EXHIBIT (b)(2)
[SUNTRUST LETTERHEAD]
June 26, 2000
Mr. E. Larry Ryder
Chief Financial Officer
Hooker Furniture Corporation
Hand Delivered
Dear Larry :
On behalf of SunTrust Bank, (the "Bank"), I am pleased to confirm the Bank's
commitment to provide the following loan subject to the terms and conditions
stated below.
Borrower: Hooker Furniture Corporation
Amount: Up to $22,500,000
- -------
Purpose: Loan to ESOP to purchase company stock
- --------
Facility Description: 10 year fully amortizing term loan
- ---------------------
Amortization: 10 year mortgage amortization, with equal total payments
- -------------
Final Maturity: 2010
- ---------------
Pricing: Variable Rate of Libor + 3/8 of 1%, currently 7.03%
- -------- Forward fixed rate swap effective 8/31/00, currently
7.65%.*
*Indication rates only based on one month
Libor. Actual rates will be determined at
closing.
Interest Period: Quarterly (Actual 360 day basis)
- ----------------
Prepayment Penalty: No prepayment penalty on variable rate portion
- ------------------- Two way make whole provision on swap to fixed rate
Security Collateral: Unsecured with a negative pledge on all corporate assets excluding fixed
- -------------------- assets securing the IRB
Proposed Covenants: Covenants representative of these type of transactions including but not
- ------------------- limited to:
1. Minimum Debt Service Coverage of 2.25
times during fiscal 2000, 2001 and 2002,
dropping to 1.75 times in years 2003,2004
and 2005 and increasing to 2.25 times
thereafter. Debt Service Ratio is defined
as follows:
Net Income + Depreciation + Amortization + Interest + ESOP Contribution -
Dividends Divided by Interest + Current Maturities of Long Term Debt + ESOP
Contribution
2. Maximum Balance Sheet Leverage of 50%
in fiscal years 2000,2001, 45% in
2002,2003, 40% in 2004,2005 and 30%
thereafter. Balance Sheet Leverage is
defined as follows:
Borrowed debt/borrowed debt + equity
Covenants will be tested quarterly.
Hooker will provide SunTrust with a
compliance certificate quarterly.
Conditions to Borrowing, Loan Agreement to include conditions, reps & warranties
- ------------------------ and events default customary in this type of transaction
of Representations
- ------------------
& Warranties, Events
- --------------------
of Default:
- -----------
Expenses: Borrower will pay all legal expenses to prepare loan documents. SunTrust's
- --------- attorney will provide Hooker with a firm fee quote on legal expenses.
Governing Law: VA
- --------------
We appreciate the opportunity to work with you and wish you much continued
success. Please do not hesitate to call if you have any questions or comments.
Thank you.
Sincerely,
/s/ Ellen L. Wood
Ellen L. Wood
Senior Vice President
Agreed by:
Hooker Furniture Corporation
By: /s/ Edwin L. Ryder 6/26/00
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Edwin L. Ryder
Title: Sr. Vice President - Finance & Admin.
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