<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
HAVERTY FURNITURE COMPANIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
HAVERTY FURNITURE COMPANIES, INC.
866 West Peachtree Street, N.W.
Atlanta, Georgia 30308-1123
ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1998
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of
Haverty Furniture Companies, Inc., a Maryland corporation (the "Company"), will
be held at 11:00 A.M., on Friday, April 24, 1998, at the Harbor Court Hotel, 550
Light Street, Baltimore, Maryland 21202, for the following purposes:
- To elect eleven directors for terms of one year and until
their successors are elected and qualified, three of whom
shall be elected by holders of Common Stock and eight of whom
shall be elected by holders of Class A Common Stock.
- To approve the Company's 1998 Stock Option Plan.
- To conduct such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 6,
1998, as the record date for the determination of stockholders entitled to
notice of, and to vote at the meeting.
By order of the Board of Directors
/s/ Jenny H. Parker
Jenny H. Parker
Vice President, Finance and
Corporate Secretary
Atlanta, Georgia
March 23, 1998
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES
WILL BE REPRESENTED. IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND
PERSONALLY CAST YOUR VOTES.
<PAGE> 3
HAVERTY FURNITURE COMPANIES, INC.
866 West Peachtree Street, N.W.
Atlanta, Georgia 30308-1123
ANNUAL MEETING OF STOCKHOLDERS
April 24, 1998
----------------------------
PROXY STATEMENT
----------------------------
The enclosed proxy is being solicited by the Board of Directors of
Haverty Furniture Companies, Inc., for use at the 1998 Annual Meeting of
Stockholders to be held on April 24, 1998, and at any and all adjournments or
postponements thereof (the "Annual Meeting"). All shares represented by duly
furnished proxies will be voted in accordance with the instructions given
therein.
Any proxy given pursuant to this solicitation may be revoked by any
stockholder who attends the meeting and gives oral notice of his election to
vote in person, without compliance with any other formalities. In addition, any
proxy given pursuant to this solicitation may be revoked prior to the meeting by
delivering to the Secretary of the Company an instrument revoking it or a duly
executed proxy for the same shares bearing a later date. Proxies which are
returned properly executed and not revoked will be voted in accordance with the
stockholder's directions specified thereon. Where no direction is specified,
proxies will be voted FOR each of the matters set forth in the Notice
accompanying this proxy statement. Abstentions and broker non-votes will not be
counted as votes either in favor of or against the matter with respect to which
the abstention or broker non-vote relates; however, with respect to any proposal
other than the election of directors, abstentions and broker non-votes would
have the effect of a vote against the proposal. All costs of this solicitation
will be borne by the Company. In addition to the U.S. mail, proxies may be
solicited by officers and employees of the Company, without remuneration, by
personal interviews, telephone and facsimile.
Only stockholders of record at the close of business on March 6, 1998,
are entitled to notice of, and to vote at, the meeting. The Annual Report to
Stockholders, Notice of Annual Meeting of Stockholders, this Proxy Statement and
form of Proxy were first mailed to stockholders of the Company on or about March
23, 1998.
OUTSTANDING CAPITAL STOCK
As of the close of business on March 6, 1998, there were outstanding
and entitled to vote at the 1998 Annual Meeting of Stockholders 8,911,356 shares
of the Company's $1.00 par value Common Stock and 2,830,043 shares of the
Company's $1.00 par value Class A Common Stock, the Company's only outstanding
classes of voting securities.
With respect to all stockholder matters, holders of Common Stock are
entitled to one vote for each share held. With respect to the election of
directors, holders of Class A Common Stock are entitled to one vote for each
share held; on all other matters, holders of Class A Common Stock are entitled
to ten votes for each share held.
The holders of Common Stock and Class A Common Stock vote as separate
classes in the election of directors. The holders of Common Stock are entitled
to elect 25% of the members of the Board of Directors, or the nearest higher
whole number that is at least 25% of the total number of directors standing for
election; and holders of Class A Common Stock are entitled to elect 75% of the
members of the Board of Directors, or the remaining number of directors standing
for election. The Common Stock carries a dividend preference over the Class A
Common Stock.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following information is provided with respect to all persons known
to the Company to be the beneficial owners of more than five percent (5%) of the
Company's Common Stock and/or Class A Common Stock as of February 28, 1998.
Unless otherwise indicated, the person or entity shown possesses sole voting and
investment powers with respect to the amounts shown.
<TABLE>
<CAPTION>
Class A
Common Stock Common Stock
Beneficially Beneficially
Owned and Owned and
Name and Address of Percent Percent
Beneficial Owner of Class of Class
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Rawson Haverty * 742,027 (a)
866 West Peachtree Street, N.W 26.21%
Atlanta, Georgia 30308-1123
Clarence H. Ridley * 254,205 (b)
191 Peachtree Street 8.98%
Atlanta, Georgia 30303
Mrs. Betty Haverty Smith * 231,989 (c)
158 West Wesley Road, N.W 8.19%
Atlanta, Georgia 30305
John Rhodes Haverty, M.D * 194,517
3359 Woodhaven Road, N.W 6.87%
Atlanta, Georgia 30305
Frank S. McGaughey, Jr * 204,255
3180 Lemons Ridge 7.21%
Atlanta, Georgia 30339
The Prudential Insurance Company of America 1,075,000 (d) *
751 Broad Street 12.14%
Newark, New Jersey 07102-3777
Dimensional Fund Advisors, Inc. 638,850 (e) *
1299 Ocean Avenue - 11th Floor 7.22%
Santa Monica, California 90401
Franklin Resources, Inc. 561,000 (f) *
777 Mariners Island Boulevard 6.34%
San Mateo, California 94404
The Capital Group Companies, Inc. 545,000 (g) *
333 South Hope Street 6.16%
Los Angeles, California 90071
T. Rowe Price Associates, Inc. 450,000 (h) *
100 East Pratt Street 5.08%
Baltimore, Maryland 21202
</TABLE>
- --------------------
* Less than 5% of outstanding shares of class.
- --------------------
(a) Of this amount, Mr. Haverty has shared voting and investment
power with respect to 218,767 shares and, in his capacity as
Chairman of the Company, shared voting and investment power
with respect to 143,375 shares held in the Company's
Retirement Plan and Trust.
(b) Of this amount, Mr. Ridley has shared voting and investment
power with respect to 1,327 shares and sole voting power with
respect to 61,152 shares.
(c) Of this amount, Mrs. Smith has shared voting and investment
power with respect to 7,360 shares.
-2-
<PAGE> 5
(d) The shares shown were reported to be held beneficially as of
12/31/97 by The Prudential Insurance Company of America in a
Schedule 13G filed with the Securities and Exchange
Commission. The Prudential Insurance Company of America (a
mutual insurance company organized under the laws of the State
of New Jersey) is an Insurance Company as defined in Section
3(a)(19) of the Securities Exchange Act of 1934 and an
Investment Adviser registered under Section 203 of the
Investment Advisers Act of 1940.
(e) The shares shown were reported to be held beneficially as of
12/31/97 by Dimensional Fund Advisors, Inc. in a Schedule 13G
filed with the Securities and Exchange Commission. Dimensional
Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of the shares
shown, all of which shares are held in portfolios of DFA
Investment Dimensions Group, Inc., a registered open-end
investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and
DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional
Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
Of the shares shown, Dimensional Fund Advisors, Inc., has sole
power to dispose of or to direct disposition of 638,850 shares
and sole voting power with respect to 418,450 shares. Persons
who are officers of Dimensional Fund Advisors, Inc., also
serve as officers of DFA Investment Dimensions Group, Inc.
(the "Fund") and The DFA Investment Trust Company (the
"Trust"), each an open-end management investment company
registered under the Investment Company Act of 1940. In their
capacities as officers of the Fund and the Trust, these
persons vote 75,900 additional shares which are owned by the
Fund and 144,500 shares which are owned by the Trust.
(f) The shares shown were reported to be held beneficially as of
1/27/98 by one or more open or closed-end investment companies
or other managed accounts which are advised by direct and
indirect investment advisory subsidiaries (the "Adviser
Subsidiaries") of Franklin Resources, Inc. ("FRI"). Such
advisory contracts grant to such Adviser Subsidiaries all
investment and/or voting power over the securities owned by
such advisory clients. Therefore, such Adviser Subsidiaries
may be deemed to be , for purposes of Rule 13d-3 under the
Securities Exchange Act of 1934, the beneficial owner of the
securities covered by this statement.
Charles B. Johnson and Rupert H. Johnson, Jr. (the "Principal
Shareholders") each own in excess of 10% of the outstanding
Common Stock of FRI and are the principal shareholders of FRI.
FRI and the Principal Shareholders may be deemed to be, for
purposes of Rule 13d-3 under the 1934 Act, the beneficial
owner of securities held by persons and entities advised by
FRI subsidiaries. FRI, the Principal Shareholders and each of
the Adviser Subsidiaries disclaim any economic interest or
beneficial ownership in any of the securities covered by this
statement.
FRI, the Principal Shareholders, and each of the Adviser
Subsidiaries are of the view that they are not acting as a
"group" for purposes of Section 13(d) under the 1934 Act and
that they are not otherwise required to attribute to each
other the "beneficial ownership" of securities held by any of
them or by any persons or entities advised by FRI
subsidiaries. Franklin Advisory Services, Inc. has sole
dispositive power with respect to 561,000 shares and sole
voting power with respect to 486,500 shares.
(g) The shares shown were reported to be held beneficially as of
12/31/97 by The Capital Group Companies, Inc. (a Parent
Holding Company in accordance with Section
240.13d-1(b)(1)(ii)(G), Capital Research and Management
Company (an Investment Adviser registered under Section 203 of
the Investment Advisor Act of 1940) and SMALLCAP World Fund,
Inc. (an Investment Company registered under Section 8 of the
Investment Company Act) in a joint filing of a Schedule 13G
with the Securities and Exchange Commission.
For purposes of the reporting requirements of the Securities
Exchange Act of 1934, The Capital Group Companies, Inc., and
Capital Research and Management Company, Inc. are deemed to be
beneficial owners of such securities; however they expressly
disclaim that they are, in fact, the beneficial owners of such
securities.
Capital Research and Management Company has sole dispositive
power and SMALLCAP World Fund, Inc., has sole voting power
with respect to the 545,000 shares shown.
(h) The shares shown were reported to be held beneficially as of
12/31/97 by T. Rowe Price Associates, Inc. (an Investment
Adviser registered under Section 203 of the Investment
Advisers Act of 1940) and T. Rowe Price Small CAP Value Fund,
Inc. (an Investment Company registered under Section 8 of the
Investment Company Act of 1940) in a joint filing of a
Schedule 13G with the Securities and Exchange Commission.
These securities are owned by various individual and
institutional investors including the T. Rowe Price Small CAP
Value Fund, Inc. which T. Rowe Price Associates, Inc. (Price
Associates) serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Securities
Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates
expressly disclaims that it is, in fact, the beneficial owner
of such securities.
Price Associates has sole dispositive power and T. Rowe Price
Small Cap Value Fund, Inc., has sole voting power with respect
to the 450,000 shares shown.
-3-
<PAGE> 6
The following information is provided with respect to the number of
shares of the Company's Common Stock and/or Class A Common Stock beneficially
owned as of February 28, 1998, by (i) two directors not standing for reelection,
(ii) two executive officers who are not directors and are named in the Summary
Compensation Table and (iii) all executive officers and directors as a group.
Unless otherwise indicated, the person or entity shown possesses sole voting and
investment powers with respect to the amounts shown.
<TABLE>
<CAPTION>
Class A
Common Stock Common Stock
Beneficially Beneficially
Name or Number of Owned and Owned and
Persons in Group Percent Percent
of Class of Class
- -----------------------------------------------------------------------------
<S> <C> <C>
John Rhodes Haverty, M.D. 69,632 (a) 194,517
* 6.87%
William A. Parker, Jr. 32,130 (b) 3,000
* *
Dennis L. Fink 107,574 (c) --
1.22%
M. Tony Wilkerson 67,255 (d) 7,477 (e)
* *
17 Executive Officers and 1,176,530 (f) 1,397,636 (g)
Directors as a Group 13.29% 49.36%
</TABLE>
- --------------------
* Less than 1% of outstanding shares of class.
- --------------------
(a) This amount includes unexercised options to purchase 16,500
shares.
(b) This amount includes unexercised options to purchase 16,500
shares.
(c) This amount includes unexercised options to purchase 94,787
shares.
(d) This amount includes unexercised options to purchase 45,389
shares.
(e) Mr. Wilkerson has shared voting and investment power with
respect to 120 shares.
(f) Of this amount, the persons included in this group have shared
voting and investment power with respect to 135,664 shares and
shared voting power with respect to 156,860 shares which
represent the shares held in the Company's 401(k) Plan, and
shared voting and investment power with respect to 34,119
shares held in the Company's Retirement Plan and Trust. This
amount includes unexercised options to purchase 558,337
shares.
(g) Of this amount, the persons included in this group have shared
voting and investment power with respect to 238,599 shares,
sole voting power with respect to 61,152 shares and shared
voting and investment power with respect to 143,375 shares
held in the Company's Retirement Plan and Trust.
-4-
<PAGE> 7
PROPOSALS 1 AND 2 - ELECTION OF DIRECTORS
The Company's Articles of Incorporation, as amended, provide for the
Board of Directors to be elected annually, with stockholders of each of the two
classes of common stock voting separately by class. The holders of Common Stock
of the Company are entitled to elect 25% of the members of the Board of
Directors, or the nearest higher whole number that is at least 25% of the total
number of directors standing for election; and the holders of Class A Common
Stock of the Company are entitled to elect 75% of the members of the Board of
Directors, or the remaining number of directors standing for election.
The Board of Directors has nominated eleven persons for election as
directors at the 1998 Annual Meeting of Stockholders, three of whom will be
elected by the holders of Common Stock and eight of whom will be elected by the
holders of Class A Common Stock.
Unless otherwise instructed, it is intended that proxies will be voted
FOR the election of the eleven nominees named below. A plurality of all votes
cast at the meeting by the holders of Class A Common Stock is sufficient for the
election of the eight nominees standing for election by the holders of that
class. A plurality of all votes cast at the meeting by the holders of Common
Stock is sufficient for the election of the three nominees standing for election
by the holders of that class.
Based on information supplied by them, set forth below is certain
information concerning the nominees for election by holders of Class A Common
Stock and the nominees for election by holders of Common Stock. Unless otherwise
indicated, the amounts shown represents the number of shares over which the
person has sole voting and investment powers and include, where applicable,
shares subject to unexercised options as of February 28, 1998. Ownership which
is less than 1% of the total outstanding class is designated with an asterisk
(*).
NOMINEES FOR ELECTION BY HOLDERS OF CLASS A COMMON STOCK
<TABLE>
<CAPTION>
Security Ownership
and Percent of Class
-------------------------------
Class A
Name and Year Common Common
First Became a Director Age Principal Occupation Stock Stock
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rawson Haverty (a) 77 Chairman of the Board of 273,897 (b) 742,027 (c)
1947 Company since 1984; 3.09% 26.21%
President (1955-1984) and
Chief Executive Officer
(1955-1990)
Clarence H. Ridley (d) 55 Partner of King & 19,555 (e) 254,205 (f)
1979 Spalding, * 8.98%
Attorneys, since 1977
Fred J. Bates 62 Regional Manager and 51,935 (g) 39,823
1981 General Manager of * 1.41%
Company's Dallas, Texas,
operations since 1979
</TABLE>
-5-
<PAGE> 8
<TABLE>
<CAPTION>
Security Ownership
and Percent of Class
---------------------------------
Class A
Name and Year Common Common
First Became a Director Age Principal Occupation Stock Stock
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John E. Slater, Jr. 63 President and Chief 117,413 (h) 15,960 (i)
1983 Executive Officer of 1.33% *
Company since 1994;
Executive Vice President
(1993-1994) and Chief
Operating Officer (1992-
1994); Senior Vice
President (1987-1993)
Lynn H. Johnston 67 Retired; Chairman of the 187,815 (j) 300
1986 Board of ING America 2.12% *
Life Corporation [formerly
the GeorgiaUS Corporation,
renamed in 1993]
(1983-1994); Chairman of
the Board and Chief
Executive Officer of Life
Insurance Company of
Georgia (1983-1994)
Clarence H. Smith (k) 47 Senior Vice President and 59,357 (l) 42,140 (m)
1989 General Manager, Stores, * 1.49%
of Company since 1996;
Vice President, Operations
and Development (1994-
1996); Vice President
(1984-1994); Regional
Manager and General
Manager of Company's
Atlanta, Georgia,
operations (1986-1994)
Rawson Haverty, Jr. (n) 41 Vice President, Real Estate 55,382 (o) 86,487 (p)
1992 and Insurance Divisions of * 3.05%
Company since 1992;
Assistant Secretary (1985-
1993)
Frank S. McGaughey, III 49 Partner of Powell, 18,534 (q) --
1995 Goldstein, Frazer & *
Murphy, Attorneys, since
1980
</TABLE>
-6-
<PAGE> 9
(a) Rawson Haverty is the father of Rawson Haverty, Jr., and uncle
of Clarence H. Ridley and Clarence H. Smith.
(b) Of this amount, Mr. Haverty has shared voting and investment
power with respect to 78,308 shares and shared voting power
with respect to 34,119 shares held in the Company's Retirement
Plan and Trust. This amount includes unexercised options to
purchase 95,000 shares.
(c) Of this amount, Mr. Haverty has shared voting and investment
power with respect to 218,767 shares and, in his capacity as
Chairman of the Company, has shared voting power with respect
to 143,375 shares held in the Company's Retirement Plan and
Trust.
(d) Mr. Ridley is the nephew of Rawson Haverty and first cousin of
Clarence H. Smith and Rawson Haverty, Jr.
(e) Of this amount, Mr. Ridley has shared voting and investment
power with respect to 1,327 shares. This amount includes
unexercised options to purchase 16,500 shares.
(f) Of this amount, Mr. Ridley has shared voting and investment
power with respect to 1,327 shares and sole voting power with
respect to 61,152 shares.
(g) This amount includes unexercised options to purchase 21,195
shares.
(h) Of this amount, Mr. Slater has shared voting and investment
power with respect to 48,019 shares. This amount includes
unexercised options to purchase 69,244 shares.
(i) Of this amount, Mr. Slater has shared voting and investment
power with respect to 15,810 shares.
(j) Of this amount, Mr. Johnston, in his capacity as Chairman of
the Employee Benefits Committee, has voting power with respect
to 156,860 shares held in the Company's 401(k) Plan and Trust.
This amount includes unexercised options to purchase 16,500
shares.
(k) Clarence H. Smith is the nephew of Rawson Haverty and first
cousin of Clarence H. Ridley and Rawson Haverty, Jr.
(l) Of this amount, Mr. Smith has shared voting and investment
power with respect to 200 shares. This amount includes
unexercised options to purchase 37,000 shares.
(m) Of this amount, Mr. Smith has shared voting and investment
power with respect to 625 shares.
(n) Rawson Haverty, Jr., is the son of Rawson Haverty and first
cousin of Clarence H. Ridley and Clarence H. Smith.
(o) This amount includes unexercised options to purchase 35,000
shares.
(p) Of this amount, Mr. Haverty has shared voting and investment
power with respect to 1,950 shares.
(q) Of this amount, Mr. McGaughey has shared voting and investment
power with respect to 7,810 shares. This amount includes
unexercised options to purchase 9,000 shares.
-7-
<PAGE> 10
NOMINEES FOR ELECTION BY HOLDERS OF COMMON STOCK
<TABLE>
<CAPTION>
Security Ownership
and Percent of Class
----------------------------
Class A
Name and Year Common Common
First Became a Director Age Principal Occupation Stock Stock
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert R. Woodson (a) 65 Retired; Chairman of the 39,398 (b) 9,000
1987 Board of John H. Harland * *
Company (1992 - 1997);
President (1984-1995);
Chief Executive Officer
(1990-1995)
L. Phillip Humann (c) 52 Chairman of the Board of 27,050 (d) --
1992 Directors and Chief *
Executive Officer,
SunTrust Banks,
Inc. since March 1998;
President (1991 - 1998)
John T. Glover (e) 51 President, Post Properties, 9,224 (f) --
1996 Inc., since 1984 *
</TABLE>
- -----------------------
(a) Mr. Woodson is a director of Allied Holdings, Inc. and John H.
Harland Company.
(b) This amount includes unexercised options to purchase 16,500
shares.
(c) Mr. Humann is a director of Coca-Cola Enterprises, Inc.,
Equifax, Inc. and SunTrust Banks, Inc.
(d) This amount includes unexercised options to purchase 16,500
shares.
(e) Mr. Glover is a director of Post Properties, Inc.
(f) This amount includes unexercised options to purchase 6,000
shares.
-8-
<PAGE> 11
BOARD COMMITTEES AND ATTENDANCE
The Company has a standing Audit Committee composed of John T. Glover,
Chairman, Lynn H. Johnston and Frank S. McGaughey, III. The Audit Committee,
which held two meetings during fiscal 1997, performs the following functions:
recommends independent certified public accountants to be engaged as auditors of
the Company; approves the fees of the Company's auditors; reviews with the
independent auditors the plan and results of the auditing engagement; reviews
the scope and results of the Company's procedures for internal auditing; and
reviews the adequacy of the Company's system of internal accounting controls.
The Executive Committee is composed of Rawson Haverty, Chairman, John
E. Slater, Jr., Clarence H. Ridley, John Rhodes Haverty, M.D. and L. Phillip
Humann. The Executive Committee held seven meetings during fiscal 1997.
The Company has no standing compensation committee; however, the
Executive Committee determines salary and bonus arrangements for certain
personnel, including the executive officers. See "Report of Executive Committee
on Executive Compensation."
The Company has a Stock Option Committee, composed of non-employee
directors appointed by the Board, which serves to administer the Company's
qualified and non-qualified stock option plans and the employee stock purchase
plan. Present members of the Stock Option Committee are Robert R. Woodson,
Chairman, Frank S. McGaughey, III and William A. Parker, Jr. The Stock Option
Committee held two meetings during fiscal 1997.
The Company has a standing Employee Benefits Committee composed of Lynn
H. Johnston, Chairman, John T. Glover and Robert S. Woodson. The Employee
Benefits Committee serves as Administrator for all formal employee benefit plans
of the Company and also oversees and gives guidance for all other employee
benefit programs and policies of the Company. The Employee Benefits Committee
held two meetings during fiscal 1997.
The Company has no standing nominating or other standing committee
performing similar functions.
The Board of Directors held a total of four meetings during fiscal
1997. Each incumbent director, except John Rhodes Haverty, M.D., and William A.
Parker, Jr., attended at least 75% of the aggregate of all meetings held by the
Board of Directors and by committees of the Board on which the director served
during the director's period of service.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers and persons who own more than 10% of the
outstanding Class A Common Stock or Common Stock of the Company, to file with
the Securities and Exchange Commission reports of changes in ownership of the
Class A Common Stock or Common Stock of the Company held by such persons.
Officers, directors and greater than 10% stockholders are also required to
furnish the Company with copies of all forms they file under this regulation. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and representations that no other reports were required
during the fiscal year ended December 31, 1997, the Company's officers,
directors and 10% stockholders complied with all Section 16(a) filing
requirements applicable to them.
-9-
<PAGE> 12
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the four other most highly compensated
officers of the Company (determined as of the end of the last fiscal year)
(hereinafter referred to as the "Named Executive Officers") for the fiscal years
ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
-------------------------------------------------------
Annual Compensation Awards
-------------------------------------------------------
Other Securities All
Annual Underlying Other
Name and Year Salary Bonus Compensation Options Compensation
Principal Position ($) ($) ($)(a) (#) ($)(b)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John E. Slater, Jr. 1997 $225,000 275,000 $3,000 50,000 $3,000
President and Chief 1996 225,000 230,000 3,000 25,000 3,000
Executive Officer 1995 200,000 250,000 3,000 35,000 3,000
(since 4/1/94)
Dennis L. Fink 1997 180,000 150,000 -- 25,000 3,000
Executive Vice President 1996 180,000 105,000 -- 15,000 3,000
and Chief Financial 1995 170,000 110,000 -- 33,750 3,000
Officer
M. Tony Wilkerson 1997 150,000 120,000 -- 20,000 3,000
Senior Vice President, 1996 150,000 95,000 -- 25,000 3,000
Marketing 1995 140,000 100,000 -- 10,000 3,000
Clarence H. Smith 1997 150,000 120,000 3,000 20,000 3,000
Senior Vice President 1996 140,000 95,000 3,000 10,000 3,000
and General Manager, 1995 120,000 90,000 3,000 10,000 2,311
Stores
Rawson Haverty, Jr. 1997 120,000 100,000 3,000 20,000 3,000
Vice President, Real 1996 115,000 85,000 3,000 10,000 3,000
Estate & Insurance 1995 100,000 90,000 3,000 10,000 3,000
Divisions
</TABLE>
- --------------------------------
(a) The amounts shown represent the annual retainer fees paid to
those named Executive Officers who are also directors for
their services on the Company's Board of Directors. For 1997
and 1996, one-half of the amount shown was paid in shares of
the Company's Common Stock equal to one-half of the annual
retainer fee as required by the Directors' Compensation Plan
adopted by the Board of Directors and approved by stockholders
in 1996.
(b) The amounts shown represent Company contributions to the
account of the Named Executive Officer pursuant to the
Company's 401(k) Plan.
-10-
<PAGE> 13
STOCK OPTION PLANS
The following table provides certain information concerning individual
grants of stock options made under the Company's 1993 Non-Qualified Stock Option
Plan during the fiscal year ended December 31, 1997, to each of the Named
Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Alternative
Grant Date
Individual Grants Value (b)
- --------------------------------------------------------------------------------------------------------------
% of Total Grant Date
Number of Options Present Value
Securities Granted to (Using Black-
Underlying Employees Exercise or Scholes Option
Options in Fiscal Base Price Expiration Pricing Model)
Name Granted (#) (a) Year ($ Per Share) Date ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John E. Slater, Jr. 50,000 12.5% $13.6875 12-18-02 $215,000
Dennis L. Fink 25,000 6.3% 13.6875 12-18-02 107,500
M. Tony Wilkerson 20,000 5.0% 13.6875 12-18-02 86,000
Clarence H. Smith 20,000 5.0% 13.6875 12-18-02 86,000
Rawson Haverty, Jr. 20,000 5.0% 13.6875 12-18-02 86,000
</TABLE>
- ---------------------
(a) These options vest in annual increments of 30%, 30% and 40%
beginning October 21, 1998.
(b) These amounts are the result of calculations based upon the
Black-Scholes pricing model. Actual gains, if any, on stock
option exercises are dependent on future performance of the
Common Stock and overall market conditions. There can be no
assurance that the amounts reflected in this column will be
achieved or if achieved, will exist at the time of any option
exercise.
Assumptions Used for Black-Scholes Model:
<TABLE>
<S> <C> <C> <C>
Grant Date: 12/18/97 Contractual Term (Years): 5
Risk-Free Rate (i): 5.8% Expected Life (Years): 5
Exercise Price: $13.6875 Dividend Yield: 2.5%
Share Price on Grant Date: $13.6875 Black-Scholes Option Value: $4.30
Volatility (ii): 34.6%
</TABLE>
(i) Based on US Stripped Treasury Securities with similar
maturities to the expected life of the option terms.
(ii) Based on 229 consecutive beginning-of-week stock prices.
-11-
<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides certain information concerning the
exercise of stock options during the fiscal year ended December 31, 1997, by the
Named Executive Officers and the fiscal year end value of unexercised options
held by such persons under the Company's 1988 Incentive Stock Option Plan and
1993 Non-Qualified Stock Option Plan:
<TABLE>
<CAPTION>
Options Exercised in 1997 All Outstanding Options
--------------------------------------------------------------------------------------------------------
Number of Securities
Shares Value Underlying Unexercised Value of Unexercised In-the-
Acquired on Realized Options at Fiscal Money Options at Fiscal
Name Exercise (#) ($) Year End (#) Year End ($) (a)
- ----------------------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John E. Slater, Jr. -0- $ -0- 84,903 67,597 $ 94,688 $ 7,500
Dennis L. Fink -0- -0- 88,753 44,997 102,815 10,938
M. Tony Wilkerson 9,000 67,500 42,714 44,286 48,893 45,358
Clarence H. Smith -0- -0- 40,907 25,093 51,509 6,366
Rawson Haverty, Jr. -0- -0- 48,163 26,837 65,204 8,546
</TABLE>
- ---------------------
(a) Dollar values were calculated by determining the difference
between the fair market value of the underlying securities at
year end and the exercise price of the options.
-12-
<PAGE> 15
RETIREMENT PLAN
The Company maintains a tax-qualified, non-contributory defined benefit
retirement plan (the "Retirement Plan"). All employees of the Company are
eligible to participate upon completion of one year of service and reaching age
21. Officers are eligible to participate in the Retirement Plan, but directors
are not eligible unless they are also full-time employees. Annual contributions
to the Retirement Plan are made in amounts determined by the Retirement Plan's
actuaries to be sufficient to fund the benefits to be paid and to meet
regulatory requirements.
The Retirement Plan provides for the payment of fixed monthly benefits
upon an employee's normal retirement at age 65. Benefits may also be paid upon
early retirement as provided in the Retirement Plan. Benefits upon retirement
are based upon years of service (up to a maximum of 40 years for calculating
such benefits) and final average earnings. "Final average earnings" means the
average annual earnings for the five consecutive years in which a participant
had the highest earnings during the last ten years of employment. Compensation
for purposes of computing annual benefits under the Retirement Plan includes
basic salary, wages, overtime pay, bonuses, commissions, amounts contributed to
the 401(k) plan by the employee and other direct compensation included in the
IRS Form W-2.
The table below illustrates the estimated annual benefits payable upon
retirement under the Retirement Plan to persons in specified years of service
and compensation categories. The benefits shown are straight-life annuities and
are based upon an assumed retirement during 1998. The compensation amounts shown
are compensation in the final year of employment. For purposes of determining
final average earnings, a 5% per year increase in earnings was used for prior
years.
<TABLE>
<CAPTION>
Years of Service
1997 ------------------------------------------------------------------------------------
Compensation 15 20 25 30 35 40 or More
-------------- -------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 5,166 $ 6,888 $ 8,610 $ 10,332 $ 12,055 $ 13,777
100,000 12,667 16,889 21,112 25,334 29,556 33,779
150,000 20,168 26,890 33,613 40,336 47,058 53,781
200,000 * 27,669 36,892 46,114 55,337 64,560 73,783
250,000 * 35,169 46,893 58,616 70,339 82,062 93,785
300,000 * 42,670 56,894 71,117 85,341 99,564 113,787
350,000 * 50,171 66,895 83,619 100,342 117,066 133,790 *
400,000 * 57,672 76,896 96,120 115,344 134,568 * 153,792 *
450,000 * 65,173 86,897 108,621 130,346 * 152,070 * 173,794 *
500,000 * 72,674 96,898 121,123 145,347 * 169,572 * 193,796 *
550,000 * 80,174 106,899 133,624 * 160,349 * 187,074 * 213,798 *
</TABLE>
- -------------------
* Under existing federal laws, earnings used to calculate
benefits under the Retirement Plan may not exceed $160,000 for
1997 and 1998. Also, annual benefits under the Retirement Plan
may not exceed $125,000 for 1997 and $130,000 for 1998,
regardless of the benefit amount otherwise produced by the
Retirement Plan formula. These limits are subject to future
adjustments for cost of living increases. Annual benefits in
the above table do not reflect either of these limits, and are
in addition to any amounts payable from Social Security.
- -------------------
The years of service accrued to the Named Executive Officers are as
follows:
<TABLE>
<CAPTION>
Employee Years of Service Accrued as of 12/31/97
-------- ---------------------------------------
<S> <C>
John E. Slater, Jr. 41
Dennis L. Fink 5
M. Tony Wilkerson 21
Clarence H. Smith 24
Rawson Haverty, Jr. 14
</TABLE>
-13-
<PAGE> 16
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
On November 3, 1995, the Board of Directors adopted a non-qualified
Supplemental Executive Retirement Plan (the "Plan"), effective January 1, 1996,
for the benefit of those employees whose retirement benefits would otherwise be
reduced by the limitation imposed by federal pension law and I.R.S. regulations
on the amount of compensation that may be taken into account in computing
benefits under a defined benefit retirement plan. Federal pension law and I.R.S.
regulations currently prohibit providing benefits on annual compensation above
$160,000 for 1997 and 1998. Under the provisions of the 1996 Supplemental Plan,
participation in the Plan will be automatic for any employee who has pay that
cannot be included in computing benefits under the Company's defined benefit
Retirement Plan because it exceeds the I.R.S. limit; however, the total amount
of annual retirement benefits that may be paid to an eligible participant in the
Plan from all sources (Retirement Plan, Social Security and the 1996
Supplemental Plan) may not exceed $125,000. [See "Retirement Plan" (p. 13) for
information on the amount of benefits which the Named Executive Officers are
eligible to receive upon retirement.]
AGREEMENTS WITH EXECUTIVES REGARDING CHANGE IN CONTROL
On February 7, 1997, the Board of Directors approved an agreement (the
"Agreement" or "Agreements") between the Company and certain executive officers
of the Company, including each of the Named Executive Officers. These Agreements
provide for certain cash payments and continuation of benefits in the event of a
Change in Control or Potential Change in Control of the Company, as defined in
the Agreement. Generally, a "Change in Control" shall be deemed to have occurred
if (i) any person becomes a beneficial owner of 20% or more of the combined
voting power of the Company's outstanding securities (other than Rawson Haverty,
Mrs. Betty Haverty Smith, Clarence H. Ridley, John Rhodes Haverty, M.D., and
Frank S. McGaughey, Jr., and their spouses, lineal descendants, heirs,
administrators or representatives), or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board and
any new director approved by two-thirds of the directors then in office cease
for any reason to constitute a majority of the Board of Directors, or (iii) the
stockholders of the Company approve a merger or statutory share exchange with
any other corporation (other than a transaction which results in the Company's
outstanding voting securities prior thereto continuing to represent at least 75%
of the combined voting power of the Company's outstanding securities, or a
transaction in which no person acquires more than 50% of the combined voting
power of the Company's outstanding securities), or (iv) the shareholders of the
Company approve a plan of complete liquidation or an agreement for the sale or
disposition of all or substantially all of the Company's assets. Messrs. John E.
Slater, Jr., Dennis L. Fink, M. Tony Wilkerson and Clarence H.
Smith have entered into agreements providing for the following:
Upon termination of the Executive's employment following a Change in
Control and during the term of the Agreement, unless termination is for cause,
by reason of death, disability or retirement, or by the Executive without "Good
Reason" as defined in the Agreement, or if termination occurs prior to a Change
in Control but following a Potential Change in Control in which the Company has
entered into an agreement the consummation of which will constitute a Change in
Control, the Company will:
(a) pay to the Executive a lump sum severance payment in cash
equal to the sum of (1) the higher of two times the
Executive's annual base salary in effect immediately prior to
the event upon which the notice of termination is based or two
times the average of the Executive's annual base salary for
the three years immediately prior to the event upon which the
notice of termination is based, and (2) the higher of two
times the amount paid to the Executive as an annual
discretionary bonus in the year preceding the year in which
the date of termination occurs or two times the average amount
paid in the three years preceding that in which the date of
termination occurs;
-14-
<PAGE> 17
(b) pay to the Executive a lump sum amount in cash equal to the
sum of any annual discretionary bonus which has been allocated
or awarded to the Executive for a completed fiscal year
preceding the date of termination but has not yet been paid
and a pro rata portion of an annual discretionary bonus for
the fiscal year in which the date of termination occurs (based
upon the discretionary bonus paid or awarded in the most
recently completed fiscal year);
(c) at the option of the Executive, repurchase all options held by
the Executive for a lump sum amount in cash equal to the
product of the spread (the value of one share of stock less
the per share exercise price) times the number of shares
covered by each option. The value of the stock for purposes of
determining the spread shall be the higher of the current
market value per share or the highest per share price paid for
shares within the six months preceding or after any Change in
Control;
(d) for 24 months after the date of termination, arrange to
provide the Executive with life, disability, accident and
health insurance benefits substantially similar to those which
the Executive is receiving immediately prior to the notice of
termination.
In addition, following a Change in Control and during the term of the
Agreement, during any period that the Executive fails to perform full-time
duties as a result of incapacity due to physical or mental illness, the Company
will pay the Executive's full salary together with all compensation and benefits
payable to the Executive until the Executive's employment is terminated by the
Company for disability. If the Executive's employment is terminated for any
reason following a Change in Control and during the term of the Agreement, the
Company will pay the Executive's full salary through the date of termination
together with all compensation and benefits payable through the date of
termination, and will pay the Executive's normal post-termination compensation
and benefits as such payments become due in accordance with the Company's
retirement, insurance and other compensation or benefit plans or programs.
Rawson Haverty, Jr., has also entered into an Agreement with the
Company on identical terms and conditions described above, except that the
severance payments with respect to annual base salary and bonus shall be with
respect to one year's base salary and one year's annual bonus (or the average of
the annual salary and the annual bonus over the previous three years, whichever
is higher) as opposed to twice such amounts, and post-termination insurance
benefits shall be provided for 12 months after termination as opposed to 24
months.
The Company may reduce payments under any Agreement in accordance with
provisions of the Agreement in order to insure that the total payments to an
Executive will be deductible pursuant to Section 280G of the Internal Revenue
Code of 1986, as amended. The term of each Agreement commenced on January 1,
1997, and will continue in effect through December 31, 1997, renewing on January
1, 1998, and each January 1 thereafter for a period of one year unless earlier
terminated under the Agreement or in the event a Change of Control occurs prior
to such January 1. If a Change in Control occurs during the term of the
Agreement, the Agreement will continue in effect for a period of not less than
36 months beyond the month in which the Change in Control occurred.
-15-
<PAGE> 18
COMPENSATION OF DIRECTORS
Annual retainer fees to directors, paid semi-annually each year on May
1 and November 1, total $3,000 for employee directors and $15,000 for
non-employee directors. Pursuant to the Directors' Compensation Plan adopted by
the Board of Directors and approved by stockholders in 1996, the semi-annual
portion of the annual retainer fee to be paid on May 1 each year shall be paid
in shares of the Company's $1 par value Common Stock equal to the fair market
value of such stock at the close of the market on that day. At the election of
the director, the remaining portion of the annual retainer fee may be paid in
shares of Common Stock. In addition to the annual retainer, each non-employee
director receives a fee of $600 for attendance at each Board meeting and each
meeting of a Board committee on which he serves, except that a non-employee
director who serves as chairman of a Board committee receives $700 for
attendance at each meeting of the committee which he chairs.
The Company maintains a Directors' Deferred Compensation Plan that
permits all directors who choose participation in the Plan to defer to a future
date receipt of payment of retainer fees and/or meeting fees (meeting fees being
applicable only to non-employee directors) which would otherwise be paid in cash
or in shares of Common Stock for their services as directors and members of
committees of the Board of Directors. Under the Plan, such deferred fees (to be
accrued in a director's account in the form of an equivalent number of shares of
Common Stock and/or cash), plus accrued interest (at a rate determined annually
by the Executive Committee in accordance with the Plan), shall be distributed in
the future to a director in one lump sum or in no more than ten equal annual
installments on the date or dates that had been pre-determined and elected by
such director upon his initial election to participate in the Plan, or in
accordance with the terms of the Plan. Five directors will participate in the
Plan in 1998.
Pursuant to an automatic grant provision under the Company's 1993
Non-Qualified Stock Option Plan, the Plan authorizes that each non-employee
director of the Company be granted, on a pre-determined date annually, an option
to purchase 3,000 shares of Common Stock at an exercise price equal to 100% of
the fair market value of such stock on the date of grant. On October 31, 1997,
options were granted to the then eight non-employee directors of the Company
covering an aggregate of 24,000 shares of Common Stock at an exercise price per
share of $13.00. Such options were granted to John T. Glover, John Rhodes
Haverty, M.D., L. Phillip Humann, Lynn H. Johnston, Frank S. McGaughey, III,
William A. Parker, Jr., Clarence H. Ridley and Robert R. Woodson.
ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Although the Company does not have a Compensation Committee of the
Board of Directors, the Executive Committee has performed the function of
determining executive officer compensation. During the fiscal year ended
December 31, 1997, the Executive Committee was comprised of five members: Rawson
Haverty, Chairman of the Board; John E. Slater, Jr., President and Chief
Executive Officer, Clarence H. Ridley, John Rhodes Haverty, M.D., and L. Phillip
Humann.
L. Phillip Humann, a director of the Company and a member of the
Executive Committee of the Board of Directors, is Chairman of the Board of
Directors and Chief Executive Officer of SunTrust Banks, Inc. SunTrust Banks,
Inc. and its subsidiaries provide commercial banking, trust and transfer agent
services to the Company on terms comparable to other customers similarly
situated. As of December 31, 1997, the Company's indebtedness to SunTrust Banks,
Inc. totaled $36.5 million.
-16-
<PAGE> 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Additional Information with Respect to Compensation Committee
Interlocks and Insider Participation in Compensation Decisions" above, which
describes certain business relationships between the Company and certain of its
directors.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Exchange Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Report of Executive Committee on
Executive Compensation and the Stockholder Return Performance Graph shall not be
incorporated by reference into any such filings.
REPORT OF EXECUTIVE COMMITTEE ON EXECUTIVE COMPENSATION
The Company has no standing compensation committee; however, the
Executive Committee of the Board of Directors determines salary and bonus
arrangements for all executive officers of the Company, including the Chief
Executive Officer. The Executive Committee is composed of Rawson Haverty,
Chairman of the Board, John E. Slater, Jr., President and Chief Executive
Officer, Clarence H. Ridley, John Rhodes Haverty, M.D., and L. Phillip Humann.
Compensation of market area and regional managers consists of a base
salary, which is related to the size of the metropolitan market managed, plus a
bonus based on a pre-set formula related to annual profits produced in such area
or region. Compensation of other officers, including executive officers and
department heads (approximately 25 persons, including the five most highly
compensated officers), consists of a base salary, which is related to the duties
and responsibilities of the position, plus a bonus related to the profits of the
Company and assessment of individual contribution. Bonuses are determined
subjectively by the Executive Committee.
Based on profits before bonuses, LIFO provision and income taxes
("corporate profits"), a pool is created for payment of executive and key-person
bonuses. Determination of actual executive and key-person bonuses is made only
after all area and regional manager bonuses have been computed. Total bonuses
earned and paid for fiscal year 1997 to 76 individuals amounted to $2,600,000,
an increase of $96,000, or 3.8%, as compared to the 1996 bonuses. Of this
amount, 29.4% was paid to the five officers holding the five most highly
compensated positions during fiscal year 1997.
The Chief Executive Officer's compensation, as well as that of the
other officers, is comprised of a base salary which is directly related to the
responsibilities of the position and a bonus which is related primarily to the
Company's performance. The principal burden of corporate management decisions is
carried by a Management Committee that is appointed by the Chief Executive
Officer and which is currently comprised of those officers holding the positions
of Chief Executive Officer, Chief Financial Officer, Senior Vice President of
Marketing, Senior Vice President and General Manager, Stores, and Vice President
of the Real Estate and Insurance Divisions, with the Chairman of the Board
serving in an advisory capacity; however, the Chief Executive Officer bears
final responsibility for such management decisions. Thus, the officers serving
as the Management Committee participate more heavily in the division of bonus
awards.
Traditionally, the compensation of the Chief Executive Officer and
other executive officers has increased or decreased in relation to the
profitability of the Company, as well as its market position and in light of
competitive compensation levels. Bonuses are based on corporate profits.
-17-
<PAGE> 20
In 1995, corporate profits decreased 2.8% from the prior year, and
actual net income of the Company also decreased 2.8%; while actual total bonuses
paid decreased 4.2% compared to the prior year. In 1996, corporate profits
decreased 1.6% from the prior year and net income of the Company increased .5%;
while actual total bonuses paid increased 2.6% compared to the prior year. In
1997, corporate profits increased 7.9% from the prior year, and actual net
income of the Company increased 9.3%, as compared to an overall increase in
bonuses of 3.8%.
Based upon a review of available information on public companies
reporting comparable amounts of annual gross revenues, the Executive Committee
believes that the cash compensation (salary and bonus) paid to the Chief
Executive Officer of the Company is comparable to the compensation of chief
executive officers of other such companies.
The Company has been in business for 113 years. Throughout its long
history it has maintained employee compensation programs designed to encourage
its employees to become owners of the business in which they are employed. Stock
options for officers and other key employees are awarded in the discretion of
the Stock Option Committee of the Board of Directors, which is comprised of
non-employee directors. A non-qualified stock option plan is in place for
non-employee directors, and in 1992, an employee stock purchase plan was
established for all eligible employees. As a result of this long established
policy, a substantial number of shares of Company Common Stock and Class A
Common Stock are held by those currently employed in the business and by former
Haverty Furniture Companies, Inc., employees.
It is the Company's intention that the compensation to be paid to its
executive officers will not exceed the present maximum allowable amount for
purposes of deductibility set forth in the Internal Revenue Code.
Executive Committee, Board of Directors
Rawson Haverty, Chairman John E. Slater, Jr., President and C.E.O.
Clarence H. Ridley John Rhodes Haverty, M.D. L. Phillip Humann
-18-
<PAGE> 21
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total stockholder return on the Company's Common Stock and
Class A Common Stock against the cumulative total return of the Nasdaq Home
Furnishings Stores Index and the Nasdaq U.S. Companies Index for the period of
five years commencing December 31, 1992, and ending December 31, 1997.
The Nasdaq Home Furnishings Stores Index includes the 30 active Nasdaq
U.S. issues as of December 31, 1997, which carry the Standard Industrial
Classification (SIC) Code of 5700-5799, defined as home furniture, furnishings
and equipment stores.
The graph below assumes that the value of the investment in the
Company's Common Stock or Class A Common Stock and each index was $100 on
December 31, 1992, and that all dividends were reinvested.
COMPARISON OF FIVE YEAR TOTAL RETURN AMONG
HAVERTY FURNITURE COMPANIES, INC.
NASDAQ HOME FURNISHINGS STORES AND
NASDAQ U.S. COMPANIES INDICES
<TABLE>
<CAPTION>
$100 Value 1992 1993 1994 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Haverty Furniture Companies, Inc. - Common Stock $100.00 $151.7 $106.1 $128.5 $108.1 $131.5
Haverty Furniture Companies, Inc. - Class A Common 100.00 164.5 104.3 139.1 122.1 136.1
Nasdaq (SIC Code 57) Home Furnishings Stores Index 100.00 97.2 73.9 58.9 50.5 60.4
Nasdaq U.S. Companies Index 100.00 137.1 118.4 100.7 111.3 190.4
</TABLE>
<TABLE>
<CAPTION>
Annual Return 1992 1993 1994 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Haverty Furniture Companies, Inc. - Common Stock N/A 52% -30% 21% -16% 22%
Haverty Furniture Companies, Inc. - Class A Common N/A 65% -37% 33% -12% 11%
Nasdaq (SIC Code 57) Home Furnishings Stores Index N/A -3% -24% -20% -14% 20%
Nasdaq U.S. Companies, Index N/A 37% -14% -15% 11% 71%
</TABLE>
-19-
<PAGE> 22
PROPOSAL 3 - ADOPT THE COMPANY'S 1998 STOCK OPTION PLAN
GENERAL
On December 18, 1997, the Stock Option Committee of the Board of
Directors of the Company adopted the 1998 Stock Option Plan (the "1998 Plan")
subject to ratification by the Board of Directors and stockholder approval. The
1998 Plan, which was ratified by the Board of Directors on February 6, 1998, is
primarily for the benefit of eligible officers, directors and key employees of
the Company. The 1998 Plan provides for the grant of both incentive and
non-qualified stock options. The purpose of the 1998 Plan is to encourage and
enable eligible directors, officers and key employees of the Company and its
subsidiaries to acquire proprietary interests in the Company and its
subsidiaries through the ownership of Common Stock of the Company and to attract
and retain persons of ability, motivate and reward good performance and
encourage directors, officers and key employees to continue to exert their best
efforts on behalf of the Company and its subsidiaries.
As of March 6, 1998, there remained an aggregate of 30,848 shares
available under the existing 1993 Non-Qualified Plan and 1988 Incentive Plan to
be granted under such plans, and those plans will expire by their terms in 1998.
The Board of Directors believes it is in the best interests of the Company and
its stockholders to approve the Plan. A copy of the 1998 Plan is attached hereto
as Exhibit A and incorporated herein by reference.
The 1998 Plan provides for the grant of options for purchase by
optionees of up to an aggregate of 1,000,000 shares of the Company's $1.00 par
value Common Stock ("Common Stock"). Under the terms of the 1998 Plan, the Board
of Directors or a committee of the Board of Directors (the "Committee") may
grant options to purchase shares of Common Stock to officers, directors and
employees of the Company or of a subsidiary of the Company, and to certain
consultants and advisors to the Company.
On December 18, 1997, the Company granted options (contingent upon
stockholder approval) to purchase shares of Common Stock pursuant to the 1998
Plan as follows: (i) each Named Executive Officer: 0 shares; (ii) all current
executive officers as a group: 18,000 shares; (iii) all current directors who
are not executive officers as a group: 0 shares; (iv) each nominee for election
as a director: 0 shares; and (v) all employees, including all current officers
who are not executive officers, as a group: 222,000 shares. See "Executive
Compensation."
The 1998 Plan must be approved by a majority of all votes present or
represented in person or by proxy at the Annual Meeting and entitled to vote on
this matter. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
1998 Stock Option Plan.
DESCRIPTION OF 1998 PLAN
Effective Date. The effective date of the 1998 Plan is December 18,
1997. The 1998 Plan shall remain in effect until all shares subject to or which
may become subject to the 1998 Plan shall have been purchased pursuant to
options granted under the 1998 Plan, provided that options under the 1998 Plan
must be granted within ten (10) years from the effective date.
Shares Subject to the 1998 Plan. The shares of the Company's Common
Stock available for issuance under the 1998 Plan may, at the election of the
Board of Directors, be either treasury shares or shares originally issued for
such purpose. The maximum number of shares which shall be reserved and made
available for sale under the 1998 Plan shall be 1,000,000 shares of Common
Stock. Any shares
-20-
<PAGE> 23
subject to an option which for any reason expires or is terminated may again be
subject to an option under the 1998 Plan.
Persons Eligible to Participate in the 1998 Plan. Under the 1998 Plan,
options may be granted only to officers, directors and key employees of the
Company or its subsidiaries, and certain consultants and advisors to the
Company. There are currently approximately 150 employees (including eight
executive officers and 11 non-executive officers) eligible to participate in the
1998 Plan, as well as six non-employee directors.
Automatic Stock Option Grants. Pursuant to the 1998 Plan, on the last
business day of October of each year during the term of the 1998 Plan, each then
non-employee director (currently six persons) will be automatically granted an
option to purchase 3,000 shares of Common Stock (currently, an aggregate of
18,000 shares) at an option exercise price equal to 100% of the Market Price of
such stock on the date of grant. All other awards under the 1998 Plan shall be
made in the discretion of the Board of Directors or the Committee, and are not
presently determinable.
The following table indicates certain stock options which were awarded
in December 1997 (subject to stockholder approval) to each of the following
individuals and groups under the 1998 Plan.
NEW PLAN BENEFITS
1998 STOCK OPTION PLAN
<TABLE>
<CAPTION>
Number of
Name and Position Dollar Value ($)(1) Options
--------------------------------------- ------------------ ---------
<S> <C> <C>
Each Named Executive Officer - 0
Executive Officer Group - 18,000
(Non-Executive Officer) Director Group - 0
Non-Executive Officer - Employee Group - 222,000
</TABLE>
- ---------------
(1) Options granted to the persons indicated in the table were
granted at an exercise price of $13.875 per share, which was
equal to 100% of the Market Price on the date of grant of the
option.
Administration of the 1998 Plan. The 1998 Plan shall be administered by
the Board of Directors or by the Committee. Each member of the Committee shall
be a "Non-Employee Director" as such term is defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, or any successor regulation.
Subject to the provisions of the 1998 Plan, the Board of Directors or the
Committee has the authority to determine the persons to whom options shall be
granted and to determine exercise prices, vesting requirements, the term of and
the number of shares covered by each option.
Exercise Price, Terms of Exercise and Payment for Shares. Each option
granted under the 1998 Plan will be represented by an Option Agreement which
shall set forth the terms particular to that option, including the number of
shares covered by the option, the exercise price, the term of the option and any
vesting requirements.
The exercise price of options granted under the 1998 Plan will be
determined by the Committee, but in no event shall such exercise price be less
than 100% of the Market Price of the Common Stock
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<PAGE> 24
on the date of grant of the option in the case of qualified incentive stock
options, or less than 75% of the Market Price in the case of non-qualified stock
options. The term "Market Price" is defined in the 1998 Plan to be the closing
per share price for the Company's shares of Common Stock as reported by the
NASDAQ National Market System (or other national quotation service). If the
Company's Common Stock is registered on a national securities exchange, then the
Market Price shall mean the closing price of the Company's Common Stock on such
national securities exchange. If the Company's Common Stock is not traded in the
organized markets, then the price shall be the fair market value of the Common
Stock as determined in good faith by the Board of Directors or the Committee. As
of March 6, 1998, the Market Price of the Company's Common Stock was $18.438,
and the value of all shares reserved and available for issuance under the 1998
Plan was approximately $18.5 million.
Options may be exercised in whole or in part by the optionee, but in no
event later than ten (10) years from the date of the grant. Any incentive stock
option granted under the 1998 Plan to an individual who owns more than 10% of
the total combined voting power of all classes of stock of the Company or a
subsidiary may not be purchased at a price less than 110% of the market price on
the day the option is granted, and no such option may be exercised more than
five (5) years from the date of grant. The purchase price for the shares shall
be paid in cash or shares of Common Stock of the Company, or a combination of
both. Upon payment, the Company will deliver stock certificates for such shares
to the optionee.
Termination of Service. In the event that a holder of an option granted
under the 1998 Plan ceases to be an employee of the Company or any subsidiary of
the Company for any reason other than (i) termination for "cause" or (ii) death
or total and permanent disability, any option or unexercised portion thereof,
which is otherwise exercisable on the date of such termination, shall expire
three (3) months from the date of such termination, but in no event after the
option term. Any options which are not exercisable on the date of such
termination shall immediately terminate.
In the event that an optionee ceases to be an employee of the Company
or any subsidiary as a result of termination for "cause," any option or
unexercised portion thereof, whether or not exercisable on the date of
termination shall expire as of the date of termination of employment. In the
event that an optionee voluntarily leaves the employment of the Company or any
subsidiary and thereafter becomes employed by a business that is competitive
with the business of the Company or any subsidiary, any option or unexercised
portion thereof which was otherwise exercisable on the date of termination of
employment shall expire as of the date of termination of employment with the
Company or such subsidiary.
Upon the death or total and permanent disability of the holder of an
option, any option or unexercised portion thereof which was otherwise
exercisable shall expire within one year of the date of such death or
disability, but in no event after the option term. Any options which were not
exercisable on the date of such death or disability shall become immediately
exercisable for a period of one year, but in no event after the option term.
Options granted under the 1998 Plan are exercisable during the lifetime
of the optionee only by the optionee. All options granted under the 1998 Plan
are non-transferable except by will or under the laws of descent and
distribution.
Reorganization and Recapitalization. In case the Company is merged or
consolidated with another corporation and the Company is not the survivor, or in
case the Company is acquired by another corporation, or in case of a separation,
reorganization, recapitalization or liquidation of the Company, the Board of
Directors of the Company shall either make appropriate provision for the
protection of any
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<PAGE> 25
outstanding options, including without limitation the substitution of
appropriate stock of the Company or of the merged, consolidated or otherwise
reorganized corporation which will be issuable in respect of the shares of the
Common Stock of the Company, or upon written notice to the optionee, provide
that the option must be exercised within 60 days or it will be terminated.
In the event that dividends are payable in Common Stock of the Company
or in the event there are splits, subdivisions or combinations of shares of
Common Stock of the Company, the number of shares available under the 1998 Plan
will be increased or decreased proportionately, as the case may be, and the
number of shares deliverable upon the exercise thereafter of any option
theretofore granted will be increased or decreased proportionately, as the case
may be, as determined to be proper by the Board of Directors or the Committee.
Limitation of Number of Shares That May be Purchased. For incentive
stock options granted under the 1998 Plan, the aggregate fair market value
(determined at the time the option was granted) of the shares with respect to
which incentive stock options are exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000.
Amendment and Termination of the 1998 Plan. With respect to any shares
of stock at the time not subject to options, the Board of Directors may at any
time and from time to time, terminate, modify or amend the 1998 Plan in any
respect, except that no such modification or amendment shall be made absent the
approval of the stockholders of the Company which would: (i) increase the
maximum number of shares for which options may be granted under the 1998 Plan,
or (ii) change the class of employees eligible for the grant of qualified
incentive stock options.
With the consent of the affected optionee, the Board of Directors or
the Committee may amend outstanding option agreements in a manner consistent
with the 1998 Plan.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. All incentive stock options granted or to be
granted under the 1998 Plan which are designated as incentive stock options are
intended to be incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
Under the provisions of Section 422 of the Code, neither the holder of
an incentive stock option nor the Company will recognize income, gain, deduction
or loss upon the grant or exercise of an incentive stock option. An optionee
will be taxed only when the stock acquired upon exercise of his incentive stock
option is sold or otherwise disposed of in a taxable transaction. If at the time
of such sale or disposition the optionee has held the shares for the required
holding period (two years from the date the option was granted and one year from
the date of the transfer of the shares to the optionee), the optionee will
recognize long-term capital gain or loss, as the case may be, based upon the
difference between his exercise price and the net proceeds of the sale. However,
if the optionee disposes of the shares before the end of such holding period,
the optionee will recognize ordinary income on such disposition in an amount
equal to the lesser of:
(a) gain on the sale or other disposition; or
(b) the amount by which the fair market value of the shares on the
date of exercise exceeded the option exercise price, with any
excess gain being capital gain, long-term or short-term, depending
on the holding period of the shares on the date of sale or other
taxable disposition.
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<PAGE> 26
The foregoing discussion and the reference to capital gain or loss
treatment therein assume that the option shares are a capital asset in the hands
of the optionee. A sale or other disposition which results in the recognition of
ordinary income to the optionee will also result in a corresponding income tax
deduction for the Company.
The 1998 Plan permits an optionee to pay all or part of the purchase
price for shares acquired pursuant to exercise of an incentive stock option by
transferring to the Company other shares of the Company's Common Stock owned by
the optionee. Section 422 of the Code provides that an option will continue to
be treated as an incentive stock option even if an optionee exercises such
incentive stock option with previously acquired stock of the corporation
granting the option. Accordingly, except as noted below with respect to certain
"statutory option stock," an optionee who exercises an incentive stock option in
whole or in part by transferring to the Company shares of the Company's Common
Stock will recognize no gain or loss upon such exercise.
Section 424(c)(3) of the Code provides that if "statutory option stock"
is transferred in connection with the exercise of an incentive stock option, and
if the holding period requirements under Section 422(a)(1) of the Code are not
met with respect to such statutory option stock before such transfer, then
ordinary income will be recognized as a result of the transfer of statutory
option stock. However, the incentive stock option stock acquired through the
exchange of statutory option stock will still qualify for favorable tax
treatment under Section 422 of the Code.
Incentive stock options offer two principal tax benefits: (1) the
possibility of recognizing a long-term capital gain rather than ordinary income
to the extent of the excess of fair market value over the option price at the
time of exercise, and (2) the deferral of recognition of gain until disposition
of the stock acquired upon the exercise of the option.
The Taxpayer Relief Act of 1997 (the "1997 Tax Act") made significant
changes to individual capital gains tax rates. The 1997 Tax Act generally
reduces the maximum tax rate for gains realized by individual taxpayers from the
sale of capital assets held for more than eighteen months from 28% to 20% (18%
if the property has been held for more than five years and is acquired and sold
after the year 2000). For capital assets held for more than one year but no more
than eighteen months, the maximum tax rate remains at 28%, as it was under prior
law. In addition, taxpayers otherwise subject to the 15% rate bracket will be
entitled to a 10% maximum tax rate on long-term capital gains (8% if the
property has been held for more than five years and is sold after the year
2000). The new maximum tax rates for long-term capital gains will apply for
purposes of both the regular income tax and the alternative minimum tax.
However, the excess of the fair market value of shares acquired through the
exercise of an incentive stock option over the exercise price is taken into
account in computing an individual taxpayer's alternative minimum taxable
income. Thus, the exercise of an incentive stock option could result in the
imposition of an alternative minimum tax liability.
In general, an option granted under the 1998 Plan which is designated
as an incentive stock option will be taxed as described above. However, in some
circumstances an option which is designated as an incentive stock option will be
treated as a non-qualified stock option and the holder taxed accordingly. For
example, a change in the terms of an option which gives the employee additional
benefits may be treated as the grant of a new option. Unless all the criteria
for treatment as an incentive stock option are met on the date the "new option"
is considered granted (such as the requirement that the exercise price of the
option be not less than the fair market of the stock as of the date of the
grant), the option will be treated and taxed as a non-qualified stock option.
-24-
<PAGE> 27
Non-Qualified Stock Options. All options granted or to be granted under
the 1998 Plan which do not qualify as incentive stock options are non-statutory
options not entitled to special tax treatment under Section 422 of the Code.
A participant in the 1998 Plan will recognize taxable income upon the
grant of a non-qualified stock option only if such option has a readily
ascertainable fair market value as of the date of the grant. In such a case, the
recipient will recognize taxable ordinary income in an amount equal to the
excess of the fair market value of the option as of such date over the price, if
any, paid for such option. No income would then be recognized on the exercise of
the option, and when the shares obtained through the exercise of the option are
disposed of in a taxable transaction, the resulting gain or loss would be
capital gain or loss (assuming the shares are a capital asset in the hands of
the optionee). However, under the applicable Treasury Regulations, the
non-qualified stock options issued under the 1998 Plan will not have a readily
ascertainable fair market value unless at the time such options are granted
similar options of the Company are actively traded on an established market. The
Company presently has no such actively traded options.
Upon the exercise of a non-statutory option not having a readily
ascertainable fair market value, the optionee recognizes ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the option exercise price for those shares. The Company is not
entitled to an income tax deduction with respect to the grant of a non-statutory
stock option or the sale of stock acquired pursuant thereto. The Company
generally is permitted a deduction equal to the amount of ordinary income the
optionee is required to recognize as a result of the exercise of a non-statutory
stock option.
The 1998 Plan permits the Committee to allow an optionee to pay all or
part of the purchase price for shares acquired pursuant to an exercise of a
non-statutory option by transferring to the Company other shares of the
Company's Common stock owned by the optionee. If an optionee exchanges
previously acquired Common Stock pursuant to the exercise of a non-qualified
stock option, the Internal Revenue Service has ruled that the optionee will not
be taxed on the unrealized appreciation of the shares surrendered in the
exchange. In other words, the optionee is not taxed on the difference between
his or her cost basis for the old shares and their fair market value on the date
of the exchange, even though the previously acquired shares are valued at the
current market price for purposes of paying all or part of the option price.
Basis and Holding Period of Shares. In most cases, the basis in shares
acquired upon exercise of a non-qualified option will be equal to the fair
market value of the shares on the employee's income recognition date, and the
holding period for determining gains and losses on a subsequent disposition of
such shares will begin on such date. However, if shares of previously acquired
stock are surrendered to pay the exercise price of an incentive stock option or
a non-qualified stock option, the basis and holding period of the shares
received in exchange therefor are determined differently. The basis of the
shares surrendered to pay the exercise price becomes the basis of an equal
number of new shares received upon the exercise of the option, and the holding
period of the new shares will include the holding period of the shares
surrendered to pay the exercise price (except for the purpose of meeting the
holding period required by Section 422 of the Code). The remaining shares
received upon the exercise of an incentive option will have a basis equal to any
cash paid on the exercise and any gain recognized on the disposition of
statutory option stock under Section 424(c)(3) of the Code. The remaining shares
received upon the exercise of a non-qualified option will have a basis equal to
the fair market value of such shares less any cash paid on the exercise (the
amount included in the optionee's taxable income). The holding period for such
remaining shares will begin on the date of receipt by the optionee.
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<PAGE> 28
General. The 1998 Plan is not qualified under Section 401(a) of the
Code and is not subject to the provisions of the Employee Retirement Income
Security Act of 1974.
The preceding discussion is based upon federal tax laws and regulations
in effect on the date of this Proxy Statement, which are subject to change, and
upon an interpretation of the statutory provisions of the Code, its legislative
history and related income tax regulations. Furthermore, the foregoing is only a
general discussion of the federal income tax consequences of the 1998 Plan and
does not purport to be a complete description of all federal income tax aspects
of the 1998 Plan. Option holders may also be subject to state and local taxes in
connection with the grant or exercise of options granted under the 1998 Plan and
the sale or other disposition of shares acquired upon exercise of the options.
Each employee receiving a grant of options should consult with his or her
personal tax advisor regarding federal, state and local consequences of
participating in the 1998 Plan.
INDEPENDENT AUDITORS
Ernst & Young were the independent auditors for the Company during the
year ended December 31, 1997. The Company has been advised that no
representative of Ernst & Young will be present at the Annual Meeting. Although
the Board of Directors has not yet selected independent auditors for the Company
for the fiscal year ended December 31, 1998, it is expected that Ernst & Young
will be chosen.
AVAILABILITY OF FORM 10-K AND ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the year ended December
31, 1997, which includes certain financial information about the Company, is
being mailed together with this Proxy Statement to Stockholders. Additional
copies of such Annual Report, along with copies of the Company's Annual Report
on Form 10-K for the year ended December 31, 1997, as filed with the Securities
and Exchange Commission (exclusive of documents incorporated by reference), are
available without charge to stockholders upon written request to Investor
Relations, Haverty Furniture Companies, Inc., 866 West Peachtree Street, N.W.,
Atlanta, Georgia 30308-1123. Certain information may also be obtained from the
Company's website - www.havertys.com.
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<PAGE> 29
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders of the Company must be received by the Secretary of the
Company, P. O. Box 54678, Civic Center Station, Atlanta, Georgia 30308-0678, no
later than November 20, 1998.
OTHER MATTERS
At the date hereof, there are no other matters management intends to
present or has reason to believe others will present to the meeting. If other
matters come before this meeting, those who shall act as proxies will vote in
accordance with their judgment.
By Order of the Board of Directors
/s/ Jenny H. Parker
Jenny H. Parker
Vice President, Finance and
Corporate Secretary
March 23, 1998
Atlanta, Georgia
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<PAGE> 30
EXHIBIT A
HAVERTY FURNITURE COMPANIES, INC.
1998 STOCK OPTION PLAN
EFFECTIVE AS OF DECEMBER 18, 1997
1. PURPOSE
The primary purpose of the Haverty Furniture Companies, Inc. 1998 Stock
Option Plan (the "Plan") is to encourage and enable eligible directors, officers
and key employees of Haverty Furniture Companies, Inc. (the "Company") and its
subsidiaries to acquire proprietary interests in the Company through the
ownership of Common Stock of the Company. The Company believes that directors,
officers and key employees who participate in the Plan will have a closer
identification with the Company by virtue of their ability as shareholders to
participate in the Company's growth and earnings. The Plan also is designed to
provide motivation for participating directors, officers and key employees to
remain in the employ of and to give greater effort on behalf of the Company. It
is the intention of the Company that the Plan provide for the award of
"incentive stock options" qualified under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") and the regulations promulgated
thereunder, as well as the award of non-qualified stock options. Accordingly,
the provisions of the Plan related to incentive stock options shall be construed
so as to extend and limit participation in a manner consistent with the
requirements of Section 422 of the Code.
2. DEFINITIONS
The following words or terms shall have the following meanings:
(a) "Agreement" shall mean a stock option agreement between the Company
and an Eligible Employee, Eligible Participant or Non-Employee Director pursuant
to the terms of this Plan.
(b) "Board of Directors" shall mean the Board of Directors of the
Company or the Executive Committee of such Board.
(c) "Committee" shall mean the committee appointed by the Board of
Directors to administer the Plan, if any, as set forth in Section 5 of the Plan.
(d) "Company" shall mean Haverty Furniture Companies, Inc., a Maryland
corporation.
(e) "Eligible Employee(s)" shall mean key employees regularly employed
by the Company or a Subsidiary (including officers, whether or not they are
directors) as the Board of Directors or the Committee shall select from time to
time.
(f) "Eligible Participant(s)" shall mean directors, officers, key
employees of the Company and its Subsidiaries, consultants, advisors and other
persons who may not otherwise be eligible to receive Qualified Incentive Options
pursuant to Section 8 of the Plan.
(g) "Market Price" shall mean the closing price of the Company's Common
Stock on the date in question, as quoted by the Nasdaq National Market System
(or other nationally recognized quotation
<PAGE> 31
service). If the Company's Common Stock is not traded on the Nasdaq National
Market but is registered on a national securities exchange, "Market Price" shall
mean the closing sales price of the Company's Common Stock on such national
securities exchange. If the Company's shares of Common Stock are not traded on a
national securities exchange or through any other nationally recognized
quotation service, then "Market Price" shall mean the fair market value of the
Company's Common Stock as determined by the Board of Directors or the Committee,
acting in good faith, under any method consistent with the Code, or Treasury
Regulations thereunder, as the Board of Directors or the Committee shall in its
discretion select and apply at the time of the grant of the option concerned.
Subject to the foregoing, the Board of Directors or the Committee, in fixing the
market price, shall have full authority and discretion and be fully protected in
doing so.
(h) For purposes of Section 10 herein, "Non-Employee Director(s)" shall
mean a director of the Company who is not a regular salaried employee of the
Company or one of its Subsidiaries.
(i) "Optionee" shall mean an Eligible Employee, Eligible Participant or
Non-Employee Director having a right to purchase Common Stock under an
Agreement.
(j) "Option(s)" shall mean the right or rights granted to Eligible
Employees, Eligible Participants or Non-Employee Directors to purchase Common
Stock under the Plan.
(k) "Plan" shall mean this Haverty Furniture Companies, Inc. 1998 Stock
Option Plan.
(l) "Shares," "Stock," or "Common Stock" shall mean shares of the $1.00
par value common stock of the Company.
(m) "Subsidiary" or "Subsidiaries" shall mean any corporation(s), if the
Company owns or controls, directly or indirectly, more than a majority of the
voting stock of such corporation(s).
(n) "Ten Percent Owner" shall mean an individual who, at the time an
Option is granted, owns directly or indirectly more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or a
Subsidiary.
3. EFFECTIVE DATE
The effective date of the Plan (the "Effective Date") shall be the date
the Plan is adopted by the Committee (subject to ratification of the Board of
Directors), or by the Board of Directors, or the date the Plan is approved by
the shareholders of the Company, whichever is earliest. The Plan must be
approved by the affirmative vote of not less than a majority of the shares
present and voting at a meeting at which a quorum is present, which shareholder
vote must be taken within twelve (12) months after the date the Plan is adopted
by the Board of Directors. Such shareholder vote shall not alter the Effective
Date of the Plan. In the event shareholder approval of the adoption of the Plan
is not obtained within the aforesaid twelve (12) month period, then any Options
granted in the intervening period shall be void.
A-2
<PAGE> 32
4. SHARES RESERVED FOR PLAN
The shares of the Company's Common Stock to be sold to Eligible
Employees, Eligible Participants and Non-Employee Directors under the Plan may
at the election of the Board of Directors be either treasury shares or Shares
originally issued for such purpose. The maximum number of Shares which shall be
reserved and made available for sale under the Plan shall be one million
(1,000,000); provided, however, that such Shares shall be subject to the
adjustments provided in Section 8(h). Any Shares subject to an Option which for
any reason expires or is terminated unexercised may again be subject to an
Option under the Plan.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors or the
Committee. The Committee shall be comprised of not less than two (2) members
appointed by the Board of Directors of the Company from among its members, each
of whom qualifies as a "Non-Employee Director" as such term is defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor regulation.
Within the limitations described herein, the Board of Directors of the
Company or the Committee shall administer the Plan, select the Eligible
Employees and Eligible Participants to whom Options will be granted, determine
the number of shares to be optioned to each Eligible Employee and Eligible
Participant and interpret, construe and implement the provisions of the Plan.
The Board of Directors or the Committee shall also determine the price to be
paid for the Shares upon exercise of each Option, the period within which each
Option may be exercised, and the terms and conditions of each Option granted
pursuant to the Plan. The Board of Directors and Committee members shall be
reimbursed for out-of-pocket expenses reasonably incurred in the administration
of the Plan.
If the Plan is administered by the Board of Directors, a majority of the
members of the Board of Directors shall constitute a quorum, and the act of a
majority of the members of the Board of Directors present at any meeting at
which a quorum is present, or acts approved in writing by all members of the
Board of Directors shall be the acts of the Board of Directors. If the Plan is
administered by the Committee, a majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by all of the
members of the Committee shall be the acts of the Committee.
6. ELIGIBILITY
Options granted pursuant to Section 8 shall be granted only to Eligible
Employees. Options granted pursuant to Section 9 may be granted to Eligible
Employees and to Eligible Participants. Options granted pursuant to Section 10
shall be granted only to Non-Employee Directors.
7. DURATION OF THE PLAN
The Plan shall remain in effect until all Shares subject to or which may
become subject to the Plan shall have been purchased pursuant to Options granted
under the Plan; provided that Options under the
A-3
<PAGE> 33
Plan must be granted within ten (10) years from the Effective Date. The Plan
shall expire on the tenth anniversary of the Effective Date.
8. QUALIFIED INCENTIVE OPTIONS
It is intended that Options granted under this Section 8 shall be
qualified incentive stock options under the provisions of Section 422 of the
Code and the regulations thereunder or corresponding provisions of subsequent
revenue laws and regulations in effect at the time such Options are granted.
Such Options shall be evidenced by stock option agreements in such form and not
inconsistent with this Plan as the Committee or the Board of Directors shall
approve from time to time, which Agreements shall contain in substance the
following terms and conditions:
(a) Price. The purchase price for shares purchased upon exercise will be
equal to 100% of the Market Price on the day the Option is granted; provided
that the purchase price of stock deliverable upon the exercise of a qualified
incentive stock option granted to a Ten Percent Owner under this Section 8 shall
be not less than one hundred ten percent (110%) of the Market Price on the day
the Option is granted, as determined by the Board of Directors or the Committee,
but in no case less than the par value of such stock.
(b) Number of Shares. The Agreement shall specify the number of Shares
which the Optionee may purchase under such Option, as determined by the Board of
Directors or the Committee.
(c) Exercise of Options. The shares subject to the Option may be
purchased in whole or in part by the Optionee in accordance with the terms of
the Agreement from time to time after shareholder approval of the Plan, as
determined by the Board of Directors or the Committee, but in no event later
than ten (10) years from the date of grant of the Option. Notwithstanding the
foregoing, Shares subject to an Option granted to a Ten Percent Owner under this
Section 8 may be purchased from time to time but in no event later than five (5)
years from the date of grant of the Option.
(d) Medium and Time of Payment. Stock purchased pursuant to an Agreement
shall be paid for in full at the time of purchase. Payment of the purchase price
shall be in cash or, in lieu of payment of all or part of the purchase price in
cash, the Optionee may surrender to the Company shares of the common stock of
the Company (including either $1.00 par value Common Stock or $1.00 par value
Class A Common Stock) valued at the Market Price on the date of exercise of the
Option in accordance with the terms of the Agreement. Upon receipt of payment,
the Company shall, without transfer or issue tax, deliver to the Optionee (or
other person entitled to exercise the Option) a certificate or certificates for
such Shares.
(e) Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to any Shares covered by an Option until the date of
issuance of the stock certificate to the Optionee for such Shares. Except as
otherwise expressly provided in the Plan, no adjustments shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued.
A-4
<PAGE> 34
(f) Nonassignability of Option. No Option shall be assignable or
transferable by the Optionee except by will or by the laws of descent and
distribution. During the lifetime of the Optionee, the Option shall be
exercisable only by him or her.
(g) Effect of Termination of Employment or Death.
(1) In the event that an Optionee during his or her lifetime
ceases to be an employee of the Company or of any Subsidiary of the
Company for any reason (including retirement) other than (A) termination
for "cause" (defined in (g)(2) below), or (B) death or permanent and
total disability, any Option or unexercised portion thereof which was
otherwise exercisable on the date of termination of employment shall
expire unless exercised within a period of three (3) months from the
date on which the Optionee ceased to be an employee, but in no event
after the term provided in the Optionee's Agreement. In the event that
an Optionee ceases to be an employee of the Company or of any Subsidiary
of the Company for any reason (including retirement) other than (A)
termination for "cause" (defined in (g)(2) below), or (B) death or
permanent and total disability prior to the time that an Option or
portion thereof becomes exercisable, such Option or portion thereof
which is not then exercisable shall terminate and be null and void.
Whether authorized leave of absence for military or government service
shall constitute termination of employment for the purpose of this Plan
shall be determined by the Board of Directors or the Committee, which
determination shall be final and conclusive.
(2) In the event that an Optionee during his or her lifetime
ceases to be an employee of the Company or of any Subsidiary of the
Company as a result of termination for "cause," any Option or
unexercised portion thereof, whether or not exercisable, on the date of
termination of employment shall expire and be deemed cancelled on the
date of termination of employment. For purposes of this Plan,
termination for "cause" shall mean termination for any one of the
following reasons:
(A) failure to perform or substandard performance of the
services required of Optionee as an employee;
(B) gross negligence or willful misconduct of Optionee
materially damaging to the business of the Company;
(C) engaging in any activity prohibited by the Company's
established employment policies; or
(D) conviction of Optionee of a crime involving breach of trust
or moral turpitude.
(3) Notwithstanding the provisions contained in subparagraph (g)(1)
above, in the event that an Optionee voluntarily leaves the employment
of the Company or of any Subsidiary of the Company and thereafter
becomes employed by, or engages directly or indirectly, in any capacity
in, a business that is competitive with the business of the Company or
any Subsidiary of the Company, any Option or unexcerised portion
thereof which was otherwise exercisable on the
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date of termination of employment shall expire and shall be deemed
cancelled as of the date of termination of employment of the Optionee
with the Company or any Subsidiary of the Company.
(4) In the event that an Optionee during his or her lifetime ceases
to be an employee of the Company or any Subsidiary of the Company by
reason of death or permanent and total disability, any Option or
unexercised portion thereof which was otherwise exercisable on the date
such Optionee ceased employment shall expire unless exercised within a
period of one (1) year from the date on which the Optionee ceased to be
an employee, but in no event after the term provided in the Optionee's
Agreement. In the event that an Optionee during his or her lifetime
ceases to be an employee of the Company or any Subsidiary of the Company
by reason of death or permanent and total disability, any Option or
portion thereof which was not exercisable on the date such Optionee
ceased employment shall become immediately exercisable for a period of
one (1) year from the date on which the Optionee ceased to be an
employee, but in no event shall the exercise period extend past the term
provided in the Optionee's Agreement.
"Permanent and total disability" as used in this Plan shall be as
defined in Section 22(e)(3) of the Code.
In the event of the death of an Optionee, the Option shall be
exercisable by his or her personal representatives, heirs or legatees, as
provided herein.
(h) Recapitalization. In the event that dividends are payable in Common
Stock of the Company or in the event there are splits, subdivisions or
combinations of shares of Common Stock of the Company, the number of Shares
available under the Plan shall be increased or decreased proportionately, as the
case may be, and the number and Option exercise price of Shares deliverable upon
the exercise thereafter of any Option theretofore granted shall be increased or
decreased proportionately, as the case may be, as determined to be proper and
appropriate by the Board of Directors or the Committee.
(i) Reorganization. In case the Company is merged or consolidated with
another corporation and the Company is not the surviving corporation, or in case
the property or stock of the Company is acquired by another corporation, or in
case of a separation, reorganization, recapitalization or liquidation of the
Company, the Board of Directors of the Company, or the Board of Directors of any
corporation assuming the obligations of the Company hereunder, shall either (i)
make appropriate provision for the protection of any outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company, or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to the shares of Common Stock of the Company, provided only
that the excess of the aggregate fair market value of the Shares subject to
option immediately after such substitution over the purchase price thereof is
not more than the excess of the aggregate fair market value of the Shares
subject to option immediately before such substitution over the purchase price
thereof, or (ii) upon written notice to the Optionee provide that the Option
(including, in the discretion of the Board of Directors, any portion of such
Option which is not then exercisable) must be exercised within sixty (60) days
of the date of such notice or it will be terminated. If any adjustment under
this Section 8(i) would create a fractional share of Stock or a right to acquire
a fractional share, such shall be disregarded and the number of shares of Stock
available under the Plan and the number of Shares covered under any Options
previously granted pursuant to the Plan shall be the next lower number of shares
of Stock, rounding all fractions downward.
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<PAGE> 36
An adjustment made under this Section 8(i) by the Board of Directors shall be
conclusive and binding on all affected persons.
Except as otherwise expressly provided in this Plan, the Optionee shall
have no rights by reason of any subdivision or consolidation of shares of stock
of any class, or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class, or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation; and any issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or prices of shares of Common Stock subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(j) Annual Limitation. The aggregate fair market value (determined at
the time the Option is granted) of the shares with respect to which incentive
stock options are exercisable for the first time by an Optionee during any
calendar year (under all incentive stock option plans of the Company and its
Subsidiaries) shall not exceed $100,000. Any excess over such amount shall be
deemed to be related to and part of a non-qualified stock option granted
pursuant to Section 9.
(k) General Restriction. Each Option shall be subject to the requirement
that if at any time the Board of Directors shall determine, in its reasonable
discretion, that the listing, registration or qualification of the Shares
subject to such Option upon any securities exchange or under any state or
federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Option or the issue or purchase of Shares thereunder, such Option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors. Alternatively, such
Options shall be issued and exercisable only upon such terms and conditions and
with such restrictions as shall be necessary or appropriate to effect exemption
from such listing, registration, or other qualification requirement.
9. NON-QUALIFIED OPTIONS
The Board of Directors or the Committee may grant to Eligible Employees
or Eligible Participants Options under the Plan which are not qualified
incentive stock options under the provisions of Section 422 of the Code. Such
non-qualified options shall be evidenced by Agreements in such form and not
inconsistent with this Plan as the Board of Directors or the Committee shall
approve from time to time, which Agreements shall contain in substance the same
terms and conditions as set forth in Section 8 hereof with respect to qualified
incentive stock options; provided, however, that:
(i) the limitations set forth in Sections 8(a) and 8(c) with
respect to Ten Percent Owners shall not be applicable to non-qualified options
granted to any Ten Percent Owner;
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<PAGE> 37
(ii) the limitations set forth in Section 8(g) with respect to
termination of employment or death shall not be applicable to non-qualified
option grants, and any such limitations shall be determined on a case by case
basis by the Board of Directors or the Committee at the time of the
non-qualified option grant;
(iii) the limitation set forth in Section 8(j) with respect to
the annual limitation of incentive stock options shall not be applicable to
non-qualified option grants; and
(iv) non-qualified options may be granted at a purchase price
equal to not less than 75% of the Market Price on the day the Option is granted.
10. OPTIONS TO NON-EMPLOYEE DIRECTORS
This Section 10 of the Plan provides the following annual Option grants
to Non-Employee Directors:
(a) On the last business day of October of each year during the
term of this Plan, each then Non-Employee Director of the Company shall be
granted, without the necessity of action by the Board of Directors or the
Committee, an Option to purchase 3,000 shares of Common Stock at an option
exercise or purchase price equal to 100% of the Market Price of such Stock on
the date of grant.
(b) Options granted under this Section 10 shall be exercisable
commencing on the date of grant or, with respect to any Option granted prior to
stockholder approval of this Plan, upon the date of such stockholder approval,
and thereafter until the earlier to occur of the following: the close of
business on (i) the date which is the tenth anniversary of the date of grant;
(ii) the date which is the 90th day following the date upon which such
Non-Employee Director ceases to be a director of the Company for any reason
other than death or permanent and total disability; or (iii) the date which is
the first anniversary of the date on which such Non-Employee Director ceases to
be a director of the Company as a result of death or permanent and total
disability.
(c) In all other respects, Options granted to Non-Employee Directors
hereunder shall contain in substance the same terms and conditions as set forth
in Section 9 hereof with respect to non-qualified options. Non-Employee
Directors shall also be eligible to receive Options under Section 9 of the Plan.
11. AMENDMENT OF THE PLAN
The Plan may at any time or from time to time be terminated, modified or
amended by the affirmative vote of not less than a majority of the shares
present and voting thereon by the Company's shareholders at a meeting of the
shareholders at which a quorum is present. The Board of Directors may at any
time and from time to time modify or amend the Plan in any respect, except that
without shareholder approval the Board of Directors may not (1) increase the
maximum number of Shares for which Options may be granted under the Plan (other
than increases due to changes in capitalization as referred to in Section 8(h)
hereof), or (2) change the class of persons eligible for qualified incentive
options. The termination or any modification or amendment of the Plan shall not,
without the written consent of an Optionee, affect his or her rights under an
Option or right previously granted to him or her. With the written consent of
the Optionee affected, the Board of Directors or the Committee may amend
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<PAGE> 38
outstanding option agreements in a manner not inconsistent with the Plan.
Without employee consent, the Board of Directors may at any time and from time
to time modify or amend outstanding option agreements in such respects as it
shall deem necessary in order that incentive options granted hereunder shall
comply with the appropriate provisions of the Code and regulations thereunder
which are in effect from time to time respecting "Qualified Incentive Options."
The Company's Board of Directors may also suspend the granting of Options
pursuant to the Plan at any time and may terminate the Plan at any time;
provided, however, no such suspension or termination shall modify or amend any
Option granted before such suspension or termination unless (1) the affected
participant consents in writing to such modification or amendment or (2) there
is a dissolution or liquidation of the Company.
12. BINDING EFFECT
All decisions of the Board of Directors or the Committee involving the
implementation, administration or operation of the Plan or any offering under
the Plan shall be binding on the Company and on all persons eligible or who
become eligible to participate in the Plan.
13. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock
pursuant to Options exercised hereunder will be used for general corporate
purposes.
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<PAGE> 39
APPENDIX
PROXY - SOLICITED BY BOARD OF DIRECTORS HAVERTY FURNITURE COMPANIES, INC. 1998
ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder(s) in HAVERTY FURNITURE COMPANIES, INC., hereby
appoints and constitutes JENNY H. PARKER and DENNIS L. FINK, or either of them,
to act as lawful attorney and proxy of the undersigned, with the power of
substitution for and in the name, place and stead of the undersigned, to vote at
the annual meeting of stockholders of the Company to be held on April 24, 1998
at the Harbor Court Hotel, 550 Light Street, Baltimore, Maryland 21202, at 11:00
A.M., or any adjournment thereof, for the following purposes and upon any other
matters that may come before the meeting or any adjournment thereof, with all
the powers the undersigned would possess if personally present, hereby revoking
all previous proxies:
<TABLE>
<C> <S> <C> <C> <C> <C>
1. To elect eight directors of the Company for terms of one year, and until their successors are elected and
PROPOSAL 1 qualified:
TO BE VOTED [ ] FOR all nominees listed (except as marked to the contrary) [ ] WITHHOLD AUTHORITY to vote for all nominees
listed
ON ONLY BY
HOLDERS OF Rawson Haverty John E. Slater, Jr. Rawson Haverty, Jr. Frank S. McGaughey,
CLASS A Lynn H. Johnston Clarence H. Ridley Clarence H. Smith III
COMMON STOCK Fred J. Bates
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space
provided below.)
----------------------------
2. To elect three directors of the Company for terms of one year, and until their successors are elected and
PROPOSAL 2 qualified:
TO BE VOTED [ ] FOR all nominees listed (except as marked to the contrary) [ ] WITHHOLD AUTHORITY To vote for all nominees
listed
ON ONLY BY
HOLDERS OF Robert R. Woodson L. Phillip Humann John T. Glover
COMMON STOCK
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space
provided below.)
---------------------------------------------------------------------------------------------------------------------
PROPOSAL 3 3. To approve the 1998 Stock Option Plan, as set forth in the Proxy Statement as Exhibit A.
TO BE VOTED [ ] FOR [ ] AGAINST [ ] ABSTAIN
ON BY ALL
STOCKHOLDERS
(Continued and to be signed and dated on the reverse side)
</TABLE>
PROXY - SOLICITED BY BOARD OF DIRECTORS (Continued from other side) 1998
ANNUAL MEETING OF STOCKHOLDERS
4. In their discretion, the Proxies are authorized to vote upon
such other business as may properly be brought before the
meeting or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S). THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" EACH OF THE ABOVE PROPOSALS. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSALS 1, 2 AND 3.
Please date and sign exactly as
name(s) appears on reverse side.
When signing as an attorney,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person. For joint accounts, each
joint owner should sign.
--------------------------------
Signature
--------------------------------
Signature
Date
----------------------------
