LADD FURNITURE, INC.
1994 INCENTIVE STOCK OPTION PLAN
Effective February 24, 1994
LADD FURNITURE, INC.
1994 INCENTIVE STOCK OPTION PLAN
TABLE OF CONTENTS
Section 1. Purpose . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Administration . . . . . . . . . . . . . . . . . . . . 1
Section 3. Stock Available for Options . . . . . . . . . . . . . 2
Section 4. Eligibility . . . . . . . . . . . . . . . . . . . . . 2
Section 5. Option Price . . . . . . . . . . . . . . . . . . . . . 3
Section 6. Director Options . . . . . . . . . . . . . . . . . . . 4
Section 7. Expiration of Options . . . . . . . . . . . . . . . . 4
Section 8. Terms and Conditions of Options . . . . . . . . . . . 4
Section 9. Exercise of Options . . . . . . . . . . . . . . . . . 5
Section 10. Termination of Employment - Except by Death or
Retirement . . . . . . . . . . . . . . . . . . . . . 6
Section 11. Termination of Employment - Retirement . . . . . . . . 6
Section 12. Termination of Employment - Death . . . . . . . . . . . 6
Section 13. Restrictions on Transfer . . . . . . . . . . . . . . . 7
Section 14. Capital Adjustments Affecting Common Stock . . . . . . 7
Section 15. Application of Funds . . . . . . . . . . . . . . . . . 8
Section 16. No Obligation to Exercise Option . . . . . . . . . . . 8
Section 17. Term of Plan . . . . . . . . . . . . . . . . . . . . . 8
Section 18. Effective Date of Plan . . . . . . . . . . . . . . . . 8
Section 19. Time of Granting of Options . . . . . . . . . . . . . . 8
Section 20. Termination and Amendment . . . . . . . . . . . . . . . 8
Section 21. Other Provisions . . . . . . . . . . . . . . . . . . . 9
LADD FURNITURE, INC.
1994 INCENTIVE STOCK OPTION PLAN
THIS IS THE 1994 INCENTIVE STOCK OPTION PLAN ("Plan") of
LADD Furniture, Inc. ("LADD"), a North Carolina corporation, with
its principal office in High Point, Guilford County, North
Carolina, effective on February 24, 1994, under which options may
be granted from time to time to eligible employees and directors
of LADD and LADD's divisions and subsidiaries to purchase shares
of common stock of LADD, subject to the provisions set forth as
follows:
Section 1. Purpose
The purpose of this Plan is to aid LADD in attracting
capable executives and directors and to provide a long range
inducement for key employees and directors to remain in the
management of LADD, to perform at increasing levels of
effectiveness and to acquire a permanent stake in LADD with the
interest and outlook of an owner. These objectives will be
promoted through the granting to key employees and directors of
options to acquire shares of common stock of LADD pursuant to the
terms of this Plan.
Section 2. Administration
The Plan shall be administered by a committee to be ap-
pointed from time to time by the Board of Directors of LADD and
shall serve at the pleasure of the directors (the "Committee").
Any or all of the members of the Committee may be members of the
Board of Directors. The Committee shall consist of not less than
three (3) persons, all of whom shall be "disinterested persons"
within the meaning of Rule 16b-3 of the Securities Exchange Act
of 1934, as amended from time to time. The Committee, from time
to time, may adopt rules and regulations for carrying out the
Plan.
Subject to the provisions of the Plan, the determinations or
the interpretation and construction of any provision of the Plan
by the Committee shall be final and conclusive upon all persons
affected thereby. By way of illustration and not of limitation,
the Committee shall have the discretion (a) to construe and
interpret the Plan and all options granted hereunder and to
determine the terms and provisions (and amendments thereof) of
the options granted under the Plan (which need not be identical);
(b) to define the terms used in the Plan and in the options
granted hereunder; (c) to prescribe, amend and rescind rules and
regulations relating to the Plan; (d) to determine the
individuals to whom and the time or times at which such options
shall be granted, the number of shares to be subject to each
option, the option price, the manner of exercise of the options,
and the determination of leaves of absence which may be granted
to participants without constituting a termination of their
employment for the purposes of the Plan; (e) to correct any
defect or supply any omission or reconcile any inconsistency in
the Plan or in any option granted under the Plan; and (f) to make
all other determinations necessary or advisable for the
administration of the Plan.
It shall be in the discretion of the Committee to grant
options which qualify as "incentive stock options" (as that term
is defined in Section 422 of the Internal Revenue Code of 1986,
as amended) or which will be given tax treatment as "nonqualified
stock options" (herein referred to collectively as "options";
however, whenever reference is specifically made only to
"incentive stock options" or "nonqualified stock options," such
reference shall be deemed to be made to the exclusion of the
other). Nonqualified stock options granted to nonemployee
directors pursuant to the terms of the Plan shall be referred to
as "Director Options."
Any action of the Committee with respect to the Plan shall
be taken by a majority vote at a meeting of the Committee or by
written consent of all of the members of the Committee without a
meeting.
Section 3. Stock Available for Options
The stock to be subject to options under the Plan shall be
authorized but unissued shares of common stock of LADD or, in the
discretion of the Committee, issued shares which have been reac-
quired by LADD. The total amount of stock for which options may
be granted under the Plan shall not exceed One Million Two
Hundred Thousand (1,200,000) shares. Such number of shares is
subject to any capital adjustments as provided in Section 14. In
the event that an option granted under the Plan expires or is
terminated unexercised as to any shares covered thereby, such
shares thereafter shall be available for the granting of options
under the Plan; however, if the expiration or termination date of
an option is beyond the term of existence of the Plan as
described in Section 17, then any shares covered by unexercised
or terminated options shall not reactivate the existence of this
Plan and therefore may not be available for additional grants
under the Plan.
Section 4. Eligibility
Options shall be granted only to individuals who meet the
following eligibility requirements:
(a) Such individual must be an employee of LADD or a
division or subsidiary of LADD or a director of LADD. An indi-
vidual shall be considered to be an "employee" only if there
exists between LADD or a division or subsidiary of LADD and the
individual the legal and bona fide relationship of employer and
employee. In determining whether such relationship exists, the
regulations of the United States Treasury Department relating to
the determination of such relationship for the purpose of collec-
tion of income tax at the source on wages shall be applied.
(b) Such employees must be "key employees" of LADD or a
division or subsidiary of LADD. For this purpose, "key employ-
ees" shall be considered to be those employees who, in the
judgment of the Committee, are in a position materially to affect
the operations
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and profitability of LADD or a division or subsidiary of LADD by
reason of the nature and extent of their duties and
responsibilities.
(c) A director of LADD who is not also an employee of LADD
is eligible for an automatic grant of options pursuant to
Section 6 hereof. A director of LADD who is not also an employee
of LADD will not be eligible to receive incentive stock options
and will only be eligible to receive Director Options.
(d) Such individual, being otherwise eligible under this
Section 4, shall have been selected by the Committee as a person
to whom an option shall be granted under the Plan.
(e) In determining the individuals to whom options shall be
granted and the number of shares to be covered by each option,
the Committee shall take into account the nature of the services
rendered by the respective individuals, their present and
potential contributions to the success of LADD and such other
factors as the Committee shall deem relevant. An employee who
has been granted an option under the Plan may be granted an
additional option or options under the Plan if the Committee
shall so determine.
Section 5. Option Price
(a) (i) Except in the case where incentive stock options
are granted to an individual who owns stock possessing more than
10 percent (10%) of the total combined voting power of all
classes of stock of LADD or its subsidiary corporations ("ten
percent shareholder"), the option price of each incentive stock
option granted under the Plan shall be not less than one hundred
percent (100%) of the market value of the stock on the date of
grant of the incentive stock option. In the case of incentive
stock options granted to a ten percent shareholder, the option
price of each incentive stock option granted under the Plan shall
not be less than one hundred ten percent (110%) of the market
value of the stock on the date of grant of the incentive stock
option. "Market value" shall be determined by taking the closing
price of the stock on the over-the-counter market on that date.
The option price is subject to any capital adjustment as provided
in Section 14.
(ii) The option price for nonqualified stock options
granted to employees shall be established by the Committee in its
discretion and may be less than market value of the stock on date
of grant.
(iii) The option price for Director Options shall
be not less than the market value of the stock on date of grant.
Market value shall be determined as set forth in Section 5(a)(i)
above.
(b) The option price shall be payable to LADD either (i) in
cash or by check, bank draft or money order payable to the order
of LADD, or (ii) at the discretion of the Committee, through the
delivery of shares of the common stock of LADD owned by the
optionee with a value equal to the option price, or (iii) at the
discretion of the Committee
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by a combination of (i) and (ii)
above. An option agreement may, in the discretion of the
Committee, provide for a "cashless exercise" of an incentive
stock option or a nonqualified stock option by establishing
procedures whereby the optionee, by a properly executed written
notice, directs (1) an immediate market sale or margin loan
respecting all or a part of the shares of common stock to which
he is entitled upon exercise pursuant to an extension of credit
by LADD to the optionee of the option price, (2) delivery of the
shares of common stock from LADD directly to a brokerage firm and
(3) the delivery of the option price from sale or margin loan
proceeds from the brokerage firm directly to LADD. Except as
provided in the preceding sentence, no shares shall be delivered
until full payment has been made. The Committee may not approve
a reduction of such purchase price in any such option, or the
cancellation of any such option and the regranting thereof to the
same optionee at a lower purchase price, at a time when the
market value of the shares is lower than it was when such option
was granted.
Section 6. Director Options
All eligible nonemployee directors of LADD will
automatically receive without any action required on the part of
the Committee the following grants of options ("Director
Options"): 1) upon initial election to office, nonqualified
stock options to purchase two thousand (2,000) shares of LADD
common stock and 2) upon subsequent elections to office each
year, first beginning with the election of directors at the 1994
Annual Meeting of Shareholders, nonqualified stock options to
purchase fifteen hundred (1,500) shares of LADD common stock.
All characteristics of the Director Options, including option
price, shall be established as provided in the Plan. The
Committee shall exercise no discretion with respect to the
granting of Director Options.
Section 7. Expiration of Options
The Committee shall determine the expiration date or dates
of each option, but such expiration date shall be not later than
ten (10) years after the date such option is granted; provided,
however, that in the case where incentive stock options are
granted to a ten percent shareholder, as defined in Section
5(a)(i) hereof, such expiration date shall be not later than five
(5) years after the date such option is granted. The Committee,
in its discretion, may extend the expiration date or dates of an
option after such date was originally set; however, such
expiration date may not exceed the maximum expiration date
described above. Notwithstanding the foregoing, all Director
Options shall be for a term of six (6) years, and such term may
not be extended or modified by the Committee.
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Section 8. Terms and Conditions of Options
(a) All options must be granted within ten (10) years of
the Effective Date of this Plan as provided in Section 18.
(b) The grant of options shall be evidenced by a written
instrument containing terms and conditions established by the
Committee consistent with the provisions of this Plan.
(c) Not less than one hundred (100) shares may be purchased
at any one time unless the number purchased is the total number
at that time purchasable under the Plan.
(d) The Committee may grant an option or options and
stipulate that a portion of such option expires or becomes exer-
cisable at a stated interval or that portions of such option
expire or become exercisable at several stated intervals.
Director Options shall be exercisable in installments of twenty
percent (20%) per year, cumulative, beginning one year after the
date of grant.
(e) An optionee shall have no rights as a stockholder with
respect to any shares covered by his option until payment in full
by him for the shares being purchased. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights
for which the record date is prior to the date such stock is
fully paid for, except as provided in Section 14 hereof.
(f) Notwithstanding any other provision of the Plan, the
aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock
options are exercisable for the first time by an optionee during
any calendar year (including incentive stock options granted
under all option plans of LADD or any of its subsidiary
corporations) shall not exceed $100,000.
(g) Notwithstanding any other provision of the Plan, the
total number of shares of common stock of LADD with respect to
which incentive stock options, nonqualifying options and Director
Options are granted to an optionee during any calendar year shall
not exceed ten percent (10%) of the total number of shares
reserved for grant under the Plan as provided in Section 3.
Section 9. Exercise of Options
(a) An optionee must have been continuously employed by
LADD or a division or subsidiary of LADD or be a director of LADD
for 12 months before the right to exercise any part of the option
granted to such optionee shall accrue. Each option granted under
the Plan shall be exercisable in such annual installments as may
be determined by the Committee at the time of the grant, or with
respect to Director Options as provided in the Plan. The right
to exercise options in annual installments may be cumulative.
Except as
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provided in Sections 11 and 12, no option may be
exercised at any time unless the holder thereof is then an
employee of LADD or a division or subsidiary of LADD or a
director of LADD. The exercise of any stock option must be
evidenced by written notice to LADD that the optionee intends to
exercise his option. In no event shall an option granted
pursuant to the terms of the Plan as amended be exercised until
the Plan, as amended, has been approved by the shareholders of
LADD.
(b) No option may be exercised and no shares may be
acquired under the Plan prior to the timely filing by both the
optionee and LADD of all appropriate documents that may be
required by applicable federal and state securities laws and
state corporate laws.
Section 10. Termination of Employment - Except by Death or
Retirement
If any optionee ceases to be employed by LADD or a division
or subsidiary of LADD or ceases to be a director of LADD for any
reason other than his death (Section 12), disability retirement
(Section 11), or normal retirement (Section 11), his option shall
immediately terminate. Whether a leave of absence shall
constitute a termination of employment or termination of the
directorship shall be determined by the Committee, whose decision
shall be final and conclusive.
Section 11. Termination of Employment - Retirement
If any optionee ceases to be employed by LADD or a division
or subsidiary of LADD or ceases to be a director of LADD due to
his retirement upon attaining normal retirement age (age 65) or
he ceases to be employed prior to age 65 due to early retirement
and such early retirement is acceptable to the Committee for the
purposes of this Section 11, he may, at any time within three (3)
months after his date of retirement, but not later than the date
of expiration of the option, exercise the option to the extent he
was entitled to do so on his date of retirement. If any optionee
ceases to be employed by LADD or a division or subsidiary of LADD
or ceases to be a director of LADD due to his becoming disabled
for purposes of LADD's Disability Plan, he may, at any time
within twelve (12) months after his date of disability
retirement, but not later than the date of expiration of the
option, exercise the option to the same extent he was entitled to
do so on his date of disability retirement. Any options or
portions of options of retired optionees not so exercised shall
terminate.
Section 12. Termination of Employment - Death
If an optionee dies while in the employment of LADD or a
division or subsidiary of LADD or while serving as a director of
LADD, the person or persons to whom the option is transferred by
will or by the laws of descent and distribution may exercise the
same option to the same extent and upon the same terms and
conditions the optionee would have been entitled to do so had he
lived until the term of the option had expired. Any options or
portions of options of deceased optionees not so exercised shall
terminate.
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Section 13. Restrictions on Transfer
An option granted under this Plan may not be transferred
except by will or the laws of descent and distribution and,
during the lifetime of the optionee to whom it was granted, may
be exercised only by such optionee.
Section 14. Capital Adjustments Affecting Common Stock
(a) If the outstanding shares of the common stock of LADD
are increased, decreased, changed into or exchanged for a
different number or kind of shares or securities of LADD or
shares of a different par value or without par value through
recapitalization, reclassification, stock dividend, stock split,
amendment to LADD's Articles of Incorporation or reverse stock
split, an appropriate adjustment shall be made in the number
and/or kind of securities allocated to the options previously and
subsequently granted under the Plan, without change in the
aggregate purchase price applicable to the unexercised portion of
the outstanding options but with a corresponding adjustment in
the price for each share or other unit of any security covered by
the options.
(b) Upon the effective date of the dissolution or
liquidation of LADD, or of a reorganization, merger or
consolidation of LADD with one or more corporations in which LADD
is not the surviving corporation, or of a transfer of sub-
stantially all the property or more than eighty percent (80%) of
the then outstanding shares of LADD to another corporation, the
Plan and any option previously granted hereunder shall terminate
unless provision is made in writing in connection with such
transaction for the continuance of the Plan and for the
assumption of options previously granted, or the substitution for
such options of new options covering the shares of a successor
employer corporation, or of a parent or subsidiary thereof, with
appropriate adjustments as to number and kind of shares and
prices in which event the Plan and the options previously granted
or the new options substituted therefor, shall continue in the
manner and under the terms so provided. Nevertheless, in the
event of such dissolution, liquidation, reorganization, merger,
consolidation, transfer of assets or transfer of shares, and if
provision is not made in such transaction for the continuance of
the Plan and for the assumption of options previously granted or
for the substitution of such options or new options covering the
shares of a successor employer corporation or a parent or
subsidiary thereof, then such optionee under the Plan shall be
entitled, prior to the effective date of any such transaction, to
purchase the full number of shares under his option which he
would otherwise have been entitled to purchase during the remain-
ing term of such option.
(c) To the extent that the foregoing adjustments relate to
particular stock or securities of LADD subject to option under
this Plan, such adjustments shall be made by the Committee, whose
determination in that respect shall be final and conclusive.
(d) The grant of an option pursuant to this Plan shall not
affect in any way the right or power of LADD to make adjustments,
reclassifications, reorganizations or changes
7
of its capital or business structure or to merge or to consolidate
or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(e) No fractional shares of stock shall be issued under the
Plan for any such adjustment.
Section 15. Application of Funds
The proceeds received by LADD from the sale of common stock
pursuant to options will be used for general corporate purposes.
Section 16. No Obligation to Exercise Option
The granting of an option shall impose no obligation upon
the optionee to exercise such option.
Section 17. Term of Plan
Options may be granted pursuant to this Plan from time to
time within a period of ten (10) years from February 24, 1994.
Section 18. Effective Date of Plan
This Plan is effective February 24, 1994, following approval
thereof by the Board of Directors and shareholders.
Section 19. Time of Granting of Options
Nothing contained in the Plan or in any resolution adopted
or to be adopted by the Committee or the shareholders of LADD and
no action taken by the Committee shall constitute the granting of
any option hereunder. The granting of an option pursuant to the
Plan shall take place only when a written option agreement shall
have been duly executed and delivered by and on behalf of LADD.
Section 20. Termination and Amendment
The Committee may at any time alter, suspend, terminate or
discontinue the Plan, but may not, without the consent of the
holder of an option previously granted, make any alteration which
would deprive him of his rights with respect thereto or, without
the approval of the stockholders, make any alteration which would
(a) increase the number of aggregate shares subject to the option
under this Plan or decrease the minimum option price except as
provided in Section 14; or (b) extend the term of this Plan as
provided in Section 17 or the maximum period during which any
option may be exercised as provided in Section 7.
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Section 21. Other Provisions
The option agreements authorized under this Plan shall
contain such other provisions not inconsistent with the
foregoing, including, without limitation, increased restrictions
upon the exercise of the option, as the Committee may deem
advisable.
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