HEILIG MEYERS CO, DEF 14A, 1994-05-03

HEILIG MEYERS CO
DEF 14A, 1994-05-03
FURNITURE STORES

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant ( )
Filed by a Party other than the Registrant (X)

Check the appropriate box:

( ) Preliminary Proxy Statement
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

Heilig Meyers Company
(Name of Registrant as Specified in its Charter)

Heilig Meyers Company
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

4) Proposed maximum aggregate value of transaction:

(X) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid: $125

2) Form, Schedule, or Registration Statement No.: Schedule 14A
Preliminary Proxy

3) Filing Party: Heilig Meyers Company

4) Date Filed: April 12, 1994

<PAGE>
HEILIG-MEYERS COMPANY
2235 STAPLES MILL ROAD
RICHMOND, VIRGINIA 23230
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 15, 1994
TO THE HOLDERS OF COMMON STOCK:
The Annual Meeting of Shareholders of Heilig-Meyers Company (the "Company")
will be held in the Auditorium, 4th Floor, Crestar Building -- 919 East Main
Street, Richmond, Virginia, on Wednesday, June 15, 1994, commencing at 10:30
a.m. E.D.T., for the following purposes:
1. To elect a board of twelve directors.
2. To act upon a proposal, previously approved by the Board of Directors,
to adopt the 1994 Stock Option Plan.
3. To act upon a proposal, previously approved by the Board of Directors,
to amend the Company's Restated Articles of Incorporation to increase
the number of shares of Common Stock which the Company is authorized to
issue to 250,000,000 shares.
4. To ratify or reject the selection of Deloitte & Touche as accountants
and auditors for the Company for the current fiscal year.
5. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on April 26, 1994,
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting and any adjournments thereof.
Your attention is directed to the attached Proxy Statement.
By Order of the Board of Directors
ROY B. GOODMAN, Secretary
May 3, 1994
PLEASE FILL IN, SIGN, DATE AND RETURN PROMPTLY THE ACCOMPANYING PROXY. IF YOU
ATTEND THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN
SHARES.

<PAGE>
HEILIG-MEYERS COMPANY
2235 STAPLES MILL ROAD
RICHMOND, VIRGINIA 23230
PROXY STATEMENT
TO BE MAILED ON OR ABOUT MAY 3, 1994
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 15, 1994
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Heilig-Meyers Company (the "Company") for use at the Annual Meeting
of Shareholders of the Company to be held June 15, 1994, or any adjournments
thereof, for the purposes set forth in this Proxy Statement and the attached
Notice of Annual Meeting of Shareholders. Supplementary solicitations may also
be made by mail or by telephone, telegraph or personal interview by directors,
officers and regular employees of the Company, none of whom will receive
additional compensation for these services. It is also contemplated that, for a
fee of $5,500 plus certain expenses, additional solicitation will be made by
personal interview, telephone, telecopy and telegraph under the direction of the
proxy solicitation firm of D. F. King & Co., Inc., 77 Water Street, New York,
New York 10005. Costs of solicitation of proxies will be borne by the Company,
which will reimburse banks, brokerage firms, other custodians, nominees, and
fiduciaries for reasonable out-of-pocket expenses incurred by them in forwarding
proxy materials to the beneficial owners of shares held by them.
The shares represented by all properly executed proxies received by the
Secretary of the Company and not revoked as herein provided will be voted as set
forth herein unless the shareholder directs otherwise in the proxy, in which
event such shares will be voted in accordance with such directions. Any proxy
may be revoked at any time before the shares to which it relates are voted
either by written notice (which may be in the form of a substitute proxy
delivered to the secretary of the meeting) or by attending the meeting and
voting in person.
Presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the meeting will
constitute a quorum. Shares for which the holder has elected to abstain or to
withhold the proxies' authority to vote (including broker non-votes) on a matter
will count towards a quorum, but will have no effect on the action taken with
respect to such matter except with respect to the proposed amendment to the
Company's Amended and Restated Articles of Incorporation. See "Amendment to the
Restated Articles of Incorporation to Increase the Number of Authorized Shares."
VOTING SECURITIES AND RECORD DATE
The Board of Directors has fixed the close of business on April 26, 1994,
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting and any adjournments thereof. Each holder of record
of the Company's Common Stock, $2.00 par value (the "Common Stock") on the
record date will be entitled to one vote for each share then registered in the
holder's name with respect to all matters to be considered at the meeting. As of
the close of business on the record date, 48,433,223 shares of Common Stock were
outstanding and entitled to vote at the meeting.
1

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ELECTION OF DIRECTORS
NOMINEES
The Company's Board of Directors presently consists of twelve directors,
who are named below as nominees and who were elected at the 1993 Annual Meeting
of Shareholders to serve until the next Annual Meeting of Shareholders or the
election and qualification of their successors. The twelve nominees for director
receiving the greatest number of votes cast for the election of directors will
be elected.
Each of the nominees has consented to his being named as a nominee in this
Proxy Statement, has agreed to serve if elected, and has furnished to the
Company the information set forth in the table below with respect to his age,
his principal occupation or employment and his beneficial ownership of the
Common Stock as of April 26, 1994. The table also sets forth the amount of
shares beneficially owned as of April 26, 1994, by all the executive officers
set forth in the summary compensation table who are not directors, and by all
executive officers and directors as a group and the percentage of outstanding
shares represented by the stated beneficial ownership. To the best of the
Company's information, the persons named in the table, and all executive
officers and directors as a group, have sole voting and investment power with
respect to shares shown as owned by them, except as set forth in the notes
thereto.
It is expected that each of these nominees will be able to serve, but in
the event that any such nominee is unable to serve for any reason (which event
is not now anticipated), the proxies reserve discretion to vote or refrain from
voting for a substitute nominee or nominees. Shareholders may withhold authority
to vote for any of the nominees on the accompanying proxy.
<TABLE>
<CAPTION>
AMOUNT OF SHARES
BENEFICIALLY OWNED
AND PERCENT OF
NAME, AGE, POSITIONS OF DIRECTORS CLASS
WITH THE COMPANY OR PRINCIPAL OUTSTANDING
OCCUPATION FOR THE PAST FIVE DIRECTOR AS OF APRIL 26,
YEARS AND OTHER INFORMATION SINCE(1) 1994(2)
<S> <C> <C>
WILLIAM C. DERUSHA, 44............................... 1983 453,053(4)(5)
Chairman of the Board since April 1986.(3)
Chief Executive Officer since April 1984.(3)
Director, Signet Banking Corporation.
TROY A. PEERY, JR., 48............................... 1984 415,943(4)
President since April 1986.(3)
Chief Operating Officer since December 1987.(3)
ALEXANDER ALEXANDER, 65.............................. 1975 13,896(4)
President, Colony Management Corporation (real estate
management).
ROBERT L. BURRUS, JR., 59............................ 1973 22,175(4)
Chairman (since 1990) and partner
of McGuire, Woods, Battle & Boothe (law firm).
Director, CSX Corporation, S&K Famous Brands, Inc.
and Concepts Direct, Inc.
</TABLE>
2

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<TABLE>
<CAPTION>
AMOUNT OF SHARES
BENEFICIALLY OWNED
NAME, AGE, POSITIONS OF DIRECTORS AND PERCENT OF CLASS
WITH THE COMPANY OR PRINCIPAL OUTSTANDING
OCCUPATION FOR THE PAST FIVE DIRECTOR AS OF APRIL 26,
YEARS AND OTHER INFORMATION SINCE(1) 1994(2)
<S> <C> <C>
ARTHUR D. CHARPENTIER, 47............................ 1987 52,902(4)(6)
President, Merritt Research Corporation (investment
advisory services) since 1987. General partner,
Prescott Group (investment partnerships) 1988 to
1991. Director, Russ Berrie and Co., Inc.
BENJAMIN F. EDWARDS III, 62.......................... 1983 20,000(7)
Chairman of the Board, President, Chief Executive
Officer and Director, A.G. Edwards, Inc., the parent
of A.G. Edwards & Sons, Inc. (securities brokerage
and investment banking). Director, National Life
Insurance Company of Vermont.
ALAN G. FLEISCHER, 77................................ 1976 2,530
Of Counsel, law firm of Hirschler, Fleischer,
Weinberg, Cox & Allen. Rector, Norfolk State
University. Member, Board of Associates, University
of Richmond.
NATHANIEL KRUMBEIN, 79............................... 1946 112,555(4)(8)
Retired Vice Chairman of the Company.
HYMAN MEYERS, 82..................................... 1940 348,764(4)(9)(10)
Retired Chairman of the Board of the Company.
S. SIDNEY MEYERS, 80................................. 1940 65,411(4)(9)(11)
Retired Vice Chairman of the Company.
LAWRENCE N. SMITH, 56................................ 1975 19,431(4)
President and Chief Executive Officer, Resource Bank
since December 1992. Chairman and Chief Executive
Officer, Essex Financial Group, Inc. (investment and
mortgage banking firm) until December 1992.
</TABLE>
3

(1) Year in which the nominee was first elected a director of the Company
or any of its predecessors. The Company's predecessors are numerous Virginia and
North Carolina corporations, the first of which was incorporated in 1940, and
all of which were merged into Heilig-Meyers Company, a North Carolina
corporation, in March 1970, which in turn was merged into the Company in June
1972.
(2) Unless otherwise indicated, less than one percent of the outstanding
Common Stock.
(3) Nominee or officer holds the same offices in the Company's wholly-owned
subsidiary Heilig-Meyers Furniture Company.
(4) Includes shares which could be acquired through the exercise of stock
options within 60 days after April 26, 1994.
(5) Excludes 150 shares owned of record by Mr. DeRusha's wife.
(6) Includes 12,402 shares held jointly with Mr. Charpentier's wife.
(7) Excludes 1,687 shares owned of record by Mr. Edwards' wife.
(8) Includes 46 shares held by Mr. Krumbein as trustee or custodian.
Excludes 81,710 shares owned of record by Mr. Krumbein's wife. Includes 6,600
shares held of record by the Krumbein Foundation of which Mr. Krumbein is an
officer, as to which shares he may be deemed to share voting and investment
powers.
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(9) Includes 5,023 shares owned of record by the Meyers-Krumbein Foundation
of which Messrs. Hyman and S. Sidney Meyers are officers, as to which shares
they may be deemed to share voting and investment powers.
(10) Includes 218,471 shares held in trusts of which Mr. Meyers is
co-trustee, as to which shares Mr. Meyers may be deemed to share voting and
investment powers.
(11) Excludes 25,949 shares owned of record by Mr. Meyers' wife.
(12) Includes 37,479 shares held by Mr. Thornton as trustee for his
children. Excludes 22,072 shares owned of record by the George and Eleanor D.
Thornton Foundation of which Mr. Thornton is a director.
(13) Excludes a total of 8,209 shares owned of record by the wives of
executive officers not named above. See notes 5 through 12 above.
The securities brokerage and investment banking firm of A.G. Edwards &
Sons, Inc., served as an underwriter for a public offering of the Common Stock
in May 1993 and may perform other services for the Company during the current
fiscal year. Mr. Edwards is Chairman of the Board, President, Chief Executive
Officer and Director of the parent company of A.G. Edwards & Sons, Inc.
As of April 26, 1994, there were no beneficial owners of more than 5% of
the Common Stock known to the Company.
NOMINATIONS FOR DIRECTOR
The By-laws of the Company provide that the only persons who may be
nominated for Directors are (i) those persons nominated by the Company's Board
of Directors; (ii) those persons nominated by the Nominating Committee of the
Company's Board of Directors and (iii) those persons whose names were personally
delivered to the Secretary of the Company not later than the close of business
on the tenth day following the mailing date of the Company's Proxy Statement for
an annual meeting or delivered to the Secretary of the Company by United States
mail, postage prepaid, postmarked no later than ten days after the mailing date
of the Proxy Statement for an annual meeting. Any shareholder wishing to
nominate a person other than those listed in this Proxy Statement must submit
the following information in writing to the Office of the Secretary,
Heilig-Meyers Company, 2235 Staples Mill Road, Richmond, Virginia 23230: (i) the
name and address of the shareholder who intends to make the nomination; (ii) the
name, address, and principal occupation of each proposed nominee; (iii) a
representation that the shareholder is entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; and (iv) the written consent of each proposed
nominee to serve as a director of the Company if so elected. The Chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
By requiring advance notice of shareholder nominations, this By-law affords
the Board of Directors the opportunity to consider the qualifications of the
proposed nominees and, to the extent deemed necessary or desirable by the Board,
to inform shareholders about such qualifications. The By-law does not give the
Board of Directors any power to approve or disapprove of shareholder nominations
for election of directors. However, it may have the effect of precluding a
contest for the election of directors if its procedures are not followed, and
therefore may discourage or deter a shareholder from conducting a solicitation
of proxies to elect his own slate of directors.
FAMILY RELATIONSHIPS
Hyman Meyers, Director of the Company, and S. Sidney Meyers, Director of
the Company, are brothers. Nathaniel Krumbein, Director of the Company, is their
brother-in-law.
5

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ATTENDANCE
The Board of Directors held eight meetings during the fiscal year ended
February 28, 1994. Each director attended 75 percent or more of these meetings,
including regularly scheduled and special meetings, and the meetings of all
committees of the Board on which they served that were held in the past fiscal
year during the periods in which they were directors or served on such
committees.
COMPLIANCE WITH EXCHANGE ACT FILING REQUIREMENTS
The Securities Exchange Act of 1934 requires the Company's executive
officers and directors, and any persons owning more than 10% of the Common
Stock, to file certain reports of ownership and changes in ownership with the
Securities and Exchange Commission. Based solely on its review of the copies of
the Forms 3, 4 and 5 received by it, and written representations from certain
reporting persons that no Forms 5 were required to be filed by those persons,
the Company believes that all executive officers and directors complied with
such filing requirements, except that Nathaniel Krumbein, a Company director,
reported late gifts of 12,014 shares by himself and his wife in January 1994,
George A. Thornton, III, a Company director, reported late the sale of 10,000
shares in July 1993 and the sale of 933 shares held as trustee for an adult son
in August 1993, Benjamin F. Edwards III a Company director, reported late the
purchase of 500 shares in February 1994 and James F. Cerza, Jr. reported late
donations of 875 shares in November 1993.
COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors of the Company include an
Audit Committee, a Compensation Committee and a Nominating Committee.
Messrs. Smith, Alexander, Charpentier and Edwards are the members of the
Audit Committee, which met two times during the fiscal year ended February 28,
1994. The primary functions of the Committee are to make recommendations to the
Board concerning engaging and discharging the independent auditors; to review
the overall scope and the results of the annual audit; to review the
independence of the independent auditors; and to review the functions and
performance of the internal audit department and the Company's internal
accounting controls.
The Compensation Committee, comprised of Messrs. Burrus, Fleischer, Smith
and Thornton, met three times during the fiscal year ended February 28, 1994.
The primary functions of the Committee are to review and make recommendations
concerning the direct and indirect compensation of officers elected by the
Board; to administer and make awards under the Company's stock option programs;
to review and report to the Board concerning annual salaries and year-end
bonuses recommended by management for all officers and certain other executives;
to recommend special benefits and perquisites for management and to generally
consult with management regarding employee benefits and personnel policies.
Messrs. Fleischer, Burrus and Thornton are the members of the Nominating
Committee, which met one time during the fiscal year ended February 28, 1994.
The primary functions of the Committee are to recommend persons to fill
vacancies on the Board and for membership on committees established by the Board
and to consider nominees recommended by shareholders.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The table below sets forth for the years ended
February 28, 1994, February 28, 1993, and February 29, 1992, the annual and
long-term compensation for services in all capacities to the Company and its
subsidiaries of those persons who at February 28, 1994, were the Company's Chief
Executive Officer and the next four highest compensated executive officers of
the Company whose salary and bonus exceeded $100,000 for the year ended February
28, 1994.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
FISCAL OTHER ANNUAL OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) SARS(#)(4) COMPENSATION(1)(2)
William C. DeRusha 1994 $432,000 $367,000 (3) 135,000 $ 12,937
<S> <C> <C> <C> <C> <C> <C>
Chairman of the 1993 400,000 340,000 (3) 0 9,652
Board and Chief 1992 331,000 198,000 -- 303,750 --
Executive Officer
Troy A. Peery, Jr. 1994 388,800 330,000 (3) 135,000 33,252
President and Chief 1993 360,000 306,000 (3) 0 22,920
Operating Officer 1992 296,000 177,000 -- 273,375 --
Joseph R. Jenkins 1994 240,000 204,000 (3) 75,000 20,339
Executive Vice 1993 210,000 178,500 (3) 0 17,170
President and Chief 1992 175,000 103,000 -- 168,750 --
Financial Officer
James F. Cerza, Jr. 1994 240,000 204,000 (3) 75,000 8,310
Executive Vice 1993 210,000 178,500 (3) 0 9,963
President, Operations 1992 170,000 100,000 -- 168,750 --
James R. Riddle 1994 217,000 184,000 (3) 75,000 18,353
Executive Vice 1993 190,000 161,500 (3) 0 13,912
President, Marketing 1992 170,000 86,000 -- 168,750 --
</TABLE>
(1) In accordance with the transitional provisions applicable to the
revised rules on executive officer and director compensation disclosure adopted
by the Securities and Exchange Commission, amounts of Other Annual Compensation
and All Other Compensation are excluded for the Company's 1992 fiscal year.
(2) Consists of Company contributions to the Employees' Profit Sharing and
Retirement Savings Plan, the Employees' Supplemental Profit Sharing and
Retirement Savings Plan and the dollar value of split dollar life insurance
premiums paid on behalf of the named executive officers.
(3) None of the named executive officers received Other Annual Compensation
in excess of the lesser of $50,000 or 10% of combined salary and bonus for 1993
or 1994.
(4) Amounts have been adjusted to reflect three-for-two stock splits
distributed in the form of a stock dividend in January 1992, November 1992 and
July 1993.
OPTION GRANT TABLE. The following table sets forth information concerning
individual grants of stock options made during the year ended February 28, 1994,
to the Company's executive officers named in the Summary Compensation Table.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED ANNUAL
OPTIONS/ OPTIONS/SARS EXERCISE RATES OF STOCK PRICE
SARS GRANTED TO OR BASE APPRECIATION FOR OPTION
GRANTED EMPLOYEES IN PRICE EXPIRATION TERM(1)
NAME (#) FISCAL YEAR ($/SH) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
William C. DeRusha 135,000 12.28% $20.83 April 6, 2003 $1,771,200 $4,479,300
Troy A. Peery, Jr. 135,000 12.28 20.83 April 6, 2003 1,771,200 4,479,300
Joseph R. Jenkins 75,000 6.82 20.83 April 6, 2003 984,000 2,488,500
James F. Cerza, Jr. 75,000 6.82 20.83 April 6, 2003 984,000 2,488,500
James R. Riddle 75,000 6.82 20.83 April 6, 2003 984,000 2,488,500
</TABLE>

(1) Stock appreciation values calculated by annually compounding the
exercise price until expiration at the growth rate noted.
AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES. The following table
sets forth the number of shares acquired on exercise of stock options and the
aggregate gains realized on exercise in fiscal 1994 by the Company's executive
officers named in the Summary Compensation Table. The table also sets forth the
number of shares covered by exercisable and unexercisable options held by such
executives on February 28, 1994, and the aggregate gains that would have been
realized had these options been exercised on February 28, 1994, even though
these options were not exercised, and the unexercisable options could not have
been exercised, on February 28, 1994.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE 2-28-94 AT 2-28-94(2)
NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
William C. DeRusha 54,967 $1,560,441 336,853 101,250 $7,676,116 $ 1,232,213
Troy A. Peery, Jr. 41,500 1,150,449 298,750 101,250 6,762,788 1,232,213
Joseph R. Jenkins 46,875 1,174,706 134,500 56,250 3,002,715 684,563
James F. Cerza, Jr. 36,875 987,078 165,000 56,250 3,733,800 684,563
James R. Riddle 37,000 928,621 139,375 56,250 3,119,569 684,563
</TABLE>

(1) This amount represents the gross value after commissions and before
adjustment for applicable federal or state taxes.
(2) Based on the closing sales price of the Common Stock of $33.00 on
February 28, 1994.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors
(comprised of directors who are not employees of the Company) has provided the
following report on Executive Compensation:
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COMPENSATION PHILOSOPHY
The Committee believes that corporate performance and, in turn, shareholder
value will be enhanced by a compensation system which supports and reinforces
the Company's key operating and strategic goals while aligning the financial
interests of the Company's executive officers with those of the shareholders.
The Company utilizes both short-term and long-term incentive compensation
programs to achieve this objective. These programs are tied to store, regional,
departmental and Company-wide business goals as well as individual goals. For
executive officers, the Company relies on an annual incentive program and stock
option program to align the executives' financial interests with those of its
shareholders.
COMPONENTS OF THE COMPENSATION PROGRAM
The Company's compensation program for executive officers consists of a
base salary, an annual incentive bonus program and a stock option program, all
of which are tied to the Company's success in achieving financial and strategic
performance goals. The Company's performance goals are proposed by management
and are approved by the Board of Directors of the Company as part of the
Company's budgeting process.
Each year, the Committee reviews proposals submitted by the Company's Chief
Executive Officer ("CEO") for annual salary for the executive officers other
than the CEO. In evaluating the CEO's proposals, the Committee considers (1) the
individual executive officer's performance, including evaluations thereof
provided by the CEO and (2) the Company's performance in relation to its
performance goals, which include pretax earnings, earnings per share and return
on equity. Under employment agreements covering the five named executive
officers, the Committee may increase, but not decrease executive salaries on an
annual basis.
The Committee also considered the effect of Internal Revenue Code Section
162(m), which imposes a $1 million limit per year on the corporate tax deduction
for compensation paid or accrued with respect to the top five executives of a
publicly-held corporation. Performance-based compensation that meets certain
requirements will not be subject to this deduction limit. The limit is generally
effective for any payment made by the Company that would be deductible for the
fiscal year beginning March 1, 1994. It was the Committee's recommendation that
no changes be made to the Company's existing compensation programs to avoid the
limit since the current compensation level of the top five executives is
unlikely to exceed the $1 million limit during the fiscal year ending February
28, 1995. However, the Company has proposed the adoption of a new 1994 Stock
Option Plan with the intention of making the plan meet the requirements for
performance-based compensation. The Committee will continue to monitor the
impact of the Section 162(m) limit and to assess various alternatives to
minimize or eliminate any loss of tax deductions in future years, provided the
alternatives are consistent with the objectives of the Company's executive
compensation program.
The annual incentive bonus program for executive officers is the principal
short-term incentive compensation program of the Company. Cash bonuses are paid
following the conclusion of the Company's fiscal year. These cash bonus awards
are based upon the achievement of Company performance goals designated at the
beginning of the Company's fiscal year and upon a series of component factors,
each determined separately. The component factors, some of which are evaluated
by the CEO, for executives other than the CEO, include: (1) personal
performance, (2) departmental business goals, (3) the extent to which the
Company's (a) pretax profits, and (b) earnings per share increase over those of
the previous fiscal year, and (4) the extent to which the Company meets or
exceeds its budgeted pretax profits and earnings per share targets. The
Committee first establishes a threshold target and maximum bonus payable for
levels of Company performance based on pretax profits, net aftertax earnings and
earnings per share. The Committee then determines the individual bonus amount by
assigning a percentage of salary to each of the component factors described
above. The total of an officer's percentages earned for each component is then
multiplied by the individual officer's salary to determine his or
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<PAGE>
her annual incentive cash bonus. The maximum percentage of salary the five named
executive officers may receive as bonus for each of the component factors is as
follows: personal performance (ten percent); departmental business goals (ten
percent); pretax profits (twenty percent); and earnings per share (twenty
percent). Consequently, bonus payments vary depending upon the extent to which
the Company achieves its target financial performance for the year. If the
targets are not achieved, no bonus is payable. However, in the event of a change
of control, a minimum annual bonus may still be paid under employment agreements
with the five named executive officers. See "Employment Agreements."
In addition, the Committee authorized a special incentive cash bonus
payment to be made to the five named executive officers for the fiscal year
ending February 28, 1994, in view of management's performance and pre-tax
earnings and earnings per share substantially greater than the amount
established as the maximum targets for the annual 1994 incentive bonus.
The Company's long-term incentive program is a stock option program under
which the Committee reviews and recommends proposed grants of long-term
incentive compensation in the form of stock options. The Committee considers
stock options to be an important means of insuring that senior executives
maintain their incentive to increase the profitability of the Company and the
value of the Company's stock. Whether a grant will be made to an executive
officer, and in what amount, are determined by the Committee based on the
Company's overall performance and the individual's performance. Because the
value of stock options is entirely a function of the value of the Company's
stock, the Committee believes that this component of the Company's compensation
arrangement aligns the interests of the senior executives with those of the
Company's shareholders. Options have always been granted with an exercise price
equal to the fair market value of the Company's stock on the date of grant.
The options granted to the five named executive officers in April 1993 were
intended to preserve for the executives the same opportunity for future
appreciation in the Company's stock that such executives possessed before
December 1992, when each of the five named executive officers exercised a block
of nonstatutory stock options and four of the five named executive officers sold
the underlying shares acquired upon the December 1992 exercise. The Committee
also considered that as a result of the December 1992 option exercises, the
Company's ability to receive the full tax benefit associated with such exercises
(i.e., the Company's deduction) was preserved.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The Committee determined the compensation of William C. DeRusha, Chief
Executive Officer, for the fiscal year ended February 28, 1994, in a manner
consistent with the guidelines described above. The Committee evaluated the
Company's performance with respect to its stated budget and financial goals that
were established and agreed to by Mr. DeRusha before the start of this fiscal
year. The Committee also evaluated Mr. DeRusha's personal performance, in view
of (a) the personal goals he established for himself, in consultation with the
Committee, as Chairman and Chief Executive Officer and (b) the extent to which
the Company exceeded its financial goals. The Committee evaluated Mr. DeRusha's
personal performance and it was determined that his performance exceeded
expectations.
ADMINISTRATION OF COMPENSATION PROGRAM
The Committee oversees all compensation programs for senior management and
reviews and approves many plans and programs for other employees. The Committee
reviews management recommendations and ultimately
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determines levels of base salary, annual incentive bonus program payments and
stock option grants. The Committee also reviews and determines the salary level
of the CEO, whose compensation is reported in this proxy statement.
COMPENSATION COMMITTEE
Robert L. Burrus, Jr., Chairman
Alan G. Fleischer
Lawrence N. Smith
George A. Thornton, III
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock ("HMY") with the cumulative total return of the companies included
in the S&P 500 and the S&P Retail Stores Composite for the last five fiscal
years.
(Performance Graph)

1989 1990 1991 1992 1993 1994
Heilig Meyers 100 139.3 169.5 310.9 444.8 742.0
S&P 500 100 118.8 136.3 158.1 174.9 189.4
S&P Retail Composite 100 119.5 147.2 198.5 227.9 228.5

<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment contracts with William C. DeRusha
and Troy A. Peery, Jr. Both contracts provided for an initial three-year term
that ended February 28, 1991, with an automatic annual one-year extension,
unless either party notifies the other at least two years in advance that it
does not wish to extend the term. The contracts also provide that Messrs.
DeRusha and Peery will receive annual salaries established by the Compensation
Committee of the Board of Directors of the Company (or the Board of Directors of
the Company), which may be increased, but not decreased, on an annual basis. In
1993, the contracts were amended to limit the circumstances under which an
executive may earn a minimum bonus payment. The contracts now provide that each
employee is entitled to an annual bonus in accordance with the terms of the
Company's annual performance bonus plan, provided that in the event of a change
of control, such payment shall be not less than the average bonus paid to him
during the three fiscal years immediately preceding the year for which the bonus
is currently payable. The contracts provide further that the Company may
terminate either employee's employment immediately for cause as defined in the
contracts. In the event of such a termination before the expiration of the
employment term, each employee will forfeit the right to receive any further
salary or benefits to which he is entitled under the employment contract. Should
either employee voluntarily terminate employment and become employed with
another employer before the expiration of the employment term, he will also
forfeit the right to receive any further salary or benefits to which he is
entitled under the employment contract.
These agreements also provide that if (a) the executive's employment is
terminated by the Company for any reason other than cause or (b) the executive
voluntarily terminates employment within 60 days after there has been a material
reduction in his compensation, benefits or other material change in his
employment status, he will be entitled to a lump sum payment equal to the
aggregate compensation he would have received during the remainder of the
employment term. If a change of control event occurs, the bonus to which the
executive is entitled during the change of control year will be computed on the
assumption that the financial results achieved before the change of control will
continue at levels not less favorable than those before the change of control.
Effective March 1, 1991, the Company also entered into employment contracts
with Joseph R. Jenkins, James F. Cerza, Jr. and James R. Riddle. The terms of
these contracts are identical to the terms of the agreements with Messrs.
DeRusha and Peery, except that the contracts with Messrs. Jenkins, Cerza and
Riddle provide for initial two-year terms with an automatic one-year renewal,
unless either party notifies the other at least one year in advance that it does
not wish to extend the term.
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
The Company has executive supplemental retirement agreements with its
twelve executive officers that entitle them to receive death benefits or
supplemental retirement income. If the executive officer dies prior to age 65 in
the employment of the Company, the executive's beneficiary will receive annual
benefits of 100% of the executive officer's salary for a period of one to two
years and/or 50% of the executive officer's salary for a period of eight years.
If the executive officer retires at age 65, he will receive an annual retirement
benefit equal to a designated percentage of his salary at the time of retirement
increased four percent annually for a period of 15 years. In the event an
executive officer dies after retirement, but before he has received all of his
retirement income, the executive officer's beneficiary will receive annual
benefits equal to a percentage of such executive officer's salary for the
balance of the 15-year period.
The executive supplemental retirement agreements with Messrs. DeRusha and
Peery provide for an actuarially reduced benefit payable in the form of a lump
sum in the event such executive's employment terminates for
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any reason (other than cause) before age 65. The remaining agreements provide
that, if the executive's employment is terminated under circumstances entitling
the executive to a payment under the Executive Severance Plan (described below),
a lump sum cash out of the executive's benefit will be made to him. The Company
owns and is the beneficiary under life insurance contracts intended to provide
the Company with funds to meet its obligations under all executive supplemental
retirement agreements.
EXECUTIVE SEVERANCE PLAN
The Company has an executive severance plan under which executives (other
than Messrs. DeRusha, Peery, Jenkins, Cerza and Riddle) designated by the
Committee are covered. The executive severance plan is triggered by a change of
control and, once triggered, provides certain employment and compensation
guarantees for a two-year period. During the two-year period, eligible
executives are guaranteed salary and bonuses at levels not less than those paid
during the one-month period before the change of control. If an executive is
terminated or voluntarily terminates within 60 days because the executive's
working conditions have materially changed, the executive will be entitled to
receive 200% of salary and bonuses received for the preceding twelve-month
period. If a change of control does not occur the plan has no effect. The
severance plan covers, in general, all officers of the Company (other than
Messrs. DeRusha, Peery, Jenkins, Cerza and Riddle), certain categories of key
administrative people designated by the Chairman and all full-time employees
with ten or more years of service.
DIRECTORS' COMPENSATION
For the fiscal year ended February 28, 1994, directors who were not
employees of the Company were each paid fees of $20,000. The Company maintains
deferred compensation agreements pursuant to which an outside director may defer
all or a portion of the fees he receives for services performed for the Company
(in his capacity as a director). The agreements provide deferred income to the
participating director and/or his family at the director's attainment of age 70
(age 59, in the case of one outside director), or upon his death. The
Compensation Committee may, in its sole discretion, provide for deferred income
benefits in the event of a director's permanent disability. The benefit payable
under these agreements is fixed for each outside director. Benefits are payable
in monthly payments over a 15-year period. These agreements provide for
immediate payment of an actuarially reduced benefit to each outside director
upon the termination of his relationship with the Company before age 70 (age 59,
in the case of one outside director) unless the relationship terminated for "due
cause" as determined by the Compensation Committee or Board of Directors of the
Company. Generally, if a director terminates his relationship with the Company
following a change of control, he will be entitled to receive a reduced lump sum
payment equal to the actuarial equivalent of the benefit he would have received
at age 70 (age 59, in the case of one outside director) (taking into account
deferrals made to the date of the director's death). However, in the case of one
outside director, the agreement provides that in the event of termination
following a change of control, an amount sufficient to satisfy the Company's
future obligations to the director (and his beneficiaries) under the agreement
will be deposited in a trust with a national bank. The deposited amount would be
subject to the claims of creditors, but would not be otherwise available to the
Company.
In addition, directors who serve on the Executive Committee of the
Company's Board of Directors and who are not full-time employees of the Company
receive annual fees of $6,000. These directors are Robert L. Burrus, Jr., Hyman
Meyers, Lawrence N. Smith and George A. Thornton, III. Messrs. DeRusha and Peery
also serve on the Executive Committee.
Under the Company's 1990 Stock Option Plan, each Director who is not a full
time employee of the Company will receive an automatic grant on August 14, 1994,
of an option to purchase 20,250 shares of Common
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<PAGE>
Stock (which reflects adjustments for stock splits distributed in the form of
stock dividends) at an exercise price equal to the fair market value of the
Common Stock on August 14, 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Burrus, Chairman of the Compensation Committee, is Chairman and partner
of the law firm of McGuire, Woods, Battle & Boothe, which was retained as
general counsel by the Company during the fiscal year ended February 28, 1994,
and has been so retained during the current fiscal year.
CERTAIN TRANSACTIONS
AGREEMENTS WITH RETIRED EXECUTIVES. The Company entered into Executive
Employment and Deferred Compensation Agreements with Hyman Meyers, S. Sidney
Meyers and Nathaniel Krumbein while these individuals were executive officers of
the Company. The agreements provide for retirement compensation until an
individual's death in an annual amount equal to 58% of the average of the
highest three years of total cash compensation paid to the individual during any
fiscal year in which he was employed by the Company. This amount will be reduced
by the individual's primary social security benefit and by the amount determined
to be payable under the employer portion of the Company's profit sharing plan.
The payment to Hyman Meyers will end upon his death. S. Sidney Meyers and
Nathaniel Krumbein elected to receive the actuarial equivalent of this amount as
a joint and survivor annuity with their spouses, providing payments to them or
their wives as long as either shall live. The Company owns and is beneficiary
under life insurance contracts, purchased in full before the retirement of these
individuals, which are intended to provide the Company with funds to meet its
obligations under these agreements.
During the year ended February 28, 1994, the Company made the following
payments as retirement compensation: $93,008 to Hyman Meyers, $39,644 to S.
Sidney Meyers, and $45,960 to Nathaniel Krumbein.
The amount of retirement compensation is automatically increased annually
by the lesser of 5% or one-half of the percentage increase in the consumer price
index over the previous year.
These agreements also provide that if a change of control occurs, amounts
sufficient to satisfy the Company's future contractual obligations to each of
these individuals (and his beneficiaries) under the agreements will be deposited
in a trust with a national bank. The deposited amounts would be subject to the
claims of creditors, but would not be otherwise available to the Company.
During retirement, the individual is also entitled to discounted purchases,
coverage under the Company's group health insurance plans, an office at a
location selected by the Company and customary office services to the same
extent that he received at the time of retirement. The Company paid
approximately $3,448 in health and life insurance premiums for Hyman Meyers and
$3,904 for each of S. Sidney Meyers and Nathaniel Krumbein during the fiscal
year ended February 28, 1994. The Company provided S. Sidney Meyers and
Nathaniel Krumbein with office space and services, which they shared at a total
cost of $56,285 during the fiscal year ended February 28, 1994.
The Company may retain any of these individuals (with his consent) on a
year-to-year basis during retirement to render consulting services as directed
by the Board of Directors, at a minimum annual fee of $10,000, plus
out-of-pocket expenses. The Company did not retain any of these individuals to
render consulting services during the fiscal year ended February 28, 1994.
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<PAGE>
LEASES. During the past fiscal year, the Company rented five of its stores
and one of its local warehouses from Hyman Meyers, S. Sidney Meyers and
Nathaniel Krumbein together with members of their families.1 The leases
generally provide for fixed rentals ranging from $12,500 to $91,770 per year;
however, four of the leases provide for rent to be adjusted every three years
with the new rent equal to four percent of net sales at the leased premises
during the fiscal year immediately preceding the rental adjustment. As of April
26, 1994, the unexpired terms of all leases with members of the Meyers and
Krumbein families, excluding renewal options, ranged from 2 3/4 years to 15 3/4
years.
During the fiscal year ended February 28, 1994, the Company paid rent
aggregating $285,048 to certain directors and members of their families. The
table below sets forth certain information concerning the rent received during
the fiscal year ended February 28, 1994, and rent to be received by these
directors and members of their families on account of properties leased to the
Company.
<TABLE>
<CAPTION>
RENT RECEIVED DURING MINIMUM ANNUAL
FISCAL YEAR ENDED RENT (AT CURRENT
FEBRUARY 28, 1994 ANNUAL RENTAL RATES)
<S> <C> <C>
Hyman Meyers.......................................................... $ 61,322 $ 61,290
S. Sidney Meyers...................................................... 61,322 61,290
Nathaniel Krumbein.................................................... 1,400 1,368
Amy M. Krumbein (Wife of Nathaniel Krumbein).......................... 59,921 59,921
Other family members.................................................. 101,083* 98,779
</TABLE>

* Consists of the following amounts payable to adult children of the
following individuals: Hyman Meyers, $33,701; S. Sidney Meyers, $33,691; and
Nathaniel Krumbein, $33,691.
With respect to principal leases with the Company's directors and members
of their families that were entered into from 1977 until 1986, the Company
obtained advice from independent fee appraisers who hold M.A.I. designation that
the terms and conditions of such leases would be fair and reasonable to the
Company as tenant. The leases and the advice of the independent fee appraisers
were reviewed by the Real Estate Committee of the Board of Directors of the
Company, made up of directors who are not employees of the Company, and
approved. The Company believes that the rent and terms provided in these leases,
as well as others negotiated without this procedure, are fair and reasonable to
the Company as tenant and will be generally comparable to the rent and terms of
leases of similar properties in the same general location.
FRANCHISES. During the fiscal year ended February 28, 1994, the Company had
one franchise agreement for use of its service mark in connection with retail
furniture operations, under which the Company supplies a merchandising and
advertising program at approximate cost and the franchisee pays a franchise fee
based upon sales. The agreement relates to stores in Norfolk, Virginia Beach and
Keller, Virginia. Florence T. Meyers, wife of Hyman Meyers, owned a one-third
interest in these franchise operations until her death in September 1993. The
estate of Mrs. Meyers, of which Mr. Hyman Meyers is executor, has disposed of
most of the interest in these franchise operations. The terms of the franchise
agreement with respect to this franchise are substantially identical to the
terms of previous franchise agreements with persons unrelated to directors of
the Company. This franchise buys a significant portion of its merchandise from
the Company. During the past fiscal year, this franchise's merchandise purchases
from the Company totaled $1,182,420.
1Under four of these leases the Company must pay real estate taxes and
insurance premiums and must provide maintenance and make certain repairs. Under
four of these leases, the Company as tenant bears the expense of real estate tax
increases and certain interior repairs and pays utility charges and insurance
rate increases attributable to it. One of these leases provides for rental
escalations for any exercised renewal options based on increases in the Consumer
Price Index.
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During the fiscal year ended February 28, 1994, the largest amount of
indebtedness to the Company at the end of any month from this franchise was
$443,822, principally in respect of merchandise purchases, and on February 28,
1994, the outstanding indebtedness was $322,255. The franchisee pays interest to
the Company on all amounts outstanding more than 30 days at 115% of the
prevailing prime rate, which is greater than the effective rate the Company pays
its major lenders.
1994 STOCK OPTION PLAN
INTRODUCTION
On February 9, 1994, the Board of Directors of the Company approved and
adopted the 1994 Stock Option Plan (the "1994 Plan") and directed that it be
submitted to shareholders for approval.
The 1994 Plan became effective as of February 8, 1994. Unless sooner
terminated by the Board of Directors, the Plan will terminate on February 7,
2004. No awards may be made under the 1994 Plan after its termination.
The 1994 Plan is intended to provide a means for selected key management
employees of the Company to increase their personal financial interest in the
Company, thereby stimulating the efforts of these employees and strengthening
their desire to remain with the Company (references to the "Company" in this
section will include any parent and subsidiary corporations).
The principal features of the 1994 Plan are summarized below. The summary
is qualified by reference to the complete text of the plan, which is attached as
Exhibit A.
GRANTS SUBJECT TO SHAREHOLDER APPROVAL
On February 8, 1994, the Compensation Committee granted options covering
107,236 shares of Common Stock to officers and key employees, subject to
shareholder approval of the 1994 Plan. One-third of the options will become
exercisable upon shareholder approval and the remainder will vest one-third on
each February 8 until 1996. The exercise price of the options is $35.06, and all
of the options will expire on February 8, 2004, if not exercised sooner. Of the
options granted subject to shareholder approval of the 1994 Plan, none were
granted to Messrs. DeRusha, Peery, Jenkins, Cerza or Riddle.
GENERAL
The 1994 Plan authorizes the reservation of 1,000,000 shares of Common
Stock for issuance pursuant to awards. Such awards may be in the form of either
incentive stock options or nonstatutory stock options (as described below).
If an award under the 1994 Plan, the Company's 1983 Stock Option Plan or
the Company's 1990 Stock Option Plan is cancelled, terminates or lapses
unexercised, any unissued shares allocable to such award may be subjected again
to an incentive award under the 1994 Plan.
Adjustments will be made in the number of shares which may be issued under
the 1994 Plan in the event of a future stock dividend, stock split or similar
pro rata change in the number of outstanding shares of Common Stock or the
future creation or issuance to shareholders generally of rights, options or
warrants for the purchase of Common Stock or Preferred Stock.
The Common Stock is traded on the New York Stock Exchange, and on April 26,
1994, the closing price was $25 1/2.
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ELIGIBILITY
All present and future employees of the Company who hold positions with
management responsibilities are eligible to receive awards under the 1994 Plan.
The Company estimates that it has approximately 85 such employees (56 of whom
are officers).
ADMINISTRATION
The 1994 Plan will be administered by a committee comprised of at least
three directors of the Company who are not eligible to participate in the Plan
and who shall be considered "disinterested" for purposes of Securities and
Exchange Commission Rule 16b-3 ("Rule 16b-3"). The 1994 Plan is intended to
conform to the provisions of Rule 16b-3 and to meet the requirements for
performance-based compensation under Code Section 162(m). Unless otherwise
determined by the Board of Directors, the Committee will be the Compensation
Committee. The Compensation Committee has the power and complete discretion to
determine when to grant awards, which eligible employees will receive awards,
whether the award will be an incentive or nonstatutory stock option, whether
stock appreciation rights will be attached to options and the number of shares
to be allocated to each award. The Compensation Committee may impose conditions
on the exercise of options and stock appreciation rights, and may impose such
other restrictions and requirements as it may deem appropriate.
STOCK OPTIONS
Options to purchase shares of Common Stock granted under the 1994 Plan may
be incentive stock options or nonstatutory stock options. Incentive stock
options qualify for favorable income tax treatment under Section 422 of the
Internal Revenue Code, while nonstatutory stock options do not. The purchase
price of Common Stock covered by an option may not be less than 100% (or, in the
case of an incentive stock option granted to a 10% shareholder, 110%) of the
fair market value of the Common Stock on the date of the option grant. Fair
market value means the average of the highest and the lowest registered sales
prices of the Common Stock on the exchange on which it generally has the highest
trading volume. The exchange on which the Common Stock currently has the
greatest trading volume is the New York Stock Exchange.
The value of incentive stock options, based on the exercise price, that can
be exercisable for the first time in any calendar year under the 1994 Plan or
any other similar plan maintained by the Company is limited to $100,000.
An employee may not receive an award of options under the 1994 Plan with
respect to more than 150,000 shares of Common Stock during any one fiscal year.
Options may only be exercised at such times as may be specified by the
Compensation Committee; provided, however, that incentive stock options may not
be exercised after the first to occur of (i) ten years (or, in the case of an
incentive stock option granted to a 10% shareholder, five years) from the date
on which the incentive stock option was granted, (ii) three months from the
optionee's termination of employment with the Company for reasons other than
death or disability, or (iii) one year from the optionee's termination of
employment on account of death or disability. The Compensation Committee may
grant options with a provision that an option not otherwise exercisable will
become exercisable upon a change of control (as defined in the 1994 Plan). The
Compensation Committee may also accelerate the expiration date of outstanding
options in the event of a change of control or a change in the corporate
structure of the Company.
An optionee exercising an option may pay the purchase price in cash; and if
the option so provides, by delivering or causing to be withheld from the option
shares, shares of Common Stock; by delivering a promissory note; or by
delivering an exercise notice together with irrevocable instructions to a broker
to promptly deliver to
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the Company the amount of sale or loan proceeds from the option shares to pay
the exercise price. The Compensation Committee may also provide in the option
that an employee who exercises an option by delivering already owned shares of
Common Stock will be automatically granted a "reload option," which is a new
option equal in amount to the number of shares delivered to exercise the option
with an exercise price equal to the fair market value of the Common Stock on the
date of delivery.
STOCK APPRECIATION RIGHTS
The Compensation Committee may award stock appreciation rights with an
option, or the Compensation Committee may subsequently award and attach stock
appreciation rights to a previously awarded nonstatutory option, and impose such
conditions upon their exercise as it deems appropriate. When the stock
appreciation right is exercisable, the holder may surrender to the Company all
or a portion of his unexercised stock appreciation right and receive in exchange
an amount equal to the excess of (i) the fair market value on the date of
exercise of the Common Stock covered by the surrendered portion of the stock
appreciation right over (ii) the exercise price of the Common Stock under the
related option. The Compensation Committee may limit the amount which can be
received when a stock appreciation right is exercised. When a stock appreciation
right is exercised, the underlying option, to the extent surrendered, will no
longer be exercisable. Similarly, when an option is exercised, any stock
appreciation rights attached to the option will no longer be exercisable. The
Company's obligation arising upon the exercise of a stock appreciation right may
be paid in Common Stock or in cash, or in any combination of the two, as the
Compensation Committee may determine.
Stock appreciation rights may only be exercised when the underlying option
is exercisable or, if there is no underlying option, at such times as may be
specified by the Compensation Committee, which may include a change of control.
There are further limitations on when an officer, director or 10% shareholder of
the Company (an "Insider"), may exercise a stock appreciation right. In
particular, Insiders may not exercise stock appreciation rights for cash within
the first six months after they are granted.
TRANSFERABILITY OF AWARDS
An option awarded under the Plan may not be sold, transferred, pledged, or
otherwise disposed of, other than by will or by the laws of descent and
distribution. All rights granted to a participant under the Plan shall be
exercisable during his lifetime only by such participant, or his guardians or
legal representatives. Upon the death of a participant, his personal
representative or beneficiary may exercise his rights under the Plan.
AMENDMENT OF THE 1994 PLAN AND AWARDS
The Board of Directors may amend the 1994 Plan in such respects as it deems
advisable; provided that, if and to the extent required by Rule 16b-3 or the
Code, the shareholders of the Company must approve any amendment that would (i)
materially increase the benefits accruing to participants under the 1994 Plan,
(ii) materially increase the number of shares of Common Stock that may be
reserved for issuance under the 1994 Plan, or (iii) materially modify the
requirements of eligibility for participation in the 1994 Plan. Awards granted
under the 1994 Plan may be amended with the consent of the recipient so long as
the amended award is consistent with the terms of the Plan.
FEDERAL INCOME TAX CONSEQUENCES
An employee will not incur federal income tax when he is granted a
nonstatutory stock option or an incentive stock option.
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Upon exercise of a nonstatutory stock option or a stock appreciation right,
an employee generally will recognize compensation income, which is subject to
income tax withholding by the Company, equal to the difference between the fair
market value of the Common Stock on the date of the exercise and the option
price. The Committee has authority under the 1994 Plan to include provisions
allowing the employee to elect to have a portion of the shares he would
otherwise acquire upon exercise of an option or stock appreciation right
withheld to cover his tax liabilities if permissible under Rule 16b-3. The
election will be effective only if approved by the Compensation Committee and
made in compliance with other requirements set forth in the Plan. When an
employee exercises an incentive stock option, he generally will not recognize
income subject to tax, unless he is subject to the alternative minimum tax.
The Company usually will be entitled to a business expense deduction at the
time and in the amount that the recipient of an incentive award recognizes
ordinary compensation income in connection therewith. As stated above, this
usually occurs upon exercise of nonstatutory options and stock appreciation
rights. In some cases, such as the exercise of a nonstatutory option, the
Company's deduction is contingent upon the Company's meeting withholding tax
requirements. No deduction is allowed in connection with an incentive stock
option, unless the employee disposes of Common Stock received upon exercise in
violation of the holding period requirements.
This summary of Federal income tax consequences of nonstatutory stock
options, incentive stock options and stock appreciation rights does not purport
to be complete. There may also be state and local income taxes applicable to
these transactions. Holders of awards should consult their own advisors with
respect to the application of the laws to them and to understand other tax
consequences of the awards including possible income deferral for Insiders,
alternative minimum tax rules, taxes on parachute payments and the tax
consequences of the sale of shares acquired under the Plan.
VOTE REQUIRED
Approval of the 1994 Stock Option Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock voting at the annual
meeting.
The Board of Directors believes that approval of the 1994 Stock Option Plan
is in the best interest of all shareholders and, accordingly, recommends a vote
"FOR" approval of the proposed 1994 Stock Option Plan.
AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board has unanimously approved, and recommends to the shareholders that
they adopt, an amendment to the first paragraph of Article III of the Restated
Articles that would increase the number of authorized shares of Common Stock
from 75,000,000 to 250,000,000 shares.
Of the 75,000,000 currently authorized shares of Common Stock, as of April
26, 1994, 48,433,223 shares have been issued and 5,178,314 shares are reserved
and unissued under the Company's stock option and employee stock purchase plans
(including 1,000,000 shares reserved for issuance under the 1994 Plan, subject
to shareholder approval). This leaves a balance of approximately 21 million
authorized but unissued shares of Common Stock available and unreserved for
future use. The Company has historically declared three-for-two stock splits
distributed in the form of 50% stock dividends when considered appropriate by
the Board of Directors and has done so in each of the last three fiscal years.
Under Virginia law, the Company must have sufficient authorized and unissued
shares of Common Stock to effectuate such a stock dividend. Consequently, in
order to effectuate such dividends in the future, the number of authorized
shares of Common Stock must be increased. Under
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Virginia law, the Board of Directors could increase the authorized number of
shares of Common Stock without shareholder approval in connection with a stock
split or dividend which results in no fractional shares or cash paid in lieu of
fractional shares, e.g. a two-for-one stock split or 100% stock dividend.
The additional shares of Common Stock for which authorization is sought
would be a part of the existing class of Common Stock and, if and when issued,
would have the same rights and privileges as the shares of Common Stock
presently outstanding. No holder of Common Stock has any preemptive rights to
acquire additional shares of the Common Stock.
The full text of the first paragraph of Article III of the Restated
Articles, including the amendment, is attached to this Proxy Statement as
Exhibit B which shareholders are urged to read carefully.
PURPOSE AND EFFECT OF AMENDMENT
The Board believes that an increase in the number of shares of Common Stock
as contemplated by this Amendment would benefit the Company and its shareholders
by (i) giving the Company the flexibility to effectuate future stock splits or
dividends consistent with prior practice, and (ii) giving the Company needed
flexibility in its corporate planning and in responding to developments in the
Company's business, including financing in acquisition transactions and other
general corporate purposes. Having such authorized shares available for issuance
in the future would give the Company greater flexibility to respond to future
developments and allow Common Stock to be issued by the Company without the
expense and delay of a special shareholders' meeting.
Unless otherwise required by applicable law or regulation, the additional
shares of Common Stock will be issuable without further authorization by a vote
or consent of the shareholders and on such terms and for such consideration as
may be determined by the Board. However, the New York Stock Exchange, on which
the Common Stock is listed, currently requires shareholder approval as a
prerequisite to listing shares in several instances, including acquisition
transactions where the present or potential issuance of shares could result in
an increase of 20% or more in the number of shares of Common Stock outstanding.
The Board could use the additional shares of Common Stock to discourage an
attempted change of control of the Company. However, the Board has no present
intention of issuing any shares of Common Stock for such purposes and this
amendment is not being recommended in response to any specific effort of which
the Company is aware to obtain control of the Company.
VOTE REQUIRED
Adoption of this amendment requires the affirmative vote of the holders of
a majority of the outstanding shares of Common Stock. Abstention from voting on
this amendment (including broker non-vote) has the same legal effect as a vote
"against" this amendment, even though the shareholder may interpret such action
differently.
RATIFICATION OF SELECTION OF AUDITORS
Deloitte & Touche, independent certified public accountants, has been
selected by the Board of Directors as accountants and auditors for the Company
for the current fiscal year, subject to ratification or rejection by the
shareholders. The firm has no relationship with the Company except that it has
served as its independent accountants and auditors since November 1, 1973.
Representatives of Deloitte & Touche are expected to be present at the Annual
Meeting of Shareholders and will have an opportunity to make a statement if they
so desire and are expected to be available to respond to appropriate questions
from shareholders. In the event the shareholders do not ratify the selection of
Deloitte & Touche, the selection of other accountants and auditors will be
considered by the Board of Directors.
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OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the meeting. However, if any other matters are properly presented, or if
any question arises as to whether any matter has been properly presented and is
a proper subject for shareholder action, the persons named as proxies in the
accompanying proxy intend to vote the shares represented by such proxy in
accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR 1994 MEETING
Proposals of shareholders intended to be presented at the 1995 Annual
Meeting must be received by the Company at its principal executive offices no
later than January 3, 1995, for inclusion in the Company's 1995 proxy materials.
Such proposals should meet the applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
FURTHER INFORMATION
The Company will provide without charge to each person from whom a proxy is
solicited by the Board of Directors, upon the written request of any such
person, a copy of the Company's annual report on Form 10-K, including the
financial statements thereto, required to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, for
the Company's fiscal year ended February 28, 1994. Such written requests should
be sent to the Office of the Treasurer, Heilig-Meyers Company, 2235 Staples Mill
Road, Richmond, Virginia 23230.
By Order of the Board of Directors
ROY B. GOODMAN
Secretary
May 3, 1994
PLEASE FILL IN, SIGN, DATE AND RETURN PROMPTLY THE ACCOMPANYING PROXY. IF YOU
ATTEND THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN
SHARES.
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EXHIBIT A
HEILIG-MEYERS COMPANY
1994 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Heilig-Meyers Company 1994 Stock Option
Plan (the "Plan") is to further the long term stability and financial success of
Heilig-Meyers Company (the "Company") by attracting and retaining key employees
of the Company through the use of stock incentives. It is believed that
ownership of Company Stock will stimulate the efforts of those employees of the
Company upon whose judgment and interest the Company is and will be largely
dependent for the successful conduct of its business. It is also believed that
Awards granted to such employees under this Plan will strengthen their desire to
remain with the Company and will further the identification of those employees'
interests with those of the Company's shareholders.
2. DEFINITIONS. As used in the Plan, the following terms have the meanings
indicated:
(a) "Award" means, collectively, the award of an Option or Stock
Appreciation Right under the Plan.
(b) "Board" means the board of directors of the Company.
(c) "Change of Control" means:
(i) The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act of 1934) of 20% or more of either the then
outstanding shares of common stock of the Company or the combined voting
power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors, but excluding for this
purpose, any such acquisition by the Company or any of its subsidiaries,
or any employee benefit plan (or related trust) of the Company or its
subsidiaries, or any corporation with respect to which, following such
acquisition, more than 50% of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by the individuals and entities who were the
beneficial owners, respectively, of the common stock and voting
securities of the Company immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately prior
to such acquisition, of the then outstanding shares of common stock of
the Company or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors, as the case may be; or
(ii) Individuals who, as of the date hereof, constitute the Board
(as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any
individual becoming a director subsequent to the date hereof whose
election or nomination for election by the Company's shareholders was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company ((within the scope of Rule
14a-11 of Regulation 14A promulgated under the Securities Exchange Act
of 1934)); or
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(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which the individuals and entities who were the respective beneficial
owners of the common stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do
not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of
the corporation resulting from such reorganization, merger or
consolidation, or a complete liquidation or dissolution of the Company
or of its sale or other disposition of all or substantially all of the
assets of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Company" means Heilig-Meyers Company, a Virginia corporation.
(f) "Company Stock" means Common Stock of the Company. If the par
value of the Company Stock is changed, or in the event of a change in the
capital structure of the Company (as provided in Section 12), the shares
resulting from such a change shall be deemed to be Company Stock within the
meaning of the Plan.
(g) "Compensation Committee" or "Committee" means the committee (or
subcommittee) appointed by the Board as described under Section 13.
(h) "Date of Grant" means the effective date of an Award granted by
the Compensation Committee.
(i) "Disability" or "Disabled" means, as to an Incentive Stock Option,
a Disability within the meaning of Section 22(e)(3) of the Code. As to all
other Awards, the Committee shall determine whether a Disability exists and
such determination shall be conclusive.
(j) "Fair Market Value" means as of the Date of Grant (or, if there
were no trades on the Date of Grant, the last preceding day on which
Company Stock was traded) (i) if the Company Stock is traded on an
exchange, the average of the highest and lowest registered sales prices of
the Company Stock at which it is traded on such date on the exchange on
which it generally has the greatest trading volume or (ii) if the Company
Stock is traded in the over-the-counter market, the average between the
closing bid and asked prices on such date as reported by NASDAQ.
(k) "Incentive Stock Option" means an Option intended to meet the
requirements of, and qualify for favorable Federal income tax treatment
under, Section 422 of the Code.
(l) "Insider" means a person subject to Section 16(b) of the
Securities Exchange Act of 1934.
(m) "Nonstatutory Stock Option" means an Option, which does not meet
the requirements of Section 422 of the Code, or even if meeting the
requirements of Section 422 of the Code, is not intended to be an Incentive
Stock Option and is so designated.
(n) "Option" means a right to purchase Company Stock granted under the
Plan, at a price determined in accordance with the Plan.
(o) "Parent" means, with respect to any corporation, a "parent
corporation" of that corporation within the meaning of Section 425(e) of
the Code.
(p) "Participant" means any employee who receives an Award under the
Plan.
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(q) "Reload Feature" means a feature of an Option described in an
employee's stock option agreement that provides for the automatic grant of
a Reload Option in accordance with the provisions described in Section
8(d).
(r) "Reload Option" means an Option granted to an employee equal to
the number of shares of already owned Company Stock delivered by the
employee to exercise an Option described in Section 8(d).
(s) "Rule 16b-3" means Rule 16b-3 of the Securities Exchange Act of
1934. A reference in the Plan to Rule 16b-3 shall include a reference to
any corresponding rule (or number redesignation) of any amendments to Rule
16b-3 enacted after the effective date of the Plan's adoption.
(t) "Stock Appreciation Right" means a right granted under the Plan to
receive amounts in cash from the Company upon the surrender of an Option.
(u) "Subsidiary" means, with respect to any corporation, a "subsidiary
corporation" of that corporation within the meaning of Section 425(f) of
the Code.
(v) "10% Shareholder" means a person who owns, directly or indirectly,
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any Parent or Subsidiary of the Company.
Indirect ownership of stock shall be determined in accordance with Section
425(d) of the Code.
(w) "Window Period" means the period beginning on the third business
day and ending on the twelfth business day following the release for
publication of quarterly or annual summary statements of the Company's
sales and earnings. The release for publication shall be deemed to have
occurred if the specified financial data (i) appears on a wire service,
(ii) appears in a financial news service, (iii) appears in a newspaper of
general circulation or (iv) is otherwise made publicly available.
3. GENERAL. Awards of Options and Stock Appreciation Rights may be granted
under the Plan. Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options.
4. STOCK. Subject to Section 12 of the Plan, there shall be reserved for
issuance under the Plan an aggregate of 1,000,000 shares of Company Stock, which
shall be authorized, but unissued shares. Shares that have not been issued under
the Heilig-Meyers Company 1990 Stock Option Plan (the "1990 Plan"), or shares
allocable to options or portions thereof that expire or otherwise terminate
unexercised under the Company's 1983 Stock Option Plan (the "1983 Plan"), the
1990 Plan or this Plan may be subjected to an Award under the Plan. Shares
allocable to Options or portions thereof granted under the Plan that expire or
otherwise terminate unexercised may again be subjected to an Award under the
Plan. The Committee is expressly authorized to make an Award to a Participant
conditioned upon the surrender for cancellation of an existing Award or Option
granted under this Plan, the 1983 Plan or the 1990 Plan. For purposes of
determining the number of shares that are available for Awards under the Plan,
such number shall, if permissible under Rule 16b-3, include the number of shares
surrendered by an optionee or retained by the Company in payment of federal and
state income tax withholding liabilities upon exercise of a Nonstatutory Stock
Option or a Stock Appreciation Right.
5. ELIGIBILITY.
(a) Any employee of the Company (or Parent or Subsidiary of the Company)
who, in the judgment of the Committee has contributed or can be expected to
contribute to the profits or growth of the Company (or Parent or Subsidiary)
shall be eligible to receive Awards under the Plan. Directors of the Company who
are employees of the Company and are not members of the Committee are eligible
to participate in the Plan. The Committee shall have the power and complete
discretion, as provided in Section 13, to select eligible employees to receive
Awards
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and to determine for each employee the terms and conditions, the nature of the
award and the number of shares to be allocated to each employee as part of each
Award.
(b) The grant of an Award shall not obligate the Company or any Parent or
Subsidiary of the Company to pay an employee any particular amount of
remuneration, to continue the employment of the employee after the grant or to
make further grants to the employee at any time thereafter.
6. STOCK OPTIONS.
(a) Whenever the Committee deems it appropriate to grant Options, notice
shall be given to the eligible employee stating the number of shares for which
Options are granted, the Option price per share, whether the Options are
Incentive Stock Options or Nonstatutory Stock Options, the extent to which Stock
Appreciation Rights are granted (as provided in Section 7), and the conditions
to which the grant and exercise of the Options are subject. This notice, when
duly accepted in writing by the eligible employee, shall become a stock option
agreement between the Company and the eligible employee.
(b) The exercise price of shares of Company Stock covered by an Option
shall be not less than 100% of the Fair Market Value of such shares on the Date
of Grant; provided, that if an Incentive Stock Option is granted to a
Participant who, at the time of the grant, is a 10% Shareholder, then the
exercise price of the Shares of the Company Stock covered by the Incentive Stock
Option shall be not less than 110% of the Fair Market Value of such shares on
the Date of Grant.
(c) An employee may not receive Awards of Options under the Plan with
respect to more than 150,000 shares of Company Stock during any "one-year
period," which for purposes of this Plan, shall mean the Company's fiscal year
beginning on March 1 of each year and ending on the last day of February of each
year.
(d) Options may be exercised in whole or in part at such times as may be
specified by the Committee in the employee's stock option agreement; provided
that the exercise provisions for Incentive Stock Options shall in all events not
be more liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after the first to
occur of (x) ten years (or, in the case of an Incentive Stock Option
granted to a 10% Shareholder, five years) from the Date of Grant, (y) three
months from the employee's retirement or termination of employment with the
Company and its parent and Subsidiary corporations for reasons other than
Disability or death, or (z) one year from the employee's termination of
employment on account of Disability or death.
(ii) Except as otherwise provided in this paragraph, no Incentive
Stock Option may be exercised unless the employee is employed by the
Company or a Parent or Subsidiary of the Company at the time of the
exercise (or was so employed not more than three months before the time of
the exercise) and has been employed by the Company or a Parent or
Subsidiary of the Company at all times since the Date of Grant. If an
employee's employment is terminated other than by reason of his Disability
or death at a time when the employee holds an Incentive Stock Option that
is exercisable (in whole or in part), the employee may exercise any or all
of the exercisable portion of the Incentive Stock Option (to the extent
exercisable on the date of termination) within three months after the
employee's termination of employment. If an employee's employment is
terminated by reason of his Disability at a time when the employee holds an
Incentive Stock Option that is exercisable (in whole or in part), the
employee may exercise any or all of the exercisable portion of the
Incentive Stock Option (to the extent exercisable on the date of
Disability) within one year after the employee's termination of employment.
If an employee's employment is terminated by reason of his death at a time
when the employee holds an Incentive Stock Option that is exercisable (in
whole or in part), the Incentive Stock Option may be exercised (to the
extent exercisable on the date of death) within one
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year after the employee's death by the person to whom the employee's rights
under the Incentive Stock Option shall have passed by will or by the laws
of descent and distribution.
(iii) An Incentive Stock Option by its terms, shall be exercisable in
any calendar year only to the extent that the aggregate Fair Market Value
(determined at the Date of Grant) of the Company Stock with respect to
which incentive stock options are exercisable for the first time during the
calendar year does not exceed $100,000 (the "Limitation Amount"). Incentive
Stock Options granted under the Plan and similar incentive options granted
after 1986 under all other plans of the Company and any Parent or
Subsidiary of the Company shall be aggregated for purposes of determining
whether the Limitation Amount has been exceeded. The Committee may impose
such conditions as it deems appropriate on an Incentive Stock Option to
ensure that the foregoing requirement is met. If Incentive Stock Options
that first become exercisable in a calendar year exceed the Limitation
Amount, the excess Options will be treated as Nonstatutory Stock Options to
the extent permitted by law.
(e) The Committee may, in its discretion, grant Options which by their
terms become fully exercisable upon a Change of Control, notwithstanding other
conditions on exercisability in the stock option agreement.
(f) The Committee may, in its discretion, grant Options containing or amend
a Nonstatutory Option previously granted to provide for a Reload Feature subject
to the limitations of Section 8(d).
7. STOCK APPRECIATION RIGHTS.
(a) Whenever the Committee deems it appropriate, Stock Appreciation Rights
may be granted in connection with all or any part of an Incentive Stock Option.
At the discretion of the Committee, Stock Appreciation Rights may also be
granted in connection with all or any part of a Nonstatutory Stock Option,
either concurrently with the grant of the Nonstatutory Stock Option or at any
time thereafter during the term of the Nonstatutory Stock Option. The following
provisions apply to all Stock Appreciation Rights that are granted in connection
with Options:
(i) Stock Appreciation Rights shall entitle the employee, upon
exercise of all or any part of the Stock Appreciation Rights, to surrender
to the Company unexercised that portion of the underlying Option relating
to the same number of shares of Company Stock as is covered by the Stock
Appreciation Rights (or the portion of the Stock Appreciation Rights so
exercised) and to receive in exchange from the Company an amount in cash or
shares of Company Stock (as provided in the Stock Appreciation Right) equal
to the excess of (x) the Fair Market Value on the date of exercise of the
Company Stock covered by the surrendered portion of the underlying Option
over (y) the exercise price of the Company Stock covered by the surrendered
portion of the underlying Option. The Committee may limit the amount that
the employee will be entitled to receive upon exercise of the Stock
Appreciation Right.
(ii) Upon the exercise of a Stock Appreciation Right and surrender of
the related portion of the underlying Option, the Option, to the extent
surrendered, shall not thereafter be exercisable.
(iii) Subject to any further conditions upon exercise imposed by the
Committee, a Stock Appreciation Right shall be exercisable only to the
extent that the related Option is exercisable, except that in no event
shall a Stock Appreciation Right held by an Insider be exercisable for cash
within the first six months after it is awarded even though the related
Option is or becomes exercisable, and shall expire no later than the date
on which the related Option expires.
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(iv) A Stock Appreciation Right may only be exercised at a time when
the Fair Market Value of the Company Stock covered by the Stock
Appreciation Right exceeds the exercise price of the Company Stock covered
by the underlying Option.
(b) The manner in which the Company's obligation arising upon the exercise
of a Stock Appreciation Right shall be paid shall be determined by the Committee
and shall be set forth in the employee's Option or the related Stock
Appreciation Rights agreement. The Committee may provide for payment in Company
Stock or cash, or a fixed combination of Company Stock or cash, or the Committee
may reserve the right to determine the manner of payment at the time the Stock
Appreciation Right is exercised. Shares of Company Stock issued upon the
exercise of a Stock Appreciation Right shall be valued at their Fair Market
Value on the date of exercise.
(c) No Stock Appreciation Right held by an Insider shall be exercisable for
cash by its terms within the first six months after it is granted.
8. METHOD OF EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS.
(a) Options and Stock Appreciation Rights may be exercised by the employee
giving written notice of the exercise to the Company, stating the number of
shares the employee has elected to purchase under the Option or the number of
Stock Appreciation Rights he has elected to exercise. In the case of the
purchase of shares under an Option, such notice shall be effective only if
accompanied by the exercise price in full in cash; provided that if the terms of
an Option so permit, the employee may (i) deliver, or cause to be withheld from
the Option Shares, shares of Company Stock (valued at their Fair Market Value on
the date of exercise) in satisfaction of all or any part of the exercise price,
(ii) deliver a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of the
sale or loan proceeds to pay the exercise price, or (iii) deliver an interest
bearing promissory note, payable to the Company, in payment of all or part of
the exercise price together with such collateral as may be required by the
Committee at the time of exercise. The interest rate under any such promissory
note shall be equal to the minimum interest rate required at the time to avoid
imputed interest to the Participant under the Code. For purposes of the method
of payment described in (a)(ii) above, the exercise shall be deemed to have
occurred on the date the Company receives the exercise notice (accompanied by
the broker instructions).
(b) The Company may place on any certificate representing Company Stock
issued upon the exercise of an Option or Stock Appreciation Right any legend
deemed desirable by the Company's counsel to comply with Federal or state
securities laws, and the Company may require of the employee a customary written
indication of his investment intent. Until the employee has made any required
payment, including any applicable withholding taxes, and has had issued to him a
certificate for the shares of Company Stock acquired, he shall possess no
shareholder rights with respect to the shares.
(c) As an alternative to making a cash payment to the Company to satisfy
tax withholding obligations, the Committee may establish procedures permitting
the Participant to elect to (i) deliver shares of already owned Company Stock or
(ii) have the Company retain the number of shares of Company Stock that would
satisfy all or a specified portion of the Federal, state and local tax
liabilities of the Participant in the year the Award becomes subject to tax. Any
such election shall be made only in accordance with procedures established by
the Committee.
(d) If an employee exercises an Option that has a Reload Feature by
delivering already owned shares of Company Stock, the employee shall
automatically be granted a Reload Option. The Reload Option shall be subject to
the following provisions:
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(i) The Reload Option shall cover the number of shares of Company
Stock delivered by the employee to the Company to exercise the Option with
the Reload Feature;
(ii) The Reload Option will not have a Reload Feature;
(iii) The exercise price of shares of Company Stock covered by a
Reload Option shall be 100% of the Fair Market Value of such shares on the
date the employee delivers shares of Company Stock to the Company to
exercise the Option that has a Reload Feature;
(iv) The Reload Option shall be subject to the same restrictions on
exercisability as those imposed on the underlying Option (possessing the
Reload Feature);
(v) The shares acquired upon the exercise of the Reload Option shall
not be disposed of until the expiration of any retention holding period
imposed on the disposition of any shares of Company Stock covered by the
underlying Option (possessing the Reload Feature).
The Committee may, in its discretion, cause the Company to place on any
certificate representing Company Stock issued to a Participant upon the exercise
of an underlying Option (possessing a Reload Feature as evidenced by the stock
option agreement for such Option) delivered pursuant to this subsection (d), a
legend restricting the sale or other disposition of such Company Stock.
9. NONTRANSFERABILITY OF AWARDS AND OPTIONS. Options and Stock Appreciation
Rights by their terms, shall not be transferable by the Participant except by
will or by the laws of descent and distribution and shall be exercisable, during
the Participant's lifetime, only by the Participant or by his guardian or legal
representative.
10. EFFECTIVE DATE OF THE PLAN. This Plan shall be effective on February 8,
1994 and shall be submitted to the shareholders of the Company for approval.
Until (i) the Plan has been approved by the Company's shareholders, and (ii) the
requirements of any applicable federal or state securities laws have been met,
no Award Option or Stock Appreciation Right shall be exercisable and no Company
Stock shall be issued under the Plan.
11. TERMINATION, MODIFICATION, CHANGE. If not sooner terminated by the
Board, this Plan shall terminate at the close of business on February 7, 2004.
No Awards shall be made under the Plan after its termination. The Board may
terminate the Plan or may amend the Plan in such respects as it shall deem
advisable; provided, that (i) if and to the extent required by the Code or Rule
16b-3, no change shall be made that materially increases the total number of
shares of Company Stock reserved for issuance pursuant to Awards granted under
the Plan (except pursuant to Section 12), materially modifies the requirements
as to eligibility for participation in the Plan, or materially increases the
benefits accruing to Participants under the Plan unless such change is
authorized by the shareholders of the Company. Notwithstanding the foregoing,
the Board may unilaterally amend the Plan and Awards as it deems appropriate to
ensure compliance with Rule 16b-3 and to cause Options to meet the requirements
of the Code and regulations thereunder. Except as provided in the preceding
sentence, a termination or amendment of the Plan shall not, without the consent
of the Participant, adversely affect a Participant's rights under an Award
previously granted to the Participant.
12. CHANGE IN CAPITAL STRUCTURE.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or merger in which the Company is the surviving corporation or
other change in the Company's capital stock (including, but not limited to, the
creation or issuance to shareholders generally of rights, options or warrants
for the purchase of common stock or preferred stock of the Company), the number
and kind of shares of stock or securities of the Company to be subject to the
Plan and to Options then outstanding or to be granted thereunder, the maximum
number of shares or securities which may be delivered under the Plan, the
exercise price and other relevant
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provisions shall be appropriately adjusted by the Committee, whose determination
shall be binding on all persons. If the adjustment would produce fractional
shares with respect to any unexercised Option, the Committee may adjust
appropriately the number of shares covered by the Option so as to eliminate the
fractional shares.
(b) If the Company is a party to a consolidation or a merger in which the
Company is not the surviving corporation, a transaction that results in the
acquisition of substantially all of the Company's outstanding stock by a single
person or entity, or a sale or transfer of substantially all of the Company's
assets, the Committee may take such actions with respect to outstanding Awards
as the Committee deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the Committee may
take the foregoing actions without the consent of any Participant, and the
Committee's determination shall be conclusive and binding on all persons for all
purposes.
(d) If a Change of Control occurs, the Committee may take such actions with
respect to outstanding Options or Awards as the Committee deems appropriate.
These actions may include, but shall not be limited to, accelerating the
expiration date of any or all outstanding Options and Awards and the dates on
which any part of the Options and Awards may be exercised, in which case they
shall be exercisable in full on dates designated by the Committee. The
effectiveness of such acceleration, and any exercise of Options and Awards
pursuant thereto with respect to shares in excess of the number of shares which
could have been exercised in the absence of such acceleration, shall be
conditioned upon the consummation of the applicable Change of Control.
13. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee (the "Committee"), consisting of not less than three Directors of the
Company, who shall be appointed by the Board of Directors. The Committee shall
be the Compensation Committee of the Board, unless the Board shall appoint
another committee (or subcommittee) to administer the Plan. If and to the extent
required by Rule 16b-3, all members of the Committee shall be "disinterested
persons," as that term is defined in Rule 16b-3. If any member fails to qualify
as a "disinterested person" (to the extent required by Rule 16b-3), such person
shall immediately cease to be a member of the Committee (or subcommittee) and
shall not take part in future Committee (or subcommittee) deliberations. The
Committee shall have general authority to impose any limitation or condition
upon an Award the Committee deems appropriate to achieve the objectives of the
Award and the Plan and, in addition, and without limitation and in addition to
powers set forth elsewhere in the Plan, shall have the following specific
authority:
(a) The Committee shall have the power and complete discretion to
determine (i) which eligible employees shall receive an Award and the
nature of the Award, (ii) the number of shares of Company Stock to be
covered by each Award, (iii) whether Options shall be Incentive Stock
Options or Nonstatutory Stock Options, (iv) when, whether and to what
extent Stock Appreciation Rights shall be granted in connection with
Options, (v) whether to include a Reload Feature in an option and to impose
limitations on the use of shares acquired through the exercise of a Reload
Option to exercise Options, (vi) the time or times when an Award shall be
granted, (vii) whether an Award shall become vested over a period of time
and when it shall be fully vested, (viii) when Options and Stock
Appreciation Rights may be exercised, (ix) whether a Disability exists, (x)
the manner in which payment will be made upon the exercise of Options or
Stock Appreciation Rights, (xi) conditions relating to the length of time
before disposition of Company Stock received upon the exercise of Options
or Stock Appreciation Rights is permitted, (xii) whether to approve a
Participant's election (X) to deliver shares of already owned Company Stock
to satisfy tax liabilities arising upon the exercise of a Nonstatutory
Stock Option or Stock Appreciation Right or (Y) to have the Company
withhold from the shares to be issued upon the exercise of a Nonstatutory
Stock Option or Stock Appreciation Right that number of shares necessary to
satisfy tax liabilities arising from such exercise, (xiii) notice
provisions
A-8

<PAGE>
relating to the sale of Company Stock acquired under the Plan, and (xiv)
any additional requirements relating to Awards that the Committee deems
appropriate. Notwithstanding the foregoing, no "tandem stock options"
(where two stock options are issued together and the exercise of one option
affects the right to exercise the other option) may be issued in connection
with Incentive Stock Options. The Committee shall also have the power to
amend the terms of previously granted Awards so long as the terms as
amended are consistent with the terms of the Plan and, where applicable,
consistent with the qualification of the Option as an Incentive Stock
Option. The consent of the Participant must be obtained with respect to any
amendment that would adversely affect a Participant's rights under the
Award, except that such consent will not be required if the amendment is
for the purpose of complying with Rule 16b-3 or any requirement of the Code
applicable to the Award.
(b) The Committee may adopt rules and regulations for carrying out the
Plan. The interpretation and construction of any provision of the Plan by
the Committee shall be final and conclusive. The Committee may consult with
counsel, who may be counsel to the Company, and shall not incur any
liability for any action taken in good faith in reliance upon the advice of
counsel.
(c) A majority of the members of the Committee shall constitute a
quorum, and all actions of the Committee shall be taken by a majority of
the members present. Any action may be taken by a written instrument signed
by all of the members, and any action so taken shall be fully effective as
if it had been taken at a meeting.
14. NOTICE. All notices and other communications required or permitted
to be given under this Plan shall be in writing and shall be deemed to have
been duly given if delivered personally or mailed first class, postage
prepaid, as follows (a) if to the Company -- at its principal business
address to the attention of the Treasurer; (b) if to any Participant -- at
the last address of the Participant known to the sender at the time the
notice or other communication is sent.
15. INTERPRETATION. The terms of this Plan are subject to all present
and future regulations and rulings of the Secretary of the Treasury or his
delegate relating to the qualification of Incentive Stock Options under the
Code and are subject to all present and future rulings of the Securities
Exchange Commission with respect to Rule 16b-3. The terms of this Plan
shall be governed by the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
this 23rd day of March, 1994.
HEILIG-MEYERS COMPANY
By s/ WILLIAM C. DERUSHA
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EXHIBIT B
ARTICLE III
The aggregate number of shares of capital stock which the Corporation shall
have authority to issue is 3,000,000 shares of Preferred Stock, par value $10.00
per share, and 250,000,000 shares of Common Stock, par value $2.00 per share.
B-1

<PAGE>
HEILIG-MEYERS COMPANY
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints David W.
Robertson and Troy A. Peery, Jr., or either of them, each with full power of
substitution, as proxies for the undersigned, and hereby authorizes them to
represent and to vote, as designated below, all of the shares of common stock of
Heilig-Meyers Company (the "Company") which the undersigned is entitled to vote
at the Annual Meeting of Shareholders of the Company to be held on June 15,
1994, at 10:30 a.m. E.D.T., or at any adjournment thereof, as fully as could the
undersigned if personally present.

1. ELECTION OF DIRECTORS ( )FOR all nominees listed ( ) WITHHOLD AUTHORITY to
below (except as marked vote for all nominees
to the contrary below) listed below

(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
William C. DeRusha, Troy A. Peery, Jr., Alexander Alexander, Robert L. Burrus,
Jr., Arthur D. Charpentier, Benjamin F. Edwards, III,
Alan G. Fleischer, Nathaniel Krumbein, Hyman Meyers, S. Sidney Meyers,
Lawrence N. Smith, George A. Thornton, III
2. ADOPTION OF 1994 STOCK OPTION PLAN.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. AMENDMENT OF THE RESTATED ARTICLES OF INCORPORATION to increase the number of
shares of Common Stock which the Company is authorized to issue to
250,000,000 shares.
( ) FOR ( ) AGAINST ( ) ABSTAIN
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)

<PAGE>
4. RATIFICATION OF THE SELECTION of Deloitte & Touche as accountants and
auditors for the Company for the current fiscal year.
( ) FOR ( ) AGAINST ( ) ABSTAIN
5. IN THEIR DISCRETION upon any other matters which may properly come before the
meeting or any adjournment thereof.
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES TO WHICH IT
RELATES WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THE SHARES
TO WHICH IT RELATES WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS LISTED ON
THE REVERSE SIDE, AND FOR ITEMS 2, 3, AND 4.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
Receipt of the Board of Directors' Notice of and Proxy Statement for the
Annual Meeting of Shareholders to be held on June 15, 1994 is hereby
acknowledged.
Dated , 1994

Signature

Signature if held jointly
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE.