<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
WELLINGTON HALL, LIMITED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
HOYT M. HACKNEY, JR. PRESIDENT,
ROUTE 1, U.S. HIGHWAY NO. 29 AND NO. 70, LEXINGTON, NORTH CAROLINA 27292
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
WELLINGTON HALL, LIMITED
Route 1, U.S. Highway No. 29 and No. 70
Post Office Box 1354
Lexington, North Carolina 27293-1354
(704) 249-4931
NOTICE OF SUBSTITUTE ANNUAL MEETING OF SHAREHOLDERS
To be held on October 1, 1997
To the Shareholders of Wellington Hall, Limited:
Notice is hereby given that the Substitute Annual Meeting of
Shareholders of Wellington Hall, Limited ("the Company") will be held on October
1, 1997, at 10:00 A.M. Eastern Time, at the offices of Turlington and Company,
the Company's independent auditors, located at 509 East Center Street,
Lexington, North Carolina for the following purposes:
1. To elect a Board of five directors to serve until the next Annual
Meeting of the Shareholders and until their successors are elected
and qualified.
2. To approve the 1997 Stock Option and Restricted Stock Plan
3. To ratify the selection by the Board of Directors of Turlington and
Company as independent auditors of the Company for fiscal year
ending April 30, 1998.
4. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on August 25,
1997, as the record date for the determination of shareholders entitled to
notice of, and to vote at the meeting and any adjournment or adjournments
thereof.
The Company's Proxy Statement is submitted herewith along with the
Annual Report for the year ended April 30, 1997.
Lexington, North Carolina
September 8, 1997
/s/ William W. Woodruff
By Order of The Board of Directors
William W. Woodruff, Secretary
<PAGE> 3
WELLINGTON HALL, LIMITED
Route 1, U.S. Highway No. 29 and No. 70
Post Office Box 1354
Lexington, North Carolina 27293-1354
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
Wellington Hall, Limited (the "Company") and is to be used at the Substitute
Annual Meeting of Shareholders to be held at the offices of Turlington and
Company, the Company's independent auditors, located at 509 East Center Street,
Lexington, North Carolina on October 1, 1997 at 10:00 A.M. Eastern Time, and at
any adjournments thereof. Any shareholder submitting the accompanying proxy may
revoke it at any time before it is voted by: (a) giving written notice to the
Secretary of the Company before the Annual Meeting; (b) attending the Annual
Meeting and announcing at the meeting that he elects to revoke his proxy and to
vote in person; or (c) delivering a proxy bearing a later date to the Company
before the Annual Meeting.
Proxies will be solicited by mail. Proxies may also be solicited
personally or by telephone by employees of the Company who will not be
additionally compensated therefor, or by the Company's transfer agent. The cost
of such solicitation will be borne by the Company. The Company intends to mail
copies of the Proxy Statement and the accompanying proxy card to the
shareholders on or soon after September 8, 1997.
Only shareholders of record at the close of the business on August 25,
1997, are entitled to notice of and to vote at the meeting. The shares
represented by all properly executed proxies which are received in time for the
meeting will be voted in accordance with the directions given thereon. If no
directions are given on a proxy, the shares represented by such proxy will be
voted "FOR" proposal 2, "FOR" proposal 3 and "FOR" the five nominees for
election as Directors named herein. Shareholders will be entitled on vote each
share of Common Stock held on the record date. As of August 25, 1997, there were
2,289,887 shares of the Company's Common Stock, no par value (the "Common
Stock"), issued and outstanding, and each share is entitled to one vote.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding directors
and executive officers of the Company, as well as those persons known by the
Company to own beneficially more than 5% of the outstanding Common Stock of the
Company, as of August 25, 1997:
Name and Address Amount and Nature Percent
of Beneficial of Beneficial of Class
Owner Ownership (1)
- ------------------------------------------------------------------------------
Hoyt M. Hackney, Jr. 226,958 (1) 9.9
409 Edgedale Drive
High Point, N.C. 27262
Ernst B. Kemm 297,280 (1) 13.0
1211 Lancaster Place
High Point, N.C. 27260
Donald W. Leonard 26,862 (1) 1.2
105 Westover Drive
Lexington, N.C. 27292
William W. Woodruff 16,000 (1) 0.7
320 Maegeo Drive
Lexington, N.C. 27292
<PAGE> 4
Arthur F. Bingham 605,437 (2,3) 26.4
315 3rd Avenue N. W.
Hickory, N.C. 28601
Ralph L. Eskelsen, Jr. -- (3) --
Tacao River
San Pedro Sula
Honduras, Central America
All executive officers 1,172,537 (3) 51.2
and Directors as a Group
(6 Persons)
-----------------------------
(1) To the best of the Company's knowledge, all persons listed above own the
shares listed directly and have sole voting and investment power with respect
thereto unless otherwise noted.
(2) Mr. Bingham's shares include 605,000 shares owned in a retirement plan of
which he is beneficiary.
(3) Excludes options to purchase shares that have been granted but are not
currently exercisable and do not become exercisable within 60 days.
To the best of the Company's knowledge, all persons listed above have sole
voting and investment power over the shares which they own directly.
ELECTION OF DIRECTORS
The Company's Bylaws provides that a minimum of three and a maximum of
nine directors shall serve on the Board of Directors, with the exact number of
directors within such limitations to be fixed by resolution of the Board prior
to the annual meeting at which directors are to be elected. The Board of
Directors has fixed the number of directors to be elected at the Annual Meeting
of Shareholders at five. It is intended that Proxies received in response to
this solicitation will be voted to elect five directors to hold office until the
next Annual Meeting and until their successors are elected and qualified. The
enclosed Proxy can not be voted for more than five persons.
The requisite quorum for the Annual Meeting will be a majority of the
outstanding shares of Common Stock entitled to vote. The directors will be
elected by a plurality of the shares voted at the Annual Meeting. Abstentions
and broker non-votes will not be treated as a vote for or against any particular
nominee and will not effect the outcome of the election of directors.
Management knows of no reason why any of the five nominees will be
unable or unwilling for good cause to serve; but if that should occur, it is the
intention of those persons named in the Proxy to vote for such other person or
persons as the Board of Directors may recommend. Unless otherwise directed, the
enclosed Proxy will be voted in favor of the five nominees for election as
Directors.
<PAGE> 5
The following table sets forth certain information, as of August 25,
1997 concerning the five persons nominated by the Board to serve as Directors.
Position with the Company; Principal
Occupation During the Preceding
Name Age Five Years (if different)
- ---- --- ------------------------------------
Hoyt M. Hackney, Jr. 59 President, Chief Executive Officer, Chief
Financial Officer and Treasurer,
Director since 1978
Donald W. Leonard (1) 78 Chairman of the Board of Directors,
Director since 1965; Private Investor
Ernst B. Kemm 61 Executive Vice President, Director
since 1978
William W. Woodruff (1) 73 Secretary, Director since 1977; President
and Owner of Woodruff Shoe Store
Arthur F. Bingham 42 Senior Executive Vice President of Sales
and Marketing (1996-present), Director
since 1996; Sales Representative for
Lexington Furniture Industries (1978-1996)
Ralph L. Eskelsen, Jr. 51 General Manager and Director of Muebles
Wellington Hall, S.A. (1989-present)
(1) Mr. Woodruff is Mr. Leonard's brother-in-law.
The executive officers are elected by the Board of Directors to serve
until the next annual meeting of the Board and until their successors have been
elected and qualified.
The Board of Directors of the Company met four times during the year
ended April 30, 1996. The Compensation Committee met once during fiscal 1996.
The Board does not have standing audit, nominating or other committees
performing similar functions. All Directors attended at least 75% of the total
number of the meetings of the Board of Directors and committees on which they
served during fiscal 1996.
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid
to the Chief Executive Officer of the Company's during the last three fiscal
years.
<TABLE>
<CAPTION>
Fiscal Annual Compensation All Other
Name/Position Year Salary($) Bonus($) Compensation (1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hoyt M. Hackney, Jr. 1997 130,183 0 25,738
President 1996 128,878 0 26,577
Treasurer 1995 166,918 37,728 27,203
Chief Executive Officer
Chief Financial Officer
</TABLE>
(1) The amounts reported in this column consists of the Company's matching
contribution under its 401(k) plan and deferred compensation plan.
<PAGE> 6
Non-salaried directors are paid $100 for each meeting of the Board of
Directors they attend and a $1,000 annual directors fee. The Company does not
pay Directors any additional amounts for committee participation.
Effective January 1, 1987. the Company entered into a 5-year employment
agreement with Mr. Hackney (the "Employment Agreement") that will automatically
be extended for successive one-year terms unless and until either party to the
Employment Agreement gives written notice of termination. Throughout the term of
the Employment Agreement, Mr. Hackney is to serve as President, Chief Executive
Officer and Chief Financial Officer of the Company, is to be nominated for
election as a Director of the Company and is to devote his full time and
attention to the Company's business affairs. If for any reason (other than his
"for cause" termination) Mr. Hackney does not continue in these positions, Mr.
Hackney may elect to terminate the Employment Agreement and receive as severance
compensation an amount equal to one and one-half times his then annual
compensation. Under the Employment Agreement, Mr. Hackney may be terminated only
"for cause", which is defined to mean (1) willful material breach of his
obligations under the Employment Agreement; (2) willful gross misconduct in the
course of his employment that is substantially injurious to the Company; or (3)
conviction in any court of a felony which results in incarceration for more than
90 consecutive days.
In conjunction with the execution of the Employment Agreement, the
Company and Mr. Hackney entered into a executive deferred compensation
agreement, effective May 8, 1987 (the "Deferred Compensation Agreement"), which
provides for the payment of $50,000 per year for a period of 10 years payable in
equal monthly installments, upon Mr. Hackney's retirement at age 62. The monthly
installment payments shall be paid to Mr. Hackney's beneficiary if he dies prior
to retirement or after retirement but prior to the expiration of the ten-year
payout period. $24,000 in deferred payments were accrued pursuant to the
Deferred Compensation Agreement for the benefit of Mr. Hackney during fiscal
1997.
If the Company is (1) merged, liquidated, consolidated or otherwise
combined with any other company, or (2) if substantially all the assets or
shares of stock of the Company are acquired by any other person or entity (1 and
2 above hereinafter a "Change of Control Event"), the Employment Agreement will,
pursuant to its terms, automatically remain in full force and effect until the
end of the two-year period immediately following the date of the Change of
Control Event. If the Employment Agreement is extended beyond December 31, 1991
due to the occurrence of a Change of Control Event, Mr. Hackney is to be paid an
annual salary of $155,000 throughout the term of extension. Upon the occurrence
of a Change of Control Event. the Company or its successor in interest may
terminate the Employment Agreement upon the payment to Mr. Hackney of a cash
amount equal to 1 1/2 times his then annual compensation. The Company or its
successor may terminate the Deferred Compensation Agreement following the
occurrence of a Change of Control event upon the payment to Mr. Hackney of (a)
$100,000 in cash or (b) a cash amount for each share of the Company stock then
owned by Mr. Hackney equal to or greater than the lesser of (i) four times the
book value per share of such stock or (ii) 15 times the net after tax profits
per share of such stock, computed as of the Company's most recent fiscal year
end in accordance with Generally Accepted Accounting Principles.
Effective September 1, 1996, the Company entered into a 10-year
employment agreement with Arthur F. Bingham ("the Employment Agreement") that is
automatically extended for successive one-year terms unless and until either
party to the Employment Agreement gives written notice of termination pursuant
to the terms therein. Throughout the term of the Employment Agreement, Mr.
Bingham is to serve as Senior Executive Vice President of Sales and Marketing
and as an exclusive sales representative of the Company and is to devote his
full time and attention to such positions. The Employment Agreement contemplates
that, for the term thereof, Mr. Bingham shall also serve as a Director of the
Company. If, for any reason other than the termination of his employment "for
cause," Mr. Bingham does not continue in these positions, Mr. Bingham may elect
to terminate the Employment Agreement and receive as severance compensation an
amount equal to one and one-half times his then annual compensation. Under the
Employment Agreement, Mr. Bingham may be terminated only "for cause," which is
defined to mean (1) willful material breach of his obligations under the
Employment Agreement, which breach is not substantially cured by Mr. Bingham
within ten business days after the Company gives to him written notice of the
specific alleged breach (it being understood that Mr. Bingham's failure to
perform or discharge his duties and responsibilities hereunder as a result of
his incapacity due to physical or mental illness or injury or accident or death
shall not be deemed such a breach); (2) willful gross misconduct in the course
of his employment that is substantially injurious to the Company; or (3)
conviction in any court of a felony that results in incarceration for more than
ninety consecutive days (unless such conviction is reversed in any final appeal
thereof).
<PAGE> 7
Pursuant to the Employment Agreement, Mr. Bingham is to be compensated
in an amount equal to a commission of 5% of all sales of products of WHCC and 6%
of all sales of products of the Company, both to exclude what is commonly
referred to as OEM sales, a commission of 5% on all orders considered "House"
orders, a commission of 5% on inventory sales used to raise capital and reduce
inventory, annual compensation of $30,000 and an annual bonus equal to the
amount that 2% of the sales in the North Carolina territory from WHCC and 1% of
the sales in the North Carolina territory from the Company exceeds $30,000 for
each fiscal year beginning September 1, 1996 through August 31, 1997.
If the Company is merged, liquidated, consolidated or otherwise
combined with any other company, or if substantially all the assets of the
Company are acquired by any other person or entity, or if the control of the
Company shall pass to any other person or entity not presently in control, the
Employment Agreement shall remain in full force and effect or, at the option of
the Company, upon the occurrence of any such event described hereinabove, the
Company or its successor may terminate this Employment Agreement upon the
payment to Mr. Bingham of an amount equal to 1 1/2 times his earnings for the
last fiscal year prior to termination, such payment to be made within thirty
days after the date of termination. For purposes of determining Mr. Bingham's
earnings, there shall be included both the commissions paid under Mr. Bingham's
sales territory and the annual compensation paid for Mr. Bingham's service as
Senior Executive Vice President of Sales and Marketing.
2. PROPOSAL TO APPROVE STOCK OPTION AND RESTRICTED STOCK PLAN
On February 10, 1997, the Board of Directors of the Company adopted,
subject to shareholder approval, the 1997 Stock Option and Restricted Stock Plan
(the "Plan"). The Plan has a ten year term and, unless sooner terminated as
provided in the Plan, will terminate on February 9, 2007.
The Plan will be administered by an option committee (the "Committee")
appointed by the Board of Directors of the Company. The Committee must consist
of no fewer than two directors appointed by the Board, none of whom is a current
employee of the Company, a former employee that receives compensation for prior
services rendered during the taxable year, an individual receiving direct or
indirect remuneration from the Company in any capacity other than as a director
or a former or current officer of the Company, all with the intent of complying
Section 162(m) of the Internal Revenue Code of 1988, as amended (the "Code").
Under the Plan, the Company may grant incentive stock options ("ISOs"),
nonqualified stock options or restricted stock awards up to an aggregate of
1,200,000 shares of the Company's common stock, no par value (the "Common
Stock"). No individual may receive options or restricted stock under the Plan
aggregating more than 600,000 shares of Common Stock over the ten-year life of
the Plan. The number and class of shares available under the Plan will be
adjusted appropriately in the event of stock splits and combinations, share
dividends and similar changes in the capitalization of the Company. Any shares
of Common Stock that are subject to incentive stock options or nonqualified
stock options granted under the Plan and that are not issued, and any shares of
Common Stock that are issued pursuant to restricted stock awards under the Plan
and that are subsequently forfeited, may again be the subject of grants or
awards under the Plan.
Awards may be granted under the Plan only to key employees (including
statutory employees within the meaning of Section 3121(d)(3) of the Code),
officers or directors of the Company, whether or not employees. The Committee
will determine those persons who will receive ISOs, nonqualified stock options
and restricted stock awards under the Plan.
The Plan provides that the Board of Directors may terminate, amend or
revise the terms of the Plan at any time, except that no amendment or revision
shall (i) increase the maximum aggregate number of shares subject to the Plan,
except as permitted by the Plan in order to make appropriate adjustments for
stock splits, share dividends or similar changes in the Common Stock; (ii)
change the minimum purchase price for shares subject to options granted under
the Plan; (iii) extend the maximum duration of ten years established under the
Plan for any option or for a restricted stock award; or (iv) permit the granting
of an option or a restricted stock award to anyone other than eligible
recipients under the terms of the Plan.
With respect to nonqualified stock options or restricted stock awards,
the Committee is authorized under the terms of the Plan, in its discretion, to
make loans or payments to optionees or restricted stock award recipients for the
purpose of assisting such persons with payment of personal income taxes incurred
upon exercise of nonqualified stock options or the lapse of restrictions to
which restricted stock is subject.
<PAGE> 8
If the Company becomes a party to any merger or consolidation in which
it is not the surviving entity or pursuant to which the shareholders of the
Company exchange their Common Stock, or if the Company dissolves or liquidates
or sells all or substantially all of its assets, the Committee may, in its
discretion, cause all ISOs and nonqualified stock options outstanding under the
Plan to become immediately exercisable and, to the extent not exercised, such
options will terminate on the effective date of such transaction. In addition,
the Committee may, in its discretion, cause all restricted stock awards that are
still subject to any restrictions or conditions to become fully vested, and no
longer subject to forfeiture, on such effective date, unless otherwise provided
in the applicable restricted stock agreement.
The price of shares subject to stock options granted under the Plan
will be determined by the Committee at the time of grant of the option, but may
not be less than 100% of the fair market value of the Common Stock at the time
of the grant. On July 28, 1997, the fair market value of the common stock was $
.25. The Committee will determine at the time of grant the dates on which stock
options will become exercisable and may accelerate the scheduled exercise date
of an option if deemed appropriate. The Committee may, in its discretion, make
any ISO or nonqualified stock option subject to the satisfaction of such
corporate or individual performance or other vesting standards as the Committee
deems appropriate. No stock option may expire later than ten year from the date
of grant. ISOs granted under the Plan are subject to the following additional
conditions: (i) no ISO may be granted to a person who owns, at the time of
grant, stock representing more than 10% of the total voting power of all classes
of stock of the Company unless the option price for the shares subject to such
ISO is at least 110% of the fair market value on the date of grant and such ISO
award is exercisable only within five years after its date of grant; and (ii)
the total fair market value of shares subject to ISOs which are exercisable for
the first time by an optionee in a given calendar year may not exceed $100,000,
valued as of the date of the ISO's grant.
Restricted stock may be issued under the terms of the Plan to eligible
recipients who are selected from time to time by the Committee. Such restricted
stock will be subject to such restrictions and conditions as may be determined
by the Committee at the time of the award. These restrictions and conditions may
include (but are not required to include) restrictions on transfer of the
awarded shares of Common Stock, vesting conditions based on continued employment
with the Company for a specified period of time following the award or
satisfaction of individual or corporate performance criteria, or satisfaction of
other vesting standards. The lapse of restrictions and conditions with respect
to restricted stock may be accelerated at any time by the Committee in its
discretion. Restrictions and conditions imposed on shares of restricted stock
shall lapse, in whole or in part, as provided in the applicable agreement
evidencing the restricted stock award, but must lapse, if at all, not later than
ten years from the date of the award.
Because the Plan is a discretionary plan, it is not possible to
determine what awards the Committee will grant thereunder.
Federal Income Tax Consequences of Stock Option and Restricted Stock Plan
ISOs granted under the Plan are intended to qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). The grant of an ISO generally does not result in taxable income to the
participant at the time of grant or at the time of exercise. however, for any
year in which Common Stock is purchased upon exercise of an ISO, the difference
between the fair market value of the Common Stock at the time of exercise and
its adjusted basis to the participant will be treated as an item of adjustment
for purposes of computation of the employee's alternative minimum taxable income
under Section 55 of the Code. If the participant exercises and ISO and sells the
Common Stock purchased thereunder at a gain, the excess of the sales price of
the Common Stock over its adjusted basis to the participant will be taxable as a
long-term capital gain if the sale is made more than two years from the granting
of the ISO and more than one year from the transfer of the stock to the
participant. If the sale is made within two years after the granting of the
option or within one year after the Common Stock is transferred to the
participant and if sales proceeds exceed the fair market value of the Common
Stock on the date of exercise, the participant generally will recognize ordinary
income, equal to the fair market value of the Common Stock on the date of
exercise less the option price, and capital gain (long-term or short-term as the
case may be), equal to the amount realized in excess of the fair market value of
the Common Stock on the date of exercise. No tax deduction will be available to
the Company as a result of the granting of ISOs, the exercise of such options,
or the sale by participants of the Common Stock purchased. However, the Company
will be entitled to a deduction in an amount equal to the ordinary income, if
any, realized by a participant on the sale of Common Stock purchased pursuant to
the exercise of an ISO.
<PAGE> 9
Nonqualified stock options granted under the plant are not intended to
qualify as ISOs under the Code. The grant of a nonqualified stock option will
not result in taxable income to the participant or a deduction to the Company.
On the date any such option is exercised, a participant generally will be deemed
to receive ordinary income equal to the amount by which the fair market value of
the Common Stock on the exercise date exceeds the option price, and the Company
will generally receive a deduction in the same amount.
Participants will recognize taxable income at the time unrestricted
stock is received under the Plan equal to the fair market value of the shares
received. The Company will be entitled to a deduction equal to the amount
includable in the participant's income.
In general, there will be no federal income tax consequences to either
the Company or the participant upon the grant of restricted stock. At that time,
the participant will recognize taxable income equal to the then fair market
value of the Common Stock and the Company will generally receive a corresponding
deduction. However, participants may elect, within 30 days after the date of
grant, to recognize ordinary income equal to the fair market value of the
restricted stock on the date of grant and the Company will be entitled to a
corresponding deduction at that time.
Any discussion herein pertaining to a deduction for the Company is
qualified by application of Section 162(m) of the Code and the regulations
thereunder. Section 162(m) limits to $1,000,000 per year the allowable deduction
for compensation paid to or accrued by the chief executive officer and the four
most highly compensated officers (other than the chief executive officer)
("Covered Employees"), except that such limit does not include
"performance-based compensation," as that term is defined therein. If the Plan
is approved by shareholders in the manner prescribed by applicable regulations,
compensation realized upon the exercise of options will be "performance-based"
if the exercise price is at least equal to the fair market value of the
underlying stock on the date of grant. The Plan is intended to meet the
provisions of Section 162(m) such that any deductions realized from stock option
transactions thereunder will not be limited. Compensation derived from other
awards that may be granted under the Plan may be deemed "performance-based" if
they are designated as such by the Committee and if the grant thereof is subject
tot he attainment of certain performance goals. Except as permitted by Section
162(m) and the regulations promulgated thereunder, compensation derived by
Covered Employees from awards that are not "performance-based" will not be
deductible by the Company.
Vote Required for Approval
The Plan will not become effective unless the proposal received the
majority of the votes cast at the meeting, assuming the presence of a quorum.
Abstentions and broker nonvotes will not have the effect of a vote against the
proposal.
CERTAIN TRANSACTIONS
In connection with the employment of Arthur F. Bingham as Senior
Executive Vice President of Sales and Marketing, Mr. Bingham made a loan to the
Company in October 1996 of $285,694 for a term of up to two years and bearing
interest at the applicable federal rate under Section 1274(d) of the Internal
Revenue Code of 1986, as amended. On February 12, 1997, Mr. Bingham purchased
600,000 shares of Common Stock of the Company at a purchase price of $.50 per
share, which purchase price was paid by cancellation of the foregoing loan and
for an additional investment of $14,306. The Company paid to Mr. Bingham
interest on the loan in the amount of $6,368. Like those transactions, all
future material affiliated transactions and loans will be made or entered into
under terms that are no less favorable to the Company than those that can be
obtained from unaffiliated third parties. In addition, all future material
affiliated transactions and loans, and any forgiveness of loans, must be
approved by a majority of the independent outside members of the Company's Board
of Directors who do not have an interest in the transactions.
SELECTION OF INDEPENDENT AUDITORS
Subject to ratification by the shareholders, the Board of Directors has
selected Turlington and Company, an independent public accounting firm, to audit
the accounts of the Company for the fiscal year ending April 30, 1998.
Turlington and Company has acted as auditors for the Company since 1978. A
representative of Turlington
<PAGE> 10
and Company is expected to be present at the Annual Meeting, will have the
opportunity to make a statement and will be available to respond to appropriate
questions.
The Board of Directors recommends a vote FOR ratifying the selection of
Turlington and Company as auditors for the Company for fiscal year ending April
30, 1998.
SHAREHOLDERS PROPOSALS
Any shareholder desiring to present a proposal for action at the next
annual meeting of shareholders must submit his proposal in writing to the
Secretary of the Company in Lexington, North Carolina by May 8, 1998, if a
description of such proposal is to be included in the Proxy Statement issued by
the Company.
OTHER MATTERS
No business other than that set forth herein is expected to come before
the meeting, but should any other matters requiring a vote of the shareholders
arise, including a question of adjourning the meeting, the persons names in the
accompanying Proxy will vote thereon according to their best judgment in the
interests of the Company.
Where a choice is specified on any Proxy as to the vote on any matter
to come before the meeting, the Proxy will be voted in accordance with such
specifications. If no specification is made by the Proxy is properly signed, the
shares represented thereby will be voted in favor of each proposal set forth
herein.
Order of the Board of Directors
/s/ William W. Woodruff
William W. Woodruff
Secretary
August 25, 1997
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING, YOU ARE URGED TO SIGN,
DATE AND MAIL THE ENCLOSED PROXY PROMPTLY. IF YOU ATTEND THE MEETING, YOU CAN
VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE> 11
APPENDIX A
WELLINGTON HALL, LIMITED
Route 1, U.S. Highway No. 29 and No. 70
Post Office Box 1354
Lexington, North Carolina 27293-1354
PROXY FOR SUBSTITUTE ANNUAL MEETING OF SHAREHOLDERS
October 1, 1997
The undersigned hereby appoints DONALD W. LEONARD, HOYT M. HACKNEY, JR. AND
WILLIAM W. WOODRUFF, and each of them, as Proxies, each with full power of
substitution, and hereby authorizes them to represent and to vote, as designated
below, all the shares of Common Stock of Wellington Hall, Limited held of record
by the undersigned on August 25, 1997 at the Annual Meeting of shareholders to
be held in Lexington, N.C. on October 1, 1997 or at any adjournments thereof.
The following proposals to be brought before the meeting are more specifically
described in the accompanying Proxy Statement.
(1) ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to contrary all nominees listed
below) ( ) below ( )
INSTRUCTIONS: To withhold authority to vote for any individual
nominees strike a line through the nominee's name in the list
below.)
Hoyt M. Hackney Jr., Ernst B. Kemm, Donald W. Leonard,
William W. Woodruff, Arthur F. Bingham
(2) To approve the 1997 Stock Option and Restricted Stock Plan
VOTE FOR ( ) VOTE AGAINST ( ) ABSTAIN ( )
(3) To ratify the selection of Turlington and Company,
independent public accountants, as auditors of the Company
for the fiscal year ending April 30, 1998
VOTE FOR ( ) VOTE AGAINST ( ) ABSTAIN ( )
(4) In their discretion, the Proxies are authorized to vote upon
such other matters as may properly come before the meeting.
Continued and to be signed on Reverse side
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder.
If no direction is made, this proxy will be voted FOR proposals
1,2, and 3
Please date and sign exactly as name appears
hereon, Joint Owners should each sign personally. ----------------------------
Trustees, custodians, executors, and others Signature
signing in a representative capacity should
indicate the capacity in which they sign. ----------------------------
Signature
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE, WHETHER OR NOT
YOU PLAN TO BE PRESENT AT THE _______________________________1997
MEETING. IF YOU ATTEND THE DATE:
MEETING YOU CAN VOTE EITHER IN
PERSON OR BY YOUR PROXY.
