Document:

Indemnification Agreement, dated as of September 3, 2003

 Exhibit 10.2 
 Execution Copy 
  

  
 INDEMNIFICATION AGREEMENT 
  
 among 
  
 FINANCIAL SECURITY ASSURANCE INC., 
  
 AFS FUNDING TRUST 
  
 and

  
 DEUTSCHE BANK SECURITIES INC. 
  
 Dated as of September 10, 2003 
  
 $196,000,000 Class A-1 1.12563% Asset Backed Notes 
 $326,000,000 Class A-2 1.74% Asset Backed Notes 
 $188,000,000 Class A-3 2.75% Asset Backed Notes 
 $206,000,000 Class A-4 3.48% Asset Backed Notes 
  

 TABLE OF CONTENTS 
  

	 	  	 	  	Page

	 Section 1.
	  	 Definitions
	  	 1

			
	 Section 2.
	  	 Representations, Warranties and Agreements of Financial Security
	  	 3

			
	 Section 3.
	  	 Representations, Warranties and Agreements of the Underwriters
	  	 5

			
	 Section 4.
	  	 Indemnification
	  	 6

			
	 Section 5.
	  	 Indemnification Procedures
	  	 6

			
	 Section 6.
	  	 Contribution
	  	 7

			
	 Section 7.
	  	 Miscellaneous
	  	 8

		
	 EXHIBIT A—Opinion of Assistant General Counsel
	  	 

 INDEMNIFICATION AGREEMENT 
  
 INDEMNIFICATION AGREEMENT dated as of September 10, 2003, among FINANCIAL SECURITY ASSURANCE INC. (“Financial
Security”), AFS FUNDING TRUST, (the “Seller”) and DEUTSCHE BANK SECURITIES INC., as the Representative (as defined below): 
  
 Section 1. Definitions. For purposes of this Agreement, the following terms shall have the meanings provided below: 
  
 “Agreement” means this Indemnification Agreement, as
amended from time to time. 
  
 “Federal Securities
Laws” means the Securities Act, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940 and the Public Utility Holding Company Act of 1935, each as
amended from time to time, and the rules and regulations in effect from time to time under such Acts. 
  
 “Financial Security Agreements” means this Agreement, the Spread Account Agreement, the Spread Account Agreement Supplement and the
Insurance Agreement. 
  
 “Financial Security
Information” has the meaning provided in Section 2(g) hereof. 
  
 “Financial Security Party” means any of Financial Security, its parent, subsidiaries and affiliates, and any shareholder, director, officer, employee, agent or “controlling person” (as such term is used in the
Securities Act) of any of the foregoing. 
  
 “Indemnified
Party” means any party entitled to any indemnification pursuant to Section 4 hereof. 
  
 “Indemnifying Party” means any party required to provide indemnification pursuant to Section 4 hereof. 
  
 “Insurance Agreement” means the Insurance and Indemnity Agreement, dated as of September 10, 2003 among Financial Security, the Trust,
AmeriCredit Financial Services, Inc., AmeriCredit Corp. and AFS Funding Trust. 
  
 “Losses” means (a) any actual out-of-pocket damages incurred by the party entitled to indemnification or contribution hereunder, (b) any actual out-of-pocket costs or expenses incurred by such party,
including reasonable fees or expenses of its counsel and other expenses incurred in connection with investigating or defending any claim, action or other proceeding which entitle such party to be indemnified hereunder (subject to the limitations set
forth in Section 5 hereof), to the extent not paid, satisfied or reimbursed from funds provided by any other Person other than an affiliate of such party (provided that the foregoing shall not create or imply any obligation to pursue recourse
against any such other Person), plus (c) interest on the amount paid by the party entitled to indemnification or contribution from the date of such payment to the date of payment by the party who is obligated to indemnify or contribute hereunder at
the statutory rate applicable to judgments for breach of contract. 

 “Offering Document” means the Prospectus and any other material or documents delivered
by the Underwriters to any Person in connection with the offer or sale of the Securities. 
  
 “Person” means any individual, partnership, joint venture, corporation, trust, unincorporated organization or other organization or entity (whether governmental or private). 
  
 “Policy” means the financial guaranty insurance policy
delivered by Financial Security with respect to the Securities. 
  
 “Prospectus” means, collectively, the Prospectus relating to the Securities dated July 10, 2003 and the Prospectus Supplement dated September 3, 2003 (the “Prospectus Supplement”) relating to the Securities.

  
 “Representative” means Deutsche Bank
Securities Inc., as representative of the Underwriters. 
  
 “Securities” means the Trust’s $195,000,000 Class A-1 1.12563% Asset Backed Notes, $326,000,000 Class A-2 1.74% Asset Backed Notes, $188,000,000 Class A-3 2.75% Asset Backed Notes and $206,000,000 Class A-4 3.48% Asset
Backed Notes issued pursuant to the Series 2003-C-F Indenture. 
  
 “Securities Act” means the Securities Act of 1933, as amended from time to time. 
  
 “Seller Party” means any of the Seller, its parent, subsidiaries and affiliates and any employee, agent or “controlling person”
(as such term is used in the Securities Act) of any of the foregoing. 
  
 “Spread Account Agreement” means the Spread Account Agreement, as amended and restated, dated as of May 11, 1998, and as further amended as of September 10, 2003, among Financial Security, AFS Funding Trust, the collateral
agent named therein and the trustees specified therein, as the same may be amended, supplemented or otherwise modified in accordance with the terms thereof. 
  
 “Spread Account Agreement Supplement” means the Series 2003-C-F Supplement to Spread Account Agreement, dated as of September 10, 2003,
among Financial Security, AFS Funding Trust, the collateral agent named therein and the trustees specified therein. 
  
 “Trust” means AmeriCredit Automobile Receivables Trust 2003-C-F. 
  
 “Underwriter Information” has the meaning provided in Section 3(c) hereof. 
  
 “Underwriter Party” means any of the Underwriters, its
respective parent, subsidiaries and affiliates and any shareholder, director, officer, employee, agent or “controlling person” (as such item is used in the Securities Act) of any of the foregoing. 
  
 “Underwriters” means Deutsche Bank Securities Inc., Lehman
Brothers Inc., J.P. Morgan Securities Inc. and Wachovia Securities, Inc., as underwriters. 
  

 2 

 “Underwriting Agreement” means the Underwriting Agreement, dated as of September 3, 2003
among the Seller, AmeriCredit Financial Services, Inc. and the Representative. 
  
 Section 2. Representations, Warranties and Agreements of Financial Security. Financial Security represents, warrants and agrees as follows: 
  
 (a) Organization, Etc. Financial Security is a stock insurance company duly organized, validly
existing and authorized to transact financial guaranty insurance business under the laws of the State of New York. 
  
 (b) Authorization, Etc. The Policy and the Financial Security Agreements have been duly authorized, executed and delivered by
Financial Security. 
  
 (c) Validity, Etc.
The Policy and the Financial Security Agreements constitute valid and binding obligations of Financial Security, enforceable against Financial Security in accordance with their terms, subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, rehabilitation, moratorium and other similar laws affecting the enforceability of creditors’ rights generally applicable in the event of the bankruptcy or insolvency of Financial Security and to the application of
general principles of equity and subject, in the case of this Agreement, to principles of public policy limiting the right to enforce the indemnification provisions contained herein. 
  
 (d) Exemption From Registration. The Policy is exempt from registration under the Securities Act.

  
 (e) No Conflicts. Neither the
execution or delivery by Financial Security of the Policy or the Financial Security Agreements, nor the performance by Financial Security of its obligations thereunder, will conflict with any provision of the certificate of incorporation or the
bylaws of Financial Security nor result in a breach of, or constitute a default under, any material agreement or other instrument to which Financial Security is a party or by which any of its property is bound nor violate any judgment, order or
decree applicable to Financial Security of any governmental or regulatory body, administrative agency, court or arbitrator having jurisdiction over Financial Security (except that, in the published opinion of the Securities and Exchange Commission,
the indemnification provisions of this Agreement, insofar as they relate to indemnification for liabilities arising under the Securities Act, are against public policy as expressed in the Securities Act and are therefore unenforceable). 

 
 (f) Financial Information. The consolidated
balance sheets of Financial Security as of December 31, 2002 and December 31, 2001 and the related consolidated statements of income, changes in shareholder’s equity and cash flows for the fiscal years then ended, and the interim consolidated
balance sheets of Financial Security as of March 31, 2003 and June 30, 2003 (unaudited), and the related statements of income, changes in shareholder equity and cash flows for the interim period then ended, which are incorporated by reference in the
Prospectus, fairly present in all material respects the financial condition of Financial Security as of such dates and for such periods in accordance with generally accepted accounting principles consistently applied (subject as 

  

 3 

 
to interim statements to normal year-end adjustments) and since the date of the most current interim consolidated balance sheet referred to above there has
been no change in the financial condition of Financial Security which would materially and adversely affect its ability to perform its obligations under the Policy. 
  
 (g) Financial Security Information. The information in the Prospectus Supplement set forth under the
caption “The Insurer” (as revised from time to time in accordance with the provisions hereof, the “Financial Security Information”) is limited and does not purport to provide the scope of disclosure required to be included
in a prospectus with respect to a registrant in connection with the offer and sale of securities of such registrant registered under the Securities Act. Within such limited scope of disclosure, however, as of the date of the Prospectus Supplement
and as of the date hereof, the Financial Security Information does not contain any untrue statement of a material fact, or omit to state a material fact necessary to make the statements contained therein, in the light of the circumstances under
which they were made, not misleading. 
  
 (h)
Additional Information. Financial Security will furnish to the Underwriters or the Seller, upon request of the Underwriters or the Seller, as the case may be, copies of Financial Security’s most recent financial statements (annual or
interim, as the case may be) which fairly present in all material respects the financial condition of Financial Security as of the dates and for the periods indicated, in accordance with generally accepted accounting principles consistently applied
except as noted therein (subject, as to interim statements, to normal year-end adjustments). In addition, if the delivery of a Prospectus relating to the Securities is required at any time prior to the expiration of nine months after the time of
issue of the Prospectus in connection with the offering or sale of the Securities, the Seller or the Underwriters will notify Financial Security of such requirement to deliver a Prospectus and Financial Security will promptly provide the
Underwriters and the Seller with any revisions to the Financial Security Information that are in the judgment of Financial Security necessary to prepare an amended Prospectus or a supplement to the Prospectus. 
  
 (i) Opinion of Counsel. Financial Security will
furnish to the Underwriters and the Seller on the closing date for the sale of the Securities an opinion of its Assistant General Counsel, to the effect set forth in Exhibit A attached hereto, dated such closing date and addressed to the Seller and
the Underwriters. 
  
 (j) Consents and Reports
of Independent Accountants. Financial Security will furnish to the Underwriters and the Seller, upon request, as comfort from its independent accountants in respect of its financial condition, (i) at the expense of the Person specified in the
Insurance Agreement, a copy of the Prospectus, including either a manually signed consent or a manually signed report of Financial Security’s independent accountants and (ii) the quarterly review letter by Financial Security’s independent
accountants in respect of the most recent interim financial statements of Financial Security. 
  
 Nothing in this Agreement shall be construed as a representation or warranty by Financial Security concerning the rating of its insurance financial strength by Fitch Ratings, Moody’s Investors Service, Inc.,
Standard & Poor’s and Rating and Investment Information, Inc. or any 

  

 4 

 
other rating assigned by a rating agency (collectively, the “Rating Agencies”). The Rating Agencies, in assigning such ratings, take into
account facts and assumptions not described in the Prospectus and the facts and assumptions which are considered by the Rating Agencies, and the ratings issued thereby, are subject to change over time. 
  
 Section 3. Representations, Warranties and Agreements of the
Underwriters. Each of the Underwriters represents, warrants and agrees as follows: 
  
 (a) Compliance With Laws. Such Underwriter will comply in all material respects with all legal requirements in connection with
offers and sales of the Securities and make such offers and sales in the manner provided in the Prospectus. 
  
 (b) Offering Document. Such Underwriter will not use, or distribute to other broker-dealers for use, any Offering Document in
connection with the offer and sale of the Securities unless such Offering Document includes such information as has been furnished by Financial Security for inclusion therein and the information therein concerning Financial Security has been
approved by Financial Security in writing. Financial Security hereby consents to the information in respect of Financial Security included in the Prospectus. Each Offering Document will include the following statement: 
  
 “The Policy is not covered by the Property/Casualty Insurance Security
Fund specified in Article 76 of the New York Insurance Law”. 
  
 Each Offering Document including financial statements with respect to Financial Security prepared in accordance with generally accepted accounting principles (but excluding any Offering Document in which such financial statements are
incorporated by reference) will include the following statement immediately preceding such financial statements: 
  
 “The New York State Insurance Department recognizes only statutory accounting practices for determining and reporting the financial condition and
results of operations of an insurance company, for determining its solvency under the New York Insurance Law, and for determining whether its financial condition warrants the payment of a dividend to its stockholders. No consideration is given by
the New York State Insurance Department to financial statements prepared in accordance with generally accepted accounting principles in making such determinations.” 
  
 (c) Underwriter Information. All material provided by the Underwriters for inclusion in the
Prospectus (as revised from time to time, the “Underwriter Information”), insofar as such information relates to the Underwriters, is true and correct in all material respects. In respect of the Prospectus Supplement, the
Underwriter Information is limited to the information set forth in the body of the Prospectus Supplement and within the 
  

 5 

 
“Underwriting” section, the first, the third and final (i.e. sixth) paragraphs immediately following the Class A-4 Notes Underwriter
commitment table. 
  
 Section 4. Indemnification.

  
 (a) Financial Security agrees, upon the terms
and subject to the conditions provided herein, to indemnify, defend and hold harmless each Seller Party and each Underwriter Party against (i) any and all Losses incurred by them with respect to the offer and sale of the Securities and resulting
from Financial Security’s breach of any of its representations, warranties or agreements set forth in Section 2 hereof and (ii) any and all Losses to which any Seller Party or Underwriter Party may become subject, under the Securities Act or
otherwise, insofar as such Losses arise out of or result from an untrue statement of a material fact contained in any Offering Document or the omission to state therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission was made in the Financial Security Information included therein in accordance with the provisions hereof. 
  
 (b) Each of the Underwriters, agrees, severally but not
jointly, upon the terms and subject to the conditions provided herein, to indemnify, defend and hold harmless each Financial Security Party and each Seller Party against (i) any and all Losses incurred by them with respect to the offer and sale of
the Securities and resulting from the Underwriters’ breach of any of its representations, warranties or agreements set forth in Section 3 hereof and (ii) any and all Losses to which any Financial Security Party or Seller Party may become
subject, under the Securities Act or otherwise, insofar as such Losses arise out of or result from an untrue statement of a material fact contained in any Offering Document or the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission was made in the Underwriter Information included therein. 
  
 (c) Upon the incurrence of any Losses for which a party is
entitled to indemnification hereunder, the Indemnifying Party shall reimburse the Indemnified Party promptly upon establishment by the Indemnified Party to the Indemnifying Party of the Losses incurred. 
  
 Section 5. Indemnification Procedures. Except as provided below in
Section 6 with respect to contribution, the indemnification provided herein by an Indemnifying Party shall be the exclusive remedy of any and all Indemnified Parties for the breach of a representation, warranty or agreement hereunder by an
Indemnifying Party; provided, however, that each Indemnified Party shall be entitled to pursue any other remedy at law or in equity for any such breach so long as the damages sought to be recovered shall not exceed the Losses incurred
thereby resulting from such breach. In the event that any action or regulatory proceeding shall be commenced or claim asserted which may entitle an Indemnified Party to be indemnified under this Agreement, such party shall give the Indemnifying
Party written or telegraphic notice of such action or claim reasonably promptly after receipt of written notice thereof. The Indemnifying Party shall be entitled to participate in and, upon notice to the Indemnified Party, 

  

 6 

 
assume the defense of any such action or claim in reasonable cooperation with, and with the reasonable cooperation of, the Indemnified Party. The Indemnified
Party will have the right to employ its own counsel in any such action in addition to the counsel of the Indemnifying Party, but the fees and expenses of such counsel will be at the expense of such Indemnified Party, unless (a) the employment of
counsel by the Indemnified Party at its expense has been authorized in writing by the Indemnifying Party, (b) the Indemnifying Party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving
notice of the commencement of the action, or (c) the named parties to any such action or proceeding (including any impleaded parties) include both the Indemnifying Party and one or more Indemnified Parties, and the Indemnified Parties shall have
been advised by counsel that (A) there may be one or more legal defenses available to them which are different from or additional to those available to the Indemnifying Party and (B) the representation of the Indemnifying Party and such Indemnified
Parties by the same counsel would be inappropriate or contrary to prudent practice (in which case, if such Indemnified Parties notify the Indemnifying Party in writing that they elect to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense of such action or proceeding on behalf of such Indemnified Parties, it being understood, however, that the Indemnifying Party shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all Seller Parties, one such firm for all Underwriter Parties and one such firm for all Financial Security Parties, as the case may be, which firm shall be designated in writing by the Seller in respect of
the Seller Parties, by the Underwriters in respect of the Underwriter Parties and by Financial Security in respect of the Financial Security Parties), in each of which cases the fees and expenses of counsel will be at the expense of the Indemnifying
Party and all such fees and expenses will be reimbursed promptly as they are incurred. The Indemnifying Party shall not be liable for any settlement of any such claim or action unless the Indemnifying Party shall have consented thereto or be in
default in its obligations hereunder. Any failure by an Indemnified Party to comply with the provisions of this Section shall relieve the Indemnifying Party of liability only if such failure is prejudicial to the position of the Indemnifying Party
and then only to the extent of such prejudice. 
  
 Section 6.
Contribution. 
  
 (a) To provide for just
and equitable contribution if the indemnification provided by any Indemnifying Party is determined to be unavailable or insufficient for any Indemnified Party (other than due to application of this Section), each Indemnifying Party shall contribute
to the Losses arising from any breach of any of its representations, warranties or agreements contained in this Agreement on the basis of the relative fault of each of the parties as set forth in Section 6(b) below; provided, however,
that an Indemnifying Party shall in no event be required to contribute to all Indemnified Parties an aggregate amount in excess of the Losses incurred by such Indemnified Parties resulting from the breach of representations, warranties or agreements
contained in this Agreement. 
  
 (b) The relative
fault of each Indemnifying Party, on the one hand, and of each Indemnified Party, on the other, shall be determined by reference to, among other things, 
  

 7 

 
whether the breach of, or alleged breach of, any representations, warranties or agreements contained in this Agreement relates to information supplied by, or
action within the control of, the Indemnifying Party or the Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such breach. 
  
 (c) The parties agree that Financial Security shall be
solely responsible for the Financial Security Information and the Underwriters shall be solely responsible for the Underwriter Information and that the balance of each Offering Document shall be the responsibility of the Seller. 
  
 (d) Notwithstanding anything in this Section 6 to the
contrary, the Underwriters shall not be required to contribute an amount in excess of the amount by which the total price of the Securities underwritten by the Underwriters exceeds the amount of any damages that the Underwriters have otherwise been
required to pay in respect of such untrue statement or omission. 
  
 (e) No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. 
  
 (f) Upon the incurrence of
any Losses entitled to contribution hereunder, the contributor shall reimburse the party entitled to contribution promptly upon establishment by the party entitled to contribution to the contributor of the Losses incurred. 
  
 Section 7. Miscellaneous. 
  
 (a) Notices. All notices and other communications
provided for under this Agreement shall be delivered to the address set forth below or to such other address as shall be designated by the recipient in a written notice to the other party or parties hereto. 
  

	If to Financial Security:	 	Financial Security Assurance Inc.
	 	 	350 Park Avenue
	 	 	New York, NY 10022
	 	 	Attention: Senior Vice President—Transaction Oversight Department (with a copy to the attention of the General Counsel)
	 	 	Re: AmeriCredit Automobile Receivables Trust 2003-C-F
	 	 	Policy No. 51450-N
	 	 	Confirmation: (212) 826-0100
	 	 	Telecopy Nos.:  (212) 339-3518,
	 	 	                           (212)
339-3529

  
  

 8 

	If to the Seller:	  	AFS Funding Trust
	 	  	c/o Deutsche Bank Trust Company Delaware
	 	  	(f/k/a Bankers Trust (Delaware))
	 	  	E.A. Delle Donne Corporate Center
	 	  	Montgomery Building
	 	  	1011 Centre Road
	 	  	Wilmington, DE 19805-1266
	 	  	Attention: Corporate Trust Administration
	 	  	Confirmation: (302) 636-3305
		
	With a copy to:	  	AmeriCredit Financial Services, Inc.
	 	  	Administrator of AFS Funding Trust
	 	  	801 Cherry Street, Suite 3900
	 	  	Fort Worth, TX 76102
	 	  	Attn: Chief Financial Officer
	 	  	Confirmation: (817) 302-7000
	 	  	Telecopy No.: (817) 302-7942
		
	If to the Underwriters:	  	Deutsche Bank Securities Inc. as Representative
	 	  	60 Wall Street
	 	  	New York, NY 10005
	 	  	Attention: AmeriCredit 2003-C-F
	 	  	Telecopy No.: 212-797-2030

  
 (b)
Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND THIS AGREEMENT AND ALL MATTERS ARISING OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK. 
  
 (c) Assignments. This Agreement may not be assigned
by any party without the express written consent of each other party. Any assignment made in violation of this Agreement shall be null and void. 
  
 (d) Amendments. Amendments of this Agreement shall be in writing signed by each party hereto. 
  
 (e) Survival, Etc. The indemnity and contribution
agreements contained in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnifying Party, (ii) the issuance of the Securities or (iii) any termination of this
Agreement or the Policy. The indemnification provided in this Agreement will be in addition to any liability which the parties may otherwise have and shall in no way limit any obligations of the Seller under the Underwriting Agreement or the
Insurance Agreement. 
  

 9 

 (f) Counterparts. This Agreement may be executed in counterparts by the parties
hereto, and all such counterparts shall constitute one and the same instrument. 
  
 [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 
  

 10 

 IN WITNESS WHEREOF, the parties hereto have caused this Indemnification Agreement to be duly executed and
delivered as of the date first above written. 
  

	 FINANCIAL SECURITY ASSURANCE INC.

		
	 By:
	 	 /s/ Ravi Gandhi

	 	 	 Name:  Ravi Gandhi

	 	 	 Title:    Authorized Officer

	
	 AFS FUNDING TRUST

	 By:
	 	AmeriCredit Financial Services, Inc., as Administrator
		
	 By:
	 	 /s/ Susan Sheffield

	 	 	 Name:  /s/ Susan Sheffield

	 	 	 Title:    Vice President, Structured Finance

	
	 DEUTSCHE BANK SECURITIES INC.

		
	 By:
	 	 /s/ Jay E. Steiner

	 	 	 Name:  Jay E. Steiner

	 	 	 Title:    Vice President

	
	 DEUTSCHE BANK SECURITIES INC.

		
	 By:
	 	 /s/ Richard V. Lawrence

	 	 	 Name:  Richard V. Lawrence

	 	 	 Title:    Director

  
  
 [INDEMNITY AGREEMENT SIG. PAGE] 

 EXHIBIT A 
  
 OPINION OF ASSOCIATE GENERAL COUNSEL 
  
 Based upon the foregoing, I am of the opinion that: 
  
 1. Financial Security is a stock insurance company duly organized, validly existing and authorized to transact financial guaranty insurance business under
the laws of the State of New York. 
  
 2. The Policy and the
Financial Security Agreements have been duly authorized, executed and delivered by Financial Security. 
  
 3. The Policy and the Financial Security Agreements constitute valid and binding obligations of Financial Security, enforceable against Financial Security
in accordance with their terms, subject, as to the enforcement of remedies, to bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other similar laws affecting the enforceability of creditors’ rights generally applicable in
the event of the bankruptcy or insolvency of Financial Security and to the application of general principles of equity and subject, in the case of the Indemnification Agreement, to principles of public policy limiting the right to enforce the
indemnification provisions contained therein insofar as they relate to indemnification for liabilities arising under applicable securities laws. 
  
 4. The Policy is exempt from registration under the Securities Act of 1933, as amended (the “Act”). 
  
 5. Neither the execution or delivery by Financial Security of the Policy or
the Financial Security Agreements, nor the performance by Financial Security of its obligations thereunder, will conflict with any provision of the certificate of incorporation or the bylaws of Financial Security or violate any law or regulation,
which violation would impair the binding effect or enforceability of the Policy or any of the Agreements or, to the best of my knowledge, result in a breach of, or constitute a default under, any agreement or other instrument to which Financial
Security is a party or by which it or any of its property is bound or, to the best of my knowledge, violate any judgment, order or decree applicable to Financial Security of any governmental or regulatory body, administrative agency, court or
arbitrator having jurisdiction over Financial Security (except that in the published opinion of the Securities and Exchange Commission the indemnification provisions of the Indemnification Agreement, insofar as they relate to indemnification for
liabilities arising under the Act, are against public policy as expressed in the Act and are therefore unenforceable). 
  
 In addition, please be advised that I have reviewed the description of Financial Security under the caption “The Insurer” in the Prospectus (the
“Offering Document”) of the Seller with respect to the Securities. The information provided in the Offering Document with respect to Financial Security is limited and does not purport to provide the scope of disclosure required to
be included in a prospectus with respect to a registrant under the Act in connection with the public offer and sale of securities of such registrant. Within such limited scope of disclosure, 
  

 A-1 

 
however, there has not come to my attention any information which would cause me to believe that the description of Financial Security referred to above, as
of the date of the Offering Document or as of the date of this opinion, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except that I express no opinion with respect to any financial statements or other financial information contained or referred to therein). 
  

 A-2EXHIBIT 10.1

 EXHIBIT 10.1 
  
 LEASE 
  
 THIS AGREEMENT OF LEASE, made on the 2nd day of September, 2003 by and between Commonwealth Blvd Associates, LLC, a Virginia Limited Liability Company (hereinafter
“Lessor”), party of the first part, and Hooker Furniture Incorporated, a Virginia Corporation (hereinafter “Lessee”), party of the second part: 
  
 WITNESSETH: 
  
 That for and in consideration of the covenants and agreements hereinafter contained, Lessor does hereby let and demise unto Lessee the hereinafter
described Premises: 
  

	1.	DESCRIPTION OF PREMISES: That certain portion of property (as described below) which is the bottom floor of the main building, and consists of approximately 165,360 square feet of
that certain real property and approximately 43,280 square feet of the 4th floor of the main building,
including all improvements therein or to be provided by Lessor under the terms of this Lease, and located at 101 Commonwealth Boulevard, Martinsville, Virginia, and generally described as the warehouse buildings of masonry and bar joist construction
containing up to approximately 845,990 square feet (“Premises”). 

  

	2.	TERM: The term of this lease shall commence on or before the 1st day of September, 2003 and shall terminate February 29, 2004. Lessee shall have the option to extend the lease to
August 31, 2004, upon 30 days notice prior to the termination, unless Lessor has notified Lessee of the withdrawal of this option with 45 days prior notice. Notwithstanding the foregoing, Lessee shall have the right to return the 4th floor space to Lessor at any time during the term of the Lease upon two (2) weeks notice and shall thereafter have no further
rental obligation for the 4th floor space. Moreover, should Lessee reduce its space as contemplated above,
contemporaneous with the Base Rent reduction, Lessee’s share of the utilities covered in paragraph 4 shall be reduced to 19%. 

  

	3.	RENTAL: Lessee covenants and agrees to pay to Lessor as rental for the bottom floor $0.15 per square foot per month and $0.10 per square foot per month for the 4th floor which
represents Base Rent. The fixed monthly rentals shall be payable in advance on the first day of each month during the term of this lease. 

  

	4.	UTILITIES: Lessor shall provide and pay for all water, sewage, gas, fuel for temporary heaters and electrical charges used upon the Premises. Lessee agrees to pay 25% of all such
bills for the term of the Lease and any extension, based on the proration of the premises being leased versus the entire premises. 

  

	5.	TAXES: Any type of inventory tax which may be levied by governmental bodies is to be paid by Lessee. 

  

	6.	RIGHT OF ENTRY: Lessor, its agents, employees, and contractors shall have the right to enter into the Premises at any time, in the case of an emergency, and otherwise at reasonable
times, subject to a twenty-four hour prior notice to Lessee with the consent of Lessee which shall not unreasonably be withheld. 

  

	7.	LIABILITY: (a) Lessee shall defend, pay, indemnify and save harmless Lessor from and against any and all claims, demands, suits, actions, proceedings, orders, decrees and judgments
of any kind or nature by or in favor of anyone whomsoever and from and against any and all costs and expenses, including reasonable attorneys’ fees, resulting from or in connection with loss of life, bodily or personal injury or property damage
arising, directly or indirectly, out of or from or on account of any occurrence in, upon, at or from the Premises and occasioned wholly or in part through the use and occupancy of the Premises and solely by any act, omission or negligence of Lessee
or any subtenant, concessionaire or licensee of Lessee or their respective employees, agents, contractors, servants, 

 licensees or invitees in, upon, at or from the Premises or any part of the warehouse buildings.

  

	 	(b)	To the extent Lessee is not insured or required to be insured pursuant to Paragraph 16.1 of this Lease, and except as otherwise provided in this lease, Lessor shall defend, pay,
indemnify and save harmless Lessee from and against any and all claims, demands, suits, actions, proceedings, orders, decrees and judgments of any kind or nature by or in favor of anyone whomsoever and from and against any and all costs and
expenses, including reasonable attorneys’ fees, resulting from or in connection with loss of life, or bodily or personal injury arising directly out of or from or account of any occurrence in, upon, at or from the Premises and occasioned solely
by any gross negligence or willful misconduct of Lessor or its employees, agents, contractors, servants, licensees or invitees (expressly excluding other tenants of the warehouse buildings and their respective licensees or invitees) in, upon, at or
from the Premises. 

  

	 	(c)	The provisions of this paragraph 7 shall survive the expiration or sooner termination of this lease. 

  

	8.	ADDITIONS AND IMPROVEMENTS: Lessee accepts Premises in an “as is” condition. Notwithstanding any provision in this lease to the contrary, Lessee acknowledges and agrees
that Lessor shall not be responsible or liable at any time for damage to any property or business of Lessee or those claiming by, under or through Lessee caused by or resulting from the bursting, breaking, leaking, running, seeping, overflowing or
backing up of water, steam, gas, sewage, snow or ice in any part of the Premises or caused by or resulting from acts of God or the elements or any defect or negligence in the occupancy, construction, operation, renovation or use of the Premises or
any improvements adjoining or in the vicinity of the Premises and/or any equipment, fixtures, machinery, appliances or apparatus therein. Lessor specifically retains responsibility and liability for its own acts or omissions that are determined to
be an intentional or wanton act or gross negligence. 

  

	9.	SURRENDER OF PREMISES: Upon the last day of the term of this lease or any renewal thereof, Lessee shall deliver up and surrender the Premises to Lessor in good order and repair,
reasonable wear and tear and damage to leased Premises resulting from fire, explosion, the elements, or other casualty, including Act of God, excepted. 

  

	10.	EMINENT DOMAIN: In the event the Premises or any portion thereof are taken under the power of eminent domain or the threat of the exercise thereof for any public or quasi-public
use, then Lessee or Lessor may terminate and cancel this lease by giving of notice, in writing, to the other party by registered or certified mail, and thereupon both parties shall be released of any further obligations under this Lease, except as
otherwise provided in this lease and except that the parties shall fulfill all obligations hereunder to be performed to the date of such termination. In the event this lease is not terminated upon the condemnation or taking of any portion of the
Premises, the rent, following such taking, shall be reduced by the reasonable sum directly proportionate to the total rent in such ratio as the value of the part of the Premises condemned plus damage to the residue shall bear to the value of the
entire Premises. It is understood and agreed that any recovery or award made in connection with such condemnation shall belong to the Lessor. 

  

	11.	CASUALTY OR DAMAGE TO PREMISES: In the event the improvements of the Premises or any portion thereof shall, during the term of this lease or any renewal hereof, be destroyed or
damaged by fire, explosion, the elements or other casualty, including act of God, the Lessee shall give immediate notice thereof to Lessor, which, except as hereinafter set forth, shall thereupon cause the damage to be repaired forthwith unless this
lease is terminated as hereinafter provided. If the Premises or any part thereof shall have been rendered untenantable from the time of damage until the completion of said repair and restoration, an equitable reduction of the rental during such
period of repair and restoration shall be made until such Premises are so repaired and again ready for occupancy. However, in the event the improvements upon the Premises are damaged to the extent of more than fifty percent (50%) of the replacement
cost thereof (as determined by Lessor) either Lessee or Lessor may elect to terminate this lease within sixty (60) days of the date of such damage by giving written notice thereof by registered or certified mail to the other and thereupon this lease
shall immediately terminate and Lessor and Lessee shall have no further obligation hereunder except as otherwise provided in this 

 Lease and except that Lessee shall pay rental accrued to the date of damage. 
  

	12.	REMOVAL: It is agreed that upon the termination of this lease, the Lessee may remove from the Premises equipment which has been installed by it and shall return Premises to Lessor
as provided herein, so long as they are in compliance with all terms, conditions and covenants of this lease. 

  

	13.	DEFAULT; BREACH; REMEDIES 

	 	13.1.	DEFAULT/BREACH: A “Default” is defined as a failure by the Lessee or Lessor to comply with or perform any of the terms, covenants, conditions or rules under this lease. A
“Breach” is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee or Lessor to cure such Default within any applicable grace period. Each of the following events shall constitute a Breach:

  

	 	13.1.1.	The abandonment of the Premises by Lessee; or the vacating of the Premises by Lessee without providing a commercially reasonable level of security or without providing reasonable
assurances to minimize potential vandalism. 

  

	 	13.1.2.	The failure of Lessee to make any payment of rent or any other payments required to be made by Lessee hereunder, where such failure continues for a period of more than five days
from the date when the rent or other payment is due. 

  

	 	13.1.3.	The failure of the Lessee to: 

	 	•	 	Provide reasonable evidence of insurance, or 

  

	 	•	 	Provide the rescission of an unauthorized assignment or subletting 

 Where any such failure continues for a period of five (5) days following written notice to Lessee. 
  

	 	13.1.4.	The failure of the Lessee to comply with paragraph 15, where any such failure continues for a period of fifteen (15) days following written notice to Lessee; however, such period
may be extended from 15 to 30 days in the event: 

  

	 	•	 	the Lessee officially commences remediation required with regard to Hazardous Substances within 15 days following written notice to Lessee and diligently pursues such remediation to
completion as quickly as possible; and 

  

	 	•	 	Lessee notifies and files a plan of remediation with the Lessor and any necessary 3rd party within 15 days following written notice to Lessee of the necessity therefor. Notwithstanding any provision in this paragraph 13 to the contrary, a Breach shall be deemed to have occurred and no
notice of Default or Breach and/or opportunity to cure shall be necessary where immediate action must be taken in order to prevent damage to property or injury (including death) to persons, and Lessee shall fail to take such immediate action.

  

	 	13.1.5.	The failure of the Lessee to comply with any other covenant, condition, term, or provision, where such failure continues for a period of thirty (30) days following written notice
thereof to the Lessee. 

  

	 	13.1.6.	The failure of the Lessor to comply with any covenant, condition, term, or provision, where such failure continues for a period of thirty (30) days following written notice thereof
to the Lessor; provided, however, that Lessor shall not be in Breach if it shall commence to cure the Default within the 30-day period and diligently pursues such remediation to completion as quickly as possible. 

  

	13.2.	REMEDIES: 

	 	13.2.1.	Lessor: Upon the occurrence of any Breach, Lessor shall have the immediate right to re-enter the Premises, either by summary proceedings, by force or otherwise and to dispossess
Lessee and all other occupants therefrom and remove all property therein and, at Lessor’s 

 election, to store such property at the cost and for the account of Lessee, all without notice of
intention to re-enter with or without resort to legal process (which Lessee hereby expressly waives) and without Lessor being deemed guilty of trespass or becoming liable for any loss or damage which may be occasioned thereby. Lessor shall also have
the right, at its option, in addition to and not in limitation of any other right or remedy, to terminate this lease by giving Lessee three (3) days notice of cancellation. Lessor shall also have the right to exercise any and all other remedies
available to it at law or in equity. Lessor may recover from Lessee all damages it may sustain by reason of any Default or Breach, including the cost of recovering the Premises and all fees of attorneys, experts and consultants. In the event this
lease is terminated pursuant to this paragraph, Lessor shall be entitled to recover from Lessee, as and for liquidated damages and not as a penalty, an amount equal to the difference between the rent for the period which otherwise would have
constituted the balance of the term of this lease and the rental value of the Premises at the time of such election, for such period, both discounted at the rate of 4% per annum to present worth, all of which shall immediately be due and payable by
Lessee to Lessor. The rights and remedies herein reserved by or granted to Lessor are distinct, separate and cumulative, and the exercise of any one of them shall not be deemed to preclude, waive or prejudice Lessor’s right to exercise any or
all others. 
  

	 	13.2.2.	Lessee: Upon the occurrence of a Breach, Lessee shall have the immediate right to exercise its rights and remedies at law or in equity. 

  

	14.	COVENANT TO COMPLY WITH GOVERNMENTAL REQUIREMENTS: The Lessee shall observe and comply with all laws, rules and regulations applicable to the Premises and/or operations therein and
will exercise reasonable care to keep the Premises safe for the public. The Lessee shall save the Lessor harmless for any liability incurred or any penalty, claim, or damage imposed, made or recovered by reason of the neglect of the Lessee to
observe said laws, rules and regulation of the City of Martinsville, State of Virginia, or the U. S. Government. The provisions of this paragraph shall survive the expiration or sooner termination of this lease. 

  

	15.	HAZARDOUS SUBSTANCES: 

	 	15.1.	DEFINED: The term “Hazardous Substances” shall include, without limitation, flammable explosives, radioactive materials, asbestos, polychlorinated biphenyl (PCBs),
chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic substances or related materials, petroleum products, and substances declared to be hazardous or toxic under any law or regulation now or
hereafter enacted or promulgated by any governmental authority. 

  

	 	15.2.	LESSEE’S RESTRICTIONS: Lessee shall not cause or permit to occur: 

	 	15.2.1.	Any violation of any federal, state, or local law, ordinance, or regulation now or hereafter enacted, related to environmental conditions on, under, or about the Premises or the
warehouse buildings or arising from Lessee’s use or occupancy of the Premises, including, but not limited to, soil and ground water conditions; or 

  

	 	15.2.2.	The use, generation, release, manufacturer, refining, production, processing, storage, or disposal of any “Hazardous Substances” on, under, or about the Premises or the
warehouse buildings, or the transportation to or from the Premises of any “Hazardous Substances” except that Lessee may use Hazardous Substances as part of Lessee’s ongoing business, which Lessee agrees it may use only in compliance
with all applicable laws and regulations so long as such use does not cause or result in a nuisance or in a health or safety hazard to property or to any occupants of the warehouse buildings or any other properties. A list of materials used will be
provided to Lessor prior to any such use or storage on the Premises. 

  

	 	15.3.	ENVIRONMENTAL CLEAN-UP: 

	 	15.3.1.	Lessee shall, at Lessee’s own expense, comply with all laws regulating the use, generation, storage, transportation, or disposal of “Hazardous Substances”
(“Laws”). 

	 	15.3.2.	Lessee shall, at Lessee’s own expense, make all submissions to, provide all information required by, and comply with all requirements of all governmental authorities (the
“Authorities”) under the Laws. 

  

	 	15.3.3.	Should any Authority or any third party, with lawful authority or legal right, demand that a cleanup plan be prepared and that a cleanup be undertaken because of any deposit, spill,
discharge, or other release of “Hazardous Substances” that occurs during the term of this lease, at or from the Premises, and which arises directly or indirectly, wholly or in part, at any time from the use or occupancy of the Premises by
Lessee or any subtenant, concessionaire or licensee of Lessee or their respective employees, agents, contractors, servants, licensees or invitees, then Lessee shall, at Lessee’s own expense, prepare and submit the required plans and all related
bonds and other financial assurances; and Lessee shall promptly carry out all such cleanup plans. Lessee is not required to pay for or arrange remediation plans for incidents that occur as the result of actions or omissions of the Lessor or
Lessor’s employees, agents, contractors or invitees. 

  

	 	15.3.4.	Lessee shall promptly provide all information regarding the use, generation, storage, transportation, or disposal of “Hazardous Substances” that is requested by Lessor. If
Lessee fails to fulfill any duty imposed under this paragraph 15.3.4 within a reasonable time, Lessor may do so at Lessee’s cost and expense; and in such case, Lessee shall cooperate with Lessor in order to prepare all documents Lessor deems
necessary or appropriate to determine the applicability of the laws to the Premises and Lessee’s use thereof, and for compliance therewith, and Lessee shall execute all documents promptly upon Lessor’s request. No such action by Lessor and
no attempt made by Lessor to mitigate damages under any law shall constitute a waiver of any of Lessee’s obligations under this paragraph 15.3.4. 

  

	 	15.3.5.	Lessee’s obligations and liabilities under this paragraph 15 shall survive the expiration of this lease. 

  

	15.4.	INDEMNITY: 

	 	15.4.1.	LESSEE’S INDEMNITY: Lessee shall indemnify, defend, hold harmless Lessor, the manager of the property, and their respective officers, directors, beneficiaries, shareholders,
partners, agents, and employees from all fines, suits, proceedings, claims, and actions of every kind, and all costs associated therewith (including attorneys’ and consultants’ fees) arising out of or in any way connected with any deposit,
spill, discharge, or other release of “Hazardous Substances” that occurs during the term of this Lease, at or from the Premises, which arises at any time solely from Lessee’s use or occupancy of the Premises, or from Lessee’s
failure to provide all information, make all submissions, and take all steps required by all authorities under the laws and all other environmental laws. 

  

	 	15.4.2.	LESSOR’S INDEMNITY: Lessor shall indemnify, defend, or hold harmless Lessee, their respective officers, directors, beneficiaries, shareholders, partners, agents, and employees
from all fines, suits, proceedings, claims, and actions of every kind, and all costs associated therewith (including attorneys’ and consultants’ fees) arising out of or in any way connected with any deposit, spill, discharge, or other
release of “Hazardous Substances” that occurs during the term of this Lease, at or from the Premises, which directly arises at any time solely as the result of the negligence or omissions of the Lessor or Lessor’s employees, agents,
contractors or invitees. 

  

	 	15.4.3.	All obligations and liabilities under this paragraph 15.4 shall survive the expiration of this lease. 

  

	 	15.4.4.	Lessee covenants and warrants that it is a duly organized and existing corporation under the laws of its state of incorporation and is authorized to enter into this lease.

	 	15.4.5.	It is the intent of this paragraph 15 that the Lessee will not be responsible for “Hazardous Substances” or “Incidents” that may have occurred prior to the
Lessee taking occupancy of the Premises under this lease. Lessor shall indemnify, defend and hold harmless Lessee, and its officers, directors, beneficiaries, shareholders, partners, agents, and employees from all fines, suits, procedures, claims,
and actions of every kind, and all costs associated therewith (including attorneys’ and consultants’ fees) arising out of or in any way connected with any deposit, spill, discharge, or other release of “Hazardous Substances” that
occurred prior to the term of this Lease, at or from the Premises 

  

	 	15.4.6.	To the best of its knowledge, Lessor is not aware of the existence on the Premises of any reportable levels of Hazardous Substances. 

  

	16.	INSURANCE AND LIABILITIES: Lessee shall indemnify the Lessor against any expenses, loss or liability paid, suffered or incurred as a result of any breach by the Lessee,
Lessee’s agents, servants or employees, of any covenant or condition of this lease as a result of Lessee’s use or occupancy of the Premises or solely by any act, omission, negligence, willful misconduct or criminal act of the Lessee or
Lessee’s agents, servants, employees, contractors, licensees, invitees, subtenants, successors or assigns. 

  
 At all times during the lease term: 
  

	 	16.1.	Lessee shall carry commercial general liability insurance in the amount of at least Five Million Dollars ($5,000,000.00) for any occurrence resulting in injury to or death of one
person and consequential damages arising therefrom, and in the amount of at least Five Million Dollars ($5,000,000.00) for any occurrence resulting in bodily injury and personal injury to or death of more than one person and consequential damages
arising therefrom and property damage of One Million Dollars ($1,000,000.00), and coverage endorsements insuring Lessee’s stock-in-trade, trade fixtures, furniture, furnishings, special equipment, floor and wall coverings and all other items of
personal property of Lessee located on or within the Premises, such coverage to be in an amount of at least Ten Million Dollars ($10,000,000.00) for any occurrence. Lessee will be responsible for carrying insurance to cover the entire value of the
property of the Lessee warehoused in the Premises. Lessee shall also carry workers’ compensation insurance in the amount and limits required by State law. Lessee shall insure its personal property and fixtures located in the Premises and Lessor
shall have no interest in the proceeds from such insurance. Lessee shall name the Lessor as an additional insured on the above liability and property policies. Prior to occupying the Premises, Lessee must furnish Lessor with Certificates of
Insurance evidencing such coverage. 

  

	 	16.2	It is acknowledged that Lessor covers the Premises under a blanket insurance policy for fire and extended coverage. Lessor agrees to furnish Lessee with a Certificate of Insurance
evidencing such coverage. Lessee shall not do anything or permit anything to occur or exist which would increase any premiums for insurance maintained by Lessor. 

  

	17.	EXTERIOR MAINTENANCE: Lessor will maintain the structure and exterior of the Premises in a safe and tenantable condition and will keep the roof of the Premises in repair, provided
that Lessee shall give Lessor written notice of the necessity for such maintenance and repairs, and provided that the necessity for such maintenance or repairs shall not have been caused by any negligence, act, omission or willful misconduct of
Lessee or its employees, agents, contractors, licensees, invitees, subtenants, successors or assigns, in which event, Lessee shall be responsible therefor. Lessor is expressly exculpated from any damage, caused to Lessee’s fixtures,
inventory, and/or decor caused by leakage of pipes or leakage from roof, except for damaged caused by Lessor’s intentional act or gross negligence. For the Premises hereunder being leased to Lessee, Lessee agrees to keep same neat and
orderly, to maintain the landscaping and parking areas, to keep snow removed, and provide security. 

  

	18.	INTERIOR MAINTENANCE: Lessee will keep the interior of the Premises, together with all electrical, plumbing, sprinkler and other mechanical installations, therein in good order and
repair at its own expense, provided, however, Lessor shall be responsible to pay for elevator repairs if the need for 

 such repair(s) is a result of the age of the equipment and not the negligent act, omission or wilful
misconduct of Lessee or its employees, agents, contractors, servants, licensees, invitees, subtenants, successors or assigns With respect to any maintenance or repairs for which Lessor is responsible under this lease, Lessor shall promptly commence
and/or continue necessary maintenance and repairs to the facility upon receipt of written notice of the necessity for such maintenance or repairs. Lessee will surrender the Premises at the expiration of the term or at such other time as it may
vacate in as good condition as when received, excepting depreciation caused by ordinary wear and tear and damage by unavoidable accident or act of God. Lessee will not overload the electrical wiring serving the Premises or within the Premises, and
will install at its own expense, but only after obtaining Lessor’s written approval, any additional electrical wiring which may be required in connection with Lessee’s apparatus. 
  

	19.	COMMON AREAS: 

  

	 	19.1.	Lessor grants to Lessee and Lessee’s customers and invitees the right to use, in common with all others to whom Lessor has or may hereafter grant rights to use the same, the
Common Areas. The term “Common Areas” as used in this Lease, shall mean the parking areas, roadways, pedestrian sidewalks, driveways, sidewalks, delivery areas, trash removal areas, landscaped areas, security areas, public washrooms and
all other common areas or improvements which may be provided by Lessor for the common use. Lessor hereby reserves the following rights with respect to the Common Areas: 

  

	 	19.1.1.	To establish reasonable rules and regulations for the use thereof; 

  

	 	19.1.2.	To use or permit the use of such Common Areas by others to whom Lessor may grant or may have granted such rights in such manner as Lessor may from time to time designate;

  

	 	19.1.3.	To close all or any portion thereof as may be deemed necessary by Lessor to make repairs or changes, to prevent a dedication thereof or the accrual of any rights to any person or
the public therein, or to discourage non-customer use or parking; 

  

	 	19.1.4.	To change the layout of such Common Areas, including the right to reasonably add to or subtract from their shape and size, whether by the addition of building improvements or
otherwise; and 

  

	 	19.1.5.	To do such other acts in and to the Common Areas as in Lessor’s judgement may be desirable. 

  

	20.	ALTERATIONS BY LESSEE: Lessee will not alter or improve the Premises and will not make any structural or nonstructural alterations to the Premises or any part thereof without first
obtaining Lessor’s written approval of such alterations, in Lessor’s sole discretion. Lessee further will not, except for the installation of trade fixtures, cut or drill into or secure any fixtures, apparatus or equipment of any kind to
any part of the Premises without first obtaining Lessor’s written consent, in Lessor’s sole discretion. 

  

	21.	USE OF PREMISES: The Premises shall be used by Lessee solely for the purpose of conducting therein the business of general warehouse and repair operations and for no other purpose.
Lessee shall not use the Premises for any other purpose without the written consent of the Lessor, in Lessor’s sole discretion. 

  

	22.	SIGNS AND ADVERTISING: Lessee will not place or suffer to be placed or maintained on the exterior of the Premises any sign, advertising matter or other thing of any kind, and will
not place or maintain any decoration, lettering or advertising matter on the glass of any window or door of the leased Premises without first obtaining Lessor’s written approval thereof; and Lessee further agrees to maintain such sign,
decoration, lettering, advertising matter or other thing as may be approved in good condition and repair at all times. 

	23.	NO ASSIGNMENTS OR SUB-LETTING: 

  

	 	23.1.	GENERALLY: Lessee will not assign this lease in whole or in part, nor sublet all or any part of the Premises, nor license concessions or leased departments therein, without the
written consent of Lessor first obtained. Such written consent of Lessor shall not be unreasonably withheld. Consent by Lessor to any assignment or subletting shall not constitute a waiver of the necessity for such consent to any subsequent
assignment or subletting. This prohibition against assigning or subletting shall be construed to include a prohibition against any assignment or subletting by operation of law. 

  

	 	23.2.	TRANSFER OF PREMIUMS: One hundred percent (100%) of any sums or other economic consideration received by Lessee as a result of any assignment or subletting entered into pursuant to
this Paragraph, however denominated under the assignment or lease, which exceed, in the aggregate (a) the total sums which Lessee is obligated to pay Lessor under this Lease, plus (b) (i) reasonable real estate brokerage commissions or fees payable
by Lessee in connection with such assignment or subletting, and (ii) the reasonable fees of attorneys, shall be paid by the Lessee to the Lessor as additional rent under this Lease without affecting or reducing any other obligations of the Lessee
hereunder. 

  

	24.	LEGAL NOTICES: Whenever such notice shall or may be given to either of the parties by the other, each such notice shall be sent by registered or certified mail addressed as follows:

  

	 Lessor: George W. Lester, II, Manager,
 Commonwealth Blvd Associates, LLC, 14 E. Liberty
 Street, Martinsville, VA 24112
	 	 Lessee: Hooker Furniture Incorporated
 Attn: E. Larry Ryder
 HOOKER FURNITURE CORPORATION
 Post
Office Box 4708
 Martinsville, Virginia 24115

		
	 With a Copy to: Monroe H. Ridenhour, III, Vice
 President, Lester Development Corp., 14 E. Liberty
 Street, Martinsville, VA 24112
	 	 With a Copy to: John L. Gregory, III
 Young, Haskins, Mann, Gregory & Smith, P.C.
 Post Office Box 72
 Martinsville, Virginia 24114

  

	26.	QUIET ENJOYMENT: Provided that no Breach exists, Lessor warrants that Lessee shall have peaceful possession and quiet enjoyment of the Premises during the term of this lease and, to
the best of Lessor’s knowledge, there are no pending suits, proposed ordinances or other laws or regulations which would prohibit or in any manner restrict use of the Premises by Lessee for its stated use. 

  

	27.	SEVERABILITY: If any term or provision of this lease or an application thereof shall be invalid or unenforceable, the remaining terms and provisions of this lease and any other
application of such terms or provisions shall not be affected thereby. Each term and provision which shall be valid and enforceable shall be utilized to the highest extent permitted by law. 

  
 This agreement shall be binding upon and shall inure to the benefit of the parties, their
successors and assigns. 
  
 IN WITNESS WHEREOF, the said parties hereto have
executed this Lease in duplicate, one of which is retained by each of said parties, as of the day and year first written above. 
  

	 LESSOR: Commonwealth Blvd Associates, LLC
	 	 	 	 LESSEE: Hooker Furniture Incorporated

					
	By:	 	/s/    GEORGE W. LESTER II        	 	 	 	By:	 	/s/    EDWIN L. RYDER        
	 	
	 	 	 	 	

	 Name:
	 	 George W. Lester II

	 	 	 	 Name:
	 	 Edwin L. Ryder

	 Title:
	 	 President

	 	 	 	 Title:
	 	 Exec Vice Pres – Finance & Admin

 ACKNOWLEDGMENT OF CORPORATE LESSOR 
  
 STATE OF VIRGINIA 
 CITY OF MARTINSVILLE, TO WIT: 
  
 I, /s/ Janet M. Decker, a Notary Public in and for the state aforesaid, do certify that /s/ George W. Lester, II whose name is signed to the foregoing
instrument, bearing date on the 2nd day of September, 2003 has acknowledged the same before me in my City and State aforesaid. Given under my hand and seal this 16th day of September, 2003. 
  

			
	/s/    JANET M. DECKER        	 	 	 	 
	
	 	 	 	 
	Notary Public	 	 	 	[SEAL APPEARS HERE]

  
 My Commission Expires: March 31,
2004  
  
 ACKNOWLEDGMENT OF CORPORATE LESSEE 

 
 STATE OF VIRGINIA 
  
 CITY/COUNTY OF Henry  
  
 I, /s/ Jill W. Brown, a Notary Public in and for the state aforesaid, do certify that
/s/ Edwin L. Ryder whose name is signed to the foregoing instrument, bearing date on the 12th day of September, 2003 has acknowledged the same before me in my City and State aforesaid. Given under my hand and seal this 12th day of September, 2003. 
  

	
	/s/    JILL W. BROWN        
	

	Notary Public

  
 My
Commission Expires: July 31, 2005  
  
 [SEAL APPEARS HERE] 

 VERIFICATION OF COMMENCEMENT DATE AND LEASE TERM 
  
 DATE OF LEASE: September 2, 2003 
  
 Lessor: Commonwealth Blvd Associates, LLC 
 14 E. Liberty Street 
 Martinsville, Va 24112 
  
 Lessee:
Hooker Furniture Incorporated 
  
 COMMENCEMENT
DATE: September 1, 2003 
  
 TERMINATION DATE:
February 29, 2004 
  
 RENT COMMENCEMENT DATE:
September 1, 2003 
  
 The parties above do hereby verify that the above dates are
correct and except for stipulating the dates as aforesaid, this “Verification of Commencement Date and Lease Term” shall not in any other way modify or amend or supplement said Lease or any of its provisions as the same are now in force
and effect. 
  
 WHEREOF, the parties have
hereunto subscribed their names this 2nd day of September, 2003 
  

	 LESSOR: Commonwealth Blvd Associates, LLC
	 	 	 	 LESSEE: Hooker Furniture Incorporated

					
	By:	 	/s/    GEORGE W. LESTER II        	 	 	 	By:	 	/s/    EDWIN L. RYDER        
	 	
	 	 	 	 	

	 Name:
	 	 George W. Lester II

	 	 	 	 Name:
	 	 Edwin L. Ryder

	 Title:
	 	 President

	 	 	 	 Title:
	 	 Exec Vice Pres – Finance & Admin

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