UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
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Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION 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.STANLEY FURNITURE COMPANY, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notes:
Stanley Furniture Company, Inc.Inc
1641 Fairystone Park Highway
Stanleytown, Virginia 24168
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held April 19, 200025, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Stanley
Furniture Company, Inc. (the "Company") will be held at the Company's corporate
headquarters, 1641 Fairystone Park Highway, Stanleytown, Virginia, on Wednesday,
April 19, 2000,25, 2001, at 11:00 A.M., for the following purposes:
(1) To elect two directors to serve a three-year term on the Company's
Board of Directors; and
(2) To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
The stockholders of record of the Company's common stock at the close of
business on March 3, 20009, 2001 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 stockholder may be revoked by that stockholder
at any time prior to the voting of the proxy.
By Order of the Board of Directors,
Douglas I. Payne
Secretary
March 10, 200016, 2001
Stanley Furniture Company, Inc.
1641 Fairystone Park Highway
Stanleytown, Virginia 24168
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
April 19, 2000APRIL 25, 2001
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 Stockholders to be held on Wednesday, April 19, 2000,25, 2001, at 11:00 A.M., at the
Company's corporate headquarters, 1641 Fairystone Park Highway, 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 10, 200016, 2001 to all holders of record of the
Company's common stock, $.02 par value (the "Common Stock") on March 3, 2000.9, 2001.
Shares of the Common Stock represented in person or by proxy will be voted as
hereinafter described or as otherwise specified by the stockholder. Any proxy
given by a stockholder may be revoked by such stockholder 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 March 3, 20009, 2001, there were 7,000,3996,634,087 shares of Common Stock outstanding
and entitled to vote. Each such share of Common Stock entitles the holder
thereof to one vote.
ELECTION OF DIRECTORS
The Board of Directors of the Company presently consists of six directors
who are divided into three classes with staggered terms. The term of Messrs.
David V. HarkinsEdward J. Mack and AlbertThomas L. PrillamanMillner expires at the time of the 20002001 Annual
Meeting of Stockholders. The Company proposes the reelection of Messrs. HarkinsMack and
PrillamanMillner for a three-year term expiring at the time of the 20032004 Annual Meeting.
The shares represented by proxies will be voted as specified by the
stockholder. If the stockholder does not specify his choice, the shares will be
voted in favor of the election of the nominees listed on the proxy card, except
that in the event such nominees should not continue to be available for
election, such proxies will be voted for the election of such other persons 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 nominees named below
will be unable or unwilling to serve.
Nominees for Election for Three-Year Term Ending 20032004
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David V. Harkins, 59, has been a Director of the Company since September
1988. Mr. Harkins is President of Thomas H. Lee Partners, L.P. Mr. Harkins has
been associated with the Thomas H. Lee Company, a sole proprietorship engaged in
acquiring or making controlling investments in established operating companies,
since 1975. Mr. Harkins is a director and Chairman of the Board of National
Dentex Corporation and also a director of Conseco, Inc., Cott Corporation,
Fisher Scientific International Inc., Freedom Securities Corporation, Metris
Companies Inc. and Syratech Corporation.
Albert L. Prillaman, 54, has been a Director of the Company since March
1986. Mr. Prillaman has been Chief Executive Officer and President 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 the
Stanley Furniture division of the predecessors of the Company since 1969. Mr.
Prillaman is a director of American Woodmark Corporation.
Directors Whose Terms Do Not Expire this Year
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Robert G. Culp, III, 53, has been a Director of the Company since July 1999
and his present term will expire in 2002. Mr. Culp has been Chief Executive
Officer and Chairman of the Board of Culp, Inc., a marketer of upholstery
fabrics for furniture and mattress ticking for bedding, since 1990.
Edward J. Mack, 84,85, has been a Director of the Company since January 1989
and his present term will expire in 2001.1989.
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.
T. Scott McIlhenny, Jr., 52,Thomas L. Millner, 47, has been a Director of the Company since April 1997 and his present term will expire in 2002. Mr. McIlhenny has been Group Vice
President of Cahners Travel Group, a publisher of materials for the hospitality
and travel industries and a division of Cahners Publishing Company ("Cahners", a
subsidiary of Reed Elsevier, Inc.), since December 1999. From January 1999 to
December 1999, Mr. McIlhenny was managing principal of Red Rock Terrace
Investment Partners; a position which he also held from 1995 to October 1996.
From October 1996 to January 1999, he was Executive Vice President of The
Village Companies of Chapel Hill, Inc., a media and communications company. From
1988 to 1995, Mr. McIlhenny served in various capacities with Cahners, including
Group Vice President and General Manager for Cahners Business Newspapers. From
1981 to 1988, Mr. McIlhenny served in various capacities with
Communications/Today, LTD. (acquired by Cahners in 1988), the publisher of
Furniture/Today, including Senior Vice President, Group Publisher.
Thomas L. Millner, 46, has been a Director of the Company since April 1998
and his present term will expire in 2001.1998.
Mr. Millner has been Chief Executive Officer and President of Remington Arms
Company, Inc. ("Remington"), a manufacturer of sporting good products for the
hunting, shooting sports and fishing markets, since April 1999 and a director of
Remington and RACI Holding, Inc., Remington's parent, since June 1994. From May
1994 to April 1999, Mr. Millner served as President and Chief Operating Officer
of Remington. From 1987 to May 1994, Mr. Millner served as Chief Executive
Officer and President of The Pilliod Cabinet Company. From 1984 to 1987, Mr.
Millner served as General Manager of the Armstrong Furniture Division of
Thomasville Furniture Industries. From 1977 to 1984, Mr. Millner served in
various sales and sales management positions with Thomasville Furniture
Industries and Broyhill Furniture Industries.
Directors Whose Terms Do Not Expire this Year
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Robert G. Culp, III, 54, has been a Director of the Company since July 1999
and his present term will expire in 2002. Mr. Culp has been Chief Executive
Officer and Chairman of the Board of Culp, Inc., a marketer of upholstery
fabrics for furniture and mattress ticking for bedding, since 1990.
T. Scott Mcllhenny, Jr., 53, has been a Director of the Company since April
1997 and his present term will expire in 2002. Mr. Mcllhenny has been Group Vice
President of Cahners Travel Group, a publisher of materials for the hospitality
and travel industries and a division of Cahners Publishing Company ("Cahners", a
subsidiary of Reed Elsevier, Inc.), since December 1999. From January 1999 to
December 1999, Mr. Mcllhenny was managing principal of Red Rock Terrace
Investment Partners; a position which he also held from 1995 to October 1996.
From October 1996 to January 1999, he was Executive Vice President of The
Village Companies of Chapel Hill, Inc., a media and communications company. From
1988 to 1995, Mr. Mcllhenny served in various capacities with Cahners, including
Group Vice President and General Manager for Cahners Business Newspapers. From
1981 to 1988, Mr. Mcllhenny served in various capacities with
Communications/Today, LTD. (acquired by Cahners in 1988), the publisher of
Furniture/Today, including Senior Vice President, Group Publisher.
David V. Harkins, 60, has been a Director of the Company since September
1988 and his present term will expire in 2003. Mr. Harkins is President of
Thomas H. Lee Partners, L.P. Mr. Harkins has been associated with the Thomas H.
Lee Company, a sole proprietorship engaged in acquiring or making controlling
investments in established operating companies, since 1975. Mr. Harkins is a
director and Chairman of the Board of National Dentex Corporation and also a
director of Conseco, Inc., Cott Corporation, Fisher Scientific International
Inc., Tucker Anthony Sutro, Metris Companies Inc. and Syratech Corporation.
Albert L. Prilaman, 55, has been a Director of the Company since March 1986
and his present term will expire in 2003. Mr. Prillaman has been Chief Executive
Officer and President 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 the Stanley Furniture division of the predecessors of the
Company since 1969. Mr. Prillaman is a director of American Woodmark
Corporation.
2
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Company has an Audit Committee, presently consisting of Messrs. Culp,
Harkins, Mack, McIlhennyMcllhenny and Millner, 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 twicethree times
in 1999.2000.
The Company has a Compensation Committee, presently consisting of Messrs.
Culp, Harkins, Mack, McIlhennyMcllhenny and Millner, 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 Plans and has authority to grant options under such plans to
officers and key employees and to determine the terms of such options in
accordance with such plans. The Compensation Committee also administers the
Company's 2000 Incentive Compensation Plan and has authority to select employees
to receive incentive awards and to determine for each employee the nature of the
incentive award and the terms and conditions of each incentive award. The Board
of Directors has the same responsibilities with regard to incentive awards for
non-employee directors. The Compensation Committee met one timefour times during 1999.2000.
The full Board of Directors met sixfour times during 1999.2000. Each incumbent
director attended at least 75% of the total 19992000 board meetings and committee
meetings held during periods that he was a member of the Board or such
committees.
Messrs. Culp, Harkins, Mack, McIlhennyMcllhenny and Millner each received
compensation in the amount of $15,000$20,000 for serving as a director in 1999. Mr. Culp received
$7,500 in 1999.2000. Mr.
Prillaman did not receive any separate compensation for serving in that
capacity during 1999.capacity. During 2000, each director, other than Mr. Prillaman, also received
options under the 2000 Incentive Compensation Plan to acquire 3,000 shares. The
Board has established a policy of providing an annual compensation for outsidegrant of an option to
acquire 1,000 shares to non-employee directors to be granted as of the Company will be increased to $20,000 for 2000.date of
the annual meeting of stockholders beginning in 2001.
NOMINATIONS FOR DIRECTOR
The Company's Bylaws provide that a stockholder 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
stockholder's 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
stockholder wishing to nominate one or more persons as director must submit the
following information in writing: (i) the name and address of the stockholder
who intends to make the nomination; (ii) a representation that the stockholder
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 stockholder 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 stockholder; (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 stockholder 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 stockholders about such qualifications. The Bylaw does not give the
Board of Directors any power to approve or disapprove a stockholder'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 stockholder from conducting a solicitation of proxies to
elect such stockholder's own slate of directors.
3
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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% stockholders
complied with such filing requirements, except that Edward J. Mack, Director,the directors and Named
Executive Officers (as defined below) each filed one late report with respect to two purchase transactions. A corrective
filing has been made by Mr. Mack.a Form 5 reporting option
grants during 2000 under the Company's 2000 Incentive Compensation Plan.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
- --------------------------
The following table sets forth, for the years ended December 31, 2000,
1999 1998
and 1997,1998, the annual and long-term compensation for services in all
capacities to the Company of those persons who at December 31, 19992000 were the
Company's Chief Executive Officer and the next four most highly compensated
executive officers of the Company for the year ended December 31, 19992000
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
----------------------------------- -------------------------------------------------- -------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options (#)Options(#)(1) Compensation (2)Compensation(2)
- ------------------------------------ ---- --------- ------------------------------------ --- ------ ------ ------------ ------------- ---------------- -------------------------------
ALBERT L. PRILLAMAN 1999 $380,004 $380,0002000 $399,996 $ 2,898 - $26,116334,899 $ 3,395 100,000 $32,166
Chairman, President and 1999 380,004 380,000 2,898 -- 26,116
Chief Executive Officer..... 1998 350,040 350,000 280,610 (3) -280,610(3) -- 26,116
Chief Executive Officer............. 1997 350,040 350,000 298,570 (3) - 25,380
DOUGLAS I. PAYNE
1999 $180,000 $144,000 $ 72 - $ 4,800
Senior Vice President --- 2000 $198,000 $ 132,285 $ 82 50,000 $ 5,100
Finance and Administration 1999 180,000 144,000 72 -- 4,800
and Secretary............... 1998 160,008 135,000 63 --- 4,800
Finance and Administration, 1997 150,012 90,000 122 - 3,362
Secretary and Treasurer.............
WILLIAM A. SIBBICK, JR. 1999 $165,000 $124,0002000 $173,004 $ 356 -108,842 $ 4,800301 30,000 $ 5,100
Senior Vice President --- 1999 165,000 124,000 356 -- 4,800
Sales...................... 1998 148,008 105,000 403 --- 4,800
Sales............................... 1997 136,008 60,000 444 - 3,557
JOHN W. JOHNSON 1999 $165,000 $124,0002000 $173,004 $ 1,802 -108,842 $ 4,8002,112 20,000 $ 5,100
Senior Vice President --- 1999 165,000 124,000 1,802 -- 4,800
Manufacturing............... 1998 144,000 105,000 1,533 10,000 4,800
Manufacturing....................... 1997 132,000 60,000 1,675 - 3,200
KELLY S. CAIN 1999 $159,996 $120,0002000 $168,000 $ 131105,493 $ 4,800150 20,000 $ 5,100
Senior Vice President - 1998 140,004 105,000 114 --- 1999 159,996 120,000 131 -- 4,800
Product Development and 1997 124,008 60,000 178 - 3,788
Merchandising......................1996 140,004 105,000 114 -- 4,800
Merchandising...............
________________________________
(1) All share and per share information in this proxy statement reflect a two-
for-one stock split effective May 15, 1998.
(2) All Other Compensation listed for Mr. Prillaman reflects life insurance
premiums paid by the Company ($27,006 in connection with a split-dollar life insurance agreement
($21,3162000, $21,316 in 1999)1999 and 1998),
and employer contributions to the Company's 401(k) Plan ($4,8005,100 in 1999)2000,
$4,800 in 1999 and 1998). The amounts for each of Messrs. Payne, Sibbick,
Johnson and Cain reflect employer contributions to the Company's 401(k)
Plan.
(3) Includes forgiveness of interest and principal, and payroll taxes paid by
the Company, with respect to a loan under the Executive Loan Plan for Mr.
Prillaman of $270,512 for 19981998.
4
Option Grant Table
- ------------------
The following table sets forth information concerning individual grants of
stock options made during the year ended December 31, 2000 to the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
------------------------------------------------------------ ------------------------------
% of Total
Options Granted Exercise
Options to Employees in Price per Expiration
Name Granted (1) Fiscal Year Share (1) Date 5% ($) 10% ($)
---- ----------- ----------- --------- ---- ------ -------
Albert L. Prillaman 100,000 26.0% $24.88 8/23/10 $1,565,000 $3,965,000
Douglas I. Payne 50,000 13.0% $24.88 8/23/10 $ 783,000 $1,983,000
William A. Sibbick, Jr. 30,000 7.8% $24.88 8/23/10 $ 470,000 $1,190,000
John W. Johnson 20,000 5.2% $24.88 8/23/10 $ 313,000 $ 793,000
Kelly S. Cain 20,000 5.2% $24.88 8/23/10 $ 313,000 $ 793,000
____________________
(1) All grants vest and $283,837 for 1997.
4
become exercisable to the extent of 20% of the shares
granted as of December 31 of each year from 2000 through 2004.
Option Value Table
- ------------------
The following table sets forth information concerning the year-end number
and value of unexercised options for each of the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN 19992000 AND 1999 YEAR END2000 YEAR-END OPTION VALUES
Shares
Number of Securities Value of Unexercised In-the-
Acquired on ValueShares Underlying Unexercised Money Options
Name Exercise (#) Realized ($)Acquired on Value Options at Fiscal Year End (#) At Fiscal Year End ($) (1)
---- ------------ ------------ ------------------------------ ------------------------------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- --------------- ------------ ------------------------- -------------
Albert L. Prillaman................... 70,000 $1,355,825Prillaman...... 330,420 $3,696,574 20,000 80,000 $ - $4,419,368 $ -
Douglas I. Payne...................... 11,686 222,833 81,000 4,000 1,051,125 40,750Payne......... - - 95,000 40,000 1,580,625 -
William A. Sibbick, Jr................ 10,000 155,755 51,006Jr... - 697,830- 57,006 24,000 991,115 -
John W. Johnson.......................Johnson.......... - - 59,000 6,000 751,250 -65,000 20,000 1,099,750 21,500
Kelly S. Cain......................... 17,252 269,843 23,000 1,000 312,750 12,313Cain............ - - 28,000 16,000 463,063 -
______________________________
(1) In-the-money options are those for which the December 31, 19992000 fair market
value of the underlying shares of Common Stock (as determined by the closing
price on The Nasdaq Stock Market) exceeds the exercise price of the option.
Employment Agreements
- ---------------------
Mr. Prillaman has an employment agreement with the Company that 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, which was initially $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 80% of his then
current base salary, contingent upon the achievement of certain threshold profit
objectives to be determined by the Board at the beginning of each year. The
agreement is automatically extended for an additional one year term at the end
of each year unless either party to the agreement gives notice on or before
November 1 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. If the Company gives such notice, 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 fiscal 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. During the two years
after such a change of control, Mr. Prillaman is entitled to terminate his
employment with the Company and receive such severance pay in a single payment.
The agreement provides that Mr. Prillaman will not compete
5
with the Company for two years after termination of the employment agreement,
except that this non-
competitionnon-competition covenant does not apply if: (i) Mr. Prillaman
terminates his employment within two years after a change of control or (ii) Mr.
Prillaman voluntarily terminates his employment and the Company does not elect
to pay severance to Mr. Prillaman.
In addition,connection with the employment agreement with Mr. Prillaman, the Company
has entered into a split-dollar life insurance agreement under which the Company
has agreed to pay premiums with respect to a life insurance policy for Mr.
Prillaman 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, Mr.
Priltaman is obligated to repay such premiums to the Company. Mr. Prillaman 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 policy. The initial face
amount of the policy for Mr. Prillaman is $1 million. During the year ended
December 31, 2000, the Company paid $21,316 in premiums for the policy of Mr.
Prillaman.
The Company has also entered into employment agreements with the following
executives: Douglas I. Payne, William A. Sibbick, Jr., John W. Johnson, and
Kelly S. Cain. Each of these employment agreements is on similar terms as those
discussed above with respect to Mr. Prillaman, with the following exceptions:
Mr. Payne serves as Senior Vice President - FinancePresident-Finance and Administration Treasurer and
Secretary of the Company, his base salary is at least $136,000, and he is
entitled to receive a potential annual bonus of $50,000, subject to upward
adjustment; Mr. Sibbick serves as Senior Vice President - Sales, his base salary
is at least $165,000, and he is entitled to receive a potential annual bonus of
$124,000, subject to upward adjustment; Mr. Johnson serves as Senior Vice
President - Manufacturing,President-Manufacturing, his base salary is at least $165,000, and he is
entitled to receive a potential annual bonus of $124,000, subject to upward
adjustment; and, Mr. Cain serves as Senior Vice President - Product Development
and Merchandising, his base salary is at least $160,000, and he is entitled to
receive a potential annual bonus of $120,000, subject to upward adjustment. In
addition, during the first year after a change of control (as defined in the
agreement) Messrs. Sibbick, Johnson, and Cain are entitled to terminate their
employment with the Company and receive severance pay only if: (i) their base
salary is reduced, (ii) they are not in good faith considered for an annual
bonus, (iii) they are denied certain customary fringe benefits, (iv) their place
of employment is relocated further 5
than 100 miles from their current place of
employment, or (v) their duties and responsibilities are substantially reduced.
In connection with the employment agreement with Mr. Prillaman, the Company
has entered into a split-dollar life insurance agreement under which the Company
has agreed to pay premiums with respect to a life insurance policy for Mr.
Prillaman 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, Mr.
Prillaman is obligated to repay such premiums to the Company. Mr. Prillaman 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 policy. The initial face
amount of the policy for Mr. Prillaman is $1 million. During the year ended
December 31, 1999, the Company paid $21,316 in premiums for the policy of Mr.
Prillaman.
Defined Benefit Pension Plans
- -----------------------------
The Company maintains a qualified defined benefit pension plan for all its
eligible employees, The Stanley Retirement Plan, and also maintains a
nonqualified, unfunded supplemental retirement plan for certain of its
employees. Effective on December 31, 1995, future benefit accruals under both
plans were curtailed. Although participants continue their participation in both
plans, additional benefits do not accrue. The accrued monthly benefit under The
Stanley Retirement Plan, assuming retirement at age 65, for each of the Named
Executive Officers through December 31, 1995, was: Albert L. Prillaman, $5,244;
Douglas I. Payne, $993; William A. Sibbick, Jr., $515; John W. Johnson, $2,864;
and Kelly S. Cain, $692. The accrued monthly benefit under the Supplemental
Retirement Plan, assuming retirement at age 65, for each of the Named Executive
Officers through December 31, 1995, was: Albert L. Prillaman, $8,838; Douglas I.
Payne, $591; William A. Sibbick, Jr., $0; John W. Johnson, $1,422; and Kelly S.
Cain $322.
6
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 that 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 stockholders. The Committee believes that equity ownership by management is
beneficial in conforming management and stockholder interests in the enhancement
of stockholder 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 individual
goals, with varying weight being given to such factors for particular
executives.
In establishing compensation for the Named Executive Officers for 2000, the
chief executive officer assisted the Committee in reviewing the executives'
compensation in conjunction with an executive compensation survey prepared by
outside compensation consultants. The survey was used for general comparability
purposes. The Committee doesdid 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.
6
The compensation currently paid by the Company is not subject to certain
Internal Revenue Code provisions that may limit the income tax deductibility to
the Company 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 of broader applicability to the Company, 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, retirement benefits and, for certain executive officers, other benefits.
Total Compensation
- ------------------
For 2000, the Committee determined that total compensation (base salary and
annual incentives) of Named Executive Officers generally should be targeted at
the 75th percentile of selected peer group companies. Because compensation was
set in December 1999, the comparable compensation was 1998 reported
compensation. The Committee, at its discretion, awarded compensation in excess
of or less than the target. This compensation level is intended to be
competitive with other high performing organizations and to enable the Company
to attract, reward and retain exceptional talent. For this period, the Committee
generally increased the total compensation of those executives who received
compensation below the 75th percentile (except for Mr. Prillaman who is
discussed below) to have an opportunity to receive compensation at approximately
the 75th percentile assuming a target bonus. The
7
Committee generally provided cost of living increases only to each executive who
was at or who exceeded the 75th percentile of peer group companies.
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 that 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.
Awards under the Incentive Plan are based on the achievement of corporate
objectives that are established annually in conjunction with adoption of the
Company's budget for the next year. At that time, the Committee sets corporate
objectives for the coming year. For 1999,2000, the performance measure was the
Company's earnings before interest and taxes ("EBIT"). No bonus would be paid if
an EBIT threshold was not met and the bonus would be increased for performance
above the threshold up to a maximum award on a per employee basis.
The amount of the maximum awards under the Incentive Plan are recommended
by management of the Company subject to approval by the Committee. For each of
the Named Executive Officers, the Committee approves an award as a set
percentage of either the executive's base salary or a fixed amount. For 2000,
the maximum incentives for the executives ranged from 75% to 100% of base salary
depending on position. The maximum incentives were paid at 84% of the maximum for 19992000
based on the targets for the Company's EBIT performance. The Incentive Plan
awards are shown on the Summary Compensation Table under the Bonus column.
Long-Term Incentives
- --------------------
The Company believes that equity-based compensation ensures that the
Company's officers have a continuing stake in the long-term success of the
Company. The Company maintains the Stanley Furniture Company, Inc. 2000
Incentive Compensation Plan (the "2000 Plan"), the Stanley Furniture Company,
Inc. 1994 Stock Option Plan, and the Stanley Furniture Company, Inc. 1992 Stock
Option Plan (the(collectively the "Option Plans") to provide employees with options
to acquire Common Stock. During early 2000, Mr. Prillaman exercised all of his
outstanding options under the Option Plans that significantly reduced the total
number of outstanding unexercised options. The reduction in unexercised options
and the relatively few remaining shares available for issuance under the 1994
Plan prompted the Board of Directors to propose the 2000 Plan to ensure that the
Company would be able to continue to attract officers and key employees with
equity-based compensation. The stockholders approved the 2000 Plan at a special
meeting.
Following approval of the 2000 Plan, the Committee made option grants to
officers and key employees under the 2000 Plan. The option grants to Named
Executive Officers are shown on the Summary Compensation Table under the Long-
Term Compensation column. All options under the Option Plans must be granted at
an option exercise price of 100% of the stock's fair market value on the date of
grant. In 1999, option grants were
made to officers and key employees under the Option Plan; however, none of the
grant recipients were Named Executive Officers.
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."
78
Chief Executive Officer Compensation
- ------------------------------------
Mr. Prillaman has an employment agreement with the Company that is
described under "Compensation of Executive Officers - EmploymentOfficers-Employment Agreements." The Committee increased Mr.
Prillaman's total potential 2000 cash compensation was significantly lower than
the 75th percentile target of peer group companies established by the Committee.
However, Mr. Prillaman requested that his base salary increase for 19992000 be
limited to $380,000 in view
of5% (an increase to $400,000) and the Company's superior financial performance during the preceding fiscal
year.Committee agreed to this
increase.
A major portion of Mr. Prillaman's compensation is contingent on the
Company's performance. In 1999,2000, Mr. Prillaman participated in the Incentive Plan
with the same corporate objectives as other corporate officers. The Committee
set Mr. Prillaman's potential bonus for 19992000 at 100% of his base salary.salary to
increase his total compensation (which is in excess of the 80% bonus target
guaranteed in his employment agreement). The Committee believes that this bonus
level was appropriate because Mr. Prillaman's leadership continues to be a key
component in the Company's performance. For 1999,2000, Mr. Prillaman received a bonus
of 84% of the maximum allowable bonus. The Committee believes that Mr.
Prillaman's bonus was justified by the Company's financial performance during
1999.2000.
Consistent with its policy of encouraging employee stock ownership, the
Committee supported Mr. Prillaman's exercise of his outstanding stock options
under the Option Plans in 2000. To facilitate Mr. Prillaman's exercise of his
outstanding stock options, the Company approved a loan in the amount of
approximately $2,600,000 to Mr. Prillaman for the exercise of stock options. The
loan provides a five-year term with a balloon payment of principal and interest
at the end of the term. Mr. Prillaman has pledged the stock acquired on exercise
of his stock options as security for the loan. The Company also purchased a term
life insurance policy on Mr. Prillaman's life, to be owned by a trust
established by Mr. Prillaman, with a face value of $3,000,000. The Company will
also pay any related taxes incurred by Mr. Prillaman with respect to payment of
policy premiums.
As part of the option grants to key executives during 2000, the Committee
granted Mr. Prillaman an award of options on 100,000 shares under the 2000 Plan.
This award reflects the Committee's desire to motivate executives through stock
ownership and that Mr. Prillaman had not received a grant of options for several
years.
Mr. Prillaman participates in the Supplemental Retirement Plan. In
addition, the Company has entered into a split-dollar life insurance agreement
with Mr. Prillaman. See "Compensation of Executive Officers - Employment
Agreements." Mr. Prillaman has received stock option awards under the Option
Plans but did not receive an award in 1999.
Mr. Robert G. Culp, III became a member of the Compensation Committee in
August 1999. Mr. Culp did not take part in any decisions regarding
determination of 1999 salaries or bonus opportunities for 1999.
The members of the Compensation Committee are:
David V. Harkins
Robert G.C. Culp, III
T. Scott McIlhenny,Mcllhenny, Jr.
Edward J. Mack
Thomas L. Millner
89
PERFORMANCE GRAPH
The following graph compares cumulative total stockholder 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 December 31, 199429, 1995 to December 31, 1999.
[GRAPH APPEARS HERE]
1994 1995 1996 1997 1998 19992000.
Comparison of Cumulative Total Return (1)
Stanley Furniture 100.00 80.00 198.75 278.75 365.00 367.50Company, Inc., Wood Household Furniture Index,
(2) 100.00 125.17 158.05 225.98 243.79 231.06
Nasdaq Non-Financial Stock Index
(3) 100.00 129.71 161.18 197.16 278.08 490.46
---------------------------- FISCAL YEAR ENDING ---------------------------
COMPANY/INDEX/MARKET 12/29/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999 12/29/2000
Stanley Furniture 100.00 248.44 348.44 456.25 459.38 603.13
Wood Household Furniture Index (2) 100.00 126.27 180.54 194.77 184.60 181.69
* Nasdaq Non-Financial Stock Index (3) 100.00 120.03 140.51 206.25 403.86 235.65
(1) The graph shows the cumulative total return on $100 invested at the market
close on December 30, 1994,29, 1995, the last trading day in 1994,1995, in Common Stock
or the 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 January 31, 2000,22, 2001, Media
General reported that SIC Code 2511 consisted of: Bassett Furniture
Industries, Inc., Bush Industries, Inc. (Class A Common Stock), Chromcraft
Revington, Inc., DMI Furniture, Inc., Ethan Allen Interiors Inc., Furniture
Brands International, Inc., Ladd Furniture, Inc., Pulaski Furniture
CorporationWellington Hall, Limited and Stanley Furniture
Company, Inc.
(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.
910
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 2000, the Compensation Committee approved a loan in the amount of
$2,584,983 to Mr. Prillaman for the exercise of outstanding stock options. The
loan bears interest at the rate of 6.71% per annum and provides a five-year term
with a balloon payment of principal and interest at the end of the term. Mr.
Prillaman pledged the stock acquired on exercise of his stock options as
security for the loan.
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 March 3, 2000,9, 2001, by each
stockholder known by the Company to be the beneficial owner of more than 5% of
its outstanding Common Stock, by each director and director nominee, 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 of Class
---- ------------------------------- --------------------------------- --------
FMR Corp.Corp........................................................... 702,700 (a).................................................... 702,100 (a) 10.0%
Brinson Partners, Inc. and affiliated entities (b)............... 607,932 (b) 8.7%
T. Rowe Price Associates, Inc. (c)............................... 567,500 (c) 8.1% 10.6%
Albert L. Prillaman (b)............................................ 568,214 (c) 8.5%
Wellington Management Company, LLP................................. 535,600 (d).......................................... 548,214 (e) 7.5% 8.1%
Dimensional Fund Advisors Inc.(f)................................ 516,100 (f) 7.4%
J.P. Morgan & Co. Incorporated (g)............................... 512,600 (g) 7.3%Inc...................................... 528,700 (e) 8.0%
Muhlenkamp & Company, Inc. and affiliated entitiesentities................. 491,050 (f) 7.4%
T. Rowe Price Associates, Inc...................................... 465,500 (g) 7.0%
Brinson Partners, Inc.............................................. 355,756 (h)........... 507,910 (h) 7.3%
Investment Counselors of Maryland, Inc. 5.4%
Ross Financial Corporation......................................... 347,500 (i)...................... 359,000 (i) 5.1% 5.2%
Douglas I. Payne (d)............................................. 86,000(b)............................................... 100,000 (j) 1.2%1.5%
John W. Johnson (d).............................................. 63,097W.Johnson(b).................................................. 69,097 (k) (l)1.0%
William A. Sibbick, Jr. (d)...................................... 51,006(b)........................................ 57,006 (I) (m) (l)
Kelly S. Cain (d)................................................ 25,158 (b)(n) (l)............................................... 30,158 (0) (m)
Edward J. Mack (d)............................................... 11,232 (l)(b)................................................. 14,232 (p) (m)
David V. Harkins (o)............................................. 5,000 (l)(q)............................................... 8,000 (p) (m)
T. Scott McIlhenny (d)........................................... 2,600 (l)Mcllhenny (b)............................................. 5,600 (p) (m)
Thomas L. Millner (d)............................................ 1,800 (l)(b).............................................. 4,800 (p) (m)
Robert G. Culp,CuIp, III (d).......................................... 300 (l)(b)............................................ 3,300 (p) (m)
All directors and executive officers as a group (11(10 persons)..... 803,107 (p) 10.6%....... 860,407 (r) 12.4%
_____________________________________________
(a) The information concerning the shares beneficially owned by FMR Corp. is
based upon the Schedule 13G/A filed with the SEC February 14, 200015, 2001 by FMR
Corp. together with Edward C. Johnson 3d, Chairman of FMR Corp., and Abigail
P. Johnson, a director of FMR Corp. Fidelity Management & Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp., is the beneficial
owner of 702,100702,700 shares of Common Stock as a result of acting as investment
advisor to Fidelity Low-Priced Stock Fund, which owned all 702,100702,700 shares.
Edward C. Johnson 3d, FMR Corp., through its control of Fidelity, and
Fidelity Low-Priced Stock Fund each has sole power to dispose of the 702,100702,700
shares owned by Fidelity Low-Priced Stock Fund. Neither Edward C. Johnson 3d
nor FMR Corp. has sole power to vote or direct the voting of the shares
owned directly by Fidelity Low-Priced Stock Fund, which power resides with
the Board of Trustees of Fidelity Low-Priced Stock Fund. The principal
business address of FMR Corp., Fidelity and Fidelity Low-Priced Stock Fund
is 82 Devonshire Street, Boston, Massachusetts 02109.
(b) The beneficial ownership information with respect to Brinson Partners, Inc.
("BPI") is based upon the Schedule 13G/A filed with the SEC February 11,
2000 by BPI together with UBS AG ("UBS AG"). BPI is an indirect, wholly-
owned subsidiary of UBS AG. The Schedule 13G/A indicates that UBS AG,
through its ownership of BPI and otherwise, has sole voting and shared
dispositive power with respect to 607,932 shares and that BPI has sole
voting and shared dispositive power with respect to 604,032 of such shares.
BPI and UBS AG disclaim beneficial ownership of such shares. The principal
business address of BPI is 209 South LaSalle, Chicago, Illinois 60604. The
principal business address of UBS AG is Bahnhofstrasse 45, 8021, Zurich,
Switzerland.
(c) The beneficial ownership information for T. Rowe Price Associates, Inc.
("Price Associates") is based upon the Schedule 13G/A filed with the SEC
February 8, 2000 by Price Associates together with T. Rowe Price Small-Cap
Value Fund, Inc. ("TRP Small-Cap"). Price Associates has sole dispositive
power with respect to 567,500 shares (and has sole voting power with
respect to 128,000 of such shares). Such shares are owned by various
individual and institutional investors, including TRP Small-Cap (which has
sole voting power with respect to 400,000 of such shares, representing 5.6%
of the shares outstanding) which Price Associates serves as investment
advisor. Price Associates disclaims beneficial ownership of such shares.
The principal business address of Price Associates and TRP Small-Cap is 100
E. Pratt Street, Baltimore, Maryland 21202.
(d) The business address for such persons is c/o Stanley Furniture Company,
Inc., 1641 Fairystone Park Highway, Stanleytown, Virginia 24168.
(e)(c) Includes 330,42020,000 shares which could be acquired through the exercise of stock
options.
(f)(d) The beneficial ownership information for Wellington Management Company, LLP
("Wellington") is based upon the Schedule 13G filed with the SEC February
13, 2001. The Schedule 13G indicates that Wellington has shared voting power
with respect to 391,600 shares and sole dispositive power with respect to
535,600 shares. The principal business address of Wellington is 75 State
Street, Boston, Massachusetts 02109.
(e) The beneficial ownership information with respect to Dimensional Fund
Advisors Inc. ("Dimensional") is based upon its Schedule 13G/A filed with
the SEC February 3, 2000.2, 2001. Dimensional has sole voting and dispositive power
with respect to 516,100528,700 shares in its capacities as investment advisor to
four investment companies and investment manager to certain other investment
vehicles (collectively, the "Dimensional Funds"). Such shares are owned by
the Dimensional Funds, and Dimensional disclaims beneficial ownership of
such shares. The principal business address of Dimensional is 1299 Ocean
Avenue, 11th Floor, Santa Monica, California 90401.
10
(g) The beneficial ownership information with respect to J.P. Morgan & Co.
Incorporated ("J.P. Morgan") is based upon its Schedule 13G/A filed with
the SEC February 14, 2000. The Schedule 13G/A indicates that J.P. Morgan
has sole voting power with respect to 431,900 shares and sole dispositive
power with respect to 512,600 shares. The principal business address of
J.P. Morgan is 60 Wall Street, New York, New York 10260.
(h)(f) The beneficial ownership information with respect to Muhlenkamp & Company,
Inc. ("Muhlenkamp & Co.") is based upon its Schedule 13G filed with the SEC
February 28, 2000.March 1, 2001. The Schedule 13G indicates that Muhlenkamp & Co. has shared
voting and dispositive power with respect to 507,910491,050 shares. The principal
business address of Muhlenkamp & Co. is 12300 Perry Highway, Wexford,
Pennsylvania 15090.
(i)11
(g) The beneficial ownership information for T. Rowe Price Associates, Inc.
("Price Associates") is based upon the Schedule 13G/A filed with the SEC
February 12, 2001 by Price Associates together with T. Rowe Price Small-Cap
Value Fund, Inc. ("TRP Small-Cap"). Price Associates has sole dispositive
power with respect to 465,500 shares (and has sole voting power with
respect to 23,600 of such shares). Such shares are owned by various
individual and institutional investors, including TRP Small-Cap (which has
sole voting power with respect to 402,200 of such shares, representing 6.1%
of the shares outstanding) which Price Associates serves as investment
advisor. Price Associates disclaims beneficial ownership of such shares.
The principal business address of Price Associates and TRP Small-Cap is 100
E. Pratt Street, Baltimore, Maryland 21202.
(h) The beneficial ownership information with respect to Investment Counselors
of Maryland,Brinson Partners, Inc.
("Investment Counselors of Maryland"BPI") is based upon the Schedule 13G/A filed with the SEC February 14,
2001 by BPI together with UBS AG ("UBS AG"). BRI is an indirect, wholly-
owned subsidiary of UBS AG. The Schedule 13G/A indicates that UBS AG,
through its ownership of BPI and otherwise, has sole voting and shared
dispositive power with respect to 355,756 shares and that BPI has sole
voting and shared dispositive power with respect to 355,756 of such shares.
BPI and UBS AG disclaim beneficial ownership of such shares. The principal
business address of BPI is 209 South LaSalle, Chicago, Illinois 60604. The
principal business address of UBS AG is Bahnhofstrasse 45, 8021, Zurich,
Switzerland.
(i) The beneficial ownership information for Ross Financial Corporation ("Ross
Financial") is based upon the Schedule 13G filed with the SEC February 10,December 21,
2000. The Schedule 13G indicates that Investment Counselors of MarylandRoss Financial has sole voting power with
respect to 316,000 shares, shared voting power with respect to 43,000
shares and sole
dispositive power with respect to 359,000347,500 shares. The principal business
address of Investment Counselors of MarylandRoss Financial is 803
Cathedral Street, Baltimore, Maryland 21201-5297.P.O. Box 31363-SMB, Grand Cayman, Cayman
Islands, B.W.I.
(j) Includes 81,00095,000 shares which could be acquired through the exercise of
stock options.
(k) Includes 59,00065,000 shares which could be acquired through the exercise of
stock options.
(l) Less than 1%.
(m) Represents 51,006(L) Includes 57,006 shares which could be acquired through the exercise of
stock options.
(m) Less than 1%.
(n) Mr. Cain has sole voting power and dispositive power with respect to 1,100
shares and shared voting and dispositive power with respect to 1058 shares.
(O) Includes 23,00028,000 shares which could be acquired through the exercise of
stock options.
(o)(p) Includes 3,000 shares which could be acquired through the exercise of stock
options.
(q) The business address for such personMr. Harkins is c/o Thomas H. Lee Company, 75 State
Street, Boston, Massachusetts 02109.
(p)(r) Includes 553,126280,006 shares which could be acquired through the exercise of
stock options.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP served as independent public
accountants for the Company for 19992000 and has served in that capacity since 1979.
While the Company expects PricewaterhouseCoopers LLP to be selected as its
independent public accountants for 2000,2001, the Board of Directors will not make
that selection until the Audit Committee completes its review of the engagement
terms for the current year.
Representatives of PricewaterhouseCoopers LLP 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.
Audit Fees
- ----------
The aggregate fees of PricewaterhouseCoopers LLP for professional
services rendered for the audit of the Company's 2000 annual financial
statements and reviews of the Company's Form's 10-Q filed during 2000 was
$112,100.
Financial Information Systems Design and Implementation Fees
- ------------------------------------------------------------
PricewaterhouseCoopers LLP did not receive any fees for services
rendered to the Company during 2000 related to financial information systems
design and implementation.
All Other Fees
- --------------
The fees of PricewaterhouseCoopers LLP for all other services rendered
to the Company during 2000 were $176,307.
12
Audit Committee Report
- ----------------------
The primary purpose of the Audit Committee is to assist the Board in
fulfilling its responsibility to oversee management's conduct of the Company's
financial reporting process. Management is responsible for preparing the
Company's financial statements and the independent accountants are responsible
for performing an independent audit of the Company's financial statements in
accordance with generally accepted auditing standards and for issuing a report
thereon. The Audit Committee Charter adopted by the Board is attached to this
proxy statement as Appendix A.
In this context, the Committee has met and held discussions with
management and the independent accountants. Management represented to the
Committee that the Company's financial statements were prepared in accordance
with generally accepted accounting principles, and the Committee has reviewed
and discussed the financial statements with management and the independent
accountants.
The Committee discussed with the independent accountants matters
required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees). In addition, the Committee has discussed
with the independent accountants the accountant's independence from the Company
and its management, including the matters in the written disclosures required by
the Independence Standard Boards Standard No. 1 (Independence Discussions with
Audit Committees). The Committee has also considered whether the provision of
non-audit services by the independent accountants is compatible with maintaining
the independent accountant's independence.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000, for filing with the Securities and Exchange Commission.
The members of the Audit Committee are:
T. Scott Mcllhenny, Jr., Chairman
Robert G. Culp, III
David V. Harkins
Edward J. Mack
Thomas L. Millner
Audit Committee Independence
- ----------------------------
The Board of Directors and the Audit Committee believe that the Audit
Committee's current members are independent directors within the meaning of Rule
4200(a)(14) of the National Association of Securities Dealers, Inc.
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.
13
ADDITIONAL INFORMATION
Voting Procedures. Votes will be tabulated by one or more Inspectors
of Elections. Except for the election of directors, approval of other matters
properly brought before 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. If a stockholder, present in person or by proxy,
abstains on any matter, the stockholder'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 stockholder may interpret such
action differently. With respect to the election of directors, the two nominees
in the class which term ends in 20032004 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.
11
Stockholder Proposals for 20012002 Annual Meeting. Any stockholder
desiring to present a proposal to the stockholders at the 20012002 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 10, 2000.11, 2001. All such proposals should be in compliance with
applicable Securities and Exchange Commission regulations. With respect to
stockholder proposals that are not included in the proxy statement for the 20012002
Annual Meeting, the persons named in the proxy solicited by the Company's Board
of Directors for the 20012002 Annual Meeting will be entitled to exercise the
discretionary voting power conferred by such proxy under the circumstances
specified in Rule 14a-4(c) under the Securities Exchange Act of 1934, as
amended, including with respect to proposals received by the Company after
January 24, 2001.30, 2002.
By Order of the Board of Directors,
Douglas I. Payne
Secretary
March 10, 2000
1216, 2001
14
Appendix A
Stanley Furniture Company, Inc.
Audit Committee Charter
The primary purpose of the Audit Committee (the "Committee") is to
assist the Board of Directors (the "Board") in fulfilling its responsibility to
oversee management's conduct of the Company's financial reporting process, the
Company's systems of internal accounting and financial controls, the annual
independent audit of the Company's financial statements, and the Company's legal
compliance. The Committee reports to the full Board on all matters within the
Committee's responsibilities. The Committee shall have available to it such
support personnel, including management staff, independent auditors, attorneys
and consultants, as it deems necessary to discharge its responsibilities.
The Committee shall be composed of at least three directors, each of
whom shall have no relationship which, in the opinion of the Board, would
interfere with the exercise of independent judgment. In addition, the members of
the Committee shall satisfy the applicable requirements for audit committee
membership imposed by the NASDAQ National Market and any applicable eligibility
requirements of the Securities and Exchange Commission. The Board shall
interpret these requirements and determine the qualifications of Committee
members in its business judgment. Subject to Board approval, the Committee shall
adopt, and at least annually review and reassess, an audit committee charter
meeting the requirements from time to time of the NASDAQ National Market. The
Committee shall provide the NASDAQ National Market periodically with such
appropriate written confirmation concerning these matters as the NASDAQ National
Market may from time to time require.
The independent auditors shall be responsible to the Board and shall
report directly to the Committee, as the Board's representative, on all matters
pertaining to their engagement. The Committee shall encourage open communication
among the Committee, independent auditors and management regarding matters
within the Committee's responsibilities. At every meeting of the Committee where
the independent auditors are present, the independent auditors shall have the
opportunity for at least a portion of such meeting to meet with the members of
the Committee without members of management present.
The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the independent auditors are responsible for auditing those
financial statements. Additionally, the Committee recognizes that financial
management, as well as the independent auditors, have more time, knowledge and
more detailed information on the Company than do Committee members;
consequently, in carrying out its oversight responsibilities, the Committee is
not providing any expert or special assurance as to the Company's financial
statements or any professional certification as to the independent auditor's
work.
The following functions shall be the common recurring activities of
the Committee in carrying out its oversight function. These functions are set
forth as a guide with the understanding that the Committee may diverge from this
guide as appropriate given the circumstances.
1. The Committee annually will review the independent auditors and
shall recommend to the Board the firm of independent auditors to
be employed to conduct the annual financial audit. The Committee
will review the compensation and fees paid to the independent
auditors for audit and non-audit work. The Committee will require
the independent auditors to review on a retrospective basis with
the Committee any non-audit assignments and fees incurred, and
will assess any impact on the objectivity and independence of
such auditors as a result of non-audit assignments, making any
appropriate recommendations to the Board. The independent
auditors shall submit periodically to the Committee a formal
written statement delineating all relationships between the
independent auditors and the Company, consistent with
Independence Standards Board Standard 1. The Board and the
Committee will have the ultimate
A-1
authority and responsibility to select, evaluate and where
appropriate replace the independent auditors or to nominate the
independent auditors to be proposed for shareholder ratification
in the proxy statement.
2. With respect to each fiscal year, the Committee will meet with
the independent auditors and the Company's senior management to
review the scope and methodology of the proposed audits for such
fiscal year. The independent auditors shall provide regular
reports to the Committee during the year on the underlying
process and status of their audits and any findings or
preliminary conclusions that have been reached.
3. The independent auditors and management shall identify to the
Committee significant business, financial or legal issues which
may significantly impact the Company's financial statements and
internal controls. Both management and the independent auditors
shall report as soon as possible to the Committee any material
weaknesses in internal controls, and any material violations of
laws and governmental regulation.
4. The Committee shall review with management and the independent
auditors the Company's annual financial statements to be included
in the Company's Annual Report on Form 10-K (or the Annual Report
to Stockholders if distributed prior to the filing of the Form
10-K). As a whole, or through the Committee chair, the Committee
shall review interim financial statements prior to filing with
the Securities and Exchange Commission of the Company's Quarterly
Reports on Form 10-Q. Periodically during the year, the Committee
shall review the independent auditors assessment as to the
adequacy of the Company's internal controls over financial
accounting and reporting, and their qualitative judgments as to
accounting principles employed and related disclosures by the
Company and the conclusions expressed in the Company's financial
reports. The independent auditors shall review with the Committee
significant judgments made by management in the preparation of
the financial statements. The independent auditors shall identify
to the Committee any areas of disagreement with management in the
preparation of financial statements.
A-2
REVOCABLE PROXY
STANLEY FURNITURE COMPANY, INC.
Annual Meeting of Stockholders - April 19, 200025, 2001
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 March 3, 2000,9, 2001, at the Annual
Meeting of Stockholders to be held April 19, 2000,25, 2001, and at any adjournment
thereof.
(1) Election of directors for three-year term ending 2003.2004.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as indicated otherwise below) for all nominees listed below
NOMINEES: David V. HarkinsEdward J. Mack and AlbertThomas L. PrillamanMillner
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
such nominee's name in the space provided below.
_______________________________________________________________________________________________________________________________________
(2) 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 Stockholders to be held on April 19, 2000,25, 2001, 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 STOCKHOLDER. IF NO CHOICE IS SPECIFIED BY THE STOCKHOLDER, THIS
PROXY WILL BE VOTED "FOR" ALL PORTIONS OF ITEM (1), 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_____________________________,2000.Dated_____________________________,2001.
________________________________________
________________________________________
Please promptly mark, date, sign, and
mail this Proxy Card in the enclosed
envelope. No postage is required.