<PAGE>
EXHIBIT (a)(1)(A)
OFFER TO PURCHASE FOR CASH
Up to 1,800,000 Shares of Common Stock, No Par Value
of
Hooker Furniture Corporation
at
A Purchase Price of $12.50 Per Share
by
Hooker Furniture Corporation
Employee Stock Ownership Plan Trust
THE TENDER OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 8, 2000,
UNLESS THE TENDER OFFER IS EXTENDED.
The Hooker Furniture Corporation Employee Stock Ownership Plan Trust (the
"ESOP Trust") for the Hooker Furniture Corporation Employee Stock Ownership
Plan (the "ESOP"), sponsored by Hooker Furniture Corporation, a Virginia
corporation (the "Company" or "Hooker"), is offering to purchase for cash up to
1,800,000 shares of Hooker's common stock upon the terms and subject to the
conditions set forth in this document and the related letter of transmittal
(which together, as they may be amended and supplemented from time to time,
constitute the tender offer). The ESOP Trust is inviting you to tender your
shares at the price of $12.50 per share, net to you in cash, without interest,
upon the terms and subject to the conditions of the tender offer.
All shares properly tendered and not properly withdrawn will be purchased at
the purchase price, on the terms and subject to the conditions of the tender
offer, including the proration provisions. The ESOP Trust reserves the right,
in its sole discretion, to purchase more than 1,800,000 shares in the tender
offer, subject to applicable law. Shares not purchased because of proration
provisions will not be purchased in the tender offer. Shares not purchased in
the tender offer will be returned to the tendering shareholders at Hooker's
expense as promptly as practicable after the expiration of the tender offer.
See Section 1.
The tender offer is subject to certain conditions, including, among other
things, that:
(1) There be validly tendered and not withdrawn before the expiration of
the tender offer that number of shares of Hooker common stock which when
combined with shares owned by the ESOP Trust would result in the ESOP Trust
owning at least 30% of the shares of Hooker common stock issued and
outstanding on the date of purchase, and
(2) After giving effect to the acceptance of shares validly tendered in
the offer, Hooker will continue to have at least 300 shareholders of
record.
See Section 6 of this offer to purchase for information regarding these
conditions and the other conditions of the tender offer.
This offer to purchase is dated August 9, 2000.
<PAGE>
At a meeting of Hooker's Board of Directors held on June 20, 2000, the Board
declared a quarterly dividend of $.085 per share payable on August 29, 2000 to
shareholders of record on August 15, 2000. Shareholders tendering shares
pursuant to the offer will continue to be shareholders of record until the
shares are purchased in the offer. Accordingly, if you are the record holder on
August 15, 2000, the record date for the regular dividend, tendering your
shares will NOT prevent you from receiving the dividend because no shares will
be purchased in the offer until after September 8, 2000.
The shares are not listed on any securities exchange or authorized to be
quoted on Nasdaq or in any other inter-dealer quotation system of a registered
national securities association. As of August 1, 2000, the latest date Hooker
could obtain sale information before the date of the public announcement of the
tender offer, the last reported sale price of the shares in the "over-the-
counter" market reported to the National Association of Securities Dealers was
$9.13 on August 1, 2000. See Section 7 for additional information regarding
reported sales prices for the shares.
Hooker's Board of Directors and U.S. Trust Company, N.A., the Trustee for
the ESOP Trust (the "Trustee"), have approved the tender offer. However,
neither Hooker's Board of Directors nor the Trustee makes any recommendation to
you as to whether you should tender or refrain from tendering your shares. You
must make your own decision as to whether to tender your shares and, if so, how
many shares to tender. This tender offer is being made to all Hooker
shareholders (excluding shares held by the ESOP Trust on behalf of ESOP
participants), including shareholders who are directors, officers or beneficial
owners of more than five percent of Hooker's common stock. Certain of Hooker's
directors and executive officers, as well as certain beneficial owners of more
than five percent of Hooker's common stock, have advised Hooker and the Trustee
that they intend to tender shares in the tender offer.
----------------
Important
If you wish to tender all or any part of your shares, you should either
(1) complete and sign a letter of transmittal, or a facsimile of it,
according to the instructions in the letter of transmittal and mail or
deliver it, together with any required signature guarantee and any other
required documents, to First Union National Bank, the depositary for the
tender offer, and mail or deliver the certificates for the shares to the
depositary together with any other documents required by the letter of
transmittal or (b) tender the shares according to the procedure for book-
entry transfer described in Section 3, or
(2) request a broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for you.
If your shares are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee, you should contact that person if you
desire to tender your shares. If you desire to tender your shares and
(1) your certificates for the shares are not immediately available or
cannot be delivered to the depositary, or
(2) you cannot comply with the procedure for book-entry transfer, or
(3) your other required documents cannot be delivered to the depositary
by the expiration of the tender offer,
you must tender your shares according to the guaranteed delivery procedure
described in Section 3.
To tender the shares properly, you must properly complete and duly execute
the related letter of transmittal.
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Questions and requests for assistance may be directed to Corporate Investor
Communications, Inc., the information agent for the tender offer at the address
and telephone number set forth on the back cover page of this document.
Requests for additional copies of this document, the related letter of
transmittal or the notice of guaranteed delivery may be directed to the
information agent.
This offer to purchase contains information about Hooker, including without
limitation, a description of Hooker's business, certain historical and pro
forma financial information of Hooker, certain forward-looking information with
respect to Hooker's business, and opinions of Hooker's management and Board of
Directors. All such information and opinions about Hooker contained in this
offer to purchase have been furnished to the Trustee by Hooker for this offer
document. The Trustee makes no representation as to, and assumes no
responsibility for, the accuracy or completeness of opinions or information
provided by Hooker or the failure by Hooker to disclose information that may
affect the accuracy of the information provided by Hooker, but which was
unknown to the Trustee.
This offer to purchase, including the Summary Term Sheet and Sections 2, 6,
7, 8, 9, 10, 11, 12 and 14 contains certain statements that are not based on
historical facts, but constitute forward-looking statements. Such forward-
looking statements include statements relating to the consummation of the
tender offer and the transactions contemplated thereby, including the related
financing, and the effects of the tender offer on Hooker and its shareholders.
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. The consummation of the tender offer and the
transactions contemplated thereby, including the related financing, are subject
to a number of significant conditions. These statements reflect Hooker'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. Hooker has identified a number of these
factors in this offer to purchase as well as in its filings with the Securities
and Exchange Commission, including its most recent Annual Report on Form 10-K
and Quarterly Report on Form 10-Q which are incorporated in this offer to
purchase by reference. You are referred to those reports for further
information. See the information under the caption "Where You Can Find More
Information Concerning Hooker" in Section 9 "Certain Information Concerning
Hooker and the ESOP Trust" for information on where and how you can inspect or
obtain copies of those reports.
In addition, the ESOP Trust has not authorized any person to make any
recommendation on its behalf as to whether you should tender or refrain from
tendering your shares in the tender offer. The ESOP Trust has not authorized
any person to give any information or to make any representation in connection
with the tender offer other than those contained in this document or in the
related letter of transmittal. If given or made, any recommendation or any such
information or representation must not be relied upon as having been authorized
by the ESOP Trust.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<C> <S> <C>
Summary Term Sheet....................................................... 1
The Tender Offer......................................................... 4
1. Number of Shares; Proration........................................ 4
2. Purpose of the Tender Offer; Material Effects of the Tender Offer.. 5
3. Procedures for Tendering Shares.................................... 8
4. Withdrawal Rights.................................................. 11
5. Purchase of Shares and Payment of Purchase Price................... 12
6. Conditions of the Tender Offer..................................... 13
7. Price Range of Shares; Dividends................................... 15
8. Source and Amount of Funds......................................... 16
9. Certain Information Concerning Hooker and the ESOP Trust........... 18
10. Approval of the Tender Offer by Hooker's Board of Directors and the
Trustee............................................................ 25
11. Interest of Hooker's Directors, Executive Officers and Principal
Shareholders; Transactions and Arrangements Concerning Shares...... 28
12. Effects of the Tender Offer on the Market for Shares; Registration
under the Exchange Act............................................. 30
13. Legal Matters; Regulatory Approvals................................ 31
14. Certain United States Federal Income Tax Consequences; Section 1042
Election........................................................... 31
15. Extension of the Tender Offer; Termination; Amendment; Subsequent
Offering Period.................................................... 34
16. Fees and Expenses.................................................. 35
17. Miscellaneous...................................................... 36
</TABLE>
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SUMMARY TERM SHEET
The ESOP Trust is providing this summary term sheet for your convenience. It
highlights the most material information in this document, but you should
realize that it does not describe all of the details of the tender offer to the
same extent described in this document. You are urged to read the entire
document and the related letter of transmittal because they contain the full
details of the tender offer. This summary includes references to the Sections
of this document where you will find a more complete discussion.
Who is offering to purchase my shares?
The Hooker Furniture Corporation Employee Stock Ownership Plan Trust is
offering to purchase your shares of Hooker common stock. The Trustee of the
ESOP Trust is U.S. Trust Company, N.A. The Trustee has responsibility for the
management of the ESOP Trust.
What will the purchase price for the shares be?
The ESOP Trust will purchase the shares at a price of $12.50 per share. See
Section 1.
How many shares will the ESOP Trust purchase?
The ESOP Trust will purchase the number shares of Hooker's common stock,
such that when the shares purchased by the ESOP Trust are combined with shares
already owned by the ESOP Trust, the ESOP Trust will own at least 30% of the
shares of Hooker common stock issued and outstanding on the date of purchase.
As of the date of this offer to purchase the ESOP Trust would need to purchase
1,720,920 shares in the tender offer to satisfy this condition. The ESOP Trust
also expressly reserves the right to purchase additional shares. See Section 1.
The tender offer is conditioned on a minimum number of shares being tendered.
See Section 6.
How will the ESOP Trust pay for the shares?
The ESOP Trust will obtain all of the funds necessary to purchase shares
tendered in the offer, by means of secured term loan from Hooker. In turn,
Hooker will obtain such funds by means of an unsecured term loan up to $22.5
million from SunTrust Bank, N.A. The tender offer is subject to the receipt by
the ESOP Trust of financing from Hooker. See Section 8.
How long do I have to tender my shares?
You may tender your shares until the tender offer expires. The tender offer
will expire on Friday, September 8, 2000, at 5:00 p.m., New York City time,
unless the Trustee extends the tender offer. See Section 1. The Trustee may
choose to extend the tender offer for any reason. See Section 15.
How will I be notified if the Trustee extends the tender offer?
The ESOP Trust will issue a press release by 9:00 a.m., New York City time,
on the next business day after the last previously scheduled or announced
expiration date if the Trustee decides to extend the tender offer. See Section
15.
Are there any conditions to the tender offer?
Yes. One condition is that there be validly tendered and not withdrawn
before the expiration of the tender offer that number of shares of Hooker
common stock which when combined with shares owned by the ESOP Trust would
result in the ESOP Trust owning at least 30% of the shares of Hooker common
stock issued and outstanding on the date of purchase. As of the date of this
offer to purchase, a minimum of 1,720,920 shares would need to be validly
tendered and not withdrawn to meet this condition. A second condition is that
after giving effect to the acceptance of shares validly tendered in the offer,
Hooker will continue to have at least 300
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shareholders of record. A third condition is that the ESOP Trust obtain from
Hooker financing to purchase the shares. A fourth condition is that the Trustee
must receive a "bring-down" opinion from its financial advisor affirming its
prior opinion concerning the tender offer. In addition, the tender offer is
subject to conditions such as the absence of legal and governmental action
prohibiting the tender offer and changes in general market conditions or
Hooker's business that, in the judgment of the Trustee, are or may be
materially adverse to the ESOP Trust or to Hooker. See Section 6.
How do I tender my shares?
To tender your shares, the following must occur prior to 5:00 p.m., New York
City time, on Friday, September 8, 2000, unless the offer is extended:
. you must deliver your share certificate(s) and a properly completed and
duly executed letter of transmittal to the depositary at the address
appearing on the back cover page of this document; or
. the depositary must receive a confirmation of receipt of your shares by
book-entry transfer and a properly completed and duly executed letter of
transmittal; or
. you must comply with the guaranteed delivery procedure.
You should contact the information agent for assistance in tendering your
shares. See Section 3 and the instructions to the letter of transmittal.
Once I have tendered shares in the tender offer, can I withdraw my tender?
You may withdraw any shares you have tendered at any time before 5:00 p.m.,
New York City time, on Friday, September 8, 2000, unless the Trustee extends
the tender offer. If the ESOP Trust has not accepted for payment the shares you
have tendered to the ESOP Trust, you may also withdraw your shares after 12:00
Midnight, New York City time, on October 8, 2000. See Section 4.
How do I withdraw shares I previously tendered?
You must deliver on a timely basis a written, telegraphic or facsimile
notice of your withdrawal to the depositary at the address appearing on the
back cover page of this document. Your notice of withdrawal must specify your
name, the number of shares to be withdrawn and the name of the registered
holder of such shares. Some additional requirements apply if the certificates
for shares to be withdrawn have been delivered to the depositary or if your
shares have been tendered under the procedure for book-entry transfer set forth
in Section 3. See Section 4.
Has Hooker's Board of Directors or the Trustee adopted a position on the tender
offer?
Hooker's Board of Directors and the Trustee have approved the tender offer.
However, neither Hooker's Board of Directors nor the Trustee makes any
recommendation to you as to whether you should tender or refrain from tendering
your shares. You must make your own decision as to whether to tender your
shares and, if so, how many shares to tender. This tender offer is being made
to all Hooker shareholders (excluding shares held by the ESOP Trust on behalf
of ESOP participants), including shareholders who are directors, officers or
beneficial owners of more than five percent of Hooker's common stock. Certain
of Hooker's directors and executive officers, and certain beneficial owners of
five percent or more of Hooker's common stock, have advised Hooker and the
Trustee that they intend to tender shares in the tender offer. See Section 10.
When will the ESOP Trust pay for the shares I tender?
The ESOP Trust will pay the purchase price, net in cash, without interest,
for the shares the ESOP Trust purchases as promptly as practicable after the
expiration of the tender offer and the acceptance of the shares for payment.
See Section 5.
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Will I have to pay brokerage commissions if I tender my shares?
If you are a registered shareholder and you tender your shares directly to
the depositary, you will not incur any brokerage commissions. If you hold
shares through a broker or bank, you are urged to consult your broker or bank
to determine whether transaction costs are applicable. See Section 3.
If I tender shares will I still receive the dividend payable to shareholders of
record on August 15, 2000?
Yes, if you are a record holder on August 15, 2000, the record date for the
dividend, tendering shares will not prevent you from receiving the dividend.
What are the United States federal income tax consequences if I tender my
shares?
Unless you are eligible to elect special tax treatment under Section 1042 of
the Internal Revenue Code, as described below, you will have a taxable
transaction for United States federal income tax purposes if you sell shares to
the ESOP Trust. In general, you will have taxable gain or loss in an amount
equal to the difference between your adjusted basis in the shares sold and the
amount of cash that you receive for the shares. See Section 14.
What is the special tax treatment provided under Section 1042 of the Internal
Revenue Code?
A feature of the offer that may be attractive to you is the opportunity for
qualifying shareholders to defer taxation of the capital gains on the sale of
their shares. You may qualify under Section 1042 of the Internal Revenue Code
to defer paying tax on the gain from the sale of your shares to the ESOP Trust
to the extent that you reinvest the sales proceeds in "qualified replacement
property" and satisfy certain other requirements. If you meet these
requirements, the gain that would have been taxed at the time of the sale is
instead taxed at the time you dispose of the qualified replacement property.
This tax treatment will apply only if you make an affirmative election for it
to apply and a number of other requirements are met. If you are also a
participant in the ESOP, and you make an election to have Section 1042 of the
Internal Revenue Code apply to the sale of your shares, you and certain of your
relatives and other related persons who participate in the ESOP (such as
spouses, brothers and sisters, children, trust and estate beneficiaries and
others) will be prohibited for a specified period of time from receiving
allocations under the ESOP of shares purchased by the ESOP Trust in the tender
offer. In addition, shareholders who own (directly or by attribution) more than
25% of Hooker's shares and who participate in the ESOP will be prohibited from
receiving an allocation of shares purchased in the tender offer if any
shareholder elects Section 1042 treatment. See Section 14.
Will I have to pay stock transfer tax if I tender my shares?
If you instruct the depositary in the related letter of transmittal to make
the payment for the shares to the registered holder, you will not incur any
stock transfer tax. See Section 5.
Who can I talk to if I have questions?
The information agent can help answer your questions. The information agent
is Corporate Investor Communications, Inc. The contact information for the
information agent is set forth on the back cover page of this document.
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THE TENDER OFFER
1. Number of Shares; Proration.
General. Upon the terms and subject to the conditions described in this
offer to purchase and in the letter of transmittal, the ESOP Trust will
purchase up to 1,800,000 shares that are validly tendered on or prior to the
expiration date of the offer, and not properly withdrawn in accordance with
Section 4, at a price of $12.50 per share. The later of 5:00 p.m., New York
time, on Friday, September 8, 2000, or the latest time and date to which the
offer is extended pursuant to Section 15, is referred to herein as the
"expiration date." The proration period also expires on the expiration date.
The ESOP Trust reserves the right, in its sole discretion, to purchase more
than 1,800,000 shares pursuant to the offer. See Section 15. In accordance with
applicable regulations of the Securities and Exchange Commission (the "SEC"),
the ESOP Trust may purchase pursuant to the offer an additional amount of
shares not to exceed 2% of the outstanding shares without amending or extending
the offer. Although the ESOP Trust has no intention to change the terms of the
offer, if (i) the ESOP Trust increases or decreases the price to be paid for
the shares, increases the number of shares being sought and such increase in
the number of shares being sought exceeds 2% of the outstanding shares, or
decreases the number of shares being sought; and (ii) the offer is scheduled to
expire at any time earlier than the expiration of a period ending on the tenth
business day from, and including, the date that notice of such increase or
decrease is first published, sent or given in the manner specified in Section
15, the offer will be extended at least until the expiration of such period of
ten business days.
This offer is conditioned on a minimum number of shares being tendered as
well as certain other conditions. See Section 6.
Upon the terms and subject to the conditions described in this offer to
purchase and in the letter of transmittal, the ESOP Trust will pay the $12.50
purchase price for shares validly tendered and not withdrawn pursuant to this
offer, taking into account the number of shares so tendered. All shares not
purchased pursuant to this offer, including shares not purchased because of
proration, will be returned to the tendering shareholders at Hooker's expense
as promptly as practicable following the expiration date.
Upon the terms and subject to the conditions of this offer, if the required
minimum number of shares (or such greater number of shares as the ESOP Trust
may elect to purchase) have been properly tendered and not properly withdrawn
on or prior to the expiration date, the ESOP Trust will purchase all such
shares up to 1,800,000 shares.
Upon the terms and subject to the conditions of the tender offer, if more
than the required minimum number of shares, or such greater number of shares as
the ESOP Trust may elect to purchase, subject to applicable law, have been
properly tendered and not properly withdrawn before the expiration date, the
ESOP Trust will purchase all shares properly tendered and not properly
withdrawn before the expiration date, on a pro rata basis (according to the
number of shares tendered) with appropriate adjustments to avoid purchases of
fractional shares, as described below.
Proration. If proration of tendered shares is required, the ESOP Trust will
determine the proration factor as soon as practicable following the expiration
date. Proration for each shareholder tendering shares shall be based on the
ratio of the number of shares properly tendered and not properly withdrawn by
such shareholder to the total number of shares properly tendered and not
properly withdrawn by all shareholders. Because of the difficulty in
determining the number of shares properly tendered, including shares tendered
by guaranteed delivery procedures, as described in Section 3, and not properly
withdrawn the ESOP Trust does not expect that it will be able to announce the
final proration factor or commence payment for any shares purchased under the
tender offer until seven to ten business days after the expiration date. The
preliminary results of any proration will be announced by press release as
promptly as practicable after the expiration date. Shareholders may
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obtain preliminary proration information from the information agent and may be
able to obtain such information from their brokers.
This offer to purchase and the related letter of transmittal will be mailed
to record holders of shares and will be furnished to brokers, dealers,
commercial banks and trust companies whose names, or the names of whose
nominees, appear on Hooker's shareholder list or, if applicable, who are listed
as participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of shares.
2. Purpose of the Tender Offer; Material Effects of the Tender Offer.
Purpose of the Tender Offer
The financial success of Hooker is dependent in large part on the efforts of
its employees. The Hooker Board of Directors believes that the ESOP is an
important and effective program for increasing the financial security of these
employees, and providing them and their beneficiaries with retirement benefits.
The Board of Directors also believes that there is not currently an orderly or
viable market for Hooker's shares and, as a result, Hooker's shares are
undervalued in the "over-the-counter" market. Hooker believes that the tender
offer is a prudent use of its financial resources given its business profile,
financial condition and current price in the "over-the-counter" market, and
that financing the purchase of the shares by the ESOP Trust is an appropriate
use of capital and an efficient means to provide liquidity and value to all of
Hooker's shareholders and will further enhance the value of the ESOP to
Hooker's employees.
Over the past two years, Hooker has considered various strategic
alternatives with respect to maximizing shareholder value. See Section 10.
During the course of its general shareholder relations efforts, several of
Hooker's large shareholders have indicated their view that large share
repurchases would be a preferable use of available resources to increase
shareholder value.
The Board of Directors has determined that the Company's financial condition
and outlook and current market conditions, including recent trading prices of
the shares, make this an attractive time for the ESOP Trust to purchase a
significant portion of the outstanding shares. In the view of Hooker, the offer
represents an attractive investment for the ESOP Trust as well as an
appropriate use of Hooker's cash that should benefit Hooker and its
shareholders over the long term. Hooker believes that increased share ownership
by the ESOP Trust will enhance Hooker's ability to recruit, retain and motivate
its employees. In deciding to approve the offer, the Board of Directors took
into account the expected financial impact of the offer on Hooker, including
the increased ESOP Trust contributions and interest expense together with
financial and operating constraints associated with the financing required to
fund the offer, and the impact on Hooker's ability to make future contributions
to the ESOP Trust. Hooker believes that its cash, short-term investments and
access to credit facilities following the completion of the offer, together
with its anticipated cash flow from operations, are adequate for its cash needs
for normal operations and anticipated capital expenditures in the foreseeable
future, and to sustain regular contributions to the ESOP Trust.
In order to achieve the potential benefits described below, the Board of
Directors of Hooker directed the Trustee to consider the purchase of shares by
the ESOP Trust in a tender offer, and the Trustee has determined, subject to
reconfirmation prior to the closing of the tender offer, that the tender offer
is in the interest of the ESOP participants and beneficiaries and that the ESOP
Trust's purchase of shares is a prudent investment for the ESOP Trust. In
reaching this conclusion, the Trustee has considered, among other things, its
fiduciary duties under the Employee Retirement Income Security Act of 1974, as
amended, and the stated purposes of the ESOP Trust. The Trustee has also
reviewed, together with its financial and legal advisors, Hooker's financial
statements, business and prospects, historical trading activity, as well as the
tender offer and ESOP Term Loan documents (as defined in Section 8 below). The
Trustee's decision, on behalf of the ESOP Trust, to purchase the shares
pursuant to this tender offer is subject to the Trustee's financial advisor's
bring-down opinion and the advice of its legal counsel with respect to the
satisfaction of the other conditions to the offer. See Section 6 for a
discussion of the conditions to the tender offer.
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To date Hooker has expended approximately $150,000, and additionally will
take approximately $300,000 of non-recurring pre-tax charges against earnings
in the second half of 2000, principally for costs associated with the analysis
and consideration of various strategic alternatives and costs associated with
the tender by the ESOP Trust.
Potential Benefits of the Tender Offer
Hooker believes the tender offer may provide several benefits to the Company
and its shareholders, including:
. Because the shares are traded only on a limited basis in the "over-the-
counter" market, the offer affords to those shareholders who desire
liquidity an opportunity to sell all or a portion of their shares at a
price of $12.50 per share. The offer may give shareholders the
opportunity to sell a larger number of shares than could likely be sold
in the "over-the-counter" market at a price greater than the "over-the-
counter" market prices reported prior to the announcement of the offer.
See Section 7 for historical share price information. In addition, where
shares are tendered by the registered owner of the shares directly to
the depositary, the sale of those shares in the tender offer will permit
the seller to avoid the usual transaction costs associated with open
market sales.
. Eligible shareholders may be permitted to defer paying tax on gains
recognized in the sale of their shares under the tender offer if they
can meet certain requirements. See Section 14.
. The offer will permit the ESOP Trust to acquire a significant number of
shares for future allocation under the ESOP and thus will enhance future
share ownership by ESOP participants and their beneficiaries. The
increased employee share ownership that will result from the purchase of
shares by the ESOP Trust will be valuable in attracting, retaining and
motivating employees. As a result of the tender offer Hooker will be
able to provide significant employee share ownership benefits that are
not currently offered by Hooker's competitors.
. After the tender offer is completed, Hooker's financial condition,
access to capital and outlook for continued favorable cash generation
will allow Hooker to continue to pursue the development of its core
business, including ongoing product development activities, important
marketing initiatives, capital expenditures and strategic acquisitions.
Accordingly, the Board of Directors of Hooker believes that the tender offer
is consistent with Hooker's long-term corporate goal of increasing shareholder
value, and believes the tender offer will enhance the value of the ESOP to
Hooker's employees. The Trustee of the ESOP Trust has independently determined
that the tender offer is in the interests of the ESOP participants and
beneficiaries. Shareholders who do not participate in the tender offer will
experience no change in their relative equity interest in Hooker, and thus will
experience no change in their share in Hooker's future earnings and assets.
Potential Risks and Disadvantages of the Tender Offer
Hooker believes the tender offer also presents some potential risks and
disadvantages to Hooker and its continuing shareholders, including:
. Hooker will incur significant additional indebtedness in order to fund
the ESOP Trust's purchase of the tendered shares. In connection with the
tender offer, Hooker will enter into a term loan for approximately $22.5
million. Hooker, in turn, will lend the proceeds of this loan to the
ESOP Trust to
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fund the purchase of the tendered shares. See Section 8 for a discussion
of the financing of the tender offer. If the tender offer is fully
subscribed, Hooker's ratio of earnings to fixed charges will decrease
materially. See Section 9 "Selected Pro Forma Financial Data". Hooker
cannot determine whether the market for Hooker's common stock or other
third party perceptions of Hooker will be adversely affected by the
additional indebtedness. Hooker's higher leverage will also result in
its continuing shareholders bearing a higher risk in the event of future
losses or earnings reductions.
. The summary pro forma financial data contained in Section 9 shows that
Hooker's interest expense for fiscal year 1999 on a pro forma basis
would have been approximately $2.4 million compared to its actual
interest expense for fiscal year 1999 of approximately $647,000, thereby
reducing its available cash for normal operations, capital expenditures
and other growth initiatives.
. For financial reporting purposes, Hooker will incur an additional non-
cash compensation expense each year resulting from the allocation to
ESOP participants of shares acquired through the tender offer by the
ESOP Trust. Shares acquired by the ESOP Trust in the tender offer will
be allocated to ESOP participants over the term of the ESOP Term Loan
(See Section 8 "Source and Amount of Funds" for a description of the
ESOP Term Loan) as principal and interest payments are made on that
loan. The summary pro forma financial data contained in Section 9
reflects additional compensation expense of approximately $1.8 million
for fiscal year 1999 on a pro forma basis.
. The acquisition of additional shares by the ESOP Trust will, over time,
significantly increase Hooker's "repurchase obligation" (as defined
below) under the ESOP. ESOP participants and beneficiaries can receive
distributions of their vested ESOP benefits in the form of Hooker
shares. In addition, participants and beneficiaries have a "put" right
pursuant to which they can require Hooker to repurchase their shares
during the 60-day period following such distribution of their shares
from the ESOP Trust, or during an additional 60-day period in the
following year. The purchase may be made by the ESOP Trust if Hooker
consents and the Trustee deems the purchase appropriate. The purchase
price for the shares must be their then current fair market value, as
determined by an independent appraiser. However, for a specified period
following the tender offer, Hooker (but not the ESOP Trust) may, in its
discretion, make purchases from such ESOP participants or beneficiaries
at a price that is not less than $17.95, which is the fair market value
determined by an independent appraiser the year immediately preceding
the year of the tender offer. The obligation of Hooker and the ESOP
Trust to repurchase participants' and beneficiaries' shares pursuant to
this put right is generally referred to as a "repurchase obligation."
Because the shares acquired in the tender offer will be allocated to
ESOP participants over the term of the ESOP Term Loan (See Section 8
"Source and Amount of Funds" for a description of the ESOP Term Loan)
and because Hooker has little control over when ESOP participants and
beneficiaries will receive distributions or whether they will exercise
their put rights, it is difficult to predict the impact of the increased
repurchase obligation in any particular year. However, it is expected
that the repurchase obligation will result in a substantial additional
aggregate liability over time.
. Hooker has or will incur one-time charges of approximately $450,000
before taxes in connection with the tender offer. See Section 9.
. Since shares purchased in the tender offer will be owned by the ESOP
Trust, the tender offer will reduce Hooker's "public float" (the number
of shares owned by non-affiliate shareholders and available for trading
in the "over-the-counter" securities market). This reduction in Hooker's
public float, combined with higher leverage, may result in lower stock
prices or reduced liquidity in the trading market for its common stock
following the completion of the tender offer.
Neither Hooker's Board of Directors nor the Trustee makes any
recommendation to any shareholder as to whether to tender or refrain from
tendering any shares. Neither Hooker's Board of Directors nor the Trustee has
authorized any person to make any such recommendation. Shareholders should
carefully evaluate all information in the tender offer, should consult their
own investment and tax advisors, and
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should make their own decisions about whether to tender shares and, if so, how
many shares to tender. Hooker and the Trustee have been informed that certain
of Hooker's directors and executive officers, as well as certain beneficial
owners of five percent or more of Hooker's common stock, intend to tender
shares in the tender offer.
This offer to purchase contains information about Hooker, including without
limitation, a description of Hooker's business, certain historical and pro
forma financial information of Hooker, certain forward-looking information with
respect to Hooker's business and opinions of Hooker's management and Board of
Directors. All such information and opinions about Hooker contained in this
offer to purchase have been furnished to the Trustee by Hooker for this offer
document. The Trustee makes no representation or warranty to recipients of this
offer as to the accuracy of such information or opinions.
Hooker or the ESOP Trust may in the future purchase additional shares of
common stock on the open market, in private transactions, through tender offers
or otherwise. Any additional purchases may be on the same terms or on terms
that are more or less favorable to shareholders than the terms of the tender
offer. However, SEC Rule 14e-5 prohibits the ESOP Trust and its affiliates from
purchasing any shares, other than pursuant to the tender offer, until the
expiration date of the tender offer, except pursuant to certain limited
exceptions provided in Rule 14e-5.
3. Procedures for Tendering Shares.
Proper Tender of Shares. For shares to be tendered properly under the tender
offer, (1) the certificates for such shares (or confirmation of receipt of such
shares under the procedure for book-entry transfer set forth below), together
with a properly completed and duly executed letter of transmittal (or a
manually signed facsimile thereof), including any required signature
guarantees, or an "agent's message" (as defined below), and any other documents
required by the letter of transmittal, must be received before 5:00 p.m., New
York City time, on the expiration date by the depositary at its address set
forth on the back cover page of this document or (2) the tendering shareholder
must comply with the guaranteed delivery procedure set forth below.
Shareholders who hold shares through brokers or banks are urged to consult
the brokers or banks to determine whether transaction costs are applicable if
shareholders tender shares through the brokers or banks and not directly to the
depository.
Signature Guarantees and Method of Delivery. No signature guarantee is
required: (1) if the letter of transmittal is signed by the registered holder
of the shares (which term, for purposes of this Section 3, shall include any
participant in The Depository Trust Company, referred to as the "book-entry
transfer facility", whose name appears on a security position listing as the
owner of the shares) tendered therewith and such holder has not completed
either the box captioned "Special Delivery Instructions" or the box captioned
"Special Payment Instructions" on the letter of transmittal; or (2) if shares
are tendered for the account of a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit
union, savings association or other entity which is an "eligible guarantor
institution", as such term is defined in Rule 17Ad-15 under the Exchange Act.
See Instruction 1 of the letter of transmittal. If a certificate for shares is
registered in the name of a person other than the person executing a letter of
transmittal, or if payment is to be made to a person other than the registered
holder, then the certificate must be endorsed or accompanied by an appropriate
stock power, in either case signed exactly as the name of the registered holder
appears on the certificate, with the signature guaranteed by an eligible
guarantor institution.
Payment for shares tendered and accepted for payment under the tender offer
will be made only after timely receipt by the depositary of certificates for
such shares or a timely confirmation of the book-entry transfer of such shares
into the depositary's account at the book-entry transfer facility as described
above, a properly completed and duly executed letter of transmittal or a
manually signed facsimile thereof, or an agent's
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message in the case of a book-entry transfer, and any other documents required
by the letter of transmittal. The method of delivery of all documents,
including certificates for shares, the letter of transmittal and any other
required documents, is at the election and risk of the tendering shareholder.
If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended.
Book-Entry Delivery. The depositary will establish an account with respect
to the shares for purposes of the tender offer at the book-entry transfer
facility within two business days after the date of this document, and any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of the shares by causing the
book-entry transfer facility to transfer shares into the depositary's account
in accordance with the book-entry transfer facility's procedures for transfer.
Although delivery of shares may be effected through a book-entry transfer into
the depositary's account at the book-entry transfer facility, either (1) a
properly completed and duly executed letter of transmittal or a manually
signed facsimile thereof with any required signature guarantees, or an agent's
message, and any other required documents must, in any case, be transmitted to
and received by the depositary at its address set forth on the back cover page
of this document before the expiration date or (2) the guaranteed delivery
procedure described below must be followed. Delivery of the letter of
transmittal and any other required documents to the book-entry transfer
facility does not constitute delivery to the depositary.
The term "agent's message" means a message transmitted by the book-entry
transfer facility to, and received by, the depositary, which states that the
book-entry transfer facility has received an express acknowledgment from the
participant in the book-entry transfer facility tendering the shares that such
participant has received and agrees to be bound by the terms of the letter of
transmittal and that the ESOP Trust may enforce such agreement against such
participant.
Federal Backup Withholding Tax. Under the United States federal backup
withholding tax rules, 31% of the gross proceeds payable to a shareholder or
other payee under the tender offer must be withheld and remitted to the United
States Treasury, unless the shareholder or other payee provides such person's
taxpayer identification number (employer identification number or social
security number) to the depositary and certifies under penalties of perjury
that such number is correct or otherwise establishes an exemption. If the
depositary is not provided with the correct taxpayer identification number or
another adequate basis for exemption, the holder may be subject to certain
penalties imposed by the Internal Revenue Service. Therefore, each tendering
shareholder should complete and sign the Substitute Form W-9 included as part
of the letter of transmittal in order to provide the information and
certification necessary to avoid backup withholding, unless such shareholder
otherwise establishes to the satisfaction of the depositary that the
shareholder is not subject to backup withholding. Specified shareholders
(including, among others, all corporations and certain foreign shareholders
(in addition to foreign corporations)) are not subject to these backup
withholding and reporting requirements rules. In order for a foreign
shareholder to qualify as an exempt recipient, that shareholder must submit an
IRS Form W-8 or a Substitute Form W-8, signed under penalties of perjury,
attesting to that shareholder's exempt status. The applicable form can be
obtained from the Information Agent. See Instructions 10 and 11 of the related
letter of transmittal.
To prevent federal backup withholding tax equal to 31% of the gross
payments made to shareholders for shares purchased under the tender offer,
each shareholder who does not otherwise establish an exemption from such
withholding must provide the depositary with the shareholder's correct
taxpayer identification number and provide other information by completing the
Substitute Form W-9 included with the letter of transmittal.
For a discussion of United States federal income tax consequences to
tendering shareholders, see Section 14.
Federal Income Tax Withholding on Foreign Shareholders. Even if a foreign
shareholder has provided the required certification as described in the
preceding paragraph to avoid backup withholding, the depositary will withhold
United States federal income taxes at a rate of 30% of the gross payment
payable to a foreign shareholder or his or her agent unless the depositary
determines that an exemption from, or a reduced rate of,
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withholding tax is available under a tax treaty or that an exemption from
withholding is applicable because such gross proceeds are effectively connected
with the conduct of a trade or business of the foreign shareholder within the
United States. In order to obtain a reduced rate of withholding under a tax
treaty, a foreign shareholder must deliver to the depositary before the payment
a properly completed and executed IRS Form 1001 or W-8BEN. In order to obtain
an exemption from withholding on the grounds that the gross proceeds paid under
the tender offer are effectively connected with the conduct of a trade or
business within the United States, a foreign shareholder must deliver to the
depositary a properly completed and executed IRS Form 4224 or W-8ECI. A foreign
shareholder may be eligible to obtain a refund of all or a portion of any tax
withheld if such shareholder is able to establish that no withholding or a
reduced amount of withholding is due. Federal backup withholding generally will
not apply to amounts subject to the 30% or a treaty-reduced rate of federal
income tax withholding.
Foreign shareholders are urged to consult their tax advisors regarding the
application of United States federal income tax withholding, including
eligibility for a reduction of or an exemption from withholding tax, and the
refund procedure. See instructions 10 and 11 of the letter of transmittal.
Guaranteed Delivery. If a shareholder desires to tender shares under the
tender offer and the shareholder's share certificates are not immediately
available or cannot be delivered to the depositary before the expiration date,
or the procedure for book-entry transfer cannot be completed on a timely basis,
or if time will not permit all required documents to reach the depositary
before the expiration date, the shares may nevertheless be tendered, provided
that all of the following conditions are satisfied:
(a) the tender is made by or through an eligible guarantor institution;
(b) the depositary receives by hand, mail, overnight courier, telegram or
facsimile transmission, before the expiration date, a properly
completed and duly executed notice of guaranteed delivery in the form
the ESOP Trust has provided with this document, including (where
required) a signature guarantee by an eligible guarantor institution in
the form set forth in such notice of guaranteed delivery; and
(c) the certificates for all tendered shares, in proper form for transfer,
or confirmation of book-entry transfer of such shares into the
depositary's account at the book-entry transfer facility, together with
a properly completed and duly executed letter of transmittal, or a
manually signed facsimile thereof, and any required signature
guarantees, or an agent's message, or other documents required by the
letter of transmittal, are received by the depositary within three
business days after the date of receipt by the depositary of the notice
of guaranteed delivery.
Return of Unpurchased Shares. If any tendered shares are not purchased under
the tender offer or are properly withdrawn before the expiration date, or if
less than all shares evidenced by a shareholder's certificates are tendered,
certificates for unpurchased shares will be returned as promptly as practicable
after the expiration or termination of the tender offer or the proper
withdrawal of the shares, as applicable, or, in the case of shares tendered by
book-entry transfer at the book-entry transfer facility, the shares will be
credited to the appropriate account maintained by the tendering shareholder at
the book-entry transfer facility, in each case without expense to the
shareholder.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of shares
to be accepted and the validity, form, eligibility (including time of receipt)
and acceptance for payment of any tender of shares will be determined by the
ESOP Trust, in its sole discretion, and its determination will be final and
binding on all parties. The ESOP Trust reserves the absolute right to reject
any or all tenders of any shares that it determines are not in proper form or
the acceptance for payment of or payment for which the ESOP Trust determines
may be unlawful. The ESOP Trust also reserves the absolute right to waive any
of the conditions of the tender offer or any defect or irregularity in any
tender with respect to any particular shares or any particular shareholder and
the ESOP Trust's interpretation of the terms of the tender offer will be final
and binding on all parties. No tender of shares will be deemed to have been
properly made until all defects or irregularities have been cured by the
tendering shareholder or waived by the ESOP Trust. None of the ESOP Trust, the
depositary, the information agent or
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any other person will be under any duty to give notification of any defects or
irregularities in any tender or incur any liability for failure to give any
such notification.
Tendering Shareholder's Representation and Warranty; ESOP Trust's Acceptance
Constitutes an Agreement. A tender of shares under any of the procedures
described above will constitute the tendering shareholder's acceptance of the
terms and conditions of the tender offer, as well as the tendering
shareholder's representation and warranty to the ESOP Trust that (1) the
shareholder has a net long position in the shares or equivalent securities at
least equal to the shares tendered within the meaning of Rule 14e-4 under the
Exchange Act and (2) the tender of shares complies with Rule 14e-4. It is a
violation of Rule 14e-4 for a person, directly or indirectly, to tender shares
for that person's own account unless, at the time of tender and at the end of
the proration period or period during which shares are accepted by lot
(including any extensions thereof), the person so tendering (1) has a net long
position equal to or greater than the amount tendered in (x) the subject
securities or (y) securities immediately convertible into, or exchangeable or
exercisable for, the subject securities and (2) will deliver or cause to be
delivered the shares in accordance with the terms of the tender offer. Rule
14e-4 provides a similar restriction applicable to the tender or guarantee of a
tender on behalf of another person. The ESOP Trust's acceptance for payment of
shares tendered under the tender offer will constitute a binding agreement
between the tendering shareholder and the ESOP Trust upon the terms and
conditions of the tender offer.
Lost or Destroyed Certificates. Shareholders whose certificate for part or
all of their shares have been lost, stolen, misplaced or destroyed may contact
First Union National Bank, the transfer agent for Hooker's shares, at (800)
829-8432, for instructions as to obtaining a replacement certificate. That
certificate will then be required to be submitted together with the letter of
transmittal in order to receive payment for shares that are tendered and
accepted for payment. A bond may be required to be posted by the shareholder to
secure against the risk that the certificates may be subsequently recirculated.
Shareholders are urged to contact First Union National Bank immediately in
order to permit timely processing of this documentation and to determine if the
posting of a bond is required.
Certificates for shares, together with a properly completed and duly
executed letter of transmittal or facsimile thereof, or an agent's message, and
any other documents required by the letter of transmittal, must be delivered to
the depositary and not to the ESOP Trust, Hooker or the information agent. Any
such documents delivered to the ESOP Trust, Hooker or the information agent
will not be forwarded to the depositary and therefore will not be deemed to be
properly tendered.
4. Withdrawal Rights.
Except as otherwise provided in this Section 4, tenders of shares under the
tender offer are irrevocable. Shares tendered under the tender offer may be
withdrawn at any time before the expiration date and, unless theretofore
accepted for payment by the ESOP Trust under the tender offer, may also be
withdrawn at any time after 12:00 midnight, New York City time, on October 8,
2000.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the depositary at
its address set forth on the back cover page of this document. Any such notice
of withdrawal must specify the name of the tendering shareholder, the number of
shares to be withdrawn and the name of the registered holder of such shares. If
the certificates for shares to be withdrawn have been delivered or otherwise
identified to the depositary, then, before the release of such certificates,
the serial numbers shown on such certificates must be submitted to the
depositary and the signature(s) on the notice of withdrawal must be guaranteed
by an eligible guarantor institution, unless such shares have been tendered for
the account of an eligible guarantor institution.
If shares have been tendered under the procedure for book-entry transfer set
forth in Section 3, any notice of withdrawal also must specify the name and the
number of the account at the book-entry transfer facility to be credited with
the withdrawn shares and must otherwise comply with such book-entry transfer
facility's
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procedures. All questions as to the form and validity (including the time of
receipt) of any notice of withdrawal will be determined by the ESOP Trust, in
its sole discretion, whose determination will be final and binding. None of the
ESOP Trust, the depositary, the information agent or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Withdrawals may not be rescinded and any shares properly withdrawn will
thereafter be deemed not properly tendered for purposes of the tender offer
unless the withdrawn shares are properly re-tendered before the expiration date
by following one of the procedures described in Section 3.
If the ESOP Trust extends the tender offer, is delayed in its purchase of
shares or is unable to purchase shares under the tender offer for any reason,
then, without prejudice to the ESOP Trust's rights under the tender offer, the
depositary may, subject to applicable law, retain tendered shares on behalf of
the ESOP Trust, and such shares may not be withdrawn except to the extent
tendering shareholders are entitled to withdrawal rights as described in this
Section 4.
5. Purchase of Shares and Payment of Purchase Price.
Upon the terms and subject to the conditions of the tender offer, as
promptly as practicable following the expiration date, the ESOP Trust will
accept for payment and pay for, and thereby purchase, shares properly tendered
and not properly withdrawn before the expiration date. For purposes of the
tender offer, the ESOP Trust will be deemed to have accepted for payment and
therefore to have purchased shares that are properly tendered and not properly
withdrawn, subject to the proration provisions of the tender offer, only when,
as and if it gives oral or written notice to the depositary of its acceptance
of the shares for payment under the tender offer.
Upon the terms and subject to the conditions of the tender offer, as
promptly as practicable after the expiration date, the ESOP Trust will accept
for payment and pay $12.50 per share for up to 1,800,000 shares, subject to
increase or decrease as provided in Section 15, if properly tendered and not
properly withdrawn.
The ESOP Trust will pay for shares purchased under the tender offer by
depositing the aggregate purchase price for such shares with the depositary,
which will act as agent for tendering shareholders for the purpose of receiving
payment from the ESOP Trust and transmitting payment to the tendering
shareholders.
In the event of proration, the ESOP Trust will determine the proration
factor and pay for those tendered shares accepted for payment as soon as
practicable after the expiration date; however, the ESOP Trust does not expect
to be able to announce the final results of any proration and commence payment
for shares purchased until approximately seven to ten business days after the
expiration date. Certificates for all shares tendered and not purchased,
including shares not purchased due to proration, will be returned to the
tendering shareholder, or, in the case of shares tendered by book-entry
transfer, will be credited to the account maintained with the book-entry
transfer facility by the participant therein who so delivered the shares, at
Hooker's expense as promptly as practicable after the expiration date or
termination of the tender offer without expense to the tendering shareholders.
Under no circumstances will interest on the purchase price be paid by the ESOP
Trust regardless of any delay in making such payment. In addition, if certain
events occur, the ESOP Trust may not be obligated to purchase shares under the
tender offer. See Section 6.
Hooker will pay all stock transfer taxes, if any, payable on the transfer to
the ESOP Trust of shares purchased under the tender offer. If, however, payment
of the purchase price is to be made to any person other than the registered
holder, or if tendered certificates are registered in the name of any person
other than the person signing the letter of transmittal, the amount of all
stock transfer taxes, if any (whether imposed on the registered holder or the
other person), payable on account of the transfer to the person will be
deducted from the purchase price unless satisfactory evidence of the payment of
the stock transfer taxes, or exemption therefrom, is submitted. See Instruction
6 of the letter of transmittal.
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Any tendering shareholder or other payee who fails to complete fully, sign
and return to the depositary the substitute Form W-9 included with the letter
of transmittal may be subject to federal income tax backup withholding of 31%
of the gross proceeds paid to the shareholder or other payee under the tender
offer. See Section 3. Also see Section 14 regarding United States federal
income tax consequences for foreign shareholders.
6. Conditions of the Tender Offer.
Notwithstanding any other provision of the tender offer, the ESOP Trust will
not be required to accept for payment, purchase or pay for any shares tendered,
and may terminate or amend the tender offer or may postpone the acceptance for
payment of, or the purchase of and the payment for shares, tendered if at any
time on or after August 9, 2000 and before the expiration date any of the
following events shall have occurred (or shall have been determined by the ESOP
Trust to have occurred) that, in the ESOP Trust's judgment and regardless of
the circumstances giving rise to the event or events (including any action or
omission to act by the ESOP Trust), makes it inadvisable to proceed with the
tender offer or with acceptance for payment:
(a) there shall not have been validly tendered and not withdrawn before the
expiration date, a number of shares which, when combined with the
shares owned by the ESOP Trust, would result in the ESOP Trust owning
at least 30% of the shares issued and outstanding on the date of
purchase;
(b) as of the expiration date, and after giving effect to the acceptance of
shares validly tendered, Hooker would not continue to have at least 300
shareholders of record or the ESOP Trust determines that the completion
of the tender offer and the purchase of the shares may otherwise cause
the shares to be eligible for deregistration under the Exchange Act;
(c) the ESOP Trust shall not have received adequate financing from Hooker
to pay for the shares validly tendered;
(d) there shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person,
domestic or foreign, before any court, authority, agency or tribunal
that directly or indirectly (i) challenges the making of the tender
offer, the acquisition of some or all of the shares under the tender
offer or otherwise relates in any manner to the tender offer or (ii) in
the ESOP Trust's judgment, could materially and adversely affect the
business, condition (financial or other), income, operations or
prospects of Hooker, or otherwise materially impair in any way the
contemplated future conduct of the business of Hooker or materially
impair the contemplated benefits of the tender offer to the ESOP Trust;
(e) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the tender offer or
Hooker or any of its subsidiaries, by any court or any authority,
agency or tribunal that, in the ESOP Trust's judgment, would or might
directly or indirectly
. make the acceptance for payment of, or payment for, some or all of
the shares illegal or otherwise restrict or prohibit completion of
the tender offer,
. delay or restrict the ability of the ESOP Trust, or render the ESOP
Trust unable, to accept for payment or pay for some or all of the
shares,
. materially impair the contemplated benefits of the tender offer to
the ESOP Trust or
. materially and adversely affect the business, condition (financial
or other), income, operations or prospects of Hooker and its
subsidiaries, taken as a whole, or otherwise materially impair in
any way the contemplated future conduct of the business of Hooker or
any of its subsidiaries;
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(f) there shall have occurred
. any general suspension of trading in, or limitation on prices for,
securities on any national securities exchange or in the over-the-
counter market in the United States,
. the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States,
. the commencement of a war, armed hostilities or other international
or national calamity directly or indirectly involving the United
States or any of its territories,
. any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any event,
or any disruption or adverse change in the financial or capital
markets generally, that, in the ESOP Trust's judgment, might affect,
the extension of credit by banks or other lending institutions in
the United States,
. any change in the general political, market, economic or financial
conditions in the United States that could, in the judgment of the
ESOP Trust, have a material adverse effect on Hooker's business,
operations or prospects, or
. in the case of any of the foregoing existing at the time of the
commencement of the tender offer, a material acceleration or
worsening thereof;
(g) a tender offer or exchange offer for any or all of the shares (other
than this tender offer), or any merger, business combination or other
similar transaction with or involving Hooker or any subsidiary, shall
have been proposed, announced or made by any person;
(h) (i) any entity, "group" (as that term is used in Section 13(d)(3) of
the Exchange Act) or person shall have acquired or proposed to acquire
beneficial ownership of more than 5% of the outstanding shares (other
than any such person, entity or group who has filed a Schedule 13D or
Schedule 13G with the SEC on or before August 9, 2000), (ii) any such
entity, group or person who has filed a Schedule 13D or Schedule 13G
with the SEC on or before August 9, 2000 shall have acquired or
proposed to acquire beneficial ownership of an additional 2% or more of
the outstanding shares or (iii) any person, entity or group shall have
filed a Notification and Report Form under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, or made a public
announcement reflecting an intent to acquire Hooker or any of its
assets or securities;
(i) any change or changes shall have occurred in the business, financial
condition, assets, income, operations, prospects or stock ownership of
Hooker or its subsidiaries that, in the ESOP Trust's judgment, is or
may be material and adverse to Hooker; or
(j) the Trustee shall not have received from Houlihan Lokey Howard & Zukin
Financial Advisors, Inc., its financial advisor, a "bring-down" opinion
affirming, as of the closing date, Houlihan Lokey Howard & Zukin's
prior opinion dated August 4, 2000 that the consideration to be paid by
the ESOP Trust is not greater than "adequate consideration"(defined as
"fair market value"), that the terms and conditions, including the
interest rate, of the ESOP Term Loan (as defined in Section 8, below)
are fair and reasonable to the ESOP Trust from a financial point of
view, assuming that the economic terms of the ESOP Term Loan are
substantially identical to those set forth in Section 8 "Source and
Amount of Funds," and that the proposed transaction is fair to the ESOP
Trust from a financial point of view.
The foregoing conditions are for the sole benefit of the ESOP Trust and may
be asserted by the ESOP Trust regardless of the circumstances (including any
action or inaction by the ESOP Trust) giving rise to any such condition, and,
except for conditions set forth in paragraphs (a) and (b) above, may be waived
by the ESOP Trust, in whole or in part, at any time and from time to time in
its sole discretion. The ESOP Trust's failure at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
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Any determination or judgment by the ESOP Trust concerning the events described
above will be final and binding on all parties.
7. Price Range of Shares; Dividends.
The table below sets forth the high and low sales prices per share for
Hooker's common stock for the periods indicated as reported to the National
Association of Securities Dealers, Inc. (the "NASD") by the NASD's member
firms. Hooker's common stock is not listed for trading on any securities
exchange or on Nasdaq or in any other inter-dealer quotation system of a
registered national securities association and there is no established public
trading market for Hooker's common stock. The stock price information reported
in the tables below represents a limited number of transactions in Hooker's
common stock in the "over-the counter" market during the periods indicated.
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
2000
First Quarter................................................. $13.50 $11.00
Second Quarter................................................ 12.50 8.00
Third Quarter (through August 1).............................. 10.00 8.00
1999
First Quarter................................................. $15.75 $13.00
Second Quarter................................................ 15.13 12.00
Third Quarter................................................. 15.00 11.00
Fourth Quarter................................................ 14.50 9.00
1998
First Quarter................................................. $15.00 $12.50
Second Quarter................................................ 17.00 13.88
Third Quarter................................................. 16.88 12.50
Fourth Quarter................................................ 16.00 11.50
</TABLE>
Hooker 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 shareholders of record approximately two weeks earlier. Although Hooker
presently intends to declare cash dividends at historical levels on a quarterly
basis for the foreseeable future, the determination as to the payment and the
amount of any future dividends will be made by the Board of Directors from time
to time and will depend on Hooker's then current financial condition, capital
requirements, results of operations and any other factors then deemed relevant
by the Board of Directors. The following table sets forth the dividends per
share paid by Hooker with respect to its common stock during Hooker's two most
recent fiscal years and the first and second quarters of fiscal 2000:
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
First Quarter........................................... $0.085 $0.075 $0.070
Second Quarter.......................................... 0.085 0.075 0.070
Third Quarter........................................... 0.075 0.070
Fourth Quarter.......................................... 0.075 0.070
</TABLE>
All per share information reflected above has been adjusted to reflect a
two-for-one stock split distributed in the form of a stock dividend on January
31, 2000.
At a meeting of Hooker's Board of Directors held on June 20, 2000, the Board
declared a quarterly dividend of $.085 per share payable on August 29, 2000 to
shareholders of record on August 15, 2000. Shareholders tendering shares
pursuant to the offer will continue to be shareholders of record until the
shares are purchased in the offer. Accordingly, if you are the record holder on
August 15, 2000, the record date for the regular dividend, tendering your
shares will NOT prevent you from receiving the dividend because no shares will
be purchased in the offer until after September 8, 2000.
15
<PAGE>
As of August 1, 2000, the latest trading day Hooker could obtain sale
information before the date of announcement of the tender offer, the last sale
of shares reported to the NASD was $9.13 on August 1, 2000.
8. Source and Amount of Funds.
Assuming that 1,800,000 shares are tendered and not withdrawn, the aggregate
purchase price will be $22.5 million. The ESOP Trust and Hooker expect that
their collective fees and expenses for the offer will be approximately
$450,000. The fees and expenses incurred by the ESOP Trust and Hooker in
connection with the tender offer will be paid by Hooker.
The ESOP Trust will obtain all of the funds necessary to fund the purchase
of the shares in the offer by means of a secured term loan from Hooker of up to
$22.5 million (the "ESOP Term Loan"). The ESOP Trust does not have alternative
financing arrangements or plans in the event that the financing to be provided
by Hooker is not available, and the ESOP Trust's obligation to purchase or pay
for any shares tendered is subject to the condition that Hooker provide the
funds necessary to fund the purchase of the shares. See Section 6. The ESOP
Trust intends to repay amounts borrowed under the ESOP Term Loan from dividends
paid to the ESOP Trust with respect to shares of Hooker common stock acquired
by the ESOP Trust with the proceeds of the ESOP Term Loan, dividends on certain
other shares allocated to plan participants and benefit plan contributions made
by Hooker to the ESOP Trust.
Hooker anticipates that it will obtain all of the funds necessary to fund
the purchase by the ESOP Trust of the shares tendered in the offer, as well as
to pay Hooker's and the ESOP Trust's related fees and expenses, by means of (1)
a senior unsecured bank term loan of up to $22.5 million (the "Bank Term Loan")
and (2) available cash. The availability of funds under the Bank Term Loan is
subject to the satisfaction or waiver of certain conditions, as summarized
below. While it is Hooker's expectation that those conditions will be
satisfied, such conditions are not all within Hooker's control, and there can
be no assurance that the conditions will be satisfied. Hooker intends to repay
amounts borrowed under the Bank Term Loan from available cash flow as payments
come due under the Bank Term Loan.
The Bank Term Loan is to be established pursuant to a commitment letter,
dated June 26, 2000 (the "Commitment Letter"), from SunTrust Bank, N.A.
("SunTrust"). SunTrust has committed, subject to the terms and conditions of
the Commitment Letter, to provide the full $22.5 million of the Bank Term Loan.
Hooker has substantially negotiated the definitive documentation for the Bank
Term Loan (the "Bank Term Loan Documents") which is expected to be executed by
Hooker and SunTrust upon the successful consummation of the tender offer.
Capitalized terms used in connection with describing the terms of the Bank Term
Loan that are not otherwise defined in this offer to purchase will have the
meanings given to them in the Bank Term Loan Documents.
SunTrust's commitments are subject, in its discretion, to certain conditions
precedent, including without limitation the conditions described below under
the caption "General Description of Bank Term Loan--Conditions to Funding".
Hooker does not have alternative financing arrangements or plans in the event
that the financing contemplated by the Commitment Letter is not available.
However, Hooker believes that it will be able to obtain alternative financing
on commercially reasonable terms if financing pursuant to the SunTrust
Commitment Letter is not available.
General Description of the ESOP Term Loan
The ESOP Term Loan is expected to consist of a secured term loan up to $22.5
million maturing on the twenty-fifth anniversary of the date on which the ESOP
Trust pays for shares accepted in the tender offer and the funding occurs. The
ESOP Trust will be required to make quarterly interest payments, minimum annual
principal payments in the amount of $600,000 and additional mandatory
reductions in principal outstanding such that the maximum principal outstanding
is $18.9 million at January 1, 2004, $15.3 million at January 1, 2008, $11.7
million at January 1, 2012, $8.1 million at January 1, 2016, $4.5 million at
January 1, 2020 and $0.9 million at January 1, 2024.
16
<PAGE>
Interest Rate for ESOP Term Loan. The ESOP Term Loan will bear interest
during the term of the loan at a fixed rate equal to 8.0% per annum payable
quarterly.
Voluntary Prepayments under ESOP Term Loan. The ESOP Term Loan may be
prepaid in whole or in part without premium or penalty.
Security. The ESOP Term Loan will be secured by a pledge of the "unallocated
shares" of Hooker common stock held by the ESOP Trust. "Unallocated shares"
means shares that have not been allocated to ESOP participants' accounts
pursuant to the terms of the ESOP.
Representations, Warranties, Covenants and Events of Default. The ESOP Term
Loan will contain certain representations and warranties, affirmative
covenants, negative covenants, conditions and events of default that are
customarily required for similar financings and will be non-recourse to the
ESOP Trust. Such covenants and events of default will include restrictions and
limitations on encumbrances, debt, use of proceeds, compliance with laws and
other restrictions and limitations.
The foregoing description is qualified in its entirety by reference to the
form of the Credit Agreement between Hooker and the ESOP Trust for the ESOP
Term Loan, a copy of which is filed as an exhibit to the Schedule TO in which
this document has been filed with the SEC and is incorporated herein by
reference.
General Description of Bank Term Loan
Pursuant to the Commitment Letter and the Bank Term Loan Documents, the Bank
Term Loan is expected to consist of a senior unsecured term loan up to $22.5
million maturing on the tenth anniversary of the date on which the ESOP Trust
pays for shares accepted in the tender offer and the funding occurs. The Bank
Term Loan will be drawn on only one time and will be used to finance the tender
offer. The Bank Term Loan will be amortized in equal quarterly installments.
Interest Rate for Bank Term Loan. The Bank Term Loan will bear interest
during the term of the loan at a variable rate equal to one-month LIBOR plus
0.375%. The interest rate on the Bank Term Loan will be reset monthly. If an
Event of Default (as that term will be defined in the Bank Term Loan Documents)
occurs and is continuing, the applicable interest rate will be equal to the
then applicable rate of interest plus 2.00% per annum.
Voluntary Prepayments under Bank Term Loan. The Bank Term Loan may be
prepaid in whole or in part without premium or penalty.
Negative Pledge under Bank Term Loan. The Bank Term Loan will be unsecured,
however, all of Hooker's real and personal property will be subject to a
negative pledge. The negative pledge will prohibit Hooker, subject to certain
exceptions, from (i) creating or permitting any Lien on Hooker's real or
personal property or (ii) selling or otherwise transferring any of its real or
personal property.
Representations, Warranties, Covenants and Events of Default. The Bank Term
Loan will contain certain representations and warranties, affirmative
covenants, negative covenants, conditions and events of default that are
customarily required for similar financings. Such covenants will include
restrictions and limitations on encumbrances, debt, contingent liabilities,
dividends, stock repurchases, consolidations and mergers, affiliate
transactions, creation or underfunding of employee benefit plans and other
restrictions and limitations.
Financial Covenants. In addition to affirmative and negative covenants, the
Bank Term Loan will require Hooker to maintain the following financial
covenants:
. a minimum Debt Service Coverage Ratio of 2.25x at each fiscal quarter
end through November 30, 2002, 1.75x at each fiscal quarter end
thereafter through November 30, 2005 and 2.25x at each fiscal quarter
end thereafter on a rolling four quarter basis; and
17
<PAGE>
. a maximum Balance Sheet Leverage of 50% at each fiscal quarter end
through November 30, 2001, 45% at each fiscal quarter end thereafter
through November 30, 2003, 40% at each fiscal quarter end thereafter
through November 30, 2005 and 30% at each fiscal quarter end thereafter.
The Debt Service Coverage Ratio will equal the product of (1) the sum of Net
Income, Depreciation, Amortization, Interest and ESOP Contribution, less
Dividends, divided by (2) the sum of Interest, Current Maturities of Long Term
Debt and ESOP Contribution.
Balance Sheet Leverage will equal the product of (1) Borrowed Debt divided
by (2) the sum of Borrowed Debt and Equity.
Funding Protections. Pursuant to the Bank Term Loan there will be certain
customary funding protections in favor of SunTrust, including protections
related to compliance with capital adequacy restrictions.
Bank Term Loan is Subject to Finalization and the Description of the Bank
Term Loan is Qualified by Reference to the Commitment Letter and Bank Term Loan
Documents. The terms of the Bank Term Loan have not yet been finalized and are
still being negotiated. Accordingly, the foregoing description of the Bank Term
Loan is preliminary and necessarily incomplete. In addition, the terms and
provisions of the Bank Term Loan, to the extent described, are subject to
change if the terms of the tender offer change, and may be changed after
consultation with Hooker in limited respects under certain circumstances. In
any event, the ultimate Bank Term Loan might contain terms that are more or
less onerous than those currently contemplated.
Conditions to Funding. Pursuant to the Bank Term Loan, the funding under the
Bank Term Loan will be subject to certain customary conditions precedent, which
may include but not be limited to (i) the negotiation, execution and delivery
of definitive documents acceptable to SunTrust for the financing, (ii) the
existence of no Default Condition or Event of Default and Hooker is in
compliance with all of the terms of the Bank Term Loan Documents (iii) Hooker
has delivered to SunTrust a form of the note for the ESOP Term Loan and copies
of the solicitation materials used in connection with the offer and (iv) such
other conditions as may be set forth in the Bank Term Loan Documents, forms of
which are filed as an exhibit to the Schedule TO of which this offer to
purchase forms a part, and which are incorporated herein by reference.
The foregoing description is qualified in its entirety by reference to the
Commitment Letter and the forms of the Bank Term Loan Documents, a copy of each
of which is filed as an exhibit to the Schedule TO in which this document has
been filed with the SEC and is incorporated herein by reference.
9. Certain Information Concerning Hooker and the ESOP Trust.
Information Concerning Hooker
Incorporated in Virginia in 1924, Hooker has become a leading manufacturer
and importer of residential furniture primarily targeted at the upper-medium
price range. Hooker offers diversified products, consisting primarily of home
office, entertainment centers, imported lines, bedroom and wall systems, across
many style categories within this price range. Its product depth and extensive
style selections make Hooker an important furniture resource for retailers in
its price range and allows Hooker to respond more quickly to shifting consumer
preferences. Hooker has established a broad distribution network that includes
independent furniture stores, department stores, specialty retailers, catalog
merchandisers and national and regional furniture chains. Hooker 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. Hooker's product lines cover most major design
categories. Hooker 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.
Hooker intends to
18
<PAGE>
continue expanding its product styles with particular emphasis on home office,
entertainment centers, occasional furniture and bedroom. Hooker believes that
the Company's products represent good value and that the quality and style of
its furniture compare favorably with more premium-priced products.
Hooker provides furniture products in a variety of materials, woods,
veneers, and finishes. The number of patterns by product line are:
<TABLE>
<CAPTION>
Number of Patterns
------------------
<S> <C>
Home office.............................................................. 43
Wall systems............................................................. 26
Entertainment centers.................................................... 50
Imported lines........................................................... 86
Bedroom.................................................................. 16
</TABLE>
These product lines cover most major design categories including European
traditional, transitional, American traditional, and country/casual designs.
Hooker designs and develops new product styles semi-annually to replace
discontinued items or styles and, if desired, expand product lines. Hooker'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. Hooker
invites key dealers and independent sale representatives to view and critique
the prototypes. From this input, changes in design are made and Hooker's
engineering department prepares a sample for actual full-scale production.
Hooker introduces its new product styles at the fall and spring international
furniture markets.
Distribution. Hooker has developed a broad domestic customer base and also
sells to a limited international market. Hooker 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 Stores, Neiman Marcus,
Dillard's Department Stores, Nebraska Furniture Mart, and Haverty's. Hooker
believes this broad network reduces its exposure to regional recessions, and
allows it to capitalize on emerging channels of distribution. Hooker 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. Hooker 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.
Hooker has sold to over 3,700 customers during the past fiscal year, and
approximately 1.7% of Hooker's sales in 1999 were to international customers.
No single customer accounted for more than five percent of Hooker's sales in
1999. No material part of Hooker's business is dependent upon a single
customer, the loss of which would have a material effect on the business of
Hooker. The loss of several of Hooker's major customers could have a material
impact on the business of Hooker.
Manufacturing. Hooker'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.
Hooker stresses strong customer relationships in developing new products as
well as improving existing ones. Hooker 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, Hooker's strategy has been to
strike a balance between minimizing cutting size together
19
<PAGE>
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. Hooker 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. Hooker is in constant contact with key
suppliers in forming partnerships which communicate both quality and delivery
issues which are imperative for both Hooker and supplier to adjust to ever
changing customer requirements.
Hooker operates manufacturing facilities in North Carolina and Virginia
consisting of an aggregate of approximately 1.8 million square feet. Hooker
considers its present equipment to be generally modern, adequate and well
maintained.
Hooker schedules production of its various styles based upon actual and
anticipated orders. Hooker's backlog of unshipped orders was $33.6 million at
November 30, 1999 and $32.8 million at November 30, 1998. With the emphasis in
recent years on inventory-on-demand, dealers no longer find it necessary to
place orders as far in advance as was once the case. In addition, it is
Hooker's policy and industry practice to allow order cancellation up to time of
shipment, therefore customer orders are not firm until shipped. For these
reasons, Hooker's management does not consider order backlogs to be an accurate
indicator of expected business. Historically, however, 92% of all orders booked
are ultimately shipped. Backlogs are normally shipped within three months.
Imported Lines. Hooker imports finished furniture in a variety of styles and
materials, and markets the products under the Hooker name through its normal
distribution channels. Product lines include occasional tables, consoles,
chests, casual dining pieces, bedroom pieces and accent items. Hooker imports
products from China, the Philippines, Mexico, Indonesia, Honduras and Egypt
from approximately 16 agents representing 35 factories. All transactions are in
U.S. dollars. Because of the large number and diverse nature of foreign
factories, Hooker has flexibility in the placement of product in any particular
country or factory. Factories located in China have become an important
resource for Hooker. The sudden disruption in Hooker's supply chain from China
could significantly impact Hooker's ability to fill customer orders for
products manufactured in that country for a three to six month period. However,
Hooker believes that such a disruption in supply would not have a material
adverse effect on Hooker's financial condition or results of operations.
Competition. Hooker is the sixteenth largest furniture manufacturer in North
America based on 1999 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 Hooker competes include a large number of relatively small
manufacturers; however, certain competitors of Hooker have substantially
greater sales volumes and financial resources than Hooker. Competitive factors
in the upper-medium price range include style, price, quality, delivery,
design, service, and durability. Hooker 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. At November 30, 1999, Hooker had approximately 2,050 employees.
None of Hooker's employees are represented by a labor union. The Company
considers its relations with its employees to be good.
Principal Executive Offices. The address of the principal executive offices
of Hooker Furniture Corporation is 440 East Commonwealth Boulevard,
Martinsville, Virginia 24112, and the telephone number is (540) 632-2133.
20
<PAGE>
Selected Historical Financial Data and Pro Forma Financial Data for Hooker
Selected Historical Financial Data. The following selected historical
financial data for each of the last five fiscal years ended November 30, 1999
have been derived from Hooker's audited financial statements. The selected
historical financial data for the six months ended May 31, 2000 and May 31,
1999 have been derived from financial statements that have not been audited,
but which, in the opinion of Hooker's management, include all adjusting entries
(consisting of normal recurring adjustments) necessary to present fairly the
information set forth therein. The selected historical financial data should be
read in conjunction with the financial statements, including the notes thereto,
and "Management's Discussion and Analysis" included in Hooker's Annual Report
on Form 10-K for the fiscal year ended November 30, 1999 and in its Quarterly
Report on Form 10-Q for the fiscal quarter ended May 31, 2000, each of which
are incorporated in this offer to purchase by reference. See the information
under the caption "Where You Can Find More Information Concerning Hooker" in
this Section 9 for information on where and how you can inspect or obtain
copies of those reports.
<TABLE>
<CAPTION>
Six Months Ended
May 31, Year Ended November 30,
----------------- --------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(In thousands, except per share and ratio data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
(1):
Net sales............. $122,302 $111,971 $227,785 $205,308 $175,385 $161,202 $144,689
Cost of goods sold.... 90,190 82,515 168,603 156,344 133,092 118,675 108,825
Selling and
administrative
expenses............. 19,746 17,217 35,648 32,051 26,685 25,172 22,474
Income from
operations........... 12,366 12,239 23,534 16,913 15,608 17,355 13,390
Other income, net..... 222 54 289 674 599 375 842
Interest expense...... 327 330 647 560 630 227 124
Income before income
taxes................ 12,261 11,963 23,176 17,027 15,577 17,503 14,108
Income taxes.......... 4,658 4,497 8,881 6,241 5,530 6,715 4,939
Net income............ 7,603 7,466 14,295 10,786 10,047 10,788 9,169
Ratio of earnings to
fixed charges (2).... 19.1 18.7 18.3 15.7 12.3 27.6 27.3
Per Share Data (3):
Basic and diluted
earnings per share... 1.00 0.98 1.87 1.40 1.30 1.39 1.18
Cash dividends per
share................ 0.17 0.15 0.30 0.28 0.26 0.22 0.18
Net book value per
share (including
common stock held by
ESOP)................ 13.35 11.78 12.52 10.97 9.86 8.85 7.68
Weighted number of
shares outstanding... 7,617 7,646 7,636 7,692 7,734 7,750 7,753
Balance Sheet Data:
Cash.................. 2,606 3,684 157 3,625 827 1,997 2,543
Inventories........... 38,030 34,231 37,051 35,812 33,475 26,013 19,818
Working capital....... 62,084 56,764 54,557 51,793 47,153 37,555 33,840
Total assets.......... 125,916 113,177 116,423 111,233 98,290 87,370 71,144
Long-term debt
(including current
maturities).......... 12,000 11,504 7,000 12,062 9,985 7,228 1,000
Common stock held by
ESOP................. 10,129 10,213 10,129 10,213 10,044 9,230 6,740
Stockholders' equity.. 91,543 79,599 85,234 73,900 66,210 59,326 52,760
</TABLE>
--------
(1) Certain items in the financial statements for periods prior to 1999 have
been reclassified to conform to the 1999 method of presentation.
(2) "Fixed charges" as calculated for the Company are defined as the sum of
interest expensed and capitalized and the interest component of rental
expense. "Earnings" as used in the calculation of the ratio are defined as
the sum of income before taxes, fixed charges as defined above and
amortization of capitalized interest; less, interest capitalized.
(3) All share and per share data reflect the effect of a two-for-one stock
split distributed in the form of a stock dividend on January 31, 2000.
21
<PAGE>
Selected Pro Forma Financial Data. The following pro forma financial
information and related notes have been prepared assuming that the purchase of
1,800,000 shares by the ESOP Trust for $12.50 per share, for an aggregate
purchase price of $22.5 million, pursuant to the tender offer is financed by
borrowings under a ten year bank term loan at an assumed rate of 8% per annum
(the "Tender Offer Transactions"). Please see Section 8 for a discussion of the
terms of the financing for the offer. The pro forma effect on Hooker's
operating results for the fiscal year ended November 30, 1999 and the six-
months ended May 31, 2000 assumes the Tender Offer Transactions occurred on the
first day of the respective twelve-month and six-month periods. The pro forma
effect on Hooker's financial position assumes that the Tender Offer
Transactions occurred on May 31, 2000. This pro forma information does not
purport to be indicative of the results that would have been obtained or
results that may be obtained in the future, or the financial condition that
would have resulted if the Tender Offer Transactions had been completed at the
dates indicated.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 2000 November 30, 1999
-------------------- --------------------
Historical Pro Forma Historical Pro Forma
---------- --------- ---------- ---------
(In thousands, except per share and ratio
data)
<S> <C> <C> <C> <C>
Income Statement Data:
Net sales.......................... $122,302 $122,302 $227,785 $227,785
Cost of goods sold (1)............. 90,190 90,969 168,603 170,184
Selling and administrative expenses
(1) (2)........................... 19,746 20,282 35,648 36,273
Income from operations............. 12,366 11,051 23,534 21,328
Other income, net.................. 222 222 289 289
Interest expense (3)............... 327 1,220 647 2,402
Income before income taxes......... 12,261 10,053 23,176 19,215
Income taxes (4)................... 4,658 3,894 8,881 7,538
Net income......................... 7,603 6,159 14,295 11,677
Ratio of earnings to fixed charges
(5)............................... 19.1 7.4 18.3 7.2
Per Share Data (6):
Basic and diluted earnings per
share (7)......................... 1.00 1.05 1.87 1.98
Cash dividends per share........... 0.17 0.17 0.30 0.30
Net book value per share (including
common stock held by ESOP) (7).... 13.35 13.61 12.52 *
Weighted number of shares
outstanding (7)................... 7,617 5,858 7,636 5,887
Balance Sheet Data:
Cash............................... 2,606 2,606 157 *
Inventories........................ 38,030 38,030 37,051 *
Working capital.................... 62,084 62,084 54,557 *
Total assets....................... 125,916 125,916 116,423 *
Long-term debt (including current
maturities) (8)................... 12,000 34,500 7,000 *
Common stock held by ESOP.......... 10,129 10,129 10,129 *
Unearned ESOP shares (contra
equity) (8)....................... (22,500) *
Stockholders' equity............... 91,543 69,043 85,234 *
</TABLE>
--------
* Not presented.
(1) Pro forma information reflects compensation expense recognized upon the
allocation of shares by the ESOP to ESOP participants at their historical
appraised value (97,035 and 48,209 shares at values of $18.10 and $17.95
for the fiscal year ended November 30, 1999 and six-month period ended May
31, 2000, respectively). The shares are released as payments of principal
and interest are made pursuant to the 25 year ESOP Term Loan. For purposes
of the pro forma financial data, level quarterly repayments of principal in
the amount of $900,000 under the ESOP Term Loan have been assumed. However,
pursuant to the ESOP Term Loan, the ESOP is only required to make minimum
annual repayments of $600,000 annually, with a mandatory aggregate
repayment of $3.6 million over four years. See Section 8 "Source and Amount
of Funds" for more information about the terms of the ESOP Term Loan.
Compensation
22
<PAGE>
expense is allocated between "cost of goods sold" and "selling and
administrative expenses". Hooker is required to perform annual appraisals
of its shares for purposes of the ESOP, in accordance with Internal Revenue
Service and Department of Labor regulations. Assuming that the Tender Offer
Transactions occurred on the first day of the respective twelve-month
period ended November 30, 1999 and six-month period ended May 31, 2000,
management believes that the appraised value of Hooker's stock would
decline from its historical appraised value. If the appraised values were
assumed to decline by 20%, pro forma compensation expense would decrease by
$385,000 to $1.4 million for the fiscal year ended November 30, 1999 and by
$192,000 to $673,000 for the six-month period ended May 31, 2000. Since the
compensation expense related to the allocation of shares to ESOP
participants recorded for financial reporting purposes is not deductible
for tax purposes, pro forma net income would increase also by $385,000 to
$12.1 for the fiscal year ended November 30, 1999 and by $192,000 to $6.4
million for the six-month period ended May 31, 2000.
(2) Pro forma information reflects transaction fees of $450,000 charged to
"selling and administrative expenses".
(3) Pro forma information reflects "interest expense" on the $22.5 million 10
year Bank Term Loan at 8%. The Bank Term Loan will be repaid in equal
quarterly installments of principal and interest. See Section 8 "Source
and Amount of Funds" for more information about the terms of the Bank Term
Loan.
(4) Pro forma income tax expense is reduced by the tax effect of (i) principal
payments made to Hooker pursuant to the ESOP Term Loan, (ii) interest paid
on the Bank Term Loan, (iii) fees incurred in connection with the "Tender
Offer Transactions" and (iv) the difference between the cost of shares
allocated to ESOP participants (at $12.50 per share) and principal
repayments on the ESOP Term Loan. An effective tax rate of 38% has been
assumed.
(5) "Fixed charges" as calculated for Hooker are defined as the sum of
interest expensed and capitalized and the interest component of rental
expense. "Earnings" as used in the calculation of the ratio are defined as
the sum of income before taxes, fixed charges as defined above and
amortization of capitalized interest; less, interest capitalized.
(6) All share and per share data reflect the effect of a two-for-one stock
split distributed in the form of a stock dividend on January 31, 2000.
(7) Only shares held by the ESOP Trust that are allocated, released or
committed to be released for allocation to ESOP participants are treated
as outstanding for purposes of calculating pro forma earnings and net book
value per share. Shares are committed to be released as the ESOP Trust
makes principal and interest payments on the ESOP Term Loan.
(8) Assuming the Tender Offer Transactions occurred on May 31, 2000, "long-
term debt" and "unearned ESOP shares" reflect the effect of borrowing
under the Bank Term Loan in the amount $22.5 million and the lending of
the proceeds to the ESOP Trust pursuant to the ESOP Term Loan for the
purchase of 1.8 million shares of Hooker common stock at $12.50 per share
from existing shareholders pursuant to this tender offer.
Where You Can Find More Information Concerning Hooker
Hooker is subject to the information requirements of the Exchange Act, and
in accordance therewith files periodic reports, proxy statements and other
information relating to its business, financial condition and other matters.
Hooker is required to disclose in such proxy statements certain information,
as of particular dates, concerning the Hooker directors and executive
officers, their compensation, the principal holders of the securities of
Hooker and any material interest of such persons in transactions with Hooker.
Pursuant to Rule 14d-1 and Rule 14d-3(a) under the Exchange Act, the ESOP
Trust has filed with the SEC a Tender Offer Statement on Schedule TO, and may
file amendments thereto, which include additional information with respect to
the tender offer. Hooker has filed with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 pursuant to Section 14(d)(4) and Rule 14d-9 under
the Exchange Act, furnishing certain additional information about Hooker's and
Hooker's Board of Directors' position concerning the tender offer, and Hooker
may file amendments thereto. Such material and other information may be
inspected at the public
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reference facilities maintained by the SEC at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549; and also should be available for inspection and
copying at the following regional offices of the SEC: 7 World Trade Center,
Suite 1300, New York, New York 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also
be obtained by mail, upon payment of the Commission's customary charges, by
writing to the Public Reference Section at 450 Fifth Street, N.W., Washington,
D.C. 20549. The SEC also maintains a web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
You are urged to review Hooker's Annual Report on Form 10-K for the fiscal
year ended November 30, 1999 and its Quarterly Reports on Form 10-Q for the
quarters ended February 28, 2000 and May 31, 2000 each of which is incorporated
in this offer to purchase by reference.
Information Concerning the ESOP Trust
The ESOP Trust is a trust that has been established under the terms of the
ESOP. Hooker sponsors the ESOP to provide ownership and retirement benefits for
its eligible employees. The ESOP covers substantially all Hooker employees, and
enables participants to share in the growth of Hooker and to accumulate a
beneficial ownership interest in Hooker's common stock. The ESOP is intended to
qualify as an "employee stock ownership plan" for purposes of Section
4975(e)(7) of the Internal Revenue Code of 1986, as amended. The Trustee of the
ESOP Trust is U.S. Trust Company, N.A. The Trustee's address, is 600 Fourteenth
Street, NW, Suite 400, Washington, DC 20005, and its telephone number is (202)
585-4170.
The shares acquired by the ESOP Trust in the tender offer will be held in an
unallocated account in the ESOP Trust called a "suspense account." Hooker will
make periodic contributions to the ESOP which will be applied by the Trustee to
pay principal and interest under the ESOP Term Loan (as described in Section
8). In addition, dividends paid on some of the shares that are held by the ESOP
(including shares in the suspense account) may also be used by the Trustee to
make principal and interest payments under the ESOP Term Loan. The ESOP Term
Loan repayments made by the Trustee will permit the Trustee to release from the
suspense account a proportionate number of shares. The shares that are released
from the suspense account each year will then be allocated among the accounts
of those ESOP participants who are eligible to receive an allocation, based
upon a pre-established allocation formula set forth in the ESOP plan document.
ESOP participants and beneficiaries are permitted to receive distributions
of their vested ESOP benefits in the form of shares of Hooker stock. As
mentioned in Section 2 "Purpose of the Tender Offer; Material Effects of the
Tender Offer," participants and beneficiaries have a "put" right under which
they can require Hooker to repurchase their shares during a 60-day period
following the distribution from the ESOP Trust of such shares or during a 60-
day period in the year following the year in which such distribution was made.
The purchase may be made by the ESOP Trust if Hooker consents and the Trustee
deems the purchase appropriate. See Section 2 "Purpose of the Tender Offer;
Material Effects of the Tender Offer" for addition information regarding
Hooker's "repurchase obligation" under the ESOP.
The Trustee's obligations with respect to the ESOP Trust are governed by a
trust agreement between Hooker and the Trustee. The trust agreement describes
the Trustee's duties and obligations with respect to the ESOP Trust. The
Trustee is required under the terms of the trust agreement to vote the shares
allocated to participants' accounts in accordance with timely voting
instructions received by the Trustee from such participants. Those allocated
shares for which no instructions are received by the Trustee, or for which
instructions are not timely received, and all unallocated shares will be voted
by the Trustee in its discretion. Hooker has agreed to pay the Trustee an
annual fee of approximately $60,000, and to reimburse the Trustee for its
reasonable expenses. In addition, Hooker has agreed under the trust agreement
to indemnify and hold the Trustee harmless for losses or liabilities relating
to its actions as trustee, unless such losses or liabilities are due to the
Trustee's negligence, bad faith or willful misconduct.
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<PAGE>
In addition to retaining U.S. Trust to serve as Trustee, Hooker has retained
U.S. Trust to serve as an independent fiduciary of the ESOP for the purposes of
evaluating the merits of the tender offer and determining whether to cause the
ESOP Trust to participate in the tender offer. Hooker has agreed to pay U.S.
Trust in its capacity as an independent fiduciary of the ESOP Trust a fee of
$75,000 for the services performed by U.S. Trust in connection with the offer.
In addition, Hooker has also agreed to pay on behalf of the ESOP Trust all
expenses incurred by the ESOP Trust in connection with the offer, including the
fees and disbursements of its legal counsel and financial advisor, and to
indemnify U.S. Trust and related parties against liabilities, including
liabilities under the federal securities laws, arising out of U.S. Trust's
engagement in connection with the offer.
10. Approval of the Tender Offer by Hooker's Board of Directors and the
Trustee.
Hooker's Board of Directors and management have from time to time discussed
strategies to maximize shareholder value as a regular part of the Hooker's
strategic planning activities. For the past 24 months, the Board and management
have considered alternatives for providing liquidity and marketability of
Hooker's shares for its shareholders. The Board and management were also
concerned that Hooker's strong operating performance was not appropriately
reflected in the price of Hooker's shares in the "over-the-counter" market.
With the aid of its financial advisors, the Board considered various
alternatives to help provide liquidity for Hooker's shareholders at an
attractive price. After considering various alternatives, the Board concluded
that some form of stock repurchase was the most promising option to achieve
this goal. In connection with exploring a stock repurchase transaction, the
Board consulted with ESOP Services, Inc. on several occasions concerning the
possibility of having the ESOP Trust make a tender offer for Hooker's shares
and the benefits to Hooker, its shareholders and the participants of the ESOP
of such a transaction.
At a meeting held on March 28, 2000, the Board, along with certain members
of management, Hooker's counsel, McGuireWoods LLP and ESOP Services, Inc., met
to discuss a potential ESOP Trust stock purchase transaction pursuant to which
the ESOP Trust would purchase a sufficient number of shares to cause the ESOP
Trust to own at least 30% of Hooker's issued and outstanding shares. The ESOP
Trust would need to purchase 1.7 to 1.8 million shares to reach 30% ownership
level. Such a transaction would permit qualifying selling shareholders to elect
to defer taxation of gains on the sale of their shares pursuant to Section 1042
of the Internal Revenue Code of 1986, as amended. The tender offer would be
funded by a term loan to Hooker from a commercial lender, the proceeds of which
would in turn be loaned to the ESOP Trust. The Board discussed the effects of
such a transaction on Hooker, the ESOP Trust, Hooker's employees and its
shareholders. The consensus of the Board was that the proposed tender by the
ESOP Trust would provide significant benefits for Hooker's shareholders and
enhance the value of the ESOP for Hooker's employees. The Board also discussed
the effect that the additional debt would have on Hooker and whether such debt
would preclude Hooker from pursuing other corporate strategies in the future.
Each of the non-employee Board members, Mr. Groves, Mr. Gregory, Mr. Beeler,
Mr. A. Frank Hooker, Jr., and Mr. Walker, was asked to serve on a special
committee to review the proposed tender offer further and to make a
recommendation to the full Board assuming a purchase price of $12.50 per share.
The proposed purchase price reflected a variety of factors considered by the
Board, including the desire to offer a price that would be attractive to
shareholders, particularly in light of the limited liquidity and trading
history for Hooker's shares, balanced against the additional debt that Hooker
would incur to fund the tender offer. The Board also considered the
price/earnings ratios of peer companies and the benefit to qualifying
shareholders of the option to defer U.S. federal income tax on the gain from
the sale of shares tendered in the offer under Section 1042 of the Internal
Revenue Code. Mr. Gregory was appointed chairman of the special committee. Mr.
Groves recommended that management evaluate and make a recommendation to the
special committee regarding the proposed tender offer by the ESOP Trust. The
special committee would in turn consider management's recommendation and make
its own recommendation to the full Board. The special committee was authorized
to engage a financial advisor to evaluate the fairness of the proposed tender
offer to Hooker, from a financial point of view.
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<PAGE>
The special committee met on June 2, 2000 along with representatives of
management, ESOP Services, Inc. and Mann Armistead & Epperson, Ltd. ("Mann
Armistead"). Mr. Gregory, as committee chairman, reported that management had,
based upon management's review of the proposed tender offer at a price per
share of $12.50, for an aggregate purchase price of approximately $22.5
million, recommended the proposed tender offer as appropriate for Hooker and
further recommended that the special committee review the proposed tender offer
by the ESOP Trust and make a recommendation to the full Board. The special
committee discussed management's analysis and recommendation with
representatives of management as well as ESOP Services, Inc. The special
committee also interviewed a representative of Mann Armistead in connection
with engaging Mann Armistead as the special committee's financial advisor.
Based upon this interview, and particularly Mann Armistead's experience and
expertise in transactions involving companies in the furniture industry, the
special committee approved the engagement of Mann Armistead. Based upon the
information presented to it by management and ESOP Services, Inc., the special
committee concluded that the proposed tender offer by the ESOP Trust at $12.50
per share was fair to and in the best interests of the Company. The special
committee unanimously voted to recommend to the full Board that the Board
approve the proposed tender offer by the ESOP Trust, subject to the receipt of
a favorable fairness opinion from Mann Armistead as to the fairness of the
proposed tender offer to Hooker from a financial point of view. The special
committee also determined to recommend that the Board make no recommendation to
Hooker's shareholders as to whether shareholders should tender shares pursuant
to the offer by the ESOP Trust. This recommendation was based upon the special
committee's view that due to the varying circumstances of each particular
shareholder, including such factors as a shareholder's desire or need for
liquidity, desire to diversify his or her holdings, the tax consequences to
such shareholder of tendering shares and whether such shareholder would be
eligible, or desire, to defer taxation of any gain on the sale of his or her
shares under Section 1042 of the Internal Revenue Code of 1986, as amended, the
decision as to whether to tender in the offer should be left to each individual
shareholder.
At the request of the special committee, Mann Armistead undertook to perform
a due diligence investigation of Hooker during the week of June 5, 2000. In
connection with this investigation, Mann Armistead interviewed members of
Hooker's management and visited Hooker's primary facilities in Martinsville,
Virginia. Mann Armistead also reviewed financial information concerning Hooker,
including budgets and financial projections, prepared by members of Hooker's
management.
On June 20, 2000, the Board of Directors met to, among other things,
consider the proposed tender offer by the ESOP Trust of up to 1.8 million
shares at a purchase price of $12.50 per share, for an aggregate purchase price
of up to $22.5 million. Representatives of McGuireWoods, ESOP Services, Inc.
and Mann Armistead also participated in the discussions concerning the proposed
tender offer. Mr. Gregory, as chairman of the special committee, reported that
subject to a favorable opinion of Mann Armistead as to the fairness, from a
financial point of view, of the proposed tender offer to Hooker, the special
committee unanimously recommended that the full Board approve the proposed
tender offer by the ESOP Trust. Mr. Gregory also reported that the special
committee recommended that the Board make no recommendation as to whether
Hooker's shareholders should tender shares pursuant to the proposed tender
offer by the ESOP Trust. Mann Armistead delivered its oral fairness opinion
(subsequently confirmed in writing) that the proposed tender offer was fair to
Hooker, from a financial point of view. A copy of Mann Armistead's fairness
opinion is included as Annex A to this offer to purchase. Mann Armistead also
discussed with the Board their firm's due diligence investigation and analysis
of the proposed tender offer.
The Board determined that the proposed tender offer and the transactions
contemplated thereby, including the required financing, is fair to and in the
best interests of Hooker and then, by unanimous vote of the Board members
present at the meeting, the Board voted to approve the proposed tender offer by
the ESOP Trust and the transactions contemplated thereby, including the
required financing. The Board also approved the appointment of U.S. Trust as an
independent fiduciary of the ESOP to evaluate the merits of the tender offer
and to determine whether to cause the ESOP Trust to participate in the tender
offer. The Board also appointed U.S. Trust to replace the former trustee of the
ESOP Trust. The Board also determined that the Board would
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<PAGE>
make no recommendation to Hooker's shareholders as to whether shareholders
should tender shares in the tender offer by the ESOP Trust.
On July 12, 2000, the Trustee, in consultation with its financial and legal
advisors, approved the tender offer. In reaching this conclusion, the Trustee
considered, among other things, its fiduciary duties under the Employee
Retirement Income Security Act of 1974, as amended, and the stated purposes of
the ESOP Trust. The Trustee also reviewed, together with its financial and
legal advisors, Hooker's financial statements, business and prospects,
historical trading activity, as well as the tender offer and ESOP Term Loan
documents.
On August 3, 2000, the Board met to discuss updated information with respect
to the tender offer. At that meeting the Board also approved the offer to
purchase, the letter of transmittal and the other tender offer documents.
Hooker's Board of Directors and the Trustee have approved the tender offer.
However, neither Hooker's Board of Directors nor the Trustee makes any
recommendation to you as to whether you should tender or refrain from tendering
your shares. You must make your own decision as to whether to tender your
shares and, if so, how many shares to tender. This tender offer is being made
to all Hooker shareholders (excluding shares held by the ESOP Trust on behalf
of ESOP participants), including shareholders who are directors, officers or
beneficial owners of more than five percent of Hooker's common stock. Certain
of Hooker's directors and executive officers, as well as certain beneficial
owners of more than five percent of Hooker's common stock, have advised Hooker
and the Trustee that they intend to tender shares in the tender offer.
The Special Committee
As described above, the special committee determined that the tender offer
is fair to and in the best interests of Hooker. In making such determination
and its recommendation that the Board approve the offer and the transactions
contemplated thereby, the special committee considered a number of factors,
including, but not limited to, the following:
. the terms and conditions of the proposed tender offer, including the
conditions to the ESOP Trust's obligation to take and pay for shares
tendered;
. the thin trading market and the lack of liquidity of the shares;
. the financial condition, results of operations, cash flows and prospects
of Hooker;
. the effect of the offer, particularly the effect of increased leverage,
on the prospects of Hooker, including its ability to make regular and
recurring contributions to the ESOP in future years;
. the historical market prices, recent trading activity and trading range
of the shares;
. the views expressed by ESOP Services, Inc. regarding, among other
things: (a) the opportunity to provide liquidity as well as related
enhanced estate planning opportunities for Hooker's shareholders and (b)
the ability to expand employee ownership of Hooker, provide enhanced
retirement benefits to ESOP participants and increase Hooker's ability
to attract, retain and motivate its employees; and
. the presentation of Mann Armistead made to the special committee and the
Board of Directors on June 20, 2000 and the oral fairness opinion
(subsequently confirmed in writing) delivered to the special committee
and the Board at that meeting to the effect that, as of such date and
based upon the terms and conditions of the proposed tender offer and
subject to certain matters stated in such opinion, the proposed tender
offer was fair to Hooker, from a financial point of view.
The Hooker Board
In reaching its determination referred to above, the Hooker Board considered
and relied upon the conclusions and unanimous recommendation of the special
committee that the full Board approve the offer and the transactions
contemplated thereby and the considerations referred to above as having been
taken into
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account by the special committee, as well as the Board's own familiarity with
Hooker's business, financial condition, results of operations and prospects and
the nature of the industry in which Hooker operates.
In light of the number and variety of factors that the special committee and
the Board considered in connection with their evaluation of the offer, neither
the special committee nor the Board found it practicable to quantify or
otherwise assign relative weights to the foregoing factors, and, accordingly,
neither the special committee nor the Board did so. In addition, individual
members of the special committee and the Board may have given different weights
to different factors. Rather, the special committee and the Board viewed their
positions and recommendations as being based on the totality of the information
presented to and considered by it.
The Board, after receiving the unanimous recommendation of the proposed
tender offer by the special committee, (i) determined that the proposed tender
offer and the transactions contemplated thereby, including the required
financing, are fair to and in the best interests of Hooker (ii) approved the
proposed tender offer and the transactions contemplated thereby, including the
required financing, (iii) directed the Trustee to undertake the tender offer,
subject to the Trustee's approval and (iv) determined to make no recommendation
to Hooker's shareholders as to whether shareholders should tender shares in the
offer.
Opinion of the Financial Advisor
On June 20, 2000, Mann Armistead rendered its oral opinion (subsequently
confirmed in writing) that the proposed tender offer was fair from a financial
point of view to Hooker. No limitations were imposed by the special committee
upon Mann Armistead with respect to the investigations made or procedures
followed by it in rendering its opinion.
The full text of the written opinion of Mann Armistead, dated June 20, 2000,
which sets forth the assumptions made and matters considered, is attached as
Annex A to this offer to purchase. Mann Armistead's opinion is addressed to the
special committee and the scope of the opinion is limited to whether the
proposed tender offer is fair to Hooker from a financial point of view. The
Mann Armistead opinion does not address whether the proposed tender offer is
fair to Hooker's shareholders and does not constitute a recommendation to any
shareholder as to whether such shareholder should tender shares in the offer.
11. Interest of Hooker's Directors, Executive Officers and Principal
Shareholders; Transactions and Arrangements Concerning Shares.
As of August 9, 2000, Hooker had 7,617,298 issued and outstanding shares.
The 1,800,000 shares the ESOP Trust is offering to purchase under the tender
offer represent approximately 23.6% of the shares outstanding as of August 9,
2000.
As of August 9, 2000, Hooker's directors and executive officers as a group
(11 persons) beneficially owned an aggregate of 2,561,002 shares of Hooker
common stock, representing approximately 33.6% of outstanding shares. The
directors and executive officers of Hooker are entitled to participate in the
tender offer on the same basis as all other shareholders.
Hooker and the Trustee have been advised by certain directors and executive
officers, as well as certain beneficial owners of five percent or more of
Hooker's common stock, that they intend to tender shares in the tender offer.
As of August 9, 2000, the aggregate number and percentage of Hooker
securities that were beneficially owned by the directors and executive officers
of Hooker were as appears in the table below. Except for J. Clyde Hooker, Jr.,
Paul B. Toms, Jr., A. Frank Hooker, Jr. and W. Christopher Beeler, Jr., no
director or executive officer beneficially owned more than 1.0% of Hooker's
shares as of such date. Assuming the ESOP Trust purchases 1,800,000 shares of
common stock and that no director or executive officer tenders any shares under
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the tender offer, then after the purchase of shares under the tender offer, the
ESOP Trust would hold 2,364,270 shares, or approximately 31.0% of the
outstanding shares, and the directors and executive officers as a group would
continue to beneficially own approximately 33.6% of the outstanding shares.
Assuming that no director or executive officer tenders any shares under the
tender offer, the percentage beneficial ownership of each director and
executive officer would be as appears in the table below.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership (1) of Class
---- ------------------------ --------
<S> <C> <C>
J. Clyde Hooker, Jr. (2)................. 1,523,570 (3)(4) 20.0%
Paul B. Toms, Jr. (2).................... 1,180,456 (5)(6) 15.5%
Mabel H. Toms (2)........................ 1,128,048 (4)(6)(7) 14.8%
Hooker Furniture Corporation Employee
Stock Ownership Plan Trust (8).......... 564,270 (9) 7.4%
A. Frank Hooker, Jr. (2)................. 409,610 (10) 5.4%
W. Christopher Beeler, Jr. (2)........... 82,400 (11) 1.1%
Irving M. Groves, Jr. (2)................ 25,796 (12) *
E. Larry Ryder (2)....................... 12,998 (13) *
Douglas C. Williams (2).................. 12,070 (14) *
L. Dudley Walker (2)..................... 10,000 *
Henry P. Long, Jr. (2)................... 7,302 (15) *
John L. Gregory, III (2)................. 800 *
All directors and executive officers as a
group (11 persons)...................... 2,561,002 (16) 33.6%
</TABLE>
--------
* Less than one percent.
(1) All share information in this proxy statement reflects a two-for-one stock
split effective January 31, 2000.
(2) The business address for such persons is c/o Hooker Furniture Corporation,
440 East Commonwealth Boulevard, Martinsville, Virginia 24112.
(3) J. Clyde Hooker, Jr. has sole voting and dispositive power with respect to
615,372 shares and shared voting and dispositive power with respect to
902,960 shares. Mr. Hooker also has sole voting power with respect to 5,238
shares held by the ESOP Trust. Shares beneficially owned by Mr. Hooker do
not include 262,912 shares beneficially owned by members of his family; Mr.
Hooker disclaims beneficial ownership of such shares. Mr. Hooker may be
deemed to share dispositive power with respect to the shares held by the
ESOP Trust (see footnote (9) below).
(4) J. Clyde Hooker, Jr. and Mabel H. Toms share voting and dispositive power
with respect to 704,000 shares held by family trusts. Such shares are
included in the shares beneficially owned by Mr. Hooker and by Mrs. Toms.
(5) Mr. Toms has sole voting and dispositive power with respect to 47,402
shares and shared voting and dispositive power with respect to 1,129,950
shares. Mr. Toms also has sole voting power with respect to 3,104 shares
held by the ESOP Trust. Shares beneficially owned by Mr. Toms do not
include 2,936 shares beneficially owned by his wife; Mr. Toms disclaims
beneficial ownership of such shares.
(6) Mabel H. Toms and her adult children, one of whom is Mr. Toms, share voting
and dispositive power with respect to 198,960 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 dispositive power with respect to
all 1,128,048 shares (which include the 198,960 shares held by the Toms
Family Trust) beneficially owned by Mrs. Toms.
(7) Mrs. Toms has sole voting and dispositive power with respect to 225,088
shares and shared voting and dispositive power with respect to 902,960
shares.
(8) U.S. Trust Company, N.A. serves as Trustee of the ESOP. The business
address for the Trustee is 600 Fourteenth Street, NW, Suite 400,
Washington, DC 20005.
(9) Shares reported as owned by the ESOP Trust include 30,504 shares that are
also reported as beneficially owned by the executive officers. The ESOP
Trustee has dispositive power with respect to shares owned by the ESOP
Trust. The ESOP Trustee may dispose of ESOP Trust shares only at the
direction of a
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committee appointed by Hooker. During fiscal 1999 such committee consisted
of the following officers of Hooker: J. Clyde Hooker, Jr., E. Larry Ryder
and Jack R. Palmer (Vice President--Human Resources). The ESOP Trustee has
sole voting power with respect to 44,560 shares held by the ESOP Trust,
which have not been allocated to plan participants. Allocated shares are
voted by the ESOP Trustee in accordance with the direction of the ESOP
participants.
(10) A. Frank Hooker, Jr. has sole voting and dispositive power with respect
to 256,800 shares and shared voting and dispositive power with respect to
145,442 shares. Mr. Hooker also has sole voting power with respect to
7,368 shares held by the ESOP Trust.
(11) Mr. Beeler has sole voting and dispositive power with respect to 2,400
shares and shared voting and dispositive power with respect to 80,000
shares.
(12) Mr. Groves has sole voting and dispositive power with respect to 25,196
shares and shared voting and dispositive power with respect to 600
shares. Shares beneficially owned by Mr. Groves do not include 12,200
shares beneficially owned by his wife; Mr. Groves disclaims beneficial
ownership of such shares.
(13) Includes 4,998 shares held by the ESOP Trust, with respect to which Mr.
Ryder has sole voting power. Mr. Ryder may also be deemed share
dispositive power with respect to the shares held by the ESOP Trust (see
footnote (9) above).
(14) Includes 6,494 shares held by the ESOP Trust, with respect to which Mr.
Williams has sole voting power.
(15) Mr. Long has sole voting and dispositive power with respect to 2,800
shares and shared voting and dispositive power with respect to 1,200
shares. Mr. Long also has sole voting power with respect to 3,302 shares
held by the ESOP Trust.
(16) Messrs. J. Clyde Hooker, Jr. and Ryder, each of whom is an executive
officer and a director, may be deemed to share dispositive power with
respect to the shares held by the ESOP Trust (see footnote (9) above).
Based on Hooker's records and information provided to Hooker by its
directors, executive officers and associates, neither Hooker, nor any
associate of Hooker nor, to the best of Hooker's knowledge, any directors or
executive officers of Hooker or any associates thereof, has effected any
transactions in Hooker shares during the 60 days before the date hereof.
Except as otherwise described herein, neither Hooker nor, to the best of
Hooker's knowledge, any of its affiliates, directors or executive officers, is
a party to any agreement, arrangement or understanding with any other person
relating, directly or indirectly, to the tender offer or with respect to any
securities of Hooker, including, but not limited to, any agreement,
arrangement or understanding concerning the transfer or the voting of the
securities of Hooker, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies, consents or authorizations.
12. Effects of the Tender Offer on the Market for Shares; Registration under
the Exchange Act.
The purchase by the ESOP Trust of shares under the tender offer will reduce
the number of Hooker shares that might otherwise be traded publicly and may
reduce the number of shareholders. The average daily trading volume for the
shares on the "over-the-counter" market as reported to the NASD by its member
firms for Hooker's fiscal year ended November 30, 1999 was 1,400 shares and
for the six months ended May 31, 2000 was 1,162 shares. Hooker's common stock
traded 186 times (352,800 shares traded) on 65 out of the 252 trading days
available during the fiscal year ended November 30, 1999 and 73 times (146,400
shares traded) on 23 out of the 126 trading days available during the six
months ended May 31, 2000. There can be assurance that following the
consummation of the offer there will be sufficient number of shares traded in
the "over-the-counter" market to ensure a liquid trading market for the
shares.
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The shares are registered under the Exchange Act, which requires, among
other things, that Hooker furnish certain information to its shareholders and
the SEC and comply with the SEC's proxy rules in connection with meetings of
the Hooker shareholders. It is a condition to the tender offer that the ESOP
Trust's purchase of shares under the tender offer will not result in there
being fewer than 300 record holders of Hooker's shares or otherwise making
Hooker eligible for deregistration under the Exchange Act.
13. Legal Matters; Regulatory Approvals.
The ESOP Trust is not, based on information provided by Hooker, aware of any
license or regulatory permit that appears material to Hooker's business that
might be adversely affected by the ESOP Trust's acquisition of shares as
contemplated by the tender offer or of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic, foreign or supranational, that would be required for the acquisition
or ownership of shares by the ESOP Trust as contemplated by the tender offer.
Should any such approval or other action be required, the ESOP Trust presently
contemplates that it will seek that approval or other action. The ESOP Trust is
unable to predict whether it will be required to delay the acceptance for
payment of or payment for shares tendered under the tender offer pending the
outcome of any such matter. There can be no assurance that any such approval or
other action, if needed, would be obtained or would be obtained without
substantial cost or conditions or that the failure to obtain the approval or
other action might not result in adverse consequences to its business and
financial condition. The obligations of the ESOP Trust under the tender offer
to accept for payment and pay for shares is subject to conditions. See Section
6.
14. Certain United States Federal Income Tax Consequences; Section 1042
Election.
The following is a summary of certain federal income tax consequences to
shareholders whose shares are purchased by the ESOP Trust pursuant to the
tender offer. The summary is based on the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), applicable current and proposed United
States Treasury Regulations, judicial authority and administrative rulings and
practice, all of which are subject to change at any time, possibly with
retroactive effect. As a result, the following statements and conclusions could
be altered or modified. The discussion does not address shareholders whose
shares are not capital assets, nor does it address shareholders who hold shares
as part of a hedging, "straddle," conversion or other integrated transaction,
or who received shares upon conversion of securities or exercise of warrants or
other rights to acquire shares. The discussion does not address shareholders
who acquired shares pursuant to the exercise of certain employee stock options
or as a result of some other compensatory transfer, or to shareholders who are
in special tax situations (such as insurance companies, tax-exempt
organizations, financial institutions, United States expatriates or non-U.S.
persons). Furthermore, the discussion does not address any aspect of foreign,
state or local taxation or estate or gift taxation.
The federal income tax consequences set forth below are included for general
information purposes only. Because individual circumstances may differ, each
shareholder should consult such shareholder's own tax advisor to determine the
applicability of the rules discussed below to such shareholder and the
particular tax effects of the offer, including the application and effect of
state, local and other income tax laws.
General
Except to the extent permitted under Section 1042 of the Code, as described
below, a shareholder's receipt of cash for shares tendered in connection with
the tender offer will be a taxable transaction for federal income tax purposes
(and also may be a taxable transaction under applicable state, local, foreign
and other income tax laws). In general, a shareholder will recognize gain or
loss in an amount equal to the difference between the shareholder's adjusted
tax basis in the shares sold in connection with the tender offer and the amount
of cash
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received for the shares. Gain or loss must be determined separately for each
block of shares (i.e., shares acquired at the same cost in a single
transaction) sold under the offer. Such gain or loss will be capital gain or
loss, and will be treated as long-term gain or loss if, on the date of sale,
the shares were held for more than one year.
Under federal income tax backup withholding rules, payments in connection
with the tender offer may be subject to "backup withholding" at a rate of 31%.
In order to avoid backup withholding, each tendering shareholder, unless an
exemption applies, must provide the depositary with such shareholder's correct
taxpayer identification number and certify that such shareholder is not subject
to such backup withholding by completing the Substitute Form W-9 included in
the letter of transmittal. Backup withholding is not an additional tax but
merely an advance payment, which may be refunded to the extent it results in an
overpayment of tax. Certain persons generally are entitled to exemption from
backup withholding, including corporations, financial institutions and certain
foreign individuals. Each shareholder should consult with the shareholder's own
tax advisor as to the shareholder's qualification for exemption from backup
withholding and the procedure for obtaining such exemption.
All shareholders tendering shares pursuant to the offer should complete and
sign the main signature form and the Substitute Form W-9 included as part of
the letter of transmittal to provide the information and certification
necessary to avoid backup withholding (unless an applicable exemption exists
and is proved in a manner satisfactory to the ESOP Trust and the depositary).
Noncorporate foreign shareholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the depositary, in order to avoid backup withholding. See
Instructions 10 and 11 to the letter of transmittal.
Deferral of Gain under Section 1042
Any shareholder of Hooker, other than a shareholder that is a "C
corporation" for federal income tax purposes, may be eligible under Section
1042 of the Code ("Section 1042") to elect to defer taxation of gain from the
sale of the shareholder's shares in the tender offer to the extent that the
shareholder reinvests the proceeds received in the sale in "qualified
replacement property" and satisfies certain other requirements (as described
below). If these requirements are met, the gain that would have been taxed at
the time of the sale is instead taxed at the time the shareholder disposes of
the qualified replacement property. The shareholder's basis in the qualified
replacement property for purposes of computing gain on the sale of the
qualified replacement property is reduced by the amount of gain not recognized
by reason of the election under Section 1042. If the shareholder purchases more
than one item of qualified replacement property, the basis of each item will be
reduced by an amount determined by multiplying the total gain not recognized in
the sale of the shares by a fraction, the numerator of which is the cost of the
item of replacement property, and the denominator of which is the total cost of
all items of qualified replacement property. The holding period of the
shareholder's shares is added onto the holding period of the qualified
replacement property for determining capital gains treatment on the disposition
of the qualified replacement property. Section 1042 only applies to a sale of
shares if the shareholder affirmatively elects for it to apply. The procedures
for electing Section 1042 treatment are generally described below.
An eligible shareholder may elect Section 1042 treatment if (1) the ESOP
holds, immediately after the sale, at least 30% of the outstanding shares of
Hooker, (2) the shares sold by the shareholder are "qualified securities" that
have been held by the shareholder for at least three years prior to the date of
the sale, (3) the shareholder reinvests the proceeds received from the sale in
"qualified replacement property" within the required time periods, and (4)
certain elections and other requirements are met (as described in greater
detail below).
Section 1042 deferral treatment is only available to eligible shareholders
for the sale of shares that are "qualified securities." Qualified securities
are shares of common stock issued by a domestic corporation that is treated as
a "C corporation" for federal income tax purposes. In addition, the corporation
that issued the shares
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cannot have had any stock outstanding that was readily tradable on an
established securities market for the one-year period preceding the sale to the
employee stock ownership plan. Hooker believes that the shares will meet both
of these requirements at the time of the tender offer.
Two other conditions also must be met in order for shares to be qualified
securities. First, an eligible shareholder's shares must not have been received
by the shareholder in a distribution from a tax-qualified retirement plan
described in Section 401(a) of the Code, such as the ESOP. Second, a
shareholder's shares cannot have been received by the shareholder under an
employee stock option, employee stock purchase plan or other compensation
arrangement, as described in Sections 83, 422, 423 of the Code (or certain
predecessor provisions). If a shareholder cannot meet both of these conditions,
the shareholder's shares will not be qualifying securities and gains on the
sale of those shares cannot be deferred under Section 1042.
For purposes of meeting the three-year holding period requirement described
above, a shareholder may include the period that another shareholder held the
shares if those shares were acquired from the first shareholder through certain
untaxed transactions. Examples of transactions that would permit this include
gifts, like-kind exchanges and transfers of shares in connection with a merger
or reorganization.
As also mentioned above, the proceeds received by the shareholder from the
sale of the shareholder's shares must be used to purchase "qualified
replacement property." This purchase must occur within the 15-month period
beginning three months before the date on which the shareholder sells shares to
the ESOP Trust. Qualified replacement property is stock, rights to acquire
stock, bonds, debentures, notes, certificates or other debt securities with
interest coupons or in registered form that have been issued by a U.S.
operating corporation (not including Hooker or any of its affiliates).
Securities issued by federal or state governments or agencies, such as Treasury
notes, savings bonds and municipal bonds, are not considered qualified
replacement property.
For purposes of these rules, an operating corporation is a corporation of
which more than 50% of the assets are used in the active conduct of a trade or
business at the time of the purchase by the shareholder of the securities or by
the end of the 15-month period described above. Financial institutions and
insurance companies are generally deemed to be operating companies. In
addition, the securities issued by a U.S. operating corporation will not
constitute qualified replacement property unless the corporation has met
certain limits on the amount of its gross receipts that constituted passive
investment income for the tax year preceding the tax year in which the
shareholder purchased the security. In light of these requirements,
shareholders are urged to consult with their own tax advisors before purchasing
replacement property with the proceeds from the sale of their shares in the
tender offer.
Procedural Requirements for Electing Section 1042 Treatment
Eligible shareholders who wish to elect to have Section 1042 apply to the
sale of their shares must attach a statement of election to their timely filed
income tax return for the tax year in which the sale occurs. The statement of
election must include certain information concerning the shares and the sale,
such as a description of the shares, the number of shares sold, the date of the
sale, the shareholder's adjusted basis in the shares, and the amount received
by the shareholder as part of the sale.
Shareholders must also file with that income tax return a "statement of
consent" and a "statement of purchase." The statement of consent is a document
that Hooker will provide to all shareholders who wish to elect Section 1042
treatment. The statement of consent affirms that Hooker will pay certain
additional taxes if the ESOP fails to hold the qualified securities for at
least three years, or if the ESOP allocates the qualified securities to certain
ESOP participants who are prohibited from receiving allocations (as described
below). The "statement of purchase" is a statement attesting to the purchase of
qualified replacement property and designating that property as qualified
replacement property. The statement must be signed and notarized within 30 days
of the purchase of the qualified replacement property to which it relates.
Failure to have any of these documents completed or to file any of these
documents with the Internal Revenue Service in a timely manner may cause the
shareholder to lose the ability to elect tax deferral treatment under Section
1042.
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ESOP Allocation Limits
For a specified period following the tender offer, the ESOP will be
prohibited from making allocations of shares acquired by the Trustee in the
tender offer to any ESOP participant who made an election to have Section 1042
apply to the sale of his or her shares under the tender offer. The ESOP
allocation restriction will also apply to relatives of the electing
shareholder, as described in Code Section 267(b) (which includes brothers and
sisters, spouses, ancestors, lineal descendants, trust beneficiaries, estate
beneficiaries and partners in a partnership of which the electing shareholder
is a partner) subject to a limited exception for lineal descendants. The
allocation restrictions will be in place for as long as payments are made being
made under the ESOP Term Loan (as described in Section 8), and in no event less
than 10 years. The allocation restriction will also apply to any shareholder
who owns more than 25% of Hooker's shares (including shares that are deemed to
be owned by that shareholder through special attribution rules) during the one-
year period following the tender offer or at any later date when an ESOP
allocation is made of the shares acquired by the Trustee in the tender offer if
any shareholder elects Section 1042 treatment in the tender offer and
regardless of whether the 25% shareholder made such an election.
In light of these allocation restrictions, eligible shareholders who are
participants in the ESOP should carefully consider the effect of making a
Section 1042 election on their participation in the ESOP and the participation
of their relatives or other related persons.
The discussion set forth above is included for general information only.
Shareholders are urged to consult their tax advisor to determine the particular
tax consequences to them of the tender offer, including the applicability and
effect of state, local and foreign tax laws.
15. Extension of the Tender Offer; Termination; Amendment; Subsequent Offering
Period.
The ESOP Trust expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 6 shall have occurred or shall be deemed by the ESOP Trust
to have occurred, to extend the period of time during which the tender offer is
open and thereby delay acceptance for payment of, and payment for, any shares
by giving oral or written notice of such extension to the depositary and making
a public announcement of such extension. The ESOP Trust also expressly reserves
the right, in its sole discretion, to terminate the tender offer and not accept
for payment or pay for any shares not theretofore accepted for payment or paid
for or, subject to applicable law, to postpone payment for shares upon the
occurrence of any of the conditions specified in Section 6 hereof by giving
oral or written notice of such termination or postponement to the depositary
and making a public announcement of such termination or postponement. The ESOP
Trust's reservation of the right to delay payment for shares which it has
accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which
requires that the ESOP Trust must pay the consideration offered or return the
shares tendered promptly after termination or withdrawal of a tender offer.
Subject to compliance with applicable law, the ESOP Trust further reserves the
right, in its sole discretion, and regardless of whether any of the events set
forth in Section 6 shall have occurred or shall be deemed by the ESOP Trust to
have occurred, to amend the tender offer in any respect, including, without
limitation, by decreasing or increasing the consideration offered in the tender
offer to holders of shares or by decreasing or increasing the number of shares
being sought in the tender offer. Amendments to the tender offer may be made at
any time and from time to time effected by public announcement, such
announcement, in the case of an extension, to be issued no later than 9:00
a.m., New York City time, on the next business day after the last previously
scheduled or announced expiration date. Any public announcement made under the
tender offer will be disseminated promptly to shareholders in a manner
reasonably designed to inform shareholders of such change. Without limiting the
manner in which the ESOP Trust may choose to make a public announcement, except
as required by applicable law, the ESOP Trust shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release through Business Wire.
If the ESOP Trust materially changes the terms of the tender offer or the
information concerning the tender offer, the ESOP Trust will extend the tender
offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. These rules and certain related releases and interpretations of
the SEC
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provide that the minimum period during which a tender offer must remain open
following material changes in the terms of the tender offer or information
concerning the tender offer (other than a change in price or a change in
percentage of securities sought) will depend on the facts and circumstances,
including the relative materiality of such terms or information. If (1) the
ESOP Trust increases or decreases the price to be paid for shares or increases
or decreases the number of shares being sought in the tender offer and, if an
increase in the number of shares being sought, such increase exceeds 2% of the
outstanding shares and (2) the tender offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such notice of an increase or decrease is first
published, sent or given to security holders in the manner specified in this
Section 15, the tender offer will be extended at least until the expiration of
such period of ten business days.
Under certain circumstances Rule 14d-11 under the Exchange Act permits a
bidder in a third-party tender offer to elect to accept and pay for securities
tendered during an initial offering period and provide a subsequent offering
period of three to 20 business days during which additional tenders will be
accepted. No subsequent offering period is permitted under Rule 14d-11 in
connection with this tender offer.
16. Fees and Expenses.
All fees and expenses incurred by the ESOP Trust or Hooker in connection
with the tender offer will be paid by Hooker. Hooker expects that the aggregate
fees and expenses for Hooker and the ESOP Trust for the offer will be
approximately $450,000.
Hooker has retained U.S. Trust Company, N.A., to serve as the Trustee of the
ESOP and to serve as an independent fiduciary of the ESOP for the purposes of
reviewing the tender offer and determining whether to cause the ESOP Trust to
participate in the tender offer. Hooker has agreed to pay U.S. Trust in its
capacity as an independent fiduciary of the ESOP Trust a fee of $75,000 for the
services performed by U.S. Trust in connection with the offer. In addition,
Hooker has also agreed to reimburse the ESOP Trust or pay on behalf of the ESOP
Trust all expenses incurred by the ESOP Trust in connection with the offer,
including the fees and disbursements of its legal counsel and financial
advisor, and to indemnify the Trustee and related parties against liabilities,
including liabilities under the federal securities laws, arising out of U.S.
Trust's engagement in connection with the offer.
Hooker has retained Corporate Investor Communications, Inc. to act as
information agent and First Union National Bank to act as depositary in
connection with the tender offer. The information agent may contact holders of
shares by mail, telephone, telegraph and in person and may request brokers,
dealers, commercial banks, trust companies and other nominee shareholders to
forward materials relating to the tender offer to beneficial owners. The
information agent and the depositary will each receive reasonable and customary
compensation for their respective services, will be reimbursed by the ESOP
Trust for specified reasonable out-of-pocket expenses and will be indemnified
against certain liabilities in connection with the tender offer, including
certain liabilities under the federal securities laws. Hooker will pay all
costs and expenses of printing and mailing the offer and any related legal fees
and expenses.
Mann Armistead has been retained as the exclusive financial advisor to the
special committee of the Hooker Board of Directors in connection with the
offer. Pursuant to the terms of Mann Armistead's engagement, Hooker has agreed
to pay Mann Armistead for its services in connection with the offer and an
aggregate financial advisory fee of $75,000, $30,000 of which is contingent
upon the successful completion of the offer. The Company has also agreed to
reimburse Mann Armistead for out-of-pocket expenses and to indemnify Mann
Armistead and related parties against liabilities, including liabilities under
the federal securities laws, arising out of Mann Armistead's engagement.
Hooker has also retained ESOP Services, Inc. as a consultant and advisor in
connection with the evaluation, structuring and execution of the tender offer.
ESOP Services, Inc. will receive an aggregate fee of $104,500 for its services.
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No fees or commissions will be payable by the ESOP Trust or Hooker to
brokers, dealers, commercial banks or trust companies (other than fees to the
information agent as described above) for soliciting tenders of shares under
the tender offer. Shareholders holding shares through brokers or banks are
urged to consult the brokers or banks to determine whether transaction costs
are applicable if shareholders tender shares through such brokers or banks and
not directly to the depositary. The ESOP Trust, however, upon request, will
reimburse brokers, dealers, commercial banks and trust companies for customary
mailing and handling expenses incurred by them in forwarding the tender offer
and related materials to the beneficial owners of shares held by them as a
nominee or in a fiduciary capacity. No broker, dealer, commercial bank or trust
company has been authorized to act as the agent of the ESOP Trust, the
information agent or the depositary for purposes of the tender offer. Hooker
will pay or cause to be paid all stock transfer taxes, if any, on its purchase
of shares except as otherwise provided in this document and Instruction 6 in
the related letter of transmittal.
17. Miscellaneous.
The ESOP Trust is not aware of any jurisdiction where the making of the
tender offer is not in compliance with applicable law. If the ESOP Trust
becomes aware of any jurisdiction where the making of the tender offer or the
acceptance of shares pursuant thereto is not in compliance with applicable law,
the ESOP Trust will make a good faith effort to comply with the applicable law.
If, after such good faith effort, the ESOP Trust cannot comply with the
applicable law, the tender offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of shares in such jurisdiction. In
any jurisdiction where the securities, blue sky or other laws require the
tender offer to be made by a licensed broker or dealer, the tender offer shall
be made on behalf of the ESOP Trust, if at all, only by one or more registered
brokers or dealers licensed under the laws of that jurisdiction.
Pursuant to Rule 14d-1 and Rule 14d-3 under the Exchange Act, the ESOP Trust
has filed with the SEC a Tender Offer Statement on Schedule TO which contain
additional information with respect to the tender offer, and may file
amendments thereto. Hooker has filed with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 pursuant to Section 14(d)(4) and Rule 14d-9 under
the Exchange Act, furnishing certain additional information about Hooker's and
Hooker's Board of Directors' position concerning the tender offer, and Hooker
may file amendments thereto. The Schedules TO and 14D-9 and any amendments and
supplements to either Schedule, including exhibits, may be examined, and copies
may be obtained, at the same places and in the same manner as is set forth in
Section 9 with respect to information concerning Hooker.
The Trustee has not authorized any person to make any recommendation on
behalf of the ESOP Trust as to whether you should tender or refrain from
tendering your shares in the tender offer. The Trustee has not authorized any
person to give any information or to make any representation in connection with
the tender offer other than those contained in this document or in the related
letter of transmittal. If given or made, any recommendation or any such
information or representation must not be relied upon as having been authorized
by the Trustee.
August 9, 2000
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ANNEX A
MANN, ARMISTEAD & EPPERSON, LTD.
INVESTMENT BANKERS and ADVISORS
June 20, 2000
Special Committee of the Board of Directors
Hooker Furniture Corporation
440 East Commonwealth Boulevard
Martinsville, Virginia 24115
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to Hooker Furniture Corporation (the "Company") of the proposed stock
purchase by the Hooker Furniture Corporation Employee Stock Ownership Plan (the
"ESOP Trust"). Under the proposal, the ESOP Trust would purchase up to 1.8
million shares of the Company's outstanding common stock ("Common Stock")
through a public tender offer. The price offered would not exceed $12.50 per
share and would be financed by a loan from the Company to the ESOP Trust in an
amount of approximately $22.5 million. The source of the Company's loan to the
ESOP Trust would be a commercial bank loan to the Company in approximately the
same amount. Under the terms of the proposal, the ESOP Trust must acquire at
least approximately 1.8 million shares of Common Stock. This would result in
the ESOP Trust owning at least 30% of the outstanding shares of Common Stock
which in turn would permit qualifying selling shareholders to take advantage of
Internal Revenue Code section 1042 (and defer the taxation of gains from the
sale of their shares to the ESOP Trust). We understand that if the required
number of shares were not to be tendered, then the proposed transaction would
not be completed.
In arriving at our opinion, we, among other things: (i) reviewed the terms
of the proposed tender offer, including the proposed terms of the commercial
bank loan to the Company and the proposed terms of the loan from the Company to
the ESOP Trust; (ii) met with the members of the Special Committee and
directors, officers and certain members of management of the Company to discuss
the business, financial condition, operating results and future prospects of
the Company; (iii) reviewed the Company's Registration Statement on Form 10,
and the amendments thereto, filed with the SEC, (iv) reviewed the Company's
Annual Reports to Shareholders and related audited financial information for
the five fiscal years ended November 30, 1999 and the Company's Annual Report
on Form 10-K for the fiscal year ended November 30, 1999; (v) reviewed the
Company's Quarterly Reports on Form 10-Q for the quarterly periods ended
February 28, 1999, May 31, 1999, August 31, 1999 and February 29, 2000 as well
as related management prepared financial information for the five months ended
April 30, 1999 and April 30, 2000; (vi) reviewed management prepared financial
and operational projections for the Company, pro forma financial statements and
financial models illustrating the effect of the proposed tender offer under
various scenarios, (vii) visited one of the Company's major operating
facilities; (viii) reviewed certain publicly available information with respect
to certain publicly traded furniture companies which we deemed relevant; (ix)
reviewed certain merger and acquisition transactions in the furniture industry
which we deemed relevant; (x) applied the results of the aforementioned public
company and merger analysis to the Company's projected operating results to
determine an estimated value for the Company assuming that the proposed stock
purchase is completed compared to an estimated value of the Company assuming
that the proposed stock purchase is not completed, and; (xi) considered such
other financial studies, analysis, inquiries, economic, demographic and other
matters as we deemed reasonable and appropriate.
In rendering this opinion, we have relied upon the accuracy and completeness
of all financial and other information furnished to us by, or on behalf of, the
Company and other information that we considered in our review and we have not
assumed any responsibility for independent verification of such information. We
have relied upon the Company's management as to the reasonableness and
achievability of its financial and
A-1
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operational forecasts and projections, and the assumptions and bases thereof
and assumed that such forecasts and projections reflect the best currently
available estimates and judgments of the Company's management and that such
forecasts and projections will be substantially realized in the amounts and in
the time periods currently estimated. During the course of our investigation
nothing has come to our attention that indicates that such financial or other
information or management prepared financial and operational forecasts and
projections, including the assumptions and bases thereof, are unreasonable in
any material respect. Our opinion herein is based on the facts and
circumstances existing and known to us as of the date hereof. We did not
undertake any independent valuation or appraisal of the assets owned by the
Company, nor were we furnished with any such evaluations or appraisals.
Consequently, we do not express any opinion regarding the value of any of the
Company's specific assets. We have relied as to certain legal ESOP Trust and
accounting matters on advice from the Company's counsel and independent public
accountant and other advisors to the Company and its Board of Directors.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us
through, the date of this letter. Although subsequent developments may affect
this opinion, we do not have any obligation to update or revise this opinion.
Furthermore, we are not expressing any opinion herein as to the fairness, from
a financial point of view, to the stockholders of Hooker Furniture Corporation
of the proposed price to be offered by the ESOP Trust for the stock purchase.
We did not review, nor were we requested to review, alternative investments for
the Company in the amount proposed for the ESOP Trust stock purchase.
Mann, Armistead & Epperson, Ltd., as part of its investment banking
services, is regularly engaged in the valuation of private and public
businesses and their securities in connection with mergers and acquisitions,
competitive biddings and valuations for estate, corporate and other purposes,
and acting as financial advisor in connection with other forms of strategic
corporate transactions. Pursuant to our engagement in connection with this
fairness opinion, we will receive a fee for our services in rendering said
opinion, a substantial portion of which is contingent upon the consummation of
the ESOP Trust stock purchase.
The opinion expressed herein is provided for the benefit of the Special
Committee of the Board of Directors of the Company. The opinion, and any
supporting analyses or other material supplied by us, may be quoted, referred
to, or used in any public filing or in any written document or other
communication from the Company or the ESOP Trust to the shareholders of the
Company, including without limitation any Schedule TO Tender Offer Statement
and Schedule 14D-9 Solicitation/Recommendation Statement under the Securities
Exchange Act of 1934, as amended, and any necessary or appropriate amendments
thereto, and any other tender offer materials.
Based on the foregoing considerations, it is our opinion that as of June 20,
2000 the proposed tender offer for Common Stock by the Company's ESOP Trust is
fair, from a financial point of view, to the Company.
Truly yours,
MANN, ARMISTEAD & EPPERSON, LTD.
A-2
<PAGE>
The letter of transmittal and certificates for shares and any other required
documents should be sent or delivered by each shareholder or such shareholder's
broker, dealer, commercial bank, trust company or nominee to the depositary at
one of its addresses set forth below.
The depositary for the tender offer is:
First Union National Bank
By mail: By hand/overnight delivery:
First Union National Bank First Union National Bank
1525 West W.T. Harris Blvd. 1525 West W.T. Harris Blvd.
Charlotte, NC 28288 Charlotte, NC 28262
Attn: Corporate Actions NC-1153 Attn: Corporate Actions NC-1153
(800) 829-8432
Any questions or requests for assistance may be directed to the information
agent at its telephone number and address set forth below. Requests for
additional copies of the offer to purchase, the related letter of transmittal
or the notice of guaranteed delivery may be directed to the information agent
at the telephone number and address set forth below. Shareholders may also
contact their broker, dealer, commercial bank, trust company or nominee for
assistance concerning the tender offer. To confirm delivery of shares,
shareholders are directed to contact the depositary.
The information agent for the tender offer is:
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, NJ 07072-2856
Call Toll Free (888) 512-3273
Banks and brokerage firms please call: (201) 896-1900
