SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1993
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commision file number #1-8484
Heilig-Meyers Company
(Exact name of registrant as specified in its charter)
Virginia 54-0558861
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
2235 Staples Mill Road, Richmond, Virginia 23230
(Address of principal executive offices) (Zip Code)
(804) 359-9171
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of January 13, 1994.
48,399,490 shares of Common Stock, $2.00 par value.
<PAGE>
HEILIG-MEYERS COMPANY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings for
Three Months and Nine Months Ended
November 30, 1993 and November 30, 1992 (Unaudited) . . . .3
Consolidated Balance Sheets As of
November 30, 1993 and February 28, 1993 (Unaudited) . . . .4
Consolidated Statements of Cash Flows for
Nine Months Ended November 30, 1993 and
November 30, 1992 (Unaudited) . . . . . . . . . . . . . . .5
Notes to Consolidated Financial Statements (Unaudited). . .6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . .8
PART II. OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - see Index to Exhibits. . . . . . . . . . . 16
b. There were no reports on Form 8-K filed
during the quarter ended November 30, 1993.
<PAGE>
HEILIG-MEYERS COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
November 30, November 30,
1993 1992 1993 1992
Revenues:
Sales $194,364 $144,104 $521,967 $397,683
Other income 36,035 27,608 99,886 77,452
Total revenues 230,399 171,712 621,853 475,135
Costs and Expenses:
Costs of sales 121,523 91,087 329,340 253,012
Selling, general and
administrative 69,272 52,776 186,648 143,874
Interest 6,032 6,035 17,912 16,963
Provision for doubtful
accounts 8,747 6,339 23,005 17,370
Total costs and expenses 205,574 156,237 556,905 431,219
Earnings before provision for
income taxes 24,825 15,475 64,948 43,916
Provision for income taxes 8,962 5,556 24,207 15,500
Net earnings $ 15,863 $ 9,919 $ 40,741 $ 28,416
Net earnings per share of common
stock:
Primary $0.32 $0.22 $0.84 $0.63
Fully diluted $0.32 $0.22 $0.83 $0.62
Cash dividends per share of
common stock $0.05 $0.04 $0.15 $0.12
See notes to consolidated financial statements.
<PAGE>
HEILIG-MEYERS COMPANY
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value data)
(Unaudited)
November 30, February 28,
1993 1993
ASSETS
Current assets:
Cash $ 3,072 $ 3,868
Accounts receivable, net 514,855 397,974
Other receivables 12,235 14,363
Inventories 168,070 131,889
Other 18,814 18,483
Total current assets 717,046 566,577
Property and equipment, net 146,124 126,611
Other assets 83,429 73,297
$946,599 $766,485
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $153,700 $113,400
Long-term debt due within
one year 49,743 49,771
Accounts payable 60,813 50,666
Accrued expenses 36,286 29,944
Total current liabilities 300,542 243,781
Long-term debt 184,863 176,353
Deferred income taxes 44,735 40,796
Commitments --- ---
Stockholders' equity:
Preferred stock, $10 par value --- ---
Common stock, $2 par value 96,128 59,296
Capital in excess of par value 114,182 73,969
Retained earnings 206,149 172,290
Total stockholders' equity 416,459 305,555
$946,599 $766,485
See notes to consolidated financial statements.<PAGE>
HEILIG-MEYERS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine Months Ended
November 30,
1993 1992
Cash flows from operating activities:
Net earnings $ 40,741 $ 28,416
Adjustments to reconcile net
earnings to net cash used by
operating activities:
Depreciation and amortization 15,014 11,912
Provision for doubtful accounts 23,005 17,371
Other, net (179) (188)
Change in operating assets and
liabilities net of the effects
of acquisitions:
Accounts receivable (141,784) (74,377)
Other receivables 2,128 1,073
Inventories (31,412) (15,432)
Prepaid expenses (1,519) (1,469)
Accounts payable 10,147 5,473
Accrued expenses 10,266 2,427
Net cash used by operating
activities (73,593) (24,794)
Cash flows from investing activities:
Acquisitions, net of cash acquired (14,947) (24,577)
Additions to property and equipment (29,852) (18,669)
Disposals of property and equipment 1,295 4,963
Miscellaneous investments (2,775) (2,983)
Net cash used by investing
activities (46,279) (41,266)
Cash flows from financing activities:
Issuance of common stock 77,176 6,249
Increase(decrease) in notes payable, net 40,300 (5,600)
Proceeds from long-term debt 30,000 85,000
Payments of long-term debt (21,518) (13,314)
Dividends paid (6,882) (5,274)
Net cash provided by financing
activities 119,076 67,061
Net increase (decrease) in cash (796) 1,001
Cash at beginning of period 3,868 2,813
Cash at end of period $ 3,072 $ 3,814
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. The accompanying unaudited consolidated financial statements have
been prepared by the Company in accordance with regulations of the Securities
and Exchange Commission in regard to quarterly reporting. In the opinion of
management, the financial information presented reflects all adjustments,
comprised only of normal recurring accruals, which are necessary for a fair
presentation of the results for the interim periods. These statements should
be read in conjunction with the consolidated financial statements and notes
to consolidated financial statements included in the February 28, 1993 Annual
Report to Stockholders and other current year 10-Q filings. Significant
accounting policies and accounting principles have been consistently applied
in both the interim and annual consolidated financial statements. Details in
the notes have not changed except as described in the following paragraphs.
B. On October 13, 1993, the Board of Directors declared a cash dividend
of $0.05 per share which was paid on November 20, 1993, to stockholders of
record on October 27, 1993.
C. Accounts receivable are shown net of the allowance for doubtful
accounts and unearned finance income. The allowance for doubtful accounts
was $32,515,000 and $20,781,000 and unearned finance income was $56,603,000
and $37,648,000 at November 30, 1993, and February 28, 1993, respectively.
D. The Company made income tax payments of $20,286,000 and $9,647,000
during the nine months ended November 30, 1993, and November 30, 1992,
respectively.
E. The Company made interest payments of $16,090,000 and $14,597,000
during the nine months ended November 30, 1993, and November 30, 1992,
respectively.
F. Effective March 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes."
Accordingly, the financial statements for all periods presented have been
restated. There was no material impact on net earnings in either the current
or prior year resulting from the implementation of SFAS 109.
G. Effective March 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The implementation of SFAS 106
had no effect on net earnings in the current year or the prior year.
H. On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993
(the "Budget Act") was signed into law. The Budget Act increases the
corporate tax rate to 35.0% from 34.0% retroactive to January 1, 1993. The
Company was required to adjust its deferred income tax balances to reflect
the higher tax rate and recognize the effects of this adjustment during the
second quarter. As a result, the Company's effective tax rate for the second
quarter rose to 40.6% as compared to 34.6% last year and the effective tax
rate for the third quarter rose to 36.1% as compared to 35.9% last year.
<PAGE>
I. On June 17, 1993, the Company's Board of Directors approved a three-
for-two common stock split which was effected in the form of a stock
dividend. Stockholders of record of common stock at the close of business on
July 14, 1993, were entitled to participate in the stock split. As a result
of the split, each common stockholder received one additional share of the
Company's common stock for each two shares they held as of July 14, 1993.
Par value remained at $2 per share. All current year and prior year per
share information presented has been restated for the stock split.
J. Effective January 1, 1994, the Company purchased certain assets of
McMahan's Furniture Company ("McMahan's") of Carlsbad, California. McMahan's
operates 92 furniture stores in California, Arizona, New Mexico, Texas,
Nevada and Colorado. The purchase price, net of accounts receivable and real
estate, was approximately $55 million. Accounts receivable of approximately
$100 million were securitized and purchased by an unaffiliated party.
Heilig-Meyers will act as servicer for these accounts. Management expects
that the real estate associated with 70 stores owned by McMahan's entities
will be purchased by an unaffiliated entity for approximately $57 million and
leased to Heilig-Meyers. Heilig-Meyers has entered into an interim lease for
these stores pending the closing of this real estate transaction, scheduled
for later in January 1994, and has assumed the leases on the remaining store
properties.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months and Nine Months Ended November 30, 1993 Compared To Three Months
and Nine Months Ended November 30, 1992
Net earnings rose 59.9% to $15,863,000 for the quarter ended November
30, 1993 from $9,919,000 in the prior year. Primary and fully diluted
earnings per share were $.32 compared to $.22 for the quarter ended November
30, 1992. For the nine months ended November 30, 1993, net earnings
increased by 43.4% to $40,741,000 from $28,416,000 in the prior year. Fully
diluted earnings per share for the current year were $.83 compared to $.62
for the prior year.
Sales and Revenues
Sales for the quarter ended November 30, 1993 increased 34.9% to $194.4
million from $144.1 million in 1992. Sales in stores which were open during
the comparable period in the prior year accounted for 14.9% of this increase
with new store sales contributing the balance. For the nine-month period
ended November 30, 1993, sales increased 31.3% to $522.0 million from $397.7
million in the prior year with sales in comparable stores increasing 13.3%.
Management primarily attributes these increases to improved merchandise
offerings and presentation and better customer targeting through its direct
marketing program. The overall economic improvement reflected by increased
consumer spending during the early weeks of the Christmas selling season also
contributed to the quarter's increases.
Other income decreased as a percentage of sales for both the three-month
and nine-month periods ended November 30, 1993. Finance income, the major
component of other income, decreased as a percentage of sales due to the
accelerated sales growth rate and the associated delay in the recognition of
the finance income which is earned over the average contract life.
Costs and Expenses
Costs of sales for the quarter ended November 30, 1993 decreased to
62.5% of sales compared to 63.2% in the prior year. For the nine-month
period, costs of sales were 63.1% of sales compared to 63.6% in the prior
year. Gross margins improved during both the three and nine-month periods
due to improved merchandise buying and less promotional pricing. Both
occupancy and delivery costs improved as a percentage of sales due to the
higher sales volume.
Selling, general and administrative expense decreased as a percentage of
sales during the quarter to 35.6% from 36.6% in the prior year. For the nine
months ended November 30, 1993, selling, general and administrative expense
decreased to 35.8% from 36.2%. Advertising costs and certain fixed selling
and administrative expenses were significantly improved as a percentage of
sales due to the increase in sales volume during the third quarter. Store
salaries expense, which had increased as a percentage of sales during the
first half of this fiscal year due to higher store incentive bonuses, also
decreased as a percentage of sales during the third quarter due to the higher
sales volume.
Interest expense was unchanged in terms of dollars for the quarter at
$6.0 million compared to the prior year. As a percentage of sales, interest
expense decreased to 3.1% from 4.2%. Weighted average long-term rates for
the quarter decreased from 9.1% to 8.8% for the current year and short-term
rates decreased from 3.6% to 3.5%. Higher average short-term debt levels
offset the effects of the decreased rates for the quarter. For the nine
months ended November 30, 1993, interest expense was $17.9 million or 3.4% of
sales compared to $17.0 million or 4.3% of sales in the prior year. Weighted
average long-term rates for the nine months decreased from 9.3% to 9.0% and
short-term rates decreased from 4.2% to 3.5%. In May 1993, the Company
completed a common stock offering of 2.3 million shares. The proceeds of
$74.5 million were used to reduce indebtedness. Despite higher debt levels,
the Company expects interest expense to be lower in the fourth quarter, as a
percentage of sales, than in the prior year due to the higher sales volume
and reduced interest rates.
The provision for doubtful accounts increased slightly as a percentage
of sales to 4.5% from 4.4% for the quarter ended November 30, 1992. For the
nine months ended November 30, 1993, the provision for doubtful accounts was
constant as a percentage of sales at 4.4%. The reserve required by a growing
accounts receivable base increased during the third quarter but was offset on
a year-to-date basis by lower repossession losses and decreased bankruptcy
losses. Management believes that the allowance for doubtful accounts of
$32.5 million at November 30, 1993, is adequate.
Provision For Income Taxes and Net Earnings
Income taxes were accrued at 37.3% for the current nine months compared
to 35.3% in the prior year. On August 10, 1993, the Omnibus Reconciliation
Act of 1993 (the "Budget Act") was signed into law. The Budget Act includes
an increase in the corporate tax rate to 35.0% from 34.0% retroactive to
January 1, 1993. The Company was required to adjust its deferred income tax
balance to reflect the higher tax rate and recognize the effects of this
adjustment during the second quarter. As a result, the tax rate for the
second quarter was 40.6% compared to 34.6% last year. The third quarter tax
rate was 36.1% compared to 35.9% last year and the Company anticipates an
effective tax rate of approximately 36.1% in the remaining quarter of the
fiscal year.
As a percentage of sales, net earnings for the quarter and nine months
ended November 30, 1993 increased significantly over the prior year due
primarily to lower costs of sales, lower selling and administrative expenses
and reduced interest expense.
Liquidity and Capital Resources
The Company decreased its cash position $796,000 to $3,072,000 at
November 30, 1993 from $3,868,000 at February 28, 1993, compared to an
increase of $1,001,000 in the comparable period a year ago.
Net cash used by the Company's operating activities was $73.6 million,
compared to $24.8 million in the prior year. While cash flow from operations
increased due to the Company's strong net earnings, the growth in accounts
receivable and inventory levels caused an overall negative cash flow from
operating activities. The growth in accounts receivable is the result of the
continuing increase in credit sales. Inventory levels increased due to the
addition of one distribution center and 65 new stores since November 30,
1992. Continued extension of credit and related increases in customer
accounts receivable will likely produce negative cash flow from operations in
the future.
Investing activities used a net of $46.3 million of cash in the first
nine months of fiscal 1994 compared to $41.3 million in the comparable period
of fiscal 1993. Capital spending has increased over the prior year due to
a more aggressive program of remodeling existing stores. With the purchase
of certain assets of McMahan's Furniture Company (see item 5 below), in
addition to the remodeling program, the Company expects capital spending for
fiscal 1994 to be slightly higher both as a percentage of sales and assets
compared to the prior fiscal year. Capital expenditures will continue to be
financed by cash flows from operations supplemented by external sources of
funds.
Net cash provided by financing activities increased to $119.1 million in
the first nine months of the year from $67.1 million in the comparable period
of the prior year. The common stock offering provided net proceeds of $74.5
million which were used to reduce indebtedness in the current year. During
the second quarter of the prior year the Company received $85 million in
long-term debt proceeds. The Company has access to a broad diversity of
external capital sources to finance asset growth and plans to continue to
finance accounts receivable, inventories and future expansion with cash flow
from operations supplemented by other sources of capital. The Company has
lines of credit through nine banks totalling $220 million of which $66.3
million was unused at November 30, 1993. Subsequent to the quarter, the
Company obtained an additional line of credit totalling $110 million, of
which $55 million was used to finance the McMahan's acquisition.
As a result of the common stock offering and the increase in net
earnings for the nine-month period, the Company's balance sheet ratios
improved in comparison to the end of fiscal 1993. Total debt as a percentage
of debt and equity decreased to 48.3% at November 30, 1993 compared to 52.6%
at February 28, 1993. The current ratio increased to 2.4 at November 30,
1993, compared to 2.3 at February 28, 1993.
Accounting Changes
During the first quarter, the Company implemented the Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
109 ("SFAS 109") which supersedes the previous standard of accounting for
income taxes, Accounting Principles Board Opinion No. 11. Accordingly, the
financial statements for all periods have been restated. There was no
material impact on net earnings in either the current year or the prior year.
The Company also implemented Statement of Financial Accounting Standards
No. 106 which establishes standards for employers' accounting for
postretirement benefits other than pensions. There was no impact on net
earnings in either the current year or the prior year.
<PAGE>
Item 5. Other Information
Effective January 1, 1994, the Company purchased certain assets relating
to 92 stores of McMahan's Furniture Company ("McMahan's") of Carlsbad,
California. Sixty-five of these stores are in California, twelve in Arizona,
seven in New Mexico, four in Texas, three in Nevada and one in Colorado. The
purchase price, net of accounts receivable and real estate, was approximately
$55 million. Accounts receivable of approximately $100 million were
securitized and purchased by an unaffiliated party. Heilig-Meyers will act
as servicer for these accounts. Management expects that the real estate
associated with 70 stores owned by McMahan's entities will be purchased by an
unaffiliated entity for approximately $57 million and leased to Heilig-
Meyers. Heilig-Meyers has entered into an interim lease for these stores
pending the closing of this real estate transaction, scheduled for later in
January 1994, and has assumed the leases on the remaining store properties.
McMahan's also operates banking and specialty insurance entities, which it
will retain.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Heilig-Meyers Company
(Registrant)
Date: January 13, 1994 /s/Joseph R. Jenkins
Joseph R. Jenkins
Executive Vice President
Principal Financial Officer
Date: January 13, 1994 /s/William J. Dieter
William J. Dieter
Senior Vice President - Accounting
Principal Accounting Officer
<PAGE>
INDEX TO EXHIBITS
2. Asset Purchase Agreement, dated as of November 24, 1993, as amended
between McMahan's Furniture Company, a California corporation, the other
sellers named therein and Heilig-Meyers Furniture Company, a North
Carolina corporation.
11. Computation of Per Share Earnings
Exhibit 2
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 24, 1993*
BETWEEN THE CORPORATIONS AND GENERAL PARTNERSHIPS
LISTED AT THE FOOT OF THIS AGREEMENT AS SELLERS
AND
HEILIG-MEYERS FURNITURE COMPANY,
a North Carolina corporation
* As amended by Amendment No. 1 dated as of November 22, 1993
and Amendment No. 2 dated January 4, 1994
TABLE OF CONTENTS
Page
I. THE TRANSACTIONS
1.1 Sale and Purchase of the Assets 1
1.2 Assignment of Leases 3
1.3 Short Term Leases 4
1.4 No Assumption of Liabilities 5
1.5 Purchase Price 6
1.6 Post-Closing True Up 7
1.7 Escrow 8
1.8 Taking Inventory of Assets 8
1.9 Allocation of Purchase Price 8
1.10 Adjustment to Purchase Price 9
II. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Sellers 9
2.2 Representations and Warranties of Buyer 23
III. CONDUCT AND TRANSACTIONS BEFORE CLOSING
3.1 Access to Records and Properties 24
3.2 Operation of Business of Sellers 26
3.3 Forbearance by the Sellers 27
3.4 Negotiations with Others 28
3.5 Repurchase of Receivables 28
3.6 HSR Filings 29
3.7 Subsequent Events 29
3.8 Risk of Loss 29
3.9 Schedules 30
3.10 Real Property Due Diligence 30
IV. CONDITIONS TO CLOSING
4.1 Conditions to Obligations of Buyer 31
4.2 Conditions to Obligations of Sellers 35
V. CLOSING
5.1 Date and Place of Closing 37
5.2 Waiver of Conditions to Closing 38
5.3 Deliveries by Sellers 38
5.4 Deliveries by Buyer 41
VI. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION: TERMINATION
6.1 Survival of Representations and Warranties 42
6.2 Indemnification 42
6.3 Third Party Claims 45
6.4 Termination 48
6.5 Termination After Investigation 49
6.6 Effect of Termination 50
6.7 Waiver and Amendment 50
VII. MISCELLANEOUS
7.1 Taxes and Prorations 50
7.2 Access to Books and Records after Closing 51
7.3 Consents; Satisfaction of Conditions 51
7.4 Further Assurances 52
7.5 Use of Names 52
7.6 Employees 53
7.7 Publicity 59
7.8 Expenses; Reimbursement of Costs 59
7.9 Entire Agreement 60
7.10 Descriptive Headings 60
7.11 Counterparts 60
7.12 Notices 60
7.13 Successors and Assigns 61
7.14 Law Applicable 61
7.15 Parties in Interest 61
7.16 Lifetime Right to Buy Furniture 62
7.17 Unemployment Rates and Reserves 62
7.18 Purchase Discounts 62
7.19 Norris Agreement 62
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of
November 24, 1993, is made between the corporations and general
partnerships listed at the foot of this agreement as sellers,
(individually a "Seller" and collectively the "Sellers"), and
HEILIG-MEYERS FURNITURE COMPANY, a North Carolina corporation
("Buyer").
I. THE TRANSACTIONS
1.1 Sale and Purchase of the Assets. On the terms and
subject to the conditions hereof, the Sellers agree to sell to
Buyer, and Buyer agrees to purchase, at the Closing (as
hereinafter defined), all of Sellers' right, title and interest
in the following assets (the "Assets"):
(a)the inventory, less merchandise sold but not
delivered, of the Sellers owned by the Sellers and located at
each of their respective stores listed on Schedule A and Schedule
E (the "Stores") and owned by the Sellers and located at the
freight consolidator's warehouse in Pomona, California (the
"Inventory");
(b) cash in the amount of $500 per Store which shall
be retained in the cash drawers of each Store;
(c) the Stores as listed on Schedule A (the "Owned
Stores");
(d) the executive office located in Fresno, California
(the "Valley Office");
(e)the accounts receivable attributable to sales at
the Stores and the consumer credit contracts related thereto, all
amounts due or to become due and all amounts received on or after
the Closing Date (as hereinafter defined) with respect thereto,
all proceeds thereof, Sellers' security interests in the
merchandise sale of which gave rise thereto, and Sellers' rights
to benefits paid under any insurance policies related thereto
(the "Receivables");
(f)the furniture, office machines, and equipment (the
"Furniture and Equipment") located at the Stores, the Valley
Office and the executive office located in Carlsbad, California
(the "Carlsbad Home Office"; the Valley Office and the Carlsbad
Home Office referred to collectively as the "Executive Offices")
but excluding the office furniture and accessories in the office
of Richard A. McMahan or in the apartment located at the Carlsbad
Home Office;
(g)any leasehold improvements owned by Sellers (the
"Leasehold Improvements") located at the Executive Offices and
the Stores which are leased by the Sellers as listed on Schedule
E (the "Leased Stores");
(h)the aircraft, motor vehicles, trailers and chassis
listed on Schedule B (the "Vehicles"), which schedule excludes
the 1983 Bonanza aircraft and the two vehicles previously
identified;
(i) the apartments, residential houses, warehouses,
garages, vacant lots and other real property listed on Schedule C
(the "Miscellaneous Real Property");
(j)the prepaid expenses and prepaid rent and security
deposits under the Leases and under any leases of Real Property
(as hereinafter defined) to third parties (the "Third Party
Leases"), listed and described on Schedule D (the "Miscellaneous
Assets"); and
(k)all of the files, documents, papers, agreements,
records and correspondence pertaining to the Stores, the
Executive Offices and the Assets, including customer and vendor
lists, receivable records, customer billing histories, computer
logs and records, personnel records and employee earnings
histories, but not including corporate records, minute books,
stock books and corporate seals.
For the purposes of this Agreement, the Owned Stores, the
Valley Office and the Miscellaneous Real Property are hereinafter
referred to collectively as the "Real Property."
1.2 Assignment of Leases. At the Closing, each of the
Sellers, as applicable, shall assign to Buyer all of its rights,
title and interests under the leases described on Schedule E (the
"Leases"), and Buyer shall assume such Seller's obligations under
the Leases arising on and after the Closing Date (the "Assumed
Lease Obligations"), provided that, the assignment of the Leases
shall have been consented to by the landlords thereof, pursuant
to "Consent and Estoppel Agreements" substantially in the form
attached hereto as Exhibit 1-A which consents Sellers shall
obtain from the respective landlords, provided that if Consent
and Estoppel Agreements substantially in the form attached hereto
as Exhibit 1-A have not been obtained for any Lease by December
10, 1993, Sellers may satisfy their obligations pursuant to this
sentence by obtaining from the landlord under such Lease a
Consent and Estoppel Agreement in the form attached hereto as
Exhibit 1-B. It is expressly understood that from and after the
date of Closing, Buyer agrees to pay and perform all of the
lessees' obligations arising on or after the date of Closing
under the Leases assigned to and assumed by Buyer at the Closing.
To the extent that any consent or approval of a landlord cannot
be obtained with respect to any Lease, Buyer agrees to cooperate
with Sellers in any sublease or other arrangement reasonably
acceptable to Buyer and Seller designed to provide for Buyer the
benefits under any such Lease, including enforcement at Sellers'
cost any and all rights of Sellers against the landlord arising
out of the breach or cancellation thereof by such other party or
otherwise. Nothing in this Section 1.2, including without
limitation, Buyer and Seller entering into a sublease or other
arrangement as contemplated above, shall limit or otherwise
affect the conditions to Buyer's obligations set forth in
Section 4.1.
1.3 Short Term Leases. In the event the Real Property
cannot be conveyed at Closing of the sale of the other Assets
(including, without limitation as a result of Buyer being unable
to finance such acquisition of Real Property with Citicorp), the
Sellers owning the Real Property agree to lease it to Buyer until
it can be conveyed to Buyer or its designee pursuant to a lease,
on a triple net basis, reasonably satisfactory in form and
substance to Buyer and Sellers (the "New Lease"). With respect
to any of the Real Property located outside of California, such
form of New Lease shall be modified as reasonably necessary to
render the New Lease enforceable in the state in which the
property is located. The New Lease will be for a one year term,
automatically terminable upon purchase hereunder, with the first
six months to be at a monthly rental of one-twelfth of eight
percent (8%) of the purchase price allocable to the Real Property
subject to such New Lease. Upon any default in the payment of
rent under the New Lease after the expiration of any applicable
cure period, Sellers may require Buyer to purchase immediately
any Real Property not previously purchased by Buyer. In the
event that the Real Property has not been conveyed to Buyer by
the end of the sixth month following the Closing Date, the
monthly rent applicable to the Real Property shall increase to
one-twelfth of twelve percent (12%) of the purchase price of the
Real Property.
1.4 No Assumption of Liabilities. Except for (a) the
Assumed Lease Obligations, (b) customer credit balances as
reflected on the books of the Sellers as of Closing,
(c) obligations under contracts as listed on Schedule F,
(d) liability for payment of invoices for Inventory in transit,
(e) customer service claims, and (f) to the extent provided in
Section 7.1, taxes and assessments, Buyer shall not assume any
liability of Sellers, and without limiting the generality of the
foregoing, Buyer shall not be liable for (i), subject to
Section 7.1, any tax incurred by Sellers, however denominated,
prior to Closing, and (ii) any liability retained by Sellers
pursuant to Section 7.6.
1.5 Purchase Price. The payment to Sellers of the purchase
price for the Assets (the "Purchase Price") shall occur upon
Closing by wire transfer to an account or accounts (not to exceed
five in number) designated by Sellers. The Purchase Price shall
be determined as follows:
(a)the purchase price for the Inventory shall be the
book value of such inventory (based upon the Specific
Identification Method of accounting with no reduction for LIFO
valuation) plus 7.25% of such book value for freight (which
represents the cost of freight), which based on the inventory as
of March 31, 1993, is estimated to be approximately Twenty-Five
Million Dollars ($25,000,000);
(b)the purchase price of Receivables shall be one
hundred percent (100%) of the aggregate principal amount thereof
less:
(i) customer credit balances (to the extent that
such customer credit balances did not serve to
previously reduce the aggregate principal amount
of the Receivables);
(ii) a reserve for bad debts of 5.38% of the
aggregate principal amount of the Receivables; and
(iii) unearned finance charges of 10.59% of the
aggregate principal amount of the Receivables;
(c) the purchase price of the Owned Stores, the Valley
Office and the Miscellaneous Real Property shall be
Fifty-Seven
Million Two Hundred and Twenty Thousand Dollars
($57,220,000).
(d) the purchase price for the assignment of the Leases,
Furniture and Equipment, Vehicles and Leasehold Improvements
shall be Nine Million Eight Hundred Twenty Six Thousand Six
Hundred Six Dollars ($9,826,606);
(e) the purchase price of the Miscellaneous Assets shall be
the value of such assets reflected on the books of Sellers as of
December 31, 1993 (to the extent such assets have cash equivalent
value) less the amount of security deposits from third party
tenants set forth on Schedule F and less the outstanding balance
on three mortgages set forth on Schedule F.
(f) the balance of the purchase price shall be $24,000,000.
1.6 Post-Closing True Up. Since the computation of the
Purchase Price of the Receivables, the Inventory and the
Miscellaneous Assets will be based upon information as of
November 30, 1993, Buyer and Sellers agree to cooperate after
Closing to update such information as of the close of business on
December 31, 1993. Not later than thirty (30) days after
Closing, the Sellers will submit to Buyer their computation of
the Purchase Price based upon information as of December 31, 1993
(the "Adjusted Purchase Price"). Buyer then has thirty (30) days
to review and confirm those computations. If the Buyer disagrees
with the Sellers' computation of the Adjusted Purchase Price, the
parties will meet to reconcile the computations. In the event
the Adjusted Purchase Price is greater than the purchase price
paid at Closing, Buyer will promptly pay the difference to
Sellers. In the event the Adjusted Purchase Price is less than
the purchase price paid at Closing, Sellers will promptly
reimburse the difference to Buyer.
1.7 Escrow. In order to secure any payments due from
Sellers pursuant to Section 1.6, Sellers agree that Ten Million
Dollars ($10,000,000) of the Purchase Price shall be held in
escrow pursuant to an Escrow Agreement substantially in the form
attached hereto as Exhibit 3. Upon submission by Sellers of the
computation of the Adjusted Purchase Price pursuant to
Section 1.6, up to $8 million of such amount shall be paid to
Sellers pursuant to the terms of such Escrow Agreement.
1.8 Taking Inventory of Assets. Before the Closing,
representatives of Buyer and Sellers shall jointly review
Receivables and take an inventory of Leasehold Improvements,
Furniture and Equipment, Motor Vehicles and Inventory for
purposes of verifying the computation of the purchase prices
thereof pursuant to Section 1.6.
Sellers shall provide Buyer at the Closing with a list of
merchandise sold but not delivered as of the Closing Date, which
list shall identify which items of such merchandise are in stock
and which items are on order.
1.9 Allocation of Purchase Price. The parties agree to
make a good faith effort to allocate the Purchase Price
consistent with Section 1060 of the Internal Revenue Code of
1986, as amended (the "Code") and the regulations thereunder. If
the parties have not reached agreement by May 31, 1994, the
Purchase Price shall be allocated and reported by each party in a
manner consistent with Section 1060 of the Code; and neither
party shall be liable to the other for adverse tax consequences
resulting from such allocation and reporting.
1.10 Adjustment to Purchase Price. In the event that the
Closing shall occur and the transactions contemplated by the
reinsurance agreements, dated December 22, 1994 (the "Reinsurance
Agreements"), between American Bankers Insurance Company, a
Florida corporation and its affiliates, and Western Family Life
Insurance Company, a Arizona corporation ("WFIC") and Western
Family Life Insurance Company, a California corporation ("WFL"),
are not consummated on or before December 31, 1994, Sellers agree
to promptly pay to Buyer $3 Million as a reduction to the
Purchase Price. Seller's obligation to make such payment is
subject to receipt by WFIC and WFL of the amounts due them under
Article VIII of the Custody Agreements attached as Exhibit 1 to
the Reinsurance Agreements.
II. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Sellers. Each Seller
represents and warrants to Buyer with respect to itself and its
Assets that:
(a)In the case of a Seller which is a corporation, it
is a corporation duly organized and validly existing under the
laws of its state of incorporation as shown at the foot of this
Agreement.
(b)In the case of a Seller which is a general
partnership, it is a general partnership duly organized and
validly existing under the laws of the state in which it was
created as shown at the foot of this Agreement.
(c)It has (in the case of McMahan Furniture Company)
or will have by Closing (in the case of the other Sellers) by all
necessary action, corporate or otherwise, validly authorized the
execution, delivery and performance by it of this Agreement and
the other documents to be delivered by such Seller pursuant
hereto; and this Agreement is a valid and binding agreement of
such Seller, enforceable against it in accordance with its terms
(except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws, now or hereafter in effect, affecting creditors' rights in
general and except as such enforceability may be limited by
general principles of equity). The execution and delivery of
this Agreement by such Seller and, subject to the consents and
approvals listed on Schedule G and expiration of the waiting
period referred to therein, the consummation of the transactions
contemplated herein will not violate any order, judgment, decree,
law, rule, or regulation; contravene any provision of its
articles of incorporation or bylaws, in the case of a Seller
which is a corporation, or its Partnership Agreement, in the case
of a Seller which is a general partnership; result in any breach
of or constitute a default (or an occurrence which with the lapse
of time or action by a third party could result in a default)
under terms, conditions or provisions of any material contract,
material agreement, or other material instrument or obligation to
which such Seller is a party or by which it or any of the Assets
are bound; or result in or require the imposition of any lien
upon or with respect to its Assets.
(d)Except as set forth in Schedule H, there are no
actions, suits, claims, investigations or proceedings (legal,
administrative or arbitrative), pending or to the best knowledge
of such Seller threatened, against any of the Sellers, whether at
law or in equity and whether civil or criminal in nature, before
any federal, state, municipal or other court, arbitrator,
governmental department, commission, agency or instrumentality,
domestic or foreign, nor are there any judgments, decrees or
orders of any such court, arbitrator, governmental department,
commission, agency or instrumentality outstanding against such
Seller which (i) have, or, if adversely determined, could
reasonably be expected to have a material adverse effect on the
Assets or on the earnings, assets, financial condition or the
operations of the Sellers' business in the aggregate (the
"Business"), (ii) seek specifically to prevent, restrict or delay
consummation of the transactions contemplated hereby or
fulfillment of any of the conditions of this Agreement, or
(iii) relate to the Assets.
(e)Each Seller has good and marketable leasehold
title to the Leased Stores pursuant to the Leases to be assigned
by such Seller. Except for mortgages and liens or encumbrances
securing monetary obligation (excluding liens for past due taxes
and assessments which shall be paid at or prior to Closing) as
set forth in Schedule I, which shall be fully discharged of
record on or before the Closing (other than as set forth on
Schedule I) and except for Permitted Exceptions or Disclosed
Matters, as hereinafter defined, such Seller has title to the
Real Property to be conveyed by such Seller, to such Seller's
best knowledge, free and clear of any liens, charges, pledges or
other security interest or other encumbrances. The term
"Permitted Exceptions" as used in this Agreement means (i)
statutory liens for current taxes or assessments not yet due or
delinquent; (ii) mechanics', carriers', workers', repairers' and
other similar liens arising or incurred in the ordinary course of
business relating to obligations as to which there is no default
on the part of such Seller, provided that the same shall be fully
discharged of record before the Closing; (iii) exceptions shown
on any surveys, title reports, title policies or title
commitments obtained by the Buyer and agreed to by Buyer; and
(iv) such other liens, imperfections in title, charges,
easements, restrictions and encumbrances which have been agreed
to by Buyer or deemed to be agreed to by Buyer pursuant to
Section 3.10.
(f)Except for the liens and other encumbrances set
forth in Schedule J, such Seller has good title to all of the
personal property, tangible or intangible, being sold by it
hereunder, free and clear of any liens, charges, pledges,
security interests or other encumbrances.
(g)Except for Disclosed Matters and set forth on
Schedule K, to the best of Sellers' knowledge no condemnation or
eminent domain proceeding affecting the Leased Stores or the Real
Property or any portion thereof is either pending or
contemplated.
(h)Except as set forth on Schedule L and Permitted
Exceptions, Sellers have no knowledge of, nor have they received
any notice of, any special taxes or assessments relating to the
Leased Stores or the Real Property.
(i)The Receivables of such Seller (i) represent bona
fide, legal, valid and binding claims (1) arising in the ordinary
course of business from sales of merchandise at its Stores, which
merchandise has either been delivered or approved for future
delivery to the purchaser thereof, unless otherwise specifically
requested by such purchaser, and (2) enforceable in accordance
with their terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, affecting the
enforcement of creditors' rights in general and except as such
enforceability may be limited by general principles of equity);
(ii) were created and administered in compliance with all
requirements of law, whether federal, state or local, applicable
to their creation, and pursuant to contracts which complied with
all applicable laws (including without limitation truth-in-
lending, equal credit opportunity, consumer credit, insurance,
usury, licensing laws, retail installment sales, revolving charge
account and similar laws); and (iii) are not subject to any right
of rescission, setoff, counterclaim or any other defense
(including, without limitation, any defense arising out of any
violation of any applicable law) of the obligors thereunder,
other than defenses arising out of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights in general and
except as such enforceability may be limited by general
principles of equity. The books of such Seller correctly record
the principal balance of all of such Seller's Receivables. Such
Seller has a valid security interest in the merchandise, sale of
which gave rise to the Receivables. Sellers make no warranty as
to the ability to pay of, or the number or amount of payments by,
any obligor under any of the Receivables. The Sellers' bad debt
reserve of 5.38% was determined consistent with prior practice.
Since March 31, 1993, there has been no material change in the
method used by Sellers to grant credit and no material change in
the collection or charge-off procedures of Sellers.
(j) The books and records of each Seller accurately
reflect the Inventory of such Seller.
(k)Schedule M contains a true and accurate list of
the sales attributable to each of its Stores for the last two
fiscal years.
(l)Schedule N contains a true and accurate list of
each contract, agreement or commitment of such Seller, other than
the Leases and Disclosed Matters relating to the Real Property:
(i) upon which any substantial part of the
business of such Seller is dependent or which, if breached, could
reasonably be expected to materially and adversely affect the
earnings, assets, financial condition or the operations of such
Seller;
(ii) which provides for aggregate future payments
by such Seller of more than $10,000; or
(iii) which contains covenants pursuant to which
any person has agreed not to compete with any business conducted
by such Seller or not to disclose to others information
concerning such Seller.
Each of the foregoing is referred to in this Agreement as a
"Material Contract." All of the Material Contracts are in full
force and effect; no Material Contract has been breached by such
Seller or, to the best of such Seller's knowledge, by any other
party to such Material Contract; and, to the best knowledge of
such Seller, no event has occurred with respect to any Material
Contract which, with the giving of notice or the passage of time
or both, would constitute a breach thereof by any party thereto.
Complete copies of all Material Contracts have been delivered to
Buyer.
(m) Except as set forth in Schedule O, the Assets
which are tangible personal property have been maintained in good
repair in accordance with the usual practice in the United States
of businesses which are similar to the business conducted by such
Seller, are in good condition, ordinary wear and tear excepted,
and are usable in the ordinary course of business of such Seller
as it is presently being conducted.
(n)The term "Licenses and Permits" as used herein
means federal, state and local governmental licenses, permits,
approvals and authorizations, but does not include Environmental
Permits, as defined in the next subparagraph. Such Seller has
all the Licenses and Permits necessary to conduct its business as
it is presently being conducted, except for those Licenses and
Permits which, if not obtained, would have no material adverse
effect on the Business. Schedule P contains a complete and
correct list of all of such Licenses and Permits, all of which
are in full force and effect. Such Seller has complied in all
material respects with the terms of such Licenses and Permits,
and no notice of any violation of any such License or Permit has
been received by such Seller, or to the best knowledge of such
Seller, recorded or published, and no proceeding is pending or,
to the best knowledge of such Seller threatened, to revoke or
limit any of them. Such Seller has no reason to believe that
either (i) the Licenses and Permits in effect on the date hereof
will not be renewed or (ii) Buyer will not be able to obtain new
Licenses and Permits upon transfer of the Assets.
(o) The term "Environmental Permits" as used herein
means federal, state and local governmental permits, licenses and
other authorizations, approvals and notifications which relate to
the environment, human health or to public health and safety or
worker health and safety as they may be affected by the
environment, including, without limitation, those relating to
(i) emissions, discharges, releases or threatened releases of
pollutants, contaminants, hazardous or toxic substances or
petroleum into the air, surface water, ground water or the ocean,
or on or into the land and (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, hazardous or toxic
substances, or petroleum. Such Seller has obtained all
Environmental Permits necessary to conduct its business as it is
presently being conducted, except for those Environmental Permits
which would have no material adverse effect on the Business if
not obtained. Schedule P contains a complete and correct list of
all such Environmental Permits, all of which are in full force
and effect and, except as set forth on Schedule P, all of which
are assignable. Except for Disclosed Matters and as set forth in
Schedule P-1, such Seller is in substantial compliance with all
of the terms and conditions set forth in such Environmental
Permits and is also in substantial compliance with all of the
terms and conditions contained in or required of it by any law,
regulation, policy, guideline, order, judgment or decree of any
federal, state, local or foreign court or governmental authority
applicable to or having jurisdiction over it or its business
which relate to the environment or human health or to public
health and safety or worker health and safety as they may be
affected by the environment ("Environmental Laws").
(p) Except for ordinary and necessary quantities of
cleaning, pest control and office supplies, and other small
quantities of hazardous substances used in the ordinary course of
the Sellers' business, used and stored in compliance with
Environmental Laws, or ordinary rubbish, debris and nonhazardous
solid waste stored in garbage cans or bins for regular disposal
off-site, or petroleum contained in and diminimus quantities
discharged from motor vehicles in their ordinary operation on the
Leased Stores and the Real Property or as shown on Schedule P-1
and except for Disclosed Matters, Sellers are not aware of (and
have not made any investigation as to the existence of) any (i)
underground storage tanks, asbestos (either commercially
processed or excavated raw materials), accumulation of tires,
batteries, mining spoil, rubbish, debris or other solid waste or
stores or accumulated "hazardous substances" (as defined in the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended) are present in, on or under the Leased
Stores and the Real Property, (ii) petroleum products which have
been stored, released, spilled, generated, discharged or treated
in, on or under the Leased Stores or the Real Property, (iii)
hazardous substances which have been stored, released, spilled,
generated, discharged or treated in, on or under the Leased
Stores and the Real Property, (iv) property adjoining the Leased
Stores and the Real Property which has been used as a landfill,
or any release or generation of any hazardous substances or
petroleum products on any adjoining property, (v) wetlands or
other waters of the United States located on the Leased Stores or
the Real Property which has been dredged, filled, altered or
otherwise modified, (vi) radon gas or urea formaldehyde which has
been discovered in or on the Leased Stores or the Real Property
or in or on any adjoining property and (vii) any other condition
exists at the Stores or the Miscellaneous Real Property that may
give rise to any liability (whether based in contract, tort,
implied or express warranty, criminal or civil statute or
otherwise) under Environmental Laws. Except for matters shown on
Schedule P-1 and except for Disclosed Matters, Sellers are in
compliance in all material respects with Environmental Laws.
(q)Neither such Seller nor its officers, directors or
employees has engaged any broker or incurred any liability for
any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated herein.
(r)Except as set forth in Schedule G, there is no
requirement applicable to such Seller to make any filing with, or
to obtain any permit, authorization, consent or approval of any
public body as a condition to the lawful consummation of the
transactions contemplated by this Agreement. Except as set forth
in Schedule G, there is no requirement that any party to any
Material Contract, Lease, license or permit for the use of
intellectual property or loan agreement to which such Seller is a
party or by which it is bound, consent to the execution of this
agreement by such Seller or consummation of the transactions
contemplated by this Agreement.
(s)Except for Disclosed Matters and as set forth in
Schedule J-1, and in addition to the representations and
warranties contained in Section 2.1(o) and (p) relating to
environmental matters and those contained in Section 2.1(r)
relating to Licenses and Permits, such Seller has been operated
in compliance with all laws, regulations, orders, policies,
guidelines, judgments or decrees of any federal, state, local or
foreign court or governmental authority applicable to it or its
business including, without limitation, those related to
insurance regulation, antitrust and trade matters, civil rights,
zoning and building codes, public health and safety, worker
health and safety and labor and nondiscrimination, the failure to
comply with which could reasonably be expected to affect,
materially and adversely, the Assets or the Business.
Furthermore, except as is disclosed in Schedule J-1, such Seller
has not received any notice alleging non-compliance with any of
the aforementioned laws, regulations, policies, guidelines,
orders, judgments or decrees.
(t)There are no collective bargaining agreements
covering, or any collective bargaining units representing,
employees of such Seller. To the best knowledge of such Seller,
there is no solicitation or campaign by any labor organization or
employee for the representation of the employees of any of the
Sellers by any labor organization. There are no controversies
pending or, to the best knowledge of such Seller, threatened
between any of the Sellers and any of their employees which
affect, or can reasonably be expected to affect materially and
adversely, the Assets, the earnings, assets, financial condition
or operations of any of the Stores or relate to any specific
effort to prevent, restrict or delay consummation of the
transactions contemplated by this Agreement.
(u)(i)Schedule Q lists all of the employee benefit
plans and programs, including, without limitation, all
retirement, savings and other pension plans ("Pension Plans"),
all health, severance, insurance, disability and other employee
welfare plans ("Welfare Plans") and all incentive, vacation and
other similar plans, all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement,
severance and other employee benefit plans, programs or
arrangements and all employment or compensation agreements that
are maintained by such Seller with respect to its employees or to
which it has contributed or is now contributing on behalf of its
employees. Schedule Q also lists all contracts, agreements or
commitments which relate to the employment, retirement or
termination of the services of any officer, key employee or
director of such Seller, other than the employment agreement with
R.A. McMahan. Such Seller is not a party to any multi-employer
plan as defined in Section 3(37) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and none of the
employee benefit plans listed on Schedule Q is a multi-employer
plan within the meaning of Section 3(37) of ERISA.
(ii)Other than the Sellers' Master Deferred
Compensation Plan and the Sellers' Severance Pay Plan
(collectively the "Plans"), Sellers maintain no plans that are
subject to the provisions of ERISA including Title IV and the
qualification provisions of section 401 of the Code.
(iii) As to each of the Welfare Plans,
employee
benefit plans and programs (including without limitation the
plans listed on Schedule Q) other than the Plans, such Seller has
complied, in all material respects, with all applicable laws,
governmental rules and regulations in the administration thereof
including, without limitation, the provisions of ERISA and the
Code when applicable.
(iv) Other than the Plans, the Sellers
maintain
no plans for which they have incurred any material liability to
the Pension Benefit Guaranty Corporation ("PBGC") under section
4001, et seq. of ERISA and, to the best knowledge of the Sellers,
they have maintained no plans other than the ones identified
immediately above for which any condition exists that could
reasonably be expected to cause any of the Sellers to incur any
liability to the PBGC.
(v) No compensation or benefit that is or
will be
payable in connection with the transactions contemplated by this
Agreement will be characterized as an "excess parachute payment"
within the meaning of Section 280G of the Code.
(vi) Except as otherwise provided for in
this
Agreement, such Seller has not made any commitment to establish
any new employee benefit plan, to modify any employee benefit
plan or to increase benefits or compensation of its employees or
its former employees (except for normal increases in compensation
consistent with past practices) except as disclosed on Schedule Q
nor has any intention to do so been communicated to its employees
or its former employees.
(v) Except as set forth in Schedule R, no officer or
director of such Seller (i) competes with, is involved with or
has any direct or indirect interest in any business entity which
competes with the business conducted by such Seller, (ii) has any
agreement of any type with such Seller or (iii) has any interest,
direct or indirect, in any property, real or personal, tangible
or intangible,including, without limitation, intellectual
property, used in or pertaining to the business conducted by such
Seller, except as a director, stockholder or employee of such
Seller.
(w)No statement contained in this Agreement or in any
statement, certificate or other instrument furnished to Buyer
pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue
statement of a material fact or will omit to state a material
fact necessary to make the statements contained herein or therein
not misleading.
2.2 Representations and Warranties of Buyer. Buyer
represents and warrants to the Sellers that:
(a)Buyer is a corporation duly organized and validly
existing under the laws of North Carolina.
(b)Buyer has by all necessary corporate action
validly authorized the execution, delivery and performance of
this Agreement by it; and this Agreement is a valid and binding
agreement of it enforceable against it in accordance with its
terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws, now or hereafter in effect, affecting creditors' rights in
general and except as such enforceability may be limited by
general principles of equity). The execution and delivery of
this Agreement by the Buyer and, subject to the consent and
approval referred to in Section 3.6 and expiration of the
waiting period referred to therein, the consummation of the
transactions contemplated herein by Buyer will not violate any
law, rule or regulation; contravene any provision of the articles
of incorporation or bylaws of Buyer; or result in any breach of
or constitute a default (or an occurrence which with the lapse of
time or action by a third party could result in a default) under
any material contract, material agreement, or other material
instrument or obligation to which it is a party.
(c)Neither Buyer nor its officers, directors or
employees has engaged any broker or incurred any liability for
any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated herein.
(d)Except as set forth in Schedule U there is no
requirement applicable to Buyer to make any filing with, or to
obtain any permit, authorization, consent or approval of any
public body as a condition to its becoming the owner of the
Assets.
III. CONDUCT AND TRANSACTIONS BEFORE CLOSING
3.1 Access to Records and Properties. From the date hereof
through the Closing Date, Sellers will give Buyer and its
representatives full access to all premises, books and records of
and relating to the Leased Stores, the Real Property and the
other Assets during normal business hours and upon reasonable
prior notice, and will cause the officers and employees of
Sellers to furnish to Buyer such financial and operating data and
other information with respect to the Leased Stores, the Real
Property and the other Assets as Buyer shall from time to time
reasonably request in order to evaluate the transactions provided
for herein. From the date hereof through the Closing Date,
Buyer, at Buyer's sole cost and expense, shall have the right to
make such tests, inspections and examinations of the Leased
Stores and the Real Property as it deems advisable (collectively,
the "Inspections"), and, for such purposes, Buyer, its employees,
agents or engineers will have full access to the Leased Stores
and the Real Property during normal business hours and upon
reasonable prior notice. In exercising its rights hereunder, the
Buyer will coordinate with Sellers to avoid unduly interfering
with the conduct of business by Sellers. For invasive testing
(exclusive of asbestos sampling) (e.g., soil and soil boring
testing), Buyer must first present to Sellers the plan of testing
that is contemplated by Buyer and Buyer may not conduct such
testing without Sellers' prior written consent, which shall not
be unreasonably withheld or delayed. In connection with such
inspection and testing, Buyer shall obtain at its sole cost and
expense all permits and licenses required in connection with the
performance of such work. Buyer shall repair any damages caused
by its tests or inspections. Buyer hereby indemnifies Sellers
for all injuries and damages to persons or property caused by
such surveys and testing and for the cost of removing all
mechanics' or materialmen's liens on the inspected property
resulting from such surveys and testing ordered by Buyer. Buyer
agrees to maintain all survey, inspection and testing data
relating to Sellers and the Assets in a confidential manner prior
to the Closing and shall not disclose prior to Closing (unless
required by law) any such data to any third party (other than
Buyer's professional advisors and lenders in connection with the
transactions contemplated hereby) without Sellers' prior consent.
In the event Buyer should elect not to close on the basis of the
information contained in the surveys, inspections and testing,
Buyer agrees to deliver to Sellers a copy of the surveys,
inspections or testing data which resulted in Buyer's decision
not to close. As used herein, "Disclosed Matters" shall mean all
surveys, environmental reports and title reports, commitments or
policies obtained by Buyer on or before December 30, 1993.
3.2 Operation of Business of Sellers. Each Seller agrees
that from the date hereof through the Closing, except for (i)
transactions contemplated by this Agreement, (ii) proposed
transactions which have heretofore been disclosed in writing to
Buyer and (iii) transactions to which Buyer shall otherwise
consent in writing, such Seller will (x) operate the business of
its Leased Stores and Real Property substantially as presently
operated and only in the ordinary course (specifically, that such
Seller will maintain its historical standards for the acceptance
of credit; will continue to collect, consistent with the
customary practices of such Seller, Receivables; and will not
conduct any deep discount "special" sales); and (y) consistent
with such operation, use its best efforts to preserve intact its
relationship with persons having business dealings with it.
Sellers shall not be obligated to make any purchases of inventory
pending the Closing. Buyer shall not be obligated to purchase
any inventory purchased by Sellers after November 1, 1993 in
excess of Sellers' historical patterns of such purchases.
Without limiting the generality of the foregoing, each Seller
will use its best efforts to operate the business of the Leased
Stores and the Real Property so that the representations and
warranties of Sellers set forth in this Agreement, to the extent
within the control of such Seller, shall be true and correct as
of the Closing.
3.3 Forbearance by the Sellers. Except as contemplated by
this Agreement, Sellers will not, from the date hereof until the
Closing Date, without the written consent of Buyer:
(i) sell, dispose of, transfer or encumber
any of
the Assets except for sales of Inventory in the ordinary
course of business;
(ii)mortgage, pledge or otherwise encumber
any of
the Assets;
(iii) amend, modify or cancel any Material
Contract or Lease;
(iv)make loans or advances to any individual
or
business entity, except in the ordinary and usual course of
business;
(v) increase in any manner the compensation
of any
of the officers of any of the Sellers (provided, however,
that Buyer agrees not to unreasonably withhold or delay its
approval of salary increases in connection with year-end
salary reviews which are consistent with past practices),
pay or agree to pay any pension or retirement allowance not
required by an existing plan or agreement to any officer or
employee of any of the Sellers, or enter into or amend any
employment agreement or any incentive compensation, profit
sharing, stock purchase, stock option, stock appreciation
rights, savings, consulting, deferred compensation,
retirement, pension or other benefit plan or arrangement
with or for the benefit of any of its officers, employees or
of any other person;
(vi)alter in any way the manner in which it
has
regularly and customarily maintained its books of account
and records;
(vii) cancel or allow any of its existing
insurance policies to lapse; or
(viii) enter into an agreement to do any of
the
things described in clauses (i) and (vii) above.
3.4 Negotiations with Others. From the date hereof until
the Closing, Sellers will not, directly or indirectly, without
the written consent of Buyer, initiate discussions or engage in
negotiations with any corporation, partnership, person or entity,
other than Buyer, concerning any sale of the Assets or of any
merger, sale of assets or similar transaction involving any of
the Sellers, other than the sale of Inventory in the ordinary
course of business.
3.5 Repurchase of Receivables. Prior to Closing, the
Sellers shall repurchase from Western Family National Bank all
receivables relating to the sale of merchandise at the Stores so
that such receivables will constitute a portion of the
Receivables referred to herein.
3.6 HSR Filings. Sellers and Buyer shall promptly make any
and all filings with the United States Federal Trade Commission
and the Antitrust Division of the United States Department of
Justice, pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
3.7 Subsequent Events. If any event shall occur prior to
the Closing which, had it occurred prior to the execution of this
Agreement, should have been disclosed by a party to this
Agreement, in a representation and warranty or otherwise, then
upon the happening of such event, such party shall promptly
disclose the happening of such event to the other party hereto.
3.8 Risk of Loss. All risk of loss to the Assets shall be
borne by Sellers until the Closing. Risk of loss shall be borne
by Buyer for all Assets on or after the Closing, including Real
Property covered by the New Lease. If any material item or
portion of the Leased Stores, the Real Property or the Assets is
materially damaged, destroyed or condemned prior to the Closing,
Buyer shall have the right, at its option, to (i) refuse to
purchase, or accept the assignment of the Lease pertaining to,
such damaged or destroyed item or portion or (ii) purchase, or
accept the assignment of the Lease pertaining to, such damaged or
destroyed item or portion and require payment to it of the amount
of any proceeds of insurance or condemnation payable to any
Seller on account of such damage, destruction or condemnation.
If the Buyer refuses to purchase any of the Assets pursuant to
this Section, the Purchase Price will be reduced by the purchase
price of the Assets which Buyer refuses to purchase without
regard to the premium paid as part of the Purchase Price.
3.9 Schedules. Sellers have delivered to Buyer a
preliminary draft of the Schedules to this Agreement. As soon as
practicable but in no event later than December 15, 1993, Sellers
shall deliver to Buyer final Schedules to this Agreement, which
such final Schedules (i) shall be executed on behalf of Sellers,
(ii) shall be and contain accurate, true and correct information
and data, and (iii) to the extent expressly set forth herein,
shall be accompanied by a copy of each document referenced to
therein. Except where this Agreement requires an update of
information in the Schedules, the information in the final
Schedules shall constitute the only exceptions, if any, to the
representations and warranties of Sellers made to Buyer under and
pursuant to this Agreement. Terms used and defined in this
Agreement shall have the same definition when used in the
Schedules.
3.10 Real Property Due Diligence. (a) Buyer shall have
until the date set forth in Section 3.10(b) below (the "Title
Investigation Period") to notify Sellers in writing of Buyer's
reasonable approval or disapproval of any matter appearing on the
title commitments. Failure to so deliver notices of disapproval
prior to the expiration of such period shall be conclusively
deemed to be an approval of the condition of title (and the
exceptions thereto) of the Real Property.
(b)Buyer shall have from the date of this Agreement until
5:00
p.m. Pacific Standard Time on December 30, 1993 to
notify Sellers in writing of Buyer's reasonable approval or
disapproval of any other matter relating to the Real Property.
If Buyer fails to give such notices of disapproval prior to the
expiration of such period, then such failure shall be
conclusively deemed the satisfaction of this condition (except
for such disapproval of the condition of title as may have been
given pursuant to paragraph (a) above). Any notice delivered to
Seller by Buyer disapproving any matter relating to the Real
Property shall set forth, with reasonable specificity, the
reasons for such disapproval.
(c)In the event that Buyer disapproves of any item
pursuant to paragraph (a) or (b) above, Sellers may, but shall
not be obligated to, take such steps to cure such condition. If
Sellers decide to attempt to cure the condition, Sellers shall
provide to Buyers periodic updates regarding the progress of the
attempted cure. In the event that Sellers fail to cure any such
condition prior to Closing, Buyer may terminate this Agreement.
IV. CONDITIONS TO CLOSING
4.1 Conditions to Obligations of Buyer. The obligations of
Buyer to be performed under this Agreement at the Closing are
subject to the satisfaction of each of the following conditions
on or before the Closing unless waived in writing by Buyer:
(a)The representations and warranties of the Sellers
made herein shall be true and correct in all material respects on
the date of this Agreement and on the date of Closing. The
Sellers shall have performed all agreements and conditions
required to be performed or complied with by them under this
Agreement on or before the Closing.
(b)Buyer shall have received copies of resolutions of
the Board of Directors of each corporate Seller, certified by
such Seller's Secretary or Assistant Secretary, authorizing this
Agreement and the transactions contemplated hereby and
appropriate similar evidence of the action by each Seller which
is a general partnership.
(c)Buyer shall have received a certificate signed by
the Chairman, President or Vice President or General Partner, as
appropriate, of each Seller, in form reasonably satisfactory to
counsel for Buyer, stating that to the best of his knowledge and
belief the conditions specified in this Section 4.1 have been
fulfilled as of the Closing.
(d)Buyer and any financial institution to which Buyer
has assigned its right to purchase the Receivables (the
"Receivables Assignee") shall have received such bills of sale,
endorsements, assignments and other instruments of conveyance,
transfer or assignment, in form and substance satisfactory to
counsel for Buyer and the Receivables Assignee, as shall be
required or desirable in the judgment of such counsel in order
effectively to vest in Buyer good and marketable title to the
Assets subject to Permitted Exceptions and, subject to any
actions to be taken by Buyer, to vest in the Receivables
Assignee, if any, good and marketable title to the Receivables.
(e)Buyer shall have been put in possession of all of
the files, documents, papers, agreements, records and
correspondence pertaining to the Leased Stores, the Real Property
and the other Assets, including customer and vendor lists,
receivable records, customer billing histories, computer logs and
records, personnel records and employee earnings histories, but
not including the corporate records, minute books, stock books
and corporate seals.
(f)Buyer and the Receivables Assignee shall have
received an opinion of Gray Cary Ware & Freidenrich, counsel for
Sellers, dated the Closing Date, in substantially the form of
Exhibit 4 hereto.
(g) All consents, authorizations, orders or approvals
of governmental or regulatory authorities and of individuals or
business entities required for the consummation of this Agreement
shall have been obtained and all waiting periods specified by law
with respect thereto shall have passed.
(h) No order of any court or governmental agency shall
be in effect which restrains or prohibits the consummation of the
transactions contemplated by this Agreement or which would limit
or affect the ability of Buyer to own or control the Assets, and
there shall not have been threatened, nor shall there be pending,
any action or proceeding by or before any such court or
governmental agency seeking to prohibit or delay or challenging
the validity of the transactions contemplated by this Agreement.
(i) No statute, rule or regulation shall have been
proposed or enacted which prohibits or might prohibit, restrict
or delay the consummation of the transactions contemplated by
this Agreement.
(j) Buyer shall have received from a title insurance
company acceptable to it (the "Title Company") commitments for
title insurance, or other assurances reasonably satisfactory to
it, that the Sellers have good and marketable title to the Real
Property free and clear of all liens, charges, pledges and other
encumbrances, other than those shown on Schedule I, which shall
be fully discharged of record on or before the Closing, and
Permitted Exceptions.
(k)Buyer shall have been assigned the Leases and, in
connection with such assignment of the Leases, Sellers shall have
delivered to the Buyer Consent and Estoppel Agreements, in either
the form of Exhibit 1-A or Exhibit 1-B, from the respective
landlords, with such changes as may have been approved by Buyer.
In the event that all Leases have not been assigned by the
Closing Date and a waiver pursuant to Section 5.2 is requested by
the Sellers, such waiver (which Buyer shall not be obligated to
give) shall be conditioned upon the Sellers' agreement to
reimburse Buyer for any adverse changes in the cost, terms or
conditions of any as yet unassigned Lease.
(l)Intentionally omitted.
(m) Heilig-Meyers Company, One Sun Insurance Agency,
Inc. and the Sellers named therein shall have entered into a
Purchase Agreement pursuant to which Heilig-Meyers Company will
purchase specified assets of One Sun Insurance Agency, Inc. or
its subsidiaries.
(n) R.A. McMahan shall have entered into a Non-
Competition Agreement in substantially the form of Exhibit 5,
providing that during the period beginning on the date of this
Agreement and ending three years from the Closing Date, he will
not in any manner directly or indirectly, own, operate, manage or
control any furniture or appliance store (other than the Stores
through the Closing Date) that operates or will operate within
the boundaries of any State in which any Store listed on
Schedule A is located.
(o) Sellers shall have adopted corporate resolutions
terminating the Plans conditioned upon, and effective as of, the
Closing. In accordance with the provisions of Section 7.6,
Sellers shall retain all liability with respect to the
maintenance and termination of these plans before and after the
Closing.
(p)Sellers shall have delivered to Buyer final
Schedules, which shall update the Schedules to reflect any
changes that have occurred since the date of this Agreement, and
Buyer shall have approved such final Schedules.
4.2 Conditions to Obligations of Sellers. The obligations
of Sellers to be performed under this Agreement at the Closing
are subject to the satisfaction of each of the following
conditions on or before the Closing unless waived in writing by
Sellers:
(a)The representations and warranties of Buyer made
herein shall be true and correct in all material respects on the
date of this Agreement and on the Closing Date. Buyer shall have
performed all agreements and conditions required to be performed
or complied with by it under this Agreement on or before the
Closing.
(b)Sellers shall have received copies of resolutions
of the Board of Directors of Buyer, certified by its Secretary or
Assistant Secretary, authorizing this Agreement and the
transactions contemplated hereby.
(c)Sellers shall have received a certificate signed
by the Chairman, President or Vice President of Buyer, in form
reasonably satisfactory to counsel for Sellers, stating that to
the best of his knowledge and belief the conditions specified in
this Section 4.2 have been fulfilled as of the Closing.
(d)Sellers shall have received the Purchase Price
(determined in accordance with Section 1.6) for the Assets
transferred to the Buyer at the Closing.
(e)Buyer shall have assumed the Leases and executed
any New Leases.
(f) Seller shall have received an opinion of McGuire,
Woods, Battle & Boothe, of Richmond, Virginia, counsel for Buyer,
dated the Closing Date, in substantially the form of Exhibit 6
hereto.
(g)All consents, authorizations, orders or approvals
of governmental or regulatory authorities and of individuals or
business entities which Buyer is required to obtain in order to
be able to purchase the Assets from Sellers, shall have been
obtained by Buyer and all waiting periods specified by law with
respect thereto shall have passed.
(h)No order of any court or governmental agency shall
be in effect which restrains or prohibits the consummation of the
transactions contemplated by this Agreement and there shall not
have been threatened, nor shall there be pending, any action or
proceeding by or before any such court or governmental agency
seeking to prohibit or delay or challenging the validity of any
of the transactions contemplated by this Agreement.
(i)No statute, rule or regulation shall have been
proposed or enacted which prohibits or might prohibit, restrict
or delay the consummation of the transactions contemplated
hereby.
(j)Heilig-Meyers Company, One Sun Insurance Agency,
Inc. and the Sellers named therein shall have entered into a
Purchase Agreement pursuant to which Heilig-Meyers Company will
purchase specific assets of One Sun Insurance Agency, Inc. or its
subsidiaries.
V. CLOSING
5.1 Date and Place of Closing. The consummation of the
purchase and sale of the Assets, other than the purchase and sale
of the Real Property (the "Closing"), shall, unless another time,
date and place is agreed to in writing by the parties hereto,
take place at the offices of Sellers' counsel in San Diego,
California on January 4, 1994 (the "Closing Date"). With respect
to the Real Property, the Closing shall, unless another time,
date and place is agreed to in writing by the parties hereto,
take place at the offices of Sellers' counsel in San Diego,
California on a date no later than one year from the Closing
Date. Upon the initial closing for the sale of the Assets, other
than the Real Property, (i) except as otherwise provided in
clause (ii) of this sentence, all conditions to purchase the Real
Property shall be deemed satisfied and (ii) Buyer shall be
irrevocably and unconditionally committed to purchase the Real
Property on the date specified above for the Closing with respect
to the Real Property, subject only to satisfaction of the
conditions set forth in Section 5.3(xi), (xii) and delivery of
evidence of authority. In the event of any breach of this
Agreement by Buyer, Sellers shall be entitled to all remedies
available at law and equity, including, without limitation the
specific enforcement of Buyer's obligation to buy the Real
Property.
5.2 Waiver of Conditions to Closing. Any waiver of a
condition to Closing hereunder shall be in writing and solely for
the purpose of effecting the purchase and sale of the Assets as
herein provided for and shall not relieve any party of its
obligation in respect of such condition unless any such written
waiver expressly so provides.
5.3 Deliveries by Sellers. At the Closing Sellers shall
deliver to Buyer the following:
(i) such bills of sale, endorsements,
assignments and other instruments of conveyances, transfer
or assignment as required by Section 4.1(d);
(ii) certificates of title, properly
endorsed,
transferring title to the Vehicles;
(iii) the certificate required by Section
4.1(c);
(iv) evidence that the corporate action
described
in Section 4.1(b) has been taken;
(v) copies of the consents required by
Section 4.1(g);
(vi) the estoppel certificates required by
Section 4.1(k);
(vii) the Non-Competition Agreement referred
to
in Section 4.1(n);
(viii) the Guaranty Agreements referred to in
Section 6.2(c);
(ix) with respect to the Real Property, grant
deeds or warranty deeds in forms sufficient to convey fee
simple title to the Real Property to Buyer or its assignee
or designee, which deeds shall be acceptable for the purpose
of the Title Company insuring good and marketable fee simple
title to the Real Property free and clear of all easements,
restrictions, liens and encumbrances except Permitted
Exceptions, (which deeds shall include customary warranties
against grantor's acts and, where customary, general
warranties of title and customary exceptions to warranties)
and which deeds shall describe each parcel of Real Property
by metes and bounds and by reference to the respective
surveys obtained by Buyer or by other description of such
parcel of Real Property as may be reasonably acceptable to
the Title Company;
(x) a non-foreign status affidavit and an
executed
Form 1099-S, in a form acceptable to Buyer;
(xi) all licenses, permits, approvals,
certifications and authorizations relating to the operation,
use and ownership of the Leased Stores and the Real
Property, including new certificates of occupancy if any are
required to be issued except for those licenses, permits,
approvals, certificates and authorizations which are not
transferrable and which Buyer will need to obtain;
(xii) such affidavits or waivers as the Title
Company shall require to issue its standard owner's policy
free of exceptions for rights of parties in possession and
unfiled mechanics' and materialmen's liens and such other
certificates, affidavits and instruments as are customary or
required by the Title Company or applicable local laws or as
may be reasonably requested by Buyer;
(xiii) copies of all warranties, if any, of
manufacturers, suppliers and installers relating to the
Assets and assignments thereof to Buyer, in form
satisfactory to Buyer;
(xiv) the assignment and estoppel agreements
with
respect to the Leases (the "Assignment and Estoppel
Agreements");
(xv) a certified copy of the Certificate of
Incorporation and a certificate from the appropriate
authority of the good standing in its jurisdiction of
incorporation for each of the Sellers which are corporations
and a certificate from the appropriate authority in each
jurisdiction in which each of the Sellers which are
corporations is qualified to do business of such Sellers'
good standing in that jurisdiction, all as of the most
recent date obtainable;
(xvi) the Opinion of Counsel required by
Section
4.1(f); and
(xvii) such additional documents as Buyer
may
reasonably request.
5.4 Deliveries by Buyer. At the Closing Buyer shall
deliver to Sellers the following:
(i) The Purchase Price in immediately
available
funds;
(ii) the certificate required by Sections
4.2(c);
(iii) evidence that the corporate action
described in Section 4.2(b) has been taken;
(iv) copies of the consents required by
Section 4.2(g);
(v) the Opinion of Counsel required by
Section
4.2(f).
(vi)Assignment and Estoppel Agreements; and
(vii) such additional documents as Sellers
may
reasonably request.
VI. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION: TERMINATION
6.1 Survival of Representations and Warranties. All of the
representations and warranties made by Sellers and Buyer in this
Agreement (collectively the "Representations and Warranties")
regarding ERISA, taxes and Receivables and the authority to enter
into and perform this Agreement shall survive the Closing and
remain in effect until the applicable statute of limitations has
elapsed. All Representations and Warranties regarding compliance
with Environmental Laws shall survive the Closing and remain in
effect for a period of two years following the Closing Date. All
other Representations and Warranties contained herein shall
survive the Closing and remain in effect for a period of one year
following the Closing Date. Notwithstanding the foregoing, any
representation or warranty in respect of which indemnification
may be sought under Section 6.2 shall survive the date specified
for the termination of its effectiveness, if written notice,
given in good faith, of the specific breach thereof is given to
the indemnifying party before such date, whether or not liability
has actually been incurred.
6.2 Indemnification.
(a)Without in any way limiting or diminishing the
warranties, representations or agreements herein contained or the
rights or remedies available to Buyer for a breach hereof,
Sellers, jointly and severally, hereby agree to indemnify, defend
and hold harmless Buyer and its assigns from and against all
losses, judgments, liabilities, claims, damages or expenses
(including reasonable attorneys' fees) of every kind, nature and
description, whether known or unknown, absolute or contingent,
joint or several, arising out of, relating to or resulting from
(i) any claim made against Buyer or any of the Assets by a
creditor of Sellers based on or alleging a violation of any bulk
sale law of any state or other jurisdiction which may be
applicable to the transfer contemplated hereby; (ii) the breach
or, in the case of a third party claim, the alleged breach by
Sellers of any representation, warranty, covenant or agreement of
Sellers contained in or arising out of this Agreement or any of
the Assignment and Estoppel Agreements; (iii) any taxes or
similar liabilities of Sellers and claims with respect thereto,
including penalties, interest, and additions to tax, such taxes,
liabilities and claims to include state, local, foreign and
federal income, excise, property, sales, franchise and payroll
taxes, except for those taxes to be paid by Buyer pursuant to
Section 7.1; (iv) any pre-closing debt, liability, obligation,
agreement or duty of Sellers not expressly assumed by Buyer
hereunder; and (v) any default on the part of Sellers in the
payment or performance of any of the terms, covenants and
conditions of the Leases occurring, or to be performed or paid
with respect to a period occurring on or prior to the Closing
Date.
(b)Buyer hereby agrees, with respect to this
Agreement, to indemnify, defend and hold harmless each Seller and
its permitted assigns (provided, however, that with respect to
any such assigns, Buyer's liability hereunder shall not be
greater than it would have been had no assignment been made) from
and against all losses, judgments, liabilities, claims, damages
or expenses (including reasonable attorneys' fees) of every kind,
nature and description, whether known or unknown, absolute or
contingent, joint or several, arising out of, relating to or
resulting from (i) the breach or, in the case of a third party
claim, the alleged breach by Buyer of any representation,
warranty, covenant or agreement contained in or arising out of
this Agreement; (ii) subject to the other provisions of this
Agreement, any debt, liability, obligation, agreement or duty
arising out of the operation of the Leased Stores, the Real
Property or the Assets on or after the date of Closing (except to
the extent that liability therefor is retained by Sellers); (iii)
any default on the part of Buyer in the payment or performance of
any of the terms, covenants and conditions of the Leases
occurring, or to be performed or paid with respect to a period
occurring on or after the Closing Date; (iv) any claim arising
out of or relating to Buyer's ownership of the Real Property on
or after the date of Closing (except to the extent that liability
therefor is retained by Sellers) or (v) any default by Buyer in
the payment or performance of any obligations relating to the
Real Property to be paid or performed with respect to a period
occurring on or after the Closing Date, which obligations run
with the land and are disclosed in the schedule typically
referred to as "Schedule B, Part I" of the final title policy
obtained by Buyer corresponding to such Real Property.
(c) To insure Sellers' ability to provide the
indemnification provided in Section 6.2 and 7.6(k), Richard A.
McMahan and affiliated McMahan family trusts, acceptable to
Buyer, shall execute and deliver Guaranty Agreements in
substantially the form attached hereto as Exhibit 7 by which they
jointly and severally guarantee the obligations of Sellers
hereunder.
(d)Notwithstanding the foregoing, all rights of
Sellers and Buyers, as the case may be to obtain indemnification
pursuant to this Section 6.2 shall not apply to any loss, cost,
expense, liability or judgment to the extent that the total of
all such losses, costs, expenses, liabilities and judgment under
this Agreement and the Purchase Agreement referred to in Section
4.1(m) in the aggregate does not exceed Three Hundred Fifty
Thousand Dollars ($350,000). The foregoing limitation shall not
apply to any claim for indemnification made pursuant to
Section 7.6(k). For purposes of this provision, the losses,
costs, expenses, liabilities and judgments of the Buyer under
this Agreement shall be aggregated with those of Heilig-Meyers
Company under the Purchase Agreement and those of the Sellers
under this Agreement shall be aggregated with those under the
Purchase Agreement with One Sun Insurance Agency, Inc. and its
subsidiaries.
6.3 Third Party Claims. The obligations and liabilities of
the parties under Sections 6.2 and 7.6(k) with respect to claims
resulting from the assertion of liability by those not parties to
this Agreement (including governmental claims for penalties,
fines and assessments) shall be subject to the following
conditions:
(a) The indemnified party shall give prompt written notice
to
the indemnifying party of the nature of the assertion
of liability by a third party and the amount thereof to the
extent known;
(b) If any action, suit or proceeding (a "Legal
Action") is brought by a third party against an indemnified
party, the Legal Action shall be defended by the indemnifying
party and such defense shall include all appeals or reviews which
counsel for the indemnifying party shall deem appropriate. Until
the indemnifying party shall have assumed the defense of any such
Legal Action, or if the indemnified party shall have reasonably
concluded that there are likely to be defenses available to the
indemnified party that are different from or in addition to those
available to the indemnifying party (in which case the
indemnifying party shall not be entitled to assume the defense of
such Legal Action and the defense may be handled by the
indemnified party), all legal or other expenses reasonably
incurred by the indemnified party shall be borne by the
indemnifying party.
(c) In any Legal Action initiated by a third party and
defended by the indemnifying party (w) the indemnified party
shall have the right to be represented by advisory counsel and
accountants, at its own expense, (x) the indemnifying party shall
keep the indemnified party fully informed as to the status of
such Legal Action at all stages thereof, whether or not the
indemnified party is represented by its own counsel, (y) the
indemnifying party shall, during normal business hours and upon
reasonable prior notice, make available to the indemnified party,
and its attorneys, accountants and other representatives, all
books and records of the indemnifying party relating to such
Legal Action and (z) the parties shall render to each other such
assistance as may be reasonably required in order to ensure the
proper and adequate defense of such Legal Action. Furthermore,
in any Legal Action initiated by a third party and defended by
the indemnifying party, the indemnifying party shall present to
the indemnified party any offer of settlement which the
indemnifying party is willing to accept. The indemnified party
may then consider whether it is willing to accept such a
settlement offer and to be bound by its terms, which such consent
shall not be unreasonably withheld. If the indemnified party
does not accept such a settlement offer, and if the settlement
offer does not involve injunctive or other equitable relief
against the indemnified party or its assets, employees or
business, the indemnifying party may, at its sole option, pay the
amount of settlement under the settlement offer to the
indemnified party, in which event the indemnifying party shall be
relieved of all liability related to such indemnified litigation,
claim or demand and in which event the indemnified party shall
conduct and defend at its own cost and through counsel of its own
choosing, the litigation, claim or demand of the third party
giving rise to such claim for indemnification. Other than as
permitted above, the indemnifying party shall not make any
settlement of any claim without the written consent of the
indemnified party.
(d) In any Legal Action initiated by a third party and
defended by the indemnifying party, the indemnifying party shall
not make any settlement of any claim without the written consent
of the indemnified party, which consent shall not be unreasonably
withheld. Without limiting the generality of the foregoing, it
shall not be deemed unreasonable to withhold consent to a
settlement involving injunctive or other equitable relief against
the indemnified party or its assets, employees or business.
6.4 Termination. This Agreement may be terminated at any
time before Closing by:
(a)The mutual written consent of both parties hereto;
(b)Buyer, if the Board of Directors of Buyer shall
have determined in its sole discretion exercised in good faith
that the purchase and sale of the Assets contemplated by this
Agreement has become inadvisable or impracticable by reason of
the threat or the institution of any litigation, proceeding or
investigation to restrain or prohibit the consummation of the
transactions contemplated by this Agreement or to obtain other
relief in connection with this Agreement;
(c)Sellers, if a majority of the Sellers shall have
determined in their sole discretion exercised in good faith that
the purchase and sale of the Assets contemplated by this
Agreement has become inadvisable or impracticable by reason of
the threat or the institution of any litigation, proceeding or
investigation to restrain or prohibit the consummation of the
transactions contemplated by this Agreement or to obtain other
relief in connection with this Agreement.
(d)Sellers or Buyer if there has been a material
breach by the other of a representation, warranty or agreement
contained herein or if any condition which must be met by the
other becomes impossible to fulfill; or
(e)Buyer if any change has occurred after the date
hereof which has or can reasonably be expected to have a material
adverse effect in the aggregate on the Assets; or upon the
operations of the Business; or in the manner provided in Section
6.5.
6.5 Termination After Investigation. As soon as
practicable but in any event by December 22, 1993, (except for
Real Property in which case it will be by December 30, 1993)
Buyer shall give Sellers notice if, on the basis of any
information contained in the final Schedules which was not
contained in the preliminary draft Schedules, it has decided that
it wishes to terminate this Agreement. Such notice shall specify
the information contained in the final Schedules which is the
basis for such decision. Sellers shall have until December 29,
1993 to review with Buyer such information, and if Buyer does not
withdraw such notice by December 29, 1993, all further
obligations of Buyer and of Sellers under this Agreement shall
terminate. If Buyer does not advise Sellers by December 22, 1993
(except for Real Property in which case it will be December 30,
1993) that it wishes to terminate this Agreement, Buyer shall be
deemed to have accepted the final Schedules. Except where this
Agreement requires an update of information in the Schedules, the
information in the final Schedules, which shall be delivered on
or before December 15, 1993 and dated the date of its delivery,
shall be deemed complete and full disclosure and shall constitute
the only exceptions, if any, to the representations and
warranties of Sellers made to Buyer under and pursuant to this
Agreement.
6.6 Effect of Termination. If this Agreement is terminated
pursuant to Section 6.4, it shall become void and have no effect,
without liability on the part of any party, or its directors,
officers or stockholders, except as provided in Section 7.8, but
such termination shall not constitute a waiver by any party of
any claims it may have for damages caused by reason of a breach
of a representation, warranty, covenant or agreement made by any
other party hereto.
6.7 Waiver and Amendment. Any term or provision of this
Agreement may be waived at any time by a written instrument
signed by the party entitled to the benefits thereof and this
Agreement may be amended or supplemented at any time by written
instrument signed by all parties hereto.
VII. MISCELLANEOUS
7.1 Taxes and Prorations. Buyer will be responsible for
any state, county, city or other local sales, use, transfer or
recording taxes, title insurance premiums or fees or any other
similar taxes or fees applicable to the sale of the Assets.
Subject to the provisions of Section 1.6, all current real estate
taxes, assessments, utility charges, and all other apportionable
items with respect to the Leased Stores and the Real Property
shall be prorated as of Closing so that Sellers shall pay all
such amounts payable in respect of any period occurring prior to
the date of Closing; provided, however that supplemental
assessments of real property taxes triggered by the sale of the
Real Property hereunder shall be paid in full by Buyer
notwithstanding the fact that such assessments relate to a fiscal
year for assessment purposes which includes a period of time
prior to Closing. To avoid any delinquencies under the Leases,
Seller shall pay all rents and other amounts due under the Leases
for or in respect of the month in which the Closing occurs. If
the applicable prorated charges have not been determined at the
date of Closing, the owing party shall pay to the other party
such prorated charges promptly upon the determination of same.
7.2 Access to Books and Records after Closing. After
Closing, Buyer shall permit Sellers reasonable access to the
books and records transferred to Buyer at Closing. Such access
shall be during normal working hours and during the First Year
after the Closing shall be at the Carlsbad Home Office and
thereafter at such location as Buyer may designate.
7.3 Consents; Satisfaction of Conditions. Subject to the
terms and conditions herein provided, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate, as promptly as
practicable, the transactions contemplated hereby, including, but
not limited to, the obtaining of all necessary consents, waivers,
authorizations, orders and approvals of third parties, whether
private or governmental, required of it to enable it to comply
with the conditions precedent to consummating the transactions
contemplated by this Agreement. Each party agrees to cooperate
fully with the other party in assisting it to comply with this
Section. Notwithstanding the foregoing, neither party shall be
required to initiate any litigation, make any substantial payment
or incur any material economic burden, except for a payment
otherwise required of it, to obtain any consent, waiver,
authorization, order or approval.
7.4 Further Assurances. Sellers and Buyer will use
reasonable efforts to implement the provisions of this Agreement,
and for such purpose, at the request of the other party hereto,
such party will, at or after the Closing, without further
consideration, promptly execute and deliver, or cause to be
executed and delivered, such additional documents as the
requesting party may reasonably deem necessary or desirable to
implement any provision of this Agreement.
7.5 Use of Names. Sellers agree that during the period
beginning on the Closing Date and ending on January 1, 1995,
Buyer may use the name or mark "McMahan's" in connection with the
operation of furniture stores in the states where the Stores are
located; provided, that Buyer may use the name or mark "McMahan's
in Riverside County, California only in connection with the
operation of those stores previously so named. During such
period and thereafter, Buyer may use such name as a footnote in
advertising. Nothing herein shall prevent Buyer from using the
name "Heilig-Meyers" in connection with the operation of the
Stores at any time.
7.6 Employees.
(a)Effective as of the close of business on the
Closing Date, each Seller shall terminate the employment of each
of its employees.
(b) Concurrent with the Closing, Buyer shall offer to
employ all of Sellers' employees (except Richard A. McMahan,
Mildred C. McMahan, JoAn McMahan, Ann McMahan Lawrence, Tamara
McMahan Moravec, and Kathryn McMahan Norris), as of the close of
business on the Closing Date at their then current salaries,
contingent, to the extent permitted by law, upon successful
completion after Closing of Buyer's drug and alcohol testing.
Such employees who elect to become employees of Buyer as of the
Closing are hereinafter referred to as "Transferred Employees."
Concurrent with the Closing, Buyer shall provide Transferred
Employees with health insurance and other benefits substantially
similar to those provided to Buyer's existing employees subject
to the terms of Buyer's plans and programs. Buyer will recognize
service performed by Transferred Employees with Sellers before
the Closing for purposes of eligibility to participate, and
eligibility for benefits only under Buyer's vacation pay policy,
sick leave policy, employee discount program and health insurance
plan. Buyer covenants to continue to compensate those key
employees listed on Schedule T at such rate through the sixth
month anniversary of the Closing Date.
(c)Each Seller shall be liable for (i) any and all
claims, causes of action or obligations, wherever asserted, that
relate to or are in any way connected with the employment or
claimed employment of any person by the Sellers or any service of
any employee or agent of Sellers or any person otherwise employed
or engaged in connection with the business of Sellers, without
regard to whether events giving rise to such claim arise before
Closing or after Closing; (ii) any severance pay claim against
Sellers or similar obligation arising by reason of the
consummation of the transactions contemplated hereby and as a
result of any action or inaction on the part of Sellers, whether
or not the person making such claim is employed or engaged by
Buyer on or after the Closing Date; or (iii) any employee benefit
plan described in Section 2.1(u), including but not limited to,
any pension or similar liability to or on account of employees or
former employees of Sellers (including, but not limited to, any
single or multi-employers plan). In no event shall Sellers be
liable for any claim or cause of action arising from Buyer's
imposition of drug or alcohol testing on Transferred Employees.
(d) Sellers shall have all duties, and retain all
liabilities and responsibilities with respect to the Plans,
(including but not limited to the liabilities, duties and
responsibilities associated with terminating the Plans) and Buyer
shall have no responsibilities, duties or obligations whatsoever
with respect to such Plans both before and after the Closing.
(e)Sellers and Buyer agree that Buyer shall assume no
liability of Sellers and Buyer shall not be liable for any
claims, causes of action or obligations, wherever asserted, that
relate to or are in any way connected with the employment or
claimed employment of any person by the Sellers or any service of
any employee or agent of Sellers or any person otherwise employed
or engaged in connection with the business of Sellers, without
regard to whether events giving rise to such claim arise before
Closing or, unless caused by any act of Buyer, after Closing.
Sellers and Buyer also agree that Buyer shall not assume any
liability of Sellers and shall not be liable for any employee
benefit plan, including but not limited to, the Plans, any plan
described in Section 2.1(u) and any pension or similar liability
to or on account of employees or former employees of Sellers
(including, but not limited to any single or multi-employer
plan).
(f) As soon as practicable after the Closing, Sellers
agree to distribute to participants and beneficiaries in a lump
sum payment, the present value of benefits payable to
participants and/or beneficiaries under each of the Plans, as
determined by Sellers in accordance with the terms of the Plans,
less applicable taxes and withholdings, or as otherwise elected
by each participant and beneficiary with the consent of the
Sellers, provided that such election is permissible under law.
Sellers covenant that Sellers shall provide Buyer with a copy of
the corporate resolution terminating the Plans and such other
evidence as Buyer may reasonably request to confirm Seller's
compliance with this Section 7.6(f). Transferred Employees shall
be eligible to participate in Buyer's qualified savings plan
("Buyer's 401(k) Plan") in accordance with its terms as soon as
practicable after the Closing. Buyer shall not recognize service
performed by Transferred Employees with Sellers for purposes of
eligibility to participate, eligibility for benefits, or for
purposes of vesting under Buyer's 401(k) Plan.
(g) Buyer shall be liable for welfare benefit claims
incurred by Transferred Employees under Buyer's welfare benefit
plans on or after the Closing. Sellers shall retain liability
for welfare benefit claims incurred by Transferred Employees
under Sellers' welfare plans before the Closing.
(h) As of the Closing, Transferred Employees will
become eligible to participate in Buyer's welfare benefit plans
subject to the terms and conditions of such plans as modified by
Section 7.6(b) of this Agreement and will cease participating in
welfare benefit plans maintained by Sellers.
(i) Buyer will assume the responsibility for all
workers compensation claims made by Transferred Employees arising
from events occurring on or after the Closing. Sellers shall
retain the responsibility for all worker's compensation claims
made by Transferred Employees that arise from events that occur
before the Closing.
(j)Except as otherwise provided for in this Agreement
each Seller shall pay to its employees all amounts due them as of
the Closing Date for compensation earned, accrued but unused
vacation time (including any vacation pay required to be carried
over by virtue of California or other state law), bonuses
(including Christmas bonuses, if any for 1993) and similar
benefits then accrued in accordance with such Sellers existing
policy.
(k)Sellers agree to indemnify Buyer for any liability
resulting from any violation of law by Sellers relating to (i)
the employment or claimed employment of any person by the
Sellers; (ii) the funding, operation, administration, amendment
or termination by Sellers, or the withdrawal or partial
withdrawal of Sellers from any employee benefit plan or
arrangement maintained or contributed to by Sellers or an
affiliate, whether arising out of or related to an event or state
of fact occurring or existing before, on or after the Closing
(including, but not limited to losses arising under ERISA, the
PBGC or the Code and losses claimed by any participants)
excluding, however, liabilities expressly assumed by Buyer under
this Agreement.
(l)The Sellers and Buyer agree that Buyer shall have
no responsibility for providing continuation health care coverage
to any employee of Seller or Sellers who terminated employment
before the Closing Date and who is, as of the Closing Date,
participating in Sellers' plan (or in a plan of an affiliate of
Sellers) as a COBRA participant.
(m)Each Seller agrees that it shall remain
responsible for any compensation earned and payable to its
employees for the period beginning December 28, 1993 through
December 31, 1993 (the "Payroll Period"). The Sellers and Buyer
agree, however, that as an accommodation to Sellers, Buyer shall
act as a limited agent for payment of compensation and employment
taxes payable to or on account of Sellers' employees during the
Payroll Period. Sellers, or their representative, agree that
Sellers shall determine the precise amount (i) due and payable to
each employee and (ii) to be withheld and remitted or otherwise
paid to the appropriate local, state or federal authorities with
respect to each employee for the Payroll Period ("Payroll Period
Compensation Amount"). Sellers agree to reimburse Buyer for the
total paid (including compensation payable to the Sellers'
employees and the Payroll Compensation Amount payable to the
appropriate governmental authority) by Buyer no later than
February 15, 1994; provided that Buyer submits evidence
satisfactory to Sellers that the Payroll Period Compensation
Amount has been paid in a timely manner. Sellers and Buyer agree
that Sellers will prepare and sign before the Closing Date, all
necessary governmental forms (including, but not limited to, a
limited power of attorney, if required) authorizing Buyer to pay
Sellers' employees during the Payroll Period and to prepare and
file on Sellers' behalf any necessary forms that would otherwise
be required to be completed by Sellers in connection with the
Payroll Period Compensation Amount. Sellers agree that Sellers
shall retain all liability with respect to both the compensation
payable to Sellers' employees and the Payroll Period Compensation
Amount payable to the appropriate governmental authorities during
the Payroll Period. Buyer and Sellers further agree that there
shall exist no employment relationship implied or otherwise
between the Buyer and Sellers' employees with respect to either
the compensation paid to Sellers' employees during the Payroll
Period or the Payroll Period Compensation Amount payable to the
appropriate governmental authorities during the Payroll Period.
7.7 Publicity. Sellers agrees not to issue any public
statement relating to the transactions contemplated by this
Agreement without the written consent of Buyer, which consent
shall not be unreasonably withheld. Except for announcements or
filings required by law, each party agrees to review all press
releases related to such transactions with the other party prior
to the issuance of such press releases.
7.8 Expenses; Reimbursement of Costs. Whether or not the
transactions contemplated hereby are consummated, each party
hereto shall pay its expenses separately incurred in connection
herewith; provided, however, that if the transactions
contemplated hereby are consummated, Buyer shall pay the
reasonable legal and accounting fees of Sellers directly related
to such transactions.
If any party shall terminate this Agreement pursuant to the
terms hereof, the terminating party shall reimburse on demand all
of the non-terminating party's (or parties') out of pocket costs
and expenses, including the reasonable fees and expenses of the
non-terminating party's (or parties') attorneys, accountants and
other professional advisors, incurred to the date of such
termination; provided, however, the terminating party shall not
be required to so reimburse the non-terminating party if this
Agreement is terminated pursuant to Section 6.5 or because of a
material breach by the non-terminating party of a representation,
warranty or agreement contained herein. Nothing in this Section
7.8 shall be deemed a waiver of any party's rights to pursue any
additional claims it may have for damages caused by reason of a
breach of a representation, warranty, covenant or agreement made
by any other party hereto.
7.9 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the purchase and
sale of the Assets and the related transactions and supersedes
all prior arrangements or understandings with respect thereto.
7.10 Descriptive Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
7.11 Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by one
or more parties hereto and each such executed counterpart shall
be, and shall be deemed to be, an original instrument.
7.12 Notices. All notices, consents, requests,
instructions, approvals and other communications provided for
herein and all legal process in regard hereto shall be validly
given, made or served, if in writing and delivered personally or
sent by registered or certified mail, postage prepaid, or by
overnight courier to:
Buyer: Heilig-Meyers Furniture Company
2235 Staples Mill Road
Richmond, Virginia 23230
Attention: Mr. Troy A. Peery, Jr.
with a copy to:
McGuire, Woods, Battle & Boothe
One James Center
Richmond, Virginia 23219
Attention: John W. Patterson, Esquire
Sellers: Mr. R. A. McMahan
P.O. Box 7000
Carlsbad, California 92018
with a copy to:
Gray, Cary, Ames & Frye
401 "B" Street, Suite 1700
San Diego, California 92101
Attention: G. Eric Georgatos
or to such other addresses as any party hereto may, from time to
time, designate in writing delivered in a like manner. Notice
given by mail or overnight carrier as set out above shall be
deemed delivered on the date received by the addressee.
7.13 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns; but prior to the
Closing no party may assign this Agreement without the written
consent of the other party, except that Buyer may designate a
third party to acquire title to any or all of the Real Property
and Buyer may assign (i) all or a portion of its rights and
obligations to one or more of its subsidiaries, (ii) its right to
purchase the Receivables to the Receivables Assignee or (iii) its
right to purchase any or all of the Real Property, provided that
Buyer shall remain liable to Sellers as though such assignment
had not taken place.
7.14 Law Applicable. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the
Commonwealth of Virginia.
7.15 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
7.16 Lifetime Right to Buy Furniture. Richard A. McMahan
and each member of his immediate family now living shall be
entitled to buy merchandise from the Stores for personal use at
landed cost for the remainder of each of their lives.
7.17 Unemployment Rates and Reserves. Sellers agree to
cooperate with Buyer with respect to the transfer to Buyer of
Sellers' unemployment reserve, account(s) and contribution rate.
7.18 Purchase Discounts. For a period of twelve (12)
months after Closing the Buyer shall permit the employees of
Western Family National Bank set forth on Schedule S to buy
merchandise from the Stores for personal use on the same terms as
Buyer's employees.
7.19 Norris Agreement. Reference is made to an agreement
dated December 24, 1969 by and among Kathleen B. Norris and
Norris Realty Co. and R.A. McMahan and McMahan Valley Stores (the
"Norris Agreement"). Buyer hereby agrees to provide Sellers with
information necessary to determine amounts payable under the
Norris Agreement and further agrees to reimburse the Sellers for
payments made by Sellers under the terms of the Norris Agreement
and to the extent such payable is for obligations incurred from
and after Closing. This obligation shall terminate at such time
that Buyer ceases to use the name "McMahan" in connection with
the operation of furniture stores in Riverside County,
California.
IN WITNESS WHEREOF, Sellers and Buyer have caused this
Agreement to be duly executed in their respective corporate names
by their respective officers, all as of the day and year first
above written.
HEILIG-MEYERS FURNITURE COMPANY
s/ William E. Helms
By: William E. Helms
Title: Senior Vice President
ATTEST:
s/ Roy B. Goodman
By: Roy B. Goodman
Title: Secretary
ATTEST:
s/ Jeffrey W. Gearheart
Jeffrey W. Gearheart
s/ Richard A. McMahan
Richard A. McMahan, duly authorized
in the capacities and on behalf of
the entities listed below
MCMAHAN FURNITURE COMPANY, a California
corporation
Richard A. McMahan, President
McMAHANS OF REDLANDS, a California
corporation
Richard A. McMahan, President
McMAHANS OF YUCAIPA, a California
corporation
Richard A. McMahan, President
McMAHANS OF SAN BERNARDINO, a
California corporation
Richard A. McMahan, Vice President
McMAHANS FURNITURE CO. OF MARYVALE,
an Arizona corporation
Richard A. McMahan, President
McMAHANS OF COLTON, a California
corporation
Richard A. McMahan, President
McMAHANS OF INDIO, a California
corporation
Richard A. McMahan, President
McMAHANS OF ONTARIO, a California corporation
Richard A. McMahan, Vice President
McMAHANS OF CHINO, a California
corporation
Richard A. McMahan, Vice President
McMAHANS OF BANNING, a California
corporation
Richard A. McMahan, Vice President
McMAHANS OF BARSTOW, a California
corporation
Richard A. McMahan, President
McMAHANS OF FONTANA, a California
corporation
Richard A. McMahan, President
McMAHANS OF RIALTO, a California
corporation
Richard A. McMahan, President
McMAHANS OF POMONA, a California corporation
Richard A. McMahan, Vice President
McMAHANS - E STREET, SAN BERNARDINO,
a California corporation
Richard A. McMahan, President
FIRST McM FURNITURE CORPORATION,
a California corporation
Richard A. McMahan, Vice President
McMAHAN'S OPERATING CO.,
a California corporation
Richard A. McMahan, President
McMAHANS FURNITURE CO. OF LAS VEGAS, INC.,
a Nevada corporation
Richard A. McMahan, President
McMAHANS FURNITURE CO. OF HENDERSON, INC.,
a Nevada corporation
Richard A. McMahan, President
McMAHAN REALTY CO.,
a California corporation
Richard A. McMahan, President
McMAHAN FURNITURE CO.,
a New Mexico corporation
Richard A. McMahan, President
McMAHAN FURNITURE CO. OF MESA,
an Arizona corporation
Richard A. McMahan, Vice President
McMAHAN FURNITURE CO. NORTH LAS VEGAS,
a Nevada general partnership
By:McMahans Furniture Co. of
Las Vegas, Inc.,
a Nevada corporation,
General Partner
Richard A. McMahan, President
By: McMahans Furniture Co. of
Henderson, Inc., a Nevada
corporation
General Partner
Richard A. McMahan, President
McMAHAN'S PHOENIX THOMAS ROAD BUILDING FUND,
an Arizona association
By: McMahan Furniture Company, a
California corporation
General Partner
Richard A. McMahan, President
McMAHAN FURNITURE CO. - THOMAS ROAD, PHOENIX,
an Arizona general partnership
By:McMahans of Fontana, a California corporation
General Partner
Richard A. McMahan, President
McMAHAN'S BORDER STORES,
a California general partnership
By:McMahan Furniture Company, a California corporation
General Partner
Richard A. McMahan, President
McMAHAN'S VALLEY STORES,
a California general partnership
By:McMahan Furniture Company, a California corporation
General Partner
Richard A. McMahan, President
C.D.C. REALTY COMPANY,
a California general partnership
By:McMahan Furniture Company, a California corporation
General Partner
Richard A. McMahan, President
By:Richard A. McMahan Family Trust dated September 20, 1979
General Partner
Richard A. McMahan, Trustee
A.D.C. COMPANY,
a California general partnership
By:McMahan Furniture Company, a California corporation
General Partner
Richard A. McMahan, President
By:Richard A. McMahan Family Trust dated September 20, 1979
General Partner
Richard A. McMahan, Trustee
McMAHAN FURNITURE CO. - RIVERSIDE,
a California general partnership
By:McMahan's Valley Stores, a California general partnership
General Partner
By:McMahan Furniture Company,
a California corporation,
General Partner of McMahan's Valley Stores
Richard A. McMahan,
President
PRESCOTT/FARMINGTON BUILDING FUND,
a California association
By:Richard A. McMahan Family Trust dated September 20, 1979
Richard A. McMahan, Trustee
RICHARD A. MCMAHAN FAMILY TRUST,
dated September 20, 1979
By:Richard A. McMahan, Trustee
INDEX OF SCHEDULES AND EXHIBITS
Schedule A - List of Stores
Schedule B - Vehicles
Schedule C - Miscellaneous Real Property
Schedule D - Miscellaneous Assets
Schedule E - Leases to be Assigned
Schedule F - Contracts to be Assumed
Schedule G - Sellers Consents and Approvals
Schedule H - Pending Litigation
Schedule I - Exceptions to Title
Schedule J - Liens and Encumbrances
Schedule J-1 - Noncompliance Items
Schedule K - Eminent Domain and Condemnation Proceedings
Schedule L - Special Taxes and Assessments
Schedule M - Store Sales
Schedule N - Materials Contracts
Schedule O - Condition of Assets
Schedule P - Certain Permits, Licenses, and Authorizations
Schedule P-1 - Other Environmental Matters
Schedule Q - Employee Benefit Plans, Employment Agreements,
etc.
Schedule R - Officer and Affiliate Agreements and Interests
Schedule S - Western Family Bank Employees
Schedule T - Key Employees
Schedule U - Buyer Consent and Approval
Exhibit 1-A - Form of Consent and Estoppel Agreement
Exhibit 1-B - Form of Consent Agreements
Exhibit 2 - Form of Lease
Exhibit 3 - Form of Escrow Agreement
Exhibit 4 - Form of Sellers' Counsel's Opinion
Exhibit 5 - Form of Non-Competition Agreement
Exhibit 6 - Form of Buyer's Counsel's Opinion
Exhibit 7 - Form of Guaranty Agreement
[The Schedules and Exhibits to this Agreement have been omitted
in accordance with Regulation S-K, Item 601(b)(2) and will be
furnished to the Securities and Exchange Commission on request]
EXHIBIT 11
HEILIG-MEYERS COMPANY
COMPUTATION OF PER SHARE EARNINGS
(Amounts in thousands except per share data)
Three Months Ended Nine Months Ended
November 30, November 30, November 30, November 30,
1993 1992 1993 1992
Primary Earnings Per Share:
Average number of
shares outstanding 48,057 44,000 46,946 43,872
Net effect of stock
options 1,855 1,370 1,689 1,299
Average number of
shares as adjusted 49,912 45,370 48,635 45,171
Net earnings $15,863 $ 9,919 $40,741 $28,416
Per share amount $ .32 $ .22 $ .84 $ .63
Fully Diluted Earnings Per Share:
Average number of
shares outstanding 48,057 44,000 46,946 43,872
Net effect of stock
options 1,933 1,570 1,967 1,654
Average number of
shares as adjusted 49,990 45,570 48,913 45,526
Net earnings $15,863 $ 9,919 $40,741 $28,416
Per share amount $ .32 $ .22 $ .83 $ .62
Earnings Per Common Share:
Earnings per common share is computed by dividing net earnings by the
weighted average number of shares of common stock and common stock
equivalents outstanding during the year. The Company has issued stock
options, which are the Company's only common stock equivalent, at exercise
prices ranging from $5.52 to $20.83.
