to similarly
situated senior executive officers of the subsidiaries of La-Z-Boy with
comparable duties and responsibilities of Executive;
(c) the Company's requirement that the Executive be based
anywhere other than the Company's office at which he was based prior to the
Change in Control of the Company; or
(d) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those specified in Section 14
of this Agreement unless La-Z-Boy or the Company deem it necessary to change
such benefits in order to conform with applicable law.
For purposes of this Section 13, the "Merger" means the merger of a
wholly-owned first-tier subsidiary of La-Z-Boy with and into the Company in
accordance with the requirements of the laws of the States of North Carolina
and Michigan, whereupon the separate existence of such subsidiary shall cease,
and the Company shall be the surviving corporation of such merger.
For purposes of Section 13(c) above, the Company shall be deemed to
have required the Executive to be based somewhere other than the Company's
office at which he was based prior to the Change in Control if the Executive is
required to spend more than two days per week on a regular basis at a business
location not within 50 miles of the Executive's primary business location as of
the Change in Control.
If the Executive shall terminate his employment for Good Reason, then
the Company shall pay him severance pay in twenty-four (24) equal monthly
payments an amount equal to two times the sum of (i) his then current base
salary in accordance with Section 4(a) above, and (ii) the average annual
incentive payments to the Executive during the preceding three (3) years. The
Executive shall not be obligated in any way to mitigate the Company's
obligations to him under this Section 13 and any amounts earned by the
Executive subsequent to his termination of employment shall not serve as an
offset to the severance payments due him by the Company under this Section.
5
<PAGE> 6
For purposes of this Agreement, a "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 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
(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.
14. Change in Control Benefits.
(a) Upon a Change in Control, as defined above in Section 13,
all outstanding stock options shall become 100% vested and immediately
exercisable, regardless of whether Executive terminates employment or not.
(b) If the Executive is terminated without cause or
terminates employment with Good Reason within twelve (12) months of a Change in
Control, to the extent permitted by law, the Company shall continue the
medical, disability and life insurance benefits which Executive was receiving
at the time of termination for a period of 36 months after termination of
employment or, if earlier, until Executive has commenced employment elsewhere
and becomes eligible for participation in the medical, disability and life
insurance programs, if any, of his successor employer. Coverage under
Employer's medical, disability and life insurance programs shall cease with
respect to each such program as Executive becomes eligible for the medical,
disability and life insurance programs, if any, of his successor employer.
15. Property of Company. Executive agrees that upon the
termination of his employment he will turn over to Company all property of
Company which has come into his possession while an Executive of Company.
16. Covenants by Executive.
(a) Non-competition. During the term of employment under this
Agreement including any renewals or extensions thereof, and for a period of two
(2) years thereafter, Executive shall not, without the prior written approval
of Company, directly or indirectly, engage in any competitive activity as
employer, employee, partner, stockholder, joint venturer or
6
<PAGE> 7
otherwise, enter into or in any manner take part in any business or other
endeavor which would be in competition with Company in the continental United
States as such business is conducted at the time of termination.
(b) Respect for Economic Relationships. Executive will not,
during the term of his employment under this Agreement including any renewals
or extensions thereof, and for a period of two (2) years thereafter, in any
fashion, form, or manner, either directly or indirectly, solicit, interfere
with, or endeavor to entice away from Company any customer or person, firm or
corporation, regularly dealing with Company or directly or indirectly interfere
with, entice away, or cause any other entity to employ any other employee of
Company.
(c) Validity of Covenants. Executive agrees that the
covenants contained in this Section are reasonably necessary to protect the
legitimate interests of Company, are reasonable with respect to time, territory
and scope, and do not interfere with the interests of the public. Executive
further agrees that the descriptions of the covenants contained in this Section
are sufficiently accurate and definite to inform Executive of the scope of such
covenants. Executive acknowledges that prior to entering into this Agreement he
was employed "at will", and agrees that the term of employment and termination
provisions contained in Sections 2, 10, 11, 12 and 13 above constitute fully
adequate and sufficient consideration for the covenants contained in Sections
16 and 18 of this Agreement.
(d) Specific Performance. Executive agrees that a breach or
violation of any of the covenants under this Section will result in immediate
and irreparable harm to Company in an amount which will be impossible to
ascertain at the time of the breach or violation and that the award of monetary
damages will not be adequate relief to Company. Therefore, the failure on the
part of Executive to perform all of the covenants established by this Section
shall give rise to a right to Company to obtain enforcement of this Section in
a court of equity by a decree of specific performance or other injunctive
relief. This remedy, however, shall be cumulative and in addition to any other
remedy Company may have.
17. Patent, Trade Dress and Trademark Assignment. Executive agrees
without additional compensation to assign promptly to Company all rights,
title, and interest in and to any and all trade secrets, inventions, letters
patent, applications for letters patent, trade dress, and trademarks whether or
not subject to state or federal trademark during the term of employment
hereunder if related to the then current products and activities of Company,
such activities to include, without limitation, product development by Company,
or if developed or made with the use of its facilities, equipment, materials,
personnel, or trade secrets, or result directly from any work performed by
Executive for Company. Executive further agrees to disclose promptly to Company
any such trade secrets, inventions, letters patent, applications for letters
patent, trade dress, and trademarks, and, at the request and expense of
Company, to apply for letters patent or registration thereon in every
jurisdiction designated by Company.
18. Confidential Information. Executive agrees both during the
term of this Agreement and thereafter to keep secret and confidential all
information labeled confidential or not generally known which is heretofore or
hereafter acquired concerning the business and affairs
7
<PAGE> 8
of Company, including without limitation, information regarding trade secrets,
trade dress, proprietary processes, confidential business plans, market
research data and financial data, and further agrees not to disclose any such
information to any person, firm, or corporation or use the same in any manner
other than in furtherance of the business or affairs of Company or unless such
information shall become public knowledge by other means. Executive agrees that
such information is a valuable, special, and unique asset of Company. Upon the
termination of Executive's employment with Company, Executive shall immediately
return to Company all documents, records, notebooks, and similar repositories
of information relating to confidential information of Company and/or the
development of any inventions.
19. Waiver of Breach. The waiver by Company or Executive of any
breach of a provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by the parties.
20. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
(a) If to Company, to:
LADD Furniture, Inc.
4620 Grandover Parkway
Greensboro, NC 27407
Attn: Chief Executive Officer
b) If to Executive, to:
William S. Creekmuir
11 Heathrow Court
Greensboro, NC 27410
21. Entire Agreement. This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between the parties
hereto with respect to the subject matter hereof and constitutes the sole and
only agreement between the parties with respect to said subject matter. Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party or by
anyone acting on behalf of any party, which are not embodied herein, and that
no agreement, statement, or promise not contained in this Agreement shall be
valid or binding or of any force or effect. No change or modification of this
Agreement shall be valid or binding upon the parties hereto unless such change
or modification is in writing and is signed by the parties hereto.
22. Severability. If any one or more of the provisions contained
in this Agreement shall be held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect for any reason, that
invalidity, illegality, or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if that invalid,
illegal, or unenforceable provision had never been contained herein.
8
<PAGE> 9
23. Parties Bound. The terms, promises, covenants, and agreements
contained in this Agreement shall apply to, be binding upon, and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement may not be assigned by Company or
Executive without the prior written consent of the other party.
24. Consolidation, Merger or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into, or
with, or transferring all or substantially all of its assets to another
corporation which assumes this Agreement and all obligations and undertakings
of the Company hereunder. Upon such a consolidation or merger, the use of the
word "Company" herein shall mean such other corporation, and this Agreement
shall continue in full force and effect.
25. Survival. The provisions of Sections 16 and 18 of this
Agreement shall survive the termination of this Agreement and shall continue
for the terms set forth in Sections 16 and 18.
26. Captions. Captions to the Sections of this Agreement are
inserted solely for the convenience of the parties, are not a part of this
Agreement, and in no way define, limit, extend or describe the scope thereof or
the intent of any of the provisions.
27. Applicable Law. This Agreement shall be construed and the
legal relationship between the parties determined in accordance with the laws
of the State of North Carolina.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written, the corporate party
acting through duly authorized officers.
ATTEST: LADD Furniture, Inc.
By:
- --------------------------- -------------------------------
Secretary President
(Corporate Seal)
(SEAL)
- --------------------------- ----------------------------
(Witness) William S. Creekmuir
10
<PAGE> 1
EXHIBIT 10.4
NORTH CAROLINA ) AMENDED AND RESTATED
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the _____ day of _______________,
1999, and effective as of September 28, 1999, by and between LADD Furniture,
Inc., a North Carolina corporation ("Company"), and Donald L. Mitchell, an
individual resident of North Carolina ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and sale
of furniture; and
WHEREAS, the Company has previously entered into an employment
agreement with Executive dated October 31, 1997; and
WHEREAS, due to changes that have occurred in the compensation
arrangements with the Company's executives and the possibility of a merger
between the Company and a subsidiary of La-Z-Boy Incorporated, further
amendments to the employment agreement are appropriate; and
WHEREAS, Company desires to continue to employ Executive as its
Executive Vice President and Executive desires to accept such continued
employment on the terms and conditions hereinafter set forth; and
WHEREAS, the retention of the Executive is critical to the success of
the negotiation and consummation of the proposed merger with a subsidiary of
La-Z-Boy Incorporated; and
WHEREAS, the amendment of the agreement will induce the Executive to
continue his employment relationship with the Company;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive
hereby accepts employment and agrees to remain in the employ of the Company
during the term of this Agreement, on the terms and conditions hereinafter set
forth.
2. Term of Employment. Subject to the provisions in Section 10
below, the term of this Agreement shall be for a one-year period beginning on
the date hereof and terminating on September 30, 2000, unless otherwise
terminated as provided herein.
<PAGE> 2
3. Nature of Employment. Executive is employed as Executive Vice
President of Company. Consistent with such position, Executive shall, subject to
the direction of the Chief Executive Officer and the Board of Directors of
Company, direct and manage the affairs of the Company as assigned. Executive
shall report to and be responsible to the Chief Executive Officer. During the
term of this Agreement and any extensions or renewals thereof, Executive shall
have no other employment of any nature whatsoever without the prior consent of
Company. Accordingly, unless otherwise approved by Company, Executive agrees to
devote his full working time to the business of Company; provided, however,
nothing herein contained shall restrict or prevent Executive from personally and
for his own account owning and dealing in stocks, bonds, securities, real
estate, commodities, or other investment properties for his own benefit or the
benefit of his family. Further, nothing herein contained shall restrict or
prevent Executive from serving on the Board of Directors of any entity which
does not directly or indirectly compete with Company.
4. Compensation.
(a) Base Salary. Compensation to Executive for the
services rendered on behalf of Company during the term of this Agreement shall
be no less than Three Hundred Twenty Thousand Dollars ($320,000) per year,
payable in equal monthly installments. From time to time during the term of this
Agreement, Executive's compensation may be increased, but shall in no event be
decreased from the amount of the base salary in effect at that time. Company
shall review Executive's compensation hereunder at least on an annual basis.
(b) Incentive Compensation. In addition to Executive's
base salary, Executive shall be entitled to participate in incentive
compensation plans and programs generally available to executives of the
Company, provided that performance goals and award targets used in the
computation of awards to the Executive hereunder shall be no less favorable than
those which are used in the computation of awards to other executives of the
Company and shall recognize the level of responsibility of the Executive.
5. Expenses. Executive is authorized to incur reasonable expenses
in connection with the business of Company, including expenses for travel and
similar items. Company will reimburse Executive for all such expenses upon the
presentation by Executive, from time to time, of an itemized account of
expenditures.
6. Vacation. Executive shall be entitled to paid vacations during
each calendar year of the term of this Agreement at such times and for such
duration as may be determined by the Chief Executive Officer of the Company,
taking into consideration the needs and requirements of Company for Executive's
services; provided, however, the minimum paid vacation to which Executive shall
be entitled in any calendar year is four (4) weeks.
7. Additional Benefits. During the term of this Agreement and any
renewals or extensions thereof, Company shall keep and maintain, for the benefit
of Executive, life insurance having a death benefit of not less than one hundred
percent (100%) of base pay (not to exceed
2
<PAGE> 3
$500,000) and disability insurance that will provide Executive a benefit of not
less than sixty-percent (60%) of base pay per month during the term of any
disability. Executive and, as applicable, the Executive's family shall also have
the right to participate in any Executive benefit plans or other fringe benefits
adopted by Company for its officers and/or other key management employees or as
a part of Company's regular compensation structure for its employees, including
any group hospitalization, medical, dental, accidental death and disability and
long-term disability income replacement insurance plans and any retirement
income and capital accumulation plans. All such benefits shall be in addition to
the compensation payments provided by this Agreement.
8. Death During Employment. If Executive dies during the term of
this Agreement, Company shall pay to the estate of Executive the compensation to
which he would otherwise be entitled through the end of the month in which death
occurs in accordance with Section 4(a) above. Company shall also pay to the
estate of Executive an amount equal to any bonus or other incentive payments
which would otherwise have been due to Executive had Executive been employed as
of fiscal year end, pro-rated to date of death. This Agreement shall thereupon
terminate, and Company shall have no further obligation to the estate of
Executive.
9. Permanent Disability During Employment. If Executive becomes
permanently disabled during the term of this Agreement, Company shall pay to
Executive the compensation, in accordance with Section 4(a) above, to which he
would otherwise be entitled to the end of the month in which such permanent
disability occurs. Thereafter, the Executive shall continue to receive his then
base salary, minus any payments provided by the Company's benefit plans
(including disability benefits paid pursuant to Section 7 above) and by any
government sponsored program, for a twenty-four (24) month period from the date
of permanent disability. This Agreement shall thereupon terminate and Company
shall have no further obligation to Executive except as may be provided under
Company's short-term and long-term disability plans during the term of such
disability and any pro rata portion of any bonus or incentive plan. Permanent
disability for purposes of this Agreement shall mean a physical or mental
condition of Executive that renders Executive incapable of performing the
essential duties of his job and which condition shall be medically determined to
be of permanent duration as same is construed under Company's disability plans.
10. Renewal. Executive's term of employment shall be automatically
extended upon the same terms and conditions contained herein for successive
one-year periods unless a written notice of termination is given by either party
at least 90 days before the end of the term of employment or any renewals or
extensions thereof. In the event the Company gives timely notice to terminate
this Agreement, the severance provision of Section 12 pertaining to termination
without cause shall become effective.
11. Termination for Cause. Company may terminate Executive's
employment at any time "for cause". The term "for cause" shall mean (i) a
material default or other breach by Executive of his obligations under this
Agreement, (ii) material failure by Executive to diligently and competently
perform his duties under this Agreement, which shall be determined by Company's
Board of Directors in its reasonable discretion, (iii) insubordination or other
act or
3
<PAGE> 4
acts by Executive detrimental to Company or damaging to Company's relationships
with customers, suppliers or employees or (iv) fraud, dishonesty,
misappropriation of Company's assets, or conviction of a felony. Upon the
occurrence of (i), (ii) or (iii) above, Company shall be entitled to terminate
the employment relationship hereunder upon thirty (30) days prior written notice
to Executive, which notice shall state the reason for such termination and shall
provide Executive an opportunity to remedy or cure such cause during such
period. If such cause is not remedied or cured during such period, Company may
terminate Executive's employment immediately. In the event of a termination for
cause, Company shall have no obligation or liability to Executive under this
Agreement except for the compensation to which he is entitled through the end of
the month of termination in accordance with Section 4(a) above.
12. Termination Without Cause. Company shall be entitled to
terminate the employment relationship hereunder without cause at any time upon
thirty (30) days prior written notice to Executive. In such event, Executive, if
requested by Company, shall continue to render his services up to the date of
termination and shall be paid the compensation to which he is entitled through
the end of the month of termination in accordance with Section 4(a) above. In
addition, if Company terminates this Agreement for any reason other than for
cause, as specified in Section 11 above, the Executive shall be entitled to
receive in twenty-four (24) equal monthly payments an amount equal to two times
the sum of (i) his then current base salary in accordance with Section 4(a)
above and (ii) the average annual incentive payments to the Executive during the
preceding three (3) years. The Executive shall not be obligated in any way to
mitigate the Company's obligations to him under this Section 12 and any amounts
earned by the Executive subsequent to his termination of employment shall not
serve as an offset to the severance payments due him by the Company under this
Section. Further, Executive shall be deemed to be One Hundred Percent (100%)
vested in the LADD Furniture, Inc. Executive Retirement Plan (the "ERP").
Payments under this Section 12 are in addition to and not in lieu of any
benefits under the ERP or other benefit programs of the Company. The Company
shall thereafter have no other obligation or liability to Executive under this
Agreement.
If the Company willfully and materially breaches this Agreement and the
Executive terminates employment on account of such breach, the Company shall be
deemed to have terminated the Executive's employment without cause. Accordingly,
the Executive shall be entitled to receive all payments and benefits due the
Executive in the event of termination without cause, as set forth in this
Section 12.
13. Termination For Good Reason. In the event of a "Change in
Control" of the Company (as hereinafter defined), the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events during the twelve (12)
months immediately preceding or following the effective date of a Change in
Control of the Company:
(a) a material change in the scope of the Executive's
assigned duties and responsibilities from those in effect immediately prior to a
Change in Control of the Company or the assignment of duties or responsibilities
that are inconsistent with the Executive's status in the Company; provided that
(i) the Executive's failure to be elected to or to remain on the board of
4
<PAGE> 5
directors of the Company or any of its subsidiaries; (ii) a change in the
Executive's status or the scope of his assigned duties and responsibilities
resulting from the Company's ceasing to be a "reporting company" under the
provisions of the Securities Exchange Act of 1934; and (iii) as long as there is
no material change in the scope of the personnel or operations reporting to the
Executive, the insertion of an additional layer of management or a change in the
individuals (but not constituting the insertion of more than one additional
layer of management) to whom the Executive reports shall not constitute a
material change in scope of the Executive's assigned duties and responsibilities
or be inconsistent with the Executive's status in the Company;
(b) a reduction by the Company in the Executive's base
salary or incentive compensation as in effect on the date of a Change in
Control; provided that no reduction in incentive compensation shall be deemed to
occur if Executive is offered the same incentive compensation offered to
similarly situated senior executive officers of the subsidiaries of La-Z-Boy
with comparable duties and responsibilities of Executive;
(c) the Company's requirement that the Executive be based
anywhere other than the Company's office at which he was based prior to the
Change in Control of the Company; or
(d) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those specified in Section 14
of this Agreement unless La-Z-Boy or the Company deem it necessary to change
such benefits in order to conform with applicable law.
For purposes of this Section 13, the "Merger" means the merger of a
wholly-owned first-tier subsidiary of La-Z-Boy with and into the Company in
accordance with the requirements of the laws of the States of North Carolina and
Michigan, whereupon the separate existence of such subsidiary shall cease, and
the Company shall be the surviving corporation of such merger.
For purposes of Section 13(c) above, the Company shall be deemed to
have required the Executive to be based somewhere other than the Company's
office at which he was based prior to the Change in Control if the Executive is
required to spend more than two days per week on a regular basis at a business
location not within 50 miles of the Executive's primary business location as of
the Change in Control.
If the Executive shall terminate his employment for Good Reason, then
the Company shall pay him severance pay in twenty-four (24) equal monthly
payments an amount equal to two times the sum of (i) his then current base
salary in accordance with Section 4(a) above, and (ii) the average annual
incentive payments to the Executive during the preceding three (3) years. The
Executive shall not be obligated in any way to mitigate the Company's
obligations to him under this Section 13 and any amounts earned by the Executive
subsequent to his termination of employment shall not serve as an offset to the
severance payments due him by the Company under this Section.
5
<PAGE> 6
For purposes of this Agreement, a "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 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
(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.
14. Change in Control Benefits.
(a) Upon a Change in Control, as defined above in Section
13, all outstanding stock options shall become 100% vested and immediately
exercisable, regardless of whether Executive terminates employment or not.
(b) If the Executive is terminated without cause or
terminates employment with Good Reason within twelve (12) months of a Change in
Control, to the extent permitted by law, the Company shall continue the medical,
disability and life insurance benefits which Executive was receiving at the time
of termination for a period of 36 months after termination of employment or, if
earlier, until Executive has commenced employment elsewhere and becomes eligible
for participation in the medical, disability and life insurance programs, if
any, of his successor employer. Coverage under Employer's medical, disability
and life insurance programs shall cease with respect to each such program as
Executive becomes eligible for the medical, disability and life insurance
programs, if any, of his successor employer.
15. Property of Company. Executive agrees that upon the
termination of his employment he will turn over to Company all property of
Company which has come into his possession while an Executive of Company.
16. Covenants by Executive.
(a) Non-competition. During the term of employment under
this Agreement including any renewals or extensions thereof, and for a period of
two (2) years thereafter, Executive shall not, without the prior written
approval of Company, directly or indirectly, engage in any competitive activity
as employer, employee, partner, stockholder, joint venturer or
6
<PAGE> 7
otherwise, enter into or in any manner take part in any business or other
endeavor which would be in competition with Company in the continental United
States as such business is conducted at the time of termination.
(b) Respect for Economic Relationships. Executive will
not, during the term of his employment under this Agreement including any
renewals or extensions thereof, and for a period of two (2) years thereafter, in
any fashion, form, or manner, either directly or indirectly, solicit, interfere
with, or endeavor to entice away from Company any customer or person, firm or
corporation, regularly dealing with Company or directly or indirectly interfere
with, entice away, or cause any other entity to employ any other employee of
Company.
(c) Validity of Covenants. Executive agrees that the
covenants contained in this Section are reasonably necessary to protect the
legitimate interests of Company, are reasonable with respect to time, territory
and scope, and do not interfere with the interests of the public. Executive
further agrees that the descriptions of the covenants contained in this Section
are sufficiently accurate and definite to inform Executive of the scope of such
covenants. Executive acknowledges that prior to entering into this Agreement he
was employed "at will", and agrees that the term of employment and termination
provisions contained in Sections 2, 10, 11, 12 and 13 above constitute fully
adequate and sufficient consideration for the covenants contained in Sections 16
and 18 of this Agreement.
(d) Specific Performance. Executive agrees that a breach
or violation of any of the covenants under this Section will result in immediate
and irreparable harm to Company in an amount which will be impossible to
ascertain at the time of the breach or violation and that the award of monetary
damages will not be adequate relief to Company. Therefore, the failure on the
part of Executive to perform all of the covenants established by this Section
shall give rise to a right to Company to obtain enforcement of this Section in a
court of equity by a decree of specific performance or other injunctive relief.
This remedy, however, shall be cumulative and in addition to any other remedy
Company may have.
17. Patent, Trade Dress and Trademark Assignment. Executive agrees
without additional compensation to assign promptly to Company all rights, title,
and interest in and to any and all trade secrets, inventions, letters patent,
applications for letters patent, trade dress, and trademarks whether or not
subject to state or federal trademark during the term of employment hereunder if
related to the then current products and activities of Company, such activities
to include, without limitation, product development by Company, or if developed
or made with the use of its facilities, equipment, materials, personnel, or
trade secrets, or result directly from any work performed by Executive for
Company. Executive further agrees to disclose promptly to Company any such trade
secrets, inventions, letters patent, applications for letters patent, trade
dress, and trademarks, and, at the request and expense of Company, to apply for
letters patent or registration thereon in every jurisdiction designated by
Company.
18. Confidential Information. Executive agrees both during the
term of this Agreement and thereafter to keep secret and confidential all
information labeled confidential or not generally known which is heretofore or
hereafter acquired concerning the business and affairs
7
<PAGE> 8
of Company, including without limitation, information regarding trade secrets,
trade dress, proprietary processes, confidential business plans, market research
data and financial data, and further agrees not to disclose any such information
to any person, firm, or corporation or use the same in any manner other than in
furtherance of the business or affairs of Company or unless such information
shall become public knowledge by other means. Executive agrees that such
information is a valuable, special, and unique asset of Company. Upon the
termination of Executive's employment with Company, Executive shall immediately
return to Company all documents, records, notebooks, and similar repositories of
information relating to confidential information of Company and/or the
development of any inventions.
19. Waiver of Breach. The waiver by Company or Executive of any
breach of a provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by the parties.
20. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
(a) If to Company, to:
LADD Furniture, Inc.
4620 Grandover Parkway
Greensboro, NC 27407
Attn: Chief Executive Officer
b) If to Executive, to:
Donald L. Mitchell
2228 Setliff Dr.
High Point, NC 27265
21. Entire Agreement. This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between the parties
hereto with respect to the subject matter hereof and constitutes the sole and
only agreement between the parties with respect to said subject matter. Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party or by
anyone acting on behalf of any party, which are not embodied herein, and that no
agreement, statement, or promise not contained in this Agreement shall be valid
or binding or of any force or effect. No change or modification of this
Agreement shall be valid or binding upon the parties hereto unless such change
or modification is in writing and is signed by the parties hereto.
22. Severability. If any one or more of the provisions contained
in this Agreement shall be held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect for any reason, that
invalidity, illegality, or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if that invalid,
illegal, or unenforceable provision had never been contained herein.
8
<PAGE> 9
23. Parties Bound. The terms, promises, covenants, and agreements
contained in this Agreement shall apply to, be binding upon, and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement may not be assigned by Company or
Executive without the prior written consent of the other party.
24. Consolidation, Merger or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into, or
with, or transferring all or substantially all of its assets to another
corporation which assumes this Agreement and all obligations and undertakings of
the Company hereunder. Upon such a consolidation or merger, the use of the word
"Company" herein shall mean such other corporation, and this Agreement shall
continue in full force and effect.
25. Survival. The provisions of Sections 16 and 18 of this
Agreement shall survive the termination of this Agreement and shall continue for
the terms set forth in Sections 16 and 18.
26. Captions. Captions to the Sections of this Agreement are
inserted solely for the convenience of the parties, are not a part of this
Agreement, and in no way define, limit, extend or describe the scope thereof or
the intent of any of the provisions.
27. Applicable Law. This Agreement shall be construed and the
legal relationship between the parties determined in accordance with the laws of
the State of North Carolina.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written, the corporate party acting
through duly authorized officers.
ATTEST: LADD Furniture, Inc.
By:
- --------------------------- -------------------------------
Secretary President
(Corporate Seal)
(SEAL)
- --------------------------- ----------------------------
(Witness) Donald L. Mitchell
10
<PAGE> 1
EXHIBIT 10.5
NORTH CAROLINA ) AMENDED AND RESTATED
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the _____ day of _______________,
1999, and effective as of September 28, 1999, by and between LADD Furniture,
Inc., a North Carolina corporation ("Company"), and Kenneth E. Church, an
individual resident of North Carolina ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and sale
of furniture; and
WHEREAS, the Company has previously entered into an employment
agreement with Executive dated May 22, 1995; and
WHEREAS, due to changes that have occurred in the compensation
arrangements with the Company's executives and the possibility of a merger
between the Company and a subsidiary of La-Z-Boy Incorporated, further
amendments to the employment agreement are appropriate; and
WHEREAS, Company desires to continue to employ Executive as its Vice
President and Executive desires to accept such continued employment on the terms
and conditions hereinafter set forth; and
WHEREAS, the retention of the Executive is critical to the success of
the negotiation and consummation of the proposed merger with a subsidiary of
La-Z-Boy Incorporated; and
WHEREAS, the amendment of the agreement will induce the Executive to
continue his employment relationship with the Company;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive
hereby accepts employment and agrees to remain in the employ of the Company
during the term of this Agreement, on the terms and conditions hereinafter set
forth.
2. Term of Employment. Subject to the provisions in Section 10
below, the term of this Agreement shall be for a one-year period beginning on
the date hereof and terminating on September 30, 2000, unless otherwise
terminated as provided herein.
<PAGE> 2
3. Nature of Employment. Executive is employed as Vice President
of Company. Consistent with such position, Executive shall, subject to the
direction of the Chief Executive Officer and the Board of Directors of Company,
direct and manage the affairs of the Company as assigned. Executive shall report
to and be responsible to the Chief Executive Officer. During the term of this
Agreement and any extensions or renewals thereof, Executive shall have no other
employment of any nature whatsoever without the prior consent of Company.
Accordingly, unless otherwise approved by Company, Executive agrees to devote
his full working time to the business of Company; provided, however, nothing
herein contained shall restrict or prevent Executive from personally and for his
own account owning and dealing in stocks, bonds, securities, real estate,
commodities, or other investment properties for his own benefit or the benefit
of his family. Further, nothing herein contained shall restrict or prevent
Executive from serving on the Board of Directors of any entity which does not
directly or indirectly compete with Company.
4. Compensation.
(a) Base Salary. Compensation to Executive for the
services rendered on behalf of Company during the term of this Agreement shall
be no less than Two Hundred Eighty-Seven Thousand Eight Hundred Dollars
($287,800) per year, payable in equal monthly installments. From time to time
during the term of this Agreement, Executive's compensation may be increased,
but shall in no event be decreased from the amount of the base salary in effect
at that time. Company shall review Executive's compensation hereunder at least
on an annual basis.
(b) Incentive Compensation. In addition to Executive's
base salary, Executive shall be entitled to participate in incentive
compensation plans and programs generally available to executives of the
Company, provided that performance goals and award targets used in the
computation of awards to the Executive hereunder shall be no less favorable than
those which are used in the computation of awards to other executives of the
Company and shall recognize the level of responsibility of the Executive.
5. Expenses. Executive is authorized to incur reasonable expenses
in connection with the business of Company, including expenses for travel and
similar items. Company will reimburse Executive for all such expenses upon the
presentation by Executive, from time to time, of an itemized account of
expenditures.
6. Vacation. Executive shall be entitled to paid vacations during
each calendar year of the term of this Agreement at such times and for such
duration as may be determined by the Chief Executive Officer of the Company,
taking into consideration the needs and requirements of Company for Executive's
services; provided, however, the minimum paid vacation to which Executive shall
be entitled in any calendar year is four (4) weeks.
7. Additional Benefits. During the term of this Agreement and any
renewals or extensions thereof, Company shall keep and maintain, for the benefit
of Executive, life insurance
2
<PAGE> 3
having a death benefit of not less than one hundred percent (100%) of base pay
(not to exceed $500,000) and disability insurance that will provide Executive a
benefit of not less than sixty-percent (60%) of base pay per month during the
term of any disability. Executive and, as applicable, the Executive's family
shall also have the right to participate in any Executive benefit plans or other
fringe benefits adopted by Company for its officers and/or other key management
employees or as a part of Company's regular compensation structure for its
employees, including any group hospitalization, medical, dental, accidental
death and disability and long-term disability income replacement insurance plans
and any retirement income and capital accumulation plans. All such benefits
shall be in addition to the compensation payments provided by this Agreement.
8. Death During Employment. If Executive dies during the term of
this Agreement, Company shall pay to the estate of Executive the compensation to
which he would otherwise be entitled through the end of the month in which death
occurs in accordance with Section 4(a) above. Company shall also pay to the
estate of Executive an amount equal to any bonus or other incentive payments
which would otherwise have been due to Executive had Executive been employed as
of fiscal year end, pro-rated to date of death. This Agreement shall thereupon
terminate, and Company shall have no further obligation to the estate of
Executive.
9. Permanent Disability During Employment. If Executive becomes
permanently disabled during the term of this Agreement, Company shall pay to
Executive the compensation, in accordance with Section 4(a) above, to which he
would otherwise be entitled to the end of the month in which such permanent
disability occurs. Thereafter, the Executive shall continue to receive his then
base salary, minus any payments provided by the Company's benefit plans
(including disability benefits paid pursuant to Section 7 above) and by any
government sponsored program, for a twenty-four (24) month period from the date
of permanent disability. This Agreement shall thereupon terminate and Company
shall have no further obligation to Executive except as may be provided under
Company's short-term and long-term disability plans during the term of such
disability and any pro rata portion of any bonus or incentive plan. Permanent
disability for purposes of this Agreement shall mean a physical or mental
condition of Executive that renders Executive incapable of performing the
essential duties of his job and which condition shall be medically determined to
be of permanent duration as same is construed under Company's disability plans.
10. Renewal. Executive's term of employment shall be automatically
extended upon the same terms and conditions contained herein for successive
one-year periods unless a written notice of termination is given by either party
at least 90 days before the end of the term of employment or any renewals or
extensions thereof. In the event the Company gives timely notice to terminate
this Agreement, the severance provision of Section 12 pertaining to termination
without cause shall become effective.
11. Termination for Cause. Company may terminate Executive's
employment at any time "for cause". The term "for cause" shall mean (i) a
material default or other breach by Executive of his obligations under this
Agreement, (ii) material failure by Executive to diligently and competently
perform his duties under this Agreement, which shall be determined by
3
<PAGE> 4
Company's Board of Directors in its reasonable discretion, (iii) insubordination
or other act or acts by Executive detrimental to Company or damaging to
Company's relationships with customers, suppliers or employees or (iv) fraud,
dishonesty, misappropriation of Company's assets, or conviction of a felony.
Upon the occurrence of (i), (ii) or (iii) above, Company shall be entitled to
terminate the employment relationship hereunder upon thirty (30) days prior
written notice to Executive, which notice shall state the reason for such
termination and shall provide Executive an opportunity to remedy or cure such
cause during such period. If such cause is not remedied or cured during such
period, Company may terminate Executive's employment immediately. In the event
of a termination for cause, Company shall have no obligation or liability to
Executive under this Agreement except for the compensation to which he is
entitled through the end of the month of termination in accordance with Section
4(a) above.
12. Termination Without Cause. Company shall be entitled to
terminate the employment relationship hereunder without cause at any time upon
thirty (30) days prior written notice to Executive. In such event, Executive, if
requested by Company, shall continue to render his services up to the date of
termination and shall be paid the compensation to which he is entitled through
the end of the month of termination in accordance with Section 4(a) above. In
addition, if Company terminates this Agreement for any reason other than for
cause, as specified in Section 11 above, the Executive shall be entitled to
receive in twenty-four (24) equal monthly payments an amount equal to two times
the sum of (i) his then current base salary in accordance with Section 4(a)
above and (ii) the average annual incentive payments to the Executive during the
preceding three (3) years. The Executive shall not be obligated in any way to
mitigate the Company's obligations to him under this Section 12 and any amounts
earned by the Executive subsequent to his termination of employment shall not
serve as an offset to the severance payments due him by the Company under this
Section. Further, Executive shall be deemed to be One Hundred Percent (100%)
vested in the LADD Furniture, Inc. Executive Retirement Plan (the "ERP").
Payments under this Section 12 are in addition to and not in lieu of any
benefits under the ERP or other benefit programs of the Company. The Company
shall thereafter have no other obligation or liability to Executive under this
Agreement.
If the Company willfully and materially breaches this Agreement and the
Executive terminates employment on account of such breach, the Company shall be
deemed to have terminated the Executive's employment without cause. Accordingly,
the Executive shall be entitled to receive all payments and benefits due the
Executive in the event of termination without cause, as set forth in this
Section 12.
13. Termination For Good Reason. In the event of a "Change in
Control" of the Company (as hereinafter defined), the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events during the twelve (12)
months immediately preceding or following the effective date of a Change in
Control of the Company:
(a) a material change in the scope of the Executive's
assigned duties and responsibilities from those in effect immediately prior to a
Change in Control of the Company or the assignment of duties or responsibilities
that are inconsistent with the Executive's status in the
4
<PAGE> 5
Company; provided that (i) the Executive's failure to be elected to or to remain
on the board of directors of the Company or any of its subsidiaries; (ii) a
change in the Executive's status or the scope of his assigned duties and
responsibilities resulting from the Company's ceasing to be a "reporting
company" under the provisions of the Securities Exchange Act of 1934; and (iii)
as long as there is no material change in the scope of the personnel or
operations reporting to the Executive, the insertion of an additional layer of
management or a change in the individuals (but not constituting the insertion of
more than one additional layer of management) to whom the Executive reports
shall not constitute a material change in scope of the Executive's assigned
duties and responsibilities or be inconsistent with the Executive's status in
the Company;
(b) a reduction by the Company in the Executive's base
salary or incentive compensation as in effect on the date of a Change in
Control; provided that no reduction in incentive compensation shall be deemed to
occur if Executive is offered the same incentive compensation offered to
similarly situated senior executive officers of the subsidiaries of La-Z-Boy
with comparable duties and responsibilities of Executive;
(c) the Company's requirement that the Executive be based
anywhere other than the Company's office at which he was based prior to the
Change in Control of the Company; or
(d) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those specified in Section 14
of this Agreement unless La-Z-Boy or the Company deem it necessary to change
such benefits in order to conform with applicable law.
For purposes of this Section 13, the "Merger" means the merger of a
wholly-owned first-tier subsidiary of La-Z-Boy with and into the Company in
accordance with the requirements of the laws of the States of North Carolina and
Michigan, whereupon the separate existence of such subsidiary shall cease, and
the Company shall be the surviving corporation of such merger.
For purposes of Section 13(c) above, the Company shall be deemed to
have required the Executive to be based somewhere other than the Company's
office at which he was based prior to the Change in Control if the Executive is
required to spend more than two days per week on a regular basis at a business
location not within 50 miles of the Executive's primary business location as of
the Change in Control.
If the Executive shall terminate his employment for Good Reason, then
the Company shall pay him severance pay in twenty-four (24) equal monthly
payments an amount equal to two times the sum of (i) his then current base
salary in accordance with Section 4(a) above, and (ii) the average annual
incentive payments to the Executive during the preceding three (3) years. The
Executive shall not be obligated in any way to mitigate the Company's
obligations to him under this Section 13 and any amounts earned by the Executive
subsequent to his termination of employment shall not serve as an offset to the
severance payments due him by the Company under this Section.
5
<PAGE> 6
For purposes of this Agreement, a "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 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
(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.
14. Change in Control Benefits.
(a) Upon a Change in Control, as defined above in Section
13, all outstanding stock options shall become 100% vested and immediately
exercisable, regardless of whether Executive terminates employment or not.
(b) If the Executive is terminated without cause or
terminates employment with Good Reason within twelve (12) months of a Change in
Control, to the extent permitted by law, the Company shall continue the medical,
disability and life insurance benefits which Executive was receiving at the time
of termination for a period of 36 months after termination of employment or, if
earlier, until Executive has commenced employment elsewhere and becomes eligible
for participation in the medical, disability and life insurance programs, if
any, of his successor employer. Coverage under Employer's medical, disability
and life insurance programs shall cease with respect to each such program as
Executive becomes eligible for the medical, disability and life insurance
programs, if any, of his successor employer.
15. Property of Company. Executive agrees that upon the
termination of his employment he will turn over to Company all property of
Company which has come into his possession while an Executive of Company.
16. Covenants by Executive.
(a) Non-competition. During the term of employment under
this Agreement including any renewals or extensions thereof, and for a period of
two (2) years thereafter, Executive shall not, without the prior written
approval of Company, directly or indirectly, engage in any competitive activity
as employer, employee, partner, stockholder, joint venturer or
6
<PAGE> 7
otherwise, enter into or in any manner take part in any business or other
endeavor which would be in competition with Company in the continental United
States as such business is conducted at the time of termination.
(b) Respect for Economic Relationships. Executive will
not, during the term of his employment under this Agreement including any
renewals or extensions thereof, and for a period of two (2) years thereafter, in
any fashion, form, or manner, either directly or indirectly, solicit, interfere
with, or endeavor to entice away from Company any customer or person, firm or
corporation, regularly dealing with Company or directly or indirectly interfere
with, entice away, or cause any other entity to employ any other employee of
Company.
(c) Validity of Covenants. Executive agrees that the
covenants contained in this Section are reasonably necessary to protect the
legitimate interests of Company, are reasonable with respect to time, territory
and scope, and do not interfere with the interests of the public. Executive
further agrees that the descriptions of the covenants contained in this Section
are sufficiently accurate and definite to inform Executive of the scope of such
covenants. Executive acknowledges that prior to entering into this Agreement he
was employed "at will", and agrees that the term of employment and termination
provisions contained in Sections 2, 10, 11, 12 and 13 above constitute fully
adequate and sufficient consideration for the covenants contained in Sections 16
and 18 of this Agreement.
(d) Specific Performance. Executive agrees that a breach
or violation of any of the covenants under this Section will result in immediate
and irreparable harm to Company in an amount which will be impossible to
ascertain at the time of the breach or violation and that the award of monetary
damages will not be adequate relief to Company. Therefore, the failure on the
part of Executive to perform all of the covenants established by this Section
shall give rise to a right to Company to obtain enforcement of this Section in a
court of equity by a decree of specific performance or other injunctive relief.
This remedy, however, shall be cumulative and in addition to any other remedy
Company may have.
17. Patent, Trade Dress and Trademark Assignment. Executive agrees
without additional compensation to assign promptly to Company all rights, title,
and interest in and to any and all trade secrets, inventions, letters patent,
applications for letters patent, trade dress, and trademarks whether or not
subject to state or federal trademark during the term of employment hereunder if
related to the then current products and activities of Company, such activities
to include, without limitation, product development by Company, or if developed
or made with the use of its facilities, equipment, materials, personnel, or
trade secrets, or result directly from any work performed by Executive for
Company. Executive further agrees to disclose promptly to Company any such trade
secrets, inventions, letters patent, applications for letters patent, trade
dress, and trademarks, and, at the request and expense of Company, to apply for
letters patent or registration thereon in every jurisdiction designated by
Company.
18. Confidential Information. Executive agrees both during the
term of this Agreement and thereafter to keep secret and confidential all
information labeled confidential or not generally known which is heretofore or
hereafter acquired concerning the business and affairs
7
<PAGE> 8
of Company, including without limitation, information regarding trade secrets,
trade dress, proprietary processes, confidential business plans, market research
data and financial data, and further agrees not to disclose any such information
to any person, firm, or corporation or use the same in any manner other than in
furtherance of the business or affairs of Company or unless such information
shall become public knowledge by other means. Executive agrees that such
information is a valuable, special, and unique asset of Company. Upon the
termination of Executive's employment with Company, Executive shall immediately
return to Company all documents, records, notebooks, and similar repositories of
information relating to confidential information of Company and/or the
development of any inventions.
19. Waiver of Breach. The waiver by Company or Executive of any
breach of a provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by the parties.
20. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
(a) If to Company, to:
LADD Furniture, Inc.
4620 Grandover Parkway
Greensboro, NC 27407
Attn: Chief Executive Officer
b) If to Executive, to:
Kenneth E. Church
26 W. Highland Avenue
Granite Falls, NC 28630
21. Entire Agreement. This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between the parties
hereto with respect to the subject matter hereof and constitutes the sole and
only agreement between the parties with respect to said subject matter. Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party or by
anyone acting on behalf of any party, which are not embodied herein, and that no
agreement, statement, or promise not contained in this Agreement shall be valid
or binding or of any force or effect. No change or modification of this
Agreement shall be valid or binding upon the parties hereto unless such change
or modification is in writing and is signed by the parties hereto.
22. Severability. If any one or more of the provisions contained
in this Agreement shall be held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect for any reason, that
invalidity, illegality, or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if that invalid,
illegal, or unenforceable provision had never been contained herein.
8
<PAGE> 9
23. Parties Bound. The terms, promises, covenants, and agreements
contained in this Agreement shall apply to, be binding upon, and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement may not be assigned by Company or
Executive without the prior written consent of the other party.
24. Consolidation, Merger or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into, or
with, or transferring all or substantially all of its assets to another
corporation which assumes this Agreement and all obligations and undertakings of
the Company hereunder. Upon such a consolidation or merger, the use of the word
"Company" herein shall mean such other corporation, and this Agreement shall
continue in full force and effect.
25. Survival. The provisions of Sections 16 and 18 of this
Agreement shall survive the termination of this Agreement and shall continue for
the terms set forth in Sections 16 and 18.
26. Captions. Captions to the Sections of this Agreement are
inserted solely for the convenience of the parties, are not a part of this
Agreement, and in no way define, limit, extend or describe the scope thereof or
the intent of any of the provisions.
27. Applicable Law. This Agreement shall be construed and the
legal relationship between the parties determined in accordance with the laws of
the State of North Carolina.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written, the corporate party acting
through duly authorized officers.
ATTEST: LADD Furniture, Inc.
By:
- --------------------------- -------------------------------
Secretary President
(Corporate Seal)
(SEAL)
- --------------------------- ----------------------------
(Witness) Kenneth E. Church
10
<PAGE> 1
EXHIBIT 10.6
NORTH CAROLINA ) AMENDED AND RESTATED
) EXECUTIVE EMPLOYMENT AGREEMENT
GUILFORD COUNTY )
THIS AGREEMENT, made and entered into the _____ day of _______________,
1999, and effective as of September 28, 1999, by and between LADD Furniture,
Inc., a North Carolina corporation ("Company"), and Michael P. Haley, an
individual resident of Virginia ("Executive");
WITNESSETH:
WHEREAS, Company is engaged in the manufacture, distribution, and sale
of furniture; and
WHEREAS, the Company has previously entered into an employment
agreement with Executive dated October 31, 1997; and
WHEREAS, due to changes that have occurred in the compensation
arrangements with the Company's executives and the possibility of a merger
between the Company and a subsidiary of La-Z-Boy Incorporated, further
amendments to the employment agreement are appropriate; and
WHEREAS, Company desires to continue to employ Executive as its
Executive Vice President and Executive desires to accept such continued
employment on the terms and conditions hereinafter set forth; and
WHEREAS, the retention of the Executive is critical to the success of
the negotiation and consummation of the proposed merger with a subsidiary of
La-Z-Boy Incorporated; and
WHEREAS, the amendment of the agreement will induce the Executive to
continue his employment relationship with the Company;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Employment. Company hereby employs Executive, and Executive
hereby accepts employment and agrees to remain in the employ of the Company
during the term of this Agreement, on the terms and conditions hereinafter set
forth.
2. Term of Employment. Subject to the provisions in Section 10
below, the term of this Agreement shall be for a one-year period beginning on
the date hereof and terminating on September 30, 2000, unless otherwise
terminated as provided herein.
<PAGE> 2
3. Nature of Employment. Executive is employed as Executive Vice
President of Company. Consistent with such position, Executive shall, subject to
the direction of the Chief Executive Officer and the Board of Directors of
Company, direct and manage the affairs of the Company as assigned. Executive
shall report to and be responsible to the Chief Executive Officer. During the
term of this Agreement and any extensions or renewals thereof, Executive shall
have no other employment of any nature whatsoever without the prior consent of
Company. Accordingly, unless otherwise approved by Company, Executive agrees to
devote his full working time to the business of Company; provided, however,
nothing herein contained shall restrict or prevent Executive from personally and
for his own account owning and dealing in stocks, bonds, securities, real
estate, commodities, or other investment properties for his own benefit or the
benefit of his family. Further, nothing herein contained shall restrict or
prevent Executive from serving on the Board of Directors of any entity which
does not directly or indirectly compete with Company.
4. Compensation.
(a) Base Salary. Compensation to Executive for the
services rendered on behalf of Company during the term of this Agreement shall
be no less than Three Hundred Twenty Thousand Dollars ($320,000) per year,
payable in equal monthly installments. From time to time during the term of this
Agreement, Executive's compensation may be increased, but shall in no event be
decreased from the amount of the base salary in effect at that time. Company
shall review Executive's compensation hereunder at least on an annual basis.
(b) Incentive Compensation. In addition to Executive's
base salary, Executive shall be entitled to participate in incentive
compensation plans and programs generally available to executives of the
Company, provided that performance goals and award targets used in the
computation of awards to the Executive hereunder shall be no less favorable than
those which are used in the computation of awards to other executives of the
Company and shall recognize the level of responsibility of the Executive.
5. Expenses. Executive is authorized to incur reasonable expenses
in connection with the business of Company, including expenses for travel and
similar items. Company will reimburse Executive for all such expenses upon the
presentation by Executive, from time to time, of an itemized account of
expenditures.
6. Vacation. Executive shall be entitled to paid vacations during
each calendar year of the term of this Agreement at such times and for such
duration as may be determined by the Chief Executive Officer of the Company,
taking into consideration the needs and requirements of Company for Executive's
services; provided, however, the minimum paid vacation to which Executive shall
be entitled in any calendar year is four (4) weeks.
7. Additional Benefits. During the term of this Agreement and any
renewals or extensions thereof, Company shall keep and maintain, for the benefit
of Executive, life insurance having a death benefit of not less than one hundred
percent (100%) of base pay (not to exceed
2
<PAGE> 3
$500,000) and disability insurance that will provide Executive a benefit of not
less than sixty-percent (60%) of base pay per month during the term of any
disability. Executive and, as applicable, the Executive's family shall also have
the right to participate in any Executive benefit plans or other fringe benefits
adopted by Company for its officers and/or other key management employees or as
a part of Company's regular compensation structure for its employees, including
any group hospitalization, medical, dental, accidental death and disability and
long-term disability income replacement insurance plans and any retirement
income and capital accumulation plans. All such benefits shall be in addition to
the compensation payments provided by this Agreement.
8. Death During Employment. If Executive dies during the term of
this Agreement, Company shall pay to the estate of Executive the compensation to
which he would otherwise be entitled through the end of the month in which death
occurs in accordance with Section 4(a) above. Company shall also pay to the
estate of Executive an amount equal to any bonus or other incentive payments
which would otherwise have been due to Executive had Executive been employed as
of fiscal year end, pro-rated to date of death. This Agreement shall thereupon
terminate, and Company shall have no further obligation to the estate of
Executive.
9. Permanent Disability During Employment. If Executive becomes
permanently disabled during the term of this Agreement, Company shall pay to
Executive the compensation, in accordance with Section 4(a) above, to which he
would otherwise be entitled to the end of the month in which such permanent
disability occurs. Thereafter, the Executive shall continue to receive his then
base salary, minus any payments provided by the Company's benefit plans
(including disability benefits paid pursuant to Section 7 above) and by any
government sponsored program, for a twenty-four (24) month period from the date
of permanent disability. This Agreement shall thereupon terminate and Company
shall have no further obligation to Executive except as may be provided under
Company's short-term and long-term disability plans during the term of such
disability and any pro rata portion of any bonus or incentive plan. Permanent
disability for purposes of this Agreement shall mean a physical or mental
condition of Executive that renders Executive incapable of performing the
essential duties of his job and which condition shall be medically determined to
be of permanent duration as same is construed under Company's disability plans.
10. Renewal. Executive's term of employment shall be automatically
extended upon the same terms and conditions contained herein for successive
one-year periods unless a written notice of termination is given by either party
at least 90 days before the end of the term of employment or any renewals or
extensions thereof. In the event the Company gives timely notice to terminate
this Agreement, the severance provision of Section 12 pertaining to termination
without cause shall become effective.
11. Termination for Cause. Company may terminate Executive's
employment at any time "for cause". The term "for cause" shall mean (i) a
material default or other breach by Executive of his obligations under this
Agreement, (ii) material failure by Executive to diligently and competently
perform his duties under this Agreement, which shall be determined by Company's
Board of Directors in its reasonable discretion, (iii) insubordination or other
act or
3
<PAGE> 4
acts by Executive detrimental to Company or damaging to Company's relationships
with customers, suppliers or employees or (iv) fraud, dishonesty,
misappropriation of Company's assets, or conviction of a felony. Upon the
occurrence of (i), (ii) or (iii) above, Company shall be entitled to terminate
the employment relationship hereunder upon thirty (30) days prior written notice
to Executive, which notice shall state the reason for such termination and shall
provide Executive an opportunity to remedy or cure such cause during such
period. If such cause is not remedied or cured during such period, Company may
terminate Executive's employment immediately. In the event of a termination for
cause, Company shall have no obligation or liability to Executive under this
Agreement except for the compensation to which he is entitled through the end of
the month of termination in accordance with Section 4(a) above.
12. Termination Without Cause. Company shall be entitled to
terminate the employment relationship hereunder without cause at any time upon
thirty (30) days prior written notice to Executive. In such event, Executive, if
requested by Company, shall continue to render his services up to the date of
termination and shall be paid the compensation to which he is entitled through
the end of the month of termination in accordance with Section 4(a) above. In
addition, if Company terminates this Agreement for any reason other than for
cause, as specified in Section 11 above, the Executive shall be entitled to
receive in twenty-four (24) equal monthly payments an amount equal to two times
the sum of (i) his then current base salary in accordance with Section 4(a)
above and (ii) the average annual incentive payments to the Executive during the
preceding three (3) years. The Executive shall not be obligated in any way to
mitigate the Company's obligations to him under this Section 12 and any amounts
earned by the Executive subsequent to his termination of employment shall not
serve as an offset to the severance payments due him by the Company under this
Section. Further, Executive shall be deemed to be One Hundred Percent (100%)
vested in the LADD Furniture, Inc. Executive Retirement Plan (the "ERP").
Payments under this Section 12 are in addition to and not in lieu of any
benefits under the ERP or other benefit programs of the Company. The Company
shall thereafter have no other obligation or liability to Executive under this
Agreement.
If the Company willfully and materially breaches this Agreement and the
Executive terminates employment on account of such breach, the Company shall be
deemed to have terminated the Executive's employment without cause. Accordingly,
the Executive shall be entitled to receive all payments and benefits due the
Executive in the event of termination without cause, as set forth in this
Section 12.
13. Termination For Good Reason. In the event of a "Change in
Control" of the Company (as hereinafter defined), the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events during the twelve (12)
months immediately preceding or following the effective date of a Change in
Control of the Company:
(a) a material change in the scope of the Executive's
assigned duties and responsibilities from those in effect immediately prior to a
Change in Control of the Company or the assignment of duties or responsibilities
that are inconsistent with the Executive's status in the Company; provided that
(i) the Executive's failure to be elected to or to remain on the board of
4
<PAGE> 5
directors of the Company or any of its subsidiaries; (ii) a change in the
Executive's status or the scope of his assigned duties and responsibilities
resulting from the Company's ceasing to be a "reporting company" under the
provisions of the Securities Exchange Act of 1934; and (iii) as long as there is
no material change in the scope of the personnel or operations reporting to the
Executive, the insertion of an additional layer of management or a change in the
individuals (but not constituting the insertion of more than one additional
layer of management) to whom the Executive reports shall not constitute a
material change in scope of the Executive's assigned duties and responsibilities
or be inconsistent with the Executive's status in the Company;
(b) a reduction by the Company in the Executive's base
salary or incentive compensation as in effect on the date of a Change in
Control; provided that no reduction in incentive compensation shall be deemed to
occur if Executive is offered the same incentive compensation offered to
similarly situated senior executive officers of the subsidiaries of La-Z-Boy
with comparable duties and responsibilities of Executive;
(c) the Company's requirement that the Executive be based
anywhere other than the Company's office at which he was based prior to the
Change in Control of the Company; or
(d) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those specified in Section 14
of this Agreement unless La-Z-Boy or the Company deem it necessary to change
such benefits in order to conform with applicable law.
For purposes of this Section 13, the "Merger" means the merger of a
wholly-owned first-tier subsidiary of La-Z-Boy with and into the Company in
accordance with the requirements of the laws of the States of North Carolina and
Michigan, whereupon the separate existence of such subsidiary shall cease, and
the Company shall be the surviving corporation of such merger.
For purposes of Section 13(c) above, the Company shall be deemed to
have required the Executive to be based somewhere other than the Company's
office at which he was based prior to the Change in Control if the Executive is
required to spend more than two days per week on a regular basis at a business
location not within 50 miles of the Executive's primary business location as of
the Change in Control.
If the Executive shall terminate his employment for Good Reason, then
the Company shall pay him severance pay in twenty-four (24) equal monthly
payments an amount equal to two times the sum of (i) his then current base
salary in accordance with Section 4(a) above, and (ii) the average annual
incentive payments to the Executive during the preceding three (3) years. The
Executive shall not be obligated in any way to mitigate the Company's
obligations to him under this Section 13 and any amounts earned by the Executive
subsequent to his termination of employment shall not serve as an offset to the
severance payments due him by the Company under this Section.
5
<PAGE> 6
For purposes of this Agreement, a "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 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
(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.
14. Change in Control Benefits.
(a) Upon a Change in Control, as defined above in Section
13, all outstanding stock options shall become 100% vested and immediately
exercisable, regardless of whether Executive terminates employment or not.
(b) If the Executive is terminated without cause or
terminates employment with Good Reason within twelve (12) months of a Change in
Control, to the extent permitted by law, the Company shall continue the medical,
disability and life insurance benefits which Executive was receiving at the time
of termination for a period of 36 months after termination of employment or, if
earlier, until Executive has commenced employment elsewhere and becomes eligible
for participation in the medical, disability and life insurance programs, if
any, of his successor employer. Coverage under Employer's medical, disability
and life insurance programs shall cease with respect to each such program as
Executive becomes eligible for the medical, disability and life insurance
programs, if any, of his successor employer.
15. Property of Company. Executive agrees that upon the
termination of his employment he will turn over to Company all property of
Company which has come into his possession while an Executive of Company.
16. Covenants by Executive.
(a) Non-competition. During the term of employment under
this Agreement including any renewals or extensions thereof, and for a period of
two (2) years thereafter, Executive shall not, without the prior written
approval of Company, directly or indirectly, engage in any competitive activity
as employer, employee, partner, stockholder, joint venturer or
6
<PAGE> 7
otherwise, enter into or in any manner take part in any business or other
endeavor which would be in competition with Company in the continental United
States as such business is conducted at the time of termination.
(b) Respect for Economic Relationships. Executive will
not, during the term of his employment under this Agreement including any
renewals or extensions thereof, and for a period of two (2) years thereafter, in
any fashion, form, or manner, either directly or indirectly, solicit, interfere
with, or endeavor to entice away from Company any customer or person, firm or
corporation, regularly dealing with Company or directly or indirectly interfere
with, entice away, or cause any other entity to employ any other employee of
Company.
(c) Validity of Covenants. Executive agrees that the
covenants contained in this Section are reasonably necessary to protect the
legitimate interests of Company, are reasonable with respect to time, territory
and scope, and do not interfere with the interests of the public. Executive
further agrees that the descriptions of the covenants contained in this Section
are sufficiently accurate and definite to inform Executive of the scope of such
covenants. Executive acknowledges that prior to entering into this Agreement he
was employed "at will", and agrees that the term of employment and termination
provisions contained in Sections 2, 10, 11, 12 and 13 above constitute fully
adequate and sufficient consideration for the covenants contained in Sections 16
and 18 of this Agreement.
(d) Specific Performance. Executive agrees that a breach
or violation of any of the covenants under this Section will result in immediate
and irreparable harm to Company in an amount which will be impossible to
ascertain at the time of the breach or violation and that the award of monetary
damages will not be adequate relief to Company. Therefore, the failure on the
part of Executive to perform all of the covenants established by this Section
shall give rise to a right to Company to obtain enforcement of this Section in a
court of equity by a decree of specific performance or other injunctive relief.
This remedy, however, shall be cumulative and in addition to any other remedy
Company may have.
17. Patent, Trade Dress and Trademark Assignment. Executive agrees
without additional compensation to assign promptly to Company all rights, title,
and interest in and to any and all trade secrets, inventions, letters patent,
applications for letters patent, trade dress, and trademarks whether or not
subject to state or federal trademark during the term of employment hereunder if
related to the then current products and activities of Company, such activities
to include, without limitation, product development by Company, or if developed
or made with the use of its facilities, equipment, materials, personnel, or
trade secrets, or result directly from any work performed by Executive for
Company. Executive further agrees to disclose promptly to Company any such trade
secrets, inventions, letters patent, applications for letters patent, trade
dress, and trademarks, and, at the request and expense of Company, to apply for
letters patent or registration thereon in every jurisdiction designated by
Company.
18. Confidential Information. Executive agrees both during the
term of this Agreement and thereafter to keep secret and confidential all
information labeled confidential or not generally known which is heretofore or
hereafter acquired concerning the business and affairs
7
<PAGE> 8
of Company, including without limitation, information regarding trade secrets,
trade dress, proprietary processes, confidential business plans, market research
data and financial data, and further agrees not to disclose any such information
to any person, firm, or corporation or use the same in any manner other than in
furtherance of the business or affairs of Company or unless such information
shall become public knowledge by other means. Executive agrees that such
information is a valuable, special, and unique asset of Company. Upon the
termination of Executive's employment with Company, Executive shall immediately
return to Company all documents, records, notebooks, and similar repositories of
information relating to confidential information of Company and/or the
development of any inventions.
19. Waiver of Breach. The waiver by Company or Executive of any
breach of a provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by the parties.
20. Notice. All notices, requests, demands, payments, or other
communications hereunder shall be deemed to have been duly given if in writing
and hand delivered or sent by certified or registered mail, return receipt
requested, to the appropriate address indicated below or to such other address
as may be given in a notice sent to all parties hereto:
(a) If to Company, to:
LADD Furniture, Inc.
4620 Grandover Parkway
Greensboro, NC 27407
Attn: Chief Executive Officer
b) If to Executive, to:
Michael P. Haley
928 Mulberry Rd.
Martinsville, VA 24112
21. Entire Agreement. This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between the parties
hereto with respect to the subject matter hereof and constitutes the sole and
only agreement between the parties with respect to said subject matter. Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party or by
anyone acting on behalf of any party, which are not embodied herein, and that no
agreement, statement, or promise not contained in this Agreement shall be valid
or binding or of any force or effect. No change or modification of this
Agreement shall be valid or binding upon the parties hereto unless such change
or modification is in writing and is signed by the parties hereto.
22. Severability. If any one or more of the provisions contained
in this Agreement shall be held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect for any reason, that
invalidity, illegality, or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if that invalid,
illegal, or unenforceable provision had never been contained herein.
8
<PAGE> 9
23. Parties Bound. The terms, promises, covenants, and agreements
contained in this Agreement shall apply to, be binding upon, and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement may not be assigned by Company or
Executive without the prior written consent of the other party.
24. Consolidation, Merger or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into, or
with, or transferring all or substantially all of its assets to another
corporation which assumes this Agreement and all obligations and undertakings of
the Company hereunder. Upon such a consolidation or merger, the use of the word
"Company" herein shall mean such other corporation, and this Agreement shall
continue in full force and effect.
25. Survival. The provisions of Sections 16 and 18 of this
Agreement shall survive the termination of this Agreement and shall continue for
the terms set forth in Sections 16 and 18.
26. Captions. Captions to the Sections of this Agreement are
inserted solely for the convenience of the parties, are not a part of this
Agreement, and in no way define, limit, extend or describe the scope thereof or
the intent of any of the provisions.
27. Applicable Law. This Agreement shall be construed and the
legal relationship between the parties determined in accordance with the laws of
the State of North Carolina.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written, the corporate party acting
through duly authorized officers.
ATTEST: LADD Furniture, Inc.
By:
- --------------------------- -------------------------------
Secretary President
(Corporate Seal)
(SEAL)
- --------------------------- ----------------------------
(Witness) Michael P. Haley
10
<PAGE> 1
EXHIBIT 10.7
FIRST AMENDMENT TO THE
LADD FURNITURE, INC.
1997 LONG-TERM INCENTIVE PLAN
This First Amendment to the LADD Furniture, Inc. 1997 Long-Term
Incentive Plan (the "Plan") made this ___ day of _______________, 1999, and
effective September 1, 1999.
W I T N E S S E T H:
WHEREAS, the Board of Directors of LADD Furniture, Inc. previously
adopted the Plan for the purpose of providing effective incentives for key
employees of the Corporation; and
WHEREAS, the Plan was originally intended to operate as a long-term
incentive plan running for a three-year period ending January 1, 2000; and
WHEREAS, the Corporation is contemplating a merger with a subsidiary of
La-Z-Boy Incorporated (the "Merger"); and
WHEREAS, the Board of Directors has determined that it is in the best
interests of the Corporation and its shareholders for the Corporation to have
the authority to pay the bonuses earned under the Plan prior to January 1, 2000.
NOW, THEREFORE, BE IT RESOLVED: that the Plan shall be amended by
adding a new paragraph 10 to read as follows:
10. Notwithstanding any other provisions of the 1997
LTIP, the Performance Bonuses earned under the Plan
by the Corporation's employees shall be paid to such
employees on or before the closing of the Merger. The
Corporation's chief executive officer shall have
discretion as to the timing of such payments,
including discretion to direct that the payment date
vary among the participants in the Plan; provided,
however, that if the closing of the Merger is not on
or before December 31, 1999, payment on or before
such date may only be made with the prior written
consent of La-Z-Boy Incorporated. If Performance
Bonuses are paid before January 1, 2000, to any
participant, all such bonuses shall be calculated
under the terms of the Plan based on the best
financial information available to the Corporation as
of the date of payment. Regardless of when the
Performance Bonuses
<PAGE> 2
are paid, they shall be calculated by excluding any
special expenses related to the Merger. All payments
under the Plan shall be made in cash.
IN WITNESS WHEREOF, the Corporation has caused this First Amendment to
be executed by the proper officers and its corporate seal hereto affixed as of
the day and year first above written.
LADD FURNITURE, INC.
Attest:
By:
- -------------------------- -----------------------------
Secretary Chairman of the Board and Chief
Executive Officer
[CORPORATE SEAL]
2
<PAGE> 1
EXHIBIT 10.8
FIRST AMENDMENT TO THE
LADD FURNITURE, INC.
1998 LONG-TERM INCENTIVE PLAN
This First Amendment to the LADD Furniture, Inc. 1998 Long-Term
Incentive Plan (the "Plan") made this ___ day of _______________, 1999, and
effective September 1, 1999.
W I T N E S S E T H:
WHEREAS, the Board of Directors of LADD Furniture, Inc. previously
adopted the Plan for the purpose of providing effective incentives for key
employees of the Corporation; and
WHEREAS, the Plan was originally intended to operate as a long-term
incentive plan running for a three-year period ending December 31, 2000; and
WHEREAS, the Corporation is contemplating a merger with a subsidiary of
La-Z-Boy Incorporated (the "Merger"); and
WHEREAS, the Plan will not operate as intended if the Merger is
consummated; and
WHEREAS, it is essential to the successful consummation of the Merger
and the on-going operation of the merged entity for participants in the Plan to
be treated fairly.
NOW, THEREFORE, BE IT RESOLVED: that the Plan shall be amended by
adding a new Section 10 to read as follows:
10. Notwithstanding any other provisions of the 1998
LTIP, Performance Bonuses shall be paid out to the
Plan's participants in an amount equal to 75% of each
participant's Target Performance Bonus. All such
payments shall be made in cash. The Corporation's
chief executive officer shall have discretion as to
the timing of such payments, including the discretion
to direct that the payment date vary among the
participants; provided that all such payments shall
be made by the Corporation on or before the closing
of the Merger; and, provided further, that if the
closing of the Merger is not on or before December
31, 1999, payment on or before such date may only be
made with the prior written consent of La-Z-Boy
Incorporated.
<PAGE> 2
Notwithstanding the preceding paragraph, if the
Merger does not occur prior to June 30, 2000, the
1998 LTIP shall be reinstated in all respects, and
(a) all amounts paid to the participants in the Plan
pursuant to this Section 10 of the Plan shall be
treated as an advance on 2000 base salary, and (b) if
payments are made in 1999, the Corporation shall pay
each participant an additional bonus in the amount
necessary to reimburse the participant for the
incremental costs he incurred by receiving such
amounts in 1999 instead of in 2000.
IN WITNESS WHEREOF, the Corporation has caused this First Amendment to
be executed by the proper officers and its corporate seal hereto affixed as of
the day and year first above written.
LADD FURNITURE, INC.
Attest:
By:
- -------------------------- ------------------------------
Secretary Chairman of the Board and Chief
Executive Officer
[CORPORATE SEAL]
2
<PAGE> 1
EXHIBIT 10.9
FIRST AMENDMENT TO THE
LADD FURNITURE, INC.
1999 LONG-TERM INCENTIVE PLAN
This First Amendment to the LADD Furniture, Inc. 1999 Long-Term
Incentive Plan (the "Plan") made this ___ day of _______________, 1999, and
effective September 1, 1999.
W I T N E S S E T H:
WHEREAS, the Board of Directors of LADD Furniture, Inc. previously
adopted the Plan for the purpose of providing effective incentives for key
employees of the Corporation; and
WHEREAS, the Plan was originally intended to operate as a long-term
incentive plan running for a three-year period ending December 30, 2001; and
WHEREAS, the Corporation is contemplating a merger with a subsidiary of
La-Z-Boy Incorporated (the "Merger"); and
WHEREAS, the Plan will not operate as intended if the Merger is
consummated; and
WHEREAS, it is essential to the successful consummation of the Merger
and the on-going operation of the merged entity for participants in the Plan to
be treated fairly.
NOW, THEREFORE, BE IT RESOLVED: that the Plan shall be amended by
adding a new paragraph 10 to read as follows:
10. Notwithstanding any other provisions of the 1999
LTIP, Performance Bonuses shall be paid out to the
Plan's participants in an amount equal to 50% of each
participant's Target Performance Bonus. All such
payments shall be made in cash. The chief executive
officer shall have discretion as to the timing of
such payments to each participant; provided that all
such payments shall be made by the Corporation on or
before the closing of the Merger; and, provided
further, that if the closing of the Merger is not on
or before December 31, 1999, payment on or before
such date may only be made with the prior written
consent of La-Z-Boy Incorporated.
<PAGE> 2
Notwithstanding the preceding paragraph, if the
Merger does not occur prior to June 30, 2000, the
1999 LTIP shall be reinstated in all respects, and
(a) all amounts paid to the participants in the Plan
pursuant to this Section 10 of the Plan shall be
treated as an advance on 2000 base salary, and (b) if
payments are made in 1999, the Corporation shall pay
each participant an additional bonus in the amount
necessary to reimburse the participant for the
incremental costs he incurred by receiving such
amounts in 1999 instead of in 2000.
IN WITNESS WHEREOF, the Corporation has caused this First Amendment to
be executed by the proper officers and its corporate seal hereto affixed as of
the day and year first above written.
LADD FURNITURE, INC.
Attest:
By:
- -------------------------- -----------------------------
Secretary Chairman of the Board and Chief
Executive Officer
[CORPORATE SEAL]
2
<PAGE> 1
EXHIBIT 10.10
FIRST AMENDMENT TO THE
LADD FURNITURE, INC.
1999 MANAGEMENT INCENTIVE PLAN
This First Amendment to the LADD Furniture, Inc. 1999 Management
Incentive Plan (the "Plan") made this ___ day of _______________, 1999, and
effective September 1, 1999.
W I T N E S S E T H:
WHEREAS, the Board of Directors of LADD Furniture, Inc. previously
adopted the Plan for the purpose of providing effective incentives for key
employees of the Corporation; and
WHEREAS, the Plan was originally intended to operate as a short-term
incentive plan running for the one-year period ending January 1, 2000; and
WHEREAS, the Corporation is contemplating a merger with a subsidiary of
La-Z-Boy Incorporated (the "Merger"); and
WHEREAS, the Board of Directors has determined that it is in the best
interests of the Corporation and its shareholders for the Corporation to have
the authority to pay the bonuses earned under the Plan prior to January 1, 2000.
NOW, THEREFORE, BE IT RESOLVED: that the Plan shall be amended by
adding a new paragraph 10 to read as follows:
10. Notwithstanding any other provisions of the 1999 MIP,
the Performance Bonuses earned under the Plan by the
Corporation's employees shall be paid to such
employees on or before the closing of the Merger. The
Corporation's chief executive officer shall have
discretion as to the timing of such payments,
including discretion to direct that the payment date
vary among the participants in the Plan; provided,
however, that if the closing of the Merger is not on
or before December 31, 1999, payment on or before
such date may only be made with the prior written
consent of La-Z-Boy Incorporated. If Performance
Bonuses are paid before January 1, 2000, to any
participant, all such bonuses shall be calculated
<PAGE> 2
under the terms of the Plan based on the best
financial information available to the Corporation as
of the date of payment. Regardless of when the
Performance Bonuses are paid, they shall be
calculated by excluding any special expenses related
to the Merger.
IN WITNESS WHEREOF, the Corporation has caused this First Amendment to
be executed by the proper officers and its corporate seal hereto affixed as of
the day and year first above written.
LADD FURNITURE, INC.
Attest:
By:
- -------------------------- -----------------------------
Secretary Chairman of the Board and Chief
Executive Officer
[CORPORATE SEAL]
2
<PAGE> 1
EXHIBIT 10.11
SIXTH AMENDMENT TO THE
LADD FURNITURE, INC.
1994 INCENTIVE STOCK OPTION PLAN
This Sixth Amendment to the LADD Furniture, Inc. 1994 Incentive Stock
Option Plan (the "Plan") made this ___ day of _______________, 1999, and
effective September 1, 1999.
W I T N E S S E T H:
WHEREAS, the Board of Directors of LADD Furniture, Inc. has appointed a
committee (the "Committee") to administer the Plan; and
WHEREAS, the Committee is authorized to amend the Plan;
WHEREAS, certain executives of LADD Furniture, Inc. have employment
agreements with the Corporation which provide for the 100% vesting of all
outstanding stock options upon the occurrence of certain events; and
WHEREAS, the Committee has determined that it is appropriate to amend
the Stock Option Plan to reflect the existing provisions of the employment
agreements and to provide for the 100% vesting of stock options held by such
executives and the directors of the corporation upon a Change in Control of the
Corporation; and
WHEREAS, the Board of Directors has approved the Sixth Amendment to the
Plan.
NOW, THEREFORE, BE IT RESOLVED: the a new subparagraph (c) shall be
added to Section 9 of the Plan to read as follows:
(c) Notwithstanding any other provision of the
Plan, all options held by an executive employee of LADD who
has an employment agreement with LADD, the terms of which
provide for the vesting of all options upon a Change in
Control, and all Director Options shall become 100% vested and
fully exercisable upon a Change in Control.
IN WITNESS WHEREOF, the Committee has caused this Sixth Amendment to be
executed by the proper officers and its corporate seal hereto affixed as of the
day and year first above written.
----------------------------------
----------------------------------
----------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LADD FURNITURE, INC. FOR THE NINE MONTHS ENDED
OCTOBER 2, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> OCT-02-1999
<CASH> 137
<SECURITIES> 0
<RECEIVABLES> 96,113
<ALLOWANCES> 2,540
<INVENTORY> 106,400
<CURRENT-ASSETS> 212,259
<PP&E> 66,828
<DEPRECIATION> 0
<TOTAL-ASSETS> 350,318
<CURRENT-LIABILITIES> 85,471
<BONDS> 95,365
0
0
<COMMON> 2,350
<OTHER-SE> 154,611
<TOTAL-LIABILITY-AND-EQUITY> 350,318
<SALES> 460,810
<TOTAL-REVENUES> 460,810
<CGS> 369,767
<TOTAL-COSTS> 369,767
<OTHER-EXPENSES> 65,793
<LOSS-PROVISION> 835
<INTEREST-EXPENSE> 5,570
<INCOME-PRETAX> 19,680
<INCOME-TAX> 7,282
<INCOME-CONTINUING> 12,398
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,398
<EPS-BASIC> 1.58
<EPS-DILUTED> 1.55
</TABLE>
