SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commisssion Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Stanley Furniture Company, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
Stanley Furniture Company, Inc.
Route 57 West
Stanleytown, Virginia 24168
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 20, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Stanley Furniture Company, Inc. (the "Company") will be held at the
Company's principal executive offices, Route 57 West, Stanleytown, Virginia
on Thursday, April 20, 1995, at 11:00 A.M., for the following purposes:
(1) To elect one director to serve a three-year term on the
Company's Board of Directors;
(2) To act upon a proposal, previously approved by the Board of
Directors, to approve the Stanley Furniture Company, Inc. 1994 Stock
Option Plan;
(3) To act upon a proposal previously approved by the Board of
Directors, to approve the Stanley Furniture Company, Inc. Executive
Loan Plan;
(4) To ratify the selection of Coopers & Lybrand L.L.P. as the
independent public accountants for the Company for 1995; and
(5) To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
The shareholders of record of the Company's common stock at the close
of business on February 28, 1995 are entitled to notice of and to vote at
this Annual Meeting or any adjournment thereof.
Even if you plan to attend the meeting in person, we request that you
mark, date, sign and return your proxy in the enclosed self-addressed
envelope as soon as possible so that your shares may be certain of being
represented and voted at the meeting. Any proxy given by a shareholder may
be revoked by that shareholder at any time prior to the voting of the
proxy.
By Order of the Board of Directors,
Douglas I. Payne
Secretary
March 7, 1995
<PAGE>
Stanley Furniture Company, Inc.
Route 57 West
Stanleytown, Virginia 24168
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 20, 1995
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Stanley Furniture Company, Inc. (the "Company") for use at the
Annual Meeting of Shareholders to be held on Thursday, April 20, 1995, at
11:00 A.M., at the Company's principal executive offices, Route 57 West,
Stanleytown, Virginia and any adjournment thereof. The matters to be
considered and acted upon at such meeting are described in the foregoing
notice of the meeting and this proxy statement. This proxy statement and
the related form of proxy are being mailed on or about March 7, 1995 to all
holders of record of the Company's common stock, $.02 par value (the
"Common Stock") on February 28, 1995. Shares of the Common Stock
represented in person or by proxy will be voted as hereinafter described or
as otherwise specified by the shareholder. Any proxy given by a
shareholder may be revoked by the shareholder at any time prior to the
voting of the proxy by delivering a written notice to the Secretary of the
Company, by executing and delivering a later-dated proxy or by attending
the meeting and voting in person.
The cost of preparing, assembling and mailing the proxy, this proxy
statement, and other material enclosed, and all clerical and other expenses
of solicitations will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, directors, officers and
employees of the Company may solicit proxies by telephone, telegram or
personal interview. The Company also will request brokerage houses and
other custodians, nominees and fiduciaries to forward soliciting material
to the beneficial owners of Common Stock held of record by such parties and
will reimburse such parties for their expenses in forwarding soliciting
material.
VOTING RIGHTS
On February 28, 1995 there were 4,724,052 shares of Common Stock
outstanding and entitled to vote. Voting rights of the Common Stock are
noncumulative, so that holders of a majority of the outstanding shares
represented at the meeting can elect all of the directors to be elected at
the meeting. The ML-Lee Acquisition Fund, L.P., a Delaware limited
partnership (the "Lee Fund") owns approximately 57% of the outstanding
Common Stock and can elect the entire Board of Directors, and approve the
other matters to be considered at the Annual Meeting, without the vote of
any other shareholder. See "Security Ownership of Certain Beneficial
Owners and Management."
ELECTION OF DIRECTORS
The Board of Directors of the Company presently consists of five
directors who are divided into three classes with staggered terms. The
term of Mr. Edward J. Mack expires at the time of the 1995 Annual Meeting
of Shareholders. The Company proposes the reelection of Mr. Mack for a
three-year term expiring at the time of the 1998 Annual Meeting.
The shares represented by proxies will be voted as specified by the
shareholder. If the shareholder does not specify his choice, the shares
will be voted in favor of the election of the nominee listed on the proxy
card, except that in the event the nominee should not continue to be
available for election, such proxies will be voted for the election of such
other person as the Board of Directors may recommend. As of the date of
this Proxy Statement, the Board of Directors has no reason to believe that
the nominee named below will be unable or unwilling to serve.
Nominee for Election for Three-Year Term Ending 1998
Edward J. Mack, 79, has been a Director of the Company since January
17, 1989. From 1948 to 1981 Mr. Mack served in various capacities with
Burlington Industries, Inc., including director and Executive Vice
President with responsibility for Burlington's furniture operations. He
has been an independent consultant, primarily with Burlington Industries,
Inc., and President of Global Business Services, LTD, an international
trading company for more than five years.
Directors whose terms do not expire this year
David V. Harkins, 54, has been a Director of the Company since
September 1988. He is a Senior Managing Director of the Thomas H. Lee
Company (the "Lee Company"), a sole proprietorship engaged in acquiring or
making controlling investments in established operating companies. Mr.
Harkins is also Senior Vice President and a Trustee of Thomas H. Lee
Advisors I, Inc., a Massachusetts business trust ("THL Advisors I") which
is responsible for the identification of investments made by the Lee Fund.
Mr. Harkins is also Senior Vice President of T. H. Lee Mezzanine II
("Mezzanine II"), which is the general partner of Thomas H. Lee Advisors
II, L.P., a Delaware limited partnership ("THL Advisors II"), which is
responsible for the identification of investments made by the ML-Lee
Acquisition Fund II, L.P. and the ML-Lee Acquisition Fund II (Retirement
Accounts), L.P., both Delaware limited partnerships (together the "Lee Fund
II"). THL Advisors I and THL Advisors II also perform managerial functions
for the Lee Fund and Lee Fund II, respectively, of the type usually carried
out by an investment advisor to a business development company. Mr.
Harkins is chairman of National Dentex Corporation and also a director of
Equicredit Corporation, First Alert, Inc. and Petco Holding Corp. His
present term will expire in 1997.
Albert L. Prillaman, 49, has been a Director of the Company since
March 1986, President and Chief Executive Officer of the Company since
December 1985 and Chairman of the Board of Directors since September 1988.
Prior thereto, Mr. Prillaman had served as a Vice President of the Company
and President of the Stanley Furniture division of the Company's
predecessor since 1983, and in various executive and other capacities with
predecessors of the Stanley Furniture division of the Company since 1969.
Mr. Prillaman is a director of Piedmont Bankgroup Incorporated. His
present term will expire in 1997.
C. Hunter Boll, 39, has been a Director of the Company since September
1988. Mr. Boll is a Managing Director of the Lee Company and a Vice
President of THL Advisors I and Mezzanine II. From 1984 to 1986, Mr. Boll
was a consultant with The Boston Consulting Group, which renders general
business consulting services. His present term will expire in 1996.
Lawrence E. Webb, Jr., 47, has been a Director of the Company since
June 1986 and Executive Vice President of the Company and its predecessor
since July 1983 and Chief Operating Officer since December 1990. His
present term will expire in 1996.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Company has an Audit Committee, presently consisting of Messrs.
Harkins, Boll and Mack, which is charged with evaluating accounting and
control procedures and practices of the Company and reporting on such to
the Board of Directors. The Audit Committee also serves as direct liaison
with the Company's independent public accountants and recommends the
selection or discharge of such accountants. The Audit Committee met once
in 1994.
The Company has a Compensation Committee, presently consisting of
Messrs. Harkins, Boll and Mack, which makes recommendations concerning
salaries and incentive compensation for officers and employees of the
Company. The Compensation Committee also administers the Company's 1992
and 1994 Stock Option Plan and has authority to grant options under such
plan to officers and key employees, as designated by the Compensation
Committee, and to determine the terms of such options in accordance with
such plans. The Compensation Committee also administers the Company's
Executive Loan Plan. The Compensation Committee met twice during 1994.
The full Board of Directors met five times during 1994. Each
incumbent director, other than Mr. Boll, attended or acted upon at least
75% of the total 1994 board meetings and committee meetings held during
periods that he was a member of the Board or such committees.
Mr. Mack receives compensation for serving as a Director at the rate
of $15,000 per year. None of the other directors receive any separate
compensation for serving in that capacity.
NOMINATIONS FOR DIRECTOR
The Company's Bylaws provide that a shareholder entitled to vote in
the election of directors may nominate one or more persons for election as
a director only if advance written notice is given. Written notice of such
shareholders' intent to make such nomination must be received by the
Secretary of the Company or deposited in the U.S. mail, postage prepaid, to
the Secretary of the Company not later than 120 days in advance of the
anniversary date of the Company's proxy statement for the previous year's
Annual Meeting. Any shareholder wishing to nominate one or more persons as
director must submit the following information in writing: (i) the name
and address of the shareholder who intends to make the nomination; (ii) a
representation that the shareholder is entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (iii) a description of all
arrangements or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to
which any nomination is to be made by the shareholder; (iv) such other
information regarding each nominee as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission, had the nominee been nominated by the Board of
Directors; and (v) the consent of each proposed nominee to serve as a
director of the Company if so elected. The Chairman of the meeting may
refuse to acknowledge the nomination of any person not made in compliance
with the foregoing procedure.
By requiring advance notice of shareholder nominations, this Bylaw
affords the Board of Directors the opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary
or desirable by the Board, to inform shareholders about such
qualifications. The Bylaw does not give the Board of Directors any power
to approve or disapprove a shareholder's nomination for election of
directors. However, it may have the effect of precluding a contest for the
election if its procedures are not followed, and therefore may discourage
or deter a shareholder from conducting a solicitation of proxies to elect
his own slate of directors.
COMPLIANCE WITH EXCHANGE ACT FILING REQUIREMENTS
The Securities Exchange Act of 1934 requires the Company's executive
officers and directors, and any persons owning more than 10% of the Common
Stock, to file certain reports of ownership and changes in ownership with
the Securities and Exchange Commission. Based solely on its review of the
copies of the Forms 3, 4 and 5 received by it, and written representations
from certain reporting persons that no Forms 5 were required to be filed by
those persons, the Company believes that all executive officers, directors
and 10% shareholders complied with such filing requirements.
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth, for the years ended December 31, 1994,
1993 and 1992, the annual and long-term compensation for services in all
capacities to the Company of those persons who at December 31, 1994 were
the Company's Chief Executive Officer and the other four executive
officers of the Company whose salary and bonus exceeded $100,000 for the
year ended December 31, 1994 (collectively, the "Named Executive
Officers").
<TABLE>
SUMMARY COMPENSATION TABLE
Long-Term
Name and Annual Compensation Compensation
Principal Other Annual Options All Other
Position Year Salary Bonus Compensation Granted Compensation(1)
<S> <C> <C> <C> <C> <C> <C>
ALBERT L. PRILLAMAN
Chairman of the Board, 1994 $310,000 $190,558 $110,887(2) 213,827 $22,261
President and Chief 1993 310,000 217,000 4,775 26,383 21,316
Executive Officer . . . . . 1992 275,000 192,500 3,943 263,827(3) 21,316
LAWRENCE E. WEBB, JR. 1994 $230,000 $121,184 $ 68,312(2) 139,745 $18,577
Executive Vice President 1993 230,000 138,000 3,087 16,975 17,797
and Chief Operating Officer 1992 200,000 120,000 2,483 169,745(3) 17,797
C. WILLIAM CUBBERLEY, JR. 1994 $195,000 $ 85,619 $ 1,437 40,000
Vice President-Sales and 1993 195,000 97,500 2,519 2,998
Marketing . . . . . . . . . 1992 170,000 85,000 2,082 29,979(3)
BOBBY I. HODGES 1994 $142,680 $ 43,907 $ 2,480 38,294
Vice President- 1993 134,004 50,000 3,622 3,729
Manufacturing . . . . . . . 1992 124,480 50,000 1,298 37,294(3)
DOUGLAS I. PAYNE 1994 $120,000 $ 30,735 $ 257 22,115
Vice President of Finance, 1993 112,008 30,000 374 1,228
Treasurer and Secretary . . 1992 91,200 35,000 366 12,287(3)
</TABLE>
____________
(1) All Other Compensation listed for Messrs. Prillaman and Webb reflects
premiums paid by the Company in connection with split-dollar life
insurance agreements maintained with these individuals. The 1994
amounts also include premiums paid on term life insurance policies for
each of these individuals.
(2) Includes forgiveness of interest and principal; and payroll taxes paid
on behalf of the executives by the Company, on loans under the
Executive Loan Plan of $98,517 for Mr. Prillaman and $59,291 for Mr.
Webb. See "Approval of Executive Loan Plan".
(3) Grants were cancelled in connection with grants awarded under the
Company's 1994 Stock Option Plan.
<PAGE>
Option Grant Table
The following table sets forth information concerning individual
grants of stock options made during the year ended December 31, 1994 to the
Named Executive Officers.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants For Option Term
% of Total
Options
Granted to
Employees Exercise
Options in Fiscal Price per Expiration
Name Granted(1) Year Share(1) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Albert L. Prillaman . . . 213,827 35.1% $10.00 12/01/04 $1,344,972 $3,408,402
Lawrence E. Webb Jr. . . 139,745 22.9% $10.00 12/01/04 878,996 2,227,535
C. William Cubberley, Jr. 40,000 6.6% $10.00 12/01/04 251,600 637,600
Bobby I. Hodges . . . . . 38,294 6.3% $10.00 12/01/04 240,869 610,406
Douglas I. Payne . . . . 22,115 3.6% $10.00 12/01/04 139,103 352,513
</TABLE>
____________
(1) All grants vest and become exercisable to the extent of 20% of the
shares granted as of December 31 of each year from 1994 through 1998;
provided none of the options granted are exercisable until the
Company's 1994 Stock Option Plan is approved by Shareholders and, in
the case of these named officers, June 1, 1995 unless the participant
dies or becomes disabled.
Option Value Table
The following table sets forth information concerning the year-end
number and value of unexercised options for each of the Named Executive
Officers.
1994 YEAR END OPTION VALUES
<TABLE>
Number of Unexercised Options Value of Unexercised In-the-Money
Name at Fiscal Year End (#) Options at Fiscal Year End($)(1)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Albert L. Prillaman 26,383 213,827 $ 39,575 $0
Lawrence E. Webb, Jr. 16,975 139,745 25,463 0
C. William Cubberley, Jr. 2,998 40,000 4,497 0
Bobby I. Hodges 3,729 38,294 5,594 0
Douglas I. Payne 1,228 22,115 1,842 0
</TABLE>
_____________
(1) In-the-Money Options are those where the 1994 year-end fair market
value of the underlying shares of Common Stock (as determined by the
closing price on the Nasdaq National Market) exceeds the exercise
price of the option.
Option Repricings Table
The following table sets forth information concerning option
repricings during the last ten years.
<TABLE>
10-YEAR OPTION REPRICINGS
Length of
Market Original
Price of Option Term
Number of Stock at Exercise Price New Remaining at
Options Time of at Time of Exercise Date of
Name Date Repriced Repricing Repricing Price Repricing
<S> <C> <C> <C> <C> <C> <C>
ALBERT L. PRILLAMAN1
Chairman of the Board,
President and Chief
Executive Officer . . . 12/02/94 213,827 $10.00 $12.86 $10.00 8 years
LAWRENCE E. WEBB, JR.1
Executive Vice President
and Chief Operating
Officer . . . . . . . . . 12/02/94 139,745 $10.00 $12.86 $10.00 8 years
C. WILLIAM CUBBERLEY, JR.
Vice President-Sales and
Marketing . . . . . . . . 12/02/94 29,979 $10.00 $12.86 $10.00 8 years
BOBBY I. HODGES
Vice President-
Manufacturing . . . . . . 12/02/94 37,294 $10.00 $12.86 $10.00 8 years
DOUGLAS I. PAYNE
Vice President of Finance,
Treasurer and Secretary . 12/02/94 12,287 $10.00 $12.86 $10.00 8 years
WILLIAM A. SIBBICK
Vice President-Product
Development . . . . . . . 12/02/94 5,029 $10.00 $12.86 $10.00 8 years
</TABLE>
____________________
1. Awards were also made under Executive Loan Plan. See "Approval of
Executive Loan Plan."
Report on Repricing of Options
The Compensation Committee of the Board of Directors (the "Committee")
has furnished the following report on repricing of options:
During 1994, the Committee voted to cancel and replace certain
outstanding options held by employees (including executive officers) in
order to give employees the benefit of a lower exercise price. The
replaced options were fully vested, while the newly granted options vest
over a five year period. The replaced options were initially granted at
the time of the Company's restructuring in 1992 at an exercise price equal
to the assumed value of the Common Stock in connection with that
restructuring. Subsequently, in July 1993, the Company completed a public
offering of Common Stock at a price below the exercise price of the 1992
options. Additional options were granted at that time with an exercise
price equal to the public offering price. While the Common Stock at times
has traded at prices above the exercise price of the 1992 options, the
trading range was below the exercise price of the 1992 options after June
1994, due to factors the Committee considered outside the control of the
Company's management. Since the exercise price of the 1992 option exceeds
the market price the Committee believes those options no longer provide the
desired incentives to the Company's employees.
The Company's compensation philosophy is to include equity interest as
an important component of compensation for key management employees. Thus,
the Committee felt it was important to reduce the exercise prices on
certain outstanding options in order to provide appropriate incentives as
contemplated by the compensation philosophy. The Committee conditioned the
new grants, made at the then current fair market value, on the employees
accepting a new vesting schedule. The new vesting schedule was 20% per
year beginning with 1994. The Committee determined that it was appropriate
to make this offer available to all employees participating in the option
program, including executive officers, to motivate and retain them. In
view of the reduced number of options granted to Messrs. Prillaman and
Webb, the Committee also made awards to these executives under the
Executive Loan Program in order for them to have an opportunity to maintain
a comparable level of equity interest in the Company. See "Approval of
Executive Loan Plan" for a discussion of the terms of these awards.
The members of the Compensation Committee are
David V. Harkins
C. Hunter Boll
Edward J. Mack
Employment Agreements. Mr. Prillaman has an employment agreement with
the Company which provides that he has the duties of President, Chief
Executive Officer and Chairman of the Board of Directors of the Company at
a base salary of at least $275,000 per year, subject to annual upward
adjustment by the Board. Mr. Prillaman is also entitled to a graduated
bonus amount up to a maximum of 70% of his base salary in effect from time
to time, contingent upon the achievement of certain threshold profit
objectives to be determined by the Board at the beginning of each year.
The agreement had an initial term ending December 31, 1993, and is
automatically extended for an additional year thereafter at the end of each
year unless either party to the agreement gives notice on or before
December 31 of any year that the agreement will not be extended. In the
event of such notice, employment terminates as of December 31 of the year
in which such notice is given and Mr. Prillaman is entitled to severance
pay during the two years following termination in an amount equal to his
base salary plus the average of bonuses paid for the three years preceding
the year in which notice of termination is given. Mr. Prillaman is
entitled to receive the total severance pay in a single payment in the
event a change in control (as defined in the agreement) occurs. Upon
termination of the employment agreement, the agreement provides that Mr.
Prillaman will not compete with the Company for the greater of two years or
the remainder of the contract term.
Mr. Webb also has an employment agreement with the Company which is on
the same terms as discussed above with respect to Mr. Prillaman, except
that Mr. Webb serves as Executive Vice President and Chief Operating
Officer of the Company. Mr. Webb's base salary is at least $200,000 and
Mr. Webb is entitled to a graduated bonus amount up to a maximum of 60% of
his base salary in effect from time to time.
In addition, the Company has entered into an employment agreement with
C. William Cubberley, Jr., Vice President-Sales and Marketing of the
Company, on similar terms as discussed above with respect to Messrs.
Prillaman and Webb, except that Mr. Cubberley serves as Vice President, his
base salary is at least $170,000 and he is entitled to receive a graduated
bonus amount up to a maximum of 50% of his base salary in effect from time
to time.
In connection with the employment agreements with Messrs. Prillaman
and Webb, the Company has entered into split-dollar life insurance
agreements with each of these individuals under which the Company has
agreed to pay premiums with respect to a life insurance policy for such
individual until the cash surrender value of the policy and all paid up
additions are sufficient to repay the Company all premiums and other
amounts paid by it and to maintain the policy's death benefit at a level no
less than the policy's initial face amount without further premium
payments. At such time, Messrs. Prillaman and Webb are obligated to repay
such premiums to the Company. Each of Messrs. Prillaman and Webb has
executed a collateral assignment of his policy in favor of the Company to
secure repayment to the Company of the premiums paid on such policies.
The initial face amount of the policy for Mr. Prillaman is $1 million and
for Mr. Webb is $750,000. During the year ended December 31, 1994 the
Company paid $21,316 and $17,797, respectively, in premiums for the
policies of Messrs. Prillaman and Webb.
Defined Benefit Pension Plans. The Company maintains a qualified
defined benefit pension plan for all its eligible employees, The Stanley
Retirement Plan (the "Stanley Furniture Plan"). The Company also maintains
a nonqualified, unfunded supplemental retirement plan (described below) for
certain of its employees.
The following table shows estimated annual benefits payable in the
form of a straight life annuity upon retirement to employees at the
specified remuneration and in various years of service classifications,
assuming retirement at age 65 on December 31, 1988 before reduction for
social security benefits. Internal Revenue Code Section 415 limits are not
considered.
Years of Credited Service
(as defined)
Average
Annual 10 15 20 25 30 35
Compensation
$125,000 $ 18,750 $ 28,125 $ 37,500 $ 46,875 $ 56,250 $ 65,625
150,000 22,500 33,750 45,000 56,250 67,500 78,750
175,000 26,250 39,375 52,500 65,625 78,750 91,875
200,000 30,000 45,000 60,000 75,000 90,000 105,000
250,000 37,500 56,250 75,000 93,750 112,500 131,250
300,000 45,000 65,300 90,000 112,500 135,000 157,500
350,000 52,500 78,750 105,000 131,250 157,500 183,750
400,000 60,000 90,000 120,000 150,000 180,000 210,000
450,000 67,500 101,250 135,000 168,750 202,500 236,250
500,000 75,000 112,500 150,000 187,500 225,000 262,500
600,000 90,000 135,000 180,000 225,000 270,000 315,000
700,000 105,000 157,500 210,000 262,500 315,000 367,500
Through 1988, the annual retirement benefit is the larger of (a) 1-
1/2% of a participant's Final Average Old Formula Earnings multiplied by
the participant's years of credited service (as defined) up to a maximum of
37 years, reduced by 2% of the annual primary Social Security benefit
multiplied by the years of credited service up to a maximum of 37 years and
(b) $30 multiplied by the years of credited service (the "Old Formula").
"Final Average Old Formula Earnings" are the average earnings, excluding
gifts and credit awards except as otherwise determined by the
administrative committee, deferred compensation (other than amounts
deferred by the participant in a 401(k) Plan), and special payments
authorized by the Company Board, for the five highest-paid years during the
preceding 10 years. Such remuneration is generally equal to the salary and
bonuses reported in the compensation table.
Effective in 1989, the annual retirement benefit is the sum of (a)
75/100 of 1% of Final Average Earnings during each year of service
multiplied by years of credited service up to a maximum of 37 years and (b)
1/2 of 1% of Final Average Earnings during each year of service in excess
of Covered Compensation multiplied by years of credited service up to a
maximum of 35 years (the "New Formula"). Effective January 1, 1994, the
maximum of 37 years was eliminated from part (a) of the formula. "Final
Average Earnings" are the average of the calendar years of compensation
paid excluding gifts and credit awards except as otherwise determined by
the administrative committee, deferred compensation (other than amounts
deferred by the participant in a 401 (k) Plan), and special payments
authorized by the Company Board, from January 1, 1987 through actual
retirement age, but not greater than the average of the final five calendar
years. Such remuneration is generally equal to the salary and bonuses
reported in the compensation table. "Covered Compensation" is the average
of the social security taxable wage bases for each calendar year during the
thirty-five year period ending with the last day of the calendar year in
which a participant attains his social security retirement age.
The following table shows estimated annual benefits payable in the
form of a straight life annuity upon retirement to employees at the
specified remuneration and in various years of service classifications,
assuming retirement at age 65 on December 31, 1994 using the New Formula.
Internal Revenue Code Section 415 limits are not considered.
Years of Credited Service
(as defined)
Average Annual
Compensation 10 15 20 25 30 35
$125,000 $14,409 $ 21,614 $ 28,819 $ 36,024 $ 43,228 $ 50,433
150,000 17,534 26,302 35,069 43,836 52,603 61,370
175,000 20,659 30,989 41,319 51,649 61,978 72,308
200,000 23,784 35,677 47,569 59,461 71,353 83,245
250,000 30,034 45,052 60,069 75,086 90,103 105,120
300,000 36,284 54,427 72,569 90,711 108,853 126,995
350,000 42,534 63,802 85,069 106,336 127,603 148,870
400,000 48,784 73,177 97,569 121,961 146,353 170,745
450,000 55,034 82,552 110,069 137,586 165,103 192,620
500,000 61,284 91,927 122,569 153,211 183,853 214,495
600,000 73,784 110,677 147,569 184,461 221,353 258,245
700,000 86,284 129,427 172,569 215,711 258,853 301,995
The Supplemental Retirement Plan of the Company (the "Supplemental
Plan") covers 26 employees and former employees of the Stanley Furniture
division. A participant who retires under any provision of the Stanley
Furniture Plan will receive a supplemental retirement allowance equal to
the excess, if any, of (a) the amount of benefit the participant would have
received under the Old Formula over (b) the amount the participant received
under the New Formula. The years of credited service for Named Executive
Officers as of February 28, 1995 are: Albert L. Prillaman, 25 years;
Lawrence E. Webb, Jr., 16 years; C. William Cubberley, Jr., 9 years; Bobby
I. Hodges, 27 years; and Douglas I. Payne, 11 years.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
Executive Compensation Philosophy
Under the supervision of the Committee, the Company has developed and
implemented executive compensation policies, plans, and programs which seek
to enhance the profitability and value of the Company. The primary
objective is to align closely the financial interests of the Company's
executives with those of its shareholders. The Committee believes that
equity ownership by management is beneficial in conforming management and
shareholder interests in the enhancement of shareholder value.
The Committee's philosophy is to integrate management pay with the
achievement of both annual and long-term financial performance goals. The
compensation package for each officer is designed to recognize individual
initiative and achievement. In establishing compensation, the Committee
incorporates a number of factors to promote both long and short-term
performance of the Company. These factors include earnings, market share
growth, cost control efforts, balance sheet strength and organizational
developments. The compensation for individual executives is based on both
corporate and personal goals, with varying weight being given to individual
factors for particular executives. The Committee does not make
compensation comparisons with the companies that are used for the
performance graph that follows this report.
The Committee believes that the Company's overall executive
compensation package should enable the Company to obtain and retain the
services of top executives. The Company operates with a small team of top
executives who are given significant and extensive responsibilities. These
executives' duties encompass both overall strategic policy of the Company
and direct, day-to-day activity in sales, customer communications, product
development, marketing, manufacturing and other similar activities. The
compensation package is intended to reflect these broad responsibilities.
The compensation currently paid by the Company is not subject to
certain Internal Revenue Code provisions that may limit the income tax
deductibility of certain forms of compensation paid to its named executive
officers in excess of $1 million per year. These provisions allow full
deductibility of certain types of performance-based compensation. If these
limitations should become applicable to the Company in the future, the
Committee will consider modifications to the Company's compensation
practices, to the extent practicable, to provide the maximum deductibility
for compensation payments.
The Company's compensation package for its executive officers consists
of base salary, annual performance-based incentive compensation, stock
option grants, supplemental retirement benefits and, for certain executive
officers, other benefits.
Base Salary
The Committee sets base salary at the minimum level deemed sufficient
to attract and retain qualified executives. By restricting the role of
base salary in the compensation package, more of an executive's
compensation can be paid in the form of incentives which encourage and
reward performance. The base salaries of individual executives are set in
light of the responsibilities of the position held and the experience of
the individual, with a recognition of the Company's requirements for the
top executives to perform many varied tasks.
Annual Incentives
The Company's annual incentive compensation program, the Executive
Incentive Compensation Plan (the "Incentive Plan"), is for corporate
officers and key employees who can directly influence the Company's
financial results. The employees who participate in the Incentive Plan are
selected at the beginning of each fiscal year. Awards under the Incentive
Plan are based on the achievement of individual performance and corporate
objectives which are established annually in conjunction with adoption of
the Company's budget for the next fiscal year. At that time, the Committee
sets corporate objectives for the coming fiscal year. The performance
targets consist of two elements. The first element is the Company's
earnings before interest and taxes ("EBIT"). The EBIT performance of the
Company is 60% of the total target. If the Company reaches the EBIT
target, 60% of the bonus is paid. No bonus is paid if certain EBIT
thresholds are not met. The second element representing 40% of the bonus
is a mixture of individual targets that reflect the responsibilities of the
individual employee. The targets are based on such factors as sales
growth, control of costs, quality performance measured by returns and
allowances, inventory management and organizational improvements. If the
objectives are not achieved, cash bonuses may be paid due to individual
achievements at the discretion of the Committee.
The performance targets for awards to participating employees under
the Incentive Plan are recommended by management of the Company subject to
approval by the Committee. An award is set at a percentage of either an
employee's base salary or his salary grade compensation midpoint for the
fiscal year prior to the year to which the award applies.
Long-Term Incentives
In 1994, the Company adopted the Stanley Furniture Company, Inc. 1994
Stock Option Plan (the "Option Plan") to provide employees with options to
acquire Company stock. All options under the Option Plan must be granted
at an option exercise price of 100% of the stock's fair market value on the
date of grant.
In 1994, option grants were made to officers and key employees under
the Option Plan. The grants cancelled and replaced options granted in
1992. The total shares under the 1994 grants was approximately the same as
under the 1992 grants. The 1994 grants were made to increase the incentive
for executives from holding options. The exercise price of the 1994
options was lower than the 1992 options, however, the 1992 options were
fully vested and the 1994 options vest over a five year period. See
"Report of Compensation Committee on Repricing of Options".
Other Compensation
The Company also has a Supplemental Retirement Plan covering
designated employees and former employees of the Company, including some
executive officers. See "Compensation of Executive Officers -- Defined
Benefit Pension Plans." In addition, the Company has entered into split-
dollar insurance agreements with Messrs. Prillaman and Webb. See
"Compensation of Executive Officers -- Employment Agreements." Messrs.
Prillaman and Webb also participate in a stock loan plan. See "Approval of
Executive Loan Plan."
Chief Executive Officer Compensation
Mr. Prillaman has an employment agreement with the Company which was
primarily negotiated between Mr. Prillaman and the Company's majority
shareholder. See "Compensation of Executive Officers -- Employment
Agreements." For 1994, Mr. Prillaman's base salary was maintained at the
same level as in 1993. In granting Mr. Prillaman a salary increase in
1993, it was agreed that his base salary would remain the same for 1994.
Also, during 1994, Mr. Prillaman received stock option grants and other
long-term incentives as explained below.
A major portion of Mr. Prillaman's compensation is contingent on the
Company's performance. Under his employment contract, Mr. Prillaman is
entitled to a graduated bonus amount up to a maximum of 70% of his base
salary in effect from time to time, contingent upon the achievement of EBIT
targets and individual goals established by the Committee at the beginning
of each year. Mr. Prillaman's potential bonus for 1994 was the same as for
1993. For 1994, the Company's EBIT was approximately 80% of the target
established by the Committee and Mr. Prillaman met the established
individual targets. Consequently, Mr. Prillaman received 88% of the
allowable bonus.
In 1994, Mr. Prillaman received a grant of stock options under the
Option Plan. Mr. Prillaman also received a Company loan to purchase
Company stock. The Committee believes that it is important for Mr.
Prillaman as CEO to have a meaningful stock interest in the Company. By
receiving a significant portion of his total compensation in the form of
stock, Mr. Prillaman has additional incentives to maximize shareholder
value. The Committee also believes that the option grant was appropriate
for the reasons outlined above under "Long-Term Incentives". Mr. Prillaman
also participates in the Supplemental Retirement Plan and has split-dollar
insurance pursuant to the terms of his employment contract.
The members of the Compensation Committee are:
David V. Harkins
C. Hunter Boll
Edward J. Mack
PERFORMANCE GRAPH
The following graph compares cumulative total shareholder return for
the Company with a broad performance indicator, the Nasdaq Non-Financial
Stock Index, and an industry index, the Wood Household Furniture Index, for
the period from November 10, 1992 to December 31, 1994. The Common Stock
began trading on the Nasdaq Small-Cap Market on November 10, 1992. In
conjunction with a public offering, the Common Stock began trading on the
Nasdaq National Market on July 1, 1993. In the graph below, the Company's
data points for November 10, 1992 and December 31, 1992 represent the
average of the bid and ask prices for such days. The Company's data point
for June 30, 1993 reflects the public offering price of $8.50 per share.
The Company's data points for December 31, 1993, June 30, 1994 and December
31, 1994 reflects that day's closing price of the Common Stock on the
Nasdaq National Market.
Performance Graph Here
<TABLE>
11/10/92 12/31/92 6/30/93 12/31/93 6/30/94 12/31/94
<S> <C> <C> <C> <C> <C> <C>
Stanley Furniture 100.00 100.00 94.44 148.61 138.89 111.11
Wood Household Furniture Index 100.00 120.07 125.29 153.70 120.32 106.82
NASDAQ Non-Financial Stocks 100.00 107.13 111.34 122.81 107.87 117.76
</TABLE>
(1) The graph shows the cumulative total return on $100 invested on
November 10, 1992 in Common Stock or specified index -including
reinvestment of dividends.
(2) SIC Code 2511 Wood household Furniture Index as prepared by Media
General Financial Services, Inc. ("Media General"). At February 13,
1995, Media General reported that SIC Code 2511 consisted of:
Ameriwood Industries International Corp., Bassett Furniture
Industries, Inc., Bush Industries Inc., Chromcraft Revington Inc., DMI
Furniture, Inc., Ethan Allen Inc., Interco Incorporated, Ladd
Furniture Inc., Masco Corp., O'Sullivan Industrial Holdings, Inc.,
Pulaski Furniture Corp., Stanley Furniture Company, Inc. and
Wellington Hall, Ltd.
(3) Nasdaq Non-Financial Stock Index prepared for the Nasdaq Stock Market
by the Center for Research in Securities Prices at the University of
Chicago.
APPROVAL OF 1994 STOCK OPTION PLAN
On December 2, 1994, the Board of Directors of the Company adopted the
1994 Stock Option Plan (the "1994 Plan") and directed that it be submitted
to shareholders for approval.
The 1994 Plan became effective December 2, 1994 and unless sooner
terminated by the Board of Directors, the 1994 Plan will terminate on
November 30, 2004. No incentive awards may be made under the 1994 Plan
after termination.
The 1994 Plan was adopted to provide a means for selected key
management employees of the Company to increase their personal financial
interest in the Company, thereby stimulating their efforts on behalf of the
Company and its shareholders, and also to strengthen their desire to remain
with the Company (references to the "Company" in this section will include
any parent and subsidiary corporations).
As of February 28, 1995, options granted under the 1994 Plan were as
follows: Mr. Prillaman -213,827; Mr. Webb - 139,745; Mr. Cubberley -
40,000; Mr. Hodges - 38,294; Mr. Payne - 22,115; all Executive Officers as
a group (6 persons) - 471,481; and all employees (other than executive
officers) -138,148. Non-employee directors are not eligible for, and have
not been granted, options under the 1994 Plan. The recipients of future
grants under the 1994 Plan are indeterminable at this time.
The closing price of the Company's Common Stock as reported on the
Nasdaq National Market on February 28, 1995 was $8.50.
The principal features of the 1994 Plan are summarized below. The
summary is qualified by reference to the complete text of the 1994 Plan,
which is attached as Exhibit A.
General. The 1994 Plan authorizes the reservation of 700,000 shares
of Common Stock (less the number of shares issued pursuant to or subject to
grants under the Company's 1992 Stock Option Plan) for issuance pursuant to
incentive awards. Such incentive awards may be in the form of incentive
stock options, nonstatutory stock options or tax offset rights (as
described below).
If an incentive award is cancelled, terminates or lapses unexercised,
any unissued shares allocable to such incentive award may be subjected
again to an incentive award. An award under the 1994 Plan may be
conditioned upon the surrender for cancellation of an existing incentive
award.
Adjustments will be made in the number of shares which may be issued
under the 1994 Plan in the event of a future stock dividend, stock split or
similar prorata change in the number of outstanding shares of Common Stock
or the future creation or issuance to shareholders generally of rights,
options or warrants for the purchase of Common Stock.
Eligibility. All present and future employees of the Company who hold
positions with management responsibilities are eligible to receive
incentive awards under the 1994 Plan. As of February 28, 1995,
approximately 26 employees are eligible to participate in the 1994 Plan.
Administration. The 1994 Plan provides for administration by a
committee (the "Committee") comprised of at least two directors of the
Company who are not eligible to participate in the 1994 Plan or any similar
plan of the Company. The Committee will be the Compensation Committee
unless another committee is appointed by the Board. The Committee has the
power and complete discretion to determine when to grant incentive awards,
which eligible employees will receive incentive awards, and the number of
shares to be allocated to each incentive award. The Committee may impose
conditions on the exercise of options received under the 1994 Plan, and may
impose such other restrictions and requirements as it may deem appropriate.
Stock Options. Options to purchase shares of Common Stock granted
under the 1994 Plan may be incentive stock options or nonstatutory stock
options. Incentive stock options qualify for favorable income tax
treatment under Section 422 of the Internal Revenue Code, while
nonstatutory stock options do not. The purchase price of Common Stock
covered by an option may not be less than 100% (or, in the case of an
incentive stock option granted to a 10% shareholder, 110%) of the fair
market value of the Common Stock on the date of the option grant.
The value of incentive stock options, based on the exercise price,
that can be exercisable for the first time in any calendar year under the
1994 Plan or any other similar plan maintained by the Company is limited to
$100,000.
Options may only be exercised at such times as may be specified by the
Committee, provided, however, that stock options may not be exercised after
the first to occur of (i) ten years from the date on which the stock
option was granted (or, in the case of an incentive stock option granted to
a 10% shareholder, five years), (ii) 90 days from the optionee's
termination of employment with the Company for reasons other than death or
disability, or (iii) one year from the optionee's termination of employment
on account of death or disability. The Committee may grant options with a
provision that an option not otherwise exercisable will become exercisable
upon a "change of control" (a term defined in the 1994 Plan).
If the option so provides, an optionee exercising an option may pay
the purchase price in cash; by delivering or causing to be withheld from
the option shares, shares of Common Stock; by delivering a promissory note;
or by delivering an exercise notice together with irrevocable instructions
to a broker to promptly deliver to the Company the amount of sale or loan
proceeds from the option shares to pay the exercise price.
Transferability of Incentive Awards. No options granted under the
1994 Plan may be sold, transferred, pledged, or otherwise disposed of,
other than by will or by the laws of descent and distribution. All rights
granted to a participant under the 1994 Plan shall be exercisable during
his lifetime only by such participant, or his guardians or legal
representatives. Upon the death of a participant, his personal
representative or beneficiary may exercise his rights under the 1994 Plan.
Amendment of the 1994 Plan and Incentive Awards. The Board of
Directors may amend the 1994 Plan in such respects as it deems advisable;
provided that the shareholders of the Company must approve any amendment
that would (i) materially increase the benefits accruing to participants
under the 1994 Plan, (ii) materially increase the number of shares of
Common Stock that may be issued under the 1994 Plan, or (iii) materially
modify the requirements of eligibility for participation in the 1994 Plan.
Incentive awards granted under the 1994 Plan may be amended with the
consent of the recipient so long as the amended award is consistent with
the terms of the 1994 Plan.
Federal Income Tax Consequences. An employee will not incur federal
income tax when he is granted an incentive stock option or a nonstatutory
stock option. Upon exercise of a nonstatutory stock option, an employee
generally will recognize ordinary income, which is subject to income tax
withholding by the Company, equal to the difference between the fair market
value of the Common Stock on the date of the exercise and the option price.
The Committee has authority under the 1994 Plan to include provisions
allowing the employee to elect to have a portion of the shares he would
otherwise acquire upon exercise of an option withheld to cover his tax
liabilities if permissible under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended. The election will be
effective only if approved by the Committee and made in compliance with
other requirements set forth in the 1994 Plan. The Committee also has the
authority to issue tax offset rights to an employee that enable the
employee to receive in cash from the Company an amount equal to or
approximating the withholding taxes due on the exercise of a stock option.
When an employee exercises an incentive stock option, he generally will not
recognize income subject to tax, unless he is subject to the alternative
minimum tax.
An employee may deliver shares of Common Stock instead of cash to
acquire shares under a nonstatutory stock option, without having to
recognize taxable gain on any appreciation in value of the shares
delivered.
The Company usually will be entitled to a business expense deduction
at the time and in the amount that the recipient of an incentive award
recognizes ordinary compensation income in connection therewith. As stated
above, this occurs upon exercise of nonstatutory options. For the
Company's taxable year beginning January 1, 1994 and later years, the
Company may not deduct annual compensation in excess of $1 million paid to
each of its chief executive officer and its other four most highly paid
officers. An exception is provided for certain performance-based
compensation if certain shareholder approval and outside director
requirements are satisfied. Based on proposed Internal Revenue Service
regulations, stock options granted under the 1994 Plan should qualify for
the performance-based compensation exemption.
This summary of Federal income tax consequences of incentive stock
options and nonstatutory stock options does not purport to be complete.
There may also be state and local income taxes applicable to these
transactions. Holders of incentive awards should consult their own
advisors with respect to the application of the laws to them and to
understand other tax consequences of the awards including possible income
deferral for executive officers, alternative minimum tax rules, taxes on
parachute payments and the tax consequences of the sale of shares acquired
under the 1994 Plan.
Vote Required. Approval of the 1994 Plan requires the affirmative
vote of the holders of a majority of the shares of Common Stock voting at
the Annual Meeting.
The Board of Directors believes that approval of the 1994 Plan is in
the best interest of all shareholders and, accordingly, recommends a vote
"FOR" approval of the proposed 1994 Plan.
APPROVAL OF EXECUTIVE LOAN PLAN
On December 2, 1994, the Board of Directors of the Company adopted the
Stanley Furniture Company, Inc. Executive Loan Plan (the "Executive Loan
Plan") which authorizes the issuance of up to 80,000 shares of Common
Stock. The Board of Directors has directed that the Executive Loan Plan be
submitted to shareholders for approval. The Executive Loan Plan became
effective December 2, 1994 and unless sooner terminated by the Board of
Directors, will terminate on December 1, 2004.
The Executive Loan Plan was adopted to further the long term stability
and financial success of the Company by attracting and retaining key
employees through the use of loans to acquire Common Stock.
The principal features of the Executive Loan Plan are summarized
below. The summary is qualified in its entirety by reference to the
complete text of the Executive Loan Plan, which is attached as Exhibit B.
General. The Executive Loan Plan authorizes loans to eligible
employees to acquire up to 80,000 shares of Common Stock. All Common Stock
will be issued pursuant to the Executive Loan Plan at the fair market value
(the "Fair Market Value") of such Common Stock as determined pursuant to
the 1994 Plan.
Eligibility. All present and future employees of the Company who hold
positions with management responsibilities are eligible to receive loans
under the Executive Loan Plan. The Committee has the power and complete
discretion to select eligible employees to receive loans. As of February
28, 1995 two executives are eligible to participate in the Executive Loan
Plan.
Administration. The Executive Loan Plan provides for administration
by a committee comprised of at least two directors of the Company who are
not eligible to participate in the Executive Loan Plan or any similar plan
of the Company. The Committee will be the Compensation Committee unless
another committee is appointed by the Board. The Committee has the power
and complete discretion to determine when to award loans, which eligible
employees will receive loans, the number of shares to be issued, and the
terms and conditions of loans, including any provisions for forgiveness of
principal and interest.
Loans. The following table sets forth information concerning loans
awarded pursuant to the Executive Loan Plan.
EXECUTIVE LOAN PLAN
Name and Position Dollar Value1 Number of Units
ALBERT L. PRILLAMAN
Chairman of the Board,
President and Chief
Executive Officer . . . . . $500,000 50,000 shares of Common Stock
LAWRENCE E. WEBB, JR.
Executive Vice President
and Chief Operating Officer $300,000 30,000 shares of Common Stock
Executive Group . . . . . . $800,000 80,000 shares of Common Stock
______________________________
1. Based upon closing price of the Common Stock, as reported by Nasdaq
National Market on December 1, 1994, of $10 per share.
On December 2, 1994, the Compensation Committee awarded Albert L.
Prillaman and Lawrence E. Webb, Jr. loans to acquire 50,000 shares and
30,000 shares of common stock, respectively and Messrs. Prillaman and Webb
delivered non-recourse promissory notes payable to the Company in the
amounts of $500,000 and $300,000 respectively. No further awards under the
Executive Loan Plan are anticipated.
The promissory notes bear interest at the rate of 7.6% per annum. One
tenth of the principal amount plus accrued interest is due each December 31
until 1998 and the remaining principal is due January 2, 1999. Pursuant to
these loans under the Executive Loan Plan, the accrued interest plus one
tenth of the principal amount will be forgiven by the Company each December
31 if the executive is still employed by the Company. As of February 28,
1995, $450,000 and $270,000 in principal amount was outstanding under the
notes delivered by Messrs. Prillaman and Webb, respectively. In the event
the Company pays a cash dividend on the Common Stock, principal will also
be forgiven in an amount equal
to the amount of any cash dividends on the number of shares to which the
loan relates. In addition, upon a "change of control" (which has the same
definition as in the 1994 Plan) the entire principal amount plus accrued
interest is forgiven. The Company has agreed to reimburse the executives
for income taxes payable by the executive as a result of the forgiveness of
interest and principal on the loan amount. In the event of the executive's
death, the outstanding principal and accrued interest on the loan is due
within 90 days. The Company has obtained a term life policy on the
executives in an amount sufficient to cover the principal and accrued
interest under the promissory note in the event of the death of such
executive.
The shares of Common Stock will be issued on January 2, 1999 or, if
sooner, upon payment or forgiveness of the respective promissory note in
full. The number of shares issuable will be adjusted to reflect future
stock dividends, stock splits or similar pro rata changes in the number of
outstanding shares or future creation or issuance to shareholders of
rights, options, or warrants for the purchase of Common Stock. The number
of shares to be issued will be reduced in the event of a payment default by
the number equal to the amount of the payment default divided by the Fair
Market Value of a share of Common Stock on the date the defaulted payment
was due.
Transferability of Loans; Amendment. No loans made under the
Executive Loan Plan may be sold, transferred, pledged or otherwise disposed
of, other than by will or by the laws of dissent and distribution. The
Board of Directors may amend the Executive Loan Plan in such respects as it
deems advisable. A termination or amendment of the Executive Loan Plan
will not, without the consent of a participant, adversely affect such
participant's right under a loan previously granted to him.
Federal Income Tax Consequences. An executive will not incur federal
income tax when he is awarded a loan under the Executive Loan Plan. To the
extent principal and interest are forgiven, the executive will recognize
ordinary income. The Company will usually be entitled to a business
expense deduction at the time and in the amount that the recipient of a
loan under the Executive Loan Plan recognizes ordinary compensation income
in connection therewith.
Vote Required. Approval of the Executive Loan Plan requires the
affirmative vote of the holders of a majority of the shares of Common Stock
voting at the Annual Meeting.
The Board of Directors believes that approval of the Executive Loan
Plan is in the best interest of all shareholders and, accordingly,
recommends a vote "FOR" approval of the Executive Loan Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is a party to a Management Agreement, pursuant to which
the Company's predecessors engaged the Lee Company for the purposes of
providing them with substantial consulting services and management advisory
services. These services have been and will be in the field of financial
and strategic corporate planning and such other management areas as the
parties mutually agree. These services have included advice concerning
strategic corporate planning, potential acquisitions and financial
planning. The term of this Agreement began on September 29, 1988 and will
expire on September 30, 1998. In consideration for the services provided
by the Lee Company under the Management Agreement, the Company pays the Lee
Company $250,000 annually. Management did not obtain bids from third
parties for similar services before the Company entered into the Management
Agreement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of February 28, 1995,
by each shareholder known by the Company to be the beneficial owner of more
than 5% of its outstanding Common Stock, by each director, by each of the
Named Executive Officers and by all directors and executive officers as a
group:
Amount and Nature Percent of
Name of Beneficial Ownership Class
ML-Lee Acquisition Fund, L.P.(a) . 2,675,552(b) 56.6%
Brinson Partners, Inc. (c) . . . . 473,454(c) 10.0%
PNC Bank Corp. (d) . . . . . . . . 319,800(d) 6.8%
Albert L. Prillaman(e) . . . . . . 125,280(f) 2.6%
Lawrence E. Webb, Jr.(e) . . . . . 69,341(g) 1.5%
Bobby I. Hodges(e) . . . . . . . . 12,490(h) (j)
C. William Cubberley, Jr.(e) . . . 7,511(i) (j)
Douglas I. Payne(e) . . . . . . . . 2,093(k) (j)
David V. Harkins(l) . . . . . . . . 2,581(b)(m) (j)
C. Hunter Boll(l) . . . . . . . . . 1,548(b)(n) (j)
Edward J. Mack(e) . . . . . . . . . 1,162 (j)
All directors and executive
officers as a group (9 persons) . . 222,509(b)(o) 4.6%
________________________
(a) The business address for such beneficial owner is c/o Merrill Lynch
Investment Banking Group, World Financial Center, South Tower, New
York, New York 10080-6123.
(b) In addition, the Lee Fund II owns an aggregate of 41,616 shares
(0.88%) of the Common Stock. Each of THL Advisors I (with respect to
the Lee Fund), THL Advisors II (with respect to the Lee Fund II),
Thomas H. Lee, as Trustee of THL Advisors I and THL Advisors II and an
individual general partner of the Lee Fund and the Lee Fund II, David
V. Harkins, as Senior Vice President and Trustee of THL Advisors I and
Senior Vice President of Mezzanine II, and C. Hunter Boll, as Vice
President of THL Advisors I and Mezzanine II, may be deemed to be
beneficial owners of the 2,675,552 and 41,616 shares held by the Lee
Fund and the Lee Fund II, respectively. Each of THL Advisors I, THL
Advisors II, Mr. Lee, Mr. Harkins and Mr. Boll disclaim beneficial
ownership of such shares. Thomas H. Lee is also the sole beneficiary
of the 1989 Thomas H. Lee Nominee Trust (the "Trust") which holds
30,409 (0.64%) shares of the Common Stock.
(c) The information with respect to Brinson Partners, Inc. is based upon
the Schedule 13G dated February 13, 1995 filed by Brinson Partners,
Inc. together with Brinson Trust Company and Brinson Holdings, Inc.
The Schedule 13G indicates that sole voting and dispositive power with
respect to 227,120 of such shares is held by Brinson Trust Company, a
wholly-owned subsidiary of Brinston Partners, Inc. Brinston Partners,
Inc. is a wholly-owned subsidiary of Brinston Holdings, Inc. The
business principal address of each of these entities is 209 South
LaSalle, Chicago, Illinois 60604.
(d) The information with respect to PNC Bank Corp. is based upon the
Schedule 13G dated February 14, 1995 filed by PNC Bank Corp. together
with PNC Bank Corp. Inc.; PNC Bank, N.A.; PNC Institutional Management
Corporation and Provident Capital Management, Inc. The Schedule 13G
indicates sole voting power with respect to 293,100 of such shares and
sole dispositive power with respect to 314,800 of such shares. The
principal business address of PNC Bank Corp. is Fifth Avenue and Wood
Street, Pittsburgh, Pennsylvania 15222.
(e) The business address for such persons is c/o Stanley Furniture
Company, Inc., Route 57 West, Stanleytown, Virginia 24168.
(f) Includes 76,383 shares which could be acquired through exercise of
stock options and pursuant to Executive Loan Plan.
(g) Includes 46,975 shares which could be acquired through exercise of
stock options and pursuant to Executive Loan Plan.
(h) Includes 3,729 shares which could be acquired through exercise of
stock options.
(i) Includes 2,998 shares which could be acquired through exercise of
stock options.
(j) Less than 1%.
(k) Includes 1,228 shares which could be acquired through exercise of
stock options.
(l) The business address for such persons is c/o Thomas H. Lee Company, 75
State Street, Boston, Massachusetts 02109.
(m) Includes 1,290 shares Mr. Harkins may receive in respect of shares of
Common Stock he presently has a right to purchase from the Trust.
(n) Includes 774 shares Mr. Boll may receive in respect of shares of
Common Stock he presently has a right to purchase from the Trust.
(o) Includes 131,816 shares which could be acquired through exercise of
stock options and pursuant to Executive Loan Plan.
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors selected the firm of Coopers & Lybrand L.L.P.
as independent public accountants for the Company for 1995, subject to
ratification by the shareholders. Action by shareholders is not required
by law in the selection of independent public accountants, but their
selection is submitted by the Board in order to give the shareholders an
opportunity to ratify the Board's selection. If the shareholders do not
ratify the selection of Coopers & Lybrand L.L.P., the Board of Directors
will reconsider the selection of independent public accountants. Unless
otherwise specified, shares represented by proxies will be voted for the
ratification of the selection of Coopers & Lybrand L.L.P., as independent
public accountants for 1995.
Representatives of Coopers & Lybrand L.L.P. are expected to be present
at the Annual Meeting. Such representatives will have the opportunity to
make a statement if they desire to do so and are expected to be available
to respond to appropriate questions.
OTHER BUSINESS
Management knows of no other business which will be presented for
consideration at the Annual Meeting, but should any other matters be
brought before the meeting, it is intended that the persons named in the
accompanying proxy will vote such proxy at their discretion.
ADDITIONAL INFORMATION
Voting Procedures. Votes will be tabulated by one or more Inspectors
of Elections. Except for the election of directors, approval of the
matters to be considered at the meeting will require the affirmative vote
of the holders of at least a majority of the shares of outstanding Common
Stock represented at the meeting, unless otherwise indicated. If a
shareholder, present in person or by proxy, abstains on any matter, the
shareholder's shares will not be voted on such matter. Thus an abstention
from voting on a matter has the same legal effect as a vote "against" the
matter, even though the shareholder may interpret such action differently.
With respect to the election of directors, the nominee receiving the
greatest number of votes cast for the election of directors will be
elected.
A majority of the shares entitled to vote, represented in person or by
proxy, will constitute a quorum for the transaction of business at the
meeting. Shares for which the holder has elected to abstain or to withhold
the proxies' authority to vote on a matter will count toward a quorum.
"Broker non-votes" will not count toward a quorum and will not be voted on
any matter to be considered at the meeting.
Shareholder Proposals for 1996 Annual Meeting. Any shareholder
desiring to present a proposal to the shareholders at the 1996 Annual
Meeting and who desires that such proposal be included in the Company's
proxy statement and proxy card relating to that meeting, must transmit such
to the Secretary of the Company so that it is received at the Company's
principal executive offices on or before November 7, 1995. All such
proposals should be in compliance with applicable Securities and Exchange
Commission regulations.
By Order of the Board of Directors,
Douglas I. Payne
Secretary
March 7, 1995
<PAGE> EXHIBIT A
STANLEY FURNITURE COMPANY, INC.
1994 STOCK OPTION PLAN
1. Purpose. The purpose of this Stanley Furniture Company, Inc.
1994 Stock Option Plan (the "Plan") is to further the long term stability
and financial success of Stanley Furniture Company, Inc. (the "Company") by
attracting and retaining key employees through the use of stock incentives.
It is believed that ownership of Company Stock will stimulate the efforts
of those employees upon whose judgment and interest the Company is and will
be largely dependent for the successful conduct of its business. It is
also believed that Incentive Awards granted to such employees under this
Plan will strengthen their desire to remain with the Company and will
further the identification of those employees' interests with those of the
Company's shareholders. The Plan is intended to conform to the provisions
of Securities and Exchange Commission Rule 16b-3.
2. Definitions. As used in the Plan, the following terms have the
meanings indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Applicable Withholding Taxes" means the aggregate amount of
federal, state and local income and payroll taxes that the Company is
required to withhold in connection with any exercise of a Nonstatutory
Stock Option or Tax Offset Right.
(c) "Board" means the board of directors of the Company.
(d) "Change of Control" means an event described in (i), (ii),
(iii), or (iv):
(i) The acquisition by a Group of Beneficial Ownership of
35% or more of the Stock or the Voting Power of the Company, but
excluding for this purpose: (A) any acquisition by the Company
(or a subsidiary), or an employee benefit plan of the Company;
(B) any acquisition of Common Stock of the Company by management
employees of the Company; or (C) any acquisition by a Group that
owns 10% or more of the Stock or Voting Power of the Company on
the Effective Date. "Group" means any individual, entity or
group within the meaning of Section 13(d)(3) or 14(d)(2) of the
Act, "Beneficial Ownership" has the meaning in Rule 13d-3
promulgated under the Act, "Stock" means the then outstanding
shares of common stock, and "Voting Power" means the combined
voting power of the outstanding voting securities entitled to
vote generally in the election of directors.
(ii) Individuals who constitute the Board on the Effective
Date (the "Incumbent Board") cease to constitute at least a
majority of the Board, provided that any director whose
nomination was approved by a majority of the Incumbent Board
shall be considered a member of the Incumbent Board unless such
individual's initial assumption of office is in connection with
an actual or threatened election contest (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Act).
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, in which
the owners of more than 50% of the Stock or Voting Power of the
Company do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more
than 50% of the Stock or Voting Power of the corporation
resulting from such reorganization, merger or consolidation.
(iv) A complete liquidation or dissolution of the Company
or of its sale or other disposition of all or substantially all
of the assets of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the committee appointed by the Board as
described under Section 14.
(g) "Company" means Stanley Furniture Company, Inc., a Delaware
corporation.
(h) "Company Stock" means Common Stock, $.02 par value, of the
Company. If the par value of the Company Stock is changed, or in the
event of a change in the capital structure of the Company (as provided
in Section 13), the shares resulting from such a change shall be
deemed to be Company Stock within the meaning of the Plan.
(i) "Covered Employee" means the Chief Executive Officer of the
Company (or an individual acting in such capacity) as of the close of
the Taxable Year or an employee whose total compensation is required
to be reported for the Taxable Year under the disclosure rules
promulgated by the Securities and Exchange Commission under the Act.
(j) "Date of Grant" means the date on which an Incentive Award
is granted by the Committee.
(k) "Disability" or "Disabled" means, as to an Incentive Stock
Option, a Disability within the meaning of Section 22(e)(3) of the
Code. As to all other Incentive Awards, a physical or mental
condition that prevents the Participant from performing his customary
duties with the Company. The Committee shall determine whether a
Disability exists on the basis of competent medical evidence, and such
determination shall be conclusive.
(l) "Effective Date" means December 2, 1994.
(m) "Fair Market Value" means,
(i) if the Company Stock is traded on an exchange, the
closing registered sales price of the Company Stock on the
day prior to the grant on the exchange on which it generally
has the greatest trading volume.
(ii) if (i) does not apply, the fair market value as
determined by the Committee using any reasonable method in
good faith.
(n) "Incentive Award" means, collectively, the award of an
Option or Tax Offset Right under the Plan.
(o) "Incentive Stock Option" means an Option intended to meet
the requirements of, and qualify for favorable federal income tax
treatment under, Code section 422.
(p) "Insider" means a person subject to Section 16(b) of the
Act.
(q) "Nonstatutory Stock Option" means an Option that does not
meet the requirements of Code section 422, or, even if meeting the
requirements of Code section 422, is not intended to be an Incentive
Stock Option and is so designated.
(r) "Option" means a right to purchase Company Stock granted
under the Plan, at a price determined in accordance with the Plan. An
Option may be either an Incentive Stock Option or a Nonstatutory Stock
Option.
(s) "Participant" means any employee who receives an Incentive
Award under the Plan.
(t) "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission promulgated under the Act. A reference in the Plan to Rule
16b-3 shall include a reference to any corresponding rule (or number
redesignation) of any amendments to Rule 16b-3 enacted after the
effective date of the Plan's adoption.
(u) "Tax Offset Right" means a right to receive amounts in cash
from the Company as described in Section 10 of the Plan.
(v) "10% Shareholder" means a person who owns, directly or
indirectly, stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any Parent or
Subsidiary of the Company. Indirect ownership of stock shall be
determined in accordance with Code section 424(d).
3. General. The following types of Incentive Awards may be granted
under the Plan: Options and Tax Offset Rights. Options granted under the
Plan may be Incentive Stock Options or Nonstatutory Stock Options.
4. Stock. Subject to Section 13 of the Plan, there shall be
reserved for issuance under the Plan an aggregate of 700,000 shares of
Company Stock, which shall be authorized, but unissued shares, reduced by
any options issued under the Stanley Furniture Company, Inc. 1992 Stock
Option Plan (the "1992 Plan") that are outstanding at any time or that have
been exercised prior to the Effective Date. Shares allocable to options or
portions thereof under the 1992 Plan that expire or otherwise terminate
unexercised after the Effective Date of the Plan may be subjected to an
Incentive Award under the Plan. Shares allocable to Options or portions
thereof granted under the Plan that expire or otherwise terminate
unexercised may again be subjected to an Option under the Plan. The
Committee is expressly authorized to make an Incentive Award to a
Participant conditioned upon the surrender for cancellation of an option
granted under an existing Incentive Award under this Plan or the 1992 Plan.
For purposes of determining the number of shares that are available for
Incentive Awards under the Plan, such number shall, to the extent
permissible under Rule 16b-3, include the number of shares surrendered by
an optionee or retained by the Company in payment of Applicable Withholding
Taxes.
5. Eligibility.
(a) All present and future employees who hold positions with
management responsibilities with the Company (or any parent or subsidiary
of the Company, whether now existing or hereafter created or acquired)
shall be eligible to receive Incentive Awards under the Plan. The
Committee shall have the power and complete discretion, as provided in
Section 14, to select eligible employees to receive Incentive Awards and to
determine for each employee the terms and conditions, the nature of the
award and the number of shares to be allocated to each employee as part of
each Incentive Award.
(b) The grant of an Incentive Award shall not obligate the
Company or any parent or subsidiary of the Company to pay an employee any
particular amount of remuneration, to continue the employment of the
employee after the grant or to make further grants to the employee at any
time thereafter.
6. Performance Program Awards.
(a) Options may be issued pursuant to the Plan in connection
with performance programs established from time to time by the Committee.
Options awarded under a performance program shall vest according to the
performance criteria and other terms established by the Committee as part
of the performance program.
(b) Whenever the Committee deems it appropriate, the Committee
may establish a performance program and notify Participants of their
participation in and the terms of the performance program. More than one
performance program may be established by the Committee and they may
operate concurrently or for varied periods of time and a Participant may be
permitted to participate in more than one performance program at the same
time. Options awarded under a performance program shall be issued subject
to the Plan.
7. Stock Options.
(a) Whenever the Committee deems it appropriate to grant
Options, notice shall be given to the Participant stating the number of
shares for which Options are granted, the Option price per share, whether
the Options are Incentive Stock Options or Nonstatutory Stock Options, and
the conditions to which the grant and exercise of the Options are subject
(including, without limitation, that the Option is awarded pursuant to a
performance program as described in Section 6). This notice, when duly
accepted in writing by the Participant, shall become a stock option
agreement between the Company and the Participant.
(b) The exercise price of shares of Company Stock covered by an
Incentive Stock Option shall be not less than 100% of the Fair Market Value
of such shares on the Date of Grant; provided that if an Incentive Stock
Option is granted to a Participant who, at the time of the grant, is a 10%
Shareholder, then the exercise price of the shares covered by the Incentive
Stock Option shall be not less than 110% of the Fair Market Value of such
shares on the Date of Grant.
(c) The exercise price of shares of Company Stock covered by an
Nonstatutory Stock Option shall be not less than 100% of the Fair Market
Value of such shares on the Date of Grant.
(d) Options may be exercised in whole or in part at such times
as may be specified by the Committee in the Participant's stock option
agreement; provided that, the exercise provisions for Options shall in all
events not be more liberal than the following provisions:
(i) No Option may be exercised after the first to occur of
(x) ten years (or, in the case of an Incentive Stock Option
granted to a 10% Shareholder, five years) from the Date of Grant.
(ii) Except as otherwise provided in this paragraph, no
Option may be exercised unless the Participant is employed by the
Company or a parent or subsidiary of the Company at the time of
the exercise and has been employed by the Company or a parent or
subsidiary of the Company at all times since the Date of Grant.
If a Participant's employment is terminated other than by reason
of his Disability or death at a time when the Participant holds
an Option that is exercisable (in whole or in part), the
Participant may exercise any or all of the exercisable portion of
the Option (to the extent exercisable on the date of termination)
within three months after the Participant's termination of
employment. If a Participant's employment is terminated by
reason of his Disability at a time when the Participant holds an
Option that is exercisable (in whole or in part), the Participant
may exercise any or all of the exercisable portion of the Option
(to the extent exercisable on the date of Disability) within one
year after the Participant's termination of employment. If a
Participant's employment is terminated by reason of his death at
a time when the Participant holds an Option that is exercisable
(in whole or in part), the Option may be exercised (to the extent
exercisable on the date of death) within one year after the
Participant's death by the person to whom the Participant's
rights under the Option shall have passed by will or by the laws
of descent and distribution.
(iii) An Incentive Stock Option by its terms, shall be
exercisable in any calendar year only to the extent that the
aggregate Fair Market Value (determined at the Date of Grant) of
the Company Stock with respect to which Incentive Stock Options
are exercisable for the first time during the calendar year does
not exceed $100,000 (the "Limitation Amount"). Incentive Stock
Options granted under the Plan and all other plans of the Company
and any Parent or Subsidiary of the Company shall be aggregated
for purposes of determining whether the Limitation Amount has
been exceeded. The Board may impose such conditions as it deems
appropriate on an Incentive Stock Option to ensure that the
foregoing requirement is met. If Incentive Stock Options that
first become exercisable in a calendar year exceed the Limitation
Amount, the excess Options will be treated as Nonstatutory Stock
Options to the extent permitted by law.
(e) Notwithstanding the foregoing, no Option shall be
exercisable by an Insider within the first six months after it is granted;
provided that, this restriction shall not apply if the Participant becomes
Disabled or dies during the six-month period.
(f) The Committee may, in its discretion, grant Options that by
their terms become fully exercisable upon a Change of Control,
notwithstanding other conditions on exercisability in the stock option
agreement.
8. Method of Exercise of Options.
(a) Options may be exercised by the Participant giving written
notice of the exercise to the Company, stating the number of shares the
Participant has elected to purchase under the Option. Such notice shall be
effective only if accompanied by the exercise price in full in cash;
provided that, if the terms of an Option so permit, the Participant may (i)
deliver, or cause to be withheld from the Option shares, shares of Company
Stock (valued at their Fair Market Value on the date of exercise) in
satisfaction of all or any part of the exercise price, (ii) deliver a
properly executed exercise notice together with irrevocable instructions to
a broker to deliver promptly to the Company, from the sale or loan proceeds
with respect to the sale of Company Stock or a loan secured by Company
Stock, the amount necessary to pay the exercise price and, if required by
the Committee, Applicable Withholding Taxes, or (iii) deliver an interest
bearing promissory note, payable to the Company, in payment of all or part
of the exercise price together with such collateral as may be required by
the Committee at the time of exercise. The interest rate under any such
promissory note shall be established by the Committee and shall be at least
equal to the minimum interest rate required at the time to avoid imputed
interest under the Code.
(b) The Company may place on any certificate representing
Company Stock issued upon the exercise of an Option any legend deemed
desirable by the Company's counsel to comply with federal or state
securities laws, and the Company may require a customary written indication
of the Participant's investment intent. Until the Participant has made any
required payment, including any Applicable Withholding Taxes, and has had
issued a certificate for the shares of Company Stock acquired, he shall
possess no shareholder rights with respect to the shares.
(c) Each Participant shall agree as a condition of the exercise
of a Nonstatutory Stock Option to pay to the Company, or make arrangements
satisfactory to the Company regarding the payment to the Company of,
Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Company have been made, no stock
certificate shall be issued upon the exercise of an Option.
(d) As an alternative to making a cash payment to the Company to
satisfy Applicable Withholding Taxes, the Committee may establish
procedures permitting the Participant to elect to (i) deliver shares of
already owned Company Stock or (ii) have the Company retain that number of
shares of Company Stock that would satisfy all or a specified portion of
the Applicable Withholding Taxes. Any such election be made only in
accordance with procedures established by the Committee, including any
procedures necessary to satisfy Rule 16b-3 if the Participant is an
Insider. The Committee shall have sole discretion to approve or disapprove
any such election.
(e) Notwithstanding anything herein to the contrary, Options
shall always be granted and exercised in such a manner as to conform to the
provisions of Rule 16b-3, to the extent applicable.
9. Nontransferability of Options. Options by their terms, shall not
be transferable except by will or by the laws of descent and distribution
or, if permitted by Rule 16b-3, pursuant to a qualified domestic relations
order (as defined in Code section 414(p)) ("QDRO") and shall be
exercisable, during the Participant's lifetime, only by the Participant or,
if permitted by Rule 16b-3, an alternate payee under a QDRO, or by his
guardian, duly authorized attorney-in-fact or other legal representative.
10. Tax Offset Rights.
(a) Whenever the Committee deems it appropriate, Tax Offset
Rights may be granted in connection with Options. Tax Offset Rights shall
be evidenced in writing as part of the stock option agreement to which they
pertain.
(b) Tax Offset Rights shall entitle the Participant, upon
exercise of all or any part of an Option or Tax Offset Right, to receive in
cash from the Company an amount equal to or approximating the Applicable
Withholding Taxes.
(c) A Participant may exercise a Tax Offset Right by giving the
Committee written notice of exercise simultaneously with the exercise of an
Option. To the extent exercised, the Tax Offset Right shall lapse.
(d) The Committee may limit the amount the Participant will be
entitled to receive in connection with a Tax Offset Right and may include
any provisions in a Tax Offset Right that the Committee deems appropriate
to ensure that the Tax Offset Right will not be characterized as an "equity
security" or "derivative security" for purposes of Section 16 of the Act
and the rules and regulations thereunder.
11. Effective Date of the Plan. This Plan shall be effective on
December 2, 1994 and shall be submitted to the shareholders of the Company
for approval. Until (i) the Plan has been approved by the Company's
shareholders, and (ii) the requirements of any applicable state securities
laws have been met, no Option shall be exercisable.
12. Termination, Modification, Change. If not sooner terminated by
the Board, this Plan shall terminate at the close of business on November
30, 2004. No Incentive Awards shall be made under the Plan after its
termination. The Board may terminate the Plan or may amend the Plan in
such respects as it shall deem advisable; provided that, if and to the
extent required by Rule 16b-3, no change shall be made that increases the
total number of shares of Company Stock reserved for issuance pursuant to
Incentive Awards granted under the Plan (except pursuant to Section 13),
materially modifies the requirements as to eligibility for participation in
the Plan, or materially increases the benefits accruing to Participants
under the Plan, unless such change is authorized by the shareholders of the
Company. Notwithstanding the foregoing, the Board may unilaterally amend
the Plan and Incentive Awards as it deems appropriate to ensure compliance
with Rule 16b-3. Except as provided in the preceding sentence, a
termination or amendment of the Plan shall not, without the consent of the
Participant, adversely affect the Participant's rights under an Incentive
Award previously granted to him.
13. Change in Capital Structure.
(a) In the event of a stock dividend, stock split or combination
of shares, recapitalization or merger in which the Company is the surviving
corporation or other change in the Company's capital stock (including, but
not limited to, the creation or issuance to shareholders generally of
rights, options or warrants for the purchase of common stock or preferred
stock of the Company), the number and kind of shares of stock or securities
of the Company to be subject to the Plan and to Options then outstanding or
to be granted thereunder, the maximum number of shares or securities which
may be delivered under the Plan, the exercise price and other relevant
provisions shall be appropriately adjusted by the Committee, whose
determination shall be binding on all persons. If the adjustment would
produce fractional shares with respect to any unexercised Option, the
Committee may adjust appropriately the number of shares covered by the
Option so as to eliminate the fractional shares.
(b) If the Company is a party to a consolidation or a merger in
which the Company is not the surviving corporation, a transaction that
results in the acquisition of substantially all of the Company's
outstanding stock by a single person or entity, or a sale or transfer of
substantially all of the Company's assets, the Committee may take such
actions with respect to outstanding Incentive Awards as the Committee deems
appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of any
Participant, and the Committee's determination shall be conclusive and
binding on all persons for all purposes.
14. Administration of the Plan. The Plan shall be administered by
the Committee, which shall consist of not less than two members of the
Board, who shall be appointed by the Board. Subject to paragraph (d)
below, the Committee shall be the Compensation Committee unless the Board
shall appoint another Committee to administer the Plan. The Committee
shall have general authority to impose any limitation or condition upon an
Incentive Award the Committee deems appropriate to achieve the objectives
of the Incentive Award and the Plan and, without limitation and in addition
to powers set forth elsewhere in the Plan, shall have the following
specific authority:
(a) The Committee shall have the power and complete discretion
to determine (i) which eligible employees shall receive Incentive
Awards and the nature of each Incentive Award, (ii) the number of
shares of Company Stock to be covered by each Incentive Award,
(i) whether Options shall be Incentive Stock Options or Nonstatutory
Stock Options, (iii) when, whether and to what extent Tax Offset
Rights shall be granted and the terms thereof, (iv) the Fair Market
Value of Company Stock, (v) the time or times when an Incentive Award
shall be granted, (vi) whether an Incentive Award shall become vested
over a period of time and when it shall be fully vested, (vii) when
Options may be exercised, (viii) whether a Disability exists, (ix) the
manner in which payment will be made upon the exercise of Options,
(x) conditions relating to the length of time before disposition of
Company Stock received upon the exercise of Options is permitted, (xi)
whether to approve a Participant's elections under the Plan, (xii)
notice provisions relating to the sale of Company Stock acquired under
the Plan, (xiii) the terms of performance programs, performance
criteria and other factors relevant to the issuance of Options that
will vest subject to performance goals, and (xiv) any additional
requirements relating to Incentive Awards that the Committee deems
appropriate. Notwithstanding the foregoing, no "tandem stock options"
(where two stock options are issued together and the exercise of one
option affects the right to exercise the other option) may be issued
in connection with Incentive Stock Options. The Committee shall have
the power to amend the terms of previously granted Incentive Awards so
long as the terms as amended are consistent with the terms of the Plan
and provided that the consent of the Participant is obtained with
respect to any amendment that would be detrimental to him, except that
such consent will not be required if such amendment is for the purpose
of complying with Rule 16b-3.
(b) The Committee may adopt rules and regulations for carrying
out the Plan. The interpretation and construction of any provision of
the Plan by the Committee shall be final and conclusive. The
Committee may consult with counsel, who may be counsel to the Company,
and shall not incur any liability for any action taken in good faith
in reliance upon the advice of counsel.
(c) A majority of the members of the Committee shall constitute
a quorum, and all actions of the Committee shall be taken by a
majority of the members present. Any action may be taken by a written
instrument signed by all of the members, and any action so taken shall
be fully effective as if it had been taken at a meeting.
(d) The Board from time to time may appoint members previously
appointed and may fill vacancies, however caused, in the Committee.
Insofar as it is necessary to satisfy the requirements of Section
16(b) of the Act, no member of the Committee shall be eligible to
participate in the Plan or in any other plan of the Company or any
parent or subsidiary of the Company that entitles participants to
acquire stock, stock options or stock appreciation rights of the
Company or any parent or subsidiary of the Company, and no person
shall become a member of the Committee if, within the preceding one-
year period, the person shall have been eligible to participate in
such a plan (other than a "safe harbor plan" permitted under Rule 16b-
3(c)(2)(i) and (ii)).
15. Notice. All notices and other communications required or
permitted to be given under this Plan shall be in writing and shall be
deemed to have been duly given if delivered personally or mailed first
class, postage prepaid, as follows (a) if to the Company - at its principal
business address to the attention of the Treasurer; (b) if to any
Participant - at the last address of the Participant known to the sender at
the time the notice or other communication is sent.
16. Interpretation. The terms of this Plan are subject to all
present and future regulations and rulings of the Secretary of the Treasury
or his or her delegate relating to the qualification of Incentive Stock
Options under the Code. If any provision of the Plan conflicts with any
such regulation or ruling, then that provision of the Plan shall be void
and of no effect. The terms of this Plan shall be governed by the laws of
the Commonwealth of Virginia.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
this 2nd day of December, 1994.
STANLEY FURNITURE COMPANY, INC.
By: /s/Albert L. Prillaman
<PAGE>
EXHIBIT B
STANLEY FURNITURE COMPANY, INC.
EXECUTIVE LOAN PLAN
1. Purpose. The purpose of this Stanley Furniture Company, Inc.
Executive Loan Plan (the "Plan") is to further the long term stability and
financial success of Stanley Furniture Company, Inc. (the "Company") by
attracting and retaining key employees through the use of loans to acquire
Company stock ("Loan").
2. Number of Shares. Under the Plan, the Company may make Loans to
eligible executives to acquire up to an aggregate of 80,000 shares of
Company Stock, which may be authorized, but unissued shares or issued
shares.
3. Eligibility. All present and future employees who hold positions
with management responsibilities with the Company (or any parent or
subsidiary of the Company, whether now existing or hereafter created or
acquired) shall be eligible to receive Loans under the Plan. The Committee
shall have the power and complete discretion to select eligible employees
to receive Loans.
4. Loans. The Committee shall have the power and complete
discretion to determine for each employee the terms, conditions, nature and
amount of a Loan. All Company stock acquired with a Loan shall be acquired
at the Fair Market Value of the stock as determined under the Stanley
Furniture Company, Inc. 1994 Stock Option Plan. The Committee may provide
that all or a portion of a Loan, including principal and interest, will be
forgiven under any circumstances determined by the Committee.
5. Effective Date of the Plan. This Plan shall be effective on
December 2, 1994.
6. Termination, Modification, Change. If not sooner terminated by
the Board, this Plan shall terminate at the close of business on December
1, 2004. No Loans shall be made under the Plan after its termination. The
Board may terminate the Plan or may amend the Plan in such respects as it
shall deem advisable. A termination or amendment of the Plan shall not,
without the consent of the Participant, adversely affect the Participant's
rights under a Loan previously granted to him.
7. Administration of the Plan.
(a) The Plan shall be administered by the Committee, which shall
consist of not less than two members of the Board, who shall be
appointed by the Board. The Committee shall be the Compensation
Committee unless the Board shall appoint another Committee to
administer the Plan. The Committee shall have general authority to
impose any limitation or condition upon a Loan that the Committee
deems appropriate to achieve the objectives of the Plan. The
Committee shall have the authority to interpret the Plan and its
interpretations shall be binding on all parties. The terms of this
Plan shall be governed by the laws of the Commonwealth of Virginia.
(b) The Board from time to time may appoint members previously
appointed and may fill vacancies, however caused, in the Committee.
Insofar as it is necessary to satisfy the requirements of Section
16(b) of the Act, no member of the Committee shall be eligible to
participate in the Plan or in any other plan of the Company or any
parent or subsidiary of the Company that entitles participants to
acquire stock, stock options or stock appreciation rights of the
Company or any parent or subsidiary of the Company, and no person
shall become a member of the Committee if, within the preceding one-
year period, the person shall have been eligible to participate in
such a plan (other than a "safe harbor plan" permitted under Rule 16b-
3(c)(2)(i) and (ii)).
8. Nontransferability of Loans. Loans by their terms, shall not be
transferable except by will or by the laws of descent and distribution or,
if permitted by Rule 16b-3, pursuant to a qualified domestic relations
order (as defined in Code section 414(p)) ("QDRO").
IN WITNESS WHEREOF, the Company has caused this Executive Loan Plan to
be executed this 2nd day of December, 1994.
STANLEY FURNITURE COMPANY, INC.
By: /s/Albert L. Prillaman
*************************APPENDIX****************************************
REVOCABLE PROXY
STANLEY FURNITURE COMPANY, INC.
Annual Meeting of Shareholders - April 20, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Douglas I. Payne and David W. Robertson
and either of them, proxies of the undersigned, with full power of
substitution, to vote all the shares of Common Stock of Stanley Furniture
Company, Inc. (the "Company") held of record by the undersigned on February
28, 1995, at the Annual Meeting of Shareholders to be held April 20, 1995, and
at any adjournment thereof.
(1) ELECTION OF DIRECTORS
( ) FOR nominee listed below ( ) WITHHOLD AUTHORITY to vote for
nominee listed below
NOMINEE: Edward J. Mack
(2) Approval of 1994 Stock Option Plan
( ) FOR ( ) AGAINST ( ) ABSTAIN
(3) Approval of Executive Loan Plan
( ) FOR ( ) AGAINST ( ) ABSTAIN
(4) Ratification of the selection of Coopers & Lybrand L.L.P. as independent
public accountants of the Company for 1995.
( ) FOR ( ) AGAINST ( ) ABSTAIN
(5) In their discretion the proxies are authorized to vote upon such other
matters as may come before the meeting or any adjournment thereof.
All as more particularly described in the Company's Proxy Statement for
the Annual Meeting of Shareholders to be held on April 20, 1995, receipt of
which is hereby acknowledged.
(Continued and to be dated and signed on reverse side)
(continued from reverse side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BY THE
UNDERSIGNED SHAREHOLDER. IF NO CHOICE IS SPECIFIED BY THE SHAREHOLDER, THIS
PROXY WILL BE VOTED "FOR" ALL PORTIONS OF ITEMS (1), (2), (3), AND (4), AND IN
THE PROXIES' DISCRETION ON ANY OTHER MATTERS COMING BEFORE THE MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote upon or act with respect to such stock and hereby ratifies and confirms
all that said proxies, their substitutes or any of them may lawfully do by
virtue hereof.
Please date this Proxy Card and sign your name
exactly as it appears hereon. Where there is
more than one owner, each should sign. When
signing as an attorney, administrator,
executor, guardian or trustee, please add your
title as such. If executed by a corporation,
this Proxy Card should be signed by a duly
authorized officer. If executed by a
partnership, please sign in partnership name by
authorized persons.
Dated ___________________________________, 1995.
_____________________________________________
_____________________________________________
Please promptly mark, sign, and mail this Proxy
Card in the enclosed envelope. No postage is
required.
