UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15 (d) of the Securities
Exchange
Act of 1934 [Fee Required]
For the fiscal year ended February 29, 1996 or
Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 1-8484
HEILIG-MEYERS COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-0558861
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2235 Staples Mill Road, Richmond, Virginia 23230
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 359-9171
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
Common Stock, $2.00 New York Stock Exchange
Par Value Pacific Stock Exchange
Rights to purchase Preferred New York Stock Exchange
Stock, Series A, $10.00 Pacific Stock Exchange
Par Value
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 of 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to the filing requirements for at least the past 90 days. Yes
X No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of May 1, 1996 was approximately $788,201,568.
<PAGE 1>
This figure was calculated by multiplying (i) the closing sales price
of the registrant's common stock on the New York Stock Exchange on May 1,
1996 by (ii) the number of shares of the registrant's common stock not held
by the officers or directors of the registrant or any persons known to the
registrant to own more than five percent of the outstanding common stock of
the registrant. Such calculation does not constitute an admission or
determination that any such officer, director or holder of more than five
percent of the outstanding common stock of the registrant is in fact an
affiliate of the registrant.
As of May 1, 1996, there were outstanding 48,592,321 shares of the
registrant's common stock, $2.00 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for its Annual Meeting of
Shareholders scheduled for June 19, 1996, are incorporated by reference into
Part III.
<PAGE 2>
INDEX
PART 1
ITEM 1. BUSINESS Page
A. Introduction 4
B. Industry Segments 4
C. Nature of Business
General 4
Competition 5
D. Store Operations
General 5
Merchandising 6
Advertising and Promotion 6
Credit Operations 7
Distribution 8
Customer Service 8
E. Corporate Expansion 9
F. Other Factors Affecting the Business of Heilig-Meyers
Suppliers 9
Service Marks, Trademarks and Franchise Operations 9
Seasonality 10
Employees 10
Foreign Operations and Export Sales 10
ITEM 2. PROPERTIES 10
ITEM 3. LEGAL PROCEEDINGS 11
ITEM 4. SUBMISSION of MATTERS to a VOTE of SECURITY HOLDINGS 11
PART II
ITEM 5. MARKET for REGISTRANT'S COMMON EQUITY and
RELATED STOCKHOLDER MATTERS 14
ITEM 6. SELECTED FINANCIAL DATA 15
ITEM 7. MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS 17
ITEM 8. FINANCIAL STATEMENTS and SUPPLEMENTARY DATA 22
ITEM 9. CHANGES in and DISAGREEMENTS with ACCOUNTANTS
on ACCOUNTING and FINANCIAL DISCLOSURE 38
PART III
ITEM 10. DIRECTORS and EXECUTIVE OFFICERS of the REGISTRANT 39
ITEM 11. EXECUTIVE COMPENSATION 39
ITEM 12. SECURITY OWNERSHIP of CERTAIN BENEFICIAL OWNERS
and MANAGEMENT 39
ITEM 13. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS 39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, and
REPORTS on FORM 8-K 39
<PAGE 3>
PART 1
ITEM 1. BUSINESS
A. Introduction
Heilig-Meyers Company (the "registrant"), which together with its
predecessors and subsidiaries, sometimes hereinafter referred to as the
"Company," is engaged primarily in the retail sale of home furnishings. 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 registrant, a Virginia
corporation, in June 1972.
The Company has grown in recent years, in part, through a series of
acquisitions. The following represent the largest acquisitions in the last
five years. In October 1992, the Company acquired the assets of 14 stores
from Wolf Furniture Enterprises, Inc. In June 1993, the Company acquired
the assets of 11 stores from L. Fish, Inc. In January 1994, the Company
acquired certain assets relating to 92 stores of McMahan's Furniture
Company. In August 1994, the Company acquired the assets of 9 stores from
Nelson Brothers Furniture Company. In February 1995, the Company acquired
certain assets relating to the operations of 17 stores owned by Berrios
Enterprises of Caguas, Puerto Rico. Most recently, in October 1995, the
Company purchased certain assets relating to the operations of 9 stores
formerly operated by BWAC International of San Juan, Puerto Rico. All of
the Company's Puerto Rican stores operate under the "Berrios" name.
B. Industry Segments
The Company considers that it is engaged primarily in one line of
business, the sale of home furnishings, and has one reportable industry
segment. Accordingly, data with respect to industry segments has not been
separately reported herein.
C. Nature of Business
General
The Company is the nation's largest publicly held specialty retailer
of home furnishings with 716 stores (as of February 29, 1996), 688 of which
are located in 26 states and 28 of which are located in Puerto Rico. The
Company's stores are primarily located in small towns and rural markets in
the Southeast, Midwest, West and Southwest of the continental United States.
The Company's operating strategy includes:
- Offering a broad selection of competively priced home
furnishings including furniture, consumer electronics,
appliances, bedding and floor coverings
- Locating stores primarily in small towns and rural markets which
are at least 25 miles from a metropolitan area
- Offering in-house credit programs to provide flexible financing
to its customers
- Utilizing centralized inventory and distribution systems in
strategic regional locations to support store inventory and
merchandise delivery operations
- Emphasizing customer service, including free delivery on most
major purchases and repair service for consumer electronics and
other mechanical items
<PAGE 4>
The Company believes this strategy of offering selection, credit, delivery
and service generally allows it to have the largest market share among home
furnishings retailers in most of its small-town markets.
Competition
The retail home furnishings industry is a highly competitive and
fragmented market. Heilig-Meyers, as a whole, competes with large chains,
independent stores, discount stores, furniture stores, specialty stores and
others, some of which have financial resources greater than those of the
Company, and some of which derive revenues from the sale of products other
than home furnishings. The Company believes that locating stores in small
towns and rural markets provides an important competitive advantage.
Currently, approximately 80% of all stores are located in towns with
populations under 50,000 and more than 25 miles from a metropolitan market.
As the majority of other furniture chains locate their stores in larger
cities, competition in these small towns largely comes from locally-owned
store operations which generally lack the financial strength to compete
effectively with the Company. Due to volume purchasing, the Company
believes it is generally able to offer merchandise at lower prices than its
competitors, especially local independent and regional specialty furniture
retailers. In addition, management believes that it offers a broader
selection of merchandise than many of its competitors. Consequently, the
Company believes that its stores have the largest market share among home
furnishings retailers in the majority of their areas.
Based on its experience, the Company believes its competitive
environment is comparable in all geographic regions in which it operates.
Therefore, the Company does not believe that a regional analysis of its
competitive market is meaningful at this time.
D. Store Operations
General
The Company's stores generally range in size from 10,000 to 35,000
square feet, with the average being approximately 20,000 square feet. A
store's attached or nearby warehouse usually measures from 3,000 to 5,000
square feet. A typical store is designed to give the customer an urban
shopping experience in a rural location. During the last four years, the
Company has revitalized its prototype store construction program. The
Company's most recent version of its prototype stores opened in fiscal 1993.
The Company added 3 of these stores in fiscal 1994, 7 in fiscal 1995, 8 in
fiscal 1996 and plans to add up to 13 more for fiscal 1997. The prototype
stores feature the latest display techniques and construction efficiencies.
Certain features of these prototype stores are incorporated into other
locations through the Company's ongoing remodeling program. The Company's
existing store remodeling program, under which stores are remodeled on a
rotational basis, provides the Company's older stores with a fresh look and
up-to-date displays on a periodic basis. During fiscal 1996, the Company
remodeled 55 existing stores and approximately 115 additional remodelings
are planned for fiscal 1997.
All operations of the Company are managed as one line of business.
Each store unit is managed by an on-site manager responsible for day-to-day
store operations including installment credit extension and collection.
Stores are grouped into divisions and regions for executive management
purposes.
The Company has an extensive in-house education program to train new
employees in its operations and to keep current employees informed of the
Company's policies. This training program emphasizes sales productivity,
credit extension and collection, and store administration. The training
program utilizes the publication of detailed store manuals, internally
produced training videotape and Company-conducted classes for employees.
The Company also has an in-store manager training program which provides
potential managers hands-on experience in all aspects of store operations.
<PAGE 5>
The Company's ongoing education program is designed to provide a sufficient
number of qualified personnel for its stores.
In recent years, the Company has enhanced operating systems to
increase the availability and effectiveness of management information and
to provide a foundation for planned future growth. In fiscal 1995, the
Company made improvements to inventory management by use of just-in-time
ordering and backhauling. Also during fiscal 1995, the Company completed
a conversion to updated hardware providing a foundation for numerous system
enhancements. In fiscal 1996, the Company completed the installation of a
new satellite system. This system provides immediate communication between
the Company's corporate headquarters, stores and distribution centers. As
a result, the Company believes customer service has been improved by
providing store management more timely access to information related to
product availability. This system is also expected to provide the means for
the Company to implement its new inventory reservation system in addition
to enhance target marketing programs.
Merchandising
The Company's merchandising strategy is to offer a broad selection of
competitively priced home furnishings, including furniture and accessories,
consumer electronics, appliances, bedding, and other items such as jewelry,
small appliances and seasonal goods. During the fiscal year ended February
29, 1996, approximately 58% of the Company's sales were derived from
furniture and accessories; 12% from consumer electronics; 11% from bedding;
9% from appliances; with the remaining 10% being divided among other items
such as jewelry, small appliances and seasonal goods. These percentages
have not varied significantly over the past four fiscal years.
The Company carries a wide variety of items within each merchandise
category to appeal to individual tastes and preferences. The Company
believes this broad selection of products has enabled it to expand its
customer base and increase repeat sales to existing customers. By carrying
seasonal merchandise (heaters, air conditioners, lawn mowers, outdoor
furniture, etc.), the Company has been able to moderate seasonal
fluctuations in sales common to its industry.
While the basic merchandise mix remained fairly constant during fiscal
1996, the Company continued to refine its merchandise selections to
capitalize on variations in customer preferences. In fiscal 1997, the
Company plans to implement (in certain markets) a new merchandising program
referred to as "MUST 2000." This program is designed to provide store
management more flexibility when implementing merchandise line-ups with
emphasis on product categories, styles and price points best suited for each
individual store. During fiscal 1996, the Company continued to strengthen
its vendor relationships. In addition to providing purchasing advantages,
these relationships provide warehousing and distribution arrangements which
improve inventory management.
Advertising and Promotion
Direct mail circulars are a key part of the Company's marketing
progam. The Company centrally designs its direct mail circulars which
accounted for approximately 43% of the Company's advertising expenses in
fiscal 1996. In fiscal 1996, the Company distributed over 160 million
direct mail circulars. This included monthly circulars sent by direct mail
to over ten million households on the Company's mailing list and special
private sale circulars mailed to over two million of these households each
month, as well as during special promotional periods.
In addition to the Company's utilization of direct mail circulars,
television and radio commercials are produced centrally and aired in
virtually all of the Company's markets. Newspaper and radio advertising is
placed largely at the store level. In fiscal 1996, the Company utilized
Spanish language television and radio in selected markets with significant
Hispanic populations. The Company also regularly conducts approximately 40
<PAGE 6>
company-wide promotional events each year. In addition to these events,
individual stores periodically conduct promotional events locally. Besides
the conventional marketing techniques noted above, Heilig-Meyers has sought
alternative methods to increase the Company's name recognition and customer
appeal. In fiscal 1996, the Company continued its sponsorship of the
Heilig-Meyers NASCAR Racing Team as a means of enhancing the Company's name
recognition among the millions of NASCAR fans in its market areas.
During fiscal 1996, the Company continued to utilize market
segmentation techniques (begun in fiscal 1994) to identify prospective
customers by matching their demographics to those of existing customers.
Management believes ongoing market research and improved mailing techniques
enhance the Company's ability to place circulars in the hands of potential
customers most likely to make a purchase. The Company believes that the
availability, as well as the terms of credit, are key determinants in the
purchase decision, and therefore, promotes credit availability by disclosing
monthly payment terms in its circulars. Historically, expenses for
advertising and promotion have been between 6% and 8% of sales. Advertising
expense was above its historical levels in fiscal 1996 at approximately 8.4%
of sales. This was the result of increased promotional activity in response
to the sluggish home furnishings retail environment.
Credit Operations
The Company believes that offering flexible, in-house credit is an
important part of its business strategy which provides a significant
competitive advantage. Because installment credit is administered at the
store level, terms can generally be tailored to meet the customer's ability
to pay. Each store has a credit manager who, under the store manager's
supervision, is responsible for extending and collecting that store's
accounts in accordance with corporate guidelines. Because Company
representatives work with customers on a local level, they can often extend
credit, without significantly increasing the risk of nonpayment, to
customers who may not qualify for credit under bank card programs or from
competitors who typically use strict, impersonal credit extension models.
The Company believes its credit program fosters customer loyalty and
repeat business. Historically, approximately 80% of the Company's sales
have been made through the Company's installment credit program. Although
the Company extends credit for terms up to 24 months, the average term of
the installment obligation for the fiscal year ended February 29, 1996, was
approximately 17 months. The Company accepts major credit cards in all of
its stores and, in addition, offers a revolving credit program featuring its
private label credit card. The Company promotes this program by direct
mailings to revolving credit customers of acquired stores and potential new
customers in targeted areas. Credit extension and collection of revolving
accounts are handled centrally from the Company's credit center located at
its corporate office.
Revenue is recognized on installment and credit sales upon approval
and establishment of a delivery date, which does not materially differ from
recognition at time of shipment. The effect of sales returns prior to
shipment date have been immaterial. Finance charges are included in
revenues on a monthly basis as earned. During fiscal 1996, finance income
amounted to $182,426,000 or approximately 13.4% of total revenues. The
Company is unable to estimate accurately the contribution of its financing
operations to net income because the Company does not specifically allocate
various costs and expenses of operations between retail sales and credit
operations.
The Company offers, but does not require, one or more of the following
credit insurance products at the time of a credit sale: property, life,
disability and unemployment insurance. The Company's employees enroll
customers under a master policy issued by an unrelated third party insurer
with respect to these credit insurance products.
<PAGE 7>
Distribution
The Company currently operates seven distribution centers in the
continental U.S. and one center in Puerto Rico. These centers are located
in Orangeburg, South Carolina; Rocky Mount, North Carolina; Russellville,
Alabama; Mount Sterling, Kentucky; Thomasville, Georgia; Moberly, Missouri;
Fontana, California; and Cidra, Puerto Rico. In fiscal 1995, the Company
expanded the Rocky Mount, Russellville, and Mount Sterling distribution
centers to meet increased volume demands. These additions added the
equivalent of one distribution center. During fiscal 1996, the Company
expanded the Moberly distribution center with a 150,000 square foot
addition. Currently, the Company's distribution network has the capacity to
service over 800 stores in the continental U.S. The Company plans to open
an eighth distribution center in Athens, Texas in late fiscal 1997 to
service expected growth in Texas, Oklahoma and Louisiana. With this
addition, the number of stores the Company will be able service in the
continental U.S. will increase to approximately 900.
The Company utilizes several sophisticated design and management
techniques to increase the operational efficiency of its distribution
network. These include cantilever racking and computer-controlled random-
access inventory storage. Use of direct shipping and backhauling from
vendors has also enhanced distribution efficiency. Backhauling from vendors
is the transportation of purchased inventory to the distribution center
while returning from normal store deliveries. The Company backhauled
approximately 18% of its purchased inventory in the continental U.S. in
fiscal 1996.
Typically, each of the Company's stores is located within 250 miles
of one of the seven distribution centers. The Company operates a fleet of
trucks which delivers merchandise to each store at least twice a week. The
Company believes the use of the distribution centers enables it to make
available a broader selection of merchandise, to reduce inventory
requirements at individual stores, to benefit from volume purchasing, to
provide prompt delivery to customers and to minimize freight costs.
Customer Service
The Company believes that customer service is an important element for
success in the retail furniture business and therefore provides a broad
range of services to its customers. These include, in most markets, free
home delivery of major purchases and set-up in the home, as well as liberal
policies with respect to exchanges and returns. In addition, the Company
offers service agreements on certain merchandise sold in its stores. The
Company sells substantially all of its service policies to third parties and
recognizes service policy income on these at the time of sale. Prior to
fiscal 1995, the Company retained a portion of its service policies and
deferred recognition of the related income along with the direct cost of
acquiring the contracts. Income on these contracts is being earned over the
life of the service policies.
In addition, the Company provides repair services on virtually all
consumer electronics and mechanical items sold in its stores. The Company
operates service centers in Fayetteville, North Carolina, Moberly, Missouri
and Fontana, California. The Fayetteville Service Center occupies
approximately 40,000 square feet and has the capacity to process 2,000
repair jobs a week. The Moberly Service Center occupies 35,000 square feet
adjacent to the Moberly, Missouri Distribution Center and has the capacity
to process 2,000 repair jobs a week. The Fontana service center occupies
15,000 square feet and has the capacity to process 500 repair jobs a week.
The service centers provide service for all consumer electronic items, most
mechanical items (except major appliances which are serviced locally) and
watches. The service centers are also authorized to perform repair work
under certain manufacturers' warranties. Service center trucks visit stores
weekly, allowing one week turnaround on most repair orders.
<PAGE 8>
E. Corporate Expansion
The Company has grown from 322 stores at February 28, 1991, to 716
stores at February 29, 1996. Over this time period, the Company has
expanded from its traditional Southeast operating region into the Midwest,
West, Southwest, and outside the continental United States into Puerto Rico.
The Company currently operates stores in Alabama, Arizona, Arkansas,
California, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky,
Louisiana, Mississippi, Missouri, Nevada, North Carolina, New Mexico, Ohio,
Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West
Virginia, Wisconsin and Puerto Rico. Growth in the number of stores comes
primarily from three sources: acquisition of chains or independent stores,
refurbishing of existing retail space and new construction. During the
fiscal year ended February 29, 1996, the Company opened 72 stores and closed
3 stores for a net increase of 69 stores. Of these, 11 are in Puerto Rico,
6 are in Illinois, 2 are in Ohio, 2 are in Iowa, 7 are in Mississippi, 5 are
in Missouri, 9 are in Florida, 4 are in Georgia, 2 are in Arizona, 1 is in
South Carolina, 1 is in West Virginia, 1 is in Wisconsin, 4 are in
California, 4 are in Kentucky, 5 are in North Carolina, 1 is in Colorado,
1 is in Texas, 1 is in Oklahoma and 5 are in Louisiana. During fiscal 1996,
1 store in North Carolina, 1 store in Illinois, and 1 store in California
were closed. Of the 72 new stores, 41 were existing furniture stores
acquired by the Company in separate transactions, 23 were operations begun
by the Company in vacant existing buildings and 8 were prototype stores
built according to the Company's specifications.
The Company constantly evaluates opportunities for further expansion
of its business. The Company plans to add approximately 70 to 80 stores in
the continental U.S. during fiscal 1997 by seeking acquisitions of existing
businesses, obtaining and renovating existing retail space or constructing
new prototype stores in selected small towns. Most fiscal 1997 expansion
is expected to be focused in Texas, Louisiana, and Oklahoma due to the
proximity of the new Athens, Texas distribution center. In addition, the
Company plans to add two new stores in Puerto Rico during fiscal 1997. In
selecting new locations, the Company intends to follow its established
strategy of generally locating stores within 250 miles of a distribution
center and in towns with populations of 5,000 to 50,000 and over 25 miles
from the closest metropolitan market. The Company believes that it has
substantial growth potential in its present and contiguous market areas.
F. Other Factors Affecting the Business of Heilig-Meyers
Suppliers
During the fiscal year ended February 29, 1996, the Company's ten
largest suppliers accounted for approximately 32% of merchandise purchased.
The Company has no long-term contracts for the purchase of merchandise. In
the past, the Company has not experienced difficulty in obtaining
satisfactory sources of supply and believes that adequate alternative
sources of supply exist for the types of merchandise sold in its stores.
Neither the Company nor its officers or directors have an interest, direct
or indirect, in any of its suppliers of merchandise other than minor
investments in publicly held companies.
Service Marks, Trademarks and Franchise Operations
The marks "Heilig-Meyers", "MacSaver", "MacSaver, design of a
Scotsman", other marks acquired through various acquisitions and the
Company's distinctive logo are federally registered service marks of the
Company. The Company has registrations for numerous other trademarks and
service marks routinely used in the Company's business. These registrations
can be kept in force in perpetuity through continued use of the marks and
timely applications for renewal.
<PAGE 9>
The mark "Berrios" is a federally registered service mark of the
Company. The Company has also applied for certain other trademarks and
service marks for use in connection with its stores in Puerto Rico.
Seasonality
Quarterly fluctuations in the Company's sales are insignificant.
Employees
As of February 29, 1996, the Company employed approximately 13,500
persons full- or part-time in the continental United States, of whom
approximately 12,750 worked in the Company's stores, distribution centers
and service centers, with the balance in the Company's corporate offices.
As of February 29, 1996, the Company employed appoximately 900 persons full-
or part-time in Puerto Rico, of whom approximately 780 worked in the stores
and distribution center, with the balance in the corporate office. The
Company is not a party to any union contract and considers its relations
with its employees to be excellent.
Foreign Operations and Export Sales
The Company has no foreign operations and makes no export sales.
ITEM 2. PROPERTIES
As of February 29, 1996, 459 of the Company's stores (continental U.S.
only) are on a single level with approximately 80% of floor space devoted
to sales and 20% used as a warehouse primarily for merchandise being
prepared for delivery and for items customers carry with them. These stores
are typically located away from the center of town. The remaining 231
stores (continental U.S.) generally are in older two- or three-level
buildings in downtown areas. Usually there is no warehouse space in these
older buildings and the stores' warehouses are located in nearby buildings.
Of the 28 stores located in Puerto Rico, two are single level with the
remaining stores occupying multi-level dwellings. Two of these stores
occupy more than one building.
As of February 29, 1996, the Company owned 80 of its stores, three of
its distribution centers and the Fayetteville, North Carolina Service
Center. The Company leases the remaining stores, the remaining distribution
centers, its corporate headquarters located at 2235 Staples Mill Road,
Richmond, Virginia and other office space. Rentals generally are fixed
without reference to sales volume although some leases provide for increased
rent due to increases in taxes, insurance premiums or both. Some renewal
options are tied to changes in the Consumer Price Index. Total rental
payments for properties for the fiscal year ended February 29, 1996, were
approximately $40,684,000. All vehicles placed in service after March 14,
1990, a majority of the distribution centers' material handling equipment
placed in service after February 27, 1991 and a majority of the Company's
data processing equipment are also leased. The Company believes that its
facilities are adequate at present levels of operations.
<PAGE 10>
ITEM 3. LEGAL PROCEEDINGS
The Company previously reported involvement in certain cases regarding
non-filing fees charged by the Company on certain credit transactions. Non-
filing fees are used to obtain insurance in lieu of filing a financial
statement to perfect a security interest in connection with a credit
transaction. The plaintiffs in the cases are alleging that the Company's
charging of the non-filing fees violates certain state and federal statutes
and are seeking statutory damages and unspecified punitive damages. Whitson
et al v. Heilig-Meyers Furniture Company was filed in the Circuit Court of
Calhoun County, Alabama on December 30, 1993 and was subsequently removed
to the United States District Court for the Northern District of Alabama
(Eastern Division). The Court approved the terms of a settlement of this
case on January 29, 1996. This settlement is not expected to have a
material impact on the Company's financial statements. Kirby et al v.
Heilig-Meyers Furniture Company and Heilig-Meyers Company was filed in the
United States District Court for the Southern District of Mississippi
(Hattiesburg District) on April 10, 1995. The plaintiffs in this case
requested certification of a class in all states except Alabama and
Georgia. On February 12, 1996, plaintiffs in this case withdrew their motion
for national class certification and moved to substitute a Mississippi class in
its place. The Company has moved to dismiss this case and for summary denial
of this class certification motion. The Company intends to vigorously
defend this case.
The Company has previously reported Inman, et al v. Heilig-Meyers
Furniture Company, et al (filed on May 12, 1994 in the Circuit Court of
Fayett County, Alabama), in which a class consisting of certain of its
Alabama customers has been conditionally certified. The plaintiffs seek
compensatory and punitive damages related to the Company's charges for
certain credit insurance products. The Company and plaintiffs have reached
a settlement agreement which has received approval from the Court and
which is not expected to be a significant amount to the Company.
In addition, the Company is party to various legal actions and
administrative proceedings and subject to various claims arising in the
ordinary course of business, including claims relating to its charges in
connection with credit sales. Based on the best information presently
available, the Company believes that the disposition of these matters will
not have a material adverse impact on the financial statements of the
Company.
ITEM 4. SUBMISSION of MATTERS to a VOTE of SECURITY HOLDERS
None.
<PAGE 11>
Executive Officers of the Registrant
The following table sets forth certain information with respect to the
executive officers of the Company as of May 2, 1996:
Positions with the Company
or Principal Occupation for
Years with the Past Five Years and
Name Age the Company Other Information
William C. DeRusha 46 27 Chairman of the Board since
April 1986. Chief Executive
Officer since April 1984.
Director since January 1983.
Troy A. Peery, Jr. 50 24 President since April 1986.
Chief Operating Officer since
December 1987. Director since
April 1984.
James F. Cerza, Jr. 48 8 Executive Vice President,
since April 1995. Executive
Vice President, Operations
from August 1989 to
April 1995.
Joseph R. Jenkins 50 8 Executive Vice President and
Chief Financial Officer since
January 1988.
James R. Riddle 54 11 Executive Vice President, since
April 1995. Executive Vice
President, Marketing from
January 1988 to April 1995.
William J. Dieter 56 23 Senior Vice President,
Accounting since April 1986.
Chief Accounting Officer
since 1975.
Roy B. Goodman 39 16 Senior Vice President, Finance;
Secretary and Treasurer since
April 1995. Vice President,
Secretary and Treasurer from
1987 to April 1995.
William E. Helms 47 17 Senior Vice President,
Corporate Expansion since
May 1987.
<PAGE 12>
Curtis C. Kimbrell 50 5 Senior Vice President,
Operations since April
1995. Regional Vice President
from March 1994 to April
1995. Division Supervisor
from 1991 to March 1994.
H.C. Poythress 53 4 Senior Vice President,
Advertising since March
1993. Vice President,
Advertising from July 1991 to
March 1993. Vice President,
Advertising, Lowes, Inc.
prior to July 1991.
Ronald M. Ragland 54 32 Senior Vice President,
Human Resources and
Training, since March 1993.
Vice President, Human
Resources and Training
from April 1985 to March 1993.
John H. Sniffin 54 27 Senior Vice President,
Government Relations, since
August 1992. Senior Vice
President, Merchandising
Administration from March
1989 to August 1992.
A. R. Weiler 60 1 Senior Vice President,
Merchandising since April
1995. Chairman and CEO of
Chittenden & Eastman from
January 1985 to February 1995.
<PAGE 13>
PART II
Item 5. MARKET for REGISTRANT'S COMMON EQUITY and RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the New York and Pacific Stock
Exchanges under the symbol HMY. The table below sets forth the high and low
prices as reported on the New York Stock Exchange Composite Tape, and
dividend information for each of the last eight fiscal quarters.
Fiscal Year High Low Dividends
1996
4th Quarter $ 20 7/8 $ 13 1/2 $ .07
3rd Quarter 24 1/8 17 1/2 .07
2nd Quarter 27 1/4 21 1/2 .07
1st Quarter 24 1/8 19 5/8 .07
1995
4th Quarter $ 29 $ 23 3/8 $ .06
3rd Quarter 30 5/8 24 3/8 .06
2nd Quarter 30 1/4 23 1/4 .06
1st Quarter 36 25 .06
There were approximately 2,300 shareholders of record as of February
29,
1996.
The Company has paid cash dividends in every year since fiscal 1976.
The Board of Directors intends to continue its present policy of paying regular
quarterly dividends when justified by the financial condition of the
Company.
The amount of future dividends, if any, will depend upon general business
conditions, earnings, capital requirements and such other factors as the
Board may deem relevant. The Company's payment of dividends is restricted,
under certain covenants in loan agreements, to $133,767,000 plus 75% of net
earnings adjusted for dividend payouts subsequent to February 29, 1996.
<PAGE 14>
Item 6. SELECTED FINANCIAL DATA
FISCAL YEAR 1996 1995 1994 1993 1992
(Dollar amounts in thousands except per share data)
Earnings Statement Data:
Sales $1,138,506 $ 956,004 $ 723,633 $549,660 $436,664
Annual growth in sales 19.1% 32.1% 31.7% 25.9% 15.9%
Other income $ 220,843 $ 196,135 $ 140,156 $107,883 $ 83,229
Total revenues 1,359,349 1,152,139 863,789 657,543 519,893
Annual growth in revenue 18.0% 33.4% 31.4% 26.5% 16.1%
Costs of sales $ 752,317 $ 617,839 $ 460,284 $351,361 $276,971
Gross profit margin 33.9% 35.4% 36.4% 36.1% 36.6%
Selling, general and
administrative expense$ 436,361 $ 350,093 $ 260,161 $200,071 $160,393
Interest expense 40,767 32,889 23,834 23,084 21,389
Provision for doubtful
accounts 65,379 45,419 32,356 24,185 20,298
Provision for income taxes 23,021 39,086 32,158 20,833 13,858
Effective income tax rate 35.7% 36.9% 36.9% 35.4% 33.9%
Earnings margin 3.7% 7.0% 7.6% 6.9% 6.2%
Cumulative effect of
accounting change --- --- --- --- ---
Net earnings $ 41,504 $ 66,813 $ 54,996 $ 38,009 $ 26,984
Earnings per share:
Primary .84 1.34 1.12 0.84 0.64
Fully diluted .84 1.34 1.12 0.83 0.63
Net earnings per share:
Primary .84 1.34 1.12 0.84 0.64
Fully diluted .84 1.34 1.12 0.83 0.63
Cash dividends per share .28 0.24 0.20 0.16 0.14
Balance Sheet Data:
Total assets $1,288,960$1,208,937 $1,049,633 $766,485 $636,576
Average assets per store 1,800 1,869 1,841 1,803 1,702
Accounts receivable, net518,969 538,208 535,437 397,974 315,949
Inventories 293,191 253,529 184,216 131,889 119,803
Property and equipment,
net 216,059 203,201 168,142 126,611 108,758
Additions to property
and equipment 40,366 49,101 36,252 27,426 24,010
Short-term debt 207,812 167,925 210,318 163,171 42,086
Long-term debt 352,631 370,432 248,635 176,353 226,112
Average debt per store 783 832 805 799 717
Stockholders' equity 518,983 490,390 433,229 305,555 263,928
Stockholders' equity
per share 10.69 10.10 8.95 6.87 6.07
Other Financial Data:
Working capital $ 527,849$ 554,096 $ 453,175 $322,796 $355,975
Current ratio 2.4 2.9 2.4 2.3 4.1
Debt to equity ratio 1.08 1.10 1.06 1.11 1.02
Debt to debt and equity 51.9% 52.3% 51.4% 52.6% 50.4%
Rate of return on
average assets (1) 5.4% 7.8% 7.7% 7.5% 7.1%
Rate of return on
average equity 8.2% 14.5% 14.9% 13.3% 12.0%
Number of stores 716 647 570 425 374
Number of employees 14,383 13,063 10,536 7,850 6,700
Average sales
per employee $ 83$ 81 $ 79 $ 76 $ 69
<PAGE 15>
SELECTED FINANCIAL DATA, cont.
FISCAL YEAR 1996 1995 1994 1993 1992
(Dollar amounts in thousands except per share
data)
Weighted average common
shares outstanding:
(in thousands)
Primary 49,604 49,954 49,103 45,356 42,123
Fully diluted 49,645 49,954 49,281 45,644 42,417
Price range on common
stock per share:
High $ 27 1/4 $36 $39 $22 3/8 $14 5/8
Low 13 1/2 23 1/4 19 3/8 10 5/8 7 3/4
Close 14 23 5/8 33 19 7/8 14 1/8
Per share amounts reflect three-for-two stock splits distributed in
November 1992 and July 1993.
(1) Calculated using earnings before interest, net of tax.
<PAGE 16>
Item 7. MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL
CONDITION and RESULTS of OPERATIONS
RESULTS OF OPERATIONS
Highlights of operations expressed as a percentage of sales are as
follows:
Fiscal Year
1996 1995 1994
Other income 19.4% 20.5% 19.4%
Costs of sales 66.1 64.6 63.6
Selling, general and
administrative expense 38.3 36.6 36.0
Interest expense 3.6 3.4 3.3
Provision for doubtful
accounts 5.7 4.8 4.5
Earnings before provision for
income taxes 5.7 11.1 12.0
Provision for income taxes 2.0 4.1 4.4
Net earnings 3.7 7.0 7.6
Revenues
Sales for fiscal 1996 compared to the two previous periods are shown
below:
Fiscal Year
1996 1995 1994
Sales (in thousands) $1,138,506 $956,004 $723,633
Percentage increase over
prior period 19.1% 32.1% 31.7%
Portion of increase from existing
(comparable ) stores 0.3 6.1 12.1
Portion of increase from new stores 18.8 26.0 19.6
The Company's fiscal 1996 consolidated net sales increased 19.1% to
$1,138.5 million compared with a 32.1% and a 31.7% increase in fiscal years
1995 and 1994, respectively. Sales of stores open at least a year, or
comparable store sales, increased 0.3% for the year ending February 29,
1996, compared to 6.1% and 12.1% in fiscal 1995 and fiscal 1994,
respectively. The Company's eastern stores provided 81% of total sales for
fiscal 1996, or $921.4 million, representing an 8.5% increase over fiscal
1995. The Company's West and Southwestern stores, most of which were
acquired through the purchase of certain assets of McMahan's Furniture
Company in January 1994, added $124.0 million of sales, or 11% of the total
sales, representing a 20.4% increase over fiscal 1995. The Company's 28
Puerto Rican stores contributed $93.1 million of sales, or 8% of the total
Company sales.
The Company attributes the growth in sales over the past three fiscal
years primarily to an increase in volume in both comparable stores and new
stores. Due to an overall sluggish home furnishings retail environment
during fiscal 1996, promotional pricing was utilized to a greater extent
than prior years. However, the Company's core pricing structure has
remained relatively constant over the past three fiscal years; therefore,
the impact of price changes on sales volumes has been immaterial.
Continuing operational improvements and the opening of approximately 70 to
80 new stores is expected to result in modest sales increases for the
Company in fiscal 1997.
During fiscal 1996, other income decreased to 19.4% of sales from
20.5% of sales for fiscal 1995. The decrease was primarily the result of
lower finance income, the major component of other income, as a percentage
of sales. During fiscal 1996, finance income increased at a lower rate than
sales mainly due to a larger pool of securitized accounts receivable
compared to the prior year. Interest costs related to securitized
<PAGE 17>
receivables, which are based on the dollar value of accounts receivable sold
to third parties, are netted against finance income. The Company's Puerto
Rican operations also contributed to the decrease in other income, as a
percentage of sales, during fiscal 1996. These operations have lower
installment sales as a percentage of sales compared to continental U.S.
operations. Other income, as a percentage of sales, for fiscal 1995
increased to 20.5% of sales from 19.4% of sales in fiscal 1994. Finance
income increased in fiscal 1995, as a percentage of sales, due to moderate
overall and comparable store sales growth during fiscal years 1995 and 1994.
Costs and Expenses
In fiscal 1996, costs of sales increased, as a percentage of sales,
to 66.1% from 64.6% in fiscal year 1995. Promotional pricing, in response
to the overall sluggish home furnishings retail environment, was used to a
greater extent in fiscal 1996 compared to fiscal 1995. Fixed-type cost
components within the comparable store base increased at a higher rate than
the .3% increase in comparable store sales. Fixed-type costs included in
costs of sales consist primarily of occupancy, depreciation and lease
charges related to store and distribution operations. Costs of sales
increased to 64.6% of sales in fiscal year 1995 from 63.6% in fiscal year
1994. Increased promotional pricing and delivery expenses resulting from
higher distribution costs associated with the Southwestern stores accounted
for the increase to costs of sales as a percentage of sales during fiscal
year 1995.
Selling, general and administrative expense increased to 38.3% of
sales in fiscal year 1996 from 36.6% of sales in fiscal 1995. Advertising
expense increased at a rate greater than sales primarily due to increased
advertising related to additional promotional activity implemented in
response to the sluggish sales experienced during fiscal 1996. Other cost
components such as depreciation and base salaries and related costs, which
are primarily fixed-type expenses, increased at a higher rate within the
comparable store base than the .3% comparable store sales increase. During
fiscal 1995, selling, general and administrative expenses increased to 36.6%
from 36.0% of sales in fiscal year 1994. This increase was primarily
attributable to higher advertising associated with the use of television and
radio media for the Company's stores located in major metropolitan markets
such as Chicago and Cleveland. Advertising costs also increased as the
result of the introduction of the Heilig-Meyers name in the six new states
and corresponding markets of the Company's West and Southwestern stores,
which were acquired in January, 1994. The increase in advertising was
partially offset by decreases, as a percentage of sales, in salaries and
related expenses and other selling, general and administrative expenses due
to the growing sales volume.
Interest expense increased to 3.6% of sales in fiscal 1996 from 3.4%
of sales in fiscal 1995. The increase was primarily the result of higher
weighted average long-term debt levels. Weighted average long-term debt
levels increased by $96.7 million while weighted average long-term interest
rates remained consistent with the prior year at 7.9%. Weighted average
short-term debt levels decreased $31.4 million during fiscal 1996. Weighted
average short-term interest rates increased to 6.3% in fiscal 1996 from 5.1%
in fiscal 1995. The Company continues to focus on structuring its debt
portfolio to contain a higher percentage of long-term fixed rate debt in
order to minimize the Company's exposure to future short-term interest rate
fluctuations. As an additional means of managing the risk of unfavorable
interest rate movements, the Company has entered into interest rate swap
agreements; however, these agreements have not had a significant impact on
the Company's financial position or results of operations. Interest expense
for fiscal 1995 was 3.4% of sales as compared to 3.3% of sales in fiscal
1994. The increase in fiscal 1995 was primarily the result of higher
weighted average short-term interest rates combined with higher weighted
average debt levels.
<PAGE 18>
The provision for doubtful accounts increased to 5.7% of sales in
fiscal 1996 from 4.8% of sales in fiscal 1995. A rise in the portfolio loss
rate and related write-offs applied to the growing accounts receivable base
(prior to the effect of securitizations) caused the increase during fiscal
1996. The extension of credit is constantly monitored by management to
minimize the portfolio loss rate. The provision for doubtful accounts
increased during fiscal 1995 to 4.8% of sales from 4.5% of sales in 1994.
Total portfolio write-offs for fiscal 1996, 1995 and 1994 were $66.1
million, $51.7 million and $32.9 million, respectively. Of these amounts,
$8.9 million, $7.6 million and $3.2 million were for purchased receivables,
respectively. Management believes that the allowance for doubtful accounts
of $54.7 million at February 29, 1996, is adequate.
Provision for Income Taxes and Net Earnings
The effective tax rate for fiscal 1996 was 35.7% compared to 36.9% for
both fiscal 1995 and 1994. This decrease in the effective tax rate was
primarily the result of higher fixed dollar income tax credits in the
current year and the lower effective tax rate on the Company's Puerto Rican
earnings compared to the Company as a whole.
Net earnings for fiscal 1996 decreased to $41.5 million from $66.8
million for fiscal 1995. As a percentage of sales, profit margin decreased
to 3.7% for fiscal 1996 from 7.0% for fiscal 1995. The decrease was mostly
attributable to the decline in gross margin, the increase in selling,
general and administrative expense and the increase in the provision for
doubtful accounts. As a percentage of sales, profit margin decreased to
7.0% for fiscal 1995 from 7.6% for fiscal 1994. Similar to fiscal 1996, the
decrease was mostly attributable to the decline in gross margin and increase
in advertising expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company increased its cash position $5.6 million to $16.0 million
at February 29, 1996, from $10.4 million at February 28, 1995.
Net cash inflow from operating activities was $92.5 million for fiscal
1996 compared to a net cash inflow of $114.2 million for fiscal 1995. The
Company traditionally produces a deficit in cash flow from operations
because it extends credit to its customers. However, during fiscal 1996,
the Company received proceeds of $150.0 million from the sale of accounts
receivable that was partially offset by cash outflows for growth in
inventories. Inventories increased during fiscal 1996 due mainly to the
opening of 69 stores. Similar to fiscal 1996, the net cash inflow from
operating activities in fiscal 1995 was due to the sale of $178.8 million
of accounts receivable during the year. This cash inflow was partially
offset by an increase in inventory levels due to the opening of the Fontana,
California, distribution center and 77 new stores. Continued extension of
credit and related increases in customer accounts receivable, as well as
increases in inventory related to expansion, will likely cause negative net
cash flows from operations in future periods. However, as noted above, the
Company periodically sells accounts receivable, as a source of liquidity,
providing additional positive cash flows from operating activities.
Investing activities produced negative cash flows of $95.6 million in
fiscal 1996 and $179.9 million in fiscal 1995. Capital spending, associated
with the Company's expansion program, remained consistent with fiscal 1995
expenditures. During fiscal 1996, the Company acquired certain assets
relating to the operation of nine stores from BWAC International of San
Jaun, Puerto Rico for approximately $39.1 million. The purchase price was
financed from cash flows from operations and proceeds from short-term debt.
Also during fiscal 1996, the Company expanded the Moberly, Missouri,
distribution facility by approximately 150,000 square feet. Total
expenditures for this expansion were approximately $3.7 million. In late
<PAGE 19>
fiscal 1997, the Company plans to open its eighth distribution center
located in Athens, Texas, southeast of Dallas. This facility will support
planned expansion in Texas, Louisiana and Oklahoma. During fiscal 1997, the
Company plans to open approximately 70 to 80 new stores as well as continue
its existing store remodeling program. Capital expenditures will continue
to be financed by external sources of funds and cash flows from operations.
Financing activities provided a positive net cash flow of $8.8 million
in fiscal 1996 as compared to $69.8 million in fiscal 1995. During fiscal
1996, the Company increased its notes payable to banks by $50.2 million. In
contrast, during fiscal 1995, the Company reduced its notes payable to banks
by $112.8 million while proceeds from long-term debt issuances increased by
$230.0 million. The Company has access to a variety of external capital
sources to finance asset growth and plans to continue to finance accounts
receivable, inventories and future expansion from operations supplemented
by other sources of capital. During the second quarter of fiscal 1996, the
Company replaced $300.0 million of previously existing lines of credit with
a $400.0 million revolving credit facility, of which $210.0 million was
unused at February 29, 1996. The Company has established additional lines
of credit with banks, totaling $60.0 million, all of which was unused at
February 29, 1996. The Company also has received a commitment from a bank
to borrow $60.0 million for five years, if necessary.
Total debt as a percentage of debt and equity was 51.9% at February
29, 1996, compared to 52.3% and 51.4% at February 28, 1995 and 1994,
respectively. The current ratio was 2.4 at February 29, 1996, compared to
2.9 and 2.4 for February 28, 1995 and 1994, respectively.
<PAGE 20>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Heilig-Meyers Company
Richmond, Virginia
We have audited the accompanying consolidated balance sheets of Heilig-
Meyers Company and subsidiaries as of February 29, 1996 and February 28,
1995, and the related consolidated statements of earnings, stockholders'
equity, and cash flows for each of the three years in the period ended
February 29, 1996. Our audits also included the financial statement
schedule listed in the Index at Item 14(a)2. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Heilig-Meyers Company and
subsidiaries as of February 29, 1996, and February 28, 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended February 29, 1996 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Deloitte & Touche LLP
Richmond, Virginia
March 25, 1996
<PAGE 21>
Item 8. FINANCIAL STATEMENTS and SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share data)
FISCAL YEAR 1996 1995 1994
Revenues:
Sales $1,138,506 $ 956,004 $ 723,633
Other income 220,843 196,135 140,156
Total revenue 1,359,349 1,152,139 863,789
Costs and expenses:
Costs of sales 752,317 617,839 460,284
Selling, general and administrative 436,361 350,093 260,161
Interest 40,767 32,889 23,834
Provision for doubtful accounts 65,379 45,419 32,356
Total costs and expenses 1,294,824 1,046,240 776,635
Earnings before provision
for income taxes 64,525 105,899 87,154
Provision for income taxes 23,021 39,086 32,158
Net earnings $ 41,504 $ 66,813 $ 54,996
Net earnings per share:
Primary and fully diluted $ .84 $ 1.34 $ 1.12
Weighted average common shares outstanding:
Primary 49,604 49,954 49,103
Fully diluted 49,645 49,954 49,281
Cash dividends per share
of common stock $ .28 $ .24 $ .20
See notes to consolidated financial statements.
<PAGE 22>
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value data)
FEBRUARY 29, (28) 1996 1995
Assets
Current assets:
Cash $ 16,017 $ 10,360
Accounts receivable, net 518,969 538,208
Other receivables 13,638 13,231
Inventories 293,191 253,529
Other 53,501 37,354
Total current assets 895,316 852,682
Property and equipment, net 216,059 203,201
Excess costs over net
assets acquired, net 177,585 153,054
$ 1,288,960 $ 1,208,937
Liabilities And Stockholders' Equity
Current liabilities:
Notes payable $ 190,000 $ 139,800
Long-term debt due within one year 17,812 28,125
Accounts payable 87,739 87,523
Accrued expenses 71,916 43,138
Total current liabilities 367,467 298,586
Long-term debt 352,631 370,432
Deferred income taxes 49,879 49,529
Stockholders' equity:
Preferred stock, $10 par value -- --
Common stock, $2 par value 97,143 97,096
Capital in excess of par value 120,769 120,129
Retained earnings 301,071 273,165
Total stockholders' equity 518,983 490,390
$ 1,288,960 $ 1,208,937
See notes to consolidated financial statements.
<PAGE 23>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands)
Number of
Common Capital in Total
Shares Common Excess of Retained Stockholders'
Outstanding Stock Par Value Earnings Equity
Balances at March 1, 1993 29,648 $59,296 $73,969 $172,290 $305,555
Cash dividends -- -- -- (9,303) (9,303)
Exercise of stock options, net 470 940 6,578 -- 7,518
Issuance of stock 2,300 4,600 69,863 -- 74,463
Three-for-two stock split 16,005 32,010 (32,010) -- --
Net earnings -- -- -- 54,996 54,996
Balances at February 28, 1994 48,423 96,846 118,400 217,983 433,229
Cash dividends -- -- -- (11,631) (11,631)
Exercise of stock options, net 125 250 1,729 -- 1,979
Net earnings -- -- -- 66,813 66,813
Balances at February 28, 1995 48,548 97,096 120,129 273,165 490,390
Cash dividends -- -- -- (13,598) (13,598)
Exercise of stock options, net 23 47 640 -- 687
Net earnings -- -- -- 41,504 41,504
Balance at February 29, 1996 48,571 $97,143 $120,769 $301,071 $518,983
See notes to consolidated financial statements.
<PAGE 24>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
FISCAL YEAR 1996 1995 1994
Cash flows from operating activities:
Net earnings $ 41,504 $ 66,813 $ 54,996
Adjustments to reconcile net earnings
to net cash used by operating activities:
Depreciation and amortization 29,460 23,878 20,627
Provision for doubtful accounts 65,379 45,419 32,356
Other, net (470) (406) 28
Change in operating assets and
liabilities, net of the effects
of acquisitions:
Accounts receivable (167,860) (171,137) (173,995)
Sale of accounts receivable 150,000 178,778 0
Other receivables (4,077) 3,237 (4,708)
Inventories (24,015) (44,206) (25,460)
Prepaid expenses (19,370) (9,067) (13,922)
Accounts payable 216 18,098 18,379
Accrued expenses 21,734 2,767 16,925
Net cash provided (used)
by operating activities 92,501 114,174 (74,774)
Cash flows from investing activities:
Acquisitions, net of cash acquired (51,658) (132,158) (75,473)
Additions to property and equipment (40,366) (49,101) (36,252)
Disposals of property and equipment 6,348 4,583 1,350
Miscellaneous investments (9,942) (3,184) (4,531)
Net cash used by
investing activities (95,618) (179,860) (114,906)
Cash flows from financing activities:
Issuance of stock 286 1,979 81,981
Proceeds from long-term debt -- 230,000 30,000
Increase (decrease) in notes payable, net 50,200 (112,800) 139,200
Payments of long-term debt (28,114) (37,797) (49,771)
Dividends paid (13,598) (11,631) (9,303)
Net cash provided by
financing activities 8,774 69,751 192,107
Net increase in cash 5,657 4,065 2,427
Cash at beginning of year 10,360 6,295 3,868
Cash at end of year $ 16,017 $ 10,360 $ 6,295
See notes to consolidated financial statements.
<PAGE 25>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY of SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Heilig-Meyers is a retailer of home furnishings with 716 stores as of
February 29, 1996 of which 688 are located in 26 states and 28 are located
in Puerto Rico. The Company's stores are primarily located in small towns
and rural markets in the Southeast, Midwest, West and Southwest continental
United States.
The Company's operating strategy includes offering a broad selection
of home furnishings including furniture, consumer electronics, appliances,
bedding and floor coverings. The Company offers in-house credit programs
to provide financing to its customers.
Fiscal years are designated in the consolidated financial statements
by the calendar year in which the fiscal year ends. Accordingly, results
for fiscal years 1996, 1995, and 1994 represent the years ended February 29,
1996, February 28, 1995 and February 28, 1994, respectively.
Principles of Consolidation
The consolidated financial statements include the accounts of
Heilig-Meyers Company and its subsidiaries (the "Company"), all of which are
wholly owned. All material intercompany balances and transactions have been
eliminated.
Segment Information
The Company considers that it is engaged primarily in one line of
business, the sale of home furnishings. Accordingly, data with respect to
industry segments have not been separately reported herein.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Accounts Receivable
In accordance with customary trade practice, payments on accounts
receivable due after one year are included in current assets. Provisions
for doubtful accounts are made to maintain an adequate allowance to cover
anticipated losses. The Company reviews customer accounts on an individual
basis in reaching decisions regarding methods of collection or write-off of
doubtful accounts. Generally, accounts on which payments have not been
received for six months are charged to the allowance for doubtful accounts.
Inventories
Merchandise inventories are stated at the lower of cost or market as
determined by the average cost method. Inventory costs include certain
warehouse and delivery expenses.
<PAGE 26>
Property and Equipment
Additions to property and equipment, other than capital leases, are
recorded at cost and, when applicable, include interest incurred during the
construction period. Capital leases are recorded at the lesser of fair
value or the discounted present value of the minimum lease payments.
Depreciation is computed by the straight-line method. Capital leases
and leasehold improvements are amortized by the straight-line method over
the shorter of the estimated useful life of the asset or the term of the
lease. The estimated useful lives are 7 to 45 years for buildings, 3 to 10
years for fixtures, equipment and vehicles, and 10 to 15 years for leasehold
improvements.
Excess Costs over Net Assets Acquired
Excess costs over net assets acquired are being amortized over periods
not exceeding 40 years using the straight-line method. The Company
evaluates excess costs over net assets acquired for recoverability on the
basis of whether it is fully recoverable from projected, undiscounted net
cash flows from operations of the related business unit. Impairment, should
one result, would be recognized by a charge to operations. Cash surrender
value of life insurance and miscellaneous investments are also included in
this category; however, their balances are not material.
Stockholders' Equity
The Company is authorized to issue 250,000,000 shares of $2 par value
common stock. At February 29, 1996, and February 28, 1995, there were
48,571,000 and 48,548,000 shares outstanding, respectively. The Company is
authorized to issue 3,000,000 shares of $10 par value preferred stock. To
date, none of these shares have been issued.
Revenues and Costs of Sales
Other income consists primarily of finance and other income earned on
accounts receivable. Finance charges were $182,426,000, $163,114,000 and
$115,532,000 during fiscal 1996, 1995 and 1994, respectively. Revenue is
recognized on installment and credit sales upon approval and establishment
of a delivery date, which does not materially differ from the recognition
at the time of shipment. The effect of sales returns prior to shipment date
has been immaterial. Finance charges are included in revenues on a monthly
basis as earned. The Company sells substantially all of its service
policies to third parties and recognizes service policy income on these at
the time of sale. Prior to fiscal 1995, the Company retained a portion of
its service policies and deferred recognition of the related income along
with the direct cost of acquiring the contracts. Income on these contracts
is being earned over the life of the service policies. Costs of sales
includes occupancy and delivery expenses.
Earnings Per Share
Primary and fully diluted earnings per share of common stock are
calculated by dividing net earnings by the weighted average number of common
shares and common stock equivalents (stock options) outstanding during the
year.
Interest Rate Swap Agreements
The Company has entered into several interest rate swap agreements
("swap agreements") as a means of managing its exposure to changes in
interest rates. These agreements in effect convert a portion of the
Company's floating rate debt and floating rate asset securitizations to
<PAGE 27>
fixed rates by exchanging floating rate payments for fixed rate payments.
The differential to be paid or received on these agreements is accrued and
is recognized as an adjustment to interest expense. The related amount
payable to or receivable from counterparties is recorded as an adjustment
to accrued interest expense.
Asset Securitizations
The Company, as a means of financing its growth, has sold a portion
of its accounts receivable. The Company continues to service these accounts
and has provided buyers with recourse, up to established limits. A reserve
is established at the time of sale to provide for this contingent liability
and is adjusted periodically. This reserve is included in the allowance for
doubtful accounts.
New Accounting Standards
During the fiscal year, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." The FASB also issued SFAS No. 123, "Accounting
for Stock-Based Compensation." These statements are effective for fiscal
years beginning after December 15, 1995. The Company does not expect the
adoption of SFAS No. 121 to have a material impact on the financial
statements. As provided for by SFAS No. 123, the Company has decided to
continue to apply Accounting Principles Board No. 25 (Accounting for Stock
Issued to Employees), for recognition and measurement purposes within the
financial statements.
(2) EXPANSION
During October 1995, the Company acquired certain assets of nine
stores of BWAC International in San Juan, Puerto Rico. The purchase price
of these assets was approximately $39,196,000. The unamortized excess of
purchase price over the fair market value of the net assets acquired from
BWAC as of February 29, 1996, was $5,401,000. Other acquisitions during
fiscal 1996 were not considered material to the financial statements.
In fiscal 1995, the Company acquired certain assets relating to the
operation of 17 stores from various corporate entities comprising Berrios
Enterprises ("Berrios") of Caguas, Puerto Rico. All 17 stores are located
in Puerto Rico. The purchase price for these assets was approximately
$99,000,000. The unamortized excess of purchase price over the fair market
value of net assets acquired from Berrios as of February 29, 1996, was
$18,560,000, which included adjustments of $2,900,000 in fiscal 1996. The
unaudited consolidated results of operations on a proforma basis as though
Berrios had been acquired as of the beginning of fiscal years 1995 and 1994
are as follows:
1995 1994
(Amounts in thousands except per share data)
Total revenues $1,227,737 $935,743
Net earnings 69,680 57,343
Net earnings per share:
Primary and fully diluted 1.40 1.17
The proforma information is presented for comparative purposes only
<PAGE 28>
and is not necessarily indicative of the operating results that would have
occurred had the Berrios acquisition been consummated as of the above dates,
nor is it necessarily indicative of future operating results.
Also during fiscal 1995, the Company acquired the assets of nine
stores from Nelson Brothers Furniture Company for $18,038,000. The excess
costs over net assets acquired related to this acquisition were not
significant.
All acquisitions have been accounted for by the purchase method, and
accordingly, operations subsequent to the respective acquisition dates have
been included in the accompanying financial statements.
The Company amortizes the excess of purchase price over fair market
value of net assets acquired on a straight-line basis over periods not
exceeding 40 years. The unamortized excess of purchase price of over the
market value of the net assets acquired for all acquisitions was
$148,130,000 and $135,753,000, net of accumulated amortization of
$15,593,000 and $11,576,000, at February 29, 1996, and February 28, 1995,
respectively.
(3) ACCOUNTS RECEIVABLE
Accounts receivable are shown net of the allowance for doubtful
accounts and unearned finance income. The allowance for doubtful accounts
was $54,714,000 and $46,678,000 and unearned finance income was $60,114,000
and $54,554,000 at February 29, 1996, and February 28, 1995, respectively.
Accounts receivable having balances due after one year were $131,501,000 and
$123,123,000 at February 29, 1996 and February 28,1995, respectively.
Credit operations are generally maintained at each store to evaluate
the credit worthiness of its customers and to manage the collection process.
Furthermore, the Company generally requires down payments on credit sales
and offers credit insurance to its customers, both of which lessen credit
risk. The Company operates its 716 stores throughout 26 states and Puerto
Rico and, therefore, is not dependent on a given industry or business for
its customer base and has no significant concentration of credit risk.
In the normal course of business, the Company is a party to financial
instruments with off-balance-sheet risk in order to meet its financing needs
and to reduce its exposure to interest rate fluctuations. These financial
instruments include asset securitizations and interest rate swaps. See NOTE
(10) FINANCIAL INSTRUMENTS for further discussion.
(4) PROPERTY and EQUIPMENT
Property and equipment consists of the following:
1996 1995
(Amounts in thousands)
Land and buildings $ 80,839 $ 75,002
Fixtures, equipment and vehicles 87,846 82,761
Leasehold improvements 142,108 116,016
Construction in progress 12,854 22,896
323,647 296,675
Less accumulated depreciation 107,588 93,474
$216,059 $203,201
<PAGE 29>
(5) NOTES PAYABLE and LONG-TERM DEBT
In July 1995 the Company entered into a five-year $400,000,000
revolving credit facility which replaced previously existing agreements
totaling $300,000,000. As of February 29, 1996, $210,000,000 was unused and
$190,000,000 was outstanding. The Company has established additional lines
of credit with banks, totaling $60,000,000, all of which was unused at
February 29, 1996. The Company has also received a commitment from a bank
to borrow $60,000,000 for five years, if necessary. The Company's maximum
short-term debt was $249,700,000 during fiscal 1996 and $278,300,000 during
fiscal 1995. The average short-term debt outstanding for fiscal 1996 was
$190,236,000 compared to $221,330,000 for fiscal 1995. The approximate
weighted average interest rates were 6.3%, 5.1% and 3.5% in fiscal 1996,
1995 and 1994, respectively.
At February 29, 1996, the Company had $190,000,000 of outstanding
short-term borrowings compared to $139,800,000 at February 28, 1995. The
average interest rate on this debt was approximately 5.6% at February 29,
1996, and 6.4% and 3.6% at February 28, 1995 and 1994, respectively. There
were no compensating balance requirements.
Long-term debt consists of the following:
1996 1995
(Amounts in thousands)
Notes payable to insurance
companies and banks, maturing
through 2002, interest ranging
from 6.25% to 9.98%, unsecured $365,371 $392,243
Notes, collateralizing industrial
development revenue bonds,
maturing through 2004, interest
ranging from a floating rate of
60% of prime to an 8.5% fixed rate 1,727 2,475
Capital lease obligations, maturing
through 2006, interest ranging
from 76% of prime to 12.9% 2,746 3,166
Term loans, maturing through 2007,
interest ranging to 9.8%,
primarily collateralized
by deeds of trust 599 673
370,443 398,557
Less amounts due within one year 17,812 28,125
$352,631 $370,432
Principal payments are due for the four years after February 28, 1997,
as follows: 1998, $99,327,000; 1999, $20,943,000; 2000, $170,659,000; and
2001, $641,000. The aggregate net carrying value of property and equipment
collateralization at February 29, 1996, was $11,812,000.
Notes payable to insurance companies contain certain restrictive
covenants. Under these covenants, the payment of cash dividends is limited
to $133,767,000 plus 75% of net earnings adjusted for dividend payouts
subsequent to February 29, 1996. Other covenants relate to the maintenance
of working capital, net earnings coverage of fixed charges, limitations on
total and funded indebtedness and maintenance of stockholders' equity. As
of February 29, 1996, the Company is in compliance with its restrictive
covenants.
<PAGE 30>
Interest payments of $40,710,000, $30,303,000, and $24,486,000, net
of capitalized interest of $2,141,000, $1,751,000 and $1,057,000, were made
during fiscal 1996, 1995 and 1994, respectively.
(6) INCOME TAXES
The provision for income taxes consists of:
1996 1995 1994
(Amounts in thousands)
Current:
Federal $11,034 $23,282 $24,633
State 1,988 3,595 3,245
Puerto Rico (522) - -
12,500 26,877 27,878
Deferred:
Federal 6,012 10,242 3,712
State 1,293 1,967 568
Puerto Rico 3,216 - -
10,521 12,209 4,280
$23,021 $39,086 $32,158
The income tax effects of temporary differences that gave rise to
significant portions of the net deferred tax liability as of February 29,
1996, and February 28, 1995, consist of the following:
1996 1995
(Amounts in thousands)
Deferred tax assets:
Allowance for doubtful accounts $ 5,943 $ 8,026
Accrued liabilities 5,028 3,334
Deferred revenue 711 696
11,682 12,056
Deferred tax liabilities:
Excess costs over net assets acquired 42,148 39,612
Asset securitizations 11,142 5,649
Costs capitalized on constructed assets 5,480 4,178
Property and equipment 4,290 3,754
Accounts receivable 4,286 -
Inventory 4,148 3,262
Other 1,338 2,908
72,832 59,363
$ 61,150 $ 47,307
Balance sheet classification:
Other current assets - 2,222
Other current liabilities 11,271 -
Deferred income tax liability 49,879 49,529
$ 61,150 $ 47,307
<PAGE 31>
A reconciliation of the statutory federal income tax rate to the
Company's effective rate is provided below:
1996 1995 1994
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal
income tax benefit 3.8 3.3 2.8
Tax credits (3.1) (1.9) (2.0)
Effect of income tax rate changes
on deferred taxes -- -- 0.9
Other, net -- 0.5 0.2
35.7% 36.9% 36.9%
Income tax payments of $24,738,000, $28,966,000 and $18,686,000 were
made during fiscal 1996, 1995 and 1994, respectively.
(7) RETIREMENT PLANS
The Company has a qualified profit sharing and retirement savings
plan, which includes a cash deferred arrangement under Section 401(k) of the
Internal Revenue Code (the "Code") and covers substantially all the
Company's employees. Eligible employees may elect to contribute specified
percentages of their compensation to the plan. The Company guarantees a
dollar-for-dollar match on the first two percent of the employee's
compensation contributed to the plan. The Company will make an additional
matching contribution if and to the extent that four percent of the
Company's estimated consolidated income before taxes exceeds the two percent
dollar-for-dollar match described above. The Company may, at the discretion
of its Board of Directors, make additional Company matching contributions
subject to certain limitations. The plan may be terminated at the
discretion of the Board of Directors. If the plan is terminated, the
Company will not be required to make any further contributions to the plan
and participants will become 100% vested in any Company contributions made
to the plan. The plan expense recognized in fiscal 1996, 1995 and 1994 was
$2,553,000, $4,505,000 and $3,631,000, respectively.
In addition, a non-qualified supplemental profit sharing and
retirement savings plan was established as of March 1, 1991, for the purpose
of providing deferred compensation for certain employees whose benefits and
contributions under the qualified plan are limited by the Code. The
deferred compensation expense recognized in fiscal 1996, 1995 and 1994 was
$254,000, $386,000, and $160,000, respectively.
The Company has an executive income continuation plan which covers
certain executive officers. The plan is intended to provide certain
supplemental preretirement death benefits and retirement benefits to its key
executives. In the event an executive dies prior to age 65 in the
employment of the Company, the executive's beneficiary will receive annual
benefits of 100% of salary for a period of one to two years and/or 50% of
salary for a period of eight years. If the executive retires at age 65,
either the executive or his beneficiary will receive an annual retirement
benefit of 20% to 25% of the executive's salary increased 4% annually for
a period of 15 years. This plan has been funded through the purchase of
life insurance contracts covering the executives and owned by the Company.
For fiscal years 1996, 1995 and 1994, there was no charge to earnings.
<PAGE 32>
(8) STOCK OPTIONS and GRANTS
Under the Company's Long-Term Incentive Award Plan, 506,250 shares of
the Company's common stock have been reserved for issuance. The Company
provides for a combination of restricted stock and cash awards to key
management employees. There was no provision required in fiscal 1996, 1995
and 1994.
The 1983, 1990 and 1994 Stock Option Plans provide that key employees
of the Company are eligible to receive common stock options (at no less than
fair market value at the date of grant) and stock appreciation rights.
Under these plans, 8,093,750 shares have been authorized to be reserved for
issuance. The following table summarizes stock option activity for fiscal
1996 and 1995.
Shares
Under Option Exercise Price
Outstanding at March 1, 1994 3,603,272 $ 5.52 to $35.06
Granted 600,500 $25.13 to $27.00
Exercised (128,043) $ 5.52 to $20.29
Outstanding at February 28, 1995 4,075,729 $ 5.52 to $35.06
Granted 412,200 $17.25
Exercised (23,525) $ 5.52 to $20.29
Canceled (32,500) $20.29 to $35.06
Outstanding at February 29, 1996 4,431,904 $ 5.52 to $35.06
Options are exercisable at such times as specified by the Compensation
Committee of the Board of Directors and generally if not exercised, expire
ten years from the date of grant. At February 29, 1996, options for
4,017,290 shares of common stock were exercisable.
(9) COMMITMENTS and CONTINGENCIES
Leases
The Company has entered into noncancellable lease agreements with
initial terms ranging from 1 to 25 years for certain stores, warehouses and
the corporate office. Certain leases include renewal options ranging from
1 to 10 years and/or purchase provisions, both of which may be exercised at
the Company's option. Most of the leases are gross leases under which the
lessor pays the taxes, insurance and maintenance costs. The following
capital leases are included in the accompanying consolidated balance sheets:
1996 1995
(Amounts in thousands)
Land and buildings $6,426 $6,426
Fixtures and equipment 675 675
7,101 7,101
Less accumulated depreciation
and amortization 3,307 3,086
$3,794 $4,015
Capitalized lease amortization is included in depreciation expense.
<PAGE 33>
Future minimum lease payments under capital leases and operating
leases having initial or remaining noncancellable lease terms in excess of
one year at February 29, 1996, are as follows:
Capital Operating
Leases Leases
(Amounts in thousands)
1997 $ 657 $ 44,988
1998 620 41,307
1999 597 38,124
2000 558 34,923
2001 573 35,516
After 2001 810 60,924
Total minimum lease payments $3,815 $255,782
Less:
Executory costs 113
Imputed interest 956
Present value of minimum
lease payments $2,746
Total rental expense under operating leases for fiscal 1996, 1995 and
1994 was $67,509,000, $50,855,000 and $35,989,000, respectively. Contingent
rentals and sublease rentals are negligible.
Payments to affiliated entities under capital and operating leases
were $625,000 for fiscal 1996, which included payments to a limited
partnership in which the Company has equity interests. Lease payments to
affiliated entities for fiscal 1995 and 1994 were $856,000 and $852,000,
respectively.
Litigation
The Company is party to various legal actions and administrative
proceedings and subject to various claims arising in the ordinary course of
business. Based on the best information presently available, the Company
believes that the disposition of these matters will not have a material
adverse effect on the financial statements.
(10) FINANCIAL INSTRUMENTS
Asset Securitizations
The Company participates in asset securitization agreements in which
it sells an interest in certain accounts receivable with limited recourse.
The aggregate notional amount of these agreements was approximately
$595,600,000 at February 29, 1996, and $416,000,000 at February 28, 1995.
The rates specified in these agreements are variable, either being tied to
LIBOR or commercial paper and ranged from 5.7% to 6.8% in fiscal 1996 and
from 6.0% to 6.7% in fiscal 1995. As a means of managing unfavorable
movements in these rates (market risk), the Company has entered into
interest swap agreements, as described below, which fixed rates on notional
amounts of $235,000,000 at February 29, 1996, and $165,000,000 at February
28, 1995. The effective interest rates on swaps at the end of fiscal 1996
ranged from 5.3% to 7.4% and 6.4% to 7.1% at the end of fiscal 1995.
The terms ranged from 29 months to 54 months for the four agreements
in effect at the end of fiscal 1996 and from 29 months to 65 months for the
five agreements in place at the end of fiscal 1995. During fiscal 1996, two
agreements were consolidated into a single agreement.
<PAGE 34>
These agreements provide third parties with limited recourse against
the Company. On two agreements totaling $140,000,000, recourse is limited
each month to 20% of the third parties' interest in the pool as of the
related settlement date. Recourse on the $63,600,000 pool of receivables
is limited to approximately 15% of the balance. The recourse provisions
relating to the $392,000,000 pool is limited to 6% of the third parties'
interest in the pool as of the related settlement date. Payments under all
recourse provisions have never exceeded the established reserves. Earnings
from asset securitizations were $8,771,000 in fiscal 1996 and $8,884,000 in
fiscal 1995.
Derivative Financial Instruments
The Company uses derivative financial instruments in the form of
interest rate swap agreements primarily to manage the risk of unfavorable
movements in interest rates. These convert floating rate notes payable to
banks and, as discussed above, floating rates on asset securitization
agreements to fixed rates. The notional amounts of these swap agreements
at February 29, 1996, and February 28, 1995 were as follows:
1996 1995
(amounts in thousands)
On notes payable and other $ 231,100 $ 178,300
On securitized receivables $ 235,000 $ 165,000
Interest rates that the Company paid per the swap agreements related
primarily to notes payable were fixed at an average rate of 6.5% at February
29, 1996. At February 28, 1995, rates were fixed at an average of 5.7%.
The variable rates received per these agreements were tied to LIBOR or
commercial paper rates and averaged 5.3% and 6.2% at February 29, 1996, and
February 28, 1995, respectively. The terms for these agreements range from
3 to 5 years.
Interest rates that the Company paid on swap agreements related to
securitized receivables were fixed at an average rate of 6.5% at February
29, 1996. At February 28, 1995, rates were fixed at an average of 6.6%.
The variable rates received per these agreements were tied to LIBOR or
commercial paper rates and averaged 5.3% and 6.2% at February 29, 1996, and
February 28, 1995, respectively. The terms for these agreements range from
2 to 5 years.
Resulting changes in interest are recorded as increases or decreases
to interest expense. The accrued interest liability is correspondingly
increased or decreased.
The Company believes its risk of credit-related losses resulting from
non-performance by a counterparty is remote. The amount of any such loss
would be limited to a small percentage of the notional amount of each swap.
As a means of reducing this risk, the Company as a matter of policy only
enters into transactions with counterparties rated "A" or higher.
The Company does not mark its swaps to market and therefore does not
record a gain or loss with interest rate changes. Gains on disposals of
swaps are recognized over the remaining life of the swap. Losses on
disposals, which there have been none to date, would be recognized
immediately.
All swaps are held for purposes other than trading.
Fair Value of Financial Instruments
The estimated fair values of financial instruments have been
determined by using available market information. The estimates are not
necessarily indicative of the amounts the Company could realize in a current
<PAGE 35>
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value
amounts.
The estimated fair values of the Company's financial instruments at
February 29, 1996, and at February 28, 1995, are as follows:
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
(Amounts in thousands)
Assets
Cash $ 16,017 $ 16,017 $ 10,360 $ 10,360
Accounts receivable 518,969 518,969 538,208 538,208
Liabilities
Accounts payable 87,739 87,739 87,523 87,523
Notes payable 190,000 190,000 139,800 139,800
Long-term debt 370,443 390,745 398,557 406,946
Off-balance-sheet
financial instruments
Interest rate swaps
agreements:
Assets -- 1,226 -- 7,434
Liabilities -- 12,412 -- 2,585
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument shown above:
Cash and Accounts Receivables
The carrying amount approximates fair value because of the short-term
maturity of these assets.
Accounts Payable and Notes Payable
The carrying value approximates fair value because of the short-term
maturity of these liabilities.
Long-Term Debt
The fair value of the Company's long-term debt is based on the
discounted cash flow of that debt, using current rates and remaining
maturities.
Interest Rate Swap Agreements
The fair value of the Company's interest rate swap agreements is the
estimated amount that the Company would receive or pay upon termination of
the agreements, based on estimates obtained from the counterparties. These
agreements are not held for trading purposes, but rather to hedge interest
rate risk.
<PAGE 36>
(11) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly financial data for fiscal 1996
and 1995:
Three Months Ended
May August November February
31 31 30 29(28)
(Amounts in thousands except per share data)
1996
Revenues $318,971 $324,861 $375,479 $340,040
Gross profit (1) 96,364 90,503 108,439 90,885
Earnings before taxes 29,211 17,678 12,849 4,789
Net earnings 18,466 11,316 8,757 2,961
Earnings per share of
common stock:
Primary and
fully diluted 0.37 0.23 0.18 0.06
Cash dividends per share
of common stock 0.07 0.07 0.07 0.07
1995
Revenues $268,847 $269,119 $315,089 $299,084
Gross profit (1) 81,910 78,115 95,950 82,192
Earnings before taxes 29,156 23,582 29,902 23,261
Net earnings 18,310 14,817 18,771 14,917
Earnings per share of
common stock:
Primary and
fully diluted 0.37 0.30 0.38 0.30
Cash dividends per share
of common stock 0.06 0.06 0.06 0.06
(1)Gross profit is sales less costs of sales.
<PAGE 37>
Item 9. CHANGES in and DISAGREEMENTS with ACCOUNTANTS on ACCOUNTING
and FINANCIAL DISCLOSURE
None.
<PAGE 38>
PART III
In accordance with general instruction G(3) of Form 10-K, the
information called for by Items 10, 11, 12 and 13 of Part III is
incorporated by reference from the registrant's definitive Proxy Statement
for its Annual Meeting of Shareholders scheduled for June 19, 1996, except
for information concerning the executive officers of the registrant which
is included in Part I of this report under the caption "Executive Officers
of the Registrant."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements of
Heilig-Meyers Company and Subsidiaries included in the
registrant's 1996 Annual Report to Shareholders are included in
item 8 herein:
Independent Auditors' Report
Consolidated Balance Sheets -
February 29, 1996 and February 28, 1995
Consolidated Statements of Earnings -
Year Ended February 29, 1996,
Year Ended February 28, 1995, and
Year Ended February 28, 1994
Consolidated Statements of Stockholders' Equity -
Year Ended February 29, 1996,
Year Ended February 28, 1995, and
Year Ended February 28, 1994
Consolidated Statements of Cash Flows -
Year Ended February 29, 1996,
Year Ended February 28, 1995, and
Year Ended February 28, 1994
Notes to Consolidated Financial Statements
<PAGE 39>
(a) 2. Financial Statement Schedules: The financial statement
schedule required by this item is listed below.
Independent Auditors' Report on Schedule included in Item 8
herein.
Schedule II - Valuation and Qualifying Accounts
Schedules other than those listed above have been omitted
because they are not applicable or are not required or
because the required information is included in the
financial statements or notes thereto.
(a) 3. Exhibits required to be filed by Item 601 of Regulation
S-K.
See INDEX TO EXHIBITS
(b) 1. Reports on Form 8-K Filed During Last Quarter of Year Ended
February 29, 1996.
None.
<PAGE 40>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
HEILIG-MEYERS COMPANY
Date: May 22, 1996 by /s/William C. DeRusha
William C. DeRusha
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Date: May 22, 1996 /s/William C. DeRusha
William C. DeRusha
Chairman of the Board
Principal Executive Officer
Date: May 22, 1996 /s/Joseph R. Jenkins
Joseph R. Jenkins
Executive Vice President
Principal Financial Officer
Date: May 22, 1996 /s/William J. Dieter
William J. Dieter
Senior Vice President,
Accounting and Principal
Accounting Officer
Date: May 22, 1996 /s/Alexander Alexander
Alexander Alexander, Director
Date: May 22, 1996 /s/Robert L. Burrus, Jr.
Robert L. Burrus, Jr., Director
<PAGE 41>
Date: May 22, 1996 /s/Arthur D. Charpentier
Arthur D. Charpentier, Director
Date: May 22, 1996 /s/Benjamin F. Edwards, III
Benjamin F. Edwards, III, Director
Date: May 22, 1996 /s/Alan G. Fleischer
Alan G. Fleischer, Director
Date: May 22, 1996 /s/Nathaniel Krumbein
Nathaniel Krumbein, Director
Date: May 22, 1996 /s/Hyman Meyers
Hyman Meyers, Director
Date: May 22, 1996 /s/S. Sidney Meyers
S. Sidney Meyers, Director
Date: May 22, 1996 /s/Troy A. Peery, Jr.
Troy A. Peery, Jr., Director
Date: May 22, 1996 /s/Lawrence N. Smith
Lawrence N. Smith, Director
Date: May 22, 1996 /s/George A. Thornton
George A. Thornton III, Director
<PAGE 42>
HEILIG-MEYERS COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)
Column A Column B Column C Column D Column
E
Write-off
Balance at Charged Charged and Purchased Balance
Beginning To Costs To Other Repossession Accounts at Close
Description of Period & Expenses Accounts Losses Receivable of Period
Allowance for
Doubtful Accounts:
Year Ended
February 29,
1996 $46,678 $65,379 $ 1,134(A) $57,231 $8,917(C) $54,714
$ 7,671(B)
Year Ended
February 28,
1995 $28,497 $45,419 $ 806(A) $45,735 $7,595(C) $46,678
$25,286(B)
Year Ended
February 28,
1994 $20,781 $32,356 $ 430(A) $29,713 $3,200(C) $28,497
$ 7,843(B)
(A) Represents recoveries on accounts previously written off.
(B) Allowance applicable to purchased accounts receivable.
(C) Deductions from reserve applicable to purchased accounts receivable, as
follows:
1996 1995 1994
Write-offs of Uncollectible Accounts $8,917 $7,595 $3,200
<PAGE 43>
Index to Exhibits
3. Articles of Incorporation and Bylaws.
a. Registrant's Restated Articles of Incorporation filed as
Exhibit 3(a) to Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1990 are incorporated herein by
this reference.
b. Articles of Amendment to Registrant's Restated Articles of
Incorporation filed as Exhibit 4 to Registrant's Form 8
(Amendment No. 5 to Form 8-A filed April 26, 1983) filed August
6, 1992 are incorporated herein by this reference.
c. Articles of Amendment to Registrant's Restated Articles of
Incorporation filed as Exhibit 3(c) to Registrant's Annual
Report on Form 10-K for the fiscal year ended February 28, 1993
are incorporated herein by this reference.
d. Articles of Amendment to Registrant's Restated Articles of
Incorporation.
e. Registrant's Amended Bylaws filed as Exhibit 3(b) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 29, 1988 are incorporated herein by this
reference.
f. Amendment to the Registrant's Bylaws.
4. Instruments defining the rights of security holders, including
indentures.
a. The long-term debt as shown on the consolidated balance sheet
of the Registrant at February 28, 1995 includes various
obligations each of which is evidenced by an instrument
authorizing an amount that is less than 10% of the total assets
of the Registrant and its subsidiaries on a consolidated basis.
The documents evidencing these obligations are accordingly
omitted pursuant to Regulation S-K, Item 601(b)(4)(iii) and
will be furnished to the Commission upon request.
10. Contracts
a. Four leases dated as of December 27, 1976 between Hyman Meyers,
Agent, and the Registrant, filed as Exhibit 10(a)(2) - Exhibit
10(a)(5) to Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1989, are incorporated herein by
this reference.
b. The following Agreements filed as Exhibits 10(b) through 10(f)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1991 are incorporated herein by this
reference:
(1) Lease dated as of January 1, 1980 between Hyman Myers,
Agent, and the Registrant.
(2) Lease dated November 1, 1970 between Hyman Meyers,
Agent, and the Registrant as successor in interest to
Heilig-Meyers Company of Greenville, Inc.
(3) Lease dated April 15, 1971 between Meyers-Thornton
Investment Co. and the Registrant as successor in
interest to Meyers-Thornton Corporation.
<PAGE 44>
(4) Lease dated June 28, 1971 between Meyers-Thornton
Investment Company and the Registrant as successor in
interest to Meyers-Thornton Corporation.
(5) Lease dated December 1, 1972 between Meyers-Thornton
Investment Company and the Registrant.
c. The following Agreements (originally filed as exhibits to
Registrant's Annual Report on Form 10-K for the fiscal year
ended March 31, 1982) were refiled as Exhibits 10(c)(1)-(3) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1993 and are incorporated herein by
reference:
(1) Executive Employment and Deferred Compensation Agreement
made January 12, 1982 between Hyman Meyers and the
Registrant.
(2) Executive Employment and Deferred Compensation Agreement
made January 12, 1982 between S. Sidney Meyers and the
Registrant.
(3) Executive Employment and Deferred Compensation Agreement
made January 12, 1982 between Nathaniel Krumbein and the
Registrant.
d. Employees' Profit Sharing Retirement Plan, amended and
restated, effective as of March 1, 1989 filed as Exhibit 10(d)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1993 is incorporated herein by this
reference.*
e. First Amendment, dated as of June 15, 1992, to the Heilig-
Meyers Employees' Profit Sharing Retirement Plan, amended and
restated, effective as of March 1, 1989, filed as Exhibit 10(e)
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended February 28, 1993 is incorporated herein by this
reference.*
f. Second Amendment, dated as of February 1, 1994, to the Heilig-
Meyers Employees' Profit Sharing Retirement Plan, amended and
restated, effective as of March 1, 1989.
g. Third Amendment, dated as of May 1, 1995, to the Heilig-Meyers
Employees' Profit Sharing Retirement Plan, amended and restated,
effective as of March 1, 1989.
h. Addendum to Lease and Contract dated February 26, 1973 amending
Lease Contract dated April 15, 1971 between Meyers-Thornton
Investment Co. and the Company as successor in interest to
Meyers-Thornton Corporation (see Exhibit 10(c)(2)), filed as
Exhibit 10(k) to Registrant's Registration Statement on Form S-
2 (No. 2-81775) is incorporated herein by this reference.
i. The following Agreements filed as Exhibits 19(a) through 19(c)
to Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1984 are incorporated herein by this reference:
(1) Agreement made as of May 4, 1984 to amend Executive
Employment and Deferred Compensation Agreement between
Hyman Meyers and Registrant.*
(2) Agreement made as of May 4, 1984 to amend Executive
Employment and Deferred Compensation Agreement
between S. Sidney Meyers and Registrant.*
<PAGE 45>
(3) Agreement made as of May 4, 1984 to amend Executive
Employment and Deferred Compensation Agreement between
Nathaniel Krumbein and Registrant.*
j. Agreement made as of September 15, 1989 to amend Executive
Employment and Deferred Compensation Agreement between Hyman
Meyers and Registrant filed as Exhibit 10(i) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1990 is incorporated herein by this
reference.*
k. Agreement made as of September 15, 1989 to amend Executive
Employment and Deferred Compensation Agreement between S.
Sidney Meyers and Registrant filed as Exhibit 10(j) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1990 is incorporated herein by this
reference.*
l. Agreement made as of September 15, 1989 to amend Executive
Employment and Deferred Compensation Agreement between
Nathaniel Krumbein and Registrant filed as Exhibit 10(k) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1990 is incorporated herein by this
reference.*
m. Deferred Compensation Agreement between Robert L. Burrus, Jr.
and the Registrant filed as Exhibit 10(o) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1987 is incorporated herein by this reference.*
n. Amendment dated September 15, 1989 to the Deferred Compensation
Agreement between Robert L. Burrus, Jr. and the Registrant
filed as Exhibit 10(m) to Registrant's Annual Report on Form
10-K for the fiscal year ended February 28, 1990 is
incorporated herein by this reference.*
o. Deferred Compensation Agreement between Lawrence N. Smith and
the Registrant filed as Exhibit 10(p) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1987 is incorporated herein by this reference.*
p. Amendment dated September 15, 1989 to Deferred Compensation
Agreement between Lawrence N. Smith and the Registrant filed as
Exhibit 10(o) to Registrant's Annual Report on Form 10-K for
the fiscal year ended February 28, 1990 is incorporated herein
by this reference.*
q. Deferred Compensation Agreement between George A. Thornton, III
and the Registrant filed as Exhibit 10(q) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1987 is incorporated herein by this reference.*
r. Amendment dated September 15, 1989 to Deferred Compensation
Agreement between George A. Thornton, III and the Registrant
filed as Exhibit 10(q) to Registrant's Annual Report on Form
10-K for the fiscal year ended February 28, 1990 is
incorporated herein by this reference.*
s. Employees Supplemental Profit-Sharing and Retirement Savings
Plan, adopted effective as of March 1, 1991, amended and
restated effective as of March 1, 1994.
<PAGE 46>
t. Registrant's 1983 Stock Option Plan, as amended, filed as
Exhibit C to Registrant's Proxy Statement dated May 9, 1988 for
its Annual Meeting of Stockholders held on June 22, 1988 is
incorporated herein by this reference.*
u. Amendments to registrant's 1983 Stock Option Plan, as amended,
filed as Exhibit 10(t) to Registrant's Annual Report on Form
10-K for the fiscal year ended February 28, 1990 is
incorporated herein by this reference.*
v. Registrant's 1990 Stock Option Plan, as amended, filed as
Exhibit 10(t) to Registrant's Annual Report on Form 10-K for
the fiscal year ended February 28, 1993 is incorporated herein
by this reference.*
w. Registrant's 1994 Stock Option Plan, as amended, filed as
Exhibit A to Registrant's Proxy Statement dated May 3, 1994 for
its Annual Meeting of Stockholders held on June 15, 1994 is
incorporated herein by this reference.*
x. Registrant's Executive Severance Plan effective as of September
15, 1989 filed as Exhibit 10(v) to Registrant's Annual Report
on Form 10-K for the fiscal year ended February 28, 1990 is
incorporated herein by this reference.*
y. Form of Executive Supplemental Retirement Agreement between the
Registrant and each of William C. DeRusha and Troy A. Peery,
Jr. dated January 1, 1995.
z. Form of Executive Supplemental Retirement Agreement between the
Registrant and each of James F. Cerza, Jr., Joseph R. Jenkins
and James R. Riddle dated January 1, 1995.
aa. Form of Executive Supplemental Retirement Agreement between the
Registrant and seven executive officers dated January 1, 1995.
bb. Form of Executive Supplemental Retirement Agreement between the
Registrant and one executive officer dated January 1, 1995.
cc. Employment Agreement dated October 20, 1988 between William C.
DeRusha and the Registrant, filed as Exhibit 10(q) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1989 is incorporated herein by this
reference.*
dd. Agreement made as of September 11, 1989 to amend the Employment
Agreement dated October 20, 1988 between William C. DeRusha and
the Registrant filed as Exhibit 10(cc) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1990 is incorporated herein by this reference.*
ee. Employment Agreement dated October 20, 1988 between Troy A.
Peery, Jr. and the Registrant, filed as Exhibit 10(r) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1989 is incorporated herein by this
reference.*
ff. Agreement made as of September 11, 1989 to amend the Employment
Agreement dated October 20, 1988 between Troy A. Peery, Jr. and
the Registrant filed as Exhibit 10(ee) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1990 is incorporated herein by this reference.*
<PAGE 47>
gg. The following Agreements filed as Exhibits 10 (ii) through 10
(kk) to the Registrant's Annual Report on Form 10-K for fiscal
year ended February 28, 1991 are incorporated herein by this
reference:
(1) Employment Agreement dated April 10, 1991 between Joseph
R. Jenkins and the Registrant.*
(2) Employment Agreement dated April 10, 1991 between
James C. Cerza, Jr. and the Registrant.*
(3) Employment Agreement dated April 10, 1991 between
James R. Riddle and the Registrant.*
hh. Carve Out Life Insurance Plan filed as Exhibit 10(ff) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1993 is incorporated herein by this
reference.*
ii. Amendment, dated as of August 18, 1993, to the Heilig-
Meyers Company Severance Plan filed as exhibit 10(hh) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1994 is incorporated herein by this
reference.*
jj. 1988 Deferred Compensation Agreement for Outside Directors
between George A. Thornton, III and the Registrant filed as
exhibit 10(ii) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1994 is incorporated
herein by this reference.*
kk. Amendment, dated as of April 18, 1994, to the 1986 Heilig-Meyers
Company Deferred Compensation Agreement for Outside Director
between George A. Thornton, III and the Registrant filed as
exhibit 10(jj) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1994 is incorporated
herein by this reference.*
ll. Amendment, dated as of April 18, 1994, to the 1990 Heilig Meyers
Company Deferred Compensation Agreement for Outside Director
between George A. Thornton, III and the Registrant filed as
exhibit 10(kk) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1994 is incorporated
herein by this reference.*
mm. Letter Agreement, dated August 26, 1993, amending employment
agreement between Joseph R. Jenkins and the Registrant filed
as exhibit 10(ll) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1994 is
incorporated herein by this reference.*
nn. Letter Agreement, dated August 26, 1993, amending employment
agreement between James R. Riddle and the Registrant filed as
exhibit 10(mm) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1994 is
incorporated herein by this reference.*
oo. Letter Agreement, dated August 26, 1993, amending employment
agreement between James F. Cerza and the Registrant filed as
exhibit 10(nn) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended February 28, 1994 is
incorporated herein by this reference.*
pp. $400,000,000 Credit Agreement dated July 18, 1995 among MacSaver
Financial Services, Inc., as Borrower; the Registrant, as
Gaurantor; and Wachovia Bank of Georgia, N.A., as Administrative
Agent, as amended by the First Amendment and Restatement of
Credit Agreement dated May 14, 1996 is filed herewith.
<PAGE 48>
CREDIT AGREEMENT
(As amended by First Amendment and Restatement
dated as of May 14, 1996)
THIS CREDIT AGREEMENT dated as of July 18, 1995 (the "Credit
Agreement"), is by and among MACSAVER FINANCIAL SERVICES, INC., a Delaware
corporation (the "Borrower"), HEILIG-MEYERS COMPANY, a Virginia corporation
(the "Company"), the several lenders identified on the signature pages
hereto and such other lenders as may from time to time become a party hereto
(the "Lenders"), WACHOVIA BANK OF GEORGIA, N.A., as administrative agent for
the Lenders (in such capacity, the "Administrative Agent"), NATIONSBANK,
N.A., as documentation agent for the Lenders (in such capacity, the
"Documentation Agent") and CRESTAR BANK and FIRST UNION NATIONAL BANK OF
VIRGINIA, as co-agents for the Lenders (in such capacity, the "Co-Agents").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide a
$400,000,000 credit facility for the purposes hereinafter set forth;
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions. As used in this Credit Agreement, the following
terms shall have the meanings specified below unless the context otherwise
requires:
"Adjusted Eurodollar Rate" means, as applicable to any Interest
Period, a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing
(i) the applicable London Interbank Offered Rate for such Interest
Period by (ii) 1.00 minus the Eurodollar Reserve Percentage.
"Administrative Agent" means Wachovia Bank of Georgia, N.A. and
any successors and assigns in such capacity.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct
or indirect common control with such Person. For purposes of this
definition, "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
Applicable Percentage- means, for any day, the appropriate
rate per annum set forth in Schedule 2.1(d), it being understood that
the Applicable Percentage for (i) Base Rate Loans shall be the
percentage set forth under the appropriate column entitled
"applicable Margin for Base Rate Loans", (ii) Eurodollar Loans shall
be the percentage set forth under the appropriate column entitled
"Applicable Margin for Eurodollar Loans" and (iii) the Facility Fee
shall be the percentage set forth under the appropriate column
entitled "Applicable Percentage for Facility Fee". The Applicable
<PAGE 49>
Percentages shall be adjusted on the following dates (each being an
Interest Determination Date):
(i) where the Company has a senior unsecured (non-
credit enhanced) long term debt rating from both S&P and
Moody's, five (5) days after receipt of notice by the
Administrative Agent of a change in any such debt rating, based
on such debt ratings:
(ii) where the Company previously had a senior unsecured
(non-credit enhanced) long term debt rating from both S&P and
Moody's, but either or both of S&P and Moody's withdraws its
rating, five (5) days after receipt by the Administrative Agent
of notice of the withdrawal of such debt rating, based on the
information contained in the most recent annual or quarterly
financial statements and related certificates provided in
accordance with Sections 7.1(a) and 7.1(b); and
(iii) where the Company does not have a senior unsecured
(non-credit enhanced) long term debt rating from both S&P and
Moody's, five (5) days after the date of delivery of the annual
and quarterly financial statements and related certificates
provided in accordance with Section 7.1(a) and 7.1(b), but not
in any event to a date later than the date 5 days after the
date by which such financial statements and related
certificates are due in accordance with the terms thereof,
based on the information contained in such financial
statements.
The Applicable Percentage shall be effective from an Interest
Determination Date until the next such Interest Determination Date.
The Administrative Agent shall determine the appropriate Applicable
Percentages promptly upon receipt of the notices and information
necessary to make such determination and shall promptly notify the
Borrower and the Lenders of any change thereof. Such determinations
by the Administrative Agent shall be conclusive absent manifest
error. The Applicable Percentage from May 14, 1996 (being the
effective date of the First Amendment to Credit Agreement) shall be
based on Pricing Level II assuming a Fixed Charge Coverage Ratio of
less than 1.6:1.0, subject to adjustment as provided herein.
"Attributable Debt" means, at any date, the obligations
incurred by the Company, the Borrower or the Furniture Company as
lessee in connection with a sale and leaseback transaction, valued at
the lesser of (i) the fair market value of the property subject to
such transaction, or (ii) the present value (discounted at the rate
of 13% per annum compounded semi-annually and in accordance with
Financial Accounting Standards Board Statement No. 13) of the
obligation of the lessee for Rentals during the term of such lease.
"Base Rate" means, for any day, the rate per annum equal to the
higher as of each such day of (i) the Prime Rate, and (ii) one-half
of one percent above the Federal Funds Rate. For purposes of
determining the Base Rate for any day, changes in the Prime Rate
shall be effective on the date of each such change.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrower" means MacSaver Financial Services, Inc., a Delaware
corporation, together with any successors and permitted assigns.
"Business" means such term as defined in Section 6.10.
<PAGE 50>
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Atlanta, Georgia, Charlotte,
North Carolina, Richmond, Virginia or New York, New York are
authorized or required by law to close, except that, when used in
connection with a Eurodollar Loan, such day shall also be a day on
which dealings between banks are carried on in U.S. dollar deposits
in London, England and New York, New York.
"Capital Lease" means any lease of property, real or personal,
the obligations with respect to which are required to be capitalized
on a balance sheet of the lessee in accordance with GAAP.
"Capital Lease Obligations" means the capitalized lease
obligations relating to a Capital Lease determined in accordance with
GAAP.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" means, with respect to each Lender, the commitment
of such Lender to make Committed Loans in an aggregate principal
amount at any time outstanding up to such Lender's Revolving
Committed Amount as specified in Schedule 2.1(a), as such amount may
be reduced from time to time in accordance with the provisions
hereof.
"Commitment Percentage" means, for each Lender, the percentage
identified as its Commitment Percentage on Schedule 2.1(a), as such
percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 11.3.
"Commitment Period" means the period from and including the
Closing Date to but not including the Termination Date.
"Committed Loans" means such term as defined in Section 2.1.
"Committed Note" or "Committed Notes" means the promissory
notes of the Borrower in favor of each of the Lenders evidencing the
Committed Loans provided pursuant to Section 2.1(e), individually or
collectively, as appropriate, as such promissory notes may be
amended, modified, supplemented, extended, renewed or replaced from
time to time.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under "common control" with the Company within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Company and which is treated as a single employer under
Section 414 of the Code.
"Company" means Heilig-Meyers Company, a Virginia corporation,
together with any successors and permitted assigns.
"Competitive Bid" means an offer by a Lender to make a
Competitive Loan pursuant to the terms of Section 2.2.
"Competitive Bid Rate" means, as to any Competitive Bid made by
a Lender in accordance with the provisions of Section 2.2, the fixed
rate of interest offered by the Lender making the Competitive Bid.
"Competitive Bid Request" means a request by the Borrower for
Competitive Bids in accordance with the provisions of Section 2.2.
"Competitive Bid Request Fee" means the administrative fee
<PAGE 51>
payable to the Administrative Agent, if any, in connection with a
Competitive Bid Request as provided in the Administrative Agent's Fee
Letter.
"Competitive Lenders" means, at any time, those Lenders which
have Competitive Loans outstanding.
"Competitive Loan" means a loan made by a Lender in its
discretion pursuant to the provisions of Section 2.2.
"Competitive Loan Maximum Amount" means such term as defined in
Section 2.2.
"Competitive Note" or "Competitive Notes" means the promissory
notes of the Borrower in favor of each of the Lenders evidencing the
Competitive Loans, if any, provided pursuant to Section 2.2(h),
individually or collectively, as appropriate, as such promissory
notes may be amended, modified, supplemented, extended, renewed or
replaced from time to time.
"Consolidated EBIT" means, for any period, the sum of
Consolidated Net Income plus Consolidated Interest Expense plus all
provisions for any Federal, state or other income taxes, for the
Company and its Subsidiaries on a consolidated basis as determined in
accordance with GAAP applied on a consistent basis. Except as
otherwise specified, the applicable period shall be for the four
consecutive quarters ending as of the date of determination.
"Consolidated Fixed Charges" means, for any period, the sum of
Consolidated Interest Expense plus Consolidated Rentals, in each case
for the Company and its Subsidiaries on a consolidated basis as
determined in accordance with GAAP applied on a consistent basis.
Except as otherwise specified, the applicable period shall be for the
four consecutive quarters ending as of the date of determination.
"Consolidated Funded Debt" means Funded Debt of the Company and
its Subsidiaries on a consolidated basis determined in accordance
with GAAP applied on a consistent basis.
"Consolidated Interest Expense" means, for any period, all
interest expense, including the amortization of debt discount and
premium and the interest component under Capital Leases for the
Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP applied on a consistent basis. Except as
otherwise specified, the applicable period shall be for the four
consecutive quarters ending as of the date of computation.
"Consolidated Net Income" means, for any period, the net income
of the Company and its Subsidiaries on a consolidated basis
determined in accordance with GAAP applied on a consistent basis, but
excluding for purposes of determining compliance with the Fixed
Charge Coverage Ratio in Section 7.9(b) hereof any extraordinary
gains or losses, and any taxes on such excluded gains and any tax
deductions or credits on account of any such excluded losses.
"Consolidated Net Income Available for Fixed Charges" means,
for the applicable period ending as of the date of determination, the
sum of Consolidated EBIT plus Consolidated Rentals, in each case for
the Company and its Subsidiaries on a consolidated basis determined
in accordance with GAAP applied on a consistent basis. Except as
otherwise specified, the applicable period shall be for the four
consecutive quarters ending as of the date of computation.
"Consolidated Net Tangible Assets" means, at any date, the
<PAGE 52>
total amount of all assets of the Company and its Subsidiaries
determined on a consolidated basis in accordance with GAAP
consistently applied, less the sum (without duplication) of (i) the
amount, if any, at which intangible assets and unamortized debt
discount and expense appear on a consolidated balance sheet, (ii) any
write-up of tangible assets after the Closing Date, (iii) Restricted
Investments (valued at the book value thereof) and (iv) all
liabilities other than Minority Interests, deferred taxes and
consolidated funded debt.
"Consolidated Net Worth" means total stockholders' equity for
the Company and its Subsidiaries on a consolidated basis as
determined at a particular date in accordance with GAAP applied on a
consistent basis.
"Consolidated Rentals" means Rentals for the Company and its
Subsidiaries on a consolidated basis determined in accordance with
GAAP applied on a consistent basis.
"Consolidated Total Capitalization" means the sum of (i)
Consolidated Funded Debt plus (ii) Consolidated Net Worth.
"Continuing Director" means, as of any date of determination,
(i) an individual who on the date two years prior to such
determination date was a member of the Company's Board of Directors
and (ii) any new Director whose nomination for election by the
Company's shareholders was approved by a vote of at least 75% of the
Directors then still in office who either were Directors on the date
two years prior to such determination date or whose nomination for
election was previously so approved.
"Contractual Obligations" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
instrument or undertaking to which such Person is a party or by which
it or any of its property is bound.
"Credit Documents" means this Credit Agreement, the Notes, the
Fee Letter and all other related agreements and documents issued or
delivered hereunder or thereunder or pursuant hereto or thereto.
"Default" means any of the events specified in Section 9,
whether or not any requirement for the giving of notice or the lapse
of time, or both, has been satisfied.
"Defaulting Lender" means, at any time, any Lender that, at
such time (a) has failed to make a Loan required pursuant to the
terms of this Credit Agreement, including the funding of a
Participation Interest in accordance with the terms hereof, (b) has
failed to pay to the Administrative Agent or any Lender an amount
owed by such Lender pursuant to the terms of this Credit Agreement,
or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or to a receiver, trustee or
similar official.
"Disposition" means such term as defined in Section 8.5(a).
"Documentation Agent" means NationsBank, N.A. and any
successors and assigns in such capacity.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Eligible Assignee" means any Lender or Affiliate or Subsidiary
of a Lender; and any other commercial bank, financial institution or
"accredited investor" (as defined in Regulation D of the Securities
and Exchange Commission) with combined capital and surplus in excess
of $500,000,000.
<PAGE 53>
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
and the rulings issued thereunder.
"Environmental Laws" means any and all applicable foreign,
Federal, state, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes or decrees of any Governmental Authority
or other Requirement of Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning
protection of human health or the environment, as now or may at any
time be in effect during the term of this Credit Agreement.
"Eurodollar Loan" means any Loan bearing interest at a rate
determined by reference to the Adjusted Eurodollar Rate.
"Eurodollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day,
as prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve requirement
for a member bank of the Federal Reserve System in respect of
"Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the
interest rate on Eurodollar Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-
United States office of any Bank to Unites States residents). The
Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" means any of the events specified in Section
9; provided, however, that any requirement for the giving of notice
or the lapse of time, or both, or any other condition, has been
satisfied.
"Facility Fee" means such term as defined in Section 3.4(a).
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the next higher 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such
day, provided that (i) if such day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding
Business Day and (ii) if such rate is not so published for any day,
the Federal Funds Rate for such day shall be the average rate charged
to the Administrative Agent on such day on such transactions, as
determined by the Administrative Agent.
"Fee Letter" means, collectively or individually, as
appropriate, (i) that letter agreement dated April 17, 1995 from
Wachovia Bank of Georgia, N.A. and Wachovia Bank of North Carolina,
N.A. accepted by the Borrower, and (ii) that letter agreement dated
as of April 17, 1995 from NationsBanc Capital Markets, Inc. and
NationsBank, N.A. accepted by the Borrower, in each case as amended,
modified or replaced from time to time.
"Fees" means all fees payable pursuant to Section 3.4.
"Fixed Charge Coverage Ratio" means the ratio of Consolidated
Net Income Available for Fixed Charges to Consolidated Fixed Charges.
"Funded Debt" means for any Person, (i) all Indebtedness of
<PAGE 54>
such Person for borrowed money or which has been incurred in
connection with the acquisition of assets, (ii) all Capital Lease
Obligations of such Person and, without duplication, (iii) all
Guarantee Obligations of such Person of Funded Debt of other Persons.
"Furniture Company" means Heilig-Meyers Furniture Company, a
North Carolina corporation, together with its successors.
"GAAP" means generally accepted accounting principles applied
on a basis consistent with those which, in accordance with Section
1.3, are to be used in making the calculations for purposes of
determining compliance with the terms of this Credit Agreement.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantee Obligation" means as to any Person (the
"guaranteeing person"), any obligation of (i) the guaranteeing person
or (ii) another Person (including, without limitation, any bank under
any letter of credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations
(the "primary obligations") of any other third Person (the "primary
obligor") in any manner, whether directly or indirectly; provided,
however, that the term Guarantee Obligation shall not include
endorsements of instruments or documents for deposit or collection in
the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Guarantee Obligation is
made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such
Guarantee Obligation, unless such primary obligation and the maximum
amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee
Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Company
in good faith.
"Guaranty" means the guaranty of the Company set forth in
Section 4.
"Indebtedness" means, of any Person at any date, (i) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable
in accordance with customary practices), (ii) any other indebtedness
of such Person which is evidenced by a note, bond, debenture or
similar instrument, (iii) all obligations of such Person as lessee
under Capital Leases, (iv) all obligations of such Person in respect
of acceptances issued or created for the account of such Person, (v)
all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become
liable for the payment thereof, (vi) all obligations of such Person
under conditional sale or other title retention agreements relating
to property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (vii) all
obligations of such Person under take-or-pay or similar arrangements
or under commodities agreements, (viii) all Guarantee Obligations of
such Person, (ix) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange
agreements, commodity purchase or option agreements or other interest
or exchange rate or commodity price hedging agreements, and (x) all
<PAGE 55>
contingent or non-contingent obligations of such Person in respect of
letters of credit issued or bankers' acceptances created for the
account of such Person.
"Insolvency" means with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of such term
as used in Section 4245 of ERISA.
"Insolvent" means pertaining to a condition of Insolvency.
"Interest Payment Date" means (i) as to any Base Rate Loan, the
last day of each March, June, September and December, the date of
repayment of principal of such Loan and the Termination Date, (ii) as
to any Eurodollar Loan or any Competitive Loan, the last day of each
Interest Period for such Loan and on the Termination Date, and in
addition where the applicable Interest Period is more than 3 months,
then also on the date 3 months from the beginning of the Interest
Period, and each 3 months thereafter until the end of such Interest
Period. If an Interest Payment Date falls on a date which is not a
Business Day, such Interest Payment Date shall be deemed to be the
next succeeding Business Day, except that in the case of Eurodollar
Loans where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day.
"Interest Period" means (i) with respect to any Eurodollar
Loan, a period of one, two, three or six months' duration, as the
Borrower may elect, commencing in each case on the date of the
borrowing (including extensions and conversions) and (ii) with
respect to any Competitive Loan, a period beginning on the date of
borrowing and ending on the date specified in the respective
Competitive Bid whereby the offer to make such Competitive Loan was
extended, which shall be not less than 7 days nor more than 180 days'
duration; provided, however, (A) if any Interest Period would end on
a day which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day (except that where the
next succeeding Business Day falls in the next succeeding calendar
month, then on the next preceding Business Day), (B) no Interest
Period shall extend beyond the Termination Date, and (C) in the case
of Eurodollar Loans, where an Interest Period begins on a day for
which there is no numerically corresponding day in the calendar month
in which the Interest Period is to end, such Interest Period shall,
end on the last Business Day of such calendar month.
"Lenders" means each of the Persons identified as a "Lender" on
the signature pages hereto, and each Person which may become a Lender
by way of assignment in accordance with the terms hereof, together
with their successors and permitted assigns.
"Leverage Ratio" means the ratio of Consolidated Funded Debt to
Consolidated Total Capitalization.
"Lien" means any mortgage, pledge, hypothecation, assignment,
security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement
to give any of the foregoing, any conditional sale or other title
retention agreement, and any lease in the nature thereof).
"Loan" or "Loans" means a Committed Loan and/or a Competitive
Loan, as appropriate.
"London Interbank Offered Rate" means, as applicable to any
Eurodollar Loan, for the Interest Period of such Eurodollar Loan, the
rate per annum determined on the basis of the offered rate for
deposits in Dollars of amounts equal or comparable to the principal
<PAGE 56>
amount of such Eurodollar Loan offered for a term comparable to such
Interest Period, which rates appear on the Reuters Screen LIBO Page
as of 11:00 A.M., London time, two (2) Business Days prior to the
first day of such Interest Period, provided that (i) if more than one
such offered rate appears on the Reuters Screen LIBO Page, the
"London Interbank Offered Rate" will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of
such offered rates; and (ii) if no such offered rates appear on such
page, the "London Interbank Offered Rate" for such Interest Period
will be the arithmetic average (rounded upward, if necessary, to the
next higher 1/100th of 1%) of rates quoted by not less than two (2)
major banks in New York City, selected by the Administrative Agent,
at approximately 10:00 A.M., Atlanta, Georgia time, two (2) Business
Days prior to the first day of such Interest Period, for deposits in
Dollars offered to leading European banks for a period comparable to
such Interest Period in an amount comparable to the principal amount
of such Eurodollar Loan.
"Material Adverse Effect" means a material adverse effect on
(i) the business, financial position or results of operations of the
Company and its Subsidiaries taken as a whole, (ii) the ability of
the Company or the Borrower to perform any material obligation under
the Credit Documents or (iii) the material rights and remedies of the
Lenders under the Credit Documents.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation.
"Minority Interests" means any shares of stock of any class of
a Subsidiary (other than directors' qualifying shares as required by
law) that are not owned by the Company, the Borrower and/or one or
more of their Subsidiaries. Minority Interests shall be valued by
valuing Minority Interests constituting preferred stock at the
voluntary or involuntary liquidating value of such preferred stock,
whichever is greater, and by valuing Minority Interests constituting
common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book
value of such common stock required by the foregoing method of
valuing Minority Interests in preferred stock.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"New Lending Office" means such term as defined in Section
3.9(b).
"Note" or "Notes" means the Committed Notes and/or the
Competitive Notes, collectively, separately or individually, as
appropriate.
"Notice of Borrowing" means the written notice of borrowing as
referenced and defined in Section 2.1(b)(i).
"Notice of Conversion/Extension" means the written notice of
extension or conversion as referenced and defined in Section 3.2.
"Obligations" means, without duplication, all of the
obligations of the Borrower to the Lenders and the Administrative
<PAGE 57>
Agent, whenever arising, under this Credit Agreement, the Notes or
any of the other Credit Documents.
"Participation Interest" means the purchase by a Lender of a
participation in Committed Loans as provided in Section 3.12.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA, and any
successor thereto.
"Permitted Liens" means:
(i) Liens securing Indebtedness existing on the Closing
Date and described on Schedule 8.2 hereto;
(ii) Liens deemed to exist (including on account of the
filing of financing statement) in connection with a Permitted
Receivables Financing;
(iii) Liens securing Indebtedness incurred to finance the
purchase, construction or other acquisition of assets after the date
of this Credit Agreement, provided that (i) any such Lien shall
attach only to such asset, (ii) at the time of acquisition of such
asset, the amount remaining unpaid on the Indebtedness secured by
such Lien shall not exceed 90% (or 100% in the case of a Capitalized
Lease) of the lesser of the total purchase price or fair market value
thereof, and (iii) after giving effect to such Indebtedness and to
the application of the proceeds thereof, the aggregate amount thereof
would be permitted by clauses (iii) and (iv) of Section 8.1;
(iv) Liens for property taxes and assessments or
governmental charges or levies, and Liens securing claims or demands
of mechanics, suppliers, carriers, landlords and other like Persons,
provided that payment thereof is not at the time required by Section
7.3;
(v) Liens incurred or deposits made in the ordinary
course of business (i) in connection with worker's compensation,
unemployment insurance, social security and other like laws or (ii)
to secure the performance of letters of credit, bids, tenders, sales
contracts, leases, statutory obligations, surety, appeal and
performance bonds and other similar obligations, in each case not
incurred in connection with the borrowing of money, the obtaining of
advances or the payment of the deferred purchase price of property;
(vi) attachment, judgment and other similar liens
arising in connection with court proceedings, provided that execution
and other enforcement are effectively stayed and all claims which the
Liens secure are being actively contested in good faith and by
appropriate proceedings;
(vii) minor reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions and
other minor title exceptions;
(viii) Liens securing Indebtedness of the Borrower or the
Furniture Company to the Company or to each other; and
(ix) Liens securing Indebtedness incurred after the
Closing Date, provided that, after giving effect thereto and to the
application of the proceeds thereof, the aggregate amount thereof
would be permitted by clauses (iii) and (iv) of Section 8.1.
"Permitted Receivables Financing" means any one or more
receivables financings (including, without limitation,
<PAGE 58>
securitizations and similar structured finance transactions)
involving the sale by the Company, the Borrower or any of their
respective Subsidiaries of retail installment sale contracts and
other consumer receivables in true sales transactions (as determined
in accordance with GAAP).
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"Plan" means at any particular time, any employee benefit plan
which is covered by Title IV of ERISA pursuant to the provisions of
Section 4021 of ERISA and in respect of which the Company or a
Commonly Controlled Entity is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an "em-
ployer" as defined in Section 3(5) of ERISA.
"Pricing Level" means the applicable pricing Level for the
Applicable Percentage shown in Schedule 2.1(d).
"Prime Rate" refers to that interest rate so denominated and
set by Wachovia from time to time as an interest rate basis for
borrowings. The Prime Rate is but one of several interest rate bases
used by Wachovia. Wachovia lends at interest rates above and below
the Prime Rate.
"Properties" means such term as defined in Section 6.10.
"Rentals" means, as of the date of determination, all fixed
payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or
surrender of the property) payable by a Person as lessee or sublessee
under a lease of real or personal property, but exclusive of any
amounts required to be paid (whether designated as rents or
additional rents) on account of maintenance, repairs, insurance,
taxes and similar charges. Fixed rents under any so-called
"percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless
of sales volume or gross rents.
"Reorganization" means with respect to any Multiemployer Plan,
the condition that such Plan is in reorganization within the meaning
of such term as used in Section 4241 of ERISA.
"Reportable Event" means any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the PBGC has by
regulation waived the applicable notice requirement, or as to which
the PBGC has announced a policy of not enforcing penalties for
failure to satisfy applicable notice requirements.
"Required Lenders" means Lenders holding in the aggregate not
less than 66-2/3% of the Commitments or, if the aggregate Commitments
have been terminated, Lenders holding in the aggregate not less than
66-2/3% of the Loans then outstanding; provided, however, that if any
Lender shall be a Defaulting Lender at such time, then there shall be
excluded from the determination of Required Lenders such Defaulting
Lender's Commitments, or after termination of the Commitments, the
principal balance of the Loans owing to such Defaulting Lender.
"Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and each law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
<PAGE 59>
any of its property or to which such Person or any of its property is
subject.
"Responsible Officer" means as to (a) the Company, the
President and Chief Executive Officer, Executive Vice President, the
Treasurer or any Assistant Treasurer, Secretary or any Assistant
Secretary of the Company or (b) the Borrower, any duly authorized
officer thereof.
"Restricted Investments" means all investments, loans or
advances made by the Company, the Borrower or their Subsidiaries in
or to any Person or property, except the following:
(i) investments, loans and advances in and to the
Furniture Company and the Borrower;
(ii) property to be used and advances made in the
ordinary course of business, including, without limitation,
customer accounts receivable generated in the ordinary course
of business from the sale of inventory on credit;
(iii) investments in obligations maturing within
three years from the date of acquisition and issued or
guaranteed by the United States of America or an agency
thereof;
(iv) municipal securities maturing within three
years from the date of acquisition and rated in one of the two
highest rating classifications (with each numerical or other
modifier being treated as a separate classification) by at
least one national rating agency;
(v) investments in certificates of deposit or
bankers' acceptances issued by commercial banks located in the
United States, Canada, Western Europe or Japan and each having
capital, surplus and undivided profits aggregating at least
$250,000,000;
(vi) investments in commercial paper maturing
within 270 days from the date of acquisition and rated in one
of the two highest rating classifications (with each numerical
or other modifier being treated as a separate classification)
by a least one national rating agency;
(vii) investments in money market preferred stock
rated in one of the two highest rating classifications (with
each numerical or other modifier being treated as a separate
classification) by at least one national rating agency;
(viii) investments in repurchase agreements with
commercial banks (a) located in the United States, (b) having
capital, surplus and undivided profits aggregating at least
$250,000,000 and (c) whose long-term certificates of deposit
are, at the time of making such investment, rated "A" or better
by S&P or "A" or better by Moody's;
(ix) investments in mutual funds duly organized
and validly existing which are restricted by their respective
charters to investing 95% or more of its funds in securities of
the type permitted by clauses (iii), (iv), (v), (vi), (vii) and
(viii) above; and
(x) investments, loans and advances existing on
the Closing Date as identified on Schedule 8.5.
"Revolving Committed Amount" means, collectively, the aggregate
<PAGE 60>
amount of all of the Commitments as referenced in Section 2.1(a) and,
individually, the amount of each Lender's Commitment as specified in
Schedule 2.1(a).
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of
such division in the business of rating securities.
"Secured Debt" means all Indebtedness which is secured by a
Lien upon any assets of the Company, the Borrower or the Furniture
Company, but shall not include liabilities in connection with Capital
Lease Obligations or Industrial Development Bonds. As used in this
definition, the term "Industrial Development Bonds" means the
obligations of the Company, the Borrower or the Furniture Company,
including, without limitation, obligations in connection with
guaranties or otherwise, which are required to be reflected as
liabilities on a consolidated balance sheet of the Company, with
respect to "industrial development bonds" as defined in Section 103
of the Internal Revenue Code of 1954 (as amended prior to the
adoption of the Code) which are (i) treated as obligations of a state
of the United States or a political subdivision thereof under any
provision of said Section 103 and (ii) used to finance or refinance
industrial or pollution control facilities of the Company, the
Borrower or the Furniture Company.
"Single Employer Plan" means any Plan which is not a
Multiemployer Plan.
"Subsidiary" means, as to any Person, a corporation,
partnership or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of
the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other
entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this Credit
Agreement shall refer to a Subsidiary or Subsidiaries of the Company.
"Termination Date" means the earlier of (i) the date which is
the fifth anniversary of the Closing Date and (ii) the date on which
the Commitments shall terminate in accordance with the provisions of
this Credit Agreement.
"Transferee" means such term as defined in Section 3.9(a).
"Wachovia" means Wachovia Bank of Georgia, N.A., a national
banking association, and its successors.
1.2 Computation of Time Periods. For purposes of computation of
periods of time hereunder, the word "from" means "from and including" and
the words "to" and "until" each mean "to but excluding."
1.3 Accounting Terms and Determinations. Unless otherwise specified
herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared,
in accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Company's independent public accountants or otherwise
<PAGE 61>
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Company and its consolidated Subsidiaries
delivered to the Lenders unless with respect to any such change concurred
in by the Company's independent public accountants or required by GAAP, in
determining compliance with any of the provisions of this Credit Agreement
or any of the other Credit Documents: (i) the Company shall have objected
to determining such compliance on such basis at the time of delivery of such
financial statements, or (ii) the Required Lenders shall so object in
writing within 30 days after the delivery of such financial statements, in
either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made
in respect of the first financial statements delivered under Section 7.1
hereof, shall mean the financial statements referred to in Section 6.1).
SECTION 2
THE CREDIT FACILITY
2.1 Revolving Loans.
(a) Revolving Commitment. During the Commitment Period,
subject to the terms and conditions hereof, each Lender severally
agrees to make revolving credit loans ("Committed Loans") to the
Borrower for the purposes hereinafter set forth; provided, however,
that (i) with regard to each Lender individually, such Lender's
share of outstanding Committed Loans shall not exceed such Lender's
Revolving Committed Amount, and (ii) with regard to the Lenders
collectively, the aggregate amount of outstanding Committed Loans
plus the aggregate amount of Competitive Loans shall not exceed
FOUR HUNDRED MILLION DOLLARS ($400,000,000) (as such aggregate
maximum amount may be reduced from time to time, the "Revolving
Committed Amount"). Committed Loans may consist of Base Rate Loans
or Eurodollar Loans, or a combination thereof, as the Borrower may
request, and may be repaid and reborrowed in accordance with the
provisions hereof.
(b) Committed Loan Borrowings.
(i) Notice of Borrowing. The Borrower shall request a
Committed Loan borrowing by written notice (or telephone
notice promptly confirmed in writing) to the Administrative
Agent not later than 11:00 A.M. (Atlanta, Georgia time) on
the Business Day of the requested borrowing in the case of
Base Rate Loans and on the third Business Day prior to the
date of the requested borrowing in the case of Eurodollar
Loans. Each such request for borrowing shall be irrevocable
and shall specify (A) that a Committed Loan is requested, (B)
the date of the requested borrowing (which shall be a
Business Day), (C) the aggregate principal amount to be
borrowed, and (D) whether the borrowing shall be comprised of
Base Rate Loans, Eurodollar Loans or a combination thereof,
and if Eurodollar Loans are requested, the Interest Period(s)
therefor. A form of Notice of Borrowing (a "Notice of
Borrowing") is attached as Schedule 2.1(b)(i). If the
Borrower shall fail to specify in any such Notice of
Borrowing (I) an applicable Interest Period in the case of a
Eurodollar Loan, then such notice shall be deemed to be a
request for an Interest Period of one month, or (II) the type
of Committed Loan requested, then such notice shall be deemed
to be a request for a Base Rate Loan hereunder. The
Administrative Agent shall give notice to each Lender
promptly upon receipt of each Notice of Borrowing, the
contents thereof and each such Lender's share thereof.
(ii) Minimum Amounts. Each Committed Loan borrowing
shall be in a minimum aggregate amount of $2,000,000 (or the
remaining amount of the Commitment if less), in the case of
Base Rate Loans, and $5,000,000, in the case of Eurodollar
<PAGE 62>
Loans, and in each case integral multiples of $1,000,000 in
excess thereof.
(iii) Advances. Each Lender will make its Commitment
Percentage of each Committed Loan borrowing available to the
Administrative Agent for the account of the Borrower at the
office of the Administrative Agent specified in Schedule
2.1(a), or at such other office as the Administrative Agent
may designate in writing, by 2:00 P.M. (Atlanta, Georgia
time) on the date specified in the applicable Notice of
Borrowing in Dollars and in funds immediately available to
the Administrative Agent. Such borrowing will then be made
available to the Borrower by the Administrative Agent by
crediting the account of the Borrower on the books of such
office with the aggregate of the amounts made available to
the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.
(c) Repayment. The principal amount of all Committed Loans
shall be due and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1,
Committed Loans shall bear interest at a per annum rate equal to:
(i) Base Rate Loans. During such periods as Committed
Loans shall be comprised of Base Rate Loans, the sum of the
Base Rate plus the Applicable Percentage;
(ii) Eurodollar Loans. During such periods as
Committed Loans shall be comprised of Eurodollar Loans, the
sum of the Adjusted Eurodollar Rate plus the Applicable
Percentage.
Interest on Committed Loans shall be payable in arrears on each
Interest Payment Date.
(e) Committed Notes. The Committed Loans made by each
Lender shall be evidenced by a duly executed promissory note of the
Borrower to each Lender in substantially the form of Schedule
2.1(e).
2.2 Competitive Loan Subfacility.
(a) Competitive Loans. During the Commitment Period,
subject to the terms and conditions hereof, from such time as the
Company shall have attained, and for so long as the Company shall
maintain
(A) Pricing Level I or II status, where the Company
does not have a senior unsecured (non-credit enhanced) long
term debt rating from both S&P and Moody's, or
(B) Pricing Level I, II, III or IV status, where the
Company has a senior unsecured (non-credit enhanced) long
term debt rating from both S&P and Moody's,
the Borrower may from time to time request and each Lender may, in
its sole discretion, agree to make, Competitive Loans to the
Borrower; provided, however, (i) the aggregate amount of
Competitive Loans shall not at any time exceed the lesser of FOUR
HUNDRED MILLION DOLLARS ($400,000,000) or the Revolving Committed
Amount (the "Competitive Loan Maximum Amount"), and (ii) the sum of
the aggregate amount of Committed Loans plus the aggregate amount
of Competitive Loans shall not at any time exceed the aggregate
Revolving Committed Amount. Each Competitive Loan shall be not
less than $10,000,000 in the aggregate and integral multiples of
$1,000,000 in excess thereof.
<PAGE 63>
(b) Competitive Bid Requests. The Borrower may solicit
Competitive Bids by delivery of a Competitive Bid Request
substantially in the form of Schedule 2.2(b)-1 to the
Administrative Agent by 11:00 A.M. (Atlanta, Georgia time) on a
Business Day not less than one (1) nor more than four (4) Business
Days prior to the date of a requested Competitive Loan borrowing.
A Competitive Bid Request shall specify (i) the date of the
requested Competitive Loan borrowing (which shall be a Business
Day), (ii) the amount of the requested Competitive Loan borrowing
and (iii) the applicable Interest Periods requested and shall be
accompanied by payment of the Competitive Bid Request Fee, if any.
The Administrative Agent shall promptly notify the Lenders of its
receipt of a Competitive Bid Request and the contents thereof and
invite the Lenders to submit Competitive Bids in response thereto.
A form of such notice is provided in Schedule 2.2(b)-2. No more
than one Competitive Bid Request shall be submitted at any one time
and Competitive Bid Requests may be made no more frequently than
once every five (5) Business Days.
(c) Competitive Bid Procedure. Each Lender may, in its sole
discretion, make one or more Competitive Bids to the Borrower in
response to a Competitive Bid Request. Each Competitive Bid must
be received by the Administrative Agent not later than 10:00 A.M.
(Atlanta, Georgia time) on the Business Day next succeeding the
date of receipt by such Lender of a related Competitive Bid
Request; provided, however, in the event the Administrative Agent
(or an Affiliate of the Administrative Agent), in its capacity as a
Lender, should elect to submit a Competitive Bid in response to a
related Competitive Bid Request, it shall submit such Competitive
Bid directly to the Borrower by 9:45 A.M. (Atlanta, Georgia time)
on the date such Competitive Bid is due. A Lender may offer to
make all or part of the requested Competitive Loan borrowing and
may submit multiple Competitive Bids in response to a Competitive
Bid Request. The Competitive Bid shall specify (i) the particular
Competitive Bid Request as to which the Competitive Bid is
submitted, (ii) the minimum (which shall be not less than
$1,000,000 and integral multiples of $500,000 in excess thereof)
and maximum principal amounts of the requested Competitive Loan or
Loans which the Lender is willing to make, and (iii) the applicable
interest rate or rates and Interest Period or Periods therefor. A
form of such Competitive Bid is provided in Schedule 2.2(c). A
Competitive Bid submitted by a Lender in accordance with the
provisions hereof shall be irrevocable. The Administrative Agent
shall promptly notify the Borrower of all Competitive Bids made and
the terms thereof. The Administrative Agent shall send a copy of
each of the Competitive Bids to the Borrower for its records as
soon as practicable.
(d) Acceptance of Competitive Bids. The Borrower may, in
its sole and absolute discretion, subject only to the provisions of
this subsection (d), accept or refuse any Competitive Bid offered
to it. To accept a Competitive Bid, the Borrower shall give
written notification (or telephone notice promptly confirmed in
writing) substantially in the form of Schedule 2.2(e) of its
acceptance of any or all such Competitive Bids to the
Administrative Agent by 11:00 A.M. (Atlanta, Georgia time) on the
date on which notice of election to make a Competitive Bid is
required to be given by the Lenders pursuant to the terms of
subsection (c) above; provided, however, (i) the failure by the
Borrower to give timely notice of its acceptance of a Competitive
Bid shall be deemed to be a refusal thereof, (ii) the Borrower may
accept Competitive Bids only in ascending order of rates, (iii) the
aggregate amount of Competitive Bids accepted by the Borrower shall
not exceed the principal amount specified in the Competitive Bid
Request, (iv) the Borrower may accept a portion of a Competitive
Bid in the event, and to the extent, acceptance of the entire
<PAGE 64>
amount thereof would cause the Borrower to exceed the principal
amount specified in the Competitive Bid Request, subject however to
the minimum amounts provided herein (and provided that where two or
more such Lenders may submit such a Competitive Bid at the same
such Competitive Bid Rate, then pro rata between or among such
Lenders) and (v) no bid shall be accepted for a Competitive Loan
unless such Competitive Loan is in a minimum principal amount of
$1,000,000 and integral multiples of $500,000 in excess thereof,
except that where a portion of a Competitive Bid is accepted in
accordance with the provisions of subsection (iv) hereof, then in a
minimum principal amount of $100,000 and integral multiples thereof
(but not in any event less than the minimum amount specified in the
Competitive Bid), and in calculating the pro rata allocation of
acceptances of portions of multiple bids at a particular
Competitive Bid Rate pursuant to subsection (iv) hereof, the
amounts shall be rounded to integral multiples of $100,000 in a
manner which shall be in the discretion of the Borrower. A notice
of acceptance of a Competitive Bid given by the Borrower in
accordance with the provisions hereof shall be irrevocable. The
Administrative Agent shall, not later than 12:00 Noon (Atlanta,
Georgia time) on the date on which notice of the election to make a
Competitive Bid is required to be given, notify the Administrative
Agent and each bidding Lender whether or not its Competitive Bid
has been accepted (and if so, in what amount and at what
Competitive Bid Rate), and each successful bidder will thereupon
become bound, subject to the other applicable conditions hereof, to
make the Competitive Loan in respect of which its bid has been
accepted.
(e) Funding of Competitive Loans. Each Lender which is to
make a Competitive Loan shall make its Competitive Loan borrowing
available to the Administrative Agent for the account of the
Borrower at the office of the Administrative Agent specified in
Schedule 2.1(a), or at such other office as the Administrative
Agent may designate in writing, by 1:30 P.M. (Atlanta, Georgia
time) on the date specified in the Competitive Bid Request in
Dollars and in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower
by crediting the account of the Borrower on the books of such
office with the aggregate of the amount made available to the
Administrative Agent by the Competitive Lenders and in like funds
as received by the Administrative Agent.
(f) Maturity of Competitive Loans. Each Competitive Loan
shall mature and be due and payable in full on the last day of the
Interest Period applicable thereto. Unless the Borrower shall give
notice to the Administrative Agent otherwise, the Borrower shall be
deemed to have requested a Base Rate Loan borrowing in the amount
of the maturing Competitive Loan, the proceeds of which will be
used to repay such Competitive Loan.
(g) Interest on Competitive Loans. Subject to the
provisions of Section 3.1, Competitive Loans shall bear interest in
each case at the Competitive Bid Rate applicable thereto. Interest
on Competitive Loans shall be payable in arrears on each Interest
Payment Date.
(h) Competitive Loan Notes. The Competitive Loans shall be
evidenced by a duly executed promissory note of the Borrower to
each Lender in an original principal amount equal to the
Competitive Loan Maximum Amount and substantially in the form of
Schedule 2.2(h).
2.3 Maximum Number of Fixed Rate Loans. Notwithstanding anything
to the contrary contained herein, the number of Eurodollar Loans and the
number of Competitive Loans outstanding at any time shall not exceed an
aggregate amount of ten (10).
<PAGE 65>
SECTION 3
OTHER PROVISION RELATING TO CREDIT FACILITIES
3.1 Default Rate. Upon the occurrence, and during the
continuance, of an Event of Default, the principal of and, to the extent
permitted by law, interest on the Loans and any other amounts owing
hereunder or under the other Credit Documents shall bear interest,
payable on demand, at a per annum rate 2% greater than the rate which
would otherwise be applicable (or if no rate is applicable, whether in
respect of interest, fees or other amounts, then 2% greater than the Base
Rate).
3.2 Extension and Conversion. The Borrower shall have the option,
on any Business Day, to extend existing Loans into a subsequent
permissible Interest Period or to convert Loans into Loans of another
type; provided, however, that (i) except as provided in Section 3.7,
Eurodollar Loans may be converted into Base Rate Loans only on the last
day of the Interest Period applicable thereto, (ii) Eurodollar Loans may
be extended, and Base Rate Loans may be converted into Eurodollar Loans,
only if no Default or Event of Default is in existence on the date of
extension or conversion, (iii) Loans extended as, or converted into,
Eurodollar Loans shall be subject to the terms of the definition of
"Interest Period" set forth in Section 1.1 and shall be in such minimum
amounts as provided in Section 2.1(b)(ii), (iv) no more than 10 separate
Eurodollar Loans shall be outstanding hereunder at any time and (v) any
request for extension or conversion of a Eurodollar Loan which shall fail
to specify an Interest Period shall be deemed to be a request for an
Interest Period of one month. Each such extension or conversion shall be
effected by the Borrower by giving a Notice of Extension/Conversion (or
telephone notice promptly confirmed in writing) to the Administrative
Agent prior to 11:00 A.M. (Atlanta, Georgia time) on the Business Day of,
in the case of the conversion of a Eurodollar Loan into a Base Rate Loan
and on the third Business Day prior to, in the case of the extension of a
Eurodollar Loan as, or conversion of a Base Rate Loan into, a Eurodollar
Loan, the date of the proposed extension or conversion, specifying the
date of the proposed extension or conversion, the Loans to be so extended
or converted, the types of Loans into which such Loans are to be
converted and, if appropriate, the applicable Interest Periods with
respect thereto. Each request for extension or conversion shall
constitute a representation and warranty by the Borrower of the matters
specified in Subsections (a), (b) and (c) of Section 5.2. In the event
the Borrower fails to request extension or conversion of any Eurodollar
Loan in accordance with this Section, or any such conversion or extension
is not permitted or required by this Section, then such Loans shall be
automatically converted into Base Rate Loans at the end of their Interest
Period. The Administrative Agent shall give each Lender notice as
promptly as practicable of any such proposed extension or conversion
affecting any Loan.
3.3 Reductions In Commitments and Prepayments.
(a) Voluntary Reduction of Commitments. The Borrower may
from time to time permanently reduce the Committed Amount in whole
or in part (in each such case in a minimum aggregate amount of
$10,000,000 and integral multiples of $1,000,000 in excess thereof)
upon three (3) Business Days' prior written notice to the
Administrative Agent.
(b) Voluntary Prepayments. The Borrower shall have the
right to prepay Committed Loans in whole or in part from time to
time without premium or penalty; provided, however, that (i)
Competitive Loans and Committed Loans which are Eurodollar Loans
may only be prepaid on three Business Days' prior written notice to
the Agent and any prepayment of such Competitive Loans or Committed
Loans which are Eurodollar Loans will be subject to Section 3.10;
and (ii) each such partial prepayment of Committed Loans shall be
<PAGE 66>
in the minimum principal amount of $2,000,000, in the case of
Committed Loans which are Base Rate Loans and $5,000,000, in the
case of Committed Loans which are Eurodollar Loans and $10,000,000,
in the case of Competitive Loans, and in each case integral
multiples of $1,000,000 in excess thereof.
(c) Mandatory Prepayments. If at any time (i) the sum of
the aggregate amount of outstanding Committed Loans plus the
aggregate amount of Competitive Loans shall exceed the aggregate
Revolving Committed Amount; or (ii) the aggregate amount of
Competitive Loans shall exceed the Competitive Loan Maximum Amount,
the Borrower shall immediately make payment on the Loans in an
amount sufficient to eliminate such excess. In the case of a
mandatory prepayment required on account of subsection (ii), the
amount required to be prepaid hereunder shall serve to temporarily
reduce the Revolving Committed Amount (for purposes of borrowing
availability hereunder, but not for purposes of computation of
fees) by the amount of the payment required until such time as the
situation described in subsection (ii) shall no longer exist.
Payments required to be made hereunder shall be applied to
Committed Loans or Competitive Loans, as appropriate, and with
respect to the types of Loans, first to Base Rate Loans and then to
Eurodollar Loans in direct order of their Interest Period
maturities.
(d) Notice. The Borrower will provide notice to the
Administrative Agent of any prepayment by 11:00 A.M. (Atlanta,
Georgia time) on the day prior to the date of prepayment. Amounts
paid on the Loans under subsection (b) and (c)(i) hereof may be
reborrowed in accordance with the provisions hereof.
3.4 Fees.
(a) Facility Fee. In consideration of the Commitments by
the Lenders hereunder, the Borrower agrees to pay to the
Administrative Agent for the ratable benefit of the Lenders a
facility fee (the "Facility Fee") equal to the Applicable
Percentage per annum on the aggregate Committed Amount in effect
from time to time for the applicable period. The Facility Fee
shall accrue from the date hereof and shall be payable quarterly in
arrears on the 15th day following the end of each calendar quarter.
(b) Administrative Fees. The Borrower agrees to pay to the
Administrative Agent, for its own account, the administrative and
other fees referenced in the Administrative Agent's Fee Letter.
3.5 Capital Adequacy. (a) If the adoption of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Lender
with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or
comparable agency, in each case made subsequent to the Closing Date has
or will have the effect of reducing the rate of return on any Lender's or
its parent company's capital by an amount such Lender deems to be
material, as a consequence of its commitments or obligations hereunder to
a level below that which such Lender or its parent company could have
achieved but for such adoption, effectiveness, change or compliance
(taking into consideration such Lender's or its parent company's policies
with respect to capital adequacy), then, upon notice from such Lender,
the Borrower shall pay to such Lender such additional amount or amounts
as will compensate such Lender and its parent company for such reduction
(it being understood that such parent company shall not be reimbursed to
the extent its subsidiary Lender is reimbursed by the Borrower in
connection with the same or a similar law, rule, regulation, change,
<PAGE 67>
request or directive applicable to such Lender). All payments required
by this Section 3.5 shall be made by the Borrower within 10 Business Days
after demand by the affected Lender. The Borrower shall not be obligated
to reimburse any Lender for any reduced return incurred more than 90 days
after the date that such Lender receives actual notice of such reduced
return unless such Lender gives notice thereof to the Borrower in
accordance with this Section 3.5 during such 90 day period. If any
Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall provide prompt notice thereof to the Borrower,
through the Administrative Agent, certifying (x) that one of the events
described in this paragraph (a) has occurred and describing in reasonable
detail the nature of such event, (y) as to the increased cost or reduced
amount resulting from such event and (z) as to the additional amount
demanded by such Lender and a reasonably detailed explanation of the
calculation thereof (including the method by which such Lender allocated
such amounts to the Borrower). Such a certificate as to any additional
amounts payable pursuant to this subsection submitted by such Lender,
through the Administrative Agent, to the Borrower shall be conclusive in
the absence of manifest error; provided, however, that the method by
which such Lender allocated such amount to the Borrower must have been
applied in good faith and must have been a method generally used by such
Lender for such purpose. This covenant shall survive the termination of
this Credit Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) Each Lender shall use its reasonable efforts to reduce
or eliminate any claim for compensation pursuant to this Section
3.5, including, without limitation, a change in the office of such
Lender at which its obligations related to this Credit Agreement
are maintained if such change will avoid the need for, or reduce
the amount of, such compensation and will not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to it. If
any such claim for compensation shall not be eliminated or waived,
the Borrower shall have the right to replace the affected Lender
with a new financial institution that shall succeed to the rights
of such Lender under this Credit Agreement; provided, however, that
such Lender shall not be replaced hereunder until it has been paid
in full such claim and all other amounts owed to it hereunder.
3.6 Inability To Determine Interest Rate. If prior to the first
day of any Interest Period, the Administrative Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrower in the absence of manifest error) that, by reason of
circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such Interest
Period, the Administrative Agent shall give telecopy or telephonic notice
thereof to the Borrower and the Lenders as soon as practicable
thereafter. If such notice is given (i) any Eurodollar Loans requested
to be made on the first day of such Interest Period shall be made as Base
Rate Loans and (ii) any Loans that were to have been converted on the
first day of such Interest Period to or continued as Eurodollar Loans
shall be converted to or continued as Base Rate Loans. Until such notice
has been withdrawn by the Administrative Agent, no further Eurodollar
Loans shall be made or continued as such, nor shall the Borrower have the
right to convert Base Rate Loans to Eurodollar Loans.
3.7 Illegality. Notwithstanding any other provision herein, if
the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof occurring after the Closing Date
shall make it unlawful for any Lender to make or maintain Eurodollar
Loans as contemplated by this Credit Agreement, (i) such Lender shall
promptly give written notice of such circumstances to the Borrower and
the Administrative Agent (which notice shall be withdrawn whenever such
circumstances no longer exist), (ii) the commitment of such Lender
hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert a Base Rate Loan to Eurodollar Loans shall forthwith be canceled
<PAGE 68>
and, until such time as it shall no longer be unlawful for such Lender to
make or maintain Eurodollar Loans, such Lender shall then have a
commitment only to make a Base Rate Loan when a Eurodollar Loan is
requested and (c) such Lender's Loans then outstanding as Eurodollar
Loans, if any, shall be converted automatically to Base Rate Loans on the
respective last days of the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day
of the then current Interest Period with respect thereto, the Borrower
shall pay to such Lender such amounts, if any, as may be required
pursuant to subsection 3.10. In any such case, interest and principal
(if any) shall be payable contemporaneously with the related Eurodollar
Loans of the other Banks.
3.8 Requirements of Law. (a) If the adoption of or any change in
any Requirement of Law or in the interpretation or application thereof
applicable to any Lender, or compliance by any Lender with any request or
directive (whether or not having the force of law) from any central bank
or other Governmental Authority, in each case made subsequent to the
Closing Date (or, if later, the date on which such Lender becomes a
Lender):
(i) shall subject such Lender to any tax of any kind
whatsoever with respect to any Eurodollar Loans made by it or its
obligation to make Eurodollar Loans, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Excluded Taxes and Non-Excluded Taxes covered by subsection 3.9
(including Non-Excluded Taxes imposed solely by reason of any
failure of such Lender to comply with its obligations under
subsection 3.9(b)) and changes in taxes measured by or imposed upon
the overall gross or net income, franchise or other taxes (imposed
in lieu of such net income tax), of such Lender or its applicable
lending office, branch, or any affiliate thereof); or
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against
assets held by, deposits or other liabilities in or for the account
of, advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Adjusted Eurodollar
Rate hereunder; or
(iii) shall impose on such Lender any other condition
(excluding any tax of any kind) whatsoever in connection with this
Credit Agreement;
and the result of any of the foregoing is to increase the cost to
such Lender, by an amount which such Lender deems to be material,
of making, converting into, continuing or maintaining Eurodollar
Loans or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from
such Lender, through the Administrative Agent, in accordance
herewith, the Borrower shall pay such Lender, any additional
amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable, provided that, in any such case, the
Borrower may elect to convert the Eurodollar Loans made by such
Lender hereunder to Base Rate Loans by giving the Administrative
Agent at least one Business Day's notice of such election, in which
case the Borrower shall promptly pay to such Lender, upon demand,
without duplication, such amounts, if any, as may be required
pursuant to subsection 3.10. All payments required by this Section
<PAGE 69>
3.8 shall be made by the Borrower within 10 Business Days after
demand by the affected Lender. The Borrower shall not be obligated
to reimburse any Lender for any increased cost or reduced return
incurred more than 120 days after the date that such Lender
receives actual notice of such increased cost or reduced return
unless such Lender gives notice thereof to the Borrower in
accordance with this Section 3.8 during such 120 day period. If
any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall provide prompt notice thereof
to the Borrower, through the Administrative Agent, certifying (x)
that one of the events described in this paragraph (a) has occurred
and describing in reasonable detail the nature of such event, (y)
as to the increased cost or reduced amount resulting from such
event and (z) as to the additional amount demanded by such Lender
and a reasonably detailed explanation of the calculation thereof
(including the method by which such Lender allocated such amounts
to the Borrower). Such a certificate as to any additional amounts
payable pursuant to this subsection submitted by such Lender,
through the Administrative Agent, to the Borrower shall be
conclusive in the absence of manifest error; provided, however,
that the method by which such Lender allocated such amount to the
Borrower must have been applied in good faith and must have been a
method generally used by such Lender for such purpose. This
covenant shall survive the termination of this Credit Agreement and
the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender shall use its reasonable efforts to reduce
or eliminate any claim for compensation pursuant to this Section
3.8, including, without limitation, a change in the office of such
Lender at which its obligations related to this Credit Agreement
are maintained if such change will avoid the need for, or reduce
the amount of, such compensation and will not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to it. If
any such claim for compensation shall not be eliminated or waived,
the Borrower shall have the right to replace the affected Lender
with a new financial institution that shall succeed to the rights
of such Lender under this Credit Agreement; provided, however, that
such Lender shall not be replaced hereunder until it has been paid
in full such claim and all other amounts owed to it hereunder.
3.9 Taxes. (a) Except as provided below in this subsection all
payments made by the Borrower under this Credit Agreement and any Notes
shall be made free and clear of, and without deduction or withholding for
or on account of, any present or future stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding taxes measured by or imposed upon the
overall gross or net income of any Lender (or any transferee or assignee
thereof, including a Participant (any such Person, a "Transferee")) or
its applicable lending office, or any branch or affiliate thereof, and
all franchise taxes, branch taxes, taxes on doing business or taxes on
the overall capital or net worth of any Lender (or Transferee) or its
applicable lending office, or any branch or affiliate thereof, in each
case imposed in lieu of net income taxes, imposed: (i) by the
jurisdiction under the laws of which such Lender (or Transferee),
applicable lending office, branch or affiliate is organized or is
located, or in which its principal executive office is located, or any
nation within which such jurisdiction is located or any political
subdivision thereof; or (ii) by reason of any connection between the
jurisdiction imposing such tax and such Lender (or Transferee),
applicable lending office, branch or affiliate other than a connection
arising solely from such Lender (or Transferee) having executed,
delivered or performed its obligations, or received payment under or
enforced, this Credit Agreement or any Notes (such excluded taxes being
referred to herein as "Excluded Taxes"). If any such non-excluded taxes,
levies, imposts, duties, charges, fees, deductions or withholdings ("Non-
Excluded Taxes") are required to be withheld from any amounts payable to
the Administrative Agent or any Lender hereunder or under any Notes, the
amounts so payable to the Administrative Agent or such Lender (or
Transferee) shall be increased to the extent necessary to yield to the
Administrative Agent or such Lender (or Transferee) (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable hereunder
<PAGE 70>
at the rates or in the amounts specified in this Credit Agreement and any
Notes, provided, however, that the Borrower shall be entitled to deduct
and withhold any Non-Excluded Taxes and shall not be required to increase
any such amounts payable to any Lender (or Transferee) that is not
organized under the laws of the United States of America or a state
thereof if such Lender (or Transferee) fails to comply with the
requirements of subsection (b) below. Whenever any Non-Excluded Taxes
are payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Administrative Agent for its own account or
for the account of such Lender (or Transferee), as the case may be, a
certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-Excluded
Taxes when due to the appropriate taxing authority or fails to remit to
the Administrative Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Administrative
Agent and the Lenders (or Transferees) for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent
or any Lender (or Transferee) as a result of any such failure. Each
Lender (or Transferee) shall make written demand for indemnification no
later than 120 days after the earlier of (i) the date on which such
Lender (or Transferee) makes such payment of Non-Excluded Taxes and (ii)
the date on which such Governmental Authority makes written demand upon
such Lender (or Transferee) for payment of such Non-Excluded Taxes. The
agreements in this subsection (a) shall survive the termination of this
Credit Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) Each Lender (or Transferee) that is not organized under
the laws of the United States of America or a state thereof
(including the District of Columbia) shall:
(X)(i) on or before the date of any payment by the
Borrower under this Credit Agreement or Notes to such Lender,
deliver to the Borrower and the Administrative Agent (A) two
duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, or successor applicable form, as
the case may be, certifying that it is entitled to receive
payments under this Credit Agreement and its Notes without
deduction or withholding of any United States federal income
taxes and (B) an Internal Revenue Service Form W-8 or W-9, or
successor applicable form, as the case may be, certifying
that it is entitled to an exemption from United States backup
withholding tax;
(ii) deliver to the Borrower and the Administrative
Agent two further copies of any such form or certification on
or before the date that such Lender (or Transferee) changes
its applicable lending office by designating a different
lending office (a "New Lending Office") and on or before the
date that any such form or certification expires or becomes
obsolete and after the occurrence of any event requiring a
change in the most recent form previously delivered by it to
the Borrower; and
(iii) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Borrower or the Administrative Agent; or
(Y) in the case of any such Lender (or Transferee)
that is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code, (i) represent to the Borrower (for
the benefit of the Borrower and the Administrative Agent)
that it is not a bank within the meaning of Section
881(c)(3)(A) of the Code, (ii) agree to furnish to the
Borrower on or before the date of any payment by the
Borrower, with a copy to the Administrative Agent (A) a
<PAGE 71>
certificate substantially in the form of Schedule 3.9 hereto
(any such certificate a "U.S. Tax Compliance Certificate")
and (B) two accurate and complete original signed copies of
Internal Revenue Service Form W-8, or successor applicable
form certifying to such Lender's legal entitlement at the
date of such certificate to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the
Code with respect to payments to be made under this Credit
Agreement and its Notes (and to deliver to the Borrower and
the Administrative Agent two further copies of such form on
or before the date it expires or becomes obsolete and after
the occurrence of any event requiring a change in the most
recently provided form and, if necessary, obtain any
extensions of time reasonably requested by the Borrower or
the Administrative Agent for filing and completing such
forms), and (iii) agree, to the extent legally entitled to do
so, upon reasonable request by the Borrower, to provide to
the Borrower (for the benefit of the Borrower and the
Administrative Agent) such other forms as may be reasonably
required in order to establish the legal entitlement of such
Lender (or Transferee) to an exemption from withholding with
respect to payments under this Credit Agreement and its
Notes;
unless in any such case any change in treaty, law or regulation has
occurred after the date such Person becomes a Lender (or
Transferee) hereunder which renders all such forms inapplicable or
which would prevent such Lender (or Transferee) from duly
completing and delivering any such form with respect to it and such
Lender (or Transferee) so advises the Borrower and the
Administrative Agent. Each Person that shall become a Lender (or
Transferee) or a participant pursuant to subsection 11.3 or
otherwise becomes a Transferee shall, upon the effectiveness of the
related transfer, be required to provide all of the forms,
certifications and statements required pursuant to this subsection,
provided that in the case of a Participant the obligations of such
Participant pursuant to this subsection (b) shall be determined as
if the Participant were a Lender except that such Participant shall
furnish all such required forms, certifications and statements to
the Lender from which the related participation shall have been
purchased.
(c) If a Lender (or Transferee) shall become aware that it
is entitled to claim a refund, credit or reduction in tax from a
Governmental Authority in respect of Non-Excluded Taxes as to which
it has been indemnified by the Borrower, or with respect to which
the Borrower has paid additional amounts, pursuant to this Section
3.9, it shall promptly notify the Borrower of the availability of
such refund claim, credit or reduction in tax and shall, within 30
days after receipt of a request by the Borrower, make a claim to
such Governmental Authority for such refund, credit or reduction in
tax at the Borrower's expense. If a Lender (or Transferee)
receives a refund (including pursuant to a claim for refund made
pursuant to the preceding sentence) or realizes a credit or
reduction in tax in respect of any Non-Excluded Taxes as to which
it has been indemnified by the Borrower or with respect to which
the Borrower has paid additional amounts pursuant to this Section
3.9, it shall within 30 days from the date of such receipt pay over
the amount of such refund or benefit of such credit or reduction in
tax to the Borrower (but only to the extent of indemnity payments
made, or additional amounts paid, by the Borrower under this
Section 3.9 with respect to the Non-Excluded Taxes giving rise to
such refund, credit or reduction in tax), net of all reasonable
out-of-pocket expenses of the Lender (or Transferee) and without
interest (other than interest paid by the relevant Governmental
Authority with respect to such refund, credit or reduction in tax);
provided, however, that the Borrower, upon request of such Lender
(or Transferee) agrees to repay the amount paid over to the
<PAGE 72>
Borrower (plus penalties, interest or other charges) to such Lender
(or Transferee) in the event such Lender (or Transferee) is
required to repay such refund, credit or reduction in tax to such
Governmental Authority.
(d) The Borrower shall not be required to indemnify any
Lender (or Transferee), or pay any additional amounts to any Lender
(or Transferee), in respect of United States Federal withholding
tax (or any withholding tax imposed by a State that applies only
when such United States Federal withholding tax is imposed)
pursuant to paragraph (a) above to the extent that: (i) the
obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Lender (or
Transferee) became a party to this Credit Agreement (or in the case
of a Transferee that is a Participant, on the date such Participant
became a Transferee hereunder) or, with respect to payments to a
New Lending Office, the date such Lender (or Transferee) designated
such New Lending Office with respect to this Credit Agreement and
any Notes; provided, however, that this clause (i) shall not apply
to any Transferee or New Lending Office that becomes a Transferee
or New Lending Office as a result of an assignment, participation,
transfer or designation made at the request of the Borrower; and
provided further, however, that this clause (i) shall not apply to
the extent that the indemnity payment or additional amounts any
Transferee, or Lender (or Transferee) through a New Lending Office,
would be entitled to receive (without regard to this clause (i)) do
not exceed the indemnity payment or additional amounts that the
person making the assignment, participation or transfer to such
Transferee, or Lender (or Transferee) making the designation of a
New Lending Office, would have been entitled to receive in the
absence of such assignment, participation, transfer or designation.
(e) Any Lender (or Transferee) claiming any indemnity
payment or additional amounts payable pursuant to this Section 3.9
shall use reasonable efforts (consistent with legal and regulatory
restrictions) to file any certificate or document reasonably
requested in writing by the Borrower or to change the jurisdiction
of its applicable lending office if the making of such a filing or
change would avoid the need for or reduce the amount of any such
indemnity payment or additional amounts that may thereafter accrue
and would not, in the good faith determination of such Lender (or
Transferee), be otherwise disadvantageous to such Lender (or
Transferee).
3.10 Indemnity. The Borrower agrees to indemnify each Lender and
to hold each Lender harmless from any loss or expense which such Lender
may sustain or incur (other than through such Lender's gross negligence
or willful misconduct) as a consequence of (a) default by the Borrower in
making a borrowing of, conversion into or continuation of Competitive
Loans or Committed Loans which are Eurodollar Loans after the Borrower
has given a notice requesting the same in accordance with the provisions
of this Credit Agreement, (b) default by the Borrower in making any
prepayment of a Competitive Loan or a Committed Loan which is a
Eurodollar Loan after the Borrower has given a notice thereof in
accordance with the provisions of this Credit Agreement or (c) the making
of a prepayment of Competitive Loans or Committed Loans which are
Eurodollar Loans on a day which is not the last day
of an Interest Period with respect thereto. Such indemnification may include
an amount equal to the excess, if any, of (i) the amount of interest which
would have accrued on the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure
to borrow, convert or continue to the last day of the applicable Interest
Period (or, in the case of a failure to borrow, convert or continue, the
Interest Period that would have commenced on the date of such failure) in each
case at the applicable rate of interest for such Competitive Loan or a
Committed Loan which is a Eurodollar Loan provided for herein (excluding,
<PAGE 73>
however, the Applicable Percentage included therein, if any) over (ii) the
amount of interest (as reasonably determined by such Lender) which would have
accrued to such Lender on such amount by placing such amount on deposit for a
comparable period with leading banks in the interbank eurodollar market. This
covenant shall survive the termination of this Credit Agreement and the
payment of the Loans and all other amounts payable hereunder.
3.11 Pro Rata Treatment. Except to the extent otherwise provided
herein:
(a) Committed Loans. Each Committed Loan borrowing, each
payment or prepayment of principal of any Committed Loan and each
payment of interest on the Committed Loans, each payment of the Facility
Fee, each reduction of the Revolving Committed Amount, and each
conversion or continuation of any Committed Loan, shall be allocated pro
rata among the relevant Lenders in accordance with the respective
applicable Revolving Committed Amounts (or, if the Commitments of such
Lenders have expired or been terminated, in accordance with the
respective principal amounts of their outstanding Committed Loans and
Participation Interests of such Lenders); and
(b) Advances. Unless the Administrative Agent shall have been
notified in writing by any Lender prior to a Committed Loan borrowing
that such Lender will not make the amount that would constitute its
Commitment Percentage of such borrowing available to the Administrative
Agent, the Administrative Agent may assume that such Lender is making
such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such amount is not
made available to the Administrative Agent by the required time on the
borrowing date therefor, such Lender shall pay to the Administrative
Agent, on demand, such amount with interest thereon at a rate equal to
the Federal Funds Rate for the period until such Lender makes such
amount immediately available to the Administrative Agent. A certificate
of the Administrative Agent submitted to any Lender with respect to any
amounts owing under this subsection shall be conclusive in the absence
of manifest error. If such Lender's Commitment Percentage of such
borrowing is not made available to the Administrative Agent by such
Lender within two Business Days of such borrowing date, the
Administrative Agent shall notify the Borrower of the failure of such
Lender to make such amount available to the Administrative Agent and the
Administrative Agent shall also be entitled to recover such amount with
interest thereon at the rate per annum applicable to Base Rate Loans
hereunder, on demand, from the Borrower.
3.12 Sharing of Payments. The Lenders agree among themselves that, in
the event that any Lender shall obtain payment in respect of any Loan or any
other obligation owing to such Lender under this Credit Agreement through the
exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a
secured claim under Section 506 of Title 11 of the United States Code or other
security or interest arising from, or in lieu of, such secured claim, received
by such Lender under any applicable bankruptcy, insolvency or other similar
law or otherwise, or by any other means, in excess of its pro rata share of
such payment as provided for in this Credit Agreement, such Lender shall
promptly purchase from the other Lenders a participation in such Loans and
other obligations in such amounts, and make such other adjustments from time
to time, as shall be equitable to the end that all Lenders share such payment
in accordance with their respective ratable shares as provided for in this
Credit Agreement. The Lenders further agree among themselves that if payment
to a Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
<PAGE 74>
such payment shall, by repurchase of a participation theretofore sold, return
its share of that benefit (together with its share of any accrued interest
payable with respect thereto) to each Lender whose payment shall have been
rescinded or otherwise restored. The Borrower agrees that any Lender so
purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including setoff, banker's lien or
counterclaim, with respect to such participation as fully as if such Lender
were a holder of such Loan or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit
Agreement, if any Lender or the Administrative Agent shall fail to remit to
the Administrative Agent or any other Lender an amount payable by such Lender
or the Administrative Agent to the Administrative Agent or such other Lender
pursuant to this Credit Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such amount is due until the date such amount is paid to the
Administrative Agent or such other Lender at a rate per annum equal to the
Federal Funds Rate. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section 3.12 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent
with the rights of the Lenders under this Section 3.12 to share in the
benefits of any recovery on such secured claim.
3.13 Place and Manner of Payments. Except as otherwise specifically
provided herein, all payments hereunder shall be made to the Administrative
Agent in Dollars in immediately available funds, without offset, deduction,
counterclaim or withholding of any kind, at its offices at the Administrative
Agent's office specified in Schedule 2.1(a) not later than 2:00 P.M. (Atlanta,
Georgia time) on the date when due. Payments received after such time shall
be deemed to have been received on the next succeeding Business Day. The
Administrative Agent may (but shall not be obligated to) debit the amount of
any such payment which is not made by such time to any ordinary deposit
account of the Borrower maintained with the Administrative Agent (with notice
to the Borrower). The Borrower shall, at the time it makes any payment under
this Credit Agreement, specify to the Administrative Agent the Loans, fees or
other amounts payable by the Borrower hereunder to which such payment is to be
applied (and in the event that it fails so to specify, or if such application
would be inconsistent with the terms hereof, the Administrative Agent shall
distribute such payment to the Lenders in such manner as the Administrative
Agent may determine to be appropriate in respect of obligations owing by the
Borrower hereunder, subject to the terms of Section 3.11). The Administrative
Agent will distribute such payments to such Lenders, if any such payment is
received prior to 12:00 Noon (Atlanta, Georgia time) on a Business Day in like
funds as received prior to the end of such Business Day and otherwise the
Administrative Agent will distribute such payment to such Lenders on the next
succeeding Business Day. Whenever any payment hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day (subject to accrual of interest
and fees for the period of such extension), except that in the case of
Eurodollar Loans, if the extension would cause the payment to be made in the
next following calendar month, then such payment shall instead be made on the
next preceding Business Day. Except as expressly provided otherwise herein,
all computations of interest and fees shall be made on the basis of actual
number of days elapsed over a year of 360 days, except with respect to
computation of interest on Base Rate Loans which shall be calculated based on
a year of 365 or 366 days, as appropriate. Interest shall accrue from and
include the date of borrowing, but exclude the date of payment.
<PAGE 75>
SECTION 4
GUARANTY
4.1 The Guaranty. The Company guarantees to each Lender and the
Administrative Agent as hereinafter provided the prompt payment of the
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise) strictly in accordance with the
terms thereof. The Company hereby further agrees that if any of the
Obligations are not paid in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration or otherwise), the Company will promptly
pay the same, without any demand or notice whatsoever, and that in the case of
any extension of time of payment or renewal of any of the Obligations, the
same will be promptly paid in full when due (whether at extended maturity, as
a mandatory prepayment, by acceleration or otherwise) in accordance with the
terms of such extension or renewal.
4.2 Obligations Unconditional. The obligations of the Company under
Section 4.1 hereof are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of any of the Credit
Documents, or any other agreement or instrument referred to therein, or any
substitution, release or exchange of any other guarantee of or security for
any of the Obligations, and, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 4.2 that the obligations of the Company
hereunder shall be absolute and unconditional under any and all circumstances.
Without limiting the generality of the foregoing, it is agreed that, to the
fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of the Company hereunder
which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Company, the time for any performance of or compliance with any of the
Obligations shall be extended, or such performance or compliance shall
be waived;
(ii) any of the acts mentioned in any of the provisions of any of
the Credit Documents or any other agreement or instrument referred to
therein shall be done or omitted;
(iii) the maturity of any of the Obligations shall be accelerated,
or any of the Obligations shall be modified, supplemented or amended in
any respect, or any right under any of the Credit Documents or any other
agreement or instrument referred to therein shall be waived or any other
guarantee of any of the Obligations or any security therefor shall be
released or exchanged in whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Administrative Agent
or any Lender or Lenders as security for any of the Obligations shall
fail to attach or be perfected; or
(v) any of the Obligations shall be determined to be void or
voidable (including, without limitation, for the benefit of any creditor
of the Company) or shall be subordinated to the claims of any Person
(including, without limitation, any creditor of the Company).
With respect to its obligations hereunder, the Company hereby expressly waives
diligence, presentment, demand of payment, protest and all notices whatsoever,
and any requirement that the Administrative Agent or any Lender exhaust any
right, power or remedy or proceed against any Person under any of the Credit
Documents or any other agreement or instrument referred to therein, or against
<PAGE 76>
any other Person under any other guarantee of, or security for, any of the
Obligations.
4.3 Reinstatement. The obligations of the Company under this Section 4
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of any Person in respect of the Obligations is
rescinded or must be otherwise restored by any holder of any of the
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and the Company agrees that it will indemnify the
Administrative Agent and each Lender on demand for all reasonable costs and
expenses (including, without limitation, reasonable fees and expenses of
counsel) incurred by the Administrative Agent or such Lender in connection
with such rescission or restoration, including any such costs and expenses
incurred in defending against any claim alleging that such payment constituted
a preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law.
4.4 Certain Additional Waivers. Without limiting the generality of the
provisions of this Section 4, the Company hereby specifically waives the
benefits of N.C. Gen. Stat. 26-7 through 26-9, inclusive. The Company
further agrees that it shall have no right of recourse to security for the
Obligations. The Company further agrees that it shall have no right of
subrogation, reimbursement or indemnity, nor any right of recourse to
security, if any, for the Obligations so long as any amounts payable to the
Administrative Agent or the Lenders in respect of the Obligations shall remain
outstanding and until all of the Commitments shall have expired or been
terminated.
4.5 Remedies. The Company agrees that, to the fullest extent permitted
by law, as between the Company, on the one hand, and the Administrative Agent
and the Lenders, on the other hand, the Obligations may be declared to be
forthwith due and payable as provided in Section 9 hereof (and shall be deemed
to have become automatically due and payable in the circumstances provided in
said Section 9) for purposes of Section 4.1 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing
such Obligations from becoming automatically due and payable) as against any
other Person and that, in the event of such declaration (or such Obligations
being deemed to have become automatically due and payable), such Obligations
(whether or not due and payable by any other Person) shall forthwith become
due and payable by the Company for purposes of said Section 4.1.
4.6 Continuing Guarantee. The guarantee in this Section 4 is a
continuing guarantee, and shall apply to all Obligations whenever arising.
SECTION 5
CONDITIONS PRECEDENT
5.1 Conditions to Closing Date. This Credit Agreement shall become
effective upon the satisfaction of the following conditions precedent:
(a) Execution of Agreement. The Administrative Agent shall have
received (i) one or more counterparts of this Credit Agreement, executed
by a duly authorized officer of each party hereto and (ii) for the
account of each Lender a Committed Note and a Competitive Note, in each
case conforming to the requirements of this Credit Agreement and
executed by a duly authorized officer of the Borrower.
(b) Corporate Documents. Receipt by the Administrative Agent of
the following:
<PAGE 77>
(i) Articles of Incorporation. Copies of the
articles of incorporation or charter documents of the
Company and the Borrower certified to be true and complete
as of a recent date by the appropriate governmental
authority of the state of its incorporation.
(ii) Resolutions. Copies of resolutions of the
Board of Directors of the Company and the Borrower approving
and adopting the Credit Documents, the transactions
contemplated therein and authorizing execution and delivery
thereof, certified by a secretary or assistant secretary as
of the Closing Date to be true and correct and in force and
effect as of such date.
(iii) Bylaws. A copy of the bylaws of the
Company and the Borrower certified by a secretary or
assistant secretary as of the Closing Date to be true and
correct and in force and effect as of such date.
(iv) Good Standing. Copies of certificates of
good standing, existence or its equivalent with respect to
the Company and the Borrower certified as of a recent date
by the appropriate governmental authorities of the state of
incorporation and each other state in which the failure to
so qualify and be in good standing would have a material
adverse effect on the business, financial position or
operations of the Company or the Borrower in such state.
(c) Officer's Certificate. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of a duly
authorized officer of each of the Company and the Borrower dated the
Closing Date, substantially in the form of Schedule 5.1(c) with
appropriate insertions and attachments.
(d) Legal Opinion of Counsel. The Administrative Agent shall
have received, with a copy for each Lender, an opinion of counsel for
the Company and the Borrower, dated the Closing Date and addressed to
the Administrative Agent and the Lenders, in form and substance
satisfactory to the Agent and the Lenders.
(e) Fees. The Administrative Agent shall have received all
fees, if any, owing pursuant to the commitment letter and Section 3.4.
(f) Subsection 5.2 Conditions. The conditions specified in
subsections 5.2(a) and (b) shall be satisfied on the Closing Date as if
Loans were to be made on such date.
(g) Additional Matters. All other documents and legal matters
in connection with the transactions contemplated by this Credit
Agreement shall be reasonably satisfactory in form and substance to the
Administrative Agent and its counsel.
5.2 Conditions to All Loans. The obligation of each Lender to make
any Loan hereunder (including the initial Loans to be made hereunder) is
subject to the satisfaction of the following conditions precedent on the date
of making such Loan:
(a) Representations and Warranties. The representations and
warranties made by the Company herein or which are contained in any
certificate furnished at any time under or in connection herewith shall
be true and correct in all material respects on and as of the date of
such Loan as if made on and as of such date.
<PAGE 78>
(b) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date or after
giving effect to the Loan to be made on such date unless such Default or
Event of Default shall have been waived in accordance with this Credit
Agreement.
(c) Additional Conditions to Committed Loans. If such Loan is
made pursuant to Section 2.1, all conditions set forth in such Section
shall have been satisfied.
(d) Additional Conditions to Competitive Loans. If such Loan is
made pursuant to Section 2.2 all conditions set forth in such Section
shall have been satisfied.
Each acceptance by the Borrower of a Loan shall be deemed to constitute
a representation and warranty by the Borrower as of the date of such Loan that
the applicable conditions in paragraphs (a), (b), (c) and/or (d) of this
subsection have been satisfied.
SECTION 6
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Credit Agreement and to make
the Loans herein provided for, the Company hereby represents and warrants to
the Administrative Agent and to each Lender that:
6.1 Financial Condition. The consolidated balance sheet of the
Company and its consolidated Subsidiaries as at February 28, 1995 and as at
May 31, 1995 and the related consolidated statements of earnings and of cash
flows for the fiscal year or three month period ended on such date, reported
on (only in the case of such annual statements) by Deloitte & Touche, LLP,
copies of which have heretofore been furnished to each Lender, present fairly
the consolidated financial condition of the Company and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the fiscal year or three month period
then ended, subject in the case of the May 31, 1995 statements to normal year
end adjustments. All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as disclosed
therein). Neither the Company nor any of its consolidated Subsidiaries had,
at the date of the balance sheets referred to above, any material Guarantee
Obligation, contingent liabilities or liability for taxes, long-term lease or
unusual forward or long-term commitment, including, without limitation, any
material interest rate or foreign currency swap or exchange transaction, which
is not reflected in the foregoing statements or in the notes thereto.
6.2 No Change. Since February 28, 1995 there has been no development
or event which has had a Material Adverse Effect.
6.3 Corporate Existence; Compliance with Law. Each of the Company,
its Subsidiaries and the Borrower (a) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, (b)
has the corporate or partnership power and authority and the legal right to
own and operate all its material property, to lease the material property it
operates as lessee and to conduct the business in which it is currently
engaged, (c) is duly qualified as a foreign corporation or partnership and in
good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification except to the extent that the failure to so qualify or be in
<PAGE 79>
good standing would not, in the aggregate, have a Material Adverse Effect and
(d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith would not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
6.4 Corporate Power; Authorization; Enforceable Obligations. Each of
the Company and the Borrower has full power and authority and the legal right
to make, deliver and perform the Credit Documents to which it is party and has
taken all necessary corporate action to authorize the execution, delivery and
performance by it of the Credit Documents to which it is party. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or with the execution, delivery or performance of any
Credit Document by the Company or the Borrower or with the validity or
enforceability of any Credit Document against the Company or the Borrower.
Each Credit Document to which it is a party has been duly executed and
delivered on behalf of the Company or the Borrower. Each Credit Document to
which it is a party constitutes a legal, valid and binding obligation of the
Company or the Borrower, as the case may be, enforceable against the Company
or the Borrower, as the case may be, in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.5 No Legal Bar; No Default. The execution, delivery and
performance of the Credit Documents, the borrowings thereunder and the use of
the proceeds of the Loans will not violate any Requirement of Law or any
Contractual Obligation of the Company, its Subsidiaries or the Borrower, and
will not result in, or require, the creation or imposition of any Lien on any
of its or their respective properties or revenues pursuant to any Requirement
of Law or Contractual Obligation other than the Liens arising under or
contemplated in connection with the Credit Documents. Neither the Company nor
any of its Subsidiaries is in default under or with respect to any of its
Contractual Obligations in any respect which would reasonably be expected to
have a Material Adverse Effect. No Default or Event of Default has occurred
and is continuing.
6.6 No Material Litigation. Except as set forth in Schedule 6.6, no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Company,
threatened by or against the Company or any of its Subsidiaries or against any
of its or their respective properties or revenues (a) with respect to the
Credit Documents or any Loan or any of the transactions contemplated hereby,
or (b) which, if adversely determined, would reasonably be expected to have a
Material Adverse Effect.
6.7 Investment Company Act. Neither the Company nor the Borrower is
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
6.8 Federal Regulations. No part of the proceeds of any Loan
hereunder will be used directly or indirectly for any purpose which violates,
or which would be inconsistent with, the provisions of Regulation G, T, U or X
of the Board of Governors of the Federal Reserve System. The Company and its
Subsidiaries taken as a group do not own "margin stock" except as identified
in the financial statements referred to in Section 6.1 and the aggregate value
of all "margin stock" owned by the Company and its Subsidiaries taken as a
group does not exceed 25% of the value of their assets.
6.9 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which
<PAGE 80>
this representation is made or deemed made with respect to any Plan, and each
Plan has complied in all material respects with the applicable provisions of
ERISA and the Code, except to the extent that any such occurrence or failure
to comply would not reasonably be expected to have a Material Adverse Effect.
No termination of a Single Employer Plan has occurred resulting in any
liability that has remained underfunded, and no Lien in favor of the PBGC or a
Plan has arisen, during such five-year period which would reasonably be
expected to have a Material Adverse Effect. The present value of all accrued
benefits under each Single Employer Plan (based on those assumptions used to
fund such Plans) did not, as of the last annual valuation date prior to the
date on which this representation is made or deemed made, exceed the value of
the assets of such Plan allocable to such accrued benefits by an amount which
would reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any Commonly Controlled Entity is currently subject to any
liability for a complete or partial withdrawal from a Multiemployer Plan which
would reasonably be expected to have a Material Adverse Effect.
6.10 Environmental Matters. Except to the extent that all of the
following, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect:
(a) To the best knowledge of the Company, the facilities and
properties owned, leased or operated by the Company or any of its
Subsidiaries (the "Properties") do not contain any Materials of
Environmental Concern in amounts or concentrations which (i) constitute
a violation of, or (ii) could give rise to liability under, any
Environmental Law.
(b) To the best knowledge of the Company, the Properties and all
operations at the Properties are in compliance, and have in the last
five years been in compliance, in all material respects with all
applicable Environmental Laws, and there is no contamination at, under
or about the Properties or violation of any Environmental Law with
respect to the Properties or the business operated by the Company or any
of its Subsidiaries (the "Business").
(c) Neither the Company nor any of its Subsidiaries has received
any notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Business,
nor does the Company have knowledge or reason to believe that any such
notice will be received or is being threatened.
(d) To the best knowledge of the Company, Materials of
Environmental Concern have not been transported or disposed of from the
Properties in violation of, or in a manner or to a location which could
give rise to liability under any Environmental Law, nor have any
Materials of Environmental Concern been generated, treated, stored or
disposed of at, on or under any of the Properties in violation of, or in
a manner that could give rise to liability under, any applicable
Environmental Law.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Company, threatened, under
any Environmental Law to which the Company or any Subsidiary is or will
be named as a party with respect to the Properties or the Business, nor
are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with
respect to the Properties or the Business.
(f) To the best knowledge of the Company, there has been no
<PAGE 81>
release or threat of release of Materials of Environmental concern at or
from the Properties, or arising from or related to the operations of the
Company or any subsidiary in connection with the Properties or otherwise
in connection with the Business, in violation of or in amounts or in a
manner that could give rise to liability under Environmental Laws.
6.11 Purpose of Loan. The proceeds of the Loans will be used to
refinance existing indebtedness and for general corporate and working capital
purposes.
6.12 Subsidiaries. Set forth on Schedule 6.12 is a complete and
accurate list of all Subsidiaries of the Company and the Borrower, the
jurisdiction of incorporation of each such Subsidiary and the percentage of
each class of stock of each such Subsidiary owned by the Company or the
Borrower.
6.13 Payment of Taxes. There have been filed on behalf of the Company
and the Borrower and their respective Subsidiaries all Federal, state and
local income, excise, property and other tax returns which are required to be
filed by them and all taxes due pursuant to such returns or pursuant to any
assessment received by or on behalf of the Company or the Borrower or any of
their respective Subsidiaries have been paid. The charges, accruals and
reserves on the books of the Company and the Borrower and their respective
Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Company and the Borrower, adequate. United States income tax
returns of the Company and the Borrower and their respective Subsidiaries have
been examined and closed through the fiscal year ended February 28, 1993.
6.14 Full Disclosure. All information heretofore furnished by the
Company and the Borrower to the Administrative Agent, the Documentation Agent
or any Lender in writing for purposes of or in connection with this Credit
Agreement or any transaction contemplated hereby is, and all such information
hereafter furnished by the Company and the Borrower to the Administrative
Agent, the Documentation Agent or any Lender will be, true, accurate and
complete in all material respects or based on reasonable estimates on the date
as of which such information is stated or certified. The Company and the
Borrower have disclosed to the Lenders in writing any and all facts of which
they have knowledge (other than matters of a general economic or political
nature that do not affect the Company or the Borrower uniquely) which would
reasonably be expected to have or cause a Material Adverse Effect.
6.15 Capital Stock. All capital stock, debentures, bonds, notes and
all other securities of the Company and the Borrower and their respective
Subsidiaries presently issued and outstanding are validly and properly issued
in accordance with all applicable laws, including, but not limited to, the
"Blue Sky" laws of all applicable states and the Federal securities laws. The
issued shares of capital stock of the Company's and the Borrower's wholly-
owned Subsidiaries are owned by the Company or the Borrower, as applicable,
free and clear of any Lien or adverse claim. At least a majority of the
issued shares of capital stock of each of the Company's and the Borrower's
other Subsidiaries (other than wholly-owned Subsidiaries) is owned by the
Company or the Borrower, as applicable, free and clear of any Lien or adverse
claim.
6.16 Insolvency. After giving effect to the execution and delivery of
the Credit Documents and the making of the Loans and the issuance of the
Guaranty under this Credit Agreement, neither the Company nor the Borrower
will be "insolvent", within the meaning of such term as used in N.C.Gen.Stat.
s39-15 or as defined in s101 of the Bankruptcy Code or Section 2 of the
Uniform Fraudulent Transfer Act, or any other applicable state law pertaining
to fraudulent transfers, as each may be amended from time to time, or be
unable to pay its debts generally as such debts become due, or have an
<PAGE 82>
unreasonably small capital to engage in any business or transaction, whether
current or contemplated.
SECTION 7
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees that on the Closing Date, and
thereafter for so long as this Credit Agreement is in effect and until the
Commitments have terminated, no Note remains outstanding and unpaid and the
Obligations, together with interest, Facility Fees and all other amounts owing
to the Administrative Agent or any Lender hereunder, are paid in full, the
Company shall, and in the case of subsections 7.3, 7.4, 7.5, 7.6, 7.7 and 7.8
shall cause each of its Subsidiaries and the Borrower, to:
7.1 Financial Statements. Furnish to the Administrative Agent (with
sufficient copies for each of the Lenders):
(a) Annual Financial Statements. As soon as available, but in
any event within 120 days after the end of each fiscal year of the
Company, a copy of the consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such fiscal year and the
related consolidated statements of earnings and of cash flows of the
Company and its consolidated Subsidiaries for such year, setting forth
in each case in comparative form the figures for the previous year,
reported on without a "going concern" or like qualification or
exception, or qualification indicating that the scope of the audit was
inadequate to permit such independent certified public accountants to
certify such financial statements without such qualification, by
Deloitte & Touche, LLP or other firm of independent certified public
accountants of nationally recognized standing; and
(b) Quarterly Financial Statements. As soon as available and in
any event within 60 days after the end of each of the first three fiscal
quarters of the Company, a consolidated balance sheet of the Company and
its consolidated Subsidiaries as at the end of such period and related
statements of earnings and of cash flows for the Company and its
consolidated Subsidiaries for such quarterly period and for the portion
of the fiscal year ending with such period, in each case setting forth
in comparative form consolidated figures for the corresponding period or
periods of the preceding fiscal year (subject to normal recurring year-
end audit adjustments), all in reasonable form and detail acceptable to
the Administrative Agent and the Required Lenders;
all such financial statements to be prepared in reasonable detail in
accordance with GAAP applied consistently throughout the periods reflected
therein.
7.2 Certificates; Other Information. Furnish to the Administrative
Agent (with sufficient copies for each of the Lenders):
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a) above, a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as specified in
such certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 7.1(a) and 7.1(b) above, a certificate of a
Responsible Officer stating that, to the best of such Responsible
<PAGE 83>
Officer's knowledge, the Company during such period observed or
performed in all material respects all of its covenants and other
agreements, and satisfied in all material respects every material
condition, contained in this Credit Agreement to be observed, performed
or satisfied by it, and that such Responsible Officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate and such certificate shall include the calculation required
to indicate compliance with Section 7.9;
(c) within thirty days after the same are sent, copies of all
reports (other than those otherwise provided pursuant to subsection 7.1
and those which are of a promotional nature) and other financial
information which the Company sends to its stockholders, and within
thirty days after the same are filed, copies of all financial statements
and non-confidential reports which the Company may make to, or file
with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority;
(d) promptly, such additional financial and other information as
the Administrative Agent, on behalf of any Lender, may from time to time
reasonably request.
7.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, in
accordance with industry practice (subject, where applicable, to specified
grace periods) all its material obligations of whatever nature and any
additional costs that are imposed as a result of any failure to so pay,
discharge or otherwise satisfy such obligations, except when the amount or
validity of such obligations and costs is currently being contested in good
faith by appropriate proceedings and reserves, if applicable, in conformity
with GAAP with respect thereto have been provided on the books of the Company
or its Subsidiaries, as the case may be.
7.4 Conduct of Business and Maintenance of Existence. Continue to
engage in business of the same general type as now conducted by it on the date
hereof and preserve, renew and keep in full force and effect its corporate
existence and take all reasonable action to maintain all rights, privileges
and franchises necessary or desirable in the normal conduct of its business;
comply with all Contractual Obligations and Requirements of Law applicable to
it except to the extent that failure to comply therewith would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
7.5 Maintenance of Property; Insurance. Keep all material property
useful and necessary in its business in good working order and condition
(ordinary wear and tear expected); maintain with financially sound and
reputable insurance companies insurance on all its material property in at
least such amounts and against at least such risks as are usually insured
against in the same general area by companies engaged in the same or a similar
business; and furnish to the Administrative Agent, upon written request, full
information as to the insurance carried; provided, however, that the Company
and its Subsidiaries may maintain self insurance plans to the extent companies
of similar size and in similar businesses do so.
7.6 Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of
all dealings and transactions in relation to its businesses and activities;
and permit, during regular business hours and upon reasonable notice by the
Administrative Agent or the Documentation Agent, the Administrative Agent or
the Documentation Agent to visit and inspect any of its properties and examine
and make abstracts from any of its books and records (other than materials
protected by the attorney-client privilege and materials which the Company may
<PAGE 84>
not disclose without violation of a confidentiality obligation binding upon
it) at any reasonable time and as often as may reasonably be desired, and to
discuss the business, operations, properties and financial and other condition
of the Company and its Subsidiaries with officers and employees of the Company
and its Subsidiaries and with its independent certified public accountants.
7.7 Notices. Give notice to the Administrative Agent (which shall
promptly transmit such notice to each Lender) of:
(a) within five Business Days after the Company knows thereof,
the occurrence of any material Default or Event of Default;
(b) promptly, any default or event of default under any
Contractual Obligation of the Company or any of its Subsidiaries or the
Borrower which would reasonably be expected to have a Material Adverse
Effect;
(c) promptly, any litigation, or any investigation or proceeding
known to the Company, affecting the Company or any of its Subsidiaries
or the Borrower which, if adversely determined, would reasonably be
expected to have a Material Adverse Effect;
(d) as soon as possible and in any event within 30 days after
the Company knows thereof: (i) the occurrence or expected occurrence of
any Reportable Event with respect to any Plan, a failure to make any
required contribution to a Plan, the creation of any Lien in favor of
the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC
or the Company or any Commonly Controlled Entity or any Multiemployer
Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan; and
(e) promptly notify the Administrative Agent of the issuance of
a senior unsecured (none-credit enhanced) long term debt rating by S&P
or Moody's and of any change in or withdrawal of such rating, together
with any correspondence or evidence thereof from S&P or Moody's;
(f) promptly, any other development or event which would
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Company proposes to take with respect
thereto.
7.8 Environmental Laws.
(a) Except to the extent that failure to do so would not
reasonably be expected to have a Material Adverse Effect, comply in all
material respects with, and ensure compliance in all material respects
by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply in all material respects with
and maintain, and ensure that all tenants and subtenants obtain and
comply in all material respects with and maintain, any and all licenses,
approvals, notifications, registrations or permits required by
applicable Environmental Laws;
(b) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all
lawful orders and directives of all Governmental Authorities regarding
<PAGE 85>
Environmental Laws except to the extent that the same are being
contested in good faith by appropriate proceedings or the pendency of
such proceedings would not reasonably be expected to have a Material
Adverse Effect; and
(c) Defend, indemnify and hold harmless the Administrative
Agent, the Documentation Agent and the Lenders, and their respective
employees, agents, officers and directors, from and against any and all
claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way resulting from
the violation of, noncompliance with or liability under, any Environ-
mental Law applicable to the operations of the Company, any of its
Subsidiaries or the Properties, or any orders, requirements or demands
of Governmental Authorities related thereto, including, without limita-
tion, reasonable attorney's and consultant's fees, investigation and
laboratory fees, response costs, court costs and litigation expenses,
except to the extent that any of the foregoing arise out of the
negligence or willful misconduct of the party seeking indemnification
therefor. The agreements in this paragraph shall survive repayment of
the Notes and all other amounts payable hereunder.
7.9 Financial Covenants.
(a) Leverage Ratio. There shall be maintained at all times a
Leverage Ratio of not greater than .65:1.0.
(b) Fixed Charge Coverage Ratio. As of the end of each fiscal
quarter, there shall be maintained a Fixed Charge Coverage Ratio of at
least:
For fiscal quarters ending
prior to May 31, 1996 1.5:1.0
From the fiscal quarter ending
May 31, 1996 through the
fiscal quarter ending
February 28, 1997 1.25:1.0
For fiscal quarters ending after
February 28, 1997 1.5:1.0
(c) Consolidated Net Worth. There shall be maintained at all
times a Consolidated Net Worth of at least $350,000,000.
SECTION 8
NEGATIVE COVENANTS
The Company hereby covenants and agrees that on the Closing Date, and
thereafter for so long as this Credit Agreement is in effect and until the
Commitments have terminated, no Note remains outstanding and unpaid and the
Obligations, together with interest, Facility Fees and all other amounts owing
to the Administrative Agent or any Lender hereunder, are paid in full (unless
the Required Lenders otherwise consent in writing):
8.1 Funded Debt. The Company will not, nor will it permit any
Subsidiary (including the Borrower) to, create, incur, assume or permit to
exist any Funded Debt, except for:
(i) the Notes;
<PAGE 86>
(ii) Funded Debt existing on the Closing Date and described on
Schedule 8.1 hereto;
(iii) additional unsecured Funded Debt of the Company and the
Borrower, provided that, at the time of the incurrence thereof and after
giving effect thereto and to the application of the proceeds thereof,
the Leverage Ratio shall not exceed the maximum level permitted in
Section 7.9(a);
(iv) additional unsecured Funded Debt of the Furniture Company,
Secured Debt and Attributable Debt, in each case without duplication,
provided that, after giving effect thereto and to the application of the
proceeds thereof, the aggregate amount thereof would be permitted by the
proviso to the preceding clause (iii) and would not exceed 10% of
Consolidated Net Tangible Assets;
(v) Funded Debt of the Borrower or the Furniture Company
payable to the Company or to each other; and
(vi) renewals, extensions and refundings of Funded Debt
permitted by this Section 8.1, provided that, after giving effect
thereto and to the application of the proceeds thereof, the aggregate
amount of Consolidated Funded Debt would be permitted by clauses (iii)
and (iv) above.
8.2 Liens. The Company will not, nor will it permit the Borrower or
the Furniture Company to, create, incur, assume or permit to exist any Lien
with respect to any of its property or assets of any kind (whether real or
personal, tangible or intangible), whether now owned or hereafter acquired,
except for Permitted Liens.
8.3 Nature of Business. The Company and its Subsidiaries will not
engage in any new type of business if, as a result, the general nature of the
business, taken on a consolidated basis, which would then be engaged in by the
Company and its Subsidiaries would be substantially changed from the general
nature of the business engaged in by the Company and its Subsidiaries on the
Closing Date.
8.4 Consolidation, Merger, Sale or Purchase of Assets, etc. The
Company will not, nor will it permit the Borrower or the Furniture Company to,
(a) dissolve, liquidate, or wind up its affairs, except in
connection with a disposition or acquisition which is otherwise
permitted under this Credit Agreement; or sell, transfer, lease or
otherwise dispose of (a "Disposition") all or any substantial part of
its property or assets other than (i) in the ordinary course of business
for fair consideration), (ii) as part of any Permitted Receivables
Financing, (iii) in connection with a Disposition of machinery or
equipment no longer useful in the conduct of its business or (iv) to the
Company or the Borrower. As used herein, "substantial part" shall mean
property and assets, the fair market value of which, when added to the
fair market value of all other assets sold, leased or otherwise disposed
of by the Company, the Borrower and the Furniture Company (other than in
the ordinary course of business), during the 18-month period ending with
the date of such sale, lease or other disposition exceeds 15% of
Consolidated Net Tangible Assets, determined as of the end of the
immediately preceding fiscal year; or
(b) enter into any transaction of merger or consolidation,
except for (i) the merger or consolidation of the Company or the
Furniture Company into the Borrower or the Borrower or the Furniture
Company into the Company, or a sale, transfer or lease of all or a
<PAGE 87>
substantial part of its properties (at fair value) to, the Company or
the Borrower, or (ii) the merger of any Person into the Company or the
Borrower, provided that the Company or the Borrower shall be the
surviving corporation, and in any such case no Default or Event of
Default would exist after giving effect thereto.
8.5 Transactions with Affiliates. The Company will not, nor will it
permit any Subsidiary to, enter into any transaction or series of transactions
with any officer, director, shareholder or Affiliate other than in the
ordinary course of business on terms and conditions substantially as favorable
as would be obtainable in a comparable arm's-length transaction with a Person
other than an officer, director, shareholder or Affiliate.
8.6 Fiscal Year. The Company will not, nor will it permit any
Subsidiary to, change its fiscal year.
SECTION 9
EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Borrower shall fail to pay any principal on any Note
when due in accordance with the terms thereof or hereof on the maturity
date thereof; or the Borrower shall fail to pay any interest on any Note
or any fee or other amount payable hereunder when due in accordance with
the terms thereof or hereof and such failure shall continue unremedied
for five (5) Business Days (or the Company shall fail to pay on the
Guaranty in respect of any of the foregoing); or
(b) Any representation or warranty made or deemed made by the
Company or the Borrower herein or which is contained in any certificate,
document or financial or other statement furnished at any time under or
in connection with this Credit Agreement shall prove to have been
incorrect, false or misleading in any material respect on or as of the
date made or deemed made; or
(c) The Company shall (i) default in the due performance or
observance of Section 7.9, or (ii) default in any material respect in
the observance or performance of any other term, covenant or agreement
contained in this Credit Agreement (other than as described in
subsection 9(a) or 9(c)(i) above), and such default shall continue
unremedied for a period of 30 days or more; or
(d) The Company, any of its Subsidiaries or the Borrower shall
(i) default in any payment of principal of or interest on any Indebted-
ness (other than the Notes) in a principal amount outstanding of at
least $5,000,000 in the aggregate for the Company, its Subsidiaries and
the Borrower or in the payment of any matured Guarantee Obligation in a
principal amount outstanding of at least $5,000,000 in the aggregate for
the Company, its Subsidiaries and the Borrower beyond the period of
grace, if any, provided in the instrument or agreement under which such
Indebtedness or Guarantee Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition relating
to any such Indebtedness in a principal amount outstanding of at least
$5,000,000 in the aggregate for the Company, its Subsidiaries and the
Borrower or Guarantee Obligation in a principal amount outstanding of at
least $5,000,000 in the aggregate for the Company, its Subsidiaries and
the Borrower or contained in any instrument or agreement evidencing,
<PAGE 88>
securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition
is to cause, or to permit the holder or holders of such Indebtedness or
beneficiary or beneficiaries of such Guarantee Obligation (or a trustee
or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable; or
(e) (i) The Company, the Borrower or the Furniture Company shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its
assets, or the Company, the Borrower or the Furniture Company shall make
a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against the Company, the Borrower or the Furniture
Company any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief
or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall
be commenced against the Company, the Borrower or the Furniture Company
any case, proceeding other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order
for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof;
or (iv) the Company, the Borrower or the Furniture Company shall take
any action in furtherance of, or indicating its consent to, approval of,
or acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) the Company, the Borrower or the Furniture Company
shall generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they become due; or
(f) One or more judgments or decrees shall be entered against
the Company, any of its Subsidiaries or the Borrower involving in the
aggregate a liability (to the extent not paid when due or covered by
insurance) of $500,000 or more and all such judgments or decrees shall
not have been vacated, discharged, stayed or bonded pending appeal
within 30 days from the entry thereof; or
(g) (i) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan for which an exception pursuant to Section 408 of
ERISA does not apply, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of the Company or any Commonly Controlled
Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a Trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) the Company, any of its Subsidiaries
or any Commonly Controlled Entity shall, or in the reasonable opinion of
the Required Lenders is likely to, incur any liability in connection
with a withdrawal from, or the Insolvency or Reorganization of, any
<PAGE 89>
Multiemployer Plan or (vi) any other similar event or condition shall
occur or exist with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with all other
such events or conditions, if any, could reasonably be expected to have
a Material Adverse Effect; or
(h) Any (i) "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of more than 30% of the then outstanding voting
stock of the Company or (ii) a majority of the Board of Directors of the
Company shall consist of individuals who are not Continuing Directors or
(iii) the Company shall fail at any time to own less than 100% of the
issued and outstanding capital stock of the Borrower; or
(i) The Guaranty or any provision thereof shall cease to be in
full force and effect or the Company or any Person acting by or on
behalf of the Company shall deny or disaffirm the Company's obligations
under the Guaranty; or
(j) Any other Credit Document shall fail to be in full force and
effect or to give the Administrative Agent and/or the Lenders the
security interests, liens, rights, powers and privileges purported to be
created thereby (except as such documents may be terminated or no longer
in force and effect in accordance with the terms herefor thereof, other
than those indemnities and provisions which by their terms shall
survive);
then, and in any such event, (A) if such event is an Event of Default
specified in clause (i) or (ii) of paragraph (e) above in respect of the
Company, automatically the Commitments shall immediately terminate and the
Loans (with accrued interest thereon), and all other amounts owing under the
Credit Documents shall immediately become due and payable, and (B) if such
event is any other Event of Default, either or both of the following actions
may be taken: (i) with the consent of the Required Lenders, the Administrative
Agent may, or upon the request of the Required Lenders, the Administrative
Agent shall, by notice to the Borrower declare the Commitments to be
terminated forthwith, whereupon the Commitments shall immediately terminate;
and (ii) with the consent of the Required Lenders, the Administrative Agent
may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice of default to the Borrower, declare the Loans (with accrued
interest thereon) and all other amounts owing under this Credit Agreement and
the Notes to be due and payable forthwith, whereupon the same shall
immediately become due and payable. Except as expressly provided above in
this Section 9, presentment, demand, protest and all other notices of any kind
are hereby expressly waived.
SECTION 10
AGENCY PROVISIONS
10.1 Appointment. Each Lender hereby designates and appoints Wachovia
Bank of Georgia, N.A. as administrative agent (in such capacity as
Administrative Agent hereunder, the "Administrative Agent") of such Lender to
act as specified herein and the other Credit Documents, and each such Lender
hereby authorizes the Administrative Agent as the agent for such Lender, to
take such action on its behalf under the provisions of this Credit Agreement
and the other Credit Documents and to exercise such powers and perform such
duties as are expressly delegated by the terms hereof and of the other Credit
Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere herein and
<PAGE 90>
in the other Credit Documents, the Administrative Agent shall not have any
duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Credit Agreement or any of the other Credit Documents,
or shall otherwise exist against the Administrative Agent. The provisions of
this Section are solely for the benefit of the Administrative Agent and the
Lenders and neither the Company nor the Borrower shall have any rights as a
third party beneficiary of the provisions hereof. In performing its functions
and duties under this Credit Agreement and the other Credit Documents, the
Administrative Agent shall not act solely as agent of the Lenders and does not
assume and shall not be deemed to have assumed any obligation or relationship
of agency or trust with or for the Company or the Borrower.
10.2 Delegation of Duties. The Administrative Agent may execute any of
its duties hereunder or under the other Credit Documents by or through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-
fact selected by it with reasonable care.
10.3 Exculpatory Provisions. Neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection herewith or in connection with any of
the other Credit Documents (except for its or such Person's own gross
negligence or willful misconduct), or (ii) responsible in any manner to any of
the Lenders for any recitals, statements, representations or warranties made
by contained herein or in any of the other Credit Documents or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection herewith or
in connection with the other Credit Documents, or enforceability or
sufficiency of any of the other Credit Documents, or for any failure of either
the Company or the Borrower to perform its obligations hereunder or
thereunder. The Administrative Agent shall not be responsible to any Lender
for the effectiveness, genuineness, validity, enforceability, collectability
or sufficiency of this Credit Agreement, or any of the other Credit Documents
or for any representations, warranties, recitals or statements made herein or
therein or made by the Company or the Borrower in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Administrative Agent to the Lenders or by or on
behalf of the Company or the Borrower to the Administrative Agent or any
Lender or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or
agreements contained herein or therein or as to the use of the proceeds of the
Loans or of the existence or possible existence of any Default or Event of
Default or to inspect the properties, books or records of the Company or the
Borrower.
10.4 Reliance on Communications. The Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to
the Company or the Borrower, independent accountants and other experts
selected by the Administrative Agent with reasonable care). The
Administrative Agent may deem and treat the Lenders as the owner of their
respective interests hereunder for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent in accordance with Section 11.3(b) hereof. The
<PAGE 91>
Administrative Agent, acting in its capacity as Administrative Agent, shall be
fully justified in failing or refusing to take any action under this Credit
Agreement or under any of the other Credit Documents unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or under any of the other Credit Documents in accordance
with a request of the Required Lenders (or to the extent specifically provided
in Section 11.6, all the Lenders) and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders
(including their successors and assigns).
10.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Company or the Borrower referring to the Credit Document,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Administrative Agent receives such
a notice, the Administrative Agent shall give prompt notice thereof to the
Lenders. The Administrative Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders.
10.6 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates
has made any representations or warranties to it and that no act by the
Administrative Agent or any affiliate thereof hereafter taken, including any
review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of
the Company and the Borrower and made its own decision to make its Loans
hereunder and enter into this Credit Agreement. Each Lender also represents
that it will, independently and without reliance upon the Administrative Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Credit
Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
conditions, prospects and creditworthiness of the Company and the Borrower.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, assets, property, financial or other conditions, prospects or
creditworthiness of the Company and the Borrower which may come into the
possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
10.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Company or the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their respective Commitments, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
<PAGE 92>
whatsoever which may at any time (including without limitation at any time
following the payment of the Obligations) be imposed on, incurred by or
asserted against the Administrative Agent in its capacity as such in any way
relating to or arising out of this Credit Agreement or the other Credit
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Administrative Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross negligence or
willful misconduct of the Administrative Agent. If any indemnity furnished to
the Administrative Agent for any purpose shall, in the opinion of the
Administrative Agent, be insufficient or become impaired, the Administrative
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished. The
agreements in this Section shall survive the payment of the Obligations and
all other amounts payable hereunder and under the other Credit Documents.
10.8 Administrative Agent in its Individual Capacity. The
Administrative Agent and its affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Company or the
Borrower as though the Administrative Agent were not Administrative Agent
hereunder. With respect to the Loans made and all Obligations owing to it,
the Administrative Agent shall have the same rights and powers under this
Credit Agreement as any Lender and may exercise the same as though they were
not Administrative Agent, and the terms "Lender" and "Lenders" shall include
the Administrative Agent in its individual capacity.
10.9 Successor Administrative Agent. The Administrative Agent may, at
any time, resign upon 20 days' written notice to the Lenders, the Borrower and
the Company, and be removed with or without cause by the Required Lenders upon
30 days' written notice to the Administrative Agent. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Administrative Agent which, so long as no Event of Default shall
then exist, is reasonably acceptable to the Borrower and which consent shall
not be unreasonably withheld or delayed. If no successor Administrative Agent
shall have been so appointed by the Required Lenders, and shall have accepted
such appointment, within 30 days after the notice of resignation or notice of
removal, as appropriate, then the retiring Administrative Agent shall select a
successor Administrative Agent which, so long as no Event of Default shall
then exist, is reasonably acceptable to the Borrower and which consent shall
not be unreasonably withheld or delayed provided such successor is a Lender
hereunder or a commercial bank organized under the laws of the United States
of America or of any State thereof and has a combined capital and surplus of
at least $400,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations as Administrative Agent, as appropriate, under this Credit
Agreement and the other Credit Documents and the provisions of this Section
10.9 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Credit Agreement.
SECTION 11
MISCELLANEOUS
11.1 Notices. Except as otherwise expressly provided herein, all
notices and other communications shall have been duly given and shall be
effective (i) when delivered, (ii) when transmitted via telecopy (or other
<PAGE 93>
facsimile device) to the number set out below, (iii) the day following the day
on which the same has been delivered prepaid to a reputable national overnight
air courier service, or (iv) the third Business Day following the day on which
the same is sent by certified or registered mail, postage prepaid, in each
case to the respective parties at the address, in the case of the Company, the
Borrower and the Administrative Agent, set forth below, and in the case of the
Lenders, set forth on Schedule 2.1(a), or at such other address as such party
may specify by written notice to the other parties hereto:
if to the Company:
Heilig-Meyers Company
2235 Staples Mill Road
Richmond, Virginia 23230
Attn: Paige Wilson
Telephone: (804) 254-1454
Telecopy: (804) 254-1493
if to the Borrower:
MacSaver Financial Services, Inc.
Suite 224
2 Read's Way
New Castle, Delaware 19720
Attn: President
Telephone: (302) 325-3841
Telecopy: (302) 324-8979
if to the Administrative Agent:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
29th Floor, MC-3490
Atlanta, Georgia 30303
Attn: Syndication Services
Telephone: (404) 332-6971
Telecopy: (404) 332-5019
with a copy to:
Wachovia Bank of Georgia, N.A.
301 North Main Street
Winston-Salem, North Carolina 27150
Attn: John C. Fox
Telephone: (910) 770-5179
Telecopy: (910) 761-6458
11.2 Right of Set-Off. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Lender is
authorized at any time and from time to time, without presentment, demand,
protest or other notice of any kind (all of which rights being hereby
expressly waived), to set-off and to appropriate and apply any and all
deposits (general or special) and any other indebtedness at any time held or
owing by such Lender (including, without limitation branches, agencies or
Affiliates of such Lender wherever located) to or for the credit or the
account of the Borrower against obligations and liabilities of the Borrower to
such Lender hereunder, under the Notes, the other Credit Documents or
otherwise, irrespective of whether such Lender shall have made any demand
hereunder and although such obligations, liabilities or claims, or any of
them, may be contingent or unmatured, and any such set-off shall be deemed to
have been made immediately upon the occurrence of an Event of Default even
<PAGE 94>
though such charge is made or entered on the books of such Lender subsequent
thereto. The Borrower hereby agrees that any Person purchasing a
participation in the Loans and Commitments hereunder pursuant to Section
11.3(c) or Section 3.12 may exercise all rights of set-off with respect to its
participation interest as fully as if such Person were a Lender hereunder.
11.3 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding
upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto; provided
that neither the Company nor the Borrower may assign and transfer
any of its interests without prior written consent of the Lenders;
provided further that the rights of each Lender to transfer,
assign or grant participations in its rights and/or obligations
hereunder shall be limited as set forth in this Section 11.3,
provided however that nothing herein shall prevent or prohibit any
Lender from (i) pledging its Loans hereunder to a Federal Reserve
Bank in support of borrowings made by such Lender from such
Federal Reserve Bank, or (ii) granting assignments or
participation in such Lender's Loans and/or Commitments hereunder
to its parent company and/or to any Affiliate of such Lender which
is at least 50% owned by such Lender or its parent company.
(b) Assignments. Each Lender may, with, so long as no
Event of Default shall then exist, the prior written consent of
the Borrower, which consent shall not be unreasonably withheld or
delayed, assign all or a portion of its rights and obligations
hereunder pursuant to an assignment agreement substantially in the
form of Schedule 11.3(b) to one or more Eligible Assignees,
provided that any such assignment shall be in a minimum aggregate
amount of $10,000,000 of the Commitments and in integral multiples
of $1,000,000 above such amount, that each such assignment shall
be of a constant, not varying, percentage of all of the assigning
Lender's rights and obligations under this Credit Agreement. Any
assignment hereunder shall be effective upon delivery to the
Administrative Agent of written notice of the assignment together
with a transfer fee of $2,500 payable to the Administrative Agent
for its own account. The assigning Lender will give prompt notice
to the Administrative Agent of any such assignment. Upon the
effectiveness of any such assignment (and after notice to and
consent of the Borrower as provided herein), the assignee shall
become a "Lender" for all purposes of this Credit Agreement and
the other Credit Documents and, to the extent of such assignment,
the assigning Lender shall be relieved of its obligations
hereunder to the extent of the Loans and Commitment components
being assigned. Along such lines the Borrower agrees that upon
notice of any such assignment and surrender of the appropriate
Note or Notes, it will promptly provide to the assigning Lender
and to the assignee separate promissory notes in the amount of
their respective interests substantially in the form of the
original Note (but with notation thereon that it is given in
substitution for and replacement of the original Note or any
replacement notes thereof).
(c) Participations. Each Lender may sell, transfer, grant
or assign participations in all or any part of such Lender's
interests and obligations hereunder; provided that (i) such
selling Lender shall remain a "Lender" for all purposes under this
Credit Agreement (such selling Lender's obligations under the
Credit Documents remaining unchanged) and the participant shall
not constitute a Lender hereunder, (ii) no such participant shall
<PAGE 95>
have, or be granted, rights to approve any amendment or waiver
relating to this Credit Agreement or the other Credit Documents
except to the extent any such amendment or waiver would (A) reduce
the principal of or rate of interest on or fees in respect of any
Loans in which the participant is participating, (B) postpone the
date fixed for any payment of principal (including extension of
the Termination Date or the date of any mandatory prepayment),
interest or fees in which the participant is participating, or (C)
release all or substantially all of the collateral or guaranties
(except as expressly provided in the Credit Documents) supporting
any of the Loans or Commitments in which the participant is
participating, (iii) sub-participations by the participant (except
to an affiliate, parent company or affiliate of a parent company
of the participant) shall be prohibited and (iv) any such
participations, other than to affiliates or subsidiaries of Banks
which are permitted hereunder, shall be in a minimum aggregate
amount of $5,000,000 of the Commitments and in integral multiples
of $1,000,000 in excess thereof. In the case of any such
participation, the participant shall not have any rights under
this Credit Agreement or the other Credit Documents (the
participant's rights against the selling Lender in respect of such
participation to be those set forth in the participation agreement
with such Lender creating such participation) and all amounts
payable by the Borrower hereunder shall be determined as if such
Lender had not sold such participation, provided, however, that
such participant shall be entitled to receive additional amounts
under Sections 3.5, 3.9, 3.10 and 3.11 on the same basis as if it
were a Lender (but only to the extent that the participating
lender would have been entitled to receive such additional amounts
with respect to the interest participated had it not sold such
participation).
11.4 No Waiver; Remedies Cumulative. No failure or delay on the part
of the Administrative Agent or any Lender in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of
dealing between the Company or the Borrower and the Administrative Agent or
any Lender shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which the Administrative Agent or any Lender would otherwise have.
No notice to or demand on the Borrower in any case shall entitle the Company
or the Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Administrative Agent
or the Lenders to any other or further action in any circumstances without
notice or demand.
11.5 Payment of Expenses, etc. The Borrower agrees to: (i) pay all
reasonable out-of-pocket costs and expenses of the Administrative Agent and
the Documentation Agent in connection with the negotiation, preparation,
execution and delivery of this Credit Agreement and the other Credit Documents
and the documents and instruments referred to therein (including, without
limitation, the reasonable fees and expenses of Moore & Van Allen, special
counsel to the Administrative Agent and the Documentation Agent) and any
amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by
the Borrower under this Credit Agreement and of the Administrative Agent, the
Documentation Agent and the Lenders in connection with enforcement of the
Credit Documents and the documents and instruments referred to therein
(including, without limitation, in connection with any such enforcement, the
<PAGE 96>
reasonable fees and disbursements of counsel, including any such fees and
disbursements allocated to in-house counsel, for the Administrative Agent, the
Documentation Agent and each of the Lenders); (ii) pay and hold each of the
Lenders harmless from and against any and all present and future stamp and
other similar taxes with respect to the foregoing matters and save each of the
Lenders harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable to
such Lender) to pay such taxes; and (iii) indemnify each Lender, its officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all losses, liabilities, claims, damages or expenses
incurred by any of them as a result of, or arising out of, or in any way
related to, or by reason of, any investigation, litigation or other proceeding
(whether or not any Lender is a party thereto) related to the entering into
and/or performance of any Credit Document or the use of proceeds of any Loans
(including other extensions of credit) hereunder or the consummation of any
other transactions contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of gross negligence or willful misconduct on the
part of the Person to be indemnified).
11.6 Amendments, Waivers and Consents. Neither this Credit Agreement
nor any other Credit Document nor any of the terms hereof or thereof may be
amended, changed, waived, discharged or terminated unless such amendment,
change, waiver, discharge or termination is in writing signed by the Required
Lenders, provided that no such amendment, change, waiver, discharge or
termination shall, without the consent of each Lender, (i) extend the
scheduled maturities (including the final maturity and any mandatory
prepayments) of any Loan, or any portion thereof, or reduce the rate or extend
the time of payment of interest (other than as a result of waiving the
applicability of any post-default increase in interest rates) thereon or fees
hereunder or reduce the principal amount thereof, or increase the Commitments
of the Lenders over the amount thereof in effect (it being understood and
agreed that a waiver of any Default or Event of Default or of a mandatory
reduction in the total commitments shall not constitute a change in the terms
of any Commitment of any Lender) (ii) release the Company from its guaranty
obligations hereunder, (iii) amend, modify or waive any provision of this
Section or Section 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 5.1, 5.2,
9.1(a), 11.2, 11.3, 11.5 or 11.9, (iv) reduce any percentage specified in, or
otherwise modify, the definition of Required Lenders or (v) consent to the
assignment or transfer by the Company or the Borrower of any of its rights and
obligations under, or in respect of, this Credit Agreement. No provision of
Section 9 may be amended without the consent of the Administrative Agent.
11.7 Counterparts. This Credit Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Credit Agreement to produce or
account for more than one such counterpart.
11.8 Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Credit Agreement.
11.9 Survival of Indemnification. All indemnities set forth herein,
including, without limitation, in Section 3.5, 3.8, 3.9, 3.11 or 11.5 shall
survive the execution and delivery of this Credit Agreement, and the making of
the Loans, the repayment of the Loans and other obligations and the
termination of the Commitment hereunder.
11.10 Governing Law; Submission to Jurisdiction; Venue.
<PAGE 97>
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any
legal action or proceeding with respect to this Credit Agreement
or any other Credit Document may be brought in the courts of the
State of North Carolina in Mecklenburg County, or of the United
States for the Western District of North Carolina, and, by
execution and delivery of this Credit Agreement, each of the
Company and the Borrower hereby irrevocably accepts for itself and
in respect of its property, generally and unconditionally, the
jurisdiction of such courts. Each of the Company and the Borrower
further irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail,
postage prepaid, to it at the address set out notices pursuant to
Section 11.1, such service to become effective 30 days after such
mailing. Nothing herein shall affect the right of the
Administrative Agent to serve process in any other manner
permitted by law or to commence legal proceedings or to otherwise
proceed against the Borrower in any other jurisdiction.
(b) Each of the Company and the Borrower hereby
irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Credit
Agreement or any other Credit Document brought in the courts
referred to in subsection (a) hereof and hereby further
irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court
has been brought in an inconvenient forum.
(c) EACH OF THE COMPANY, BORROWER, THE LENDERS AND THE
ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.11 Severability. If any provision of any of the Credit Documents is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid
or unenforceable provisions.
11.12 Entirety. This Credit Agreement together with the other Credit
Documents represent the entire agreement of the parties hereto and thereto,
and supersede all prior agreements and understandings, oral or written, if
any, including any commitment letters or correspondence relating to the Credit
Documents or the transactions contemplated herein and therein.
11.13 Survival of Representations and Warranties. All representatives
and warranties made by the Company and the Borrower herein shall survive
delivery of the Notes and the making of the Loans hereunder.
[Remainder of Page Intentionally Left Blank]
<PAGE 98>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit Agreement to be duly executed and delivered as of the date
first above written.
BORROWER:
MACSAVER FINANCIAL SERVICES, INC.
a Delaware corporation
By /s/ D.V. Bhavnagri
Title Vice President
COMPANY:
HEILIG-MEYERS COMPANY,
a Virginia corporation
By /s/ Roy B. Goodman
Title Senior Vice President
Finance, Treasury and Secretary
<PAGE 99>
ADMINISTRATIVE AGENT:
WACHOVIA BANK OF GEORGIA, N.A.,
in its capacity as Administrative Agent
By /s/ Terry Katon
Title Vice President
DOCUMENTATION
AGENT: NATIONSBANK, N.A.,
in its capacity as Documentation Agent
By /s/ Chris L. Corish
Title__________________________
CO-AGENTS: CRESTAR BANK,
in its capacity as Co-Agent
By /s/ J.F. Goyles Jr.
Title Senior Vice President
FIRST UNION NATIONAL BANK OF VIRGINIA,
in its capacity as Co-Agent
By /s/ Signature Unreadable
Title Vice President
LENDERS: WACHOVIA BANK OF NORTH CAROLINA, N.A.
By /s/ John C. Fox
Title Senior Vice President
NATIONSBANK, N.A.
By /s/ Chris L. Corish
Title__________________________
<PAGE 100>
CRESTAR BANK
By /s/ J.F. Goyle Jr.
Title Vice President
FIRST UNION NATIONAL BANK OF VIRGINIA
By /s/ Monica S. Binziger
Title Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Signature Unreadable
Title S.V.P.
NBD BANK
By /s/ L.E. Schuster
Title Vice President
TRUST COMPANY BANK
By /s/ Ruth E. Whitner
Title AVP
By /s/ Signature Unreadable
Title AVP
SIGNET BANK/VIRGINIA
By /s/ William D. Garrison
Title Senior Vice President
<PAGE 101>
PNC BANK, NATIONAL ASSOCIATION
By /s/ Signature Unreadable
Title V.P.
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By /s/ David M. Cawrse
Title__________________________
CREDIT LYONNAIS ATLANTA AGENCY
By /s/ David M. Cawrse
Title Vice President
THE FUJI BANK, LIMITED - NEW YORK BRANCH
By /s/ Gina M. Kearns
Title Vice President & Manager
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
By /s/ Signature Unreadable
Title Corporate Banking Manager
<PAGE 102>
Schedules
(Omitted except for Schedule 2.1(d))
Schedule 2.1(a)
Schedule of Lenders and Commitments
Schedule 2.1(b)(i)
Form of Notice of Borrowing
Schedule 2.1(e)
Form of Committed Note
Schedule A to the Committed Note of MacSaver Financial Services, Inc. Dated
July 18, 1995
Schedule 2.2(b)-1
Form of Competitive Bid Request
Schedule 2.2(b)-2
Form of Notice of Competitive Bid Request
Schedule 2.2(c)
Form of Competitive Bid
Schedule 2.2(d)
Form of Competitive Bid Accept/Reject Letter
Schedule 2.2(h)
Form of Competitive Note
Schedule A to the Competitive Note of MacSaver Financial Services, Inc. Dated
July 18, 1995
Schedule 3.2
Form of Notice of Conversion/Extension
Schedule 6.6
Litigation
Schedule 6.12
Subsidiaries
Schedule 7.2(b)
Form of Officer's Compliance Certificate
Attachment to Officer's Certificate
Computation of Financial Covenants
Schedule 8.1
Funded Debt Existing on the Closing Date
Schedule 8.2
Liens Existing on the Closing Date
Schedule 11.3(b)
Form of Assignment and Acceptance
<PAGE 103>
Schedule 2.1(d)
Applicable Percentage
PRICING MATRIX APPLICABLE WHERE THE COMPANY HAS A SENIOR UNSECURED
(NON-CREDIT ENHANCED)
LONG TERM DEBT RATING FROM BOTH S&P AND MOODY'S.
Applicable Applicable Applicable
Pricing S&P Moody's Margin for Margin for Percentage
for
Level Rating Rating Eurodollar Loans Base Rate Loans Facility
Fee
Level I A- or above A3 or above .20% 0% .10%
Level II BBB+ Baa1 .25% 0% .125%
Level III BBB Baa2 .275% 0% .15%
Level IV BBB- Baa3 .325% 0% .175%
Level V BB+ Ba1 .45% 0% .25%
Level VI BB or lower Ba2 or below .70% 0% .30%
In the event of a Split Rating, the applicable Pricing Level shall be
based on the higher rating. In the event of a Double Split Rating, the
applicable Pricing Level shall be based on an average of the Pricing
Levels corresponding to the ratings (e.g., the average of Pricing Level
I and Pricing Level III would be Pricing Level II). Where the average
of the Pricing Levels falls between two of the identified Pricing Levels
(because the respective ratings indicate Pricing Levels 3 or 5 levels
apart), the applicable Pricing Level shall be the lower of the two
identified Pricing Levels nearest such average.
As used herein:
"Split Rating" means the ratings of S&P and Moody's would
indicate different Pricing Levels, but the Pricing Levels are not
more than one Pricing Level apart.
"Double Split Rating" means the ratings of S&P and Moody's
would indicate different Pricing Levels, but the Pricing Levels
are two or more Pricing Levels apart.
Competitive Loans shall not be available at Pricing Levels V and VI.
<PAGE 104>
Schedule 2.1(d)
Applicable Percentage
PRICING MATRIX APPLICABLE WHERE THE COMPANY DOES NOT HAVE A
SENIOR UNSECURED (NON-CREDIT ENHANCED) LONG TERM DEBT RATING FROM BOTH S&P
AND MOODY'S.
Applicable Applicable Applicable
Margin for Margin for Percentage for
Eurodollar Loans Base Rate Loans Facility Fee
____________ ____________ ____________
Fixed Charge Fixed Charge Fixed Charge
Coverage Ratio Coverage Ratio Coverage Ratio
Pricing Leverage
Level Ratio <1.6:1.0 >1.6:1.0 <1.6:1.0 >1.6:1.0 <1.6:1.0 >1.6:1.0
Level I < .40:1.0 .25% .20% 0% 0%. .125% 10%
Level II >.40:1.0 but .325% .275% 0% 0%. .175% .15%
< .60:1.0
Level III> .60:1.0 .70% .45% 0% 0% .30% .25%
Competitive Loans shall not be available at Pricing Level III.
<PAGE 105>
11. Computation of per share earnings for the fiscal years ended February
29, 1996, February 29, 1995 and February 28, 1994.
21. Subsidiaries of Registrant.
23. Consents of experts and counsel.
a. Consent of Deloitte & Touche LLP to incorporation by
reference of Accountants' Reports into Registrant's
Registration Statements on Form S-8.
27. Financial Data Schedule
* Management contract or compensatory plan or arrangement of the Company
required to be filed as an exhibit.
<PAGE 106>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
FISCAL YEAR ENDED
February 29, February 28, February 28,
1996 1995 1994
Primary Earnings Per Share:
Average number
shares outstanding 48,559,901 48,458,905 47,292,368
Net effect of stock
options 1,043,736 1,494,894 1,810,937
Average number of
shares as adjusted 49,603,637 49,953,799 49,103,305
Net earnings $41,504,000 $66,813,000 $54,996,000
Per share amount $0.84 $1.34 $1.12
Fully Diluted Earnings Per Share:
Average number of
shares outstanding 48,559,901 48,458,905 47,292,368
Net effect of stock
options 1,084,671 1,494,894 1,988,509
Average number of
shares as adjusted 49,644,572 49,953,799 49,280,878
Net earnings $41,504,000 $66,813,000 $54,996,000
Per share amount $0.84 $1.34 $1.12
Earnings Per Common Share
Earnings per common share is computed by dividing net income by the weighted
number of shares of common stock and common stock equivalents outstanding
during each period. The Company has issued stock options, which are the
Company's only common stock equivalents, at exercise prices ranging currently
from $5.52 to $35.06. All shares and prices reflect three-for-two common
stock splits distributed in July 1993.
<PAGE 107>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Heilig-Meyers Furniture Company, incorporated under the laws of North
Carolina;
HMPR, Inc., incorporated under the laws of Puerto Rico;
MacSaver Financial Services, Inc., incorporated under the laws of Delaware;
MacSaver Insurance Company, Ltd., incorporated under the laws of Bermuda.
<PAGE 108>
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in (i) the Registration
Statements No. 2-96961 and No. 33-28095 on Form S-8 and related Prospectus of
Heilig-Meyers Company relating to Common Stock issued and issuable under the
1983 Stock Option Plan of the Company, (ii) the Registration Statements No.
33-35263, No. 33-50086 and No. 33-64616 on Form S-8 and related Prospectus of
Heilig-Meyers Company relating to Common Stock issued and issuable under the
1990 Stock Option Plan of the Company and related Prospectus of the Company,
(iii) the Registration Statement No. 33-43791 on Form S-8 relating to the
Heilig-Meyers Company Employee Stock Purchase Plan and related Prospectus of
the Company and (iv) Registration Statement No. 33-54261 on Form S-8 and
related Prospectus of Heilig-Meyers Company relating to Common Stock issued
and issuable under the 1994 Stock Option Plan of the Company of our report
dated March 25, 1996 on the consolidated financial statements and schedule of
Heilig-Meyers Company and subsidiaries, as listed under Items 14(a) (1) and
(2), both appearing in the Annual Report on Form 10-K of Heilig-Meyers Company
for the year ended February 29, 1996.
/s/ Deloitte & Touche LLP
Richmond, Virginia
May 24, 1996
<PAGE 109>
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