<PAGE>
As filed with the Securities and Exchange Commission on February 3, 1999
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
HOOKER FURNITURE CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0251350
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
440 East Commonwealth Blvd.
MARTINSVILLE, VIRGINIA 24115
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (540) 632-2133
Securities to be registered pursuant to Section 12(b) of the Act: None
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
------------------------------------
(Title of class)
<PAGE>
ITEM 1. BUSINESS.
General
- -------
Incorporated in Virginia in 1924, Hooker Furniture Corporation
("Hooker" or the "Company") has become a leading manufacturer and importer of
residential furniture primarily targeted at the upper-medium price range. The
Company offers diversified product lines across many style and product
categories within this price range. Its product depth and extensive style
selections make the Company an important furniture resource for retailers in its
price range and allows the Company to respond more quickly to shifting consumer
preferences. The Company has established a broad distribution network that
includes independent furniture stores, department stores, specialty retailers,
catalog merchandisers and national and regional furniture chains. The Company
emphasizes continuous improvement in its manufacturing processes to enable it to
continue providing competitive advantages to its customers, such as quick
delivery, reduced inventory investment, high quality, and value.
Products and Styles
- -------------------
The Company's product lines cover most major design categories. The
Company believes that the diversity of its product lines enables it to
anticipate and respond quickly to changing consumer preferences and provides
retailers an important furniture resource in the upper-medium price range. The
Company intends to continue expanding its product styles with particular
emphasis on home office, entertainment centers, occasional furniture and
bedroom. The Company believes that its products represent good value and that
the quality and style of its furniture compare favorably with more
premium-priced products.
The Company provides furniture products in a variety of materials,
woods, veneers, and finishes. Percentage of revenue provided by major design
categories for the last three fiscal years are as follows:
1998 1997 1996
------ ------ ------
Desks/Home Office 22.2% 18.9% 17.5%
Wall Systems/Home Theater 21.5 22.2 26.6
Entertainment Centers 21.1 22.9 24.0
Imported lines 18.1 17.2 13.9
Bedroom 16.2 17.8 16.2
All others 0.9 1.0 1.8
------ ------ ------
100.0% 100.0% 100.0%
These product lines cover most major design categories including
European traditional, transitional, American traditional, and country/casual
designs.
The Company designs and develops new product styles semi-annually to
replace discontinued items or styles and, if desired, expand product lines. The
Company's product design process begins with marketing personnel identifying
customer needs and conceptualizing product ideas, which generally consist of a
group of related furniture pieces. A variety of sketches are produced, usually
by independent designers, from which prototype furniture pieces are built. The
Company invites key dealers and independent sale representatives to view and
critique the prototypes. From this input, changes in design are made and the
Company's engineering department prepares a sample for actual full-scale
production. The Company introduces its new product styles at the fall and spring
international furniture markets.
Distribution
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The Company has developed a broad domestic customer base and also sells
to a limited international market. The Company sells its furniture through
approximately 80 independent sales representatives to independent furniture
retailers, catalog merchandisers, and national and regional chain stores.
Representative customers include Federated Department
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Stores, Sears, Neiman Marcus, Dillard's Department Stores, Nebraska Furniture
Mart, and Haverty's. The Company believes this broad network reduces its
exposure to regional recessions, and allows it to capitalize on emerging
channels of distribution. The Company offers tailored merchandising programs to
address each channel of distribution.
The general marketing practice followed in the furniture industry is to
exhibit products at international and regional furniture markets. In the spring
and fall of each year, a nine-day furniture market is held in High Point, North
Carolina, which is attended by most buyers and is regarded by the industry as
the international market. The Company utilizes approximately 32,000 square feet
of showroom space at the High Point market to introduce new products, increase
sales of its existing products, and test ideas for future products.
The Company has sold to over 3,800 customers during the past fiscal
year, and approximately 2.3% of the Company's sales in 1998 were to
international customers. No single customer accounted for more than six percent
of the Company's sales in 1998. No material part of the Company's business is
dependent upon a single customer, the loss of which would have a material effect
on the business of the Company. The loss of several of the Company's major
customers could have a material impact on the business of the Company.
Manufacturing
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The Company's manufacturing strategy is to produce products which are
on the leading edge of changing consumer demand for the home, such as home
theater, home office and computer furniture, as well as traditional bedroom and
occasional products. The Company stresses strong customer relationships in
developing new products as well as improving existing ones. The Company believes
strongly in employee involvement with employee and management teams working and
communicating in all areas of manufacturing to improve production and quality
related issues, stressing quality improvement not quality control. To meet
customer expectations of just-in-time inventory delivery, the Company's strategy
has been to strike a balance between minimizing cutting size together with
increasing the frequency of cuttings on the one hand, and the efficiencies
gained from longer production runs on the other. In recent years, cutting sizes
have been reduced, frequencies of cuttings increased, and finished goods
inventory levels increased. The Company manufactures products using a flexible
plant philosophy structure with all plants capable of making and sharing product
lines according to customer demands and plant loads, which allows for quicker
delivery of high demand products. The Company is in constant contact with key
suppliers in forming partnerships which communicate both quality and delivery
issues which are imperative for both the Company and supplier to adjust to ever
changing customer requirements
The Company operates manufacturing facilities in North Carolina and
Virginia consisting of an aggregate of approximately 1.8 million square feet.
The Company considers its present equipment to be generally modern, adequate and
well maintained.
The Company schedules production of its various styles based upon
actual and anticipated orders. The Company's backlog of unshipped orders was
$32.8 million at November 30, 1998 and $24.7 million at November 30, 1997.
Imported Lines
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The Company imports finished furniture in a variety of styles and
materials, and markets the product under the Company name through its normal
distribution channels. Product lines include occasional tables, consoles, casual
dining, and accent pieces. The Company imports product from the Philippines,
China, Honduras, Mexico, Egypt and Indonesia from approximately 20 suppliers.
All transactions are in US dollars. Because of the large number and diverse
nature of foreign factories, the Company has flexibility in the placement of
product in any particular country and factory. The Company does not have a
concentration of product in any one country or factory. No one particular
supplier would adversely affect the production of imports should it fail to meet
a production schedule and thus production disruptions resulting from political
or economic instability in any one country are minimized.
2
<PAGE>
Raw Materials
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The principal materials used by the Company in manufacturing its
products include lumber, veneers, plywood, particleboard, hardware, glue,
finishing materials, glass products, and fasteners. The Company uses a variety
of species of lumber, including cherry, oak, ash, poplar, pine, and maple. The
Company's five largest suppliers accounted for approximately 14.9% of its
purchases in 1998.
The Company believes that its sources of supply for these materials are
adequate and that it is not dependent on any one supplier.
Competition
- -----------
The Company is the seventeenth largest furniture manufacturer in North
America based on 1997 sales, according to Furniture/Today, a trade publication.
The furniture industry is highly competitive and includes a large number of
foreign and domestic manufacturers, none of which dominates the market. The
markets in which the Company competes include a large number of relatively small
manufacturers; however, certain competitors of the Company have substantially
greater sales volumes and financial resources than the Company. Competitive
factors in the upper-medium price range include style, price, quality, delivery,
design, service, and durability. The Company believes that its long-standing
customer relationships, customer responsiveness, consistent support of existing
diverse product lines that are high quality and good value, and experienced
management are competitive advantages.
Employees
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At November 30, 1998, the Company had approximately 2,000 employees.
None of the Company's employees are represented by a labor union. The Company
considers its relations with its employees to be good.
The Corporation sponsors the Hooker Furniture Corporation Employee
Stock Ownership Plan (the "ESOP") to provide retirement benefits for eligible
employees. The ESOP covers substantially all the Company employees. The ESOP
enables employees to share in the growth of the Company and to accumulate a
beneficial ownership interest in the Company's Common Stock.
Patents and Trademarks
- ----------------------
The trade name of the Company represents many years of continued
business, and the Company believes such name is well recognized and associated
with quality in the furniture industry. The Company owns a number of patents,
trademarks, and licenses, none of which is considered to be material to the
Company.
Governmental Regulations
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The Company is subject to federal, state, and local laws and
regulations in the areas of safety, health, and environmental pollution
controls. Compliance with these laws and regulations has not in the past had any
material effect on the Company's earnings, capital expenditures, or competitive
position; however, the effect of such compliance in the future cannot be
predicted. Management believes that the Company is in material compliance with
applicable federal, state, and local environmental regulations.
Regulations issued in December 1995 under the Clean Air Act Amendments
of 1990 as part of the National Emission Standards for Hazardous Air Pollutants
program and negotiated into the Furniture Maximum Achievable Control Technology
Standard, requires the Company to reformulate certain furniture finishes and
institute process and administrative changes to reduce emissions of hazardous
air pollutants. The Company believes it is in compliance with these regulations
by its use of compliant coatings and by training its associates in work practice
standards. The Company cannot at this time
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estimate the future impact of these standards on the Company's operations and
capital expenditure requirements. See "Item 8--Legal Proceedings."
Forward-Looking Statements
- --------------------------
Certain statements made in this registration statement are not based on
historical facts, but are forward-looking statements. These statements can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy. These statements reflect the Company's reasonable judgment with
respect to future events and are subject to risks and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statements. Such risks and uncertainties include the cyclical nature of the
furniture industry, fluctuations in the price for lumber which is the most
significant raw material used by the Company, competition in the furniture
industry, capital costs and general economic conditions.
4
<PAGE>
ITEM 2. FINANCIAL INFORMATION.
SELECTED FINANCIAL DATA
The following selected financial data for each of the last five fiscal
years ended November 30, 1998 have been derived from the Company's audited
financial statements. The selected financial data should be read in conjunction
with the Financial Statements, including the Notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended November 30,
----------------------------------------------------------------------
(in thousands, except per share data)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $205,308 $175,385 $161,202 $144,689 $138,158
Cost of goods sold 158,752 135,085 120,687 110,777 108,399
Selling and administrative expenses 29,643 24,692 23,160 20,522 19,090
Income from operations 16,913 15,608 17,355 13,390 10,669
Other income 607 600 577 874 382
Interest expense (561) (630) (227) (124) (523)
Income (loss) in investee company 68 (1) (202) (32) 3
Income before income taxes 17,027 15,577 17,503 14,108 10,531
Income taxes 6,241 5,530 6,715 4,939 3,907
Net income 10,786 10,047 10,788 9,169 6,624
Earnings Per Share Data:
Basic and diluted earnings per
share (1) 2.80 2.60 2.78 2.37 1.71
Weighted number of shares outstanding
(in thousands) 3,846 3,867 3,875 3,877 3,873
Balance Sheet Data:
Cash 3,625 827 1,997 2,543 3,078
Inventories 35,812 33,475 26,013 19,818 20,022
Working capital 51,793 47,153 37,555 33,840 35,098
Total assets 111,233 98,290 87,370 71,144 70,366
Long-term debt (including current
maturities) 12,062 9,985 7,228 1,000 8,500
Common stock--held by ESOP 10,213 10,044 9,230 6,740 5,051
Stockholders' equity 73,900 66,210 59,326 52,760 46,760
Cash dividends per share (1) 0.56 0.52 0.44 0.36 0.30
</TABLE>
(1) In 1994 the Company recorded a two-for-one stock split. All per share data
have been retroactively adjusted to effect the split.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Selected Financial Data above and the Financial Statements and Notes thereto
contained elsewhere in this document.
Results of Operations
- ---------------------
The following table sets forth the percentage relationship to net
sales of certain items included in the Statements of Income:
<TABLE>
<CAPTION>
For the Year Ended November 30,
-------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 77.3 77.0 74.9
----- ----- -----
Gross profit 22.7 23.0 25.1
Selling & administrative expenses 14.5 14.1 14.3
----- ----- -----
Operating income 8.2 8.9 10.8
Other income -net 0.4 0.4 0.2
Interest expense 0.3 0.4 0.1
----- ----- -----
Income before income taxes 8.3 8.9 10.9
Income taxes 3.0 3.2 4.2
----- ----- -----
Net income 5.3% 5.7% 6.7%
===== ===== =====
</TABLE>
General
Historically, American furniture companies, including Hooker, relied
on relatively short product lines and large, infrequent cuttings of suites of
furniture with similar design and finish characteristics. This sometimes lead to
out-of-stock inventory situations between cuttings and ultimately consumer
dissatisfaction. Recent years have seen a trend in the industry for more varied
product offerings and shorter production cycles, coupled with larger finished
goods inventories, working toward inventory-on-demand for Hooker's dealers. It
has been Hooker's policy in recent years that as demand for its product
increased and backlogs grew, additional manufacturing capacity was added by
purchasing existing furniture manufacturing plants and converting the production
to Hooker product.
During the latter part of 1995, the Company found itself in the
position that, due to increased demand for its products, delivery times to
dealers were lengthening. As a result, additional capacity was needed. In April
of 1996, a furniture manufacturing plant was purchased to provide this needed
capacity. This facility was producing lower-end tables inconsistent with
Hooker's offerings, but for which there was an existing market. Hooker continued
to produce and sell the existing product in 1996 and at the same time began
retooling the facility, retraining the workforce, and in the later part of 1996
began producing Hooker's product.
In 1997 the industry experienced a weak market for retail furniture
sales. Consumer discretionary purchases emphasized electronics and investing in
a rapidly expanding economy, and furniture sales suffered. Finding itself with
new additional capacity and a less than favorable sales environment, Hooker
implemented a smaller than normal price increase for its product in 1997 in an
attempt to gain market share and keep all manufacturing plants operating.
The Company believes that the styling of its imported furniture
together with strong consumer demand for home computers and audio/video
entertainment systems has contributed to the growth of Hooker's product
offerings in recent years.
6
<PAGE>
1998 Compared to 1997
Net sales increased $30 million or 17.1% in 1998 compared to 1997.
The increase was due principally to higher unit volume, particularly in three
major product lines: imported occasional furniture, home entertainment systems,
and home office furniture.
Gross profit margin for 1998 decreased to 22.7% compared to 23.0%
for 1997. The decline was due primarily to the Company's decision to implement
smaller price increases to dealers in December of 1997 than had been implemented
in previous years.
Selling and administrative expenses rose from 14.1% of net sales in
1997 to 14.5% in 1998. The increase was primarily due to the Company's planned
investment upgrades in year-2000 compliant hardware, software, and network
technology.
As a result of the above, operating income dropped from 8.9% of net
sales in 1997 to 8.2% of net sales in 1998.
Interest expense dropped from 0.4% of net sales in 1997 to 0.3% in
1998. During 1998 amounts outstanding under the Company's revolving line of
credit were reduced due to increased cash flows from operations. In the fourth
quarter of 1998, the Company purchased additional warehouse facilities to be
used as a central distribution center, increasing the revolving line of credit
by $4 million. Also, in the fourth quarter, the Company renegotiated its
Industrial Development Revenue Bonds issued in 1996, securing a more favorable
amortization schedule and rate of interest.
The Company's effective tax rate was 35.5% of income before taxes in
1997 and 36.6% in 1998.
1997 Compared to 1996
Net sales increased $14 million or 8.8% in 1997 compared to 1996.
The increase was due primarily to higher unit volume, particularly in imported
occasional furniture, home entertainment systems, and home office furniture, and
to a lesser extent higher average selling prices.
Gross profit percentages decreased from 25.1% in 1996 to 23.0% in
1997. Many of the costs of retooling and retraining the workforce for the plant
purchased in 1996 were not incurred and expensed until late 1996 and 1997. The
soft retail environment also caused finished furniture inventory to grow by $6.5
million and total inventories by $7.5 million. In an effort to expand market
share and sell furniture produced by the additional capacity, many dealer
programs were offered to encourage volume buying. Many of these programs
involved price concessions and further contributed to the deterioration of the
gross profit margin in 1997. Also, new product introductions in 1997 were priced
with lower than normal margins.
Selling and administrative expenses as a percentage of net sales
were 14.1% for 1997 and 14.3% for 1996. These expenses were lower in 1997 due
primarily to lower selling expenses resulting, in part, from lower commission
rates paid to independent sales representatives, which were phased in over a
two-year period and were fully realized in 1997.
As the result of the above, operating income decreased from 10.8% in
1996 to 8.9% of net sales in 1997.
Other income (net) increased from 0.2% in 1996 to 0.4% in 1997,
primarily due to lower losses on the Company's investment in a joint venture in
1997. Interest expense increased from 0.1% of net sales in 1996 to 0.4% of net
sales in 1997. The increase was due to increased borrowings for the plant
purchased in April of 1996, together with funding the growth in finished goods
inventory during 1997.
The Company's effective income tax rate was 38.4% in 1996 and 35.5%
in 1997. The decrease was primarily the result of a contribution of land to a
local municipality.
7
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Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
As of November 30, 1998, assets totaled $111.2 million, up from
$98.3 million in 1997 and $87.4 in 1996. Stockholders' equity at November 30,
1998, was $73.9 million, rising from $66.2 million in 1997 and $59.3 million in
1996. Cash generated from operating activities rose to $15.1 million during 1998
compared to $4.6 million in 1997 and $8.1 million in 1996. Cash flow from
operating activities increased from 1997 to 1998 primarily due to a reduction of
$7.3 million in the increase in accounts receivable and inventory.
Investing activities consumed $11.5 million in cash during 1998
compared to $6.2 million during 1997 and $13.1 million in 1996. Cash absorbed by
investing activities in all three years was due to capital expenditures as the
Company continued to invest in property, plant, and equipment for furniture
manufacturing capacity and distribution. The Company had committed approximately
$1.8 million for the purchase of property, plant, and equipment as of November
30, 1998. During the fourth quarter of 1998, the Company purchased a 400,000
square foot distribution warehouse for consolidation and shipment of its
finished furniture. In the first half of 1999, the Company will be consolidating
finished inventory presently kept in three separate warehouses into the new
central distribution center. One of the existing warehouses is under lease,
which expires in April of 1999, one facility is presently offered for sale or
lease, and the final facility will be converted to additional manufacturing
needs. Management anticipates that the consolidation will provide improved
inventory control, less handling, and improved efficiency for the distribution
of its product. The Company used $0.8 million for financing activities in 1998
compared with providing cash from financing activities in the amount of $0.4
million in 1997 and $4.5 million in 1996. The major financing applications of
cash in 1996 were for additional manufacturing plant acquisition and the
acquisition of additional finished goods warehousing, totaling $8.5 million.
In 1996, the Company incurred $7.2 million of additional debt
comprised of Industrial Development Revenue Bonds for the purchase, expansion,
and retooling of an additional furniture manufacturing facility. During 1997,
the Company incurred additional debt through its revolving line of credit for
working capital needs primarily as a result of a $7.5 million increase in
inventories. During 1998, total long-term debt increased $2.1 million, primarily
to fund the purchase of additional warehouse capacity during the fourth quarter.
At November 30, 1998, the Company had $3 million available under its
reducing revolving line of credit and additional lines of credit of $15 million
to fund working capital needs as necessary. The Company believes it has the
financial resources needed to meet business requirements in the foreseeable
future, including capital expenditures for the expansion of manufacturing
capacity, working capital requirements, and the Company's dividend program (see
"Item 9--Market Price and Dividends on the Registrant's Common Equity and
Related Stockholder Matters").
Recent Accounting Pronouncements
- --------------------------------
Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income", effective for periods beginning after December
15, 1997, establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements.
Statements of Financial Accounting Standards No. 132 ("SFAS 132"),
"Employers' Disclosures about Pensions and Other Postretirement Benefits",
effective for periods beginning after December 15, 1997, revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments," ("SFAS 133"), effective for fiscal years beginning after June 15,
1999. SFAS 133 requires that an entity recognize all derivatives as either
assets or liabilities and measure those instruments at fair market value. Under
certain circumstances, a portion of the derivative's gain or loss is initially
reported as a component of other comprehensive income and subsequently
reclassified into income when the transaction affects earnings. For a derivative
not designated as a hedging instrument, the gain or loss is recognized in income
in the period of change. The Company anticipates that the adoption of SFAS 133
will not have an effect on the Company's financial position or results of
operations.
8
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Year 2000 Issue
- ---------------
The Company recognizes that the arrival of Year 2000 presents many
challenges for information systems, as well as other time-sensitive machinery
and equipment and other systems relied on for day-to-day operation of the
business. In 1996 the Company embarked on a plan to identify, assess, and to
modify or replace equipment and systems that may be impaired following December
31, 1999. A taskforce was created under the leadership of a corporate officer
and comprised of representatives from administration, information services, and
manufacturing to begin the identification and assessment phase of the project.
Early assessments determined that the Company would be required to modify or
replace significant portions of its Information Systems software so that
computer systems would continue to function properly in Year 2000 and beyond.
The Company decided to transition its operating systems from a non-compliant
legacy mainframe to a compliant client-server network environment. During 1997
and 1998 predominately all of the required hardware was installed, tested, and
Company employees trained on its use and operation. Efforts have been underway
since 1996 to create new, or to transition existing operations software, to be
Year 2000 compliant. As of November 30, 1998, certain critical operating systems
had been transitioned to this new environment and are fully integrated into the
day-to-day operation of the business. All other systems will be moved to the new
environment by the end of third quarter 1999.
The taskforce has communicated in writing with all suppliers of
goods and services to determine the extent to which the Company might be
vulnerable to third parties' failure to remediate their own Year 2000 issue. If
no response is received, a second request will be sent. By August 1, 1999,
negative responses as to the suppliers readiness or non-response will cause the
supplier to be reviewed. The Company anticipates that noncompliant or
unresponsive suppliers that provide critical product or services will be
terminated and other year 2000 compliant suppliers will be used. Additionally,
manufacturing personnel at each plant location have physically inventoried
machinery, equipment, building systems, and other software for Year 2000
compliance. Manufacturers of equipment and software have been formally asked to
respond to their products Year 2000 readiness. Equipment found lacking
compliance will be modified or replaced prior to December 31, 1999.
Additionally, certain critical equipment to the manufacture of product has been
or will be tested by manufacturing personnel.
The principal cost associated with the Year 2000 compliance has been
the purchase of computer hardware together with software costs. As of November
30, 1998, approximately $2 million has been expended. It is management's
estimate that additional cost for compliance will not exceed $1 million. Funding
for the Year 2000 compliance project has been provided by cash generated from
operations. Project expenditures are being capitalized or expensed as
appropriate and are not expected to have a material effect on the results of
operations.
The Company cannot fully assess the risks of the Year 2000 problems
due to numerous uncertainties surrounding the issue. However, the Company has
five separate manufacturing locations, in two states and five separate
communities each able to produce most products in the Company's line.
Additionally, for most processes each plant has multiple machines from many
manufacturers purchased over a long period of time. This flexibility also offers
redundancy of operations within and between manufacturing locations so that in
the event of a shutdown, product could be moved to other functional plant
locations. The Company is also not dependent on any single supplier for raw
materials or imported furniture. The Company has not developed a contingency
plan in the event that the changes in its operating systems are not ready by
December 31, 1999, but expects to have such a plan by August 1, 1999.
The failure to correct a material Year 2000 problem could result in
the interruption or a failure of certain normal business activities or
operations, which could materially and adversely affect the Company's results of
operations, liquidity, and financial condition. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of the
Year 2000 readiness of third-party suppliers and customers, the Company is
unable to determine at this time whether the consequences of Year 2000 problems
will have a material impact on the Company's results of operations, liquidity,
or financial condition.
9
<PAGE>
ITEM 3. PROPERTIES.
Set forth below is certain information with respect to the Company's
principal properties. The Company believes that all these properties are well
maintained and in good condition. The Company believes its manufacturing
facilities are being efficiently utilized. The Company estimates that its
facilities are currently being operated at approximately 95% capacity, on a
one-shift basis. Each manufacturing facility is flexible in regard to product
lines manufactured, allowing the Company to shift products between plants
according to customer sales and delivery demands. All Company plants are
equipped with automatic sprinkler systems and modern fire and spark detection
systems, which the Company believes are adequate. All facilities set forth below
are active and operational.
<TABLE>
<CAPTION>
Approximate
Facility Size
Location Primary Use (Square Feet) Owned or Leased
-------- ----------- ------------- ---------------
<S> <C> <C> <C>
Martinsville, VA Corporate Headquarters 32,000 Owned
Martinsville, VA Manufacturing 760,000 Owned
Martinsville, VA Distribution 400,000 Owned
Martinsville, VA Distribution 189,200 Owned
Martinsville, VA Import Division 125,000 Leased (1)
Martinsville, VA Plywood Production 146,000 Owned
Kernersville, NC Manufacturing 115,000 Owned
Roanoke, VA Manufacturing 265,000 Owned
Pleasant Garden, NC Manufacturing 300,000 Owned
Maiden, NC Manufacturing 200,000 Owned
High Point, NC Showroom 32,000 Leased (2)
</TABLE>
(1) Lease expires April 30, 1999.
(2) Lease expires April 30, 2000.
10
<PAGE>
ITEM 4. 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 January 29, 1999,
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 (as defined in Item 6, "Executive
Compensation") and by all directors and executive officers as a group:
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership Of Class
---- -------------------- --------
<S> <C> <C>
J. Clyde Hooker, Jr. (1)............................................... 761,166 (2)(3) 19.9%
Paul B. Toms, Jr. (1).................................................. 588,676 (4)(5) 15.4%
Mabel H. Toms (1)...................................................... 564,024 (3)(5)(6) 14.7%
Hooker Furniture Corporation Employee Stock Ownership Plan (7)......... 282,185 (8) 7.4%
A. Frank Hooker, Jr. (1)............................................... 201,721 (9) 5.3%
W. Christopher Beeler, Jr. (1)......................................... 41,200 (10) 1.1%
Irving M. Groves, Jr. (1).............................................. 11,564 (11) *
L. Dudley Walker (1)................................................... 5,000 *
E. Larry Ryder (1)..................................................... 4,000 (12) *
Douglas C. Williams (1)................................................ 2,788 *
Henry P. Long, Jr. (1)................................................. 2,000 (13) *
Judge John D. Hooker (1)............................................... 892 *
John L. Gregory, III (1)............................................... 400 *
All directors and executive officers as a group (12 persons)........... 1,267,407 (14) 33.1%
</TABLE>
* Less than one percent.
(1) The business address for such persons is c/o Hooker Furniture Corporation,
440 East Commonwealth Blvd., Martinsville, Virginia 24115.
(2) Mr. J. Clyde Hooker, Jr. has sole voting and disposition power with respect
to 309,686 shares and shared voting and disposition power with respect to
451,480 shares. Shares beneficially owned by Mr. Hooker do not include
131,456 shares beneficially owned by members of his family; Mr. Hooker
disclaims beneficial ownership of such shares. Mr. Hooker also shares
voting and disposition power with respect to 282,185 shares held by the
Hooker Furniture Corporation Employee Stock Ownership Plan (the "ESOP")
(see footnote (8) below).
(3) Mr. J. Clyde Hooker, Jr. and Mrs. Mabel H. Toms share voting and
disposition power with respect to 352,000 shares held by family trusts.
Such shares are included in the shares beneficially owned by Mr. Hooker and
Mrs. Toms.
(4) Mr. Toms has sole voting and disposition power with respect to 23,701
shares and shared voting and disposition power with respect to 564,975
shares. Shares beneficially owned by Mr. Toms do not include 1,468
shares beneficially owned by his wife; Mr. Toms disclaims beneficial
ownership of such shares.
(5) Mrs. Mabel H. Toms and her adult children, one of whom is Mr. Toms,
share voting and disposition power with respect to 99,480 shares held by
a family trust (the "Toms Family Trust"). In addition, pursuant to a
revocable power of attorney, Mr. Toms has shared voting and disposition
power with respect to all 564,024 shares (which include the 99,480
shares held by the Toms Family Trust) beneficially owned by Mrs. Toms.
(6) Mrs. Toms has sole voting and disposition power with respect to 112,544
shares and shared voting and disposition power with respect to 451,480
shares.
(7) BB&T Corp. serves as trustee (the "ESOP Trustee") of the ESOP. The
business address for the ESOP Trustee is BB&T Corp., Trust Investment
Department, P.O. Box 29542, Raleigh, North Carolina 27626-0542.
(8) The ESOP Trustee has sole voting and disposition power with respect to
shares owned by the ESOP. The Trustee may dispose of and, except with
respect to certain fundamental corporate transactions, vote ESOP shares
only at the direction of a committee appointed by the Company. During
fiscal 1998 such committee consisted of the following officers of the
Company: J. Clyde Hooker, Jr., E. Larry Ryder and Jack R. Palmer (Vice
President - Human Resources).
11
<PAGE>
(9) Mr. A. Frank Hooker, Jr. has sole voting and disposition power with respect
to 151,000 shares and shared voting and disposition power with respect to
52,721 shares.
(10) Mr. Beeler has sole voting and disposition power with respect to 1,200
shares and shared voting and disposition power with respect to 40,000
shares.
(11) Mr. Groves has sole voting and disposition power with respect to 8,864
shares and shared voting and disposition power with respect to 2,700
shares. Shares beneficially owned by Mr. Groves do not include 5,700
shares beneficially owned by his wife; Mr. Groves disclaims beneficial
ownership of such shares.
(12) Mr. Ryder also shares voting and disposition power with respect to 282,185
shares held by the ESOP (see footnote (8) above).
(13) Mr. Long has sole voting and disposition power with respect to 1,400 shares
and shared voting and disposition power with respect to 600 shares.
(14) Messrs. J. Clyde Hooker, Jr. and E. Larry Ryder, each of whom is an
executive officer and a director, also share voting and disposition power
with respect to 282,185 shares held by the ESOP (see footnote (8) above).
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The Company's executive officers and directors, their ages as of
January 31, 1999 and the year each joined the Company or its Board are as
follows:
<TABLE>
<CAPTION>
Year Joined
Name Age Position Company
---- --- -------- -------
<S> <C> <C> <C>
J. Clyde Hooker, Jr. 78 Chairman and Chief Executive Officer, and Director* 1946
A. Frank Hooker, Jr. 69 President and Chief Operating Officer, and Director* 1956
Paul B. Toms, Jr. 44 Executive Vice President - Marketing, and Director* 1983
Henry P. Long, Jr. 47 Senior Vice President - Merchandising and Design, and Director* 1983
E. Larry Ryder 51 Senior Vice President - Finance and Administration, Assistant 1977
Secretary, and Director*
Douglas C. Williams 51 Senior Vice President - Manufacturing, and Director* 1971
W. Christopher Beeler, Jr. 47 Director* 1994
John L. Gregory, III 51 Director* 1988
Irving M. Groves, Jr. 69 Director* 1964
Judge John D. Hooker 89 Director* 1982
Mabel H. Toms 73 Director* 1977
L. Dudley Walker 68 Director* 1995
</TABLE>
* All of the Company's directors serve one-year terms.
12
<PAGE>
J. Clyde Hooker, Jr. has been Chairman of the Board since 1987 and
Chief Executive Officer since 1966. He was President from 1960 to 1987. Prior to
1960, Mr. Hooker held various positions in sales and marketing. Mr. Hooker
joined the Company in 1946 and has been a Director since 1947. He is the first
cousin of A. Frank Hooker, Jr., the uncle of Paul B. Toms, Jr. and the brother
of Mabel H. Toms.
A. Frank Hooker, Jr. has been Chief Operating Officer and President
since 1987. He was Executive Vice President from 1968 to 1987 and Vice President
from 1959 to 1968. Mr. Hooker joined the Company in 1956 and has been a Director
since 1958. Mr. Hooker is the first cousin of J. Clyde Hooker, Jr., the first
cousin once removed of Paul B. Toms, Jr. and the first cousin of Mabel H. Toms.
Paul B. Toms, Jr. has been Executive Vice President - Marketing
since 1994. Mr. Toms was Senior Vice President - Sales & Marketing from 1993 to
1994 and Vice President - Sales from 1987 to 1993. Mr. Toms joined the Company
in 1983 and has been a Director since 1993. Mr. Toms serves on the Board of
Directors of Piedmont Trust Bank (a subsidiary of MainStreet Financial
Corporation). Mr. Toms is the nephew of J. Clyde Hooker, Jr., the first cousin
once removed of A. Frank Hooker, Jr. and the son of Mabel H. Toms.
Henry P. Long, Jr. has been Senior Vice President - Merchandising
and Design since 1994. He was Vice President - Sales from 1987 to 1994. Mr. Long
joined the Company in 1983 and has been a Director since 1993.
E. Larry Ryder has been Senior Vice President - Finance and
Administration since 1987 and Assistant Secretary since 1990. He was Treasurer
from 1989 to 1998 and Vice President - Finance and Administration from 1983 to
1987. Prior to 1983, Mr. Ryder served in various financial capacities. Mr. Ryder
joined the Company in 1977 and has been a Director since 1987.
Douglas C. Williams was elected Senior Vice President -
Manufacturing in 1987. He was Vice President - Manufacturing from 1986 to 1987.
Prior to 1986, he held various positions in production. Mr. Williams joined the
Company in 1971 and has been a Director since 1987.
W. Christopher Beeler, Jr. has been a Director since 1994. He is the
President and Chief Executive Officer of Virginia Mirror Company and Virginia
Glass Products Corporation, both of which manufacture and fabricate glass
products. Mr. Beeler is a director of MainStreet Financial Corporation.
John L. Gregory, III has been a Director since 1988. He is a partner
in, and is a director of, the law firm of Young, Haskins, Mann, Gregory & Smith,
P.C.
Irving M. Groves, Jr. has been a Director since 1964. He is the
retired Chief Executive Officer, President and Chairman of Piedmont BankGroup (a
predecessor to MainStreet Financial Corporation).
Judge John D. Hooker has been a Director since 1982. He is a retired
Virginia state circuit court judge. Judge Hooker is the second cousin of A.
Frank Hooker, Jr. and J. Clyde Hooker, Jr.
Mabel H. Toms has been a Director since 1977. She is a private
investor. Mrs. Toms is the sister of J. Clyde Hooker, Jr., the first cousin of
A. Frank Hooker, Jr. and the mother of Paul B. Toms, Jr.
L. Dudley Walker has been a Director since 1995. He is Chairman of
the Board of VF Knitwear, Inc. (formerly Bassett-Walker, Inc.) a wholly-owned
subsidiary of VF Corporation. Mr. Walker is the retired President and Chief
Executive Officer of Bassett-Walker, Inc., a manufacturer of knitted fleecewear.
He is a director of VF Corporation and Crestar Financial Corporation (a
wholly-owned subsidiary of SunTrust Banks, Inc.).
13
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
Summary Compensation Table
- --------------------------
The following table sets forth, for the years ended November 30,
1998, 1997 and 1996, the compensation for services in all capacities to the
Company of those persons who at November 30, 1998 were the Company's Chief
Executive Officer and the next four most highly compensated executive officers
of the Company for the year ended November 30, 1998 (collectively, the "Named
Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------
All Other
Name and Principal Position Year Salary ($)(1) Bonus ($) Compensation ($)(2)
- --------------------------- ---- ------------- --------- -------------------
<S> <C> <C> <C> <C>
J. Clyde Hooker, Jr. 1998 $154,000 $ 73,497 $27,393
Chairman and 1997 112,000 133,305 31,710
Chief Executive Officer 1996 112,000 139,479 26,937
A. Frank Hooker, Jr. 1998 $185,200 $110,246 $6,700
President and 1997 130,000 177,740 6,204
Chief Operating Officer 1996 130,750 232,465 6,244
Paul B. Toms, Jr. 1998 $145,600 $102,896 $32,749
Executive Vice 1997 106,000 124,418 36,066
President-Marketing 1996 100,750 111,583 32,293
E. Larry Ryder 1998 $131,200 $ 73,497 $22,062
Senior Vice President- 1997 102,400 88,870 24,799
Finance & Administration 1996 98,350 92,986 21,606
Douglas C. Williams 1998 $163,600 $102,896 $17,443
Senior Vice 1997 124,000 124,418 19,240
President-Manufacturing 1996 118,750 130,180 15,493
</TABLE>
(1) Includes for each Named Executive Officer compensation for services as a
director in the amount of $4,000 in both 1998 and 1997. Also includes
director compensation of $4,000 for Mr. J. Clyde Hooker, Jr. and $4,750 for
each of Messrs. A. Frank Hooker, Jr., Toms, Ryder and Williams in 1996. See
"-Compensation of Directors."
(2) All Other Compensation listed for the Named Executive Officers (excluding
Mr. A. Frank Hooker, Jr.) includes the present value of the benefit to the
executive officer of the Company's contribution toward premiums for
split-dollar life insurance under a program offered to all officers and
plant managers. The Company is entitled to recover the premiums from any
amounts paid to the insurer on such split-dollar life policies and has
retained a collateral interest in each policy to the extent of the premiums
paid with respect to such policy. All Other Compensation also includes for
all the Named Executive Officers employer contributions to the Company's
401(k) Plan and ESOP.
<TABLE>
<CAPTION>
All Other Compensation For Fiscal Year 1998
-------------------------------------------
Split-Dollar Life Matching 401(k) ESOP
Name Insurance ($) Contribution ($) Contribution ($)
---- -------------- ---------------- ----------------
<S> <C> <C> <C>
J. Clyde Hooker, Jr. $20,693 $5,000 $1,700
A. Frank Hooker, Jr. - 5,000 1,700
Paul B. Toms, Jr. 26,049 5,000 1,700
E. Larry Ryder 15,362 5,000 1,700
Douglas C. Williams 10,743 5,000 1,700
</TABLE>
14
<PAGE>
Deferred Compensation
- ---------------------
Messrs. A. Frank Hooker, Jr., Toms, Ryder, Williams and Long have
each entered into a deferred compensation agreement with the Company. Pursuant
to these agreements each such executive officer, or his beneficiary, will be
entitled to receive additional compensation in the form of ten annual payments
of $40,000 upon his retirement, death, or disability. The full retirement
benefit vests at age 60 and a reduced retirement benefit vests after age 55. The
death and disability benefits vest immediately, however, the disability benefit
would not be paid until the executive officer reached the age of 60.
Compensation of Directors
- -------------------------
Directors receive an annual retainer fee of $1,000 and $750 for each
meeting attended, including committee participation or special assignments. In
1998, Messrs. Beeler, Gregory and Walker each received $5,500 for services as
directors of the Company. Each of the other directors received $4,000 for
services in 1998.
Board Interlocks and Insider Participation
- ------------------------------------------
Messrs. J. Clyde Hooker, Jr., A. Frank Hooker, Jr., Toms, Long,
Ryder and Williams are each an officer and a director of the Company and each
participates in the deliberations of the Company's Board of Directors concerning
executive officer compensation.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Board of Directors, at a meeting held December 30, 1997,
approved the purchase by the Company of 20,000 shares of the Company's Common
Stock from Mr. A. Frank Hooker, Jr., the Company's President and Chief Operating
Officer. The shares were purchased at $25 per share for an aggregate purchase
price of $500,000. The sale was consummated January 2, 1998. This purchase was
made in accordance with the Board's policy to purchase the Company's Common
Stock from time to time at prices attractive to the Company. The price per share
paid by the Company represented an approximately 30% discount off the appraised
value of the Common Stock as of November 30, 1997.
ITEM 8. LEGAL PROCEEDINGS.
In 1998 a manufacturing joint venture in which the Company owns a
50% interest was cited by the Environmental Protection Agency ("EPA") for
violations of certain regulations under the Clean Air Act Amendments of 1990.
The members of the joint venture determined that the costs to bring the plant
into compliance, together with costs for other needed capital improvements,
would be prohibitive. Thus, the joint venture ceased operations in November
1998. No final action has been taken by the EPA in this matter, including the
assessment of any fines against the joint venture. The joint venture is
currently negotiating the sale of the property. Company management anticipates
that any shortfall between the remaining carrying value of the joint venture
investment, including any fines that might be levied by the EPA, and proceeds
from the sale of the joint venture facility and equipment will not have a
material adverse affect on the Company's financial condition or annual results
of operations but it could have a material adverse affect on the Company's
results of operations for any particular fiscal quarter.
15
<PAGE>
ITEM 9. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
There is no established public trading market for the Company's
Common Stock. As of January 29, 1999 there were approximately 700 beneficial
stockholders. As of the same date approximately 2,277,057 shares of the
Company's Common Stock could be sold pursuant to Rule 144.
The Company pays quarterly dividends on its Common Stock on or about
the last day of February, May, August and November, when declared by the Board
of Directors, to stockholders of record approximately two weeks earlier. The
amount of any future dividends will be determined by the Board based upon the
financial performance and condition of the Company. The following table sets
forth the dividends per share paid by the Company with respect to its Common
Stock during the Company's two most recent fiscal years:
1998 Dividends
---- Per Share
---------
First Quarter................ $0.14
Second Quarter............... 0.14
Third Quarter................ 0.14
Fourth Quarter............... 0.14
1997
----
First Quarter................ $0.13
Second Quarter............... 0.13
Third Quarter................ 0.13
Fourth Quarter............... 0.13
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The authorized capital stock of the Company consists of 10,000,000
shares of Common Stock, no par value. As of January 29, 1999, there were
3,826,649 shares of Common Stock issued and outstanding.
The following brief description of the Company's Common Stock does
not purport to be complete and is subject in all respects to applicable Virginia
law and to the provisions of the Company's Amended and Restated Articles of
Incorporation, as amended (the "Articles"), and Bylaws, copies of which have
been filed as exhibits to the registration statement.
Holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Holders of Common Stock do not
have cumulative voting rights, and therefore holders of a majority of the shares
voting for the election of directors can elect all of the directors.
In such event, the holders of the remaining shares will not be able to elect any
directors.
Holders of Common Stock are entitled to receive such dividends as
may be declared from time to time by the Board of Directors out of funds legally
available therefor. In the event of the liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities.
16
<PAGE>
The Common Stock has no preemptive or conversion rights and is not
subject to further call for assessments by the Company. The Common Stock
currently outstanding is validly issued, fully paid and nonassessable.
The Company's Articles require, in addition to any vote required by
law or the Articles, subject to certain exceptions, that certain fundamental
corporate transactions ("business combinations") between the Company (including
any subsidiary of the Company) and any beneficial holder of more than 10% of the
Company's outstanding voting stock (an "interested stockholder") or an affiliate
or associate of such interested stockholder be approved by the holders of at
least 75% of the then outstanding shares of the voting stock of the Company.
"Business combinations" include (i) mergers and consolidations, (ii) statutory
share exchanges, (iii) dispositions of all or a substantial part of corporate
assets, (iv) any issuance or transfer by the Company of any securities of the
Company having a fair market value equal to or greater than 10% of the aggregate
fair market value of the outstanding voting stock of the Company, (v) any
liquidation or dissolution of the Company, or (vi) any reclassification,
(including reverse stock splits), recapitalization or merger or consolidation of
the Company with any of its subsidiaries, that increases by more than 5% the
percentage of any securities of the Company beneficially owned by an interested
stockholder.
The exceptions to the 75% stockholder approval requirement require
either that (i) the business combination be approved by a majority of the
Company's "continuing directors" or (ii) the business combination satisfy
certain fair-price and procedural requirements. In general, the fair-price
requirements provide that in a two-step acquisition transaction, the interested
stockholder must pay the stockholders of the Company in the second step either
the same amount of cash or the same amount and type of consideration paid to
acquire the Company's shares in the first step. A "continuing director" includes
any director who (a) was a member of the Board before December 28, 1987 (the
date the Company's Amended and Restated Articles of Incorporation were adopted),
(b) is unaffiliated with the interested stockholder and was a director prior to
the time the interested stockholder became an interested stockholder, or (c) any
successor of a continuing director who is unaffiliated with the interested
stockholder and is recommended to succeed a continuing director by a majority of
continuing directors then on the Board.
These provisions are designed to deter certain types of takeovers of
the Company. The Company's Articles require the affirmative vote of 75% of the
voting shares of the Company to amend or repeal these interested stockholder
provisions.
The transfer agent and registrar for the Common Stock is First Union
National Bank of North Carolina.
The Virginia Stock Corporation Act contains provisions governing
"Affiliated Transactions." These provisions, with several exceptions discussed
below, generally require approval of certain material transactions between a
Virginia corporation and any beneficial holder of more than 10% of any class of
its outstanding voting shares (an "Interested Shareholder") by a majority of
disinterested directors and by the holders of at least two-thirds of the
remaining voting shares. Affiliated Transactions subject to this approval
requirement include mergers, share exchanges, material dispositions of corporate
assets not in the ordinary course of business, any dissolution of the
corporation proposed by or on behalf of an Interested Shareholder, or any
reclassification, including reverse stock splits, recapitalization or merger of
the corporation with its subsidiaries, which increases the percentage of voting
shares owned beneficially by an Interested Shareholder by more than 5%.
For three years following the time that an Interested Shareholder
becomes an owner of 10% of the outstanding voting shares, a Virginia corporation
cannot engage in an Affiliated Transaction with such Interested Shareholder
without the approval of two-thirds of the voting shares other than those shares
beneficially owned by the Interested Shareholder, and the approval of a majority
of the Disinterested Directors. "Disinterested Director" means, with respect to
a particular Interested Shareholder, a member of the Company's Board of
Directors who was
. a member on the date on which an Interested Shareholder became an
Interested Shareholder or
. recommended for election by, or was elected to fill a vacancy and
received the affirmative vote of, a majority of the Disinterested
Directors then on the Board.
After the expiration of the three-year period, the statute requires approval of
Affiliated Transactions by two-thirds of the voting shares other than those
beneficially owned by the Interested Shareholder.
17
<PAGE>
The principal exceptions to the special voting requirements apply to
transactions proposed after the three-year period has expired and require either
that the transaction be approved by a majority of the Company's Disinterested
Directors or that the transaction satisfy the fair-price requirements of the
statute. In general, the fair-price requirement provides that in a two-step
acquisition transaction, the Interested Shareholder must pay the shareholders in
the second step either the same amount of cash or the same amount and type of
consideration paid to acquire the Company's shares in the first step.
None of the foregoing limitations and special voting requirements
applies to an Interested Shareholder whose acquisition of shares making such
person an Interested Shareholder was approved by a majority of the Company's
Disinterested Directors.
These provisions are designed to deter certain types of takeovers of
Virginia corporations. The statute provides that, by affirmative vote of a
majority of the voting shares other than shares owned by any Interested
Shareholder, a corporation can adopt an amendment to its articles of
incorporation or by-laws providing that the Affiliated Transactions provisions
shall not apply to the corporation. The Company has not "opted out" of the
Affiliated Transactions provisions.
Virginia law also generally provides that shares of a Virginia
corporation acquired in a transaction that would cause the acquiring person's
voting strength to meet or exceed any of three thresholds (20%, 33-1/3% or 50%)
have no voting rights with respect to such shares unless granted by a majority
vote of shares not owned by the acquiring person or any officer or
employee-director of the corporation. This provision empowers an acquiring
person to require the Virginia corporation to hold a special meeting of
shareholders to consider the matter within 50 days of its request. The Board of
Directors of a Virginia corporation can opt out of this provision at any time
before four days after receipt of a control share acquisition notice.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 10 of the Virginia Stock Corporation Act (the "VSCA")
allows, in general, for indemnification, in certain circumstances, by a
corporation of any person threatened with or made a party to any action, suit or
proceeding by reason of the fact that he or she is, or was, a director, officer,
employee or agent of such corporation. Indemnification is also authorized with
respect to a criminal action or proceeding where the person had no reasonable
cause to believe that his or her conduct was unlawful. Article 9 of the VSCA
provides limitations on damages payable by officers and directors, except in
cases of willful misconduct or knowing violation of criminal law or any federal
or state securities law.
Article IV of the Company's Amended and Restated Articles of
Incorporation provides for mandatory indemnification of any individual who is,
was or is threatened to be made a party to any proceeding (including any
proceeding by or on behalf of the Company) because such individual is or was a
director or officer of the Company or because such individual was serving the
Company or any other legal entity in any capacity at the request of the Company
while a director or officer of the Company, against all liabilities and
reasonable expenses incurred in the proceeding, except such liabilities and
expenses as are incurred because of such director's or officer's willful
misconduct or knowing violation of the criminal law.
Article IV of the Company's Amended and Restated Articles of
Incorporation also provide that in every instance permitted under the VSCA in
effect from time to time, the liability of a director or officer of the Company
to the Company or its stockholders arising out of a single transaction,
occurrence or course of conduct shall be limited to one dollar.
The Company maintains a standard policy of officers' and directors'
liability insurance.
18
<PAGE>
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
For the information required by this Item, refer to the Index to
Financial Statements appearing on page F-1 of the registration statement.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
Financial Statements
For the information required by this Item, refer to the Index to
Financial Statements appearing on page F-1 of the registration statement.
Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Amended and Restated Articles of Incorporation of the Company
3.2 Articles of Amendment to Amended and Restated Articles of
Incorporation of the Company
3.3 Amended and Restated Bylaws of the Company
4.1 Amended and Restated Articles of Incorporation of the Company
(See Exhibit 3.1)
4.2 Articles of Amendment to Amended and Restated Articles of
Incorporation of the Company (See Exhibit 3.2)
4.3 Bylaws of the Company (See Exhibit 3.3)
Pursuant to Regulation S-K, Item 601(b)(4)(iii), instruments
evidencing long term debt less than 10% of the Company's total assets have been
omitted and will be furnished to the Securities and Exchange Commission upon
request.
10.1 Lease, dated March 14, 1994, between Fred B. Caffey, as lessor, and
the Company, as lessee
10.2 Lease, dated November 1, 1994, between Southern Furniture Exposition
Building, Inc. and the Company
10.3 Form of Salary Continuation Agreement
10.4 Form of Split Dollar Agreement
27.1 Financial Data Schedule
19
<PAGE>
HOOKER FURNITURE CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Financial Statements
- --------------------
<S> <C>
Report of Independent Certified Public Accountants........................................................F-2
Balance Sheets as of November 30, 1998 and 1997...........................................................F-3
Statements of Income for the fiscal years ended November 30, 1998, 1997 and 1996..........................F-4
Statements of Cash Flows for the fiscal years ended November 30, 1998, 1997 and 1996......................F-5
Statements of Stockholders' Equity for the fiscal years ended November 30, 1998, 1997 and 1996............F-6
Summary of Significant Accounting Policies................................................................F-7
Notes to Financial Statements.....................................................................F-8 to F-12
Financial Statement Schedule
- ----------------------------
Schedule II-Valuation and Qualifying Accounts for the fiscal years ended November 30, 1998, 1997
and 1996............................................................................................S-1
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Hooker Furniture Corporation
Martinsville, Virginia
We have audited the accompanying balance sheets of Hooker Furniture Corporation
as of November 30, 1998 and 1997 and the related statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended November 30, 1998. We have also audited the schedule listed in the
accompanying index. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedule. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and schedule. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hooker Furniture Corporation at
November 30, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended November 30, 1998 in conformity
with generally accepted accounting principles.
Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
BDO Seidman, LLP
Richmond, Virginia
December 15, 1998
F-2
<PAGE>
Balance Sheets Hooker Furniture Corporation
<TABLE>
<CAPTION>
November 30, 1998 1997
- -------------------------------------------------------------------------------------------------------
Assets
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash, primarily interest-bearing deposits..........................$ 3,624,920 $ 826,543
Trade receivables, less allowance of $500,000...................... 23,345,761 22,976,701
Inventories (Note 1)............................................... 35,812,460 33,474,733
Prepaid expenses and other......................................... 1,637,196 1,328,078
------------ -----------
Total Current Assets................................ 64,420,337 58,606,055
Property, plant and equipment, net (Note 2).............................. 41,500,124 34,913,861
Other Assets
Investment in and advances to investee company (Note 7)............ 2,371,409 2,303,828
Miscellaneous .................................................... 2,941,474 2,465,925
------------ -----------
$111,233,344 $98,289,669
============ ===========
- -------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- -------------------------------------------------------------------------------------------------------
Current Liabilities
Trade accounts payable............................................. $ 4,757,043 $ 4,175,171
Accrued salaries, wages, and benefits.............................. 4,464,435 4,098,620
Other accrued expenses (Note 4).................................... 3,405,769 1,579,263
Current maturities of long-term debt (Note 3)...................... - 1,600,000
------------ -----------
Total Current Liabilities........................... 12,627,247 11,453,054
Long-term debt, less current maturities (Note 3)......................... 12,061,592 8,384,620
Deferred compensation (Note 4)........................................... 1,865,865 1,602,035
Deferred income taxes (Note 6)........................................... 565,607 595,907
------------ -----------
Total Liabilities................................... 27,120,311 22,035,616
------------ -----------
Commitments (Note 4)
Common Stock - held by ESOP (Note 5)..................................... 10,213,287 10,044,006
Stockholders' Equity
Common stock - no par value
Authorized 10,000,000 shares; issued
3,835,729 shares (3,865,080 in 1997) ......................... 2,434,983 2,453,632
Retained earnings.................................................. 71,464,763 63,756,415
------------ -----------
Total Stockholders' Equity.......................... 73,899,746 66,210,047
------------ -----------
$111,233,344 $98,289,669
============ ===========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying Summary of Significant Accounting Policies and Notes to
Financial Statements
F-3
<PAGE>
Statements of Income Hooker Furniture Corporation
<TABLE>
<CAPTION>
Year ended November 30, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES............................................................ $205,307,641 $175,385,497 $161,201,507
COSTS AND EXPENSES
Cost of goods sold.............................................. 158,751,682 135,084,924 120,686,628
Selling expenses ............................................... 16,626,677 13,052,392 13,075,741
Administrative expenses......................................... 13,016,684 11,640,329 10,084,276
-------------- -------------- --------------
188,395,043 159,777,645 143,846,645
-------------- -------------- --------------
INCOME FROM OPERATIONS............................. 16,912,598 15,607,852 17,354,862
-------------- -------------- --------------
OTHER INCOME AND EXPENSES
Other income.................................................... 607,510 599,504 577,153
Interest expense................................................ (560,563) (630,107) (227,301)
Proportionate share of income (loss) in investee company........ 67,581 (647) (201,538)
-------------- -------------- --------------
114,528 (31,250) 148,314
-------------- -------------- --------------
INCOME BEFORE INCOME TAXES......................... 17,027,126 15,576,602 17,503,176
-------------- -------------- --------------
INCOME TAXES (Note 6)
Federal......................................................... 5,483,000 5,009,000 5,744,000
State........................................................... 758,000 521,000 971,000
-------------- -------------- --------------
6,241,000 5,530,000 6,715,000
-------------- -------------- --------------
NET INCOME ........................................ $ 10,786,126 $ 10,046,602 $ 10,788,176
============== ============== ==============
EARNINGS PER SHARE DATA
Basic and diluted earnings per share............................ $ 2.80 $ 2.60 $ 2.78
-------------- -------------- --------------
Weighted average number of shares outstanding................... 3,846,011 3,866,850 3,875,220
-------------- -------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying Summary of Significant Accounting Policies and Notes to
Financial Statements
F-4
<PAGE>
Statements of Cash Flows Hooker Furniture Corporation
<TABLE>
<CAPTION>
Year ended November 30, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Cash received from customers............................... $205,376,331 $173,397,676 $160,627,239
Cash paid to suppliers and employees....................... (183,744,913) (162,882,466) (145,822,728)
Income taxes paid.......................................... (6,038,139) (5,310,122) (6,605,631)
Interest paid.............................................. (560,453) (630,107) (221,859)
Interest and dividends received............................ 101,534 57,803 88,908
-------------- -------------- ------------
Net cash provided by operating activities....................... 15,134,360 4,632,784 8,065,929
-------------- -------------- ------------
Cash flows from investing activities
Purchase of property and equipment......................... (11,485,808) (6,211,526) (13,107,957)
-------------- -------------- ------------
Net cash absorbed by investing activities....................... (11,485,808) (6,211,526) (13,107,957)
-------------- -------------- ------------
Cash flows from financing activities
Proceeds from long-term debt............................... 6,876,972 6,756,855 18,227,765
Payments on long-term debt................................. (4,800,000) (4,000,000) (12,000,000)
Cash dividends paid........................................ (2,152,265) (2,010,791) (1,705,079)
Purchase and retirement of common stock.................... (774,882) (337,616) (27,200)
-------------- -------------- ------------
Net cash provided (absorbed) by financing activities........... (850,175) 408,448 4,495,486
-------------- -------------- ------------
NET INCREASE (DECREASE) IN CASH................................. 2,798,377 (1,170,294) (546,542)
CASH AT BEGINNING OF YEAR....................................... 826,543 1,996,837 2,543,379
-------------- -------------- ------------
CASH AT END OF YEAR............................................. $ 3,624,920 $ 826,543 $ 1,996,837
============== ============== ============
Reconciliation of net income to net cash provided by operating
activities
Net income...................................................... $ 10,786,126 $ 10,046,602 $ 10,788,176
Depreciation and amortization.............................. 4,899,545 4,769,938 3,782,774
Increase in trade receivables.............................. (369,059) (2,536,337) (1,062,513)
Increase in inventories.................................... (2,337,728) (7,462,195) (6,194,981)
Increase in prepaid expenses and other assets.............. (852,249) (660,129) (189,767)
Increase (decrease) in trade accounts payable.............. 581,872 (330,382) 854,179
Increase (decrease) in other accrued expenses.............. 2,192,323 (104,613) 424,481
Increase in deferred compensation.......................... 263,830 303,313 89,635
Increase (decrease) in deferred income taxes............... (30,300) 606,587 (426,055)
-------------- -------------- ------------
Net cash provided by operating activities....................... $ 15,134,360 $ 4,632,784 $ 8,065,929
============== ============== ============
</TABLE>
- --------------------------------------------------------------------------------
See accompanying Summary of Significant Accounting Policies and Notes to
Financial Statements
F-5
<PAGE>
Statements of Stockholders' Equity Hooker Furniture Corporation
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Common Stock
-------------------- Retained
Shares Amount Earnings
------ ------ --------
<S> <C> <C> <C>
Balance at November 30, 1995 3,875,380 $2,460,224 $50,299,274
Net income 10,788,176
Cash dividends on common stock ($0.44 per share) (1,705,079)
Increase in fair value of shares held by ESOP (2,489,569)
Purchase and retirement of common stock (800) (512) (26,688)
--------- ---------- -----------
Balance at November 30, 1996 3,874,580 2,459,712 56,866,114
Net income 10,046,602
Cash dividends on common stock ($0.52 per share) (2,010,791)
Increase in fair value of shares held by ESOP (813,973)
Purchase and retirement of common stock (9,500) (6,080) (331,537)
--------- ---------- -----------
Balance at November 30, 1997 3,865,080 2,453,632 63,756,415
Net income 10,786,126
Cash dividends on common stock ($0.56 per share) (2,152,265)
Increase in fair value of shares held by ESOP (169,281)
Purchase and retirement of common stock (29,351) (18,649) (756,232)
--------- ---------- -----------
Balance at November 30, 1998 3,835,729 $2,434,983 $71,464,763
========= ========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying Summary of Significant Accounting Policies and Notes to
Financial Statements
F-6
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Corporation manufactures and imports household and office furniture for sale
to wholesale and retail merchandisers located primarily throughout North
America.
The Corporation operates predominantly in one business segment. Substantially
all revenues result from the sale of residential furniture products.
Substantially all of the Corporation's trade accounts receivable are due from
retailers in this market, which consists of a large number of entities with a
broad geographical dispersion.
INVENTORIES
Inventories are stated at the lower of cost, using the last-in, first-out (LIFO)
method, or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost, less allowances for
depreciation. Provision for depreciation has been computed (generally by the
declining balance method) at annual rates that will amortize the cost of the
depreciable assets over their estimated useful lives as follows: buildings (15
to 40 years), machinery and equipment (8 to 20 years), furniture and fixtures (5
to 10 years), and other (3 to 30 years).
INVESTMENT IN INVESTEE COMPANY
The Corporation accounts for its investment in its investee company under the
equity method of accounting.
INCOME TAXES
Deferred income taxes reflect the future tax consequences of differences between
the tax basis of assets and liabilities and their financial reporting amounts at
each year end.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Corporation's financial instruments' (consisting of cash, accounts
receivable, accounts payable, and accrued salaries) carrying values approximate
fair value because of the short-term nature of those instruments.
The fair value of the Corporation's industrial development revenue bonds and
reducing revolving line of credit is estimated based on the quoted market rates
for similar debt with remaining maturity. At November 30, 1998, the carrying
value of the industrial revenue bonds and reducing revolving line of credit
approximated fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reported period. Actual
results could differ from those estimates.
REVENUE RECOGNITION
Sales are recognized when products are shipped and invoiced to customers.
Substantially all of the Corporation's trade accounts receivable are from
customers in the retail furniture industry. Management periodically performs
credit evaluations of its customers and generally does not require collateral.
The Corporation uses credit insurance to minimize the risk on certain accounts.
LONG LIVED ASSETS
Long-lived assets, such as property and equipment, are evaluated for impairment
when events or changes in circumstances indicate that the carrying amount of the
asset may not be recoverable through the estimated undiscounted future cash
flows from the use of those assets. When any such impairment exists, the related
assets will be written down to fair value. No impairment losses have been
necessary through November 30, 1998.
F-7
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
EARNINGS PER SHARE
For the year ended November 30, 1998, the Corporation adopted Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." SFAS
128 is effective for financial statements issued after December 15, 1997. SFAS
128 provides for the calculation of basic and diluted earnings per share. Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilutive effect of
securities that could share in earnings of an entity. At November 30, 1998,
there were no securities which had a dilutive effect. Earnings per share has
been computed based upon the weighted average number of common shares
outstanding during the year (3,846,011 shares -1998, 3,866,850 shares - 1997,
and 3,875,220 shares - 1996).
ADVERTISING COSTS
Advertising costs are expensed when incurred. The Corporation charged
$4,083,850, $3,381,830 and $2,532,511 to advertising expense during the years
ended November 30, 1998, 1997 and 1996, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income", effective for periods beginning after December 15, 1997,
establishes standards for reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income is defined to include
all changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS 130 requires that all
items that are required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
Statements of Financial Accounting Standards No. 132 (SFAS 132), "Employers'
Disclosures about Pensions and Other Postretirement Benefits", effective for
periods beginning after December 15, 1997, revises employers' disclosures about
pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments,"
("SFAS 133"), effective for fiscal years beginning after June 15, 1999. SFAS 133
requires that an entity recognize all derivatives as either assets or
liabilities and measure those instruments at fair market value. Under certain
circumstances, a portion of the derivative's gain or loss is initially reported
as a component of other comprehensive income and subsequently reclassified into
income when the transaction affects earnings. For a derivative not designated as
a hedging instrument, the gain or loss is recognized in income in the period of
change. The Company anticipates that the adoption of SFAS 133 will not have an
effect on the Company's financial position or results of operations.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - INVENTORIES
The components of inventories are summarized as follows:
November 30
-----------------------------
1998 1997
----------- -----------
Finished furniture ............... $29,786,567 $26,715,151
Furniture in process ............... 1,663,518 2,314,137
Materials and supplies.............. 13,628,203 12,826,714
----------- -----------
45,078,288 41,856,002
Reduction to LIFO basis............. 9,265,828 8,381,269
----------- -----------
$35,812,460 $33,474,733
=========== ===========
F-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 1 - INVENTORIES (continued)
If the first-in, first-out (FIFO) method had been used in valuing all
inventories, net income would have been $11,356,666, $10,756,602, and
$10,782,647 for the years ended November 30, 1998,1997, and 1996, respectively.
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
Major classes of property, plant and equipment are summarized as follows:
November 30
--------------------------------
1998 1997
----------- -----------
Buildings............................ $32,621,398 $29,800,626
Machinery and equipment.............. 37,006,631 35,052,887
Furniture and fixtures............... 6,082,256 5,116,142
Other ............................... 9,198,863 4,014,362
----------- -----------
84,909,148 73,984,017
Accumulated depreciation............. (44,590,267) (39,965,352)
----------- -----------
40,318,881 34,018,665
Land ............................... 1,181,243 895,196
----------- -----------
$41,500,124 $34,913,861
=========== ===========
NOTE 3 - LONG TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
November 30
------------------------------
1998 1997
------------ -----------
<S> <C> <C>
Industrial development revenue bonds issued in 1996, secured by a letter of
credit of $10,240,000 from NationsBank N.A., maturing annually from 2004
through 2006 with a variable interest rate (3.3% at November 30, 1998)........ $ 7,061,592 $6,984,620
Reducing revolving line of credit to bank, with a maximum of $8,000,000 at
November 30, 1998, variable rate (5.9% at November 30, 1998) unsecured,
interest payable monthly...................................................... 5,000,000 3,000,000
----------- ----------
12,061,592 9,984,620
Less current maturities............................................................. - 1,600,000
----------- ----------
$12,061,592 $8,384,620
=========== ==========
</TABLE>
During fiscal 1998, the Corporation entered into an interest rate swap agreement
with NationsBank N.A., which effectively provides a fixed interest rate of 4.71%
on the industrial development revenue bonds through 2006.
F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 3 - LONG TERM DEBT (continued)
Maturities of long-term debt during the next five years are $2,440,000 in 2001
and $2,560,000 in 2002.
The debt instruments contain, among other things, certain restrictions as to
minimum tangible net worth, net equity ratio, current ratio, and debt coverage
ratio. The Corporation was in compliance with these restrictions as of November
30, 1998.
The Corporation has available additional lines of credit of $15 million to fund
its working capital needs as necessary, all of which was unused at November 30,
1998.
NOTE 4 - EMPLOYEE BENEFIT PLANS
Deferred Compensation Agreements
The Corporation maintains several individual deferred compensation agreements
for certain employees. These are unfunded agreements with all benefits paid out
of the general assets of the Corporation when the employee retires. The amount
of benefits to be paid is specified in each individual agreement.
The following table sets forth the financial status and amounts recognized for
the deferred compensation plan:
<TABLE>
<CAPTION>
November 30
------------------------------
1998 1997
------------- ------------
<S> <C> <C>
Projected benefit obligation, including vested
benefits of $725,000 at November 30, 1998............... $2,082,830 $1,791,501
Unrecognized net loss from past experience.................... (573,626) (386,259)
Unrecognized prior service cost............................... (72,478) (93,138)
Unrecognized net obligation................................... (19,702) (23,768)
Additional liability.......................................... 529,049 403,907
---------- ---------
Accrued liability included in balance sheet................... $1,946,073 $1,692,243
========== ==========
</TABLE>
Pursuant to SFAS 87, Employer's Accounting for Pensions, the Corporation
recorded an additional liability in the amount of $529,049 at November 30, 1998
(1997-$403,907). In addition, the Corporation has an intangible asset in the
amount of $137,473 at November 30, 1998, which is being amortized on a
straight-line basis over 15 years. The current obligation of $80,208
(1997-$90,208) has been included in other accrued expenses in the balance sheet.
The net periodic cost included the following components:
<TABLE>
<CAPTION>
Year Ended November 30
---------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Service cost - benefits earned during the period.............. $ 35,150 $ 25,782 $ 41,608
Interest cost on projected benefit obligations................ 138,762 128,630 105,151
Net amortization and deferral................................. 44,984 33,873 24,726
-------- -------- --------
Net periodic cost included in statements of income............ $218,896 $188,285 $171,485
======== ======== ========
</TABLE>
The weighted average discount rate and rate of compensation increase used in
determining the actuarial present value of the projected benefit obligation was
7.0 percent (7.5 percent in 1997), and 5.0 percent respectively.
F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 4 - EMPLOYEE BENEFIT PLANS (continued)
Employee Savings Plan
The Corporation sponsors the Employee's Savings Plan (the Plan). The Plan is a
qualified savings plan (a 401(k) plan) that is designed to permit employees of
the Corporation to meet their savings goals and share in the Corporation's
profits as a way of providing them with funds for retirement. The Plan covers
substantially all employees. A participant in the Plan may contribute an amount
not less than 1%, nor more than 16% of their compensation. The Corporation will
contribute 50% of the amount contributed by the participant, up to 6% of their
compensation, as a matching contribution. Contributions to the Plan by the
Corporation amounted to $571,000 in 1998, $549,000 in 1997, and $515,000 in
1996.
NOTE 5 - COMMON STOCK - HELD BY ESOP
Employee Stock Ownership Plan
The Corporation sponsors an Employee Stock Ownership Plan (ESOP) which is
designed to provide retirement benefits for eligible employees by allowing them
to share on a noncontributory basis in the growth of the Corporation, and allow
them to accumulate a beneficial ownership interest in the common stock of the
Corporation. The ESOP covers substantially all employees. Shares contributed to
the ESOP are valued at fair market value as determined by an independent
appraisal. Dividends paid on shares held by the ESOP are charged to retained
earnings. The Company is obligated under certain circumstances to repurchase
shares covered by the ESOP, therefore, the estimated fair value of the shares
held in the ESOP, representing the maximum potential repurchase obligation, is
classified outside of stockholders' equity. At November 30, 1998, 282,135 shares
were allocated to participants. Contributions to the ESOP are at the discretion
of the Board of Directors and amounted to $725,000 in 1998, $359,000 in 1997,
and $353,000 in 1996.
NOTE 6 - INCOME TAXES
Deferred income tax assets (liabilities) are as follows:
November 30
1998 1997
----------- -----------
Assets
Deferred compensation................... $ 740,000 $ 643,000
Inventory............................... 94,000 127,000
Advertising allowance................... - 175,000
Investment in investee.................. 134,000 160,000
----------- -----------
968,000 1,105,000
----------- -----------
Liabilities
Property................................ (1,302,000) (1,346,000)
Allowance for bad debts................. (162,000) (256,000)
Other................................... (70,000) (99,000)
----------- -----------
(1,534,000) (1,701,000)
----------- -----------
Net deferred tax asset (liability)........... $ (566,000) $ (596,000)
=========== ===========
F-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - INCOME TAXES (continued)
The effective tax rate on income before taxes differed from the federal
statutory tax rate. The following summary reconciles taxes at the federal
statutory rate with the effective rate:
<TABLE>
<CAPTION>
Year Ended November 30
-------------------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Income taxes at statutory rate $5,789,000 34.0% $5,296,000 34.0% $5,951,000 34.0%
Increase in taxes resulting from:
State taxes, net of federal income
tax benefit 426,000 2.5 390,000 2.5 600,000 3.5
Contribution of land - - (252,000) (1.6) - -
Other 26,000 .1 96,000 .6 164,000 .9
---------- ---- ---------- ---- ---------- ----
$6,241,000 36.6% $5,530,000 35.5% $6,715,000 38.4%
========== ==== ========== ==== ========== ====
</TABLE>
NOTE 7 - INVESTMENT IN AND ADVANCES TO INVESTEE COMPANY
The Company owns a 50% interest in a joint venture that produces particleboard
for manufacturing. During 1998, the joint venture was cited by the Environmental
Protection Agency ("EPA") for a violation of certain regulations under the Clean
Air Act Amendments of 1990. The joint venture members determined that the cost
of modification to the plant to come into compliance, together with other needed
capital improvements, would be prohibitive and the joint venture elected to
cease operations in November 1998. Company management is currently in
negotiation for sale of the property and anticipates that any shortfall between
the remaining carrying value of the joint venture investment, including any
fines levied by the EPA, and the sale of the facility and the equipment will not
be significant.
F-12
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Additions
-------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End of
Year Description of Period Expenses Accounts Deductions (1) Period
---- ----------- --------- -------- -------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
1998 Allowance for Doubtful Accounts $500 $287 - $287 $500
1997 Allowance for Doubtful Accounts 500 353 - 353 500
1996 Allowance for Doubtful Accounts 500 404 - 404 500
</TABLE>
(1) Net bad debts
S-1
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
HOOKER FURNITURE CORPORATION
Date: February 3, 1999
/s/ E. LARRY RYDER
-------------------------------
E. Larry Ryder
Senior Vice President - Finance
and Administration
SP-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company
3.2 Articles of Amendment to Amended and Restated Articles of Incorporation of the Company
3.3 Amended and Restated Bylaws of the Company
4.1 Amended and Restated Articles of Incorporation of the Company (See Exhibit 3.1)
4.2 Articles of Amendment to Amended and Restated Articles of Incorporation of the Company (See Exhibit 3.2)
4.3 Bylaws of the Company (See Exhibit 3.3)
10.1 Lease, dated March 14, 1994, between Fred B. Caffey, as lessor, and the Company, as lessee
10.2 Lease, dated November 1, 1994, between Southern Furniture Exposition Building, Inc. and the Company
10.3 Form of Salary Continuation Agreement
10.4 Form of Split Dollar Agreement
27.1 Financial Data Schedule
</TABLE>
EI-1
<PAGE>
Exhibit 3.1
HOOKER FURNITURE CORPORATION
AMENDED AND RESTATED ARTICLES OF INCORPORATION
ARTICLE I
NAME
The name of the Corporation is Hooker Furniture Corporation.
ARTICLE II
PURPOSE
The Corporation is organized to engage in any lawful business not required
by the Virginia Stock Corporation Act to be stated in the Articles of
Incorporation.
ARTICLE III
AUTHORIZED SHARES
3.1 Number and Designation. The number and designation of shares that the
----------------------
Corporation shall have authority to issue and the par value per share are as
follows:
Class Number of Shares Par Value
----- ---------------- ---------
Common 5,000,000 No Par
3.2 Preemptive Rights. No holder of outstanding shares shall have any
-----------------
preemptive right with respect to (i) any shares of any class of the Corporation,
whether now or hereafter authorized, (ii) any warrants, rights or options to
purchase any such shares, or (iii) any obligations convertible into any such
shares or into warrants, rights or options to purchase any such shares.
<PAGE>
ARTICLE IV
LIMIT ON LIABILITY AND INDEMNIFICATION
4.1 Definitions. For purposes of this Article the following definitions
-----------
shall apply:
(i) "Corporation" means this Corporation only and no predecessor
-----------
entity or other legal entity;
(ii) "expenses" include counsel fees, expert witness fees, and costs
--------
of investigation, litigation and appeal, as well as any amounts expended in
asserting a claim for indemnification;
(iii) "liability" means the obligation to pay a judgment, settlement,
---------
penalty, fine, or other such obligation, including, without limitation, any
excise tax assessed with respect to an employee benefit plan;
(iv) "legal entity" means a corporation, partnership, joint venture,
------------
trust, employee benefit plan or other enterprise;
(v) "predecessor entity" means a legal entity the existence of which
------------------
ceased upon its acquisition by the Corporation in a merger or otherwise;
and
(vi) "proceeding" means any threatened, pending, or completed action,
----------
suit, proceeding or appeal whether civil, criminal, administrative or
investigative and whether formal or informal.
4.2 Limit on Liability. In every instance permitted by the Virginia Stock
------------------
Corporation Act, as it exists on the date hereof or may hereafter be amended,
the liability of a director or
-2-
<PAGE>
officer of the Corporation to the Corporation or its shareholders arising out of
a single transaction, occurrence or course of conduct shall be limited to one
dollar.
4.3 Indemnification of Directors and Officers. The Corporation shall
-----------------------------------------
indemnify any individual who is, was or is threatened to be made a party to a
proceeding (including a proceeding by or in the right of the Corporation)
because he is or was a director or officer of the Corporation or because he is
or was serving the Corporation or any other legal entity in any capacity at the
request of the Corporation while a director or officer of the Corporation,
against all liabilities and reasonable expenses incurred in the proceeding
except such liabilities and expenses as are incurred because of his willful
misconduct or knowing violation of the criminal law. Service as a director or
officer of a legal entity controlled by the Corporation shall be deemed service
at the request of the Corporation. The determination that indemnification under
this Section 4.3 is permissible and the evaluation as to the reasonableness of
expenses in a specific case shall be made, in the case of a director, as
provided by law, and in the case of an officer, as provided in Section 4.4 of
this Article; provided, however, that if a majority of the directors of the
Corporation has changed after the date of the alleged conduct giving rise to a
claim for indemnification, such determination and evaluation shall, at the
option of the person claiming indemnification, be made by special legal counsel
agreed upon by the Board of Directors and such person. Unless a determination
has been made
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<PAGE>
that indemnification is not permissible, the Corporation shall make advances and
reimbursements for expenses incurred by a director or officer in a proceeding
upon receipt of an undertaking from him to repay the same if it is ultimately
determined that he is not entitled to indemnification. Such undertaking shall be
an unlimited, unsecured general obligation of the director or officer and shall
be accepted without reference to his ability to make repayment. The termination
of a proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent shall not of itself create a presumption that
- ---- ----------
a director or officer acted in such a manner as to make him ineligible for
indemnification. The Corporation is authorized to contract in advance to
indemnify and make advances and reimbursements for expenses to any of its
directors or officers to the same extent provided in this Section 4.3.
4.4 Indemnification of Others. The Corporation may, to a lesser extent or
-------------------------
to the same extent that it is required to provide indemnification and make
advances and reimbursements for expenses to its directors and officers pursuant
to Section 4.3, provide indemnification and make advances and reimbursements for
expenses to its employees and agents, the directors, officers, employees and
agents of its subsidiaries and predecessor entities, and any person serving any
other legal entity in any capacity at the request of the Corporation, and may
contract in advance to do so. The determination that indemnification under this
Section 4.4 is permissible, the authorization of such
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<PAGE>
indemnification and the evaluation as to the reasonableness of expenses in a
specific case shall be made as authorized from time to time by general or
specific action of the Board of Directors, which action may be taken before or
after a claim for indemnification is made, or as otherwise provided by law. No
person's rights under Section 4.3 of this Article shall be limited by the
provisions of this Section 4.4.
4.5 Miscellaneous. Every reference in this Article to persons who are or
-------------
may be entitled to indemnification shall include all persons who formerly
occupied any of the positions referred to and their respective heirs, executors
and administrators. Special legal counsel selected to make determinations under
this Article may be counsel for the Corporation. Indemnification pursuant to
this Article shall not be exclusive of any other right of indemnification to
which any person may be entitled, including indemnification pursuant to a valid
contract, indemnification by legal entities other than the Corporation and
indemnification under policies of insurance purchased and maintained by the
Corporation or others. However, no person shall be entitled to indemnification
by the Corporation to the extent he is indemnified by another, including an
insurer. The Corporation is authorized to purchase and maintain insurance
against any liability it may have under this Article or to protect any of the
persons named above against any liability arising from their service to the
Corporation or any other legal entity at the request of the Corporation
regardless of the Corporation's power to indemnify against such liability. The
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<PAGE>
provisions of this Article shall not be deemed to preclude the Corporation from
entering into contracts otherwise permitted by law with any individuals or legal
entities, including those named above. If any provision of this Article or its
application to any person or circumstance is held invalid by a court of
competent jurisdiction, the invalidity shall not affect other provisions or
applications of this Article, and to this end the provisions of this Article are
severable.
4.6 Applications; Amendments. The provisions of this Article shall be
------------------------
applicable from and after its adoption even though some or all of the underlying
conduct or events relating to a proceeding may have occurred before its
adoption. No amendment, modification or repeal of this Article shall diminish
the rights provided hereunder to any person arising from conduct or events
occurring before the adoption of such amendment, modification or repeal.
ARTICLE V
CERTAIN BUSINESS COMBINATIONS
5.1 Vote Required for Certain Business Combinations. In addition to any
-----------------------------------------------
affirmative vote required by law or these Amended and Restated Articles of
Incorporation, and except as otherwise expressly provided in Section 5.2 of this
Article:
(1) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (a) any Interested Stockholder (as hereinafter
defined) or (b) any other corporation which immediately before such merger or
consolidation is an
-6-
<PAGE>
Affiliate or Associate (as hereinafter defined) of an Interested Stockholder; or
(2) any statutory exchange of stock in which any Interested Stockholder
or any Affiliate or Associate of an Interested Stockholder acquires the issued
and outstanding shares of any class of capital stock of the Corporation or any
Subsidiary in exchange for cash or property or shares or other securities or
obligations of any other corporation; or
(3) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder of all or any Substantial Part (as hereinafter defined) of the
assets of the Corporation or any Subsidiary; or
(4) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary having an aggregate Fair Market Value equal to or
greater than 10% of the aggregate Fair Market Value of all of the issued and
outstanding shares of the Voting Stock of the Corporation on the Determination
Date (as hereinafter defined) to any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
(5) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
-7-
<PAGE>
(6) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving an Interested Stockholder)
which has the effect directly or indirectly, of increasing by more than 5% the
proportion of any class of securities of the Corporation or any Subsidiary
directly or indirectly owned by an Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; shall require the affirmative vote of
the holders of at least 75% of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors (the
"Voting Stock"), voting together as a single class. Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law or otherwise.
5.2 When Higher Vote is Not Required. The provisions of Section 5.1 of this
--------------------------------
Article shall not be applicable to any particular Business Combination (as
hereinafter defined), and such Business Combination shall require only such
affirmative vote as is required by law and any other provision of these Amended
and Restated Articles of Incorporation, if all of the conditions specified in
either of the following paragraphs (1) or (2) are met:
(1) Approval by Continuing Directors. The Business Combination shall
--------------------------------
have been approved by a majority of the Continuing Directors (as hereinafter
defined), it being
-8-
<PAGE>
understood that this condition shall not be capable of satisfaction unless there
is at least one Continuing Director.
(2) Price and Procedure Requirements. Consideration shall be paid to
--------------------------------
the holders of the Common Shares in such Business Combination and all of the
following conditions shall have been met:
(a) the aggregate amount of the cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the Business
Combination of consideration other than cash to be received per share by
holders of Common Shares in such Business Combination shall be at least
equal to the highest of the following:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Stockholder for any Common Shares acquired by it
(AA) within the two--year period immediately prior to the first public
announcement of the proposal of the Business Combination (the
"Announcement Date") or (BB) in the transaction in which it became an
Interested Stockholder, whichever is higher;
(ii) the Fair Market Value per Common Share on the Announcement
Date or on the date on which the Interested Stockholder became an
Interested Stockholder (such latter date is referred to in this Article
as the "Determination Date"), whichever is higher; and
-9-
<PAGE>
(iii) (if applicable) the price per share equal to the Fair Market
Value per Common Share determined pursuant to paragraph (2) (a) (ii) above,
multiplied by the ratio of (AA) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
the Interested Stockholder for any Common Shares acquired by it within the
two-year period immediately prior to the Announcement Date to (BB) the Fair
Market Value per Common Share on the first day in such two--year period
upon which the Interested Stockholder acquired any Common Shares.
(b) the consideration to be received by holders of Common Shares shall be
in cash or in the same form as the Interested Stockholder has previously paid
for shares of such class. If the Interested Stockholder has paid for Common
Shares with varying forms of consideration, the form of consideration for Common
Shares shall be either cash or the form used to acquire the largest number of
shares of such class previously acquired by the Interested Stockholder.
(c) after such Interested Stockholder has become an Interested Stockholder
and prior to the consummation of such Business Combination, except as approved
by a majority of the Continuing Directors: (i) there shall have been (AA) no
reduction in the annual rate of dividends paid on the Common Shares (except as
necessary to reflect any subdivision of
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<PAGE>
the Common Shares), and (BB) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has the effect
of reducing the number of outstanding Common Shares; and (ii) such Interested
Stockholder shall have not become the beneficial owner of any additional shares
of Voting Stock except as part of the transaction which results in such
Interested Stockholder becoming an Interested Stockholder.
(d) after such Interested Stockholder has become an Interested Stockholder,
except as approved by a majority of the Continuing Directors, such Interested
Stockholder shall not have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances, guarantees, pledges
or other financial assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of or in connection with
such Business Combination or otherwise.
(e) except as otherwise approved by a majority of the Continuing Directors,
a proxy or information statement describing the proposed Business Combination
and complying with the requirements of the Securities Exchange Act of 1934 and
the rules and regulations thereunder (or any subsequent provisions replacing
such Act, rules or regulations) shall be mailed to shareholders of the
Corporation at least 30 days prior to the consummation of such Business
Combination
-11-
<PAGE>
(whether or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
5.3 Certain Definitions. For the purposes of this Article:
-------------------
(1) A "Business Combination" as used in this Article shall mean any
transaction which is referred to in any one or more clauses (1) through (6) of
Section 5.1 of this Article.
(2) A "person" shall mean any individual, firm, corporation,
partnership, joint venture or other entity.
(3) "Interested Stockholder" shall mean any person who or which is the
beneficial owner, directly or indirectly, of more than 10% of the outstanding
Voting Stock; provided, however, the term Interested Stockholder shall not
include the Corporation, any Subsidiary, or any savings, employee stock
ownership or other employee benefit plan of the Corporation or any Subsidiary,
or any fiduciary with respect to any such plan when acting in such capacity.
(4) A person shall be a "beneficial owner" of any Voting Stock as to
which such person and any such person's Affiliates or Associates, individually
or in the aggregate, have or share directly, or indirectly through any contract,
arrangement, understanding, relationship, or otherwise:
(a) voting power, which includes the power to vote, or to direct the
voting of Voting Stock; or
(b) investment power, which includes the power to dispose or to direct
the disposition of, Voting Stock; or
-12-
<PAGE>
(c) economic benefit, which includes the right to receive or control
the disposition of income or liquidation proceeds from Voting Stock; or
(d) the right to acquire voting power, investment power or economic
benefit (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise; provided, that in no case shall a director of the
Corporation be deemed to be the beneficial owner of Voting Stock
beneficially owned by another director of the Corporation solely by reason
of actions undertaken by such persons in their capacity as directors of the
Corporation.
(5) For the purpose of determining whether a person is an Interested
Stockholder pursuant to paragraph (3) of this Section 5.3, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of paragraph (4) of this Section 5.3 but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options or otherwise.
(6) "Affiliate" means a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with the person specified.
(7) "Associate" means as to any specified person:
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<PAGE>
(a) any corporation or organization (other than the Corporation and
its Subsidiaries) of which such person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities;
(b) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a
similar fiduciary capacity; and
(c) any relative or spouse of such person or any relative of such
spouse, who has the same home as such person.
(8) "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in paragraph (3) of this Section 5.3, the term
"Subsidiary" shall mean only a corporation of which a majority of each class of
equity securities is owned, directly or indirectly, by the Corporation.
(9) "Continuing Director" means any member of the Board of Directors
of the Corporation (the "Board") who (i) is a member of the Board before the
adoption of these Amended and Restated Articles of Incorporation or (ii) is
unaffiliated with the Interested Stockholder and was a member of the Board prior
to the time that the Interested Stockholder became an Interested Stockholder, or
(iii) any successor of a Continuing Director who is unaffiliated with the
Interested Stockholder and is
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<PAGE>
recommended to succeed a Continuing Director by a majority of Continuing
Directors then on the Board.
(10) "Fair Market Value" means:
(a) in the case of stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange--Listed Stocks, or,
if such stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on any such Exchange, on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if such stock is
not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such
quotations are available, the fair market value on the date in question of
a share of such stock as determined by a majority of the Continuing
Directors in good faith; and
(b) in case of property other than cash or stock, the fair market
value of such property on the date in question as determined by a majority
of the Continuing Directors in good faith.
(11) "Substantial Part" means more than 10% of the book value of the
total assets of the entity in question, as reflected on the most recent fiscal
year end consolidated balance sheet of
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<PAGE>
such entity existing at the time the shareholders of the Corporation would be
required to approve or authorize the Business Combination involving the assets
constituting any such Substantial Part.
5.4 Powers of the Continuing Directors. A majority of the Continuing
----------------------------------
Directors shall have the power and duty to determine for the purposes of this
Article, on the basis of information known to it after reasonable inquiry, (i)
whether a person is an Interested Stockholder, (ii) the number of shares of
Voting Stock beneficially owned by any person, (iii) whether a person is an
Affiliate or Associate of another, (iv) whether the securities to be issued or
transferred by the Corporation or any Subsidiary in any Business Combination
involving such person have an aggregate Fair Market Value equal to or greater
than 10% of the aggregate Fair Market Value of all of the issued and outstanding
shares of the Voting Stock of the Corporation on the Determination Date, and (v)
whether the assets which are the subject of any Business Combination involving
such person constitute a Substantial Part of the assets of the Corporation or
any Subsidiary.
5.5 No Effect on Fiduciary Obligations. Nothing contained in this Article
----------------------------------
shall be construed to relieve any Interested Stockholder or any director of the
Corporation from any obligation imposed by law.
5.6 Amendment or Repeal. Notwithstanding any other provision of law, these
-------------------
Amended and Restated Articles of Incorporation or the bylaws of the Corporation
(and notwithstanding the fact that a lesser percentage may be
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<PAGE>
specified by law, these Amended and Restated Articles of Incorporation or the
bylaws of the Corporation), and in addition to any affirmative vote of the
holders of any other class of capital stock of the Corporation then outstanding
which is required by law or by these Amended and Restated Articles of
Incorporation or the bylaws of the Corporation, the affirmative vote of the
holders of 75% or more of the voting power of the shares of the then outstanding
Voting Stock, voting together as a single class, shall be required to amend or
repeal this Article of these Amended and Restated Articles of Incorporation.
-17-
<PAGE>
Exhibit 3.2
ARTICLES OF AMENDMENT TO THE
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF HOOKER FURNITURE CORPORATION
WHEREAS, Hooker Furniture Corporation (the "Corporation"), a
corporation organized and existing under the laws of the Commonwealth of
Virginia, desires to have its existing Amended and Restated Articles of
Incorporation amended pursuant to Code of Virginia (1950) (S)13.1-707 as
hereinafter set forth;
NOW, THEREFORE, to that end, we, the undersigned, being the President
and Secretary of the Corporation, do hereby certify as follows:
1. That on the 25/th/ day of March, 1997, the Board of Directors of
the Corporation, by the unanimous vote of all Directors, adopted the following
Resolution:
BE IT RESOLVED that the Board of Directors of the Corporation deems it
advisable to recommend that the stockholders amend the Corporation's Amended and
Restated Articles of Incorporation to increase the number of authorized no par
value common shares from 5,000,000 to 10,000,000 and, accordingly, the Board of
Directors hereby recommends that the stockholders of the Corporation adopt at
the next annual meeting of stockholders a Resolution amending the Corporation's
Amended and Restated Articles of Incorporation as specified.
2. That on the 30/th/ day of December, 1997, the regular annual
meeting of stockholders of the Corporation was held pursuant to the notice to
stockholders as set forth in Code of Virginia (1950) (S)13.1-658, which notice
stated that one of the purposes of said meeting was to consider the adoption of
the following Resolution as required by Code of Virginia (1950) (S)13.1-707(D).
At least 69.6% of the total shares outstanding were present either in person or
by proxy at said meeting. By unanimous vote of the shares present either in
person or by proxy, thus constituting a vote of more than two-thirds of all
votes entitled to be cast as required by Code of
1
<PAGE>
Virginia (1950) (S)13.1-707(E), the stockholders voted to amend the Amended and
Restated Articles of Incorporation of the Corporation to increase the number of
authorized shares from 5,000,000 to 10,000,000, by the adoption of the following
Resolution:
BE IT RESOLVED that the existing Amended and Restated Articles of
Incorporation of Hooker Furniture Corporation be amended to increase the number
of authorized no par value common shares from 5,000,000 to 10,000,000.
Accordingly, the Corporation hereby requests that the State
Corporation Commission admit this document to record and issue a certificate
evidencing the effectiveness hereof.
IN WITNESS WHEREOF, the President and Secretary of the Corporation
hereunto affix their respective signatures, this 31/st/ March, 1998.
/s/ A. F. Hooker, Jr.
-----------------------------------
President
/s/ Robert W. Sherwood
-----------------------------------
Secretary
2
<PAGE>
Exhibit 3.3
AMENDED AND RESTATED
BYLAWS
OF
HOOKER FURNITURE CORPORATION
March 31, 1998
ARTICLE I. OFFICES
The principal office of the corporation shall be located in the City
of Martinsville, Virginia. The corporation may have such other offices, either
within or without the Commonwealth of Virginia, as the Board of Directors may
designate or as the business of the corporation may require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders
--------------
shall be held not later than the last business day in the month of March of each
year, beginning with the year 1999, at the hour of 10:00 o'clock a.m., for the
purpose of electing Directors and for the transaction of such other business as
may come before the meeting. If the election of Directors shall not be held on
the day designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as conveniently may
be. Unless required by law or
Amended and Restated Bylaws
Page 1 of 15
<PAGE>
the Articles of Incorporation require otherwise, notice of an annual meeting of
shareholders need not state the purpose or purposes for which the meeting is
called.
SECTION 2. Special Meetings. Special meetings of the shareholders,
----------------
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than ten (10%) percent of
all the outstanding shares of the corporation entitled to vote at the meeting.
Notice of a special meeting shall state the purpose or purposes for which the
meeting is called.
SECTION 3. Place of Meeting. The Board of Directors may designate
----------------
any place, either within or without the Commonwealth of Virginia unless
otherwise prescribed by statute, as the place of meeting of shareholders for any
annual meeting or for any special meeting called by the Board of Directors. A
waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the Commonwealth of Virginia,
unless otherwise prescribed by statute, as the place for the holding of such
meeting. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the corporation in
the Commonwealth of Virginia.
SECTION 4. Notice of Meeting. Written notice stating the place, day
-----------------
and hour of the meeting and, in case of special meetings, the purpose or
purposes for which the meeting is called, shall unless otherwise prescribed by
statute, be delivered not less than ten (10) nor more than sixty (60) days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, or the Secretary, or the persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. If the
purpose for which a shareholders
Amended and Restated Bylaws
Page 2 of 15
<PAGE>
meeting is called is to act on an amendment to the Articles of Incorporation, a
plan of merger or share exchange, a proposed sale of assets pursuant to Code of
Virginia (1950) (S)13.1-724, or the dissolution of the corporation, notice shall
be delivered not less than twenty-five (25) nor more than sixty (60) days before
the meeting date. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at his address
as it appears on the stock transfer books of the corporation, with postage
thereon prepaid. Notwithstanding the foregoing, no notice of a shareholder's
meeting need be given to a shareholder if (i) an annual report and proxy
statements for two consecutive annual meetings of shareholders, or (ii) all, and
at least two, checks in payment of dividends or interest on securities during a
twelve-month period, have been sent by first-class United States mail, addressed
to the shareholder at his address as it appears on the share transfer books of
the corporation, and returned undeliverable. The obligation of the corporation
to give notice of shareholders' meetings to any such shareholder shall be
reinstated once the corporation has received a new address for such shareholder
for entry on its stock transfer books.
SECTION 5. Closing of Transfer Books or Fixing of Record Date. For
--------------------------------------------------
the purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy (70) nor less
than ten (10) days prior to the date on which the particular action requiring
such determination of shareholders is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof unless the Board of Directors fixes a new
Amended and Restated Bylaws
Page 3 of 15
<PAGE>
record date, which shall be required if the meeting is adjourned to a date more
than one-hundred twenty (120) days after the date of the original meeting.
SECTION 6. Voting Lists. At least ten (10) days before each meeting
------------
of shareholders, the officer or agent having charge of the stock transfer books
for shares of the corporation shall take reasonable steps to make a complete
list of the shareholders entitled to vote at such meeting or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. Such list shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
for a period of ten (10) days prior to the meeting during regular business hours
and during the whole time of the meeting for the purposes thereof.
SECTION 7. Quorum. A majority of the outstanding shares of the
------
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
SECTION 8. Proxies. At all meetings of shareholders, a shareholder
-------
may vote in person or by proxy executed in writing by shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of
the corporation before or at the time of the
Amended and Restated Bylaws
Page 4 of 15
<PAGE>
meeting. No proxy shall be valid after six (6) months from the date of its
execution, unless otherwise provided in the proxy.
SECTION 9. Voting of Shares. Each outstanding share entitled to vote
----------------
shall be entitled to one vote upon each matter submitted to a vote at a meeting
of shareholders.
SECTION 10. Voting of Shares by Certain Holders. Shares standing in
-----------------------------------
the name of another corporation may be voted by such officer, agent or proxy as
the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the Court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation shall not be
voted, directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
Amended and Restated Bylaws
Page 5 of 15
<PAGE>
SECTION 11. Action by Shareholders Without Meeting. Unless otherwise
--------------------------------------
provided by law, any action required to be taken at a meeting of the
shareholders, or any other action which may be taken at a meeting of the
shareholders, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
SECTION 12. Cumulative Voting. Unless otherwise provided in the
-----------------
Articles of Incorporation, Directors are elected by a plurality of the votes
cast by the shares entitled to vote in the election at a meeting at which a
quorum is present. Shareholders do not have a right to cumulate their votes for
Directors unless the Articles of Incorporation so provide.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the
--------------
corporation shall be managed by its Board of Directors.
SECTION 2. Number, Tenure and Qualification. The number of
--------------------------------
directors of the Corporation shall not be less than five (5) nor more than
fifteen (16). No decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. Each director shall hold office
until the next annual meeting of shareholders and until his successor shall have
been elected and duly qualified, or until removed by the shareholders, whichever
event first occurs.
SECTION 3. Regular Meetings. A regular meeting of the Board of
----------------
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place for the holding of
additional regular meetings without other notice than such resolution.
Amended and Restated Bylaws
Page 6 of 15
<PAGE>
SECTION 4. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by or at the request of the President or any two
directors. The person or persons authorized to call special meetings of the
Board of Directors may fix the place for holding any special meeting of the
Board of Directors called by them.
SECTION 5. Notice. Notice of any special meeting shall be given at
------
least seven (7) days prior thereto by written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail so addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any director may waive notice of any
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 6. Quorum. A majority of the number of directors in office
------
immediately before the meeting shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors then present may
adjourn the meeting from time to time without further notice.
SECTION 7. Manner of Acting. The act of the majority of the
----------------
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
SECTION 8. Action Without a Meeting. Any action that may be taken
------------------------
by the Board of Directors at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so to be taken, shall be signed
before such action by all of the directors.
Amended and Restated Bylaws
Page 7 of 15
<PAGE>
SECTION 9. Vacancies. Any vacancy occurring in the Board of
---------
Directors may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors, unless otherwise
provided by law. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of directors may be filled by election by
the Board of Directors for a term of office continuing only until the next
election of directors by the shareholders.
SECTION 10. Compensation. By resolution of the Board of Directors,
------------
each director may be paid his expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a stated salary as director or a fixed
sum for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 11. Presumption of Assent. A director of the corporation who
---------------------
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
ARTICLE IV. OFFICERS
SECTION 1. Number. The officers of the corporation shall include
------
the Chairman of the Board of Directors, a President, an Executive Vice-
Amended and Restated Bylaws
Page 8 of 15
<PAGE>
President, one or more Senior Vice-Presidents, a Secretary, and a Treasurer,
each of whom shall be elected by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected by the Board of
Directors or appointed by the President. One person may hold two or more
offices, except those of President and Secretary.
SECTION 2. Election and Term of Office. The officers of the
---------------------------
corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign or shall have been removed in the manner hereinafter provided.
SECTION 3. Removal. Any officer, employee or agent may be removed
-------
by the Board of Directors with or without cause whenever in its judgment, the
best interests of the corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Any officer or assistant officer, if appointed by another officer, may likewise
be removed by such officer. Election or appointment of an officer, employee or
agent shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. Chairman of the Board of Directors. The Chairman of the
----------------------------------
Board of Directors shall preside at all meetings of stockholders and of the
Board of Directors and shall
Amended and Restated Bylaws
Page 9 of 15
<PAGE>
perform such other duties as may be prescribed from time to time by these Bylaws
or by the Board of Directors. In addition, the Chairman shall be an ex-officio
member of all committees appointed by the shareholders or by the Board of
Directors of the Corporation.
SECTION 6. President. The President shall be the principal
---------
executive officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the corporation thereunto authorized by the Board
of Directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 7. Executive Vice-President. In the absence of the
------------------------
President or in event of his death, inability or refusal to act, the Executive
Vice-President shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President. The Executive Vice-President shall perform such other duties as from
time to time may be assigned to him by the President or by the Board of
Directors.
SECTION 8. Senior Vice-President. In the absence of both the
---------------------
President and the Executive Vice-President, or in event of their death,
inability or refusal to act, the Senior Vice-President having the most seniority
with the corporation shall perform the duties of the President,
Amended and Restated Bylaws
Page 10 of 15
<PAGE>
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Senior Vice-Presidents shall perform such other
duties as from time to time may be assigned to them by the President or by the
Board of Directors.
SECTION 9. Secretary. The Secretary shall: (a) keep the minutes of
---------
the proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the Secretary by such shareholder; (e) sign with the President, certificates
for shares of the corporation, the issuance of which shall have been authorized
by resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors.
SECTION 10. Treasurer. The Treasurer shall: (a) have charge and
---------
custody of and be responsible for all funds and securities of the corporation;
(b) receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositaries as shall be
selected in accordance with the provisions of Article V of these Bylaws; and (c)
in general perform all of the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him by the President
or by the Board of Directors. If required by the
Amended and Restated Bylaws
Page 11 of 15
<PAGE>
Board of Directors, the Treasurer shall give a bond for the faithful discharge
of his duties in such sum and with such surety or sureties as the Board of
Directors shall determine.
SECTION 11. Salaries. The salaries and expense allowances of the
--------
President and Chairman of the Board shall be fixed from time to time by the
Board of Directors. The President and Chairman of the Board shall fix the
salaries and expense allowances of the other officers from time to time. No
officer shall be prevented from receiving such salary by reason of the fact that
he is also a director of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The President shall be empowered in his
---------
discretion to enter into any contract or agreement and to execute and deliver
any instrument in the name of and on behalf of the corporation unless
specifically limited by the Board of Directors. The Board of Directors may
authorize any other officer or officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and on behalf of
the corporation, and such authority may be general or confined to specific
instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
-----
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. Checks, Drafts, etc. All checks, drafts or other orders
-------------------
for the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Amended and Restated Bylaws
Page 12 of 15
<PAGE>
SECTION 4. Deposits. All funds of the corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the Board of Directors
may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing
-----------------------
shares of the corporation shall be in such form as shall be determined by the
Board of Directors. All such certificates shall be signed by the President or
Vice-President and the Secretary or an Assistant Secretary, or be authenticated
by facsimiles of the signatures of the President and Secretary or by a facsimile
of the signature of the President and the written signature of the Secretary or
an Assistant Secretary. Every certificate authenticated by a facsimile of a
signature must be countersigned by a transfer agent or transfer clerk, or by the
facsimile signature of the transfer agent or transfer clerk, and be registered
by an incorporated bank or trust company, either domestic of foreign, as
registrar of transfers, before issuance. Even though an officer who signed, or
whose facsimile signature has been written, printed or stamped on, a certificate
for shares shall have ceased by death, resignation, or otherwise to be an
officer of the corporation before such certificate is delivered by the
corporation, such certificate shall be as valid as though signed by a duly
elected, qualified and authorized officer, if it be countersigned by a signature
or facsimile signature of a transfer agent or transfer clerk and registered by
an incorporated bank or trust company as registrars of transfers. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled, except that in case of a lost,
destroyed
Amended and Restated Bylaws
Page 13 of 15
<PAGE>
or mutilated certificate, a new one may be issued therefor upon such
terms and indemnity to the corporation as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the corporation
------------------
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the corporation,
and on surrender for cancellation of the certificate for such shares. The
person in whose name shares stand on the books of the corporation shall be
deemed by the corporation to be the owner thereof for all purposes.
SECTION 3. Transfer Agents and Registrar. The Board of Directors may
-----------------------------
appoint one or more transfer agents or transfer clerks, and one or more
registrars which shall be an incorporated bank or trust company, either domestic
or foreign, who shall be appointed at such times and places as the requirements
of the corporation may necessitate and the Board of Directors may designate.
ARTICLE VII. FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of
December and end on the 30th day of November in each year.
ARTICLE VIII. DIVIDENDS
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
Amended and Restated Bylaws
Page 14 of 15
<PAGE>
ARTICLE IX. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation. The failure to affix a seal shall not affect
the validity of any instrument.
ARTICLE X. WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to
be given to any shareholder or director of the corporation under the provisions
of these Bylaws or under the provisions of the Articles of Incorporation or
under the provisions of the Virginia Stock Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
ARTICLE XI. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board of Directors at any regular or special meeting of the Board
of Directors.
ADOPTED AND EFFECTIVE as of the 31st day of March, 1998.
/s/ Robert W. Sherwood
________________________________________
Secretary
Approved:
/s/ J. Clyde Hooker Jr.
_____________________________________
Chairman of the Board
Amended and Restated Bylaws
Page 15 of 15
<PAGE>
Exhibit 10.1
LEASE OF CAFFEY WAREHOUSE
HIGHWAY 58 EAST, HENRY COUNTY, VIRGINIA
THIS LEASE made this 14th day of March, 1994, by and between FRED B.
CAFFEY, of Martinsville, Virginia, hereinafter referred to as "Lessor," and
HOOKER FURNITURE CORPORATION, of Martinsville, Virginia, hereinafter referred to
as "Lessee."
RECITALS
1. Lessor is the sole owner of the premises hereinafter described and
desires to lease the same Lessee for storage and/or its manufacturing business.
2. The parties hereto desire to set forth the agreement between them
concerning the lease of said property.
3. It is the purpose of this agreement to set forth the terms and
conditions of this lease.
IN CONSIDERATION of the mutual covenants and promises contained herein, the
parties agree as follows:
ARTICLE ONE
SUBJECT AND PURPOSE
Lessor leases to Lessee the building known as Caffey Warehouse situated on
Highway #58 in Henry County, Virginia.
All that said warehouse containing 125,000 square feet, which is the entire
square footage of said warehouse, and the right of ingress and egress thereto.
It is understood and agreed that Lessee shall have the right to use the
parking lot situated on the premises, and Lessee has the responsibility of
maintaining the parking lot and grounds surrounding said building. In addition,
Lessee shall have use of all toilets situated in the warehouse and must maintain
the same in a clean and sanitary condition throughout the term hereof. Map of
said property attached. Described as Tract "B", 12,467 acres.
ARTICLE TWO
TERM, RENT AND OPTION TO PURCHASE
Lessor demises the above premises for a term of three years, commencing May
1, 1994, and terminating April 30, 1997, at a monthly
<PAGE>
[MAP APPEARS HERE]
<PAGE>
rental of $22,500.00 ($.18 per square foot), due and payable on the first of
each month. The total rental amount for this term will be $810,000.00. Should
any installment of rent not be paid by the 10th day of any month, Lessee shall
pay a late charge of 5% of the delinquent installment. All rental payments shall
be made to Lessor at 407 Starling Avenue, Martinsville, VA 24112.
Lessee has option to purchase said property for $2,050,000.00 if Lessor is
notified at least six months before expiration of said lease. If option is
exercised a $.02 per square foot per month will be credited ($90,000.00) toward
the purchase price of $2,050,000.00. The net purchase price will be
$1,960,000.00. It is agreed that Lessor has the option of making an IRS 1031
Starker Tax deferred exchange with Lessor bearing the expense of said exchange.
Closing will occur within thirty (30) days of expiration of lease with taxes and
rent being pro-rated. The Lessor shall convey the property by General Warranty
Deed with English Covenants of title.
ARTICLE THREE
ALTERATIONS, ADDITIONS AND IMPROVEMENTS
Lessee shall not alter, add ot, or make improvements upon the demised
premises without first obtaining the express written consent of Lessor. Further,
should Lessor grant his consent to any such alterations, additions, or
improvements placed on the premises by Lessee, it shall be at the sole expense
of Lessee.
ARTICLE FOUR
REPAIRS
Lessee covenants and agrees to make all necessary repairs to the premises
of all descriptions as needed, including, but not limited to, all docks and
overhead doors. Lessor agrees to the contract dated 4/4/94 with National Roof
Coaters of St. Albans, West Virginia, for $ 93,352.00 Any subsequent repairs to
the roof will be the responsibility of Lessee. Further, Lessee agrees at the
termination of this lease to return the demised premises to Lessor in the same
condition which they were at the commencement of this lease, less any reasonable
wear and tear. Lessee further agrees to maintain the premises in a good state of
cleanliness and good order. In addition, should
-2-
<PAGE>
Lessee during the term of this lease damage the premises for whatever reason,
then it shall be liable for such damages and shall make all necessary repairs to
restore the premises to their undamaged condition, with the full written
approval of Lessor as to such damage repairs. Lessee agrees to maintain and make
necessary repairs to the sprinkler system.
ARTICLE FIVE
UTILITIES
All applications and connections for necessary utility services used by
Lessee on the demised premises shall be made in the name of Lessee only, and
Lessee shall be solely liable for utility charges as they become due, including
those for sewer, water, gas, electricity and telephone services, if any.
ARTICLE SIX
TAXES
Lessor shall pay all real estate taxes levied against the demised property,
except Lessee shall be liable for any increase in real estate taxes as a result
of a higher assessment for improvements or alterations placed on the demised
premises by Lessee with Lessor's written permission. All other taxes and levies
for personal property and fixtures of whatever description shall be the sole
responsibility of Lessee.
ARTICLE SEVEN
INSURANCE
During the term of this lease, Lessor shall maintain at his sole expense
fire and extended coverage insurance covering the demised premises. Such
insurance shall only cover the improvements upon the demised premises, and such
other fire insurance to cover the tangible personal property, including
equipment and fixtures placed on the premises by Lessee, shall be carried by
Lessee at its sole expense. Further, Lessee shall maintain adequate insurance
coverage to protect the demised premises as a result of any damages caused by
its activities and its occupancy and use of the premises. In addition, should
Lessor be required to pay higher rates for fire and extended coverage insurance
covering the demised premises as a result of the activities or use and occupancy
of the premises by Lessee, then Lessee shall be liable to reimburse Lessor for
any such increase in insurance costs.
-3-
<PAGE>
Lessor and Lessee hereby mutually release and discharge each other from any
liabilities arising from leased premises.
Lessee shall at its sole expense maintain liability insurance coverage,
which shall be so drawn so as to provide insurance protection to Lessee as well
as Lessor as a result of injuries to third persons, including other tenants, or
property damages to such third persons and other tenants resulting from the
negligent acts of Lessee, its employees, agents or invitees.
ARTICLE EIGHT
UNLAWFUL OR DANGEROUS ACTIVITY
Lessee shall neither use nor occupy the demised premises or any part
thereof for any unlawful, disreputable, or ultra-hazardous business purpose nor
operate or conduct its business in a manner constituting a nuisance of any kind.
Lessee shall immediately, on discovery of any unlawful, disreputable, or
ultra-hazardous use, take action to halt such activity.
ARTICLE NINE
INDEMNITY
Lessee shall indemnify Lessor against all expenses, liabilities and claims
of every kind, including reasonable counsel fees, by or on behalf of any person
or entity, arising out of either (1) a failure by Lessee to perform any of the
terms or conditions of this lease, (2) any injury or damage happening on or
about the demised premises due solely to the negligence of the Lessee, (3)
failure to comply with any law of any governmental authority, or (4) any
mechanic's lien or security interest filed against the demised premises or
equipment, materials for alterations of buildings, or improvements thereon.
ARTICLE TEN
DEFAULT OR BREACH
Each of the following events shall constitute a default or breach of this
lease by Lessee:
1. If Lessee, or any successor or assignee of Lessee, while in possession,
shall file a petition in bankruptcy or insolvency or for reorganization under
any bankruptcy act, or shall voluntarily take advantage of any such act by
answer or otherwise, or shall make an assignment for the benefit of creditors.
-4-
<PAGE>
2. If involuntary proceedings under any bankruptcy law or insolvency act
shall be instituted against Lessee, or if a receiver or trustee shall be
appointed of all or substantially all of the property of Lessee, and such
proceedings shall not be dismissed or the receivership or trusteeship vacated
within thirty (30) days after the institution or appointment.
3. If Lessee shall fail to pay Lessor any rent or additional rent when the
rent shall become due and shall not make the payment within thirty (30) days
after notice thereof by Lessor to Lessee.
4. If Lessee shall fail to perform or comply with any of the conditions of
this lease and if the nonperformance shall continue for a period of thirty (30)
days after notice thereof by Lessor to Lessee or, if the performance cannot be
reasonably had within the 30-day period, Lessee shall not in good faith have
commenced performance within the 30-day period and shall not diligently proceed
to completion of performance.
5. If Lessee shall vacate or abandon the demised premises.
6. If this lease or the estate of Lessee hereunder shall be transferred to
or shall pass to or devolve on any other person or party, except in the manner
herein permitted.
ARTICLE ELEVEN
EFFECT OF DEFAULT
In the event of any default hereunder, as set forth in Article Ten, the
rights of Lessor shall be as follows:
1. Lessor shall have the right to cancel and terminate this lease, as well
as all of the right, title and interest of Lessee hereunder, by giving the
Lessee not less than ten (10) days' notice of the cancellation and termination.
On expiration of the time fixed in the notice, this lease and the right, title
and interest of Lessee hereunder shall terminate in the same manner and with the
same force and effect, except as to Lessee's liability, as if the date fixed in
the notice of cancellation and termination were the end of the term herein
originally determined.
2. Lessor may elect, but shall not be obligated, to make any payment
required of Lessee herein or comply with any agreement, term or condition
required hereby to be performed by Lessee, and Lessor shall
-5-
<PAGE>
have the right to enter the demised premises for the purpose of correcting or
remedying any such default and to remain until the default has been corrected or
remedied, but any expenditure for the correction by Lessor shall not be deemed
to waive or release the default of Lessee or the right of Lessor to take any
action as may be otherwise permissible hereunder in the case of any default.
3. Lessor may re-enter the premises immediately and remove the property and
personnel of Lessee, and store the property in a public warehouse or at a place
selected by Lessor, at the expense of Lessee. After re-entry, Lessor may
terminate the lease on giving ten (10) days' written notice of termination to
Lessee. With the notice, re-entry will not terminate the lease. On termination,
Lessor may recover from Lessee all damages approximately resulting from the
breach, including the cost of recovering the premises, and the worth of the
balance of this lease over the reasonable rental value of the premises for the
remainder of the lease term, which sum shall be immediately due Lessor from
Lessee. Notwithstanding the rights of Lessor hereunder relative to re-entry and
termination, he may elect not to re-enter and not to terminate this lease, but
to hold Lessee liable for the payment of the full rental for the remainder of
the term of this lease.
4. After re-entry, Lessor may relet the premises or any part thereof for
any term without terminating the lease, at the rent and on the terms as Lessor
may choose. Lessor may make alterations and repairs to the premises. The duties
and liabilities of the parties if the premises are relet as provided herein
shall be as follows:
(a) In addition to Lessee's liability to Lessor for breach of the
lease, Lessee shall be liable for all expenses of the reletting, for the
alterations and repairs made, and for the difference between the rent
received by Lessor under the new lease agreement and the rent installments
that are due for the same period under this lease.
(b) Lessor shall have the right, but shall not be required, to apply
the rent received from reletting the premises (1) to reduce the
indebtedness of Lessee to Lessor under the lease, not including
indebtedness for rent, (2) to expenses of the reletting and altera-
-6-
<PAGE>
tions and repairs made, (3) to rent due under this lease, or
(4) to payment of future rent under this lease as it becomes due.
If the new Lessee does not pay a rent installment promptly to Lessor, and
the rent installment has been credited in advance of payment to the indebtedness
of Lessee other than rent, or if rentals from the new Lessee have been otherwise
applied by Lessor as provided for herein and during any rent installment period
are less than the rent payable for the corresponding installment period under
this lease, Lessee shall pay Lessor the deficiency, separately for each rent
installment deficiency period, and before the end of that period. Lessor may at
any time after a reletting terminate the lease for the breach on which Lessor
had based the re-entry and subsequently relet the premises.
ARTICLE TWELVE
ACCESS TO PREMISES: SIGNS POSTED BY LESSOR
Lessee shall permit Lessor or his agents to enter the demised premises at
all reasonable hours to inspect the premises or make repairs that Lessee may
neglect or refuse to make in accordance with the provisions of this lease, and
also to show the premises to prospective purchasers or tenants. Lessee shall,
within two months prior to expiration of the term, permit the usual notice of
"For Rent" and "For Sale" to be placed on the demised premises and to remain
thereon without hindrance and molestation.
ARTICLE THIRTEEN
WAIVERS
The failure of Lessor to insist on a strict performance of any of the terms
and conditions hereof shall be deemed a waiver of the rights or remedies that
Lessor may have regarding that specific instance only, and shall not be deemed a
waiver of any subsequent breach or default in any terms and conditions.
ARTICLE FOURTEEN
ASSIGNMENT, MORTGAGE OR SUBLEASE
Neither Lessee nor its successors or assigns shall assign, mortgage, pledge
or encumber this lease or sublet the demised premises
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<PAGE>
in whole or in part, or permit the premises to be used or occupied by others,
nor shall this lease be assigned or transferred by operation of law without the
prior consent in writing of Lessor in each instance. Such consent shall not be
unreasonably withheld by the Lessor. If this lease is assigned or transferred,
or if all or any part of the demised premises is sublet or occupied by anybody
other than Lessee, Lessor may, after default by Lessee, collect rent from the
assignee, transferee, subtenant, or occupant, and apply the net amount collected
to the rent reserved herein, but no such assignment, subletting, occupancy, or
collection shall be deemed a waiver of any agreement or condition hereof, or the
acceptance of the assignee, transferee, subtenant, or occupant as Lessee. Lessee
shall continue to be liable hereunder in accordance with the terms and
conditions of this lease and shall not be released from the performance of the
terms and conditions hereof. The consent by Lessor to an assignment, mortgage,
pledge, or transfer shall not be construed to relieve Lessee from obtaining the
express written consent of Lessor to any future transfer of interest.
ARTICLE FIFTEEN
SURRENDER OF POSSESSION
Lessee shall, on the last day of the term, or on earlier termination and
forfeiture of the lease, peaceably and quietly surrender and deliver the demised
premises to Lessor free of subtenancies, including all buildings, additions, and
improvements constructed or placed thereon by Lessee, except movable trade
fixtures, all in good condition and repair. Any trade fixtures or personal
property not used in connection with the operation of the demised premises and
belonging to Lessee, if not removed within thirty (30) days at the termination
or default, and if Lessor shall so elect, shall be deemed abandoned and become
the property of Lessor without any payment or effect therefor. Lessor may remove
such fixtures or property from the demised premises and store them at the risk
and expense of Lessee if Lessor shall not so elect. Lessee shall repair and
restore all damage to the demised premises caused by the removal of equipment,
trade fixtures, and personal property.
-8-
<PAGE>
ARTICLE SIXTEEN
CONDEMNATION
In the event of a taking by eminent domain in whole or in part of the
leased premises or the building of which they are a part (or a sale under threat
thereof) or the parking lot appurtenant thereto, resulting in the leased
premises becoming unsuitable for the use then being made of them by Lessee, then
this lease shall automatically cease and terminate on the date title passes to
the condemning authority. If there is a partial taking which does not result in
the leased premises being rendered unsuitable for the use then being made of
them by Lessee, then this lease shall continue, with a proportionate abatement
of rent for that portion of the leased premises, if any, so taken.
ARTICLE SEVENTEEN
TOTAL AGREEMENT: APPLICABLE TO SUCCESSORS
This lease contains the entire agreement between the parties and cannot be
changed or terminated except by a written instrument subsequently executed by
the parties hereto. This lease and the terms and conditions hereto apply to and
are binding upon the heirs, legal representatives, successors, and assigns of
both parties.
ARTICLE EIGHTEEN
APPLICABLE LAW
THIS AGREEMENT shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia.
ARTICLE NINETEEN
NOTICES
All notices permitted or required to be given hereunder shall be given in
writing and sent by registered or certified mail, return receipt requested; if
to Lessor, to 407 Starling Avenue, Martinsville, VA 24112, and if to Lessee, to
P.O. Box 4708 Martinsville, VA 24115.
IN WITNESS WHEREOF, Lessor has hereunto set his hand and seal, and Lessee
has caused its corporate name to be signed by E. Larry Ryder,
-9-
<PAGE>
its Vice President, the day and year first above written.
(SEAL) /s/ Fred B. Caffey
---------------------------------
Fred B. Caffey
Lessor
CORPORATION - Lessee HOOKER FURNITURE
(SEAL)
By /s/ E. Larry Ryder
-------------------------------
E. Larry Ryder
Senior Vice President
Finance and Administration
STATE OF VIRGINIA,
COUNTY/CITY OF MARTINSVILLE, TO WIT
The foregoing instrument was acknowledged before me this 17th day of March,
1994, by Fred B. Caffey as Lessor herein.
My Commission expires: March 31, 1995
/s/ Rebecca V. Hartis
---------------------------------
Notary Public
-10-
<PAGE>
STATE OF VIRGINIA,
COUNTY/CITY OF MARTINSVILLE, TO-WIT:
The foregoing instrument was acknowledged before me this 12th day of April,
1994, by E. Larry Ryder, Vice President of Hooker Furniture Corporation, on
behalf of that corporation as Lessee herein.
My Commission expires: 4/30/95
/s/ JoAnne D. Gravely
---------------------------------
Notary Public
<PAGE>
Addendum to lease of Caffey Warehouse Highway 58 East Henry county, Virginia
dated March 14, 1994 by and between Fred B. Caffey (Lessor) and Hooker Furniture
Corporation (Lessee) all of Martinsville, Virginia. This addendum only changes
Article Two titled Term, Rent, and Option to Purchase. The remainder of said
lease will remain in effect.
The above lease will be extended from May 1, 1997 to April 30, 1999 at 17(cents)
per Square foot per month ($21,250.) Lessee has an option for an additional two
years or purchase with 6 months notice required in either case before expiration
of this addendum. If lease is renewed for an additional 2 years annualized cost
of living adjustment (COLA) will be added to rent.
LESSOR
/s/ Fred B. Caffey
---------------------------------
Fred B. Caffey
Corporation Lessee Hooker Furniture Corporation
By /s/ Edwin L Ryder
-------------------------------
E. Larry Ryder
Senior Vice President
Finance and Administration
State of Virginia,
county/city of Martinsville, To Wit
The foregoing instrument was acknowledge before me this 20th day of Sept.,
1996 by Fred B. Caffey as Lessor herein,
My commission expires: 1-31-97
[SIGNATURE APPEARS HERE]
---------------------------------
Notary Public
State of Virginia,
county/city of , To Wit:
----------------------
The foregoing instrument was acknowledge before me this ______ day of
_______, 1996 by E. Larry Ryder, Senior Vice President of Hooker Furniture
Corporation, on behalf of that Corporation as Lessee herein.
My commission expires:
-------------------------
---------------------------------
Notary Public
<PAGE>
Addendum 2 to lease of Caffey Warehouse located Highway 58 East Henry County,
Virginia dated March 14, 1994 by and between Fred E. Caffey (Lessor) and Hooker
Furniture Corporation (Lessee) all of Martinsville, Virginia. Lessee has
requested installing an enclosed finishing area for furniture in said property
which includes using flammable materials. With proper governmental approval
Lessor has granted permission with the following provisions:
(1) Lessee agrees to bear the cost of insurance formerly provided by Lessor as
describe in the first sentence of Section 7 Titled Insurance.
(2) Lessee agrees if and when lessee vacates the property any environmental
problems created by said addition will be cleaned up to governmental
requirements at lessees expense.
This addendum is in effect starting December 19, 1997
Lessor
/s/ Fred B. Caffey
---------------------------------
Fred B. Caffey
Hooker Furniture Corporation
Lessee
---------------------------------
E. Larry Ryder
Senior Vice President
Finance and Administration
State of Virginia,
county/city of Martinsville, To Wit
The foregoing instrument was acknowledge before me this 22nd day of
December, 1997 by Fred B. Caffey as Lessor herein,
My commission expires: 1-31-2001 [SIGNATURE APPEARS HERE]
------------------------------------
Notary Public
State of Virginia,
county/city of , To Wit
------------------
The foregoing instrument was acknowledge before me this _______ day of
________________,1997 by E. Larry Ryder, Senior Vice President of Hooker
Furniture Corporation, on behalf of that Corporation as Lessee herein.
My commission expires:
------------------------------------
Notary Public
<PAGE>
Exhibit 10.2
LEASE OF SPACE IN INTERNATIONAL HOME FURNISHINGS CENTER
IHFC: Southern Furniture Exposition LESSEE: Hooker Furniture Corp.
Building, Inc. P0 Box 4708
Post Office Box 828 Martinsville VA 24115
High Point, North Carolina 27261
INCLUDE NAME ADDRESS FOR NOTICES AND STATE OF INCORPORATION
DESCRIPTION OF PREMISES: Space No. W1047 plus bays W1041-W1054 inclusive,
---------------------------------------------
in the International Home Furnishings C1003, C1005, C1007 C1009 C1011, C1067,
Center, High Point, North Carolina C1069, H1047, H1001, H1002, HI042,
HI043 AND HI045
TERM: 5 1/2 years
------
COMMENCEMENT DATE: November 1, 1994.
---------- --
EXPIRATION DATE: April 30, 2000.
-------- ----
ANNUAL RENTAL:
24,633 sq. ft. @ $9.40 per sq. ft. per yr. $231 ,550.20
7,232 sq. ft. @ $9.85 per sq. ft. per yr. 71,235.20
-------------
$ 302,785.40
Plus: November 1, 1994 - October 31, 1999
7,232 sq. ft. @ $1.00 per sq. ft. per yr. $ 7,232.00
for common area improvements for above
lease term only
ADDITIONAL OR SUPPLEMENTAL TERMS AND PROVISIONS:
Addendum A for Hamilton Wing Leases is attached hereto and made a part of this
lease.
This lease supersedes the present lease between the Lessor and Lessee for Space
No. W1047, dated February 13, 1992, and such prior lease shall be deemed
cancelled.
IHFC, by this Agreement, leases to Lessee and Lessee leases from IHFC, the
Premises described above, at the rental, for the term and upon the other terms
and conditions contained on this page and in IHFC's Standard Terms and
Conditions of Lease (IHFC Form No.900103) which are incorporated by reference in
and made a part of this Lease.
IHFC and Lessee have caused this Lease to be executed by their duly
authorized officers, this the 6th day of October, 1994.
--- ------- --
IHFC: LESSEE:
Southern Furniture Hooker Furniture Corp.
Exposition Building, Inc. ------------------------------
COMPLETE FORMAL BUSINESS NAME
By: [SIGNATURE APPEARS HERE] CORPORATION
---------------------------- -----------------------------
PRESIDENT LEGAL FORM OF BUSINESS: CORPORA-
TION, PARTNERSHIP OR INDIVIDUAL
AND STATE OF PRINCIPAL OFFICE
By: [SIGNATURE APPEARS HERE]
--------------- ---------
NAME TITLE
Attest: [SIGNATURE APPEARS HERE] PRESIDENT, VICE PRESIDENT, GENERAL
------------------------- PARTNER, OWNER
SECRETARY
Attest: [SIGNATURE APPEARS HERE]CORPORATE
------------------------ SEAL
SECRETARY IF LESSEE IS A
CORPORATION
CORPORATE SEAL
<PAGE>
Page 1 of 5
STANDARD TERMS AND CONDITIONS OF LEASE
IHFC FORM NO. 900103
1.0 (S)1.1. Description. Lessee acknowledges receipt of a drawing or
PREMISES floor plan showing the exact location of the Premises in the
Intentional Home Furnishings Center showroom complex owned and
operated by IHFC (the "Home Furnishings Center"). The Home
Furnishings Center is more particularly described on a map or
plat prepared by Davis-Martin-Powell and Associates, Inc. and
designated Job No. S-18512, a copy of which is on file at the
office of IHFC and is incorporated in this Lease by reference.
The lease of the Premises includes the right of access to the
Premises through the common areas of the Home Furnishings Center.
(S)1.2. Relocation. Lessee acknowledges and agrees that it is
essential to the orderly and efficient operation of the Home
Furnishings Center by IHFC that IHFC have the right from time to
time to relocate lessees in order to achieve optimum utilization
of all space in the Home Furnishings Center. Consequently, IHFC
shall be entitled to relocate Lessee as provided in this section
if IHFC determines that relocation of Lessee is in the best
interest of the Home Furnishings Center in the conduct of its
business. IHFC shall exercise its right to relocate Lessee in the
following manner: (a) the premises to which Lessee is to be
relocated (the "New Premises") shall be selected by IHFC and
shall be equivalent (as determined by IHFC in its sole
discretion) in size and value to the Premises; (b) IHFC shall
notify Lessee of its intent to relocate Lessee within a time
period prior to the commencement of the next regularly scheduled
Market such that the Lessee has a reasonable period of time (as
determined by IHFC in its sole discretion) to refixture,
redecorate, and prepare to show at that Market and identify the
proposed New Premises; (c) within ten (10) days after notice of
relocation by IHFC, Lessee, at its option, may terminate this
Lease by written notice to IHFC; (d) if Lessee fails to terminate
this Lease as provided in (c) above, the New Premises shall be
substituted for the original Premises, this Lease shall continue
in full force and effect without any other change, and IHFC, at
its expense, shall move Lessees property to the New Premises and
shall pay the costs (less a reasonable allowance for
depreciation) of replacing (as nearly as possible) all
installations and improvements of Lessee which cannot be moved to
the New Premises.
2.0 (S)2.1. Commencement and Expiration Date. The Commencement Date
TERM and Expiration Date of the Lease term are the dates set forth on
the first page of this Lease.
(S)2.2. Holding Over. If Lessee remains in possession of the
Premises after the expiration or termination of this Lease,
Lessee shall be only a tenant at will but its occupancy shall
otherwise be subject to all of the terms and provisions of this
Lease, except that Lessee shall pay per diem rent for each day
Lessee occupies the premises, in an amount equal to one hundred
fifty percent (150%) of the then prevailing annual rates for
comparable space charged by IHFC to new tenants, prorated on a
daily basis.
3.0 (S)3.1. Annual Rental. Lessee shall pay to IHFC without offset or
RENT deduction the Annual Rental for the Premises set forth on the
first page of this Lease, in semiannual installments, each such
semiannual installment being due and payable in advance on or
before the first day of November and on or before the first day
of May (the "Rental Payment Dates") of each calendar year during
the Lease term, except as provided in (S)3.2.
(S)3.2. No Reduction. If the Commencement Date is a day other
than a Rental Payment Date, Lessee acknowledges and agrees that
by receiving possession of the Premises on the Commencement Date,
Lessee will be able to show its merchandise at the next ensuing
Market and will receive the same benefits as would have been the
case had the Lease term commenced on the Rental Payment Date next
preceding the actual Commencement Date. Lessee therefore agrees
to pay a full semiannual rental payment for the period of time
beginning with the Commencement Date and ending on the day before
the next Rental Payment Date.
(S)3.3. Rent Adjustment. In addition to the Annual Rental
provided for in (S)3.1, Lessee agrees to pay IHFC, for each
Lease Year, an amount determined by multiplying the Annual Rental
by a percentage equal to the cumulative percentage increase, if
any, in the CPI, determined as follows:
(a) "CPI" means the Consumer Price Index, All Urban Consumers -
U.S. City Average - All items (1982-4=100) as published by the
Bureau of Labor Statistics of the United States Department of
Labor;
(b) If the Commencement Date is a Rental Payment Date, A Lease
Year is the annual period commencing on the Commencement Date
and on each anniversary thereof. If the Lease Term commences on
any other date, a Lease Year is the annual period commencing on
the Rental Payment Date next preceding the Commencement Date,
and on each anniversary thereof;
(c) The cumulative percentage increase in the CPI shall be the
percentage increase, if any, in the CPI for the sixth month
prior to the Lease Year in question over the CPI for the same
month next preceding the Commencement Date;
(d) If the CPI ceases to use the 1982-4 average equaling 100 as
the basis of calculation, or if a change is made in the term or
number of items contained in the CPI, or if the CPI is altered,
modified, converted or revised in any other way, then the
foregoing computations shall be made with the use of such
conversion factor, formula or table for converting the CPI as
may be published by the Bureau of Labor Statistics or, if the
Bureau shall not publish the same, then with the use of a
conversion factor which adjusts the modified CPI to the figure
that would have been arrived at had the change in the manner of
computing the CPI in effect on the date of this lease not been
altered. If the Bureau shall cease publication of the CPI, then
any substitute or successor index published by the Bureau or
other governmental agency of the United States shall be used,
similarly adjusted. If neither the CPI or a successor or
substitute index similarly adjusted is available, then a
reliable governmental or other reputable publication selected
by IHFC and evaluating the information theretofore used in
determining the CPI shall be used;
(e) IHFC shall bill the Lessee for the cumulative increase in
the Annual Rental at the same time as its normal invoices for
Annual Rental are sent prior to each Lease Year, and, upon
request by Lessee, shall furnish Lessee with a statement
explaining the method of computation of the CPI increase; and
(f) IHFC shall not be obliged to make any adjustments or
recomputations, retroactive or otherwise, by reason of any
revision which may later be made in the amount of the CPI first
published for any month.
<PAGE>
Page 2 of 5
4.0 (S)4.1. Use. Lessee shall use the Premises for the display,
USE AND exhibition, and sale of home furnishings, furniture, accessories,
OCCUPANCY carpeting and wall coverings, and for office or clerical purposes
OF PREMISES to the extent reasonably required for the conduct of such
BY LESSEE activities at the Premises, and for no other purpose.
(S)4.2. Operation During Markets. Lessee shall open the Premises,
exhibit its products and staff the Premises with employees for
the entire period of each regularly scheduled Market.
(S)4.3. Rules and Regulations. IHFC has established rules,
regulations, guidelines and policies (the "Guidelines") regarding
the operation of the Home Furnishings Center, and shall be
entitled to establish Guidelines from time to time after the
execution of this Lease. Lessee acknowledges receipt of a copy of
the current Guidelines and agrees to comply, and to cause its
employees, contractors, agents and others occupying the Premises
to comply, with all current and future Guidelines, provided that
(a) IHFC notifies Lessee of any Guidelines established after the
date of this Lease and (b) the Guidelines established by IHFC do
not unreasonably interfere with Lessee's use of the Premises for
the purposes set forth in (S)4.1.
(S)4.4. Restriction on Other Operations of Lessee. Lessee agrees
(insofar as and to the extent Lessee may lawfully do so) that
during all regularly scheduled Markets or other times at which
the Home Furnishings Center is officially open to buyers during
the term of this Lease, Lessee will not, within a five (5) mile
radius of the Home Furnishings Center (a) operate any other
showroom under the same trade name or names under which Lessee
does business from the Premises or (b) exhibit in any other
location the same merchandise which Lessee exhibits in the
Premises. Lessee acknowledges and agrees that it is in the best
interest of Lessee and other tenants in the Home Furnishings
Center as exhibitors, and in the best interest of the successful
operation of the Home Furnishings Center as a national market for
home furnishings, to maximize buyer traffic in, and the duration
of buyer visits to, the Home Furnishings Center. Lessee agrees
that the foregoing provisions are reasonably necessary to
accomplish these purposes, and that a breach of these provisions
by Lessee will constitute a material breach of the Lease.
(S)4.5. Property of Others. Lessee will not place or permit to be
placed in the Premises property of any other person or entity,
unless it has first secured the written consent of IHFC.
(S)4.6. Market Dates; Admission. IHFC shall have the sole right
to prescribe the dates of regularly scheduled Markets applicable
to Lessee's lines of merchandise, and qualifications, conditions
and times of admission to the Home Furnishings Center. IHFC may
restrict admission to accredited buyers and condition admission
upon the presentation of credentials prescribed or provided by
IHFC. Without limiting the generality of the foregoing, Lessee
agrees not to admit any buyers to the Premises during the seven
day period prior to each Market.
(S)4.7. Compliance. Lessee agrees not to use or occupy the
Premises, or permit them to be used or occupied, in any manner
which violates applicable laws or regulations affecting the
Premises or the Home Furnishings Center established by any
governmental or public authority having jurisdiction to
promulgate such laws or regulations, or by any insurance carrier
insuring the Premises, property located therein, or the Home
Furnishings Center.
(S)4.8. Inspection by IHFC. IHFC and its representatives shall be
entitled to enter the Premises at any reasonable time for the
purpose of inspecting the Premises, performing any work required
or permitted to be performed by IHFC under this Lease, and
exhibiting the Premises to prospective mortgagees and tenants.
IHFC agrees that to the extent practical, it will not
unreasonably interfere with the operation of Lessee's business in
the exercise of its rights under this Section.
5.0 (S)5.1. Transfers by Lessee. Lessee agrees not to assign this
ASSIGNMENT Lease or sublet all or any part of the Premises without Lessor's
AND prior written consent in each instance. In the event of an
SUBLETTING assignment or sublease, Lessee shall remain primarily liable for
payment and performance of all obligations under this Lease upon
default by the assignee or subtenant, notwithstanding the
acceptance of rent or performance directly from the assignee or
subtenant by IHFC.
(S)5.2. Subleasing Policy. All proposed subleases which IHFC is
requested to approve pursuant to (S)5.1 must conform to
subleasing policies established by IHFC from time to time, and
Lessee acknowledges and agrees that IHFC's subleasing policies,
among other things, may provide for selection of sublessees from
a priority waiting list, the use of standard forms, direct
billing by IHFC, the imposition of subleasing fees by IHFC, and
the retention by IHFC of the excess of any amounts payable under
the sublease over the rent and other charges payable under this
Lease. Nothing in this section may be construed to create any
inference that IHFC is obligated to approve any sublease which
complies with the provisions of this section.
(S)5.3. Change of Ownership. For purposes of this Paragraph, an
assignment includes: (1) one or more sales or transfers by
operation of law or otherwise by which an aggregate of more than
fifty percent (50%) of Lessee's shares or ownership shall be
vested in a party or parties who are not shareholders or owners
of Lessee as of the date of this Lease; (2) any transfer by
operation of law; (3) any assignment among co-tenants; and (4)
any assignment of a part interest in this lease.
6.0 (S)6.1. Acceptance. Lessee has examined the Premises and accepts
REPAIRS them in their present conditions, without any representation on
AND the part of IHFC as to the present or future condition of the
MAINTENANCE Premises except as otherwise specifically provided in this Lease.
(S)6.2. IHFC's Repair Obligations. IHFC shall at IHFC's expense
maintain the exterior walls, roof, structural supports and common
areas of the Home Furnishings Center in good order and repair;
provided, however, that (a) IHFC is not an insuror and its
responsibility to do so shall be confined to making the proper
repairs within a reasonable time after it has received notice of
the necessity, nature and location of the repairs and (b) Lessee
shall repair any damage to the Home Furnishings Center caused by
Lessee or its agents.
(S)6.3. Lessee's Repair Obligations. Lessee agrees to maintain
the Premises in a neat and clean condition, in good order and
repair, and in full compliance with applicable laws, ordinances,
regulations, and codes.
(S)6.4. Surrender. At the expiration or termination of this
Lease, Lessee agrees to quit and surrender the Premises to IHFC
in as good a condition as when received, reasonable wear and tear
and damage by fire or other casualty excepted.
<PAGE>
Page 3 of 5
7.0 (S)7.1. Lessee's Property. Subject to the security interest
LESSEE'S granted in (S)12.4 of this Lease, all merchandise, office
PROPERTY; furniture and equipment, samples, inventory and other unattached
ALTERATIONS movable property placed in the Premises by Lessee shall remain
AND the property of Lessee, and Lessee, if it is not in default under
IMPROVEMENTS this Lease, shall be entitled to remove such items from the
Premises, provided Lessee repairs any damage to the Premises or
the Home Furnishings Center caused by such removal.
(S)7.2. Placing Property in or Removing Property From Premises.
Except as otherwise specifically permitted by IHFC's Guidelines,
all property of Lessee shall be moved to or from the Premises by
the employees or designated contractors of IHFC, at the expense
and risk of Lessee, and Lessee agrees to pay IHFC upon receipt of
IHFC's invoice, IHFC's standard charges for moving such items to
and from the Premises. IHFC shall not be liable for any loss or
damage to property of Lessee, unless caused by the negligence of
IHFC or its employees.
(S)7.3. Alterations and Improvements. Lessee shall be entitled to
make alterations, additions, and improvements to the Premises,
provided Lessee first obtains IHFC's written consent, which IHFC
will not unreasonably withhold. Any alteration, addition,
improvement or other property attached to the Premises by Lessee
(including, without limitation, electrical wiring, lighting
fixtures, carpeting and track lighting) shall become the property
of IHFC upon the expiration or termination of this Lease, unless
IHFC elects to require Lessee to remove the same, repair any
damages occasioned by such installation or removal, and restore
the Premises to their original condition.
(S)7.4. Performance of Work. All work in connection with
alterations, additions, or improvements to the Premises (a) shall
be performed in a first class, workmanlike manner with all
required governmental and utility permits obtained in advance by
Lessee; (b) shall not weaken or impair the structural integrity
of the Home Furnishings Center; and (c) shall be in accordance
with plans and specifications, and performed by contractors,
approved by IHFC. All contractors performing such work shall
carry insurance satisfactory to IHFC and shall execute lien
waivers, and indemnity agreements satisfactory to IHFC. IHFC
shall have no duty to Lessee or anyone else to enforce these
requirements or inspect the work of Lessee's contractors.
8.0 IHFC agrees to pay all ad valorem taxes and assessments levied,
TAXES assessed or charged against the Home Furnishings Center. Lessee
agrees to list and pay all license, privilege, ad valorem or
other taxes levied, assessed or charged against Lessee or IHFC on
account of the operation of Lessee's business in the Premises or
on account of property owned by Lessee.
9.0 IHFC agrees to furnish heat, electricity, air conditioning, and
UTILITIES elevator service to the Premises for a period beginning thirty
(30) days prior to the commencement of each regularly scheduled
Market, and ending fourteen (14) days following the close of each
such Market; provided, however, that IHFC shall not be liable for
interruptions in service due to breakdowns or other causes beyond
its control. If Lessee uses the Premises at any other times,
Lessee agrees to pay such additional charges as may be imposed by
IHFC for such excess utility use.
10.0 (S)10.1. Insurance. Lessee agrees to keep its property located in
INSURANCE; the Premises, including all alterations, additions and
INDEMNITY improvements made by it, insured against loss or damage by fire
or other casualty, under an "all risks" policy in an amount equal
to full replacement cost value thereof. Lessee agrees to maintain
in force comprehensive general liability insurance coverage on
the Premises, with a minimum combined single limit of $500,000
for death, personal injury or property damage, naming IHFC as an
additional insured. This general liability coverage may be either
on an "occurrence" or a "claims made" basis. If on a "claims
made" basis, Lessee must either:
(a) Agree to provide certificates of insurance evidencing the
above coverages for a period of three years after expiration
of the lease, which certificate shall evidence a "retroactive
date" no later than the Commencement Date; or
(b) Purchase the extended reporting period endorsement for the
policy or policies in force during the term of this lease and
evidence the purchase of this extended reporting period
endorsement by means of a certificate of insurance or a copy of
the endorsement itself.
All policies shall provide that unless IHFC is given ten (10)
days written notice of any cancellation, failure to renew, or
material change, the insurance shall remain in full force and
effect, without change. On or before the Commencement Date,
Lessee agrees to provide IHFC with satisfactory evidence that all
required insurance is in force. Lessee may provide any insurance
required under this Article through its corporate or blanket
policies.
(S)10.2. Waiver of Subrogation. To the extent that any business
interruption or loss or damage to property occurring in the
Premises or in the Home Furnishings Center, or in any manner
growing out of or connected with Lessee's occupation of the
Premises or the condition thereof (whether or not caused by the
negligence of IHFC or Lessee or their respective agents,
employees, contractors, tenants, licensees, or assigns) is
covered by insurance (regardless of whether the insurance is
payable to or protects IHFC or Lessee, or both) neither IHFC nor
Lessee, nor their respective officers, directors, employees,
agents, invitees, assignees, tenants, or subtenants, shall be
liable to the other for such business interruption or loss or
damage to property, it being understood and agreed that each
party will look to its insuror for reimbursement. This release
shall be effective only so long as the applicable insurance
policies contain a clause to the effect that it shall not affect
the right of the insured to recover under the policies. Such
clauses shall be obtained by the parties wherever possible.
Nothing in this Section may be construed to impose any other or
greater liability upon either IHFC or Lessee than would have
existed in its absence.
(S)10.3. Assumption of Risks, Release, and Indemnity. Lessee (1)
assumes all risks with respect to, (2) releases IHFC from
liability for, and (3) agrees (except to the extent IHFC is
effectively protected by insurance) to protect, indemnify and
save harmless IHFC from and to defend IHFC (through counsel
acceptable to IHFC) against any claim liability, loss, or damage
arising out of or connected with the following, however caused
and wherever originating and regardless of whether the cause or
means of repairing the same is accessible to or under the control
of Lessee:
(a) Damage to property of Lessee, or its agents, employees or
subtenants occurring in or about the Home Furnishings Center;
(b) Damage to property of anyone occurring in or about the
Premises;
(c) Any injury to or interruption of business or loss of
profits attributable to or connected with any damage to
property referred to in subparagraphs (a) or (b), above.
<PAGE>
Page 4 of 5
(d) Death or personal injury occurring in or about the Premises
(unless resulting from the negligence of IHFC or its
employees); or(e) Any other risks with respect to which Lessee
is required to insure by the terms of this Lease (whether or
not such insurance is actually in force).
In addition to and without limiting the generality of the
foregoing. Lessee's assumption of risk, release, and indemnity
obligations as set forth above shall apply to any claim,
liability, loss or damage arising out of or in connection with
(1) Lessee's occupancy of or conduct of business in the Premises;
(2) the condition of the Premises; (3) any default of Lessee
under this Lease; and (4) mechanic's or materialmen's liens
asserted by persons claiming to have dealt with Lessee or
Lessee's contractors.
11.0 (S)11.1. Option to Terminate. If the Premises are damaged or
DAMAGE OR destroyed by fire or other casualty to such extent that they are
DESTRUCTION completely untenantable, or if the area of the Home Furnishings
Center in which the Premises are located is so severely damaged
that IHFC elects to demolish, or completely rebuild it, IHFC may
terminate this Lease by notifying Lessee within thirty (30) days
following the damage or destruction, and rent and other charges
payable by Lessee under this lease shall be apportioned to the
date of the damage or destruction.
(S)11.2. Obligation to Repair or Restore. If the Premises are
damaged by fire or other casualty, unless IHFC has exercised its
right to terminate, if any, under (S)11.1, IHFC shall with
reasonable dispatch, and in any event within one hundred eighty
(180) days, repair and restore the Premises to their condition
existing at the date of the damage or destruction (except for
alterations and improvements installed by Lessee and other
property of Lessee, which Lessee shall repair and restore within
that time) and this Lease shall remain in full force and effect
except that rent shall abate as provided in (S).11.3.
(S)11.3. Rent Abatement. If the Premises are damaged or destroyed
by fire or other casualty and this Lease is not terminated, rent
and other charges under this Lease shall abate in the same
percentage as the rentable area of the Premises available for use
bears to the entire rentable area of the Premises; provided,
however, that if the Premises are damaged or destroyed to such
extent that it is unreasonable to expect Lessee to continue to
operate the Premises as a showroom, all rent shall abate from the
date of the damage or destruction until the earlier of the date
the Premises are repaired and restored, or the date Lessee
reopens the Premises as a showroom. Notwithstanding the
foregoing, if IHFC is able to repair and restore the Premises
within such time as to permit Lessee (in the exercise of
reasonable dispatch and considering the time required for Lessee
to complete Lessee's restorations to the Premises and redecorate
them) to use the Premises for a showroom at the next ensuing
Market after the damage or destruction, there shall be no
abatement of rent.
12.0 (S)12.1. Events of Default. Lessee shall be in default under this
DEFAULT Lease if any one of the following Events of Default occurs:
(a) Lessee fails to pay when due any installment of rent or
other amount due under the terms of this Lease;
(b) Lessee fails to pay when due any other amount owed to IHFC;
or
(c) Lessee repudiates or fails to perform any obligation under
(S).1.2 (Relocation), (S).4.0 (Use), (S).5.0 (Assignment and
Subletting), (S).7.3 (Alterations), (S).13.0 (Subordination)
or (S).14.0 (Estoppel Certificates).
(d) Lessee vacates or abandons the Premises;
(e) Lessee becomes insolvent, executes an assignment for the
benefit of creditors, is adjudicated a bankrupt, files for
relief under the reorganization provisions of any Federal
bankruptcy law or state insolvency law, or a permanent receiver
of the property of Lessee is appointed by any court of
competent jurisdiction.
(f) Lessee repudiates or, within ten (10) days after notice of
nonperformance by IHFC, fails to perform any other obligation
which it is required to perform under the terms of this Lease
or, if performance cannot reasonably be had within ten (10)
days after notice from IHFC, Lessee fails to commence
performance within that period and diligently proceed to
completion of performance.
(S)12.2. Remedies. If an Event of Default occurs, IHFC, at its
option and without further notice to Lessee, may pursue any
remedy now or hereafter available to IHFC under the laws of the
State of North Carolina. Without limiting the generality of the
foregoing, IHFC shall be entitled to reenter the Premises by
force, summary proceedings or otherwise, expelling Lessee and
removing all property from the Premises, all without liability to
Lessee or anyone else and either:
(a) attempt to relet the Premises for such term and rental and
upon such other terms and conditions as IHFC in its sole
discretion deems advisable. All rentals received by IHFC from
such reletting shall be applied, first, to payment of any
indebtedness other than rent due from Lessee to IHFC; second,
to payment of any expenses of reletting, including, without
limitation, the costs of recovering the Premises, such
alterations or repairs as may be necessary to relet the
Premises, brokerage fees, and reasonable attorney's fees; third
to payment of any rent unpaid under the terms of this Lease;
and the residue, if any, to the payment of rent as the same
becomes due and payable under this Lease. If the amount
received from such reletting and applied to rent during any
semiannual period is less than the rent reserved under this
Lease, Lessee agrees to pay the deficiency to IHFC. The
deficiency shall be calculated and paid semiannually. No
reentry or taking possession of the Premises by IHFC shall be
construed as an election upon its part to terminate this Lease
unless IHFC so notifies Lessee or this Lease is terminated by
order of a court of competent jurisdiction; or
(b) notwithstanding any reletting without termination, at any
time after an Event of Default occurs, elect to terminate this
Lease, and, in addition to IHFC's other remedies, recover from
Lessee all damages incurred by reason of Lessee's default,
including, without limitation, the costs of recovering the
Premises, reasonable attorney's fees, and the worth, at the
time of the termination, of the excess, if any, of the amount
of rent reserved under this Lease over the then reasonable
rental value of the Premises for the remainder of the term of
the Lease, all of which amounts shall be immediately due and
payable from Lessee to IHFC.
(S)12.3. Late Charges. If any installment of rent or any other
amount due under this Lease is not received by IHFC within ten
(10) days after the date such payment was due, then Lessee shall
be obligated to pay, in addition to the amount due, a late charge
equal to five percent (5%) of the overdue amount. Lessee agrees
that this late charge represents a fair and reasonable estimate
of the additional processing, accounting and other costs IHFC
will incur by reason of late payment by Lessee, the exact amount
of which would be difficult to ascertain. Notification by IHFC to
Lessee that a late payment charge has been added to the amount of
overdue rent or other charges shall not constitute a waiver of
Lessee's default, nor preclude IHFC from exercising any other
remedy.
<PAGE>
Page 5 of 5
(S)12.4. Security Interest. As security for performance and
payment of all present and future rents and other obligations
required to be paid or performed by Lessee under the terms of
this Lease, and for any other amounts owed IHFC by Lessee, Lessee
hereby grants unto IHFC a security interest in all
installations, samples, goods, merchandise, furniture, fixtures,
and other property of Lessee, now owned or hereafter acquired,
located in the Premises or the Home Furnishings Center. If an
Event of Default occurs, IHFC at any time thereafter may
exercise, in addition to its other remedies, the rights of a
secured party under Chapter 25 of the North Carolina General
Statutes. The proceeds from any sale of the collateral pursuant
to such remedies shall be applied in the following order: (a) the
expense of taking, removing, holding for sale, and preparing for
sale, specifically including IHFC's reasonable attorney's fees;
(b) the expense of liquidating any liens, security interests or
other encumbrances superior to this security interest; and (c)
amounts owed by Lessee to IHFC under the terms of this Lease or
otherwise, in the order herein provided for. Lessee agrees to
execute such financing statements and other documents as may be
required to perfect the security interest granted to IHFC under
this Section.
(S)12.5. Partial Payment. IHFC shall not be obligated to accept
partial payments of rent or other charges due under this Lease.
If IHFC accepts any such payment, IHFC shall not be deemed to
have waived the default of Lessee by reason of non-payment of
such charges in full, nor to have waived its right to collect
late charges. IHFC will hold any partial payment so received as a
deposit against full payment of such amounts. At any time prior
to full payment by Lessee of such amounts, IHFC may exercise any
one or more of its remedies on default, and apply the deposit to
any amounts or damages owed IHFC as of the date IHFC elects to
exercise such remedies, including, without limitation, pro rata
rent and other charges payable under this Lease for the current
lease period up through the date of the exercise by IHFC of its
remedies upon default. The acceptance of such deposit by IHFC
shall be entirely without prejudice to IHFC's right thereafter,
at any time prior to payment in full, to assert such default,
apply the deposit as provided in this section, and pursue all
remedies available to IHFC under this Lease or applicable law.
(S)12.6. Default Under Prior Lease. If this Lease is to take
effect at the expiration of an earlier lease between IHFC and
Lessee for space in the Home Furnishings Center (the "Prior
Lease"), then this Lease is subject to Lessee's performing its
obligations under the Prior Lease up through the date of its
expiration. If an Event of Default occurs under the Prior Lease
and IHFC, pursuant to its rights under the Prior Lease, either
(a) terminates Lessee's right to possession of the Premises or
(b) terminates the Prior Lease, then this Lease shall be
automatically terminated, whether or not such termination is
expressly stated in any notice from IHFC to Lessee.
13.0 At the election of IHFC, this Lease shall be subordinate to a
SUBORDINATION first mortgage or deed of trust held by a lending institution and
secured by the Home Furnishings Center; provided, however, that
IHFC agrees to use reasonable efforts to secure from the
mortgagee a nondisturbance agreement providing that in the event
of foreclosure the mortgagee will recognize the validity of this
Lease, and, provided Lessee is not in default, will not disturb
Lessee's possession hereunder.
14.0 Upon ten (10) days prior written notice from IHFC, Lessee agrees
ESTOPPEL to execute, acknowledge and deliver to IHFC, Lessee's
CERTIFICATES certificate: (a) stating whether this Lease is in full force and
effect; (b) stating whether this Lease has been modified, and if
so, the nature of such modification; (c) stating the date through
which rent and other charges are paid in advance; (d) stating
whether, to Lessee's knowledge, there are any uncured defaults of
IHFC under this Lease, specifying the nature of any claimed
default; and (e) providing such other information as IHFC may
reasonably request with respect to the status of the Lease. Any
such certificate may be conclusively relied upon by IHFC or any
prospective purchaser or mortgagee of the Home Furnishings
Center.
15.0 All notices required or permitted by the terms of this Lease
NOTICES shall be deemed given when deposited in the United States
Registered or Certified Mail, Postage Prepaid, or with
verification of delivery by telegram, cable, telex, commercial
courier or any other generally accepted means of business
communication, to either party, at the address set forth for such
party on the first page of this Lease. Either party may change
the address to which notices must be sent by giving notice to the
other party in accordance with this Section.
16.0 (a) This Lease shall be governed, construed, and enforced under
MISCELLANEOUS the laws of North Carolina and the parties submit to the
jurisdiction of the courts of North Carolina and stipulate that
Guilford County, North Carolina, is proper venue for the
purpose of all controversies which may arise under this Lease;
(b) This Lease contains the entire understanding of the parties
and there are no conditions precedent to its effectiveness or
collateral understandings with respect to its subject matter;
(c) It may not be modified except by writing signed by both
parties;
(d) it shall not be construed strictly against either party,
but fairly in accordance with their intent as expressed herein;
(e) Lessor's remedies are cumulative and not exclusive of other
remedies to which Lessor may be legally entitled;
(f) No waiver of any breach of a provision of this Lease may be
construed to be a waiver of any succeeding breach of the same
or any other provision, nor shall any endorsement or statement
on any check or letter accompanying payment be deemed an accord
and satisfaction, and IHFC may accept payment without prejudice
to its rights to pursue any remedy provided for in this Lease;
(g) Time is of the essence in every particular, especially
where the obligation to pay money is involved;
(h) Amounts not paid IHFC when due will bear interest on the
unpaid balance at the lower of one and one-half percent (1-
1/2%) per month or the maximum lawful rate; and
(i) This Lease binds the parties, their respective heirs,
personal representatives, successors and assigns.
<PAGE>
- --------------------------------------------------------------------------------
ADDENDUM A
- --------------------------------------------------------------------------------
This Addendum contains provisions which modify and supplement the provisions
contained in the standard IHFC Lease and in IHFC's Standard Terms and Conditions
of Lease. If there is any conflict between the terms of this Addendum and the
terms of IHFC's standard Lease or Standard Terms and Conditions of Lease, this
Addendum controls.
1. SIGNAGE
. Lessee agrees to pay for and maintain the standard exterior signage in
accordance with signing specification on all fascias. (Signs are required
on all fascias.) Lessee agrees not to place any other signs, banners, or
other material of any kind on the exterior of the premises.
2. DESIGN STATEMENT
. This Lease is contingent upon Lessee making a professionally designed
showroom statement both interiorly and exteriorly.
3. WINDOWS
. Lessee agrees that draperies, blinds, paper, curtains, or any other
device that limits vision in the Premises will not be installed upon or
near any window or door of the Premises.
<PAGE>
[GRAPHIC OF FLOOR PLAN APPEARS HERE]
Space No. W1047 plus bays W1041 through W1054 inclusive,
TENTH FLOOR PLAN C1003, C1005, C1007, C1009, C1011, C1067, C1069,
H1047, H1001, H1002, H1042, H1043, H1045 31,865 Sq. Ft.
Wrenn, Commerce & Hamilton Wings
<PAGE>
Exhibit 10.3
SALARY CONTINUATION AGREEMENT
-----------------------------
This agreement entered into the______ day of __________ , _______, between
Hooker Furniture Corporation, a domestic Corporation having its principal office
in Martinsville, Virginia (hereinafter referred to as "the Company") and
________________ of _________________, ________________, (hereinafter referred
to as "the Employee").
Whereas the Employee has rendered the Company valuable service and it is the
desire of the Company to have the benefit of his continued loyalty, service and
counsel and also to assist him in providing for the contingencies of death and
old age dependency, it is hereby agreed:
1. Benefits - Total salary continuation benefits as set forth in this
--------
contract shall be based on annual compensation for the preceding year as
described in Schedule A attached and included as part of this contract. Once
the Employee attains a level of annual compensation and receives the
corresponding salary continuation benefits per Schedule A, the Employee will
remain in that total salary continuation bracket until his annual compensation
level increases to the next bracket. Once the total salary continuation amount
is attained, it may only be increased and not decreased as a result of possible
decreases in annual compensation levels.
2. Retirement - Should the Employee still be in the employ of the Company
----------
upon the first day of the month following or coincident with his 60th birthday,
he will be fully vested in the retirement benefits under this agreement and upon
application for such retirement, the Company will commence to pay him 1/10th of
his total salary continuation amount, per Schedule A attached, each year for a
period of 10 years. At any time after attaining age 55 and before attaining age
60, the Employee may apply in writing for early retirement. In that event, the
annual payment specified above will be reduced by 1/120th for each full month
remaining from the date of retirement until the Employee's 60th birthday. In
the event of early retirement, the employee may elect to have payments deferred
for any length of time until the January following his 65th birthday when
payments will automatically begin. In the event that the Employee should die
after said payments have commenced, but before expiration of said 10 year
period, the unpaid balance of the 10 annual payments will continue to be paid by
the Company to those beneficiaries designated in Paragraph 3.
3. Death Benefit - Should the Employee die while still in the employee of
-------------
the Company, the Company will commence to pay 1/10th of the total salary
continuation, per Schedule A attached, each year for a continuous period of 10
years as follows: _____________________________. The beneficiaries named hereon
may be changed at any time by the Employee, with the agreement of the Company,
by written amendment.
<PAGE>
Page 2 of 4
4. Disability Benefit - In the event of total disability (as defined
------------------
below) this contract will continue in effect throughout such period of
disability until the Employee's 60th birthday when full benefits or, in the case
of early retirement, partial benefits as described in Paragraph 2 above are
payable.
For purposes of this section, the term "disability" means that the Employee
is not able to perform with reasonable continuity the substantial and material
duties of his own occupation in the usual or customary way due to injury,
disease, illness, pregnancy or mental disorder.
5. Conditions - (a) The provisions of Paragraph 2 are conditional upon
----------
the continuous employment of the Employee by the Company (excluding periods of
compulsory military service and subject to the provisions of Paragraph 5 hereof)
until the first day of the month following or coincident with the Employee's
60th birthday, or his death, whichever is sooner, and upon the first further
condition that, during the 10 year period subsequent to said date, the Employee
shall not engage in business activities which are in competition with the
Company without first obtaining the written consent of the Company.
(b) The Company has procured certain life insurance policies on the
life of the Employee to aid in meeting his obligations under this agreement. It
is understood, however, that such policies held by the Company, and the proceeds
therefrom, shall be treated as the general assets of the Company; that it shall
in no way represent the vested, secured or preferred interest of the Employee or
his beneficiaries under this agreement; and that the Company shall be under no
obligation to either procure or continue life insurance in force upon the life
of the Employee.
(c) The Employee hereby agrees that he has answered truthfully and
completely, without mental reservation or concealment, any question or request
for information by the insurance company in connection with the issuance of
insurance policies described in Paragraph 5 (b) above. In the event the
Employee fails to do so, or dies by suicide, and the liability of the insurer of
such policy is restricted as a result of such failure or suicide, then the
Company shall thereby be released from all of its obligations under Paragraph 2
of this Agreement.
6. Leave of Absence - The Company may, in its sole discretion, grant the
----------------
Employee a leave of absence for a period not to exceed one year, during which
time the Employee will be considered to be still in the employ of the Company
for the purposes of this Agreement.
7. Right to Accelerate Payment of Benefits - The Company hereby reserves
---------------------------------------
the right to accelerate the payment of any of those sums specified in Paragraph
1 and 2 thereof without the consent of the Employee, his estate, beneficiaries,
or any other person claiming through or under him.
8. Assignability - Except to the extent that this provision may be
-------------
contrary to law, no assignment, pledge or attachment of any of the benefits
under this Agreement shall be valid or recognized by the Company.
<PAGE>
Page 3 of 4
9. Employment or Other Rights - This Agreement creates no rights in the
--------------------------
Employee to continue in the employ of the Company for any specific length of
time, nor does it create any rights in the employ or obligations on the part of
the Company, other than those set forth herein.
THIS AGREEMENT is solely between the Company and the Employee. The Employee and
his beneficiaries designated under Paragraph 3, shall have recourse only against
the Company for enforcement, and it shall be binding upon the beneficiaries,
heirs, executors and administrators of the Employee and upon the successors and
assigns of the Company.
EXECUTED as of the day and year first above written.
WITNESS: COMPANY BY:
____________________________________ ____________________________________
WITNESS: EMPLOYEE:
____________________________________ ____________________________________
<PAGE>
Page 4 of 4
SCHEDULE A
----------
- -----------------------------------------------------------------------
ANNUAL COMPENSATION (1) TOTAL SALARY CONTINUATION (2)
- -----------------------------------------------------------------------
$175,000 AND OVER $400,000
150,000 TO 174,999 350,000
125,000 TO 149,999 300,000
100,000 TO 124,999 250,000
75,000 TO 99,999 200,000
50,000 TO 74,999 150,000
UNDER $50,000 100,000
(1) To be defined for the current year as reported W-2 earnings for the
previous December 31st before adjustment for salary deferrals.
(2) Payable in ten (10) equal annual installments beginning on the January 10th
following the Employee's retirement or death and annually on January 10 for
a period of ten (10) years.
<PAGE>
Exhibit 10.4
HOOKER FURNITURE CORPORATION
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT made as of the _____ day of _____________, ______, by
and between Hooker Furniture Corporation, (the "Corporation") and
__________________ (the "Employee").
WHEREAS, the Employee is a valued employee of the Corporation; and
WHEREAS, the Employee wishes to provide life insurance protection for
his beneficiary or beneficiaries in the event of his death, under a policy or
policies of life insurance insuring his life (hereinafter referred to as the
"Policy"), which is described in Exhibit A attached hereto and which is being
issued by ____________________ Insurance Company (the "Insurer"); and
WHEREAS, in recognition of the management service that Employee has
rendered and is expected to render to the Corporation, the Corporation is
willing to pay the premiums due on the Policy as an additional employment
benefit for the Employee, on the terms and conditions hereinafter set forth; and
WHEREAS, the Employee has purchased or will contemporaneously purchase
the Policy from the Insurer in the face amount designated in Exhibit A; and
WHEREAS, the Corporation and the Employee have agreed that the
Employee collaterally assign the Policy to the Corporation, in order to secure
the repayment of the premiums which the Corporation will pay on the Policy, or
such other amount as described in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants hereinafter set forth, the Parties agree as follows:
ARTICLE 1: OWNERSHIP OF THE POLICY
1.1 Employee as Owner. The Employee shall be the sole and absolute
-----------------
owner of the Policy including all supplemental riders and endorsements thereto
and may exercise all ownership rights granted to the owner thereof by the terms
of the Policy, except as otherwise provided herein.
1.2 Future Actions. The Employee and Corporation agree that they
--------------
will take all necessary action to cause the Insurer to issue the Policy, and
shall take any further action which may be necessary to cause the Policy to
conform to the provisions of this Agreement. The parties hereto agree that the
Policy shall be subject to the terms and conditions of this Agreement and of the
collateral assignment filed with the Insurer relating to the Policy.
<PAGE>
1.3 Assignment. The Employee agrees to execute an assignment
----------
(hereinafter the "Assignment") to the Corporation to secure the Corporation's
rights under this Agreement, in the form required by or acceptable to the
Insurer, a copy of which is attached hereto as Exhibit B. The Employee and the
Corporation agree to be bound by the terms of the Assignment, and the Assignment
shall not be terminated, altered or amended by the Employee prior to a
termination event as described in Section 4.1, without the express written
consent of the Corporation.
1.4 Corporation's Rights. The Corporation's rights with respect to
--------------------
the Policy shall be limited to:
(a) The right to receive an amount as set forth in Section 4.3
(the "Corporate Interest") on a termination event, as defined in
Section 4.1;
(b) The right to possess the Policy; and
(c) The right to release the Assignment upon receipt of the
Corporate Interest.
The Corporation shall have the right to borrow against the Policy, and
to secure that loan by the Policy, in an amount which, together with the unpaid
interest accrued thereon, will at no time exceed the Corporate Interest.
The Corporation shall make the Policy reasonably available to the
Employee and the Insurer.
1.5 Employee's Rights. The Employee shall, as owner of the Policy,
-----------------
retain all other rights in the Policy not held by the Corporation pursuant to
Section 1.4, including, but not limited to, the following:
(a) The right to cause the full or partial surrender of the
Policy upon a termination event, as defined in Section 4.1, and to
succeed to full ownership of the Policy cash values after satisfaction
of the Corporate Interest; provided, however, that the Employee shall
give the Corporation thirty (30) days advance written notice of the
exercise of such right;
(b) The right to exercise all non-forfeiture or lapse option
rights permitted by the terms of the Policy;
(c) The right to designate and change the beneficiary or
beneficiaries of the portion of the proceeds of the Policy payable,
upon the death of the Employee, pursuant to Section 3.1 (the
"Employee's Death Benefit Portion"); and
(d) The right to assign the Employee's rights in and with
respect to the Policy.
-2-
<PAGE>
Prior to a termination event, as defined in Section 4.1, the Employee
shall not have the right to borrow against the Policy.
Pursuant to Section 1.5(d), the Employee shall have the right
absolutely and irrevocably to give to a transferee all of his right, title and
interest in and to the Policy, subject to the collateral assignment of the
Policy to the Corporation pursuant hereto. The Employee may exercise this right
by executing a written transfer of ownership in the form used by the Insurer for
transferring insurance policies, and delivering this form to the Corporation.
Upon receipt of such form, executed by the Employee and duly accepted by the
transferee thereof, the Corporation shall acknowledge such transfer in writing,
and shall thereafter treat the Employee's transferee as the sole owner of all of
the Employee's right, title and interest in and to the Policy, subject to this
Agreement and the collateral assignment of the Policy to the Corporation
pursuant hereto. Thereafter, the Employee shall have no right, title or interest
in and to the Policy, all such rights being vested in and exercisable only by
the assignee.
ARTICLE 2: PAYMENT OF PREMIUMS AND APPLICATION OF DIVIDENDS
2.1 Premium Payment; Timing. The Corporation shall pay the premiums,
-----------------------
including all costs associated with all supplemental riders and endorsements to
the Policy (the "Premium"), on the Policy to the Insurer on or before the due
date of each Premium payment, and in any event, not later than the expiration of
the grace period under the Policy for such Premium payment. As soon as
practicable following the payment of a Premium, the Corporation shall furnish
the Employee with written notice of such timely payment. The Corporation shall
annually furnish the Employee a statement of the amount of income reportable by
the Employee for income tax purposes as a result of this Agreement.
Each year, the Employee shall reimburse the Corporation for a portion
of the premium paid by the Corporation. The amount of reimbursement shall equal
the value of the economic benefit attributable to the life insurance protection
provided to the Employee under this Agreement. The value of the economic benefit
attributable to the life insurance protection provided to the Employee under
this Agreement shall be the lower of (a) the PS-58 rates (as set forth in
Revenue Ruling 55-747 or the corresponding applicable section of any future
Revenue Ruling) or (b) the Insurer's current published premium rate for annually
renewable term insurance for standard risks, assuming a death benefit equal to
the face amount of the Policy less the Corporate Interest.
The Corporation shall continue to pay its portion of the Premiums
until a termination event, as defined in Section 4.1.
2.2 Dividend. Any dividends declared on the Policy shall be applied
--------
as shown in the Policy illustration, Exhibit B.
-3-
<PAGE>
ARTICLE 3: RIGHTS UPON DEATH OF EMPLOYEE
3.1 Employee's Death Benefit Portion. If Employee dies prior to
--------------------------------
termination of employment, the Employee's designated beneficiary or
beneficiaries as set forth in the Policy shall be entitled to receive the death
proceeds as provided under the Policy. For purposes of this Agreement, the term
"death proceeds" shall mean the face amount of the death benefit provided for in
the Policy plus any increase in the Death Benefit from dividends, cash or
accumulation value as those terms may be defined in any Policy contract or
option contained therein.
3.2 Corporation's Death Benefit Portion. Notwithstanding Section
-----------------------------------
3.1, upon the death of the Employee, the Corporation shall be entitled to
receive an amount equal to the Corporate Interest.
ARTICLE 4: TERMINATION OF AGREEMENT OR SURRENDER OF POLICY
4.1 Termination Defined. This Agreement shall automatically
-------------------
terminate upon the occurrence of any of the following events:
(a) the bankruptcy, receivership or dissolution of the
Corporation;
(b) the Employee's termination of employment with the
Corporation (including permanent and total disability); or
(c) the written agreement of the Employee and the Corporation.
Also, if the Employee so elects, this Agreement shall terminate upon
the occurrence of a Change in Control, as defined in Section 5.10
4.2 Rights Upon Termination. If this Agreement terminates pursuant
-----------------------
to an event described in Section 4.1, the Employee shall have the option of
obtaining the release of the Assignment by either:
(a) paying to the Corporation, within 60 days of the termination
event described in Section 4.1, the Corporate Interest; or
(b) notifying the Corporation in writing, within 60 days of the
termination event described in Section 4.1, of the Employee's desire
to have the Assignment released and, as soon as practicable
thereafter, jointly applying to the Insurer to surrender dividend
values from the Policy and, if necessary, to make a loan to the
Employee from the Policy. Such amounts will be paid directly to the
Corporation to be applied to the payment of the Corporate Interest.
Upon receipt of the Corporate Interest, the Corporation shall take all
steps necessary to release the Assignment so that the Employee shall own the
Policy free of all encumbrances thereon in favor of the Corporation required by
this Agreement. Thereafter, neither the
-4-
<PAGE>
Corporation nor the Corporation's successors or assigns shall have any further
interest in and to the Policy.
If the Employee fails to exercise one of the options described in
subsection (b) or (c) of this Section 4.2, at the request of the Corporation,
the Employee shall execute any document or documents required by the Insurer to
transfer ownership of the Policy to the Corporation. Alternatively, the
Corporation may enforce its right to receive the Corporate Interest from the
cash surrender value of the Policy, as set forth in the Assignment; provided
that, in the event the cash surrender value of the Policy exceeds the amount due
the Corporation, such excess shall be paid to the Employee. Thereafter, neither
the Employee nor the Employee's heirs, assigns or beneficiaries shall have any
further interest in and to the Policy.
4.3 Corporate Interest. Corporate Interest means an amount equal to
------------------
the cumulative value of all Premiums paid by the Corporation.
ARTICLE 5: ADMINISTRATIVE PROVISIONS
5.1 Insurer's Responsibility. The Insurer shall not be considered a
------------------------
party to this Agreement and shall not be bound hereby. No provision of this
Agreement, or any amendment hereof, shall in any way enlarge, change, vary or
affect the obligations of the Insurer as expressly provided in the Policy,
except to the extent that this Agreement becomes a part of the Policy by
acceptance of the Assignment by the Insurer.
5.2 Amendment. Notwithstanding anything else in this Agreement to
---------
the contrary, the Corporation reserves the right to amend or terminate this
Agreement (including the right not to pay a Premium) at any time with the
consent of Employee.
5.3 Notice. Any and all notices required to be given under the terms
------
of this Agreement shall be given in writing and signed by the appropriate party,
and shall be sent by certified mail, postage prepaid, to the appropriate address
set forth below:
(a) to the Employee at:
________________________
________________________
________________________
(b) to the Corporation at:
Hooker Furniture Corporation
440 East Commonwealth Boulevard
Martinsville, Virginia 24112
ATTN: Senior Vice President,
Finance and Administration
-5-
<PAGE>
5.4 Heirs, Successors and Assigns. This Agreement shall be binding
-----------------------------
upon and shall inure to the benefit of the Employee, his or her successors,
heirs and the executors or administrators of the estate of the Employee, and to
the Corporation and its successors. The Employee and the Corporation agree that
either party may assign its interest under this Agreement, and any assignee
shall be bound by the terms and conditions of this Agreement as if an original
party hereto.
5.5 Interpretation. This Agreement and the interests of the Employee
--------------
and the Corporation hereunder shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia.
5.6 Terms. This Agreement shall be effective as of the date first
above written, and shall continue until terminated as herein provided or until
all covenants herein activated by the death of the Employee are fully carried
out.
5.7 Headings. Any headings or captions in this Agreement are for
--------
reference purposes only and shall not expand, limit, change or affect the
meaning of any provision of this Agreement.
5.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same Agreement.
5.9 ERISA. The following provisions are part of this plan and are
-----
intended to meet the requirements of the Employee Retirement Income Security Act
of 1974:
(a) Fiduciary. The named Fiduciary and administrator of the
---------
split-dollar arrangement established pursuant to this Agreement shall
be the Senior Vice President of Finance and Administration of the
Corporation (hereinafter the "Fiduciary"). The Fiduciary shall have
full power to administer this Agreement, and the Fiduciary's actions
with respect hereto shall be binding and conclusive upon all persons
for all purposes.
(b) The funding policy under this plan is that the Employee and
the Corporation shall remit premiums when due.
(c) The amounts payable pursuant to this Agreement shall be paid
by the Insurer solely from the Policy.
(d) Claims Procedure. Any controversy or claim arising out of
----------------
or relating to this Agreement shall be filed with the Fiduciary which
shall make all determinations concerning such claim. Any decision by
the Fiduciary denying such claim shall be in writing and shall be
delivered to all parties in interest in accordance with the notice
provisions of Section 5.3 hereof. Such decision shall set forth, in
plain language, the
-6-
<PAGE>
reasons for denial. Pertinent provisions of the Agreement shall be
cited and, where appropriate, an explanation as to how the Employee
can perfect the claim will be provided. This notice of denial of
benefits will be provided within 90 days of the Fiduciary's receipt of
the Employee's claim for benefits. If the Fiduciary fails to notify
the Employee of his decision regarding his claim, the claim shall be
considered denied, and the Employee shall then be permitted to proceed
with his appeal as provided in this Section.
If Employee has been completely or partially denied a benefit,
the Employee shall be entitled to appeal this denial of his claim by
filing a written statement of his position with the Fiduciary no later
than sixty (60) days after receipt of the written notification of such
claim denial. The Fiduciary shall schedule an opportunity for a full
and fair review of the issue within thirty (30) days of receipt of the
appeal.
The decision on review shall set forth specific reasons for the
decision, and shall cite specific references to the pertinent
Agreement provisions on which the decision is based.
Following the Fiduciary's review of any additional information
submitted by the Employee, either through the hearing process or
otherwise, the Fiduciary shall render a decision on his review of the
appealed claim in the following manner:
(i) The Fiduciary shall make its decision regarding the
merits of the appealed claim within 60 days following his receipt
of the request for review (or within 120 days after such receipt
in a case where there are special circumstances requiring
extension of time for reviewing the appealed claim). The
Fiduciary shall deliver the decision to the claimant in writing.
If an extension of time for reviewing the appealed claim is
required because of special circumstances, written notice of the
extension shall be furnished to the Employee prior to the
commencement of the extension. If the decision on review is not
furnished within the prescribed time, the claim shall be deemed
denied on review.
(ii) The decision on review shall set forth specific reasons
for the decision, and shall cite specific references to the
pertinent Agreement provisions on which the decision is based.
5.10 Change in Control. A "Change in Control" shall mean any of the
-----------------
following events:
(a) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, shall become the
beneficial owner of shares of the Corporation with respect to which
40% or more of the total number of votes which may be cast for the
election of the Board of Directors of the Corporation;
-7-
<PAGE>
(b) as a result of, or in connection with, any cash tender
offer, merger or other business combination, sale of assets or
contested election, or combination of the foregoing, the persons who
were directors of the Corporation shall cease to constitute a majority
of the Board of Directors of the Corporation; or
(c) the shareholders of the Corporation shall approve an
agreement providing either for a transaction in which the Corporation
will cease to be an independent publicly owned entity or for a sale or
other disposition of all or substantially all the assets of the
Corporation.
IN WITNESS WHEREOF, the parties hereto have signed this document
as of the day and year first above written.
HOOKER FURNITURE CORPORATION
By: _________________________________
Title: ______________________________
THE EMPLOYEE
______________________________________
-8-
<PAGE>
EXHIBIT A
---------
The following life insurance policy or policies is subject to the
attached Split-Dollar Agreement:
Insurer: ____________________________ Insurance Company
Insured: ____________________________
Policy Number: ____________________________
Face Amount: ____________________________
Corporation: Hooker Furniture Corporation
----------------------------
Date of Issue: ____________________________
<PAGE>
EXHIBIT B
---------
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
A. FOR VALUE RECEIVED, _____________________ (the "Employee") hereby assigns,
transfers and sets over to Hooker Furniture Corporation, with its principal
offices in Martinsville, Virginia, its successors and assigns, (herein
called the "Corporation") Policy No. ______________ issued by
________________________ Insurance Company, (herein the "Insurer") and any
supplementary contracts issued in connection therewith (said policy and
contracts being herein called the "Policy"), upon the life of the Employee,
an individual residing in the Commonwealth of Virginia and all claims,
options, privileges, rights, title and interest therein and thereunder
(except as provided in Paragraph C hereof), subject to all the terms and
conditions of the Policy and to all superior liens, if any, which the
Insurer may have against the Policy. The undersigned by this instrument
jointly and severally agree and the Corporation, by the acceptance of this
Assignment, agrees to the conditions and provisions herein set forth.
B. It is expressly agreed that, without detracting from the generality of the
foregoing, the following specific rights are included in this Assignment
and pass by virtue hereof:
1. The right to collect from the Insurer an amount equal to its total
premium payments made under the Policy or a portion of the death
proceeds as provided for under the terms of a Split Dollar Agreement
between the Employee and the Corporation, dated __________________
(herein called the "Split Dollar Agreement"), when it becomes a claim
by death or maturity or upon such other events as may be set forth in
the Split Dollar Agreement;
2. The right to surrender the Policy and receive the surrender values
thereof at any time provided by the terms of the Policy and at such
other times as the Insurer may allow; and
3. The right to obtain one or more loans or advances on the Policy,
either from the Insurer, or, at any time, from other persons, and to
pledge or assign the Policy as security for such loans or advances.
C. It is expressly agreed that the following specific rights, so long as the
Policy has not been surrendered, are reserved and excluded from this
Assignment and do not pass by virtue hereof:
1. The right to collect from the Insurer any disability benefit payable
in cash that does not reduce the amount of insurance;
2. The right to designate and change the beneficiary;
<PAGE>
3. The right to elect any optional mode of settlement permitted by the
Policy or allowed by the Insurer,
but the reservation of these rights shall in no way impair the right of the
Corporation to surrender the Policy completely with all its incidents or
impair any other right of the Corporation hereunder, and any designation or
change of beneficiary or election of a mode of settlement shall be made
subject to this Assignment and to the rights of the Corporation hereunder.
D. This Assignment is made and the Policy is to be held as collateral security
for any and all liabilities of the undersigned, or any of them, to the
Corporation, either now existing or that may hereafter arise under the
terms of the Split Dollar Agreement (all of which liabilities secured or to
become secured are herein called "Liabilities").
E. The Corporation covenants and agrees with the undersigned as follows:
1. That any balance of sums received hereunder from the Insurer remaining
after payment of the then existing Liabilities, matured or unmatured,
shall be paid by the Corporation to the persons entitled thereto under
the terms of the Policy had this Assignment not been executed;
2. That the Corporation will not exercise either the right to surrender
the Policy or the right to obtain policy loans from the Insurer,
except as expressly provided under the terms of the Split Dollar
Agreement; and
3. That the Corporation will, upon request, forward without unreasonable
delay to the Insurer the Policy for endorsement of any designation or
change of beneficiary or any election of an optional mode of
settlement.
F. The Insurer is hereby authorized to recognize the Corporation's claims to
the rights hereunder without investigating the reason for any action taken
by the Corporation, or the validity or the amount of the Liabilities or the
existence of any default therein, or the application to be made by the
Corporation of any amounts to be paid to the Corporation. The sole
signature of the Corporation shall be sufficient for the exercise of any
rights under the Policy assigned hereby and the sole receipt of the
Corporation for any sums received shall be a full discharge and release to
the Insurer. Checks for all or any part of the sums payable under the
Policy and assigned herein shall be drawn to the exclusive order of the
Corporation if, when and in such amounts as may be requested by the
Corporation.
G. The exercise of any right, option privilege or power given herein to the
Corporation shall be at the option of the Corporation, but (except as
restricted by Paragraph E(2) above) the Corporation may exercise any such
right, option, privilege or power without notice to, or
<PAGE>
assent by, or affecting the liability of, or releasing any interest hereby
assigned by the undersigned, or any of them.
H. The Corporation may take or release other security, may release any party
primarily or secondarily liable for any of the Liabilities, may grant
extensions, renewals or indulgences with respect to the Liabilities, or may
apply to the Liabilities in such order as the Corporation shall determine,
the proceeds of the Policy hereby assigned or any amount received on
account of the Policy by the exercise of any right permitted under this
Assignment, without resorting or regard to other security.
I. Each of the undersigned declares that no proceedings in bankruptcy are
pending against him and that his property is not subject to any assignment
for the benefit of creditors.
* * * * * * * * *
EXECUTED IN MARTINSVILLE VIRGINIA THIS ___________ DAY OF________________,
_______.
____________________________________ ____________________________________
Witness [Name of Employee]
Employee's Address:
____________________________________
____________________________________
____________________________________ ____________________________________
Witness Beneficiary
Beneficiary's Address:
____________________________________
____________________________________
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS OF HOOKER FURNITURE CORPORATION FOR THE FISCAL YEAR ENDED
NOVEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<CASH> 3,625
<SECURITIES> 0
<RECEIVABLES> 23,846
<ALLOWANCES> 500
<INVENTORY> 35,812
<CURRENT-ASSETS> 64,420
<PP&E> 86,090
<DEPRECIATION> 44,590
<TOTAL-ASSETS> 111,233
<CURRENT-LIABILITIES> 12,627
<BONDS> 12,062
10,213<F1>
0
<COMMON> 2,435
<OTHER-SE> 71,465
<TOTAL-LIABILITY-AND-EQUITY> 111,233
<SALES> 205,308
<TOTAL-REVENUES> 205,308
<CGS> 158,752
<TOTAL-COSTS> 188,395
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 287
<INTEREST-EXPENSE> 561
<INCOME-PRETAX> 17,027
<INCOME-TAX> 6,241
<INCOME-CONTINUING> 10,786
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,786
<EPS-PRIMARY> 2.80
<EPS-DILUTED> 2.80
<FN>
<F1>Represents Common Stock held by ESOP
</FN>
</TABLE>
