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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 28, 1997 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. [ X ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of May 1, 1997 was approximately $624,713,837.
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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, 1997
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, 1997, there were outstanding 54,414,463 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 18, 1997, are incorporated by reference into
Part III.
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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 7
Credit Operations 7
Distribution 8
Customer Service 9
E. Corporate Expansion 9
F. Other Factors Affecting the Business of Heilig-Meyers
Suppliers 11
Service Marks, Trademarks and Franchise Operations 11
Seasonality 11
Employees 11
Foreign Operations and Export Sales 11
ITEM 2. PROPERTIES 11
ITEM 3. LEGAL PROCEEDINGS 13
ITEM 4. SUBMISSION of MATTERS to a VOTE of SECURITY HOLDINGS 13
PART II
ITEM 5. MARKET for REGISTRANT'S COMMON EQUITY and
RELATED STOCKHOLDER MATTERS 16
ITEM 6. SELECTED FINANCIAL DATA 17
ITEM 7. MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS 19
ITEM 8. FINANCIAL STATEMENTS and SUPPLEMENTARY DATA 24
ITEM 9. CHANGES in and DISAGREEMENTS with ACCOUNTANTS
on ACCOUNTING and FINANCIAL DISCLOSURE 43
PART III
ITEM 10. DIRECTORS and EXECUTIVE OFFICERS of the REGISTRANT 44
ITEM 11. EXECUTIVE COMPENSATION 44
ITEM 12. SECURITY OWNERSHIP of CERTAIN BENEFICIAL OWNERS
and MANAGEMENT 44
ITEM 13. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, and
REPORTS on FORM 8-K 44
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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. Among the largest recent acquisitions are the January 1994
acquisition of certain assets relating to 92 stores of McMahan's Furniture
Company, the February 1995 acquisition of certain assets relating to the
operations of 17 stores owned by Berrios Enterprises of Caguas, Puerto Rico, the
October 1996 acquisition of certain assets relating to the 20 stores of J.
McMahan's in Santa Monica, California and the unrelated acquisition of
certain assets relating to the 23 stores of Self-Service Furniture Company of
Spokane, Washington and the December 1996 acquisition of the Atlanta,
Georgia-based Rhodes, Inc., a publicly traded home furnishings retailer with 105
stores in 15 states. Most recently, during February 1997, the Company acquired
certain assets relating to the 10 stores of The RoomStore, Inc. of Ft. Worth,
Texas. The Rhodes and RoomStore chains will continue to operate under their
respective names and formats. The Company also acquired the assets of a 19-
store furniture chain based in North Carolina on February 28, 1997. These stores
began operations March 1, 1997 and are, therefore, excluded from the February
28, 1997 store count.
As of February 28, 1997, Heilig-Meyers Company operates stores under
four names and formats. The "Heilig-Meyers" name is associated with the
Company's historical format with the majority of the stores operating in
smaller markets with a broad line of merchandise. All of the Company's Puerto
Rican stores operate under the "Berrios" name. The Berrios format is similar to
the stores operated under the "Heilig-Meyers" name. The "Rhodes" name is
used for the 105 stores acquired on December 31, 1996. The Rhodes format
retailing strategy is selling quality furniture to a broad base of middle income
customers. "The RoomStore" name and format is utilized for 10 stores
acquired in February 1997 that display and sell furniture in complete room
packages. The rooms are arranged by professional designers and sell at a value
if purchased as a group.
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 specialty retailer of home
furnishings with 944 stores (as of February 28, 1997), 912 of which are located
in 32 states with the remainder in Puerto Rico. The Company's Heilig- Meyers
stores are primarily located in small towns and rural markets in the southeast,
southcentral, midwest, west, northwest and southwest Continental United States.
The 105 Rhodes stores are primarily located in the midsized markets and
metropolitan areas of 15 southern, midwestern and western states.
The Company's operating strategies include: (1) offering a broad
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selection of competitively priced home furnishings, including furniture and
accessories, and bedding, and in the Heilig-Meyers and Berrios stores, consumer
electronics, appliances, and other items such as jewelry, small appliances and
seasonal goods; (2) locating Heilig-Meyers stores primarily in small towns and
rural markets which are at least 25 miles from a metropolitan market; (3)
offering credit programs to provide flexible financing to its customers; (4)
utilizing centralized inventory and distribution systems in strategic regional
locations to support store inventory and merchandise delivery operations; (5)
emphasizing customer service, including free delivery on most major purchases in
the Heilig-Meyers stores and repair service for consumer electronics and other
mechanical items. As a result of the acquisition of Rhodes and The RoomStore,
the Company now has the ability to expand by matching operating formats to
markets with appropriate demographic and competitive factors. The Company
expects to expand these formats as appropriate markets are identified.
The Company believes this strategy of offering selection, credit,
delivery and service generally allows its Heilig-Meyers stores to have the
largest market share among home furnishings retailers in most of their small-
town markets.
Competition
The retail home furnishings industry is a highly competitive and
fragmented market. The Company, 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 the addition of the "Rhodes" and
"The RoomStore" names and formats will enhance the Company's
competitive position. The Company is now more capable of matching the store
format with the local market environment. The Company believes the "Rhodes"
and "The RoomStore" formats are better suited for larger markets than
the Heilig-Meyers store format, which it believes better serves small towns.
Due to volume purchasing, the Company believes it is generally able to
offer merchandise at equal or lower prices than its competitors, particularly
local independent and regional specialty furniture retailers. In addition,
Management believes that it offers a broader selection of merchandise than many
of its competitors. The Company believes that locating its Heilig-Meyers stores
in small towns and rural markets provides an important competitive advantage.
Currently, approximately 80% of all Heilig-Meyers stores are located in towns
with populations under 50,000 that are more than 25 miles from a metropolitan
market. Competition in these small towns largely comes from locally-owned store
operations, which generally lack the financial strength to compete effectively
with the Company. Consequently, the Company believes that its Heilig-Meyers
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 Heilig-Meyers 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 five years, the Company has
revised its Heilig-Meyers prototype store construction program. The Company's
most recent version of its prototype stores opened in fiscal 1997. The Company
added 3 of these stores in fiscal 1994, 7 in fiscal 1995, 8 in fiscal 1996, 8 in
fiscal 1997 and plans to add up to 15 more for fiscal
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1998. The prototype stores are 27,000 square feet and 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
1997, the Company remodeled 75 existing stores and approximately 105 additional
remodelings are planned for fiscal 1998. The existing Rhodes and RoomStore
formats average approximately 34,000 and 25,000 square feet, respectively.
Each store unit is managed by an on-site manager responsible for
day-to-day store operations including, if offered in that store, 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
videotapes 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. The Company's ongoing education
program is designed to provide a sufficient number of qualified personnel for
its stores.
In recent years, Heilig-Meyers has enhanced its 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, Heilig-Meyers 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 also provided the means for the Company to implement its new
inventory reservation system and enhanced target marketing programs during
fiscal 1997. The Rhodes and The RoomStore formats have operating systems in
place that provide similar operating capabilities.
Merchandising
The Company's Heilig-Meyers 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 and seasonal goods. During the fiscal year ended February 28, 1997, the
percentage of Heilig-Meyers stores' sales derived from the following
merchandising categories was as follows:
Furniture and accessories 60%
Consumer electronics 10
Bedding 12
Appliances 8
Other (e.g. jewelry and seasonal goods 10
These percentages have not varied significantly over the past five
fiscal years. The RoomStore and Rhodes stores primarily sell mid-price point
furniture and bedding. Historically, 89% of Rhodes' sales consisted of furniture
and accessories with bedding comprising the remaining 11%.
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
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and increase repeat sales to existing customers. By carrying seasonal
merchandise (heaters, air conditioners, lawn mowers, outdoor furniture, etc.) in
its Heilig-Meyers stores, the Company has been able to moderate the seasonal
fluctuations in its sales which are common to the industry.
While the basic merchandise mix remained fairly constant during fiscal
1997, the Company continued to refine its merchandise selections to capitalize
on variations in customer preferences. During fiscal 1997, 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
program. The Company centrally designs its direct mail circulars, which
accounted for approximately 45% of the Company's advertising expenses in fiscal
1997. In fiscal 1997, the Company distributed over 140 million direct mail
circulars. This included monthly circulars sent by direct mail to over nine
million households on the Company's mailing list and special private sale
circulars mailed to approximately 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 advertising is placed largely at the
store level. The Company also utilizes Spanish language television and radio in
selected markets with significant Hispanic populations. The Company also
regularly conducts approximately 40 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 1997, 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 current and
potential market areas.
During fiscal 1997, 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 those 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 purchasing decision, and
therefore, promotes credit availability by disclosing monthly payment terms in
its circulars.
Credit Operations
The Company believes that offering flexible credit options is an
important part of its business strategy, which provides a significant
competitive advantage. Because Heilig-Meyers installment credit is administered
at the store level, terms can generally be tailored to meet the customer's
ability to pay. Each Heilig-Meyers 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
whose other credit sources may be limited.
The Company believes its credit program fosters customer loyalty and
repeat business. Historically, approximately 80% of sales in the Heilig- Meyers
stores have been made through the Company's installment credit program. Although
the Company extends credit for original terms up to 24 months, the average term
of the installment obligation for the fiscal year ended February 28, 1997, was
approximately 17 months. The Company accepts major credit cards
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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 in
Richmond, Virginia.
The Company offers a revolving credit program in the recently acquired
Rhodes stores through a private label credit facility pursuant to an ongoing
merchant agreement with Beneficial National Bank USA. The Company does not
service or provide recourse on these accounts. All credit applications, sales,
and many payments on account are processed electronically through Rhodes'
point-of-sale system. Approximately 70% of Rhodes sales are made through the
revolving credit program.
Revenue is recognized on installment and credit sales upon approval
and establishment of a delivery date, which does not differ materially 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 1997, finance income amounted to $209,491,000, or
approximately 13.1% of total revenues. Because credit operations are integrated
with sales and store administration, management does not believe that an
accurate allocation of various costs and expenses of operations can be made
between retail sales and credit operations. Therefore, the Company is unable to
estimate accurately the contribution of its financing operations to net income.
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.
Distribution
The Company currently operates eight Heilig-Meyers 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; Athens, Texas; and Cidra, Puerto Rico. The Athens
distribution center was completed near the end of fiscal 1997, with full
operations commencing in March 1997. During fiscal 1996, the Company expanded
the Moberly distribution center with a 150,000 square foot addition. Currently,
the Company's Heilig-Meyers distribution network has the capacity to service
over 900 stores in the continental U.S. The Company plans to relocate the
Fontana, CA distribution center in July 1997 to a larger, 400,000 square foot
facility with highly mechanized operations including conveyor systems located in
Hesperia, CA. The new distribution center will also contain the relocated
Fontana Service Center as well as an outlet store. The Company also operates the
eleven Rhodes distribution centers, which collectively have more than 1.1
million square feet and include home delivery operations in certain markets. The
Company also operates The RoomStore's 200,000 square foot distribution center.
Management is in the process of evaluating the distribution function in light of
recent acquisitions in order to maximize warehousing and transportation
efficiencies.
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 involves routing its trucks so that they
can transport purchased inventory from suppliers to the distribution centers
while returning from normal store deliveries. The Company backhauled
approximately 26% of its purchased inventory in the Continental U.S. in fiscal
1997.
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Typically, each of the Company's Heilig-Meyers stores is located
within 250 miles of one of the eight distribution centers, and each Rhodes store
is within 100 miles of one of the eleven Rhodes 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 home delivery and setup, 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. Revenue from service
policies and extended warranty contracts retained by the Company are deferred
and recognized over the life of the contract period.
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 750 repair jobs a week. The Fontana service center will be
relocated with the distribution center to a 35,000 square foot facility in
Hesperia, CA. 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.
E. Corporate Expansion
The Company has grown from 374 stores at February 29, 1992, to 944
stores at February 28, 1997. Over this time period, the Company has expanded
from its traditional southeast operating region into the midwest, west,
southwest, northwest and southcentral Continental United States as well as
Puerto Rico. In addition, the Company has acquired new operating formats as a
result of the Rhodes and The RoomStore acquisitions.
(PAGE)
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The following table discloses the Company's stores by state and
format as of February 28, 1997:
Heilig-
State Meyers Rhodes
Alabama 37 9
Arizona 15
Arkansas 3
California 89
Colorado 4 8
Florida 39 18
Georgia 53 18
Idaho 4
Iowa 20
Illinois 41 2
Indiana 20 1
Kansas 1
Kentucky 28 2
Louisiana 12
Maryland 1
Mississippi 30 1
Missouri 29 6
Montana 2
North Carolina 88 11
Nevada 5
New Mexico 7
Ohio 34 8
Oklahoma 7
Oregon 6
Pennsylvania 16
South Carolina 44 6
Tennessee 54 6
Texas 20 8
Virginia 45
Washington 14
West Virginia 27
Wisconsin 3
797 105
The Company also operates 10 The RoomStores in Texas and 32 Berrios stores in
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 28, 1997, the Company opened
or acquired 238 stores and closed 10 stores for a net increase, of 228 stores.
Of the 238 new stores, 175 were existing furniture stores acquired by the
Company in separate transactions, 55 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 60 to 80 Heilig-Meyers
stores in the Continental U.S. during fiscal 1998 by seeking acquisitions of
existing businesses, obtaining and renovating existing retail space or
constructing new prototype stores in selected small towns. Most fiscal 1998
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 1998. In selecting new
Heilig-Meyers locations, the Company intends to follow its established strategy
of generally locating stores within 250 miles of a
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distribution center and in towns with populations of 5,000 to 50,000 that are
over 25 miles from the closest metropolitan market. The Company believes that it
has substantial growth potential in its present and contiguous market areas.
Growth opportunities of the recently acquired stores operating under the Rhodes
and The RoomStore formats are being evaluated. The Company plans to expand these
formats as the appropriate markets are identified.
F. Other Factors Affecting the Business of the Company
Suppliers
During the fiscal year ended February 28, 1997, the Company's ten
largest suppliers accounted for approximately 35% 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.
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.
The marks "Rhodes" and "The RoomStore" are federally
registered service marks of the Company which were acquired in fiscal year 1997.
Seasonality
Quarterly fluctuations in the Company's sales are insignificant.
Employees
As of February 28, 1997, the Company employed approximately 18,200
persons full- or part-time in the Continental United States, of whom
approximately 17,200 worked in the Company's stores, distribution centers and
service centers, with the balance in the Company's corporate offices. As of
February 28, 1997, the Company employed approximately 1,000 persons full- or
part-time in Puerto Rico, of whom approximately 800 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 good.
Foreign Operations and Export Sales
The Company has no foreign operations and makes no export sales.
ITEM 2. PROPERTIES
As of February 28, 1997, 668 of the Company's stores 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. The Heilig-Meyers stores are typically located away
from the center of town. The remaining 276 stores 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.
(page 12)
As of February 28, 1997, the Company owned 71 of its Heilig-Meyers and
12 of its Rhodes stores, three of its Heilig-Meyers and five of its Rhodes
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 28, 1997, were approximately $59,096,000. Most vehicles, a
majority of the distribution centers' material handling equipment, 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 13)
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 financing 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. 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 and subsequently moved to
substitute a Mississippi class in its place. On February 3, 1997, this case and
Richardson v. Heilig-Meyers Company and Heilig-Meyers Furniture Company filed on
July 11, 1996 in the United States District Court for the North District of
Florida (Tallahassee Division) (the "Florida District Court") (seeking
certification of a class of Florida residents and alleging violation of federal
statutes) were transferred by the panel on multi district litigation (the "MDL
Panel") to the United States District Court for the Middle District of Alabama.
The Company has moved to return these cases to the courts in which these cases
were originally filed. There are also three cases pending in United States
District Courts which seek to certify classes of residents in Georgia, Illinois
and Virginia, respectively: Eubanks v. Heilig- Meyers Company and Heilig-Meyers
Furniture Company (Southern District of Georgia) filed on March 5, 1997 in
Georgia State Court and subsequently removed to United States District Court
(alleges violation of Georgia statutes); Faulkner v. Heilig-Meyers Company
(Northern District of Illinois) filed on February 18, 1997 (alleges violation of
federal and Illinois statutes); and Via v. Heilig-Meyers Company and
Heilig-Meyers Furniture Company (Western District of Virginia) filed on April
23, 1997 (alleges violation of federal statutes). The Company intends to
vigorously defend all of these cases. The Company has reached a settlement in a
case pending in the Florida District Court, Pace v. Heilig-Meyers Company and
Heilig-Meyers Furniture Company, which sought certification of a class of
Florida residents and alleged violations of Florida statutes. The settlement,
which was approved by the Florida District Court in May 1997, is not expected to
have a material impact on the Company's financial statements. In Jones v.
Heilig-Meyers Company and Heilig-Meyers Furniture Company (filed on February 23,
1996 in the Memphis, Tennessee Circuit Court seeking certification of a class of
Tennessee residents and alleging violations of Tennessee statutes), the Court
granted the Company's motion to deny class certification on April 29, 1997 and
subsequently granted the Company's motion to deny class certification on April
29, 1997 and subsequently granted the Company's motion to dismiss the case.
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 14)
Executive Officers of the Registrant
The following table sets forth certain information with respect to the
executive officers of the Company as of May 1, 1997:
Positions with the Company
or Principal Occupation for
Years with the Past Five Years and
Name Age the Company Other Information
---- --- ----------- -----------------
William C. DeRusha 47 28 Chairman of the Board since
April 1986. Chief Executive
Officer since April 1984.
Director since January 1983.
Troy A. Peery, Jr. 51 25 President since April 1986.
Chief Operating Officer since
December 1987. Director since
April 1984.
James F. Cerza, Jr. 49 9 Executive Vice President,
since April 1995. Executive
Vice President, Operations
from August 1989 to April 1995.
Joseph R. Jenkins 51 9 Executive Vice President and
Chief Financial Officer since
January 1988.
Irwin L. Lowenstein 61 - Executive Vice President, Rhodes
since April 1997. Executive Vice
President, Rhodes, Inc. since
January 1997. Chairman of the
Board, Rhodes, Inc. from 1994 to
December 1996. Chief Executive
Officer, Rhodes, Inc. from 1989 to
December 1996. President and Chief
Operating Officer, Rhodes, Inc.
from 1973 to 1994.
Frederick E. Meiser 53 - Executive Vice President,
Merchandising since December 1996.
Executive Vice President,
Montgomery Ward from March
1996 to December 1996 (retail
merchandising of electronics,
appliances, furniture and jewelry).
Chairman of the Board and Chief
Executive Officer, Lechmere from
November 1995 to December 1996
(retail merchandising of
home oriented products). Executive
Vice President, Merchandising,
Builders Square from 1994 to
November 1995 (retail
merchandising of home improvement
and repair products). Senior Vice
President, Marketing, Builders
Square from 1992 to 1994.
(page 15)
James R. Riddle 55 12 Executive Vice President,
since April 1995. Executive
Vice President, Marketing
from January 1988 to April
1995.
George A. Thornton III 56 - Executive Vice President, Rhodes
since April 1997. Director from
April 1980 to February 1997.
Independent consultant to
furniture manufacturers and
Chairman, Tim Buck II, LTD (real
estate development) for more than
five years prior to April 1997.
William J. Dieter 57 24 Senior Vice President, Accounting
since April 1986. Chief Accounting
Officer since 1975.
(page 16)
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
1997
4th Quarter $ 16 1/8 $ 12 3/4 $ .07
3rd Quarter 17 1/4 12 5/8 .07
2nd Quarter 24 1/8 16 .07
1st Quarter 23 3/8 13 7/8 .07
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
There were approximately 3,100 shareholders of record as of February
28, 1997.
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 $150,293,000 plus 75% of net earnings
adjusted for dividend payouts subsequent to February 28, 1997.
Recent Sales of Unregistered Securities. During the past fiscal year,
the Company issued shares of its common stock in the transactions described
below. The sales of the securities were exempt from registration under the
Securities Act of 1933 ("the Act") for transactions not involving a public
offering, based on the fact that the private placements were made to accredited
investors and a limited number of nonaccredited investors permitted under Rule
506 of Regulation D under the Act.
On February 18, 1997, the Company acquired substantially all the
assets of The RoomStore, Inc. which operated 10 stores in Texas. The
shareholders of The RoomStore, Inc. received 720,000 shares of the Company's
common stock as part of the transaction.
On February 28, 1997, the Company acquired substantially all the
assets of Star Furniture Company, Incorporated which operated a 19-store
furniture chain based in North Carolina. The shareholders of Star Furniture
Company, Incorporated received 500,000 shares of the Company's common stock as
part of the transaction.
(page 17)
Item 6. SELECTED FINANCIAL DATA
FISCAL YEAR 1997 1996 1995 1994 1993
(Dollar amounts in thousands except per share data)
Earnings Statement Data:
Sales $1,342,208 $1,138,506 $ 956,004 $ 723,633 $549,660
Annual growth in sales 17.9% 19.1% 32.1% 31.7% 25.9%
Other income $ 250,911 $ 220,843 $ 196,135 $ 140,156 $107,883
Total revenues 1,593,119 1,359,349 1,152,139 863,789 657,543
Annual growth in revenue 17.2% 18.0% 33.4% 31.4% 26.5%
Costs of sales $ 876,142 $ 752,317 $ 617,839 $ 460,284 $351,361
Gross profit margin 34.7% 33.9% 35.4% 36.4% 36.1%
Selling, general and
administrative
expense $ 526,369 $ 436,361 $ 350,093 $ 260,161 $200,071
Interest expense 47,800 40,767 32,889 23,834 23,084
Provision for doubtful
accounts 80,908 65,379 45,419 32,356 24,185
Provision for income
taxes 21,715 23,021 39,086 32,158 20,833
Effective income tax
rate 35.1% 35.7% 36.9% 36.9% 35.4%
Earnings margin 3.0% 3.7% 7.0% 7.6% 6.9%
Cumulative effect of
accounting change --- --- --- --- ---
Net earnings $ 40,185 $ 41,504 $ 66,813 $ 54,996 $ 38,009
Earnings per share:
Primary .80 .84 1.34 1.12 .84
Fully diluted .80 .84 1.34 1.12 .83
Net earnings per share:
Primary .80 .84 1.34 1.12 .84
Fully diluted .80 .84 1.34 1.12 .83
Cash dividends per share .28 .28 .24 .20 .16
Balance Sheet Data:
Total assets $1,837,158 $1,288,960$1,208,937 $1,049,633 $766,485
Average assets per store1,946 1,800 1,869 1,841 1,803
Accounts receivable,
net 596,959 518,969 538,208 535,437 397,974
Inventories 433,277 293,191 253,529 184,216 131,889
Property and equipment,
net 366,749 216,059 203,201 168,142 126,611
Additions to property
and equipment 84,137 40,366 49,101 36,252 27,426
Short-term debt 256,413 207,812 167,925 210,318 163,171
Long-term debt 561,489 352,631 370,432 248,635 176,353
Average debt per store 866 783 832 805 799
Stockholders' equity 642,621 518,983 490,390 433,229 305,555
Stockholders' equity
per share 11.81 10.69 10.10 8.95 6.87
Other Financial Data:
Working capital $ 550,137 $ 527,849$ 554,096 $ 453,175 $322,796
Current ratio 1.9 2.4 2.9 2.4 2.3
Debt to equity ratio 1.27 1.08 1.10 1.06 1.11
Debt to debt and equity 56.0% 51.9% 52.3% 51.4% 52.6%
Rate of return on
average assets (1) 4.6% 5.4% 7.8% 7.7% 7.5%
Rate of return on
average equity 6.9% 8.2% 14.5% 14.9% 13.3%
Number of stores 944 716 647 570 425
Number of employees 19,131 14,383 13,063 10,536 7,850
Average sales
per employee $ 84 $ 83$ 81 $ 79 $ 76
(page 18)
SELECTED FINANCIAL DATA, cont.
FISCAL YEAR 1997 1996 1995 1994 1993
(Dollar amounts in thousands except per share data)
Weighted average common shares outstanding:
(in thousands)
Primary 50,146 49,604 49,954 49,103 45,356
Fully diluted 50,157 49,645 49,954 49,281 45,644
Price range on common stock per share:
High $ 24 1/8 $27 1/4 $36 $39 $22 3/8
Low 12 5/8 13 1/2 23 1/4 19 3/8 10 5/8
Close 14 1/8 14 23 5/8 33 19 7/8
Per share amounts reflect a three-for-two stock split distributed in July
1993.
(1) Calculated using earnings before interest, net of tax.
(page 19)
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
1997 1996 1995
Other income 18.7% 19.4% 20.5%
Costs of sales 65.3 66.1 64.6
Selling, general and
administrative expense 39.2 38.3 36.6
Interest expense 3.6 3.6 3.4
Provision for doubtful
accounts 6.0 5.7 4.8
Earnings before provision for
income taxes 4.6 5.7 11.1
Provision for income taxes 1.6 2.0 4.1
Net earnings 3.0 3.7 7.0
Revenues
Sales for fiscal 1997 compared to the two previous periods are shown
below:
Fiscal Year
1997 1996 1995
Sales (in thousands) $1,342,208 $1,138,506 $956,004
Percentage increase over
prior period 17.9% 19.1% 32.1%
Portion of increase from existing
(comparable) stores (0.6) 0.3 6.1
Portion of increase from new stores 18.5 18.8 26.0
The growth in total sales of Heilig-Meyers Company (the
"Company") for fiscal years 1997 and 1996 is primarily attributed to the
growth in operating units. An increased number of operating units as well as
increased volume in comparable stores caused the fiscal 1995 increase. The
impact of price changes on sales growth over the last three fiscal years has
been insignificant. Expansion of the Heilig-Meyers retail units during fiscal
1997 was primarily in the southcentral, southwestern and northwestern United
States. The Heilig-Meyers units contributed 86%, 92% and 99.6% of sales for
fiscal years 1997, 1996 and 1995, respectively. The Company's Puerto Rican
operations, which conduct business under the name "Berrios," contributed
8% of total sales for fiscals 1997 and 1996 and .4% for fiscal 1995. On December
31, 1996, Rhodes, Inc., a Georgia Corporation, became a wholly-owned subsidiary
of the Company, and the acquisition was accounted for under the purchase method.
The Company operates these stores under the Rhodes name and format. The 105
Rhodes stores are primarily located in metropolitan areas of 15 southern,
midwestern and western states. Sales by the Rhodes stores for the two-month
period ended February 28, 1997 represented approximately 5.8% of the
Company's total sales for fiscal 1997. In late February 1997, the Company
acquired certain assets relating to 10 stores operating in central Texas under
the name "The RoomStore." The RoomStore operates under a "rooms
concept," displaying and selling furniture in complete room packages. The
Company plans to maintain The RoomStore name and continue to operate these
stores under this format. Due to the timing of the acquisition, The RoomStore
contribution to the Company's fiscal 1997 consolidated sales was not
significant. On February 28, 1997, the Company acquired a 19-store chain based
in North Carolina. These stores will begin operations in March 1997, and are
excluded from the table below. A summary of retail locations in
(page 20)
operation at the end of the last three fiscal years follows:
Fiscal Year
1997 1996 1995
Heilig-Meyers 797 688 630
Rhodes 105 - -
The RoomStore 10 - -
Berrios 32 28 17
TOTAL 944 716 647
The Company plans to continue its strategy of locating Heilig-Meyers
stores primarily in small towns and rural markets and expects to open 60 to 80
new stores in fiscal 1998. Growth opportunities of the stores operating under
the Rhodes and The RoomStore names are being evaluated. The Company expects to
expand these formats as appropriate markets are identified.
Management attributes the recent trends in sales primarily to a weak
overall home furnishings retail environment. The consumer demand for home
furnishings continued to be sluggish during fiscal 1997, which management
believes has been impacted by an overall rise in consumer debt levels. In
addition, the Company's operating strategy during fiscal 1997 was designed
to increase the quality of sales, as measured by increasing margin percentages
over the prior year, and to reduce the growth rate in the provision for doubtful
accounts as a percentage of sales.
Other income decreased to 18.7% of sales for fiscal 1997 from 19.4% of
sales for fiscal 1996. This decrease was due primarily to the impact of the
addition of the Rhodes stores acquired on December 31, 1996. The Rhodes stores
generate minimal finance related revenues because they do not offer in-house
credit to their customers. The Rhodes stores offer a private label credit card
program that is serviced by a third party. Other income for fiscal 1996
decreased to 19.4% of sales from 20.5% of sales in fiscal 1995. This decrease is
primarily attributed to a larger pool of securitized accounts receivable during
fiscal 1996 as compared to fiscal 1995. Interest costs related to securitized
receivables, which are based on the dollar value of accounts receivable sold to
third parties, are netted against finance income.
The Company plans to continue to offer the third party private label
credit card program by its Rhodes stores in fiscal 1998, and to continue its
program of periodically securitizing a portion of the installment accounts
receivable portfolio of its other stores. Proceeds from securitized receivables
are generally used to lower debt levels.
Costs and Expenses
In fiscal 1997, costs of sales decreased, as a percentage of sales, to
65.3% from 66.1% in fiscal year 1996. The reduction in costs of sales was
primarily related to improved raw selling margins in the Heilig-Meyers stores. A
reduction in the use of aggressive, price-cutting promotions and improvement in
day-to-day pricing policies were the primary contributors to the raw selling
margin results. Additionally, as compared to fiscal 1996, the merchandise sales
mix for fiscal 1997 included a higher percentage of furniture and bedding, which
carry higher raw selling margins. Costs of sales increased to 66.1% of sales in
fiscal 1996 from 64.6% in fiscal 1995. This increase was due to utilization of
promotional pricing in response to the sluggish sales environment experienced in
fiscal 1996 and increases in costs associated with occupancy, depreciation and
lease charges related to store and distribution operations.
Selling, general and administrative expenses increased to 39.2% of
sales in fiscal 1997 from 38.3% in fiscal 1996 and 36.6% in fiscal 1995. The
increase in fiscal 1997 is primarily the result of loss of sales leverage on
fixed type expenses such as base salaries, data processing and depreciation and
amortization, given the modest decline in comparable store sales during the
year. Advertising costs in fiscal 1997 were slightly down as a
(page 21)
percentage of sales compared to fiscal 1996; however, expenditures during the
year remained above the fiscal 1995 percentage. In fiscal 1996 the increase in
selling, general and administrative expenses as compared to fiscal 1995 was
primarily due to an increase in advertising expense associated with additional
promotional activities in response to the sluggish retail sales environment.
Interest expense was 3.6% of sales in fiscal years 1997 and 1996 and
3.4% of sales in fiscal 1995. The impact of an increase in weighted average
long-term debt of $93.5 million was offset by lower weighted average interest
rates, which decreased to 7.7% from 7.9% on long-term debt and to 5.8% from 6.3%
on short-term debt in fiscal years 1997 and 1996, respectively. The increase as
a percentage of sales from fiscal 1995 to fiscal 1996 was due to a $96.7 million
increase in weighted average long-term debt levels with no change in weighted
average long-term interest rates. Although weighted average short-term debt
levels declined during fiscal 1996 by approximately $31.4 million, weighted
average short-term interest rates increased to 6.3% from 5.1% in fiscal 1995.
The increase in long-term debt levels in both fiscal 1997 and 1996 was
consistent with the Company's plan to structure its debt portfolio to
contain a higher percentage of long-term fixed rate debt in order to minimize
the exposure to future short-term interest rate fluctuations.
The provision for doubtful accounts was 6.0% of sales in fiscal 1997
compared to 5.7% and 4.8% of sales in fiscal years 1996 and 1995, respectively.
The increase in the provision for doubtful accounts as a percentage of sales is
a result of a rise in the portfolio loss rate and related write-offs experienced
during the last three fiscal years. The growth rate of the provision as a
percentage of sales decreased in fiscal 1997 as a result of the sales
contribution of the Rhodes stores and a more disciplined approach to credit
extension and account collection in Heilig- Meyers stores during the year. The
Company plans to continue this approach in order to minimize the portfolio loss
rate, and continue to offer third party credit without recourse in the Rhodes
stores during fiscal 1998.
Total portfolio write-offs for fiscal 1997, 1996 and 1995 were $77.4
million, $66.1 million and $51.7 million, respectively. Of these amounts, $6.9
million, $8.9 million and $7.6 million were for purchased receivables,
respectively. Management believes that the allowance for doubtful accounts at
February 28, 1997, is adequate.
Provision for Income Taxes and Net Earnings
The effective tax rate for fiscal 1997 was 35.1% compared to 35.7% and
36.9% for fiscal 1996 and fiscal 1995, respectively. This decrease in the
effective tax rate was primarily the result of higher fixed dollar income tax
credits in the current year and lower levels of pretax earnings.
Net earnings for fiscal 1997 decreased to $40.2 million from $41.5
million for fiscal 1996. As a percentage of sales, profit margin decreased to
3.0% for fiscal 1997 from 3.7% for fiscal 1996. The decrease was mostly
attributable to an increase as a percentage of sales in selling, general and
administrative expense due to the decline in comparable store sales and an
increase in the provision for doubtful accounts. 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 a decline in the gross margin percentage, an
increase in selling, general and administrative expense and an increase in the
provision for doubtful accounts.
LIQUIDITY AND CAPITAL RESOURCES
The Company decreased its cash position $1.0 million to $15.0 million
at February 28, 1997, from $16.0 million at February 29, 1996. As the Company
continued to expand its store base, cash flows used for investing activities
exceeded cash provided by operating activities for fiscal years 1997, 1996 and
1995. The Company's operating activities typically use cash primarily
because the significant majority of customer sales have been through the
Company's in-house credit program. These uses of cash have been partially
offset by proceeds from the sale of accounts receivable and
(page 22)
financing activities.
Operating activities used cash of $3.0 million for fiscal 1997
compared to cash provided of $92.5 million in fiscal 1996 and $114.2 million in
fiscal 1995. The Company's investment in accounts receivable grew by $144.1
million in fiscal 1997 because of the continued extension of credit to customers
and a reduced amount of accounts sold during the year as compared to the amounts
sold in fiscal 1996. The increase in inventory levels has primarily been the
result of the opening of 113 new Heilig-Meyers and Berrios stores in fiscal
1997, 69 in fiscal 1996 and 77 in fiscal 1995. Continued extension of credit and
related increases in customer accounts receivable, as well as increases in
inventory related to new stores, are expected to be negative cash flow
activities in future periods. However, as noted above, the Company periodically
sells accounts receivable to provide a source of positive cash flows from
operating activities.
Investing activities produced negative cash flows of $146.5 million in
fiscal 1997, $95.6 million in fiscal 1996, and $179.9 million in fiscal 1995.
Cash used for acquisitions was relatively consistent in fiscal 1997 compared to
fiscal 1996, at $58.8 million and $51.7 million, respectively. Cash used for
acquisitions in fiscal 1995 was $132.2 million primarily due to the acquisition
of 17 stores in Puerto Rico for $99.0 million. Cash used for additions to
property and equipment resulted from the opening of new store locations and
related support facilities as well as the remodeling and improvement of existing
and acquired locations. The increase in the cash required for capital
expenditures in fiscal 1997 is the result of a larger number of prototype stores
and support facilities completed or under construction as of February 28, 1997,
compared to February 29, 1996. This includes the Company's distribution
center located in Athens, Texas which opened in late fiscal 1997. This facility
will support current and future stores located in Texas, Louisiana and Oklahoma.
During fiscal 1998, the Company plans to open approximately 60 to 80 new
Heilig-Meyers stores as well as continue its existing store remodeling program.
Capital expenditures will continue to be financed by cash flows from operations
and external sources of funds.
Financing activities provided a positive net cash flow of $148.4
million in fiscal 1997 as compared to $8.8 million in fiscal 1996 and $69.8
million in fiscal 1995. In July 1996, the Company and a wholly-owned subsidiary
filed a joint Registration Statement on Form S-3 with the Securities and
Exchange Commission relating to up to $400.0 million aggregate principal amount
of securities. Long-term notes payable with an aggregate principal amount of
$300.0 million were issued to the public during fiscal 1997 leaving $100.0
million available to be issued in the future. All previously issued debt had
been in private placements rather than public markets. Proceeds were used to
reduce long-term debt which matured in fiscal 1997 and short-term notes payable.
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 operating cash flows supplemented by other sources of
capital. As of February 28, 1997, the Company had a $400.0 million revolving
credit facility in place which expires in July 2000. This facility includes
fourteen banks and had $145.0 million outstanding and $255.0 million unused as
of February 28, 1997. The Company also had additional lines of credit with banks
totaling $54.0 million of which $43.0 million was unused as of February 28,
1997.
Total debt as a percentage of debt and equity was 56.0% at February
29, 1997, compared to 51.9% and 52.3% at February 29, (28), 1996 and 1995,
respectively. The current ratio was 1.9 at February 28, 1997, compared to 2.4
and 2.9 for February 29, (28), 1996 and 1995, respectively. The decrease in the
current ratio at February 28, 1997 is primarily attributed to an $82.6 million
increase in long-term debt due within one year.
FORWARD-LOOKING STATEMENTS
Certain statements included in this Annual Report are not based on
historical facts, but are forward-looking statements. These statements can be
identified by the use of forward-looking terminology such as "believes,"
(page 23)
"expects," "may," "will," "should," or
"anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy. See, e.g.,
"Management's Discussion and Analysis of Financial Condition and Results
of Operations." These statements reflect the Company's reasonable
judgments with respect to future events and are subject to risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. Such risks and uncertainties include, but are
not limited to, the customer's willingness, need and financial ability to
purchase home furnishings and related items, the Company's ability to extend
credit to its customers, the costs and effectiveness of promotional activities,
the Company's ability to realize cost savings and other synergies from
recent acquisitions as well as the Company's access to, and cost of,
capital. Other factors such as changes in tax laws, recessionary or expansive
trends in the Company's markets, inflation rates and regulations and laws
which affect the Company's ability to do business in its markets may also
impact the outcome of forward-looking statements.
(page 24)
Item 8. FINANCIAL STATEMENTS and SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in thousands except per share data)
FISCAL YEAR 1997 1996 1995
---------- ---------- ---------
Revenues:
Sales $1,342,208 $1,138,506 $ 956,004
Other income 250,911 220,843 196,135
---------- ---------- ---------
Total revenues 1,593,119 1,359,349 1,152,139
Costs and expenses:
Costs of sales 876,142 752,317 617,839
Selling,general and administrative 526,369 436,361 350,093
Interest 47,800 40,767 32,889
Provision for doubtful accounts 80,908 65,379 45,419
---------- ---------- ---------
Total costs and expenses 1,531,219 1,294,824 1,046,240
---------- ---------- ---------
Earnings before provision for income
taxes 61,900 64,525 105,899
Provision for income taxes 21,715 23,021 39,086
---------- ---------- ---------
Net earnings $ 40,185 $ 41,504 $ 66,813
========== ========== =========
Net earnings per share:
Primary and fully diluted $ .80 $ .84 $ 1.34
========== ========== =========
Weighted average common shares outstanding:
Primary 50,146 49,604 49,954
Fully diluted 50,157 49,645 49,954
========== ========== =========
Cash dividends per share of common
stock $ .28 $ .28 $ .24
========== ========== =========
See notes to consolidated financial statements.
(PAGE)
(page 25)
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value data)
FEBRUARY 28, (29) 1997 1996
Assets
Current assets:
Cash $ 14,959 $ 16,017
Accounts receivable, net 596,959 518,969
Inventories 433,277 293,191
Other current assets 88,862 67,139
----------- -----------
Total current assets 1,134,057 895,316
Property and equipment, net 366,749 216,059
Other assets 42,262 29,455
Excess costs over net
assets acquired, net 294,090 148,130
----------- -----------
$ 1,837,158 $ 1,288,960
=========== ===========
Liabilities And Stockholders' Equity
Current liabilities:
Notes payable $ 156,000 $ 190,000
Long-term debt due within one year 100,413 17,812
Accounts payable 160,857 87,739
Accrued expenses 166,650 71,916
----------- -----------
Total current liabilities 583,920 367,467
Long-term debt 561,489 352,631
Deferred income taxes 49,128 49,879
Stockholders' equity:
Preferred stock, $10 par value -- --
Common stock, $2 par value 108,828 97,143
Capital in excess of par value 195,352 120,769
Unrealized gain on investments 10,797 --
Retained earnings 327,644 301,071
----------- -----------
Total stockholders' equity 642,621 518,983
----------- -----------
$ 1,837,158 $ 1,288,960
=========== ===========
See notes to consolidated financial statements.
(page 26)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands)
Number of
Common Capital in Total
Shares Common Excess of Unrealized Retained Stockholders'
Outstanding Stock Par Value Gain Earnings Equity
----------------- --------- ---- -------- ------
Balances at
March 1, 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
-------------------------------------------------------------
Balances at
February 29,1996 48,571 97,143 120,769 -- 301,071 518,983
Cash dividends -- -- -- -- (13,612) (13,612)
Common stock
issued for
acquisitions 5,791 11,582 73,842 -- -- 85,424
Exercise of stock
options, net 52 103 741 -- -- 844
Unrealized gain
on investments -- -- -- 10,797 -- 10,797
Net earnings -- -- -- -- 40,185 40,185
-------------------------------------------------------------
Balances at
February 28,1997 54,414 $108,828 $195,352 $10,797 $327,644 $642,621
=============================================================
See notes to consolidated financial statements.
(page 27)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
FISCAL YEAR 1997 1996 1995
--------- --------- ---------
Cash flows from operating activities:
Net earnings $ 40,185 $ 41,504 $ 66,813
Adjustments to reconcile net earnings
to net cash provided (used) by
operating activities:
Depreciation and amortization 33,874 29,460 23,878
Provision for doubtful accounts 80,908 65,379 45,419
Other, net 588 (470) (406)
Change in operating assets and
liabilities, net of the effects
of acquisitions:
Accounts receivable (204,560) (167,860) (171,137)
Sale of accounts receivable 60,500 150,000 178,778
Inventories (35,154) (24,015) (44,206)
Other current assets (10,306) (23,447) (5,830)
Accounts payable 18,017 216 18,098
Accrued expenses 12,948 21,734 2,767
--------- --------- ---------
Net cash provided (used)
by operating activities (3,000) 92,501 114,174
--------- --------- ---------
Cash flows from investing activities:
Acquisitions, net of cash acquired (58,842) (51,658) (132,158)
Additions to property and equipment (84,137) (40,366) (49,101)
Disposals of property and equipment 3,423 6,348 4,583
Miscellaneous investments (6,907) (9,942) (3,184)
--------- --------- ---------
Net cash used by
investing activities (146,463) (95,618) (179,860)
--------- --------- ---------
Cash flows from financing activities:
Issuance of stock 683 286 1,979
Proceeds from long-term debt 299,444 -- 230,000
Increase (decrease) in notes
payable, net (34,000) 50,200 (112,800)
Payments of long-term debt (104,110) (28,114) (37,797)
Dividends paid (13,612) (13,598) (11,631)
--------- --------- ---------
Net cash provided by
financing activities 148,405 8,774 69,751
--------- --------- ---------
Net increase (decrease) in cash (1,058) 5,657 4,065
Cash at beginning of year 16,017 10,360 6,295
--------- --------- ---------
Cash at end of year $ 14,959 $ 16,017 $ 10,360
========= ========= ========
See notes to consolidated financial statements.
(page 28)
Notes To Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Nature of Operations
Heilig-Meyers is a retailer of home furnishings which operated 944
stores as of February 28, 1997 of which 912 are located in 32 states and 32 are
located in Puerto Rico. The Company's stores are primarily located in small
towns and rural markets in the southeast, south-central, midwest, west,
northwest and southwest continental United States. During the fourth quarter of
this fiscal year, the Company acquired Rhodes, Inc. of Atlanta, Georgia and
certain assets of The RoomStore of Dallas, Texas. The Rhodes and The RoomStore
stores continue to operate under their respective names and formats.
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 installment
and third party private label credit card programs to provide financing to its
customers.
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.
Fiscal Year
Fiscal years are designated in the consolidated financial statements by
the calendar year in which the fiscal year ends. Accordingly, results for fiscal
years 1997, 1996 and 1995 represent the years ended February 28, 1997, February
29, 1996 and February 28, 1995, respectively. Certain amounts in the fiscal 1996
consolidated financial statements have been reclassified to conform to the
fiscal 1997 presentation.
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. The Company has sold
a portion of its accounts receivable. These sales are accounted for under
Statement of Financial Accounting Standards (SFAS) No.
(page 29)
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities."
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 handling costs.
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
goodwill is fully recoverable from projected, undiscounted net cash flows from
operations of the related business unit. Impairment, should any occur, would be
recognized by a charge to operating results and a reduction in the carrying
value of excess costs over net assets acquired.
Stockholders' Equity
The Company is authorized to issue 250,000,000 shares of $2 par value
common stock. At February 28, (29), 1997 and 1996, there were 54,414,000 and
48,571,000 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.
New Accounting Standards
Effective March 1, 1996, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." The adoption of SFAS No. 121 did not have a
material impact on the financial statements. The Company also adopted SFAS No.
123, "Accounting for Stock-Based Compensation." As provided for by SFAS
No. 123, the Company has decided to continue to apply Accounting Principles
Board (APB) No. 25 "Accounting for Stock Issued to Employees," for
recognition and measurement purposes within the financial statements. During the
fiscal year, the Financial Accounting Standards Board issued SFAS No. 125. This
statement was effective for applicable transactions after January 1, 1997.
Revenues and Costs of Sales
Other income consists primarily of finance and other income earned on
accounts receivable. Finance charges were $209,491,000, $182,426,000, and
$163,114,000 during fiscal 1997, 1996 and 1995, respectively. 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. Finance charges are included in revenues on a monthly basis as earned.
The effect of sales returns prior to shipment date have
(page 30)
been immaterial. The Company sells substantially all of its service policies to
third parties and recognizes service policy income on these at the time of sale.
Revenue from service policies and extended warranty contracts retained by the
Company are deferred and recognized over the life of the contract period. Costs
of sales includes occupancy and delivery expenses.
Earnings and Dividends 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
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 of payable
to or receivable from counterparties is recorded as an adjustment to accrued
interest expense.
(2) Expansion
During fiscal years 1997 and 1996, the Company made the acquisitions
described below. 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. Pro forma
results of operations for certain acquisitions have not been presented because
the effects were not significant. Other acquisitions completed during fiscal
years 1997 and 1996 are not discussed below because they are not considered
material to the financial statements.
During October 1996, the Company acquired certain assets related to 20
stores of J. McMahan's in Santa Monica, California. The purchase price of
these assets was approximately $20,021,000, net of $26,989,000 of assets which
were subsequently sold. The unamortized excess of purchase price over the fair
market value of the net assets acquired from J. McMahan as of February 28, 1997
was $16,333,000.
During October 1996, the Company purchased certain assets relating to
23 stores of Self Service Furniture Company of Spokane, Washington. The purchase
price of these assets was approximately $19,163,000. The unamortized excess of
purchase price over the fair market value of the net assets acquired from Self
Service as of February 28, 1997 was $5,195,000.
During December 1996, the Company acquired Rhodes, Inc., a publicly
traded home furnishings retailer with 105 stores in 15 states. The Company
issued approximately 4,588,000 shares of its common stock in the transaction
valued at $69,390,000, assumed debt and other accrued liabilities of
$192,542,000 and incurred approximately $1,400,000 in costs related to the
acquisition. The Company assigned $107,782,000 of acquisition costs to excess of
purchase price over the fair market value of the net assets acquired. As of
February 28, 1997, the purchase price allocation was considered preliminary as
certain studies related to the fair value of assets acquired and liabilities
assumed have not been completed. However, management does not expect the
resulting adjustments to be material.
The unaudited consolidated results of operations on a pro forma basis
as though Rhodes had been acquired as of the beginning of fiscal years 1997 and
1996 are as follows:
(page 31)
1997 1996
---- ----
(Amounts in thousands except per share data)
Total revenues $2,027,753 $1,795,015
Net earnings 33,829 48,674
Net earnings per share:
Primary and fully diluted 0.63 0.90
The pro forma information is presented for comparative purposes only
and is not necessarily indicative of the operating results that would have
occurred had the Rhodes acquisition been consummated as of the above dates, nor
is it necessarily indicative of future operating results.
During February 1997, the Company acquired certain assets relating to
10 stores of The RoomStore, Inc. of Dallas, Texas. The Company issued 720,000
shares of its common stock in the transaction valued at $9,630,000, and assumed
debt and other accrued liabilities of $5,984,000. The unamortized excess of
purchase price over the fair market value of the net assets acquired as of
February 28, 1997 was $7,905,000.
During fiscal 1996, the Company acquired certain assets related to 9
stores of BWAC International located in 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
28, 1997 was $8,631,000.
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 over the fair value of the
net assets acquired for all acquisitions was $294,090,000 and $148,130,000, net
of accumulated amortization of $20,213,000 and $15,593,000, at February 28, 1997
and February 29, 1996, respectively.
(3) Accounts Receivable
As of February 28, 1997, accounts receivable consisted of amounts due
from customers of $421,999,000, a related allowance for doubtful accounts of
$41,120,000, and the Company's $216,080,000 interest in a Master Trust (the
"Trust"), which is more fully described below. As of February 29, 1996,
accounts receivable consisted of amounts due from customers of $573,683,000, and
an allowance for doubtful accounts, applicable to those accounts owned as well
as those sold with recourse, of $54,714,000. Balances receivable from customers
are shown net of unearned finance income of $44,356,000 and $60,114,000 at
February 28, 1997, and February 29, 1996, respectively. Accounts receivable
having balances due after one year were $139,233,000 and $131,501,000 at
February 28, 1997 and February 29, 1996, 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 944 stores throughout 32 states and Puerto Rico and,
therefore, is not dependent on any given industry or business for its customer
base and has no significant concentration of credit risk.
As noted above, the Company participates in an asset securitization
agreement in which it sells interests in certain installment accounts receivable
from its customers to third parties. The Company was required to apply SFAS No.
125 to all securitization transactions entered into after January 1, 1997. The
adoption of SFAS No. 125 had no impact on earnings.
During fiscal 1997, the Company terminated its existing securitization
programs and replaced them with a new securitization arrangement. Under the new
arrangement, all previously securitized accounts and an additional $60,500,000
in aggregate principal amount were transferred without recourse to the Trust.
The Trust issued certificates representing undivided interests in the assets of
the Trust. Senior Class certificates having an aggregate principal amount of
$592,000,000 were sold
(page 32)
to investors. Subordinate Class certificates and the remaining undivided
interest in the Trust, which are subordinated to the Senior Class certificates,
were retained by the Company.
Cash flows generated from the receivables in the Trust are, to the
extent allocable to holders of the Senior Class certificates and the Subordinate
Class certificates, applied to pay interest on Senior Class and Subordinate
Class certificates, cover credit losses, and pay servicing fees to the Company,
which will continue to service the receivables in the Trust. The receivables
were transferred without recourse. Excess cash flows revert to the Company and
have been recorded as an interest-only strip. No servicing asset resulted
because contractual rates are at estimated market rates and are considered
adequate compensation for servicing.
The interest rate in effect for the certificates issued under the new
securitization agreement, which is a variable rate tied to commercial paper
indices, was 5.7% at February 28, 1997. The term on the new securitization
agreement is 29 months. The rates in effect for the previous securitization
agreements were variable, either being tied to LIBOR or commercial paper and
ranged from 5.7% to 6.8% in fiscal 1996. As a means of managing unfavorable
movements in these rates, the Company has entered into interest rate swap
agreements which fix rates on notional amounts of $235,000,000 at February 28,
1997 and February 29, 1996. The swap rates in effect at the end of fiscal 1997
and 1996 ranged from 5.3% to 7.4%. The terms on the previous securitization
agreements in effect during fiscal 1996 ranged from 29 to 54 months.
The former agreements in existence during fiscal 1996 and throughout
much of fiscal 1997 provided third parties with limited recourse against the
Company. On a $140,000,000 pool of receivables, recourse was limited each month
to 20% of the third parties' interest in the pool as of the related
settlement date. Recourse on a $63,600,000 pool of receivables was limited to
approximately 15% of the balance. The recourse provisions relating to a
$392,000,000 pool were limited to 6% of the third parties' interest in the
pool as of the related settlement date. Payments under all recourse provisions
never exceeded established reserves. Earnings from securitizations were
$4,250,000 and $8,771,000 in fiscal 1997 and 1996, respectively.
The Company offers certain of its customers revolving credit through
private label credit facilities with commercial banks. Heilig-Meyers offers
revolving credit to certain customers through an agreement with NationsBank,
N.A. The Company services these accounts and provides recourse up to specified
limits. A second revolving credit program is offered by the recently acquired
Rhodes stores through a private label credit facility pursuant to an on-going
merchant agreement with Beneficial National Bank USA. The Company does not
service or provide recourse on these accounts.
The Company's interest in the Trust and interest-only strip are
carried at fair value and consist of the following:
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(Amounts in thousands)
Investment in
receivables $200,229 $15,851 $ - $216,080
Interest-only strip 25,337 2,010 - 27,347
Total $225,566 $17,861 $ - $243,427
(4) Property and Equipment
Property and equipment consists of the following:
(page 33)
1997 1996
---- ----
(Amounts in thousands)
Land and buildings $133,049 $ 80,839
Fixtures, equipment and vehicles 111,916 87,846
Leasehold improvements 215,683 142,108
Construction in progress 36,484 12,854
497,132 323,647
Less accumulated depreciation 130,383 107,588
$366,749 $216,059
(5) Notes Payable and Long-Term Debt
The Company is currently in the second year of a five-year $400,000,000
revolving credit facility dated July 19, 1995. Comprised of fourteen banks, the
facility had $145,000,000 outstanding and $255,000,000 unused as of February 28,
1997. The Company also has additional lines of credit with banks, totaling
$54,000,000, $43,000,000 of which was unused at February 28, 1997, and a
$6,000,000 letter of credit, of which all was unused at February 28, 1997. The
Company's maximum short-term borrowings were $321,000,000 during fiscal 1997
and $249,700,000 during fiscal 1996. The average short-term debt outstanding for
fiscal 1997 was $186,281,000 compared to $190,236,000 for fiscal 1996. The
approximate weighted average interest rates were 5.8%, 6.3% and 5.1% in fiscal
1997, 1996 and 1995, respectively.
At February 28, 1997, the Company had $156,000,000 of outstanding
short-term borrowings compared to $190,000,000 at February 29, 1996. The average
interest rate on this debt was approximately 5.8% at February 28, 1997, and 5.6%
and 6.4% at February 29, 1996 and February 28, 1995, respectively. There were no
compensating balance requirements.
Long-term debt consists of the following:
1997 1996
(Amounts in thousands)
Shelf registration issues:
7.88% unsecured notes due 2003 $200,000 $ -
7.40% unsecured notes due 2002 100,000 -
Other issues:
Notes payable to insurance companies and banks, maturing through 2002,
interest ranging from 6.25% to 9.98%,
unsecured 343,400 365,371
Notes, collateralizing industrial development revenue bonds, maturing
through 2004, interest ranging from a floating rate of 60% of prime to
an
8.50% fixed rate 1,316 1,727
Term loans, maturing through 2007,
interest ranging to 9.80%, primarily
collateralized by deeds of trust 505 599
Capital lease obligations, maturing
through 2006, interest ranging from
76% of prime to 12.90% 16,681 2,746
661,902 370,443
Less amounts due within one year 100,413 17,812
561,489 $352,631
Principal payments are due for the four years after February 28, 1998
(page 34)
as follows: 1999, $20,943,000; 2000, $165,659,000; 2001, $641,000; and 2002,
$160,200,000. The aggregate net carrying value of property and equipment
collateralization at February 28, 1997, was $11,091,000. The Company has on file
a shelf registration to issue up to $400,000,000 of common stock, warrants and
debt securities. The $200,000,000 unsecured 7.88% notes due 2003 and the
$100,000,000 unsecured 7.40% notes due 2002 were issued under the shelf
registration with the remaining $100,000,000 unissued at February 28, 1997.
Notes payable to insurance companies contain certain restrictive
covenants. Under these covenants, the payment of cash dividends is limited to
$150,293,000 plus 75% of net earnings adjusted for dividend payouts subsequent
to February 28, 1997. 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 28,
1997, the Company is in compliance with its restrictive covenants.
Interest payments of $46,710,000, $40,710,000 and $30,303,000 net of
capitalized interest of $2,360,000, $2,141,000 and $1,751,000 were made during
fiscal 1997, 1996 and 1995, respectively.
(6) Income Taxes
The provision for income taxes consists of the following:
1997 1996 1995
(Amounts in thousands)
Current:
Federal $ 5,481 $11,034 $23,282
State 3,006 1,988 3,595
Puerto Rico 2,160 (522) -
Deferred:
Federal 7,758 6,012 10,242
State 1,618 1,293 1,967
Puerto Rico 1,692 3,216 -
11,068 10,521 12,209
$21,715 $23,021 $39,086
The income tax effects of temporary differences that gave rise to
significant portions of the net deferred tax liability as of February 28, 1997
and February 29, 1996, consist of the following:
1997 1996
(Amounts in thousands)
Deferred tax assets:
Accrued liabilities $25,198 $5,028
Allowance for doubtful accounts 8,775 5,943
Subsidiary net operating
loss carryforward 5,622 -
Puerto Rico alternative minimum
tax credit carryforward 3,014 -
Deferred revenues 1,487 711
Other 435 -
44,531 11,682
(page 35)
Deferred tax liabilities:
Excess costs over net
assets acquired 58,172 42,148
Asset securitizations 19,152 11,142
Inventory 7,469 4,148
Property and equipment 7,029 4,290
Puerto Rico accounts receivable 6,813 4,286
Costs capitalized on
constructed assets 5,767 5,480
Other 2,547 1,338
106,949 72,832
$62,418 $61,150
Balance sheet classification:
Other current liabilities $13,290 $11,271
Deferred income tax liability 49,128 49,879
$62,418 $61,150
A reconciliation of the statutory federal income tax rate to the
Company's effective rate is provided below:
1997 1996 1995
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal
income tax benefit 3.7 3.8 3.3
Tax credits (5.3) (3.1) (1.9)
Other, net 1.7 - .5
35.1% 35.7% 36.9%
Income tax payments of $18,446,824, $24,737,603 and $28,966,000 were
made during fiscal 1997, 1996 and 1995, respectively.
A wholly-owned subsidiary has a separate company net operating loss
carryforward in the amount of $16,065,100 at February 28, 1997, which will
expire in fiscal year 2012.
(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 all eligible employees of the
Company who have completed twelve months of employment and have attained the age
of 21. 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 1997, 1996 and 1995 was
$2,507,000, $2,553,000 and $4,505,000, 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 1997, 1996 and 1995 was $283,000, $254,000 and
$386,000, 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
(page 36)
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 25% to 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 6%
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
1997, 1996 and 1995, there was no charge to earnings.
As of February 28, 1997, the Company continued to operate separate
employee benefit plans covering certain groups of employees of Rhodes, which was
acquired on December 31, 1996. These plans include a qualified non-contributory
defined benefit plan covering substantially all employees who are at least 21
years old, a non-qualified unfunded defined benefit plan covering certain
officers who earn compensation in excess of the limits imposed by the Code, and
a qualified defined contribution savings plan.
A comparison of accumulated plan benefits and plan net assets as of
February 28, 1997 for the defined benefit plan follows(Amounts in thousands):
Actuarial present value of accumulated plan benefits: $13,495
Vested 387
Non-vested $13,882
Net assets available for plan benefits $12,972
The projected benefit obligation of the unfunded plan totaled
$1,062,000 at February 28, 1997. The assumed rate of return used in determining
the actuarial present value of accumulated plan benefits for both defined
benefit plans was 7.75%. The expense related to the operation of these plans
during fiscal 1997 was insignificant.
In connection with the acquisition of Rhodes, the Company developed a
plan to potentially terminate these separate benefit plans. The estimated
additional liability associated with such termination was recorded as part of
the purchase price allocation to the acquired assets and liabilities of Rhodes.
(8) Stock Options
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretation in accounting for its employee stock options. In electing to
account for its stock options under APB 25, the Company is required by SFAS No.
123, "Accounting for Stock-Based Compensation" to provide pro forma
information regarding net income and earnings per share.
The 1983, 1990 and 1994 Stock Option Plans provide that key employees
of the Company are eligible to receive common stock options (at an exercise
price of no less than fair market value at the date of grant) and stock
appreciation rights. Under these plans, approximately 8,094,000 shares have been
authorized to be reserved for issuance. All options granted have ten year terms.
The options vest on a graduated basis and become fully exercisable at the end of
two years of continued employment.
Pro forma information regarding net income and earnings per share as
required by SFAS No. 123 has been determined as if the Company had accounted for
its employee stock options under the fair value method of that statement. The
fair value for these options was estimated at the date of grant using a
Black-Scholes option valuation model with the following weighted-average
assumptions for fiscal 1997 and 1996, respectively: risk- free interest rates of
6.1% and 5.2%; a dividend yield of 1.6%; volatility factors of the expected
market price of the Company's common stock of 41%; and a weighted-average
expected option life of 3.48 years and 3.50 years for fiscal years 1997 and
1996, respectively.
(page 37)
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options vesting period. The
Company's pro forma information follows:
1997 1996
(Amounts in thousands except per share data)
Pro forma net income $37,072 $36,524
Pro forma earnings per share:
Primary $.74 $.74
Fully diluted $.74 $.74
Weighted
Average
Exercise
Options Price
Outstanding at March 1, 1994 3,603,272 $16.98
Granted 600,500 $26.18
Exercised (128,043) $11.52
Outstanding at February 28, 1995 4,075,729 $18.46
Granted 1,045,200 $17.25
Exercised (23,525) $12.17
Forfeited (665,500) $32.50
Outstanding at February 29, 1996 4,431,904 $18.49
Granted 816,480 $14.55
Exercised (51,500) $13.25
Outstanding at February 28, 1997 5,196,884 $15.55
A summary of the Company's stock option activity and related
information for the years ended February 28, 1997, 1996 and 1995 follows:
Range of $5.52 $10.01 $17.01 $27.01
Exercise to to to to
Prices $10.00 $17.00 $27.00 $35.06
Options outstanding
at February 28, 1997 1,639,804 816,480 2,728,600 12,000
Weighted average
remaining contract life,
outstanding options 4.16 9.94 6.96 6.95
Weighted average
exercise price,
outstanding options $8.58 $14.55 $20.54 $35.06
Options exercisable
at February 28, 1997 1,639,804 568,142 2,542,900 12,000
Weighted average
exercise price,
exercisable options $8.58 $14.19 $20.36 $35.06
Options exercisable at year end and the respective weighted average
exercise prices were 4,762,846 at $15.50, 4,017,290 at $18.06 and 3,334,019
(page 38)
at $16.80 for fiscal 1997, 1996 and 1995, respectively.
The weighted average fair value of options granted during the year
was $4.88 for fiscal 1997 and $5.42 for fiscal 1996.
(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:
1997 1996
(Amounts in thousands)
Land and buildings $12,098 $6,426
Fixtures and equipment 675 675
12,773 7,101
Less accumulated depreciation
and amortization 3,724 3,307
$ 9,049 $3,794
Capitalized lease amortization is included in depreciation expense.
Future minimum lease payments under capital leases and operating leases having
initial or remaining noncancellable lease terms in excess of one year at
February 28, 1997, are as follows:
Fiscal Years Capital Leases Operating Leases
(Amounts in thousands)
1998 $ 3,411 $ 79,791
1999 3,389 74,643
2000 3,566 65,980
2001 3,546 59,001
2002 2,957 50,188
After 2002 7,351 255,872
Total minimum lease payments $24,220 $585,475
Less:
Executory costs 99
Imputed interest 7,440
Present value of minimum
lease payments $16,681
Total rental expense under operating leases for fiscal 1997, 1996 and
1995 was $83,888,000, $67,509,000 and $50,855,000, respectively. Contingent
rentals and sublease rentals are negligible.
Payments to affiliated entities under capital and operating leases were
$314,000 for fiscal 1997, which included payments to limited partnerships in
which the Company has equity interests. Lease payments to affiliated entities
for fiscal 1996 and 1995 were $625,000 and $856,000, respectively.
Litigation
(page 39)
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 effect
on the financial statements.
(10) 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 floating rates on asset securitization agreements to fixed rates. The
notional amounts of these swap agreements at February 28, (29) were as follows:
1997 1996
(Amounts in thousands)
On notes payable and other $211,700 $231,100
On securitized receivables $235,000 $235,000
Interest rates that the Company paid per the swap agreements related
primarily to notes payable were fixed at an average rate of 6.7% at February 28,
1997. At February 29, 1996, rates were fixed at an average of 6.5%. The variable
rates received per these agreements were tied to LIBOR or commercial paper rates
and averaged 5.7% and 5.3% at February 28, (29), 1997 and 1996, 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 28,
1997. At February 29, 1996, rates were fixed at an average of 6.5%. The variable
rates received per these agreements were tied to LIBOR or commercial paper rates
and averaged 5.5% and 5.3% at February 28, (29), 1997 and 1996, 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
nonperformance 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.
(11) 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 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 28, 1997 and at February 29, 1996 are as follows:
(page 40)
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets:
Cash $14,959 $14,959 $16,017 $16,017
Accounts receivable 596,959 596,959 518,969 518,969
Liabilities:
Accounts payable 160,857 160,857 87,739 87,739
Notes payable 156,000 156,000 190,000 190,000
Long-term debt 645,221 661,940 370,443 390,745
Off-balance-sheet financial instruments:
Interest rate swap agreements:
Assets - 632 - 1,226
Liabilities - 6,247 - 12,412
The following methods and assumptions were used to estimate the fair
value for each class of financial instruments shown above:
Cash and Accounts Receivable
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.
(12) Quarterly Financial Data (Unaudited)
The following is a summary of quarterly financial data for fiscal 1997
and 1996:
Three months ended
May 31 August 31 November 30 February 28,(29)
(Amounts in thousands except per share data)
1997
Revenues $357,914 $343,523 $413,474 $478,207
Gross profit (1) 106,977 95,784 123,614 139,692
Earnings before
taxes 19,208 12,085 14,701 15,907
Net earnings 12,371 7,747 9,492 10,576
Earnings per share of common stock:
Primary and fully
diluted 0.25 0.16 0.19 0.20
Cash dividends per share
of common stock 0.07 0.07 0.07 0.07
(page 41)
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
(1) Gross profit is sales less costs of sales.
(13) MacSaver Financial Services
MacSaver Financial Services ("MacSaver"), is the Company's
wholly-owned subsidiary whose principal business activity is to obtain financing
for the operations of Heilig-Meyers and its other subsidiaries, and in
connection therewith, MacSaver generally acquires and holds the aggregate
principal amount of installment credit accounts generated by the Company's
operating subsidiaries, and issues and carries substantially all of the
Company's notes payable and long-term debt. Substantially all of the net
revenues generated by MacSaver are pursuant to operating agreements with the
Company and certain of its wholly-owned subsidiaries. In July 1996, the Company
and MacSaver filed a joint Registration Statement on Form S-3 with the
Securities and Exchange Commission relating to up to $400,000,000 aggregate
principal amount of securities. MacSaver has issued $300,000,000 in aggregate
principal amount of its notes; $200,000,000 at 7.88% due 2003 and $100,000,000
at 7.40% due 2002. These notes are unconditionally guaranteed as to payment of
principal and interest by the Company. The Company has not presented separate
financial statements and other disclosures concerning MacSaver because
management has determined that such information is not material to holders of
the debt securities. However, as required by the 1934 Act, the summarized
financial information concerning MacSaver is as follows:
MacSaver Financial Services Summarized Statements of Earnings
Twelve months ended February 28,(29),
1997 1996 1995
(Amounts in thousands)
Net revenues $158,306 $116,243 $91,001
Operating expenses 102,706 71,649 46,367
Earnings before taxes 55,600 44,594 44,634
Net earnings $ 36,140 $ 28,986 $29,012
MacSaver Financial Services Summarized Balance Sheets
February 28, February 29,
1997 1996
(Amounts in thousands)
Current assets $ 36,401 $ 43,869
Accounts receivable, net 454,774 423,105
Due from affiliates 504,763 224,292
TOTAL ASSETS $995,938 $691,266
Current liabilities $128,921 $ 33,785
Notes payable 156,000 190,000
Long-term debt 545,000 348,401
Stockholder's equity 166,017 119,080
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $995,938 $691,266
(page 42)
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 28, 1997 and February 29, 1996, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended February 28, 1997. 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 28, 1997 and February 29, 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended February 28, 1997 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, 1997
(page 43)
Item 9. CHANGES in and DISAGREEMENTS with ACCOUNTANTS on ACCOUNTING
and FINANCIAL DISCLOSURE
None.
(page 44)
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 18, 1997, 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 1997 Annual
Report to Shareholders are included in item 8 herein:
Independent Auditors' Report
Consolidated Balance Sheets -
February 28, 1997 and February 29, 1996
Consolidated Statements of Earnings -
Year Ended February 28, 1997,
Year Ended February 29, 1996, and
Year Ended February 28, 1995
Consolidated Statements of Stockholders' Equity -
Year Ended February 28, 1997,
Year Ended February 29, 1996, and
Year Ended February 28, 1995
Consolidated Statements of Cash Flows -
Year Ended February 28, 1997,
Year Ended February 29, 1996, and
Year Ended February 28, 1995
Notes to Consolidated Financial Statements
(page 45)
(a) 2. Financial Statement Schedules: The financial statement
schedule required by this item is listed below.
Independent Auditors' Report on Schedule II 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 28, 1997.
There were two Current Reports on Form 8-K filed during the last quarter of
the fiscal year ended February 28, 1997. On January 10, 1997, Registrant
filed a Form 8-K in which it reported that Registrant had acquired Rhodes,
Inc. ("Rhodes") and including certain financial statements related
thereto. On February 24, 1997, Registrant filed Amendment No. 1 to its
January 10, 1997 Form 8-K, in which it reported certain financial
statements related to Rhodes.
(page 46)
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 27, 1997 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 27, 1997 /s/William C. DeRusha
William C. DeRusha
Chairman of the Board
Principal Executive Officer
Director
Date: May 27, 1997 /s/Joseph R. Jenkins
Joseph R. Jenkins
Executive Vice President
Principal Financial Officer
Date: May 27, 1997 /s/William J. Dieter
William J. Dieter
Senior Vice President,
Accounting and Principal
Accounting Officer
Date: May 27, 1997 /s/Alexander Alexander
Alexander Alexander, Director
Date: May 27, 1997 /s/Robert L. Burrus, Jr.
Robert L. Burrus, Jr., Director
(page 47)
Date: May 27, 1997 /s/Beverley E. Dalton
Beverley E. Dalton, Director
Date: May __, 1997 ___________________
Charles A. Davis, Director
Date: May 27, 1997 /s/Benjamin F. Edwards, III
Benjamin F. Edwards, III, Director
Date: May __, 1997 __________________
Alan G. Fleischer, Director
Date: May 27, 1997 /s/Nathaniel Krumbein
Nathaniel Krumbein, Director
Date: May 27, 1997 /s/Hyman Meyers
Hyman Meyers, Director
Date: May 27, 1997 /s/S. Sidney Meyers
S. Sidney Meyers, Director
Date: May 27, 1997 /s/Troy A. Peery, Jr.
Troy A. Peery, Jr., Director
Date: May 27, 1997 /s/Lawrence N. Smith
Lawrence N. Smith, Director
Date: May 27, 1997 /s/Eugene P. Trani
Eugene P. Trani, Director
(page 48)
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 Sold Balance
Beginning To Costs To Other Repossession Accounts Accounts at Close
Description of Period &Expenses Accounts Losses Receivable Receivable of Period
Allowance for
Doubtful Accounts:
Year Ended
February 28,
1997 $54,714 $80,908 $1,330(A) $70,438 $6,912(C) $33,940 $41,120
$15,458(B)
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)
(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:
1997 1996 1995
Write-offs of Uncollectible Accounts $6,912 $8,917 $7,595
(page 49)
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 (No. 1-8484) 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 (No. 1-8484) 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 (No. 1-8484) are incorporated herein by this reference.
d. Articles of Amendment to Registrant's Restated Articles of
Incorporation, filed as Exhibit 3(d) to Registrant's Annual
Report on Form 10-K for the fiscal year ended February 28,
1995 (No. 1-8484), are incorporated herein by this reference.
e. Registrant's Amended Bylaws.
4. Instruments defining the rights of security holders, including
indentures.
a. Indenture dated as of August 1, 1996, among Registrant,
MacSaver Financial Services, Inc. ("MacSaver") and
First Union National Bank of Virginia, as Trustee, filed with
the Commission as Exhibit 4(a) to Registrant's Current
Report on Form 8-K dated September 11, 1996 (No. 1-8484), is
incorporated herein by this reference.
b. Officer's Certificate dated August 9, 1996, relating to the
public offering by MacSaver of $200 million aggregate
principal amount of 7/8% Notes due August 1, 2003, guaranteed
as to payment of principal and interest by Registrant, filed
with the Commission as Exhibit 4(b) to Registrant's
Current Report on Form 8-K dated September 11, 1996
(No.1-8484), is incorporated herein by this reference.
c. In addition to the foregoing, 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. Three leases dated as of December 27, 1976 between Hyman
Meyers, Agent, and the Registrant, filed as Exhibit 10(a)(2)
(page 50)
and Exhibit 10(a)(4) - Exhibit 10(a)(5) to Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1989 (No. 1-8484), 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 (No. 1-8484) 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.
(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 (No. 1-8484) 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 (No. 1-8484) 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 (No. 1-8484) 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. *
(page 51)
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 (No. 1-8484) 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.*
(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 (No. 1-8484) 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 (No. 1-8484) 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 (No. 1-8484)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 (No. 1-8484) 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 (No. 1-8484) is incorporated herein by this reference.*
o. Deferred Compensation Agreement between Lawrence N. Smith and
(page 52)
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 (No. 1-8484) 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 (No. 1-8484) 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 (No. 1-8484) 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 (No. 1-8484)
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. *
t. Registrant's 1983 Stock Option Plan, as amended, filed as
Exhibit C to Registrant's Proxy Statement dated May 9, 1988
(No. 1-8484) 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 (No.
1-8484) 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 (No. 1-8484) 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
(No. 1-8484) 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 (No. 1-8484) 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, 1996. *
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, 1996. *
aa. Form of Executive Supplemental Retirement Agreement between
the Registrant and William J. Dieter dated January 1, 1996. *
(page 53)
bb. Employment Agreement made as of November 1, 1996
between William C. DeRusha and the Registrant. *
cc. Employment Agreement made as of November 1, 1996
between Troy A. Peery, Jr. and the Registrant. *
dd. 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 (No. 1-8484) 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.*
ee. 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 (No. 1-8484) is incorporated herein
by this reference.*
ff. 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 (No. 1-8484) is incorporated herein
by this reference.*
gg. 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 (No. 1-8484) is
incorporated herein by this reference.*
hh. 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 (No. 1-
8484) is incorporated herein by this reference.*
ii. 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 (No. 1-
8484) is incorporated herein by this reference.*
jj. 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 (No. 1-8484)
is incorporated herein by this reference.*
kk. 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 (No. 1-8484) is
incorporated herein by this reference.*
ll. Letter Agreement, dated August 26, 1993, amending employment
(page 54)
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 (No. 1-8484) is
incorporated herein by this reference.*
mm. $400,000,000 Credit Agreement dated July 18, 1995 among
MacSaver Financial Services, Inc., as Borrower; the
Registrant, as Guarantor; 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 filed
as exhibit 10 (pp) to the Registrant's Annual Report on Form
10-K for the fiscal year ended February 29, 1996 (No. 1-8484)
is incorporated herein by this reference.
nn. Rhodes, Inc. Employees' Savings Plan, filed with the
Commission as Exhibit 10.6 to Rhodes, Inc.'s Annual
Report on Form 10-K for the year ended February 28, 1986 (No.
0-08966) is incorporated herein by this reference.*
oo. Policy issued by Life Insurance Company of North America,
dated March 1, 1989 covering the Rhodes, Inc. Employee
Disability Plan, filed with the Commission as Exhibit 10.38
to Rhodes, Inc.'s Annual Report on Form 10-K for the year
ended February 28, 1991 (No. 0-08966) is incorporated herein
by this reference.*
pp. Form of Compensation (change in control) Agreement between
Irwin L. Lowenstein and Rhodes, Inc., filed with the
Commission as Exhibit 10.7 to Rhodes, Inc.'s Annual
Report on Form 10-K for the year ended February 28, 1995 (No.
1-09308) is incorporated herein by this reference.*
qq. Amended and Restated Merchant Agreement by and between
Beneficial National Bank USA, HMY RoomStore, Inc. and Rhodes,
Inc., dated as of May 9, 1997.
rr. Compensation Agreement entered into between Rhodes, Inc. and
Joel T. Lanham, filed with the Commission as Exhibit 10.10 to
Rhodes, Inc.'s. Annual Report on Form 10-K for the year
ended February 29, 1996 (No. 1-09308) is incorporated herein
by this reference.*
ss. Compensation Agreement entered into between Rhodes, Inc. and
Joel H. Dugan, filed with the Commission as Exhibit 10.11 to
Rhodes, Inc.'s Annual Report on Form 10-K for the year
ended February 29, 1996 (No. 1-09308) is incorporated herein
by this reference.*
(page 55)
11. Computation of per share earnings for the fiscal years ended
February 28, (29), 1997, 1996 and 1995.
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 56)
EXHIBIT 3.e.
BY-LAWS
OF
HEILIG-MEYERS COMPANY
ARTICLE 1 - OFFICES
A. The principal office of the Corporation shall be at 2235 Staples
Mill Road, Richmond, Virginia. The Corporation may also have offices at such
other places, within or without the State of Virginia, as the Board of Directors
may, from time to time, appoint, or the business of the Corporation may require.
B. The registered office of the Corporation shall be its initial
registered office as shown in the Articles of Incorporation or at such other
place in Virginia as the Board of Directors shall, from time to time, appoint,
and may, but need not, be at the principal office of the Corporation.
ARTICLE II - STOCK AND OTHER SECURITIES
A. Certificates of Stock shall be in such form as is required by law
and approved by the Board of Directors. Each stockholder shall be entitled to a
certificate signed by either the Chairman of the Board and Chief Executive
Officer or a Vice President, and by either the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary or any other officer
authorized by resolution of the Board of Directors. Each certificate may (but
need not) be sealed with the seal of the Corporation or a facsimile thereof.
B. The signatures of the officers upon a stock certificate, bond, note
or debenture issued by the Corporation may be facsimiles if such stock
certificate is countersigned by a transfer agent or registered by a registrar,
other than the Corporation itself or an employees of the Corporation, or if such
bond, note or debenture is countersigned or otherwise authenticated by the
signature of a trustee. If any officer who has signed, or whose facsimile
signature has been placed upon, a stock certificate, bond, note or debenture,
shall be ceased to be such officer before such certificate, bond, note or
debenture is issued, or may be issued by the Corporation with the same effect as
if he were such officer at the date of its issue.
C. Only stockholders of record on the stock transfer books of the
Corporation shall be entitled to be treated by the Corporation as the holders of
the stock standing in their respective names, and except to the extent, if any,
required by law, the Corporation shall not be obligated to recognize any
equitable or other claim to, or interest in, any share on the part of any other
person, whether or not it shall have express or other notice thereof.
D. Transfers of stock shall be made on the stock transfer books only
upon surrender of the certificate therefor, endorsed or accompanied by a written
assignment signed by the holder of record or by his duly authorized
attorney-in-fact. The Board of Directors may, from time to time, make reasonable
regulations governing transfers of stock and other securities. No share shall be
transferred, unless otherwise required by law, if such transfer would violate
the terms of any written agreement to which the Corporation, and either the
transferor or transferee, is a party.
E. In case of the loss, mutilation or destruction of a stock
certificate, bond, note or debenture, a duplicate may be issued upon such
terms, and bearing such legend, if any, as the Board of Directors may
lawfully prescribe.
(page 57)
ARTICLE III - STOCKHOLDERS' MEETING
A. Meetings of the stockholders shall be held at the principal office
of the Corporation, or at such other place, within or without the State of
Virginia, as the Board of Directors may designate from time to time. At least
ten (10) days before each meeting, a complete list of the stockholders entitled
to vote at such meeting, or any adjournment thereof, with the address and number
of shares held by each, shall be prepared, kept on file subject to inspection by
any stockholder during regular business hours, at the principal office of the
Corporation or its registered office or the office of its transfer agent or
registrar.
B. The annual meeting of the stockholders shall be held on the second
Wednesday of July of each year (and if such day is a legal holiday, on the next
business day) or such other date as may be set by the Board of Directors, for
the purpose of electing Directors and transacting such other business as may
properly come before the meeting.
C. Special meetings of the stockholders may be called by the
Chairman of the Board and Chief Executive Officer, the President, the
Secretary or the Board of Directors.
D. Written notice stating the place, day and hour of the meeting, and,
in the case of a special meeting (or required by law or the Articles of
Incorporation or these By-Laws), the purpose or purposes for which the meeting
was called, shall be given to each stockholder entitled to vote at such meeting.
Such notice shall be given either personally or by mail, by or at the direction
of the officer or other person or persons calling the meeting not more than
fifty (50) days nor less than ten (10) days before the date of the meeting
(except that such notice shall be given not less than twenty-five (25) days
before a meeting called to act on a plan of merger of consolidation, or on
proposal to amend the Articles of Incorporation or to reduce stated capital, or
to sell,, lease, exchange, mortgage or pledge for a consideration other than
money, all or substantially all the property or assets of the Corporation, if
not in the usual and regular course of its business and such notice shall be
accompanied by a copy of any proposed amendment or plan of reduction, merger or
consolidation). Notice to a stockholder shall be deemed given when deposited in
the United States mail, with postage prepaid, addressed to the stockholder at
his address as it appears on the stock transfer books of the Corporation.
Any stockholder who attends a meeting shall be deemed to have had
timely and proper notice of the meeting, unless the attends for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened.
E. Notice of any meeting may be waived, and any action may be taken by
the stockholders without a meeting if a consent in writing, setting forth the
action to be taken, shall be signed by all the stockholders entitled to vote
thereon, in accordance with " 13.1-27 and 13.1-28 of the Virginia Stock
Corporation Act.
F. The stock transfer books may be closed by order of the Board of
Directors for not more than fifty (50) days for the purpose of determining
stockholders entitled to notice of, or to vote at, any meeting of the
stockholders or any adjournment thereof (or entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
purpose). In lieu of closing such books, the Board of Directors may fix in
advance, as the record date for any such determination, a date not more than
fifty (50) days before the date on which such meeting is to be held (or such
payment is to be made, or other action requiring such determination is to be
taken). If the books are not thus closed or the record date is not thus fixed,
then the date on
(page 58)
which the notice of the meeting was mailed (or on which such dividend is
declared or such other action approved by the Board of Directors) shall be the
record date.
G. The Chairman of the Board and Chief Executive Officer or the
President shall preside as Chairman over the meetings of stockholders. If
neither the Chairman of the Board and Chief Executive Officer nor the President
is present, the meeting shall elect a chairman. The Secretary, or, in his
absence, an Assistant Secretary, shall act as Secretary of such meeting. If no
such officer is present, the chairman shall appoint the Secretary of the
meeting.
H. Two inspectors of election may be appointed by the Board of
Directors before each meeting of the stockholders; and if no such appointment
has been made, or if any inspector thus appointed shall not be present, the
Chairman may, and if requested by stockholders holding in the aggregate at least
one-fifth (1/5) of the stock entitled to vote at the meeting shall, appoint such
an inspector or inspectors to determine the qualifications of voters, the
validity of proxies and the number of shares represented at the meeting, to
supervise voting, and to ascertain the results thereof.
I. A stockholder may vote either in person or by proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact. No proxy
shall be valid after eleven (11) months from its date unless otherwise provided
in the proxy. A proxy may be revoked at any time before the shares to which it
relates are voted by written notice, which may be in the form of a substitute
proxy to the secretary of the meeting. A proxy apparently executed in the name
of a partnership or other Corporation, or by one of several fiduciaries, shall
be presumed to be valid until challenged, and the burden of proving invalidity
shall rest upon the challenger.
J. The procedure at each meeting of the stockholders shall be
determined by the Chairman of the meeting, and (subject to paragraph H of this
Article III) the vote on all questions before any meeting shall be taken in such
manner as the Chairman prescribes. However, upon the demand of stockholders
holding in the aggregate at least one-fifth (1/5) of the stock entitled to vote
on any questions, such vote shall be by ballot.
K. A quorum at any meeting of stockholders shall be a majority of the
shares entitled to vote, represented in person or by proxy. The affirmative vote
of a majority of such quorum shall be the act of the stockholders, unless a
greater vote is required by the Virginia Stock Corporation Act or the Articles
of Incorporation (except that in elections of directors, those receiving the
greatest number of votes shall be elected even though less than such a
majority). Less than a quorum may, by the vote of a majority of the shares
present and entitled to vote, adjourn the meeting to a fixed time and place,
without further notice; and if a quorum shall then be present in person or by
proxy, any business may be transacted which might have been transacted if a
quorum had been present at the meeting as originally called.
L. All committees of stockholders created at any meeting of the
stockholders shall be appointed by the Chairman of the meeting unless
otherwise directed by the meeting.
ARTICLE IV - BOARD OF DIRECTORS
A. The Board of Directors shall consist of thirteen (13) persons, none
of whom need be residents of Virginia or stockholders of the Corporation.
Nominations for the election of directors may be made by the Directors or a
nominating committee appointed by the Board of Directors or by any stockholder
entitled to vote in the election of directors. A stockholder entitled to vote in
the election of directors
(page 59)
may nominate one or more persons for election as a director at an annual or
special meeting of stockholders only if written notice of such stockholder's
intent to make such nomination has been given, either by personal delivery to
the Secretary of the Corporation not later than the close of business on the
tenth day following the date on which notice of such meeting is first mailed to
stockholders or by Untied States mail, postage prepaid, to the Secretary of the
Corporation postmarked not later than the tenth day following the date on which
notice of such meeting is first mailed to stockholders. Each notice required by
this section shall set forth: (1) the name and address of the stockholder who
intends to make the nomination; (2) the name, address, and principal occupation
of each proposed nominee; (3) a representation that the stockholder is entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; and (4) the
consent of each proposed nominee to serve as a director of the Corporation if so
elected. The Chairman of the meeting may refuse to acknowledge the nomination of
any person not made in compliance with the foregoing procedure.
B. Regular meetings of the Board of Directors may be held without
notice at such time and place as the Board of Directors may designate from time
to time (and, in the absence of such designation, at the principal office of the
Corporation). A regular meeting shall be held as soon as practicable after each
annual meeting of the stockholders for the purpose of electing officers and
transacting such other business as may properly come before the meeting.
C. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board and Chief Executive Officer or by
any director.
D. Notice of the time and place of each special meeting shall be given
to each director either by mail, telegraph, or written communication delivered
to the address of such director as it appears in the records of the Corporation,
at least twenty-four (24) hours before such meeting. Neither the business to be
transacted at, nor the purpose of, any meeting of the Board of Directors need be
specified in the notice or any waiver of notice of such meeting.
A director who attends a meeting shall be deemed to have had
timely and proper notice thereof, unless he attends for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
E. Notice of any meeting may be waived, and any action may be taken by
the Board of Directors (or by any committee thereof) without a meeting if a
consent in writing, setting forth the action taken, shall be signed by all the
directors (or members of the committee, as the case may be), in accordance with
"13.1-41 and 13.1-41.1 of the Virginia Stock Corporation Act.
F. Each director shall be elected to hold office until the next
succeeding annual meeting, and shall hold office until his successor shall have
been elected and qualifies, or until such earlier time as he shall resign, die
or be removed. No decrease in the number of directors by amendment to these
By-Laws shall change the term of any incumbent director.
G. Any director may be removed, with or without cause, by a vote
of the holders of a majority of the number of shares entitled to vote at
an election of directors.
H. Any vacancy in the Board of Directors (including any vacancy
resulting from an increase of not more than thirty percent (30%) of the number
of directors last elected by the shareholders) may be filled by the affirmative
vote of a majority of the remaining directors, even though less than a quorum,
unless filled by the stockholders.
I. A quorum at a meeting of the Board of Directors shall be a
(page 60)
majority of the number of directors fixed by these By-Laws. The act of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
J. An Executive Committee consisting of at least two (2) or more
directors may be designated by a resolution adopted by a majority of the number
of directors fixed by these By-Laws. To the extent provided in such resolution,
such Executive Committee shall have and may exercise all of the authority of the
Board of Directors except to approve an amendment to the Articles of
Incorporation or a plan of merger or consolidation.
Other committees with limited authority may be designated by
resolution adopted by a majority of the directors present at a meeting at which
a quorum is present.
Regular meetings of any committee may be held without notice
at such time and place as shall be fixed by a majority of the committee. Special
meetings of any committee may be called at the request of the Chairman of the
Board and Chief Executive Officer or any member of the committee. Notice of such
special meetings shall be given by the Chairman of the Board and Chief Executive
Officer or any member of any such committee, and shall be deemed duly given, or
may be waived, or action may be taken without a meeting, as provided in
paragraphs D and E of this Article IV. A majority of any such committee shall
constitute a quorum, and the act of a majority of those present at any meeting
at which a quorum is present shall be the act of the committee, unless otherwise
provided by the Board of Directors.
ARTICLE V - OFFICERS, AGENTS AND EMPLOYEES
A. The officers of the Corporation shall be a Chairman of the Board
and Chief Executive Officer, a President, a Secretary, and a Treasurer, each of
whom shall be elected by the Board of Directors at the regular meeting of the
Board of Directors to be held as soon as practicable after each annual meeting
of the stockholders, and any officer may be elected at any meeting of the Board
of Directors. Any officer may hold more than one office and he may, but need not
be a director, except that the same person may not be Chairman of the Board and
Chief Executive Officer and Secretary, and the Chairman of the Board and Chief
Executive Officer shall be a director. The Board may elect one or more Vice
Presidents and any other officers and assistant officers and may fill any
vacancies. The officers shall have such authority and perform such duties as
generally pertain to their offices and as may lawfully be provided by these
By-Laws or by resolution of the Board of Directors not inconsistent with these
By-Laws.
B. The Chairman of the Board and Chief Executive Officer shall have
general supervision over, responsibility for, and control of the other officers,
agents, and employees of the Corporation and shall preside as Chairman at
meetings of the stockholders and the directors. The Chairman of the Board and
Chief Executive Officer shall also perform such duties and shall also have such
authority as may lawfully be required of or conferred upon him by the Board of
Directors.
C. The President and each Vice President shall perform such duties and
shall have such authority as may be lawfully required of or conferred upon him
by the Chairman of the Board and Chief Executive Officer or the Board of
Directors. The President shall, during the absence, disqualification, or
incapacity of the Chairman of the Board and Chief Executive Officer, exercise
all the functions and perform all the duties of the Chairman of the Board and
Chief Executive Officer.
D. The Secretary shall, as Secretary of the meeting, record all
proceedings at stockholders' meetings and directors' meetings, in books
kept for that purpose. He shall maintain the record of stockholders of
the Corporation, giving the names and addresses of all stockholders and
(page 61)
the number, classes and series of the shares held by each; and, unless otherwise
prescribed by the Board of Directors, he shall maintain the stock transfer
books.
E. The Treasurer shall have custody of all moneys and securities of
the Corporation. He shall deposit the same in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors,
disburse the funds of the Corporation as may be required, and cause books and
records of account to be kept in accordance with generally accepted accounting
practices and principles.
F. During the absence, disqualification, or incapacity of any officer
of the Corporation other than the Chairman of the Board and Chief Executive
Officer, the Chairman of the Board and Chief Executive Officer may be written
order, or the Board of Directors may by resolution, delegate the power of each
such officer to any other officer or employee of the Corporation.
G. Each officer shall be elected to hold office until the next
succeeding regular meeting of the Board of Directors to be held as soon as
practicable after each annual meeting of the stockholders, or for such longer or
shorter term as the Board of Directors may lawfully specify; and he shall hold
office until his successor shall have been elected and qualified, or until such
earlier time as he shall resign, die or be removed.
H. Any officer may be removed, with or without cause, at any time
whenever the Board of Directors in its absolute discretion shall consider that
the best interests of the Corporation would be served thereby. Any officer or
agent appointed otherwise than by the Board of Directors may be removed with or
without cause at any time by any officer having authority to appoint such an
officer or agent, except as may be otherwise provided in these By-Laws, whenever
such officer in his absolute discretion shall consider that the best interests
of the Corporation will be served thereby. Any such removal shall be without
prejudice to the recovery of damages for breach of the contract rights, if any,
of the person removed. Election or appointment of an officer or agent shall not
of itself create contract rights.
I. Checks, drafts, notes and orders for the payment of money shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may, from time to time, authorize, and any endorsement of such
paper in the ordinary course of business shall be similarly made, except that
any officer or assistant officer of the Corporation may endorse checks, drafts
or notes for collection or deposit to the credit of the Corporation. The
signature of any such officer or other person may be a facsimile when authorized
by the Board of Directors.
J. Unless otherwise provided by resolution of the Board of Directors,
the Chairman of the Board and Chief Executive Officer may, from time to time,
himself or by such proxies, attorneys, or agents of the Corporation as he shall
designate in the name and on behalf of the Corporation, cast the votes to which
the Corporation may be entitled as a stockholder or otherwise in any other
Corporation, at meetings, or consent in writing to any action by any such
Corporation. He may instruct the person or persons so appointed as to the manner
of casting such votes or giving such consent, and may execute or cause to be
executed on behalf of the Corporation and under its corporate seal, or
otherwise, such written proxies consents, waivers, or other instruments as he
may deem necessary or desirable in the premises.
ARTICLE VI - SEAL
The seal of the Corporation shall be a flat-face circular die, of
which there may any number of counterparts or facsimiles, in such form as
(page 62)
the Board of Directors shall, from time to time, adopt as the corporate seal of
the Corporation.
ARTICLE VII - AMENDMENTS
These By-Laws may be repealed or changed, and new By-Laws made, by the
stockholders entitled to vote at any annual or special meeting, or by the Board
of Directors at any regular or special meeting. By-Laws made by the directors
may be repealed or changed by the stockholders; and ByLaws made by the
stockholders may be repealed or changed by the directors, except as, and to the
extent that, the stockholders prescribe that the By-Laws, or any specified
By-Law, shall not be altered, amended or repealed by the directors.
(page 63)
Exhibit 10.f.
SECOND AMENDMENT
TO THE
HEILIG-MEYERS EMPLOYEES' PROFIT-SHARING
AND
RETIREMENT SAVINGS PLAN
SECOND AMENDMENT, dated as of February 1, 1994, to the Heilig-Meyers Employees'
Profit-Sharing and Retirement Savings Plan by Heilig-Meyers Company (the
"Company"). The Company maintains the Heilig-Meyers Employees' Profit-Sharing
and Retirement Savings Plan, as amended and restated effective as of March 1,
1989 (the "Plan"). The Company now wishes to amend the Plan to change its plan
year and to make certain other changes required under applicable law. NOW,
THEREFORE, the Plan is amended as follows: I. Section 1.8 is amended by
inserting the following new subsection (d) and by relettering the remainder of
the section accordingly: (d) Heilig-Meyers Company Associates, Inc.
II. Section 1.10(b) is amended by inserting the following new sentence
immediately after the first sentence thereof: Effective for Plan Years beginning
on or after March 1, 1994, the dollar amount referred to in the preceding
sentence shall be $150,000, or an adjusted amount as determined pursuant to Code
Sections 401(a)(17) and 415(d).
III. Effective as of March 1, 1994, Section 1.11 is amended in its
entirety as follows:
1.11 Consolidated Income Before Income Taxes: The Company's estimated
consolidated income before taxes for the fiscal year that begins in the
Plan Year for which such calculation is performed. Consolidated Income
Before Income Taxes shall be determined in whatever manner the Board, in
its discretion, deems appropriate.
IV. Effective for plan years beginning on or after January 1, 1995,
Section 1.16 is amended as follows:
1.16 Entry Dates: Each January 1 and July 1.
V. Section 1.28 is amended in its entirety to read as follows:
1.28 Plan Year: Effective as of January 1, 1995, the calendar
(page 64)
year. The Plan Year from March 1, 1994 to December 31, 1994 shall be a short
Plan Year.
VI. Section 4.10 is deleted in its entirety.
VII. Section 6.6(b) is amended by deleting all but the first sentence
thereof and by substituting the following in place of the deleted
language:
The Participant's consent must be given in writing on a form provided by the
Committee. Such form, and a notice which explains the optional forms of benefit
available to the Participant under the Plan and his right to defer the receipt
of his benefits under subsection (c), will be provided to the Participant no
less than 30 days and no more than 90 days before the Annuity Starting Date. For
the purposes of this subsection, Annuity Starting Date shall mean the date on
which the distribution to the Participant is to commence. Notwithstanding the
foregoing, a distribution may commence less than 30 days after the date on which
the notice described above is given to the Participant, provided that:
(1) The Committee clearly informs the Participant that the Participant has a
right to a period of at least 30 days after receiving the notice to consider the
decision of whether or not to elect a distribution (and, if applicable, a
particular distribution option), and
(2) The Participant, after receiving the notice, affirmatively elects a
distribution.
VIII. Section 6.6 is further amended by adding the following new
subsection (c) and subsection (d), and by relettering the remainder of
the section accordingly:
(c) If a Participant who becomes entitled to a distribution under subsection (b)
does not consent to the distribution, the Participant's vested Account balance
will be held in the Trust and will not be distributed until the earlier of (i)
the date the Participant consents to the distribution, (ii) the Participant's
Normal Retirement Date, or (iii) the Participant's death.
(d) If a Participant's vested Account balance is $3,500 or less, the Account
will be distributed in a single sum payment without the Participant's consent.
IX. Section VI is amended by adding the following new Section 6.12:
6.12 Eligible Rollover Distributions:
(a) This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Committee, to have any portion of
an eligible rollover distribution paid
(page 65)
directly to an eligible retirement plan specified by the distributee in a
direct rollover.
(b) Definitions.
(i) Eligible rollover distribution: An eligible rollover distribution
is any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under Code section 401(a)(9); and the portion of any distribution that
is not includible in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to Employer securities).
(ii) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Code section 408(a), an individual
retirement annuity described in Code section 408(b), an annuity plan described
in Code section 403(a), or a qualified trust described in Code section 401(a),
that accepts the distributee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to the surviving Spouse, an eligible
retirement plan is an individual retirement account or individual retirement
annuity.
(iii) Distributee: A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving Spouse and
the Employee's or former Employee's Spouse or former Spouse who is the Alternate
Payee under a qualified domestic relations order, as defined in Code section
414(p), are distributees with regard to the interest of the Spouse or former
Spouse.
(iv) Direct rollover: A direct rollover is a payment by the Plan
to the eligible retirement plan specified by the distributee.
X. Except where otherwise stated, this Amendment shall be effective as
of March 1, 1994.
XI. In all respects not amended, the Plan is hereby ratified and
confirmed.
To record the adoption of the Second Amendment, as set forth above, the Company
has caused this document to be signed on this 28th day of December, 1994.
HEILIG-MEYERS COMPANY
By:/s/ William J. Dieter
(page 66)
Exhibit 10.g.
THIRD AMENDMENT
TO THE
HEILIG-MEYERS EMPLOYEES'
PROFIT SHARING AND RETIREMENT SAVINGS PLAN
THIRD AMENDMENT, dated as of May 1, 1995, to the Heilig-Meyers Employees' Profit
Sharing and Retirement Savings Plan, by Heilig-Meyers Company (the "Company").
The Company maintains the Heilig-Meyers Employees' Profit Sharing and Retirement
Savings Plan, originally effective as of March 31, 1969, most recently amended
and restated effective as of March 1, 1989, and subsequently amended (the
"Plan"). The Company has the power to amend the Plan and now wishes to do so.
NOW, THEREFORE, the Plan is amended as follows:
I. The last paragraph of Section 1.19 is amended in its entirety to
read as follows:
To the extent required by law, the Plan will be administered in accordance with
the Family and Medical Leave Act of 1993 and the Uniformed Services Employment
and Reemployment Rights Act of 1994.
II. Section 2.1 is amended by adding the following new subsection (e) and by
relettering current subsections (e) and (f): (e) Effective July 1, 1995, each
Employee who is not an Ineligible Employee and who is not already a Participant
pursuant to the provisions of this Section 2.1, will become a Participant on the
first Entry Date after he has satisfied the following requirements, if he is
then an Employee:
(i) He has completed a One-Year Period of Service.
(ii) He has attained age 21.
(iii) He has completed an election form in the time prescribed under section
3.1.
Any Employee who was an Ineligible Employee prior to July 1, 1995, solely
because of his failure to satisfy the condition contained in Section 2.1(d)(ii)
above shall no longer be considered an Ineligible Employee.
(page 67)
III. The second sentence of Section 4.2(c) is amended in its entirety to read as
follows: The allocation shall be made in the proportion that each such
Participant's Salary Reduction Contributions or Voluntary Employee Contributions
for the Plan Year, up to 6% of his Compensation, bear to the Salary Reduction
Contributions and Voluntary Employee Contributions of all such Participants for
the Plan Year, up to 6% of all such Participants' Compensation.
IV. The first sentence of Section 9.1 is amended in its entirety to
read as follows:
This Plan shall be irrevocable and binding as to all contributions made by the
Company to the Trust, but this Plan may be amended from time to time by
resolution of the Board, or by resolution of an Executive Committee of such
Board, pursuant to the Company's bylaws.
V. The first sentence of Section 9.2 is amended in its entirety to
read as follows:
This Plan may be terminated at any time by resolution of the Board, or by
resolution of an Executive Committee of such Board, pursuant to the Company's
bylaws.
VI. This Amendment shall be effective as of July 1, 1995.
VII. In all respects not amended, the Plan is hereby ratified and
confirmed.
To record the adoption of the Amendment as set forth above, the Company has
caused this document to be signed on this 26th day of June, 1995.
HEILIG-MEYERS COMPANY
By:/s/ William J. Dieter
(page 68)
Exhibit 10.s.
HEILIG-MEYERS
EMPLOYEES' SUPPLEMENTAL PROFIT-SHARING
AND RETIREMENT SAVINGS PLAN
The Heilig-Meyers Employees' Supplemental Profit-Sharing and Retirement
Savings Plan, adopted effective as of March 1, 1991, is hereby amended and
restated effective as of March 1, 1994.
SECTION I
PURPOSE
This Plan is established and maintained solely for the purpose of
providing deferred compensation for a select group of highly-compensated
management employees in excess of the limitations imposed by Code sections
401(a)(17), 402(g) and 415 on benefits payable to those employees under the
Heilig-Meyers Employees' Profit-Sharing and Retirement Savings Plan (including
such other limitation imposed by the Company under Code sections 401(k) and
401(m)).
SECTION II
DEFINITIONS
Whenever used in this Plan, unless the context clearly indicates
otherwise, the following terms shall have the following meanings:
2.1 Adjustment Date: The last day of each Plan Year. The
Committee may establish more frequent Adjustment Dates, if the Committee
deems it appropriate.
2.2 Beneficiary: Any person designated by a Participant or otherwise
entitled to receive benefits payable upon the death of the Participant.
Beneficiary designations shall be made on a Participant's Deferral Election and
may be changed by the Participant at any time before the date on which payment
of the Participant's Benefits is to commence. A Participant's Benefits may be
paid only to one designated Beneficiary. A Participant may designate primary and
secondary Beneficiaries.
2.3 Benefits: The aggregate amount of all Deferrals credited to
(page 69)
a Participant's Deferrals Account under Sections 4.1 and 4.4, all Matching
Credits credited to and payable from a Participant's Matching Credits Account
under Sections 4.2 and 4.5, and all Earnings with respect to such Deferrals and
Matching Credits.
2.4 Board: The Board of Directors of Heilig-Meyers Company.
2.5 Code: The Internal Revenue Code of 1986, as amended, or any
subsequently enacted federal revenue law. Reference to a particular section of
the Code shall include a reference to any regulations issued under the section
and to the corresponding section of any subsequently enacted federal revenue
laws.
2.6 Committee: The committee established pursuant to Section VII
of the Employees' Plan.
2.7 Company:
(a) Heilig-Meyers Company
(b) MacSaver Financial Services, Inc.
(c) Heilig-Meyers Furniture Company
(d) Heilig-Meyers Company Associates, Inc.
(e) Any other Related Company that adopts the Employees'
Plan with the consent of Heilig-Meyers Company.
"Company" shall include any other company or organization that may be connected
with any of the foregoing corporations by merger, consolidation or otherwise and
which succeeds in writing to its rights, powers, liabilities and duties
hereunder.
2.8 Company Matching Contributions: The Company contribution
that is made pursuant to the provisions of the Employees' Plan.
2.9 Company Matching Contributions Account: For any Participant,
that account maintained for the Participant in accordance with the
provisions of the Employees' Plan.
2.10 Compensation: For any Participant, total earnings paid by
the Company during the Plan Year as determined pursuant to the provisions
of the Employees' Plan.
2.11 Deferral Election: An election filed with the Company
by a Participant to have Deferrals made under the Employees' Plan and
this Plan. A Participant's Deferral Election shall specify the
percentage of Compensation that the Participant elects to contribute as
(page 70)
Deferrals to the Employees' Plan; the excess portion that may not be contributed
to the Employees' Plan as a result of the Tax Limits will automatically be
contributed to this Plan.
2.12 Deferrals: For any Participant, compensation deferrals
credited to such Participant's Account under Section 4.1.
2.13 Deferrals Account: The bookkeeping account established and
maintained for each Participant to record such Participant's Deferrals
and adjustments thereto pursuant to Section 4.4.
2.14 Earnings: The amount of earnings, if any, that accrue on the
investment of Participants' Deferrals and Matching Credits pursuant to
Section 4.6.
2.15 Eligible Employee: Any employee (a) who is a participant in the
Employees' Plan, (b) whose Salary Reduction Contributions under the Employees'
Plan are limited by the provisions of that plan which are designed to comply
with Code sections 401(a)(17), 402(g) and 415 or such other limitation imposed
by the Company under Code sections 401(k) and 401(m), (c) who is a management or
highly compensated employee within the meaning of section 201(2) of the Employee
Retirement Income Security Act of 1974, as amended, and (d) who is designated by
the Committee as eligible for participation in this Plan.
2.16 Employee: Any person employed by the Company as an employee,
other than as an independent contractor.
2.17 Employees' Plan: The Heilig-Meyers Employees' Profit-
Sharing and Retirement Savings Plan.
2.18 Matching Credits: For any Participant, amounts that are
credited by the Company to such Participant's Matching Credits Account
under Section 4.2.
2.19 Matching Credits Account: The bookkeeping account
established and maintained for each Participant to record such
Participant's Matching Credits and adjustments thereto pursuant to
Section 4.4.
2.20 Participant: Each Eligible Employee who is an active
participant in the Employees' Plan and who elects to participate in this
Plan.
2.21 Payment Election: An election filed with the Company by a
Participant that specifies the date on which the Participant wishes to
receive payment of all or a portion of his or her Benefits, and the form
in which such Benefits are to be paid. The timing and form of benefit
(page 71)
selected by the Participant must be consistent with the provisions of Section V
of the Plan and in no event may benefits commence before age 50.
2.22 Plan: The "Heilig-Meyers Employees' Supplemental Profit-
Sharing and Retirement Savings Plan," as set forth herein and as amended
from time to time.
2.23 Plan Year: The calendar year. The period from March 1, 1994
(the effective date of the amended and restated Plan) to December 31,
1994 shall be a short plan year.
2.24 Related Company: Any corporation or business organization that is under
common control with the Company (as determined under Code section 414(b) or
(c)); a member of an affiliated service group with the Company (as determined
under Code section 414(m)); or an entity required to be aggregated pursuant to
Code section 414(o) and the regulations thereunder.
2.25 Retirement: A Participant's retirement from the Company in
accordance with the Company's standard retirement policy.
2.26 Retirement Date: The date on which the Participant elects to
retire from the Company in accordance with the Company's standard
retirement policy.
2.27 Salary Reduction Contributions: Contributions made at the
election of a Participant by the Employer pursuant to the provisions of
the Employees' Plan.
2.28 Salary Reduction Contributions Account: For any Participant,
that account maintained for the Participant in accordance with the
provisions of the Employees' Plan.
2.29 Tax Limits: The restrictions on Salary Reduction Contributions and
Company Matching Contributions under the Employees' Plan required by Code
sections 401(a)(17), 402(g) and 415 or as required by the Company under Code
sections 401(k) and 401(m).
2.30 Termination Date: The date on which a Participant terminates
employment with the Company other than on account of his/her Retirement.
2.31 Termination of Employment: A Participant's termination of
employment with the Company other than on account of his/her Retirement.
SECTION III
PARTICIPATION
(page 72)
3.1 Election to Participate:
(a) An Eligible Employee may elect to become a Participant in
this Plan as of any January 1 by filing a Deferral Election with the Company by
no later than the November 30 immediately preceding the January 1 on which the
Eligible Employee's participation is to become effective.
(b) If an Employee first becomes an Eligible Employee after
January 1 of a Plan Year, the Eligible Employee may become a participant by
filing a Deferral Election with the Company within 15 days after the date on
which he or she is notified that he or she has become an Eligible Employee. The
Eligible Employee shall become a Participant effective as of the date on which
he or she files a Deferral Election with the Company.
3.2 Deferral Elections:
(a) A Participant's Deferral Election shall apply only to
Compensation earned after the effective date of the Deferral Election. Only one
Deferral Election may be made with respect to Compensation to be earned in a
single Plan Year.
(b) A Participant's Deferral Election shall continue in
effect until the close of the Plan Year to which it relates. However, if the
Participant ceases to be an Eligible Employee during a Plan Year, his or her
Deferral Election shall terminate as of the date on which he ceases to be an
Eligible Employee.
(c) Participants may make Deferral Elections for subsequent
Plan Years by filing a new Deferral Election with the Company by no later than
the November 30 immediately preceding the January 1 of the Plan Year to which
the Deferral Election will relate. All Deferral Elections shall automatically
terminate as of the close of the Plan Year to which they relate. A Participant
may elect to no longer actively participate in the Plan in subsequent Plan Years
by not making Deferral Elections for such subsequent Plan Years.
3.3 Termination of Participation; Re-employment: Participation shall
cease upon a Participant's termination of employment or if the Participant
ceases to be an Eligible Employee. Upon re-employment as an Eligible Employee, a
former Participant may again become a Participant in the Plan effective as of
the January 1 next following the date of his or her reemployment by filing a
Deferral Election with the Company in accordance with the provisions of Section
3.1(a). If a Participant elects not to become an active Participant for a Plan
Year, he or she may become an active Participant effective as of the next
following January 1, or any subsequent January 1, by filing a Deferral Election
with the Company in accordance with the provisions of Section 3.1(a).
(page 73)
3.4 Change in Status: If a Participant ceases to be an Eligible
Employee or elects not to be an active Participant, but continues to be employed
by the Company, Deferrals and Matching Credits shall be suspended as provided in
Section 4.3. All other provisions of this Plan shall remain in effect, and he or
she shall continue to be entitled to receive credits pursuant to Section 4.3,
and to receive Earnings, until his or her Benefits are fully distributed as
provided in Section V.
SECTION IV
DEFERRALS, MATCHING CREDITS AND ACCOUNTS
4.1 Participant Deferrals: A Participant will be entitled to make
Deferrals under this Plan in accordance with the Participant's election to make
Salary Reduction Contributions pursuant to the terms of the Employees' Plan. Any
amounts that cannot be credited to the Participant's Salary Reduction
Contributions Account under the Employees' Plan because of the Tax Limits shall
be credited to his or her Deferrals Account maintained pursuant to Section 4.4.
In no event may a Participant make Deferrals during a Plan Year unless he has
made the maximum amount of Salary Reduction Contributions to the Employees' Plan
permitted under Section 402(g) of the Code and under the terms of the Employee's
Plan. The aggregate amount of a Participant's Deferrals under this Section 4.1
in any given Plan Year shall not exceed the excess of (a) the amount that the
Participant would have been able to contribute to such Participant's Salary
Reduction Contributions Account for such Year if there were no Tax Limits over
(b) the amount of any Salary Reduction Contributions actually credited to such
Participant's Salary Reduction Contributions Account for such Plan Year.
4.2 Matching Credits: Each Plan Year, the Company shall credit to the
Matching Credits Account of each Participant an amount equal to the excess of
(a) the amount of the Company Matching Contributions that the Company would have
made on behalf of such Participant for such Plan Year (pursuant to the
provisions of the Employees' Plan) if there were no Tax Limits and such
Participant had made Salary Reduction Contributions to the Employees' Plan equal
to the sum of the Salary Reduction Contributions actually made plus the
Deferrals made pursuant to this Plan for such Plan Year over (b) the amount of
any Company Matching Contributions actually made by the Company on behalf of
such Participant during such Plan Year. Amounts credited to a Participant's
Matching Credits Account shall be payable to the Participant only if the
Participant would have had a vested interest in such amounts had they been
credited to the Participant's Company Matching Contributions Account under the
Employees' Plan.
4.3 Change of Status: Participant Deferrals pursuant to Section 4.1 and
Matching Credits pursuant to Section 4.2 for a Participant who changes his or
her status will be governed by the following provisions:
(page 74)
(a) A Participant who elects not to participate in the Plan
will be credited with Deferrals and Matching Credits through and ending with the
payroll period within which the Participant's election is received by the
Company or until such other date as is administratively practicable.
(b) A Participant who ceases to be an Eligible Employee will
be credited with Deferrals and Matching Credits through and ending with the
payroll period within which he or she ceases to be an Eligible Employee or until
such other date as is administratively practicable.
4.4 Deferrals Accounts: For bookkeeping purposes only, the Company
shall maintain a Deferrals Account for each Participant to which each
Participant's Deferrals shall be credited. Deferrals shall be credited to a
Participant's Deferrals Account as of the end of the month in which the
Compensation constituting such Deferral is earned. Any Earnings shall be
credited to the Participant's Deferrals Account as of each Adjustment Date.
4.5 Matching Credits Accounts: For bookkeeping purposes only, the
Company shall maintain a Matching Credits Account for each Participant to which
Matching Credits made on behalf of such Participant shall be credited. Matching
Credits shall be credited to a Participant's Matching Credits Account at least
annually. Any Earnings shall be credited to the Participant's Matching Credits
Account as of each Adjustment Date.
SECTION V
PAYMENT OF BENEFITS
5.1 Payment Elections:
(a) A Participant's Benefits shall be paid in accordance with
the terms of the Payment Election relating to such Benefits and in accordance
with the provisions of this Section V. A Participant may elect to have the
Benefits attributable to any single Deferral Election paid at a time and in a
form different from the time and form of payment elected with respect to the
Benefits attributable to any other Deferral Election, provided that such
election complies with the terms of this Section V. Each Participant, and each
former Participant with Benefits under the Plan, must have at least one or more
Payment Elections on file with the Company at all times.
(b) A Payment Election shall become effective as of the first
day of the month immediately following the date on which the Payment Election is
filed with the Company.
(page 75)
(c) Subject to the limitations described in subsection (d)
below, a Participant may change a Payment Election by filing a new Payment
Election with the Company. Such new Payment Election shall be effective as of
the first day of the month immediately following the date on which the new
Payment Election is filed with the Company. The new Payment Election may specify
that a Participant's Benefits be paid as of a date different from the date
specified in the Participant's current Payment Election provided that the new
payment date is at least 12 or more months after the effective date of the new
Payment Election, and (ii) the payment date specified in the current Payment
Election will not occur for at least 12 or more months after the effective date
of the new Payment election.
(d) A Participant may change a Payment election relating to a
Deferral Election three (3) times; provided, however, that a Payment Election
may not be changed in successive [Plan Years] and may be changed only once every
three (3) [Plan Years].
5.2 Timing of Payment:
(a) Generally, a Participant's Benefits shall begin to be
distributed as of the January 1 following the date specified in the
Participant's Payment Election. The specified date may be either the (i)
Participant's Retirement Date or (ii) the date on which the Participant will
attain age 50 or some later specified age.
(b) In the event a Participant fails to designate a date in
the Payment Election, a Participant's Benefits automatically shall be
distributed as of the earliest of the January 1 following (i) the Participant's
death, (ii) the Participant's Retirement Date, or (iii) the Participant's
Termination Date.
5.3 Form of Payment: If a Participant's Benefits are to be paid on
account of the Participant's Termination of Employment, the entire amount of the
Participant's Benefits will be paid in the form of a single lump sum payment as
of the January 1 following the date of the Participant's Termination Date. In
all other cases, Benefits shall be paid in the form designated by the
Participant on the Payment Election relating to such benefits. The available
distribution forms are as follows:
(i) A single lump sum payment.
(ii) Annual installments over a term of five
(5), ten (10), or fifteen (15) years, as selected by the Participant. If the
Participant dies before the completion of installment payments, any remaining
Benefits shall be paid to his or her Beneficiary. If a Beneficiary who is
receiving payments dies, any remaining balance of the account shall be paid to
the personal representative of the Beneficiary's estate.
(page 76)
If a Participant has not designated the form in which his or her Benefits are to
be paid prior to the date on which the Benefits become payable, such Benefits
will be distributed to the Participant in a single lump sum payment as of the
date on which they are first payable.
5.4 Method of Payment: All payments to any Participant or
Beneficiary under this Plan shall be made in cash.
5.5 Death Benefits:
(a) If a Participant's Benefits become payable on account of
the Participant's death, his or her Beneficiary shall receive Benefits equal to
the greater of (1) seventy-five percent (75%) of the total Benefits that would
have been paid to the Participant had the Participant survived to his or her
Retirement Date or (2) the Participant's total Benefits as of the date of death.
The Beneficiary shall be entitled to elect to receive such Benefits under one of
the forms described in Section 5.3.
(b) Notwithstanding the foregoing, if a Participant dies
prior to the second December 31 following the effective date of any given
Deferral Election, his or her Beneficiary shall receive Benefits equal to the
total Benefits relating to that Deferral Election as of the date of the
Participant's death.
5.6 Disability: If Participant becomes permanently disabled, the
Participant may elect to receive all or a portion of his or her Benefits before
the payment date specified in his or her Payment Election. A Participant will be
considered permanently disabled for purposes of this Section 5.6 only if (i) the
Participant has been determined to be permanently disabled under the provisions
of the Employees' Plan and (ii) the Committee determines that payment of all or
a portion of the Participant's Benefits is necessary to alleviate financial
hardships caused by the permanent disability of the Participant. The amount of
Benefits available for payment to a permanently disabled Participant under this
Section 5.6 are the total Benefits to which the Participant is entitled as of
the date of the Committee's determination that he or she is permanently
disabled.
SECTION VI
UNFUNDED PLAN
There is no fund associated with this Plan. The Company shall be
required to make payments only as Benefits become due and payable. No
Participant or Beneficiary shall have any right, other than the right of an
unsecured general creditor, against the Company in respect to the Benefits
payable, or which may be payable, to such Participant or Beneficiary hereunder.
If the Company, acting in its sole discretion,
(page 77)
establishes a reserve or other fund associated with this Plan, then, except as
may otherwise be provided in the instrument pursuant to which such reserve or
fund is established, no Participant or Beneficiary shall have any right to or
interest in any specific amount or asset of such reserve or fund by reason of
amounts which may be payable to such person under this Plan, nor shall such
person have any right to receive any payment under this Plan except as and to
the extent expressly provided in this Plan.
SECTION VII
MISCELLANEOUS PROVISIONS
7.1 Non-Guarantee of Employment: Nothing contained in this Plan shall
be construed as a contract of employment between the Company and any
Participant, or as a right of any such Participant to be continued in the
employment of the Company or as a limitation of the right of the Company to deal
with any Participant, as to their hiring, discharge, layoff, compensation, and
all other conditions of employment in all respects as though this Plan did not
exist.
7.2 Rights Under Employees' Plan: Nothing in this Plan shall be
construed to limit, broaden, restrict, or grant any right to a Participant or
Beneficiary under the Employees' Plan, nor in any way to limit, modify, repeal
or otherwise affect the Company's right to amend or modify the Employees' Plan.
7.3 Amendments/Termination: The Company reserves the right to amend or
terminate this Plan by vote duly adopted by the Board (or any duly authorized
committee thereof); provided, however, that no such amendment or termination
shall adversely affect the total Benefits to which a Participant is entitled as
of the date of amendment or termination of the Plan.
7.4 Non-Assignability: The Benefits payable under this Plan shall not
be subject to alienation, assignment, pledge, garnishment, execution or levy of
any kind and any attempt to cause any such Benefits to be so subjected shall not
be recognized.
7.5 Plan Administration: This Plan shall be operated and
administered by the Committee whose decision on all matters involving the
interpretation and administration of this Plan shall be final and
binding.
7.6 Withholding of Taxes, etc.: All amounts payable hereunder shall be
reduced for the amounts required to be withheld pursuant to any applicable
governmental law or regulation with respect to taxes or any similar provisions.
7.7 Successor Company: In the event of the dissolution, merger,
consolidation or reorganization of the Company, provision may be made by which a
successor to all or a major portion of the Company's property or business shall
continue this Plan, and the successor shall have all of the powers, duties and
responsibilities of the Company under this Plan.
7.8 Governing Law: This Plan shall be construed and enforced in
accordance with, and governed by, the laws of the Commonwealth of
Virginia.
* * * * *
IN WITNESS WHEREOF, Heilig-Meyers Company has caused this Plan to be
executed the 5th day of December, 1995.
HEILIG-MEYERS COMPANY
By:/s/ William J. Dieter
Title: Sr. Vice President-Accounting
(page 78)
Exhibit 10.y.
HEILIG-MEYERS COMPANY
EXECUTIVE SUPPLEMENTAL RETIREMENT AGREEMENT
In June, 1986,__________ ("Executive") and Heilig- Meyers Company
("Company") entered into an Executive Supplemental Retirement Agreement
("Agreement") to provide supplemental retirement income payments at normal
retirement or upon an earlier termination of employment.
The Agreement was subsequently amended and restated, effective
September 15, 1989, to reflect a change in the level of benefits provided and to
make certain other clarifying changes in the Agreement. The Agreement is hereby
amendment and restated, effective as of January 1, 1996.
1. Purpose. The purpose of this Agreement is to assist the Company in retaining
an Executive whose judgment, abilities and experience will contribute to its
continued progress. The Agreement provides deferred compensation for an
Executive considered by the Board to be a member of a select group of management
and highly compensated employees. The Board has determined that the benefits to
be paid to the Executive under this Agreement constitute reasonable compensation
for the services rendered and to be rendered by the Executive. The Agreement was
originally effective as of June 1, 1986. The Company now wishes to amend and
restate the Agreement effective as of January 1, 1996.
2. Definitions.
(a) Agreement. This Heilig-Meyers Company Executive
Supplemental Retirement Agreement, as in effect on June 1, 1986 and as
subsequently amended.
(b) Beneficiary. A person or persons or other entity
designated by the Executive to receive the payment of the Executive's benefits
under this Agreement. If there is no valid designation by the Executive, or if
the designated Beneficiary is not living or, if a trust, is not in existence at
the time of the Executive's death, the Executive's Beneficiary is the
Executive's estate.
(c) Board. The Board of Directors of the Company.
(d) Committee. The Compensation Committee of the Board.
(e) Company. Heilig-Meyers Company.
(f) Executive._________________
(g) Final Compensation. The Committee will compare
Executive's most recent base salary established by the Committee for each
(page 79)
of the three consecutive 12-month periods (Fiscal Years) immediately preceding
the month in which Executive attains age 65, dies or terminates employment
before attaining age 65, also including any bonus paid or payable to Executive
on account of each of the Fiscal Years. Executive's final compensation shall be
the highest amount paid or payable to Executive during (or on account of) one of
those three Fiscal Years.
3. Administration.
(a) This Agreement is administered by the Committee. Subject
to the Agreement's provisions, the Committee may adopt rules and regulations
necessary to carry out the Agreement's purposes. Subject to subsection 3(b), the
Committee's interpretation and construction of any Agreement provision is final
and conclusive.
(b) If for any reason a benefit due under this Agreement is
not paid when due, the person entitled to such benefit may file a written claim
with the Committee. If the claim is denied or no response is received within 90
days (in which case the claim will be deemed to have been denied), the person
may appeal the denial to the Board within 60 days of the denial. In pursuing an
appeal, an individual may request that a responsible officer review the denial,
may review pertinent documents, and may submit issues and comments in writing. A
decision on appeal will be made within 60 days after the appeal is made, unless
special circumstances require the Board to extend the period for another 60
days. The decision of the Board shall be final and binding upon both the
Committee and the appellant.
4. Benefits.
(a) Normal Retirement.
(i) If the Executive retires at or after age 65, upon
his retirement he will be entitled to receive an annual retirement benefit that
will be distributed in monthly payments for a 15-year period. The first annual
retirement benefit will be equal to twenty-five percent of the Executive's Final
Compensation. The amount of each subsequent annual retirement benefit will be an
amount equal to the previous year's annual retirement benefit increased by 4%.
(ii) If the Executive dies after retirement at or after
age 65, but before he has received payments for a 15-year period, the balance of
the payments due to him shall be made to the Executive's Beneficiary. Payments
to the Executive's Beneficiary shall be distributed on a monthly basis unless
the Committee selects another distribution method (for example, annual payments
or a lump sum payment equivalent in value to the unpaid payments). If the
Beneficiary dies before he receives all of the payments due to him, the balance
of the payments due shall be paid to the Beneficiary's estate.
(page 80)
(b) Pre-Retirement Death.
(i) If the Executive continues to be employed by the
Company and dies before attaining age 65, his Beneficiary shall receive an
annual death benefit that will be distributed in monthly payments for a 10-year
period. The first and second annual pre-retirement death benefit payments will
be equal to one-hundred percent of the Executive's Final Compensation. The
amount of each subsequent annual pre-retirement death benefit payment will be an
amount equal to fifty percent of the Executive's Final Compensation.
(ii) If the Beneficiary dies before he receives all of
the payments due to him, the balance of the payments due shall be paid to the
Beneficiary's estate. The Committee, in its sole discretion, may authorize
another distribution method (for example, a lump sum payment equivalent in value
to the unpaid payments).
(c) Termination of Employment Before Age 65. If the Executive
terminates employment with the Company or is terminated by the Company before
attaining age 65 for any reason other than for "due cause," he shall be entitled
to receive in a lump sum within 30 days of such termination the present
discounted value of the annual benefit that would have been paid over a 15-year
period under this Agreement if he had retired at age 65 in accordance with
paragraph 4(a) above. In determining the present discounted value of benefits
under Section 4(a)(i), the interest rate employed shall be equal to 120% of the
Applicable Federal Rate determined under Internal Revenue Code Section 1274(d),
compounded semi-annually.
For purposes of this Agreement, "due cause" shall mean (i)
The commission of a crime of moral turpitude resulting in damage to the Company;
or (ii) The commission of a crime against the property or person of another
employee.
The Company's Board of Directors or Compensation Committee shall, in
its discretion, determine whether "due cause" exists.
(d) Timing of Distributions. Payments to the Executive begin
on the first day of the month after the Executive's retirement or termination of
employment. Payments to a Beneficiary begin on a date selected by the Committee
within six months of the Executive's date of death.
5. Designation of Beneficiary.
(a) The Executive may designate a Beneficiary to receive any
benefits due under this Agreement upon the Executive's death. The Beneficiary
designation must be made by executing a Beneficiary designation form provided by
the Committee.
(page 81)
(b) The Executive may change an earlier Beneficiary
designation by a later execution of a Beneficiary designation form. A
Beneficiary designation is not binding on the Company until the Chief Financial
Officer receives the Beneficiary designation form.
6. Obligation of the Company. The amounts payable under this Agreement are to
be satisfied solely out of the general assets of the Company that remain subject
to the claims of its creditors. A benefit is at all times a mere contractual
obligation of the Company. The Executive and his Beneficiaries have no right,
title, or interest in benefits or any claim against them. The Company will not
segregate any funds for benefits nor issue any notes or security for the payment
of any benefits. No provision of this Agreement shall be construed as giving the
Executive any right to continue in the employ of the Company.
7. Restrictions on Transfer. Any benefits to which the Executive or his
Beneficiary is or may become entitled under this Agreement are not subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to do so is void. Benefits are not
subject to attachment or legal process for the debts, contracts, liabilities,
engagements, or torts of the Executive or his Beneficiary. This Agreement does
not give the Executive any interest, lien, or claim against any specific asset
of the Company. The Executive and his Beneficiaries have only the rights of a
general creditor of the Company.
8. Assignments. The Executive's interest in a benefit under this
Agreement is not assignable by the Executive or his Beneficiary. The
Company may assign its responsibilities and obligations under this
Agreement to anyone with or without notice to the Executive or
Beneficiaries.
9. Amendment or Termination.
(a) Subject to subsections 9(b) and (c) the Board may amend
or terminate this Agreement at any time.
(b) The Board may not amend or terminate this Agreement if
that action would reduce the benefit payable in the future or suspend or
interrupt the payment of benefits to the Executive or a Beneficiary who is
receiving payments pursuant to Section 4.
(c) This Agreement may not be amended or terminated if (i)
the Company's common stock is no longer publicly traded, or (ii) as a result of,
or in connection with, any cash tender or exchange offer, merger or other
business combination, sale of assets or contested election, or any combination
of the foregoing transactions, the persons who were directors of the Company
before such transaction shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company.
10. Successors and Assigns. This Agreement shall be binding on the Company, its
successors, and assigns. Should there be a consolidation or merger of the
Company with or into another corporation, or a purchase of all or substantially
all of the asset of the Company by another entity, the surviving or acquiring
corporation will succeed to the rights and obligations of the Company under this
Agreement.
11. Enforcement by Executive. If litigation shall be brought by the Company or
by Executive in good faith to enforce or interpret any provision of this
Agreement, or if Executive shall have to institute litigation brought in good
faith to enforce any of his rights under the Agreement, the Company shall
indemnify Executive for his reasonable attorney's fees and disbursements
incurred in any such litigation.
(page 82)
12. Computations. The computation of the amount of any payment or
benefit under this Agreement shall be made by the Company's then
independent accountants.
13. Construction. For construction, one gender includes the other, and the
singular and plural include each other where the meaning would be appropriate.
This Agreement is construed in accordance with the laws of the Commonwealth of
Virginia (other than its choice-of-law rules), except to the extent that the
laws of the United States of America have superseded those laws. The headings in
this Agreement have been inserted for convenience of reference only and are to
be ignored in any construction of the provisions. If a provision of this
Agreement is not valid, that invalidity does not affect other provisions.
HEILIG-MEYERS COMPANY
Date: ____________________ By_______________________________
Date: ____________________ _________________________________
EXECUTIVE
(page 83)
Exhibit 10.z.
HEILIG-MEYERS COMPANY
EXECUTIVE SUPPLEMENTAL RETIREMENT AGREEMENT
____________________ ("Executive") and Heilig-Meyers Company
("Company") have previously entered into an Executive Supplemental Retirement
Agreement ("Agreement") to provide supplemental retirement income payments at
normal retirement or upon an earlier termination of employment.
The Agreement was amended and restated, effective September 15, 1989,
to reflect a change in the level of benefits provided and to make certain other
clarifying changes in the Agreement. The Agreement is hereby amended and
restated, effective as of January 1, 1996.
1. Purpose. The purpose of this Agreement is to assist the Company in retaining
an Executive whose judgment, abilities and experience will contribute to its
continued progress. The Agreement provides deferred compensation for an
Executive considered by the Board to be a member of a select group of management
and highly compensated employees. The Board has determined that the benefits to
be paid to the Executive under this Agreement constitute reasonable compensation
for the services rendered and to be rendered by the Executive. The Agreement was
originally effective as of June 1, 1986. The Company now wishes to amend and
restate the Agreement effective as of January 1, 1996.
2. Definitions.
(a) Agreement. This Heilig-Meyers Company Executive
Supplemental Retirement Agreement, as in effect on June 1, 1986 and as
subsequently amended.
(b) Beneficiary. A person or persons or other entity
designated by the Executive to receive the payment of the Executive's benefits
under this Agreement. If there is no valid designation by the Executive, or if
the designated Beneficiary is not living or, if a trust, is not in existence at
the time of the Executive's death, the Executive's Beneficiary is the
Executive's estate.
(c) Board. The Board of Directors of the Company.
(d) Committee. The Compensation Committee of the Board.
(e) Company. Heilig-Meyers Company.
(f) Executive.____________________
(g) Final Compensation. The Committee will compare
Executive's most recent base salary established by the Committee for each
(page 84)
of the three consecutive 12-month periods (Fiscal Years) immediately preceding
the month in which Executive attains age 65, dies or terminates employment
before attaining age 65, also including any bonus paid or payable to Executive
on account of each of the Fiscal Years. Executive's final compensation shall be
the highest amount paid or payable to Executive during (or on account of) one of
those three Fiscal Years.
3. Administration.
(a) This Agreement is administered by the Committee. Subject
to the Agreement's provisions, the Committee may adopt rules and regulations
necessary to carry out the Agreement's purposes. Subject to subsection 3(b), the
Committee's interpretation and construction of any Agreement provision is final
and conclusive.
(b) If for any reason a benefit due under this Agreement is
not paid when due, the person entitled to such benefit may file a written claim
with the Committee. If the claim is denied or no response is received within 90
days (in which case the claim will be deemed to have been denied), the person
may appeal the denial to the Board within 60 days of the denial. In pursuing an
appeal, an individual may request that a responsible officer review the denial,
may review pertinent documents, and may submit issues and comments in writing. A
decision on appeal will be made within 60 days after the appeal is made, unless
special circumstances require the Board to extend the period for another 60
days. The decision of the Board shall be final and binding upon both the
Committee and the appellant.
4. Benefits.
(a) Normal Retirement.
(i) If the Executive retires at or after age 65, upon
his retirement he will be entitled to receive an annual retirement benefit that
will be distributed in monthly payments for a 15-year period. The first annual
retirement benefit will be equal to twenty-two and one-half percent of the
Executive's Final Compensation. The amount of each subsequent annual retirement
benefit will be an amount equal to the previous year's annual retirement benefit
increased by 4%.
(ii) If the Executive dies after retirement at or after
age 65, but before he has received payments for a 15-year period, the balance of
the payments due to him shall be made to the Executive's Beneficiary. Payments
to the Executive's Beneficiary shall be distributed on a monthly basis unless
the Committee selects another distribution method (for example, annual payments
or a lump sum payment equivalent in value to the unpaid payments). If the
Beneficiary dies before he receives all of the payments due to him, the balance
of the payments due shall be paid to the Beneficiary's estate.
(b) Pre-Retirement Death.
(i) If the Executive continues to be employed by the
Company and dies before attaining age 65, his Beneficiary shall receive an
annual death benefit that will be distributed in monthly payments for a 9-year
period. The first annual pre-retirement death benefit payment will be equal to
one-hundred percent of the Executive's Final Compensation. The amount of each
subsequent annual pre-retirement death benefit payment will be an amount equal
to fifty percent of the Executive's Final Compensation.
(ii) If the Beneficiary dies before he receives all of
the payments due to him, the balance of the payments due shall be paid to
the Beneficiary's estate. The Committee, in its sole discretion, may
authorize another distribution method (for example, a lump sum payment
(page 85)
equivalent in value to the unpaid payments).
(c) Termination of Employment Before Age 65. If the Executive
terminates employment with the Company or is terminated by the Company before
attaining age 65 under circumstances entitling Executive to a payment under the
Company's Severance Plan he shall be entitled to receive in a lump sum within 30
days of such termination the present discounted value of the annual benefit that
would have been paid over a 15-year period under this Agreement if he had
retired at age 65 in accordance with paragraph 4(a) above. In determining the
present discounted value of benefits under Section 4(a)(i), the interest rate
employed shall be equal to 120% of the Applicable Federal Rate determined under
Internal Revenue Code Section 1274(d), compounded semi-annually.
(d) Timing of Distributions. Payments to the Executive begin
on the first day of the month after the Executive's retirement or termination of
employment. Payments to a Beneficiary begin on a date selected by the Committee
within six months of the Executive's date of death.
5. Designation of Beneficiary.
(a) The Executive may designate a Beneficiary to receive any
benefits due under this Agreement upon the Executive's death. The Beneficiary
designation must be made by executing a Beneficiary designation form provided by
the Committee.
(b) The Executive may change an earlier Beneficiary
designation by a later execution of a Beneficiary designation form. A
Beneficiary designation is not binding on the Company until the Chief Financial
Officer receives the Beneficiary designation form.
6. Obligation of the Company. The amounts payable under this Agreement are to
be satisfied solely out of the general assets of the Company that remain subject
to the claims of its creditors. A benefit is at all times a mere contractual
obligation of the Company. The Executive and his Beneficiaries have no right,
title, or interest in benefits or any claim against them. The Company will not
segregate any funds for benefits nor issue any notes or security for the payment
of any benefits. No provision of this Agreement shall be construed as giving the
Executive any right to continue in the employ of the Company.
7. Restrictions on Transfer. Any benefits to which the Executive or
his Beneficiary is or may become entitled under this Agreement are not
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge, and any attempt to do so is
void. Benefits are not subject to attachment or legal process for the
debts, contracts, liabilities, engagements, or torts of the Executive or
his Beneficiary. This Agreement does not give the Executive any
(page 86)
interest, lien, or claim against any specific asset of the Company. The
Executive and his Beneficiaries have only the rights of a general creditor of
the Company.
8. Assignments. The Executive's interest in a benefit under this
Agreement is not assignable by the Executive or his Beneficiary. The
Company may assign its responsibilities and obligations under this
Agreement to anyone with or without notice to the Executive or
Beneficiaries.
9. Amendment or Termination.
(a) Subject to subsections 9(b) and (c) the Board may amend
or terminate this Agreement at any time.
(b) The Board may not amend or terminate this Agreement if
that action would reduce the benefit payable in the future or suspend or
interrupt the payment of benefits to the Executive or a Beneficiary who is
receiving payments pursuant to Section 4.
(c) This Agreement may not be amended or terminated if (i)
the Company's common stock is no longer publicly traded, or (ii) as a result of,
or in connection with, any cash tender or exchange offer, merger or other
business combination, sale of assets or contested election, or any combination
of the foregoing transactions, the persons who were directors of the Company
before such transaction shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company.
10. Successors and Assigns. This Agreement shall be binding on the Company, its
successors, and assigns. Should there be a consolidation or merger of the
Company with or into another corporation, or a purchase of all or substantially
all of the asset of the Company by another entity, the surviving or acquiring
corporation will succeed to the rights and obligations of the Company under this
Agreement.
11. Enforcement by Executive. If litigation shall be brought by the Company or
Executive in good faith to enforce or interpret any provision of this Agreement,
or if Executive shall have to institute litigation brought in good faith to
enforce any of his rights under the Agreement, the Company shall indemnify
Executive for his reasonable attorney's fees and disbursements incurred in any
such litigation.
12. Computations. The computation of the amount of any payment or
benefit under this Agreement shall be made by the Company's then
independent public accountants.
(page 87)
13. Construction. For construction, one gender includes the other, and the
singular and plural include each other where the meaning would be appropriate.
This Agreement is construed in accordance with the laws of the Commonwealth of
Virginia (other than its choice-of-law rules), except to the extent that the
laws of the United States of America have superseded those laws. The headings in
this Agreement have been inserted for convenience of reference only and are to
be ignored in any construction of the provisions. If a provision of this
Agreement is not valid, that invalidity does not affect other provisions.
HEILIG-MEYERS COMPANY
Date: ____________________ By_______________________________
Date: ____________________ _________________________________
EXECUTIVE
(page 88)
Exhibit 10.aa.
HEILIG-MEYERS COMPANY
EXECUTIVE SUPPLEMENTAL RETIREMENT AGREEMENT
____________________ ("Executive") and Heilig-Meyers Company
("Company") have previously entered into an Executive Supplemental Retirement
Agreement ("Agreement") to provide supplemental retirement income payments at
normal retirement or upon an earlier termination of employment.
The Agreement was amended and restated, effective September 15, 1989,
to reflect a change in the level of benefits provided and to make certain other
clarifying changes in the Agreement. The Agreement is hereby amended and
restated, effective as of January 1, 1996.
1. Purpose. The purpose of this Agreement is to assist the Company in retaining
an Executive whose judgment, abilities and experience will contribute to its
continued progress. The Agreement provides deferred compensation for an
Executive considered by the Board to be a member of a select group of management
and highly compensated employees. The Board has determined that the benefits to
be paid to the Executive under this Agreement constitute reasonable compensation
for the services rendered and to be rendered by the Executive. The Agreement was
originally effective as of June 1, 1986. The Company now wishes to amend and
restate the Agreement effective as of January 1, 1996.
2. Definitions.
(a) Agreement. This Heilig-Meyers Company Executive
Supplemental Retirement Agreement, as in effect on June 1, 1986 and
as subsequently amended.
(b) Beneficiary. A person or persons or other entity
designated by the Executive to receive the payment of the Executive's
benefits under this Agreement. If there is no valid designation by the
Executive, or if the designated Beneficiary is not living or, if a
trust, is not in existence at the time of the Executive's death, the
Executive's Beneficiary is the Executive's estate.
(c) Board. The Board of Directors of the Company.
(d) Committee. The Compensation Committee of the Board.
(e) Company. Heilig-Meyers Company.
(f) Executive.____________________
(g) Final Compensation. The Committee will compare
Executive's most recent base salary established by the Committee
for each of the three consecutive 12-month periods (Fiscal Years)
(page 89)
immediately preceding the month in which Executive attains age 65, dies
or terminates employment before attaining age 65, also including any
bonus paid or payable to Executive on account of each of the Fiscal
Years. Executive's final compensation shall be the highest amount paid
or payable to Executive during (or on account of) one of those three
Fiscal Years.
3. Administration.
(a) This Agreement is administered by the Committee. Subject
to the Agreement's provisions, the Committee may adopt rules and
regulations necessary to carry out the Agreement's purposes. Subject to
subsection 3(b), the Committee's interpretation and construction of any
Agreement provision is final and conclusive.
(b) If for any reason a benefit due under this Agreement is
not paid when due, the person entitled to such benefit may file a
written claim with the Committee. If the claim is denied or no response
is received within 90 days (in which case the claim will be deemed to
have been denied), the person may appeal the denial to the Board within
60 days of the denial. In pursuing an appeal, an individual may request
that a responsible officer review the denial, may review pertinent
documents, and may submit issues and comments in writing. A decision on
appeal will be made within 60 days after the appeal is made, unless
special circumstances require the Board to extend the period for
another 60 days. The decision of the Board shall be final and binding
upon both the Committee and the appellant.
4. Benefits.
(a) Normal Retirement.
(i) If the Executive retires at or after age 65, upon
his retirement he will be entitled to receive an annual
retirement benefit that will be distributed in monthly
payments for a 15-year period. The first annual retirement
benefit will be equal to twenty percent of the Executive's
Final Compensation. The amount of each subsequent annual
retirement benefit will be an amount equal to the previous
year's annual retirement benefit increased by 4%.
(ii) If the Executive dies after retirement at or after
age 65, but before he has received payments for a 15-year
period, the balance of the payments due to him shall be made
to the Executive's Beneficiary. Payments to the Executive's
Beneficiary shall be distributed on a monthly basis unless
(page 90)
the Committee selects another distribution method (for
example, annual payments or a lump sum payment equivalent in
value to the unpaid payments). If the Beneficiary dies before
he receives all of the payments due to him, the balance of
the payments due shall be paid to the Beneficiary's estate.
(b) Pre-Retirement Death.
(i) If the Executive continues to be employed by the
Company and dies before attaining age 65, his Beneficiary
shall receive an annual death benefit that will be
distributed in monthly payments for an 8-year period. The
amount of each annual pre-retirement death benefit payment
will be an amount equal to fifty percent of the Executive's
Final Compensation.
(ii) If the Beneficiary dies before he receives all of
the payments due to him, the balance of the payments due
shall be paid to the Beneficiary's estate. The Committee, in
its sole discretion, may authorize another distribution
method (for example, a lump sum payment equivalent in value
to the unpaid payments).
(c) Termination of Employment Before Age 65. If the Executive
terminates employment with the Company or is terminated by the Company
before attaining age 65 under circumstances entitling Executive to a
payment under the Company's Severance Plan he shall be entitled to
receive in a lump sum within 30 days of such termination the present
discounted value of the annual benefit that would have been paid over a
15-year period under this Agreement if he had retired at age 65 in
accordance with paragraph 4(a) above. In determining the present
discounted value of benefits under Section 4(a)(i), the interest rate
employed shall be equal to 120% of the Applicable Federal Rate
determined under Internal Revenue Code Section 1274(d), compounded
semi-annually.
(d) Timing of Distributions. Payments to the Executive begin
on the first day of the month after the Executive's retirement or
termination of employment. Payments to a Beneficiary begin on a date
selected by the Committee within six months of the Executive's date of
death.
5. Designation of Beneficiary.
(a) The Executive may designate a Beneficiary to receive any
benefits due under this Agreement upon the Executive's death. The
Beneficiary designation must be made by executing a Beneficiary
designation form provided by the Committee.
(page 91)
(b) The Executive may change an earlier Beneficiary
designation by a later execution of a Beneficiary designation form. A
Beneficiary designation is not binding on the Company until the Chief
Financial Officer receives the Beneficiary designation form.
6. Obligation of the Company. The amounts payable under this
Agreement are to be satisfied solely out of the general assets of
the Company that remain subject to the claims of its creditors. A
benefit is at all times a mere contractual obligation of the
Company. The Executive and his Beneficiaries have no right, title,
or interest in benefits or any claim against them. The Company
will not segregate any funds for benefits nor issue any notes or
security for the payment of any benefits. No provision of this
Agreement shall be construed as giving the Executive any right to
continue in the employ of the Company.
7. Restrictions on Transfer. Any benefits to which the Executive or
his Beneficiary is or may become entitled under this Agreement are
not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any
attempt to do so is void. Benefits are not subject to attachment
or legal process for the debts, contracts, liabilities,
engagements, or torts of the Executive or his Beneficiary. This
Agreement does not give the Executive any interest, lien, or claim
against any specific asset of the Company. The Executive and his
Beneficiaries have only the rights of a general creditor of the
Company.
8. Assignments. The Executive's interest in a benefit under this
Agreement is not assignable by the Executive or his Beneficiary.
The Company may assign its responsibilities and obligations under
this Agreement to anyone with or without notice to the Executive or
Beneficiaries.
9. Amendment or Termination.
(a) Subject to subsections 9(b) and (c) the Board may amend
or terminate this Agreement at any time.
(b) The Board may not amend or terminate this Agreement if
that action would reduce the benefit payable in the future or suspend
or interrupt the payment of benefits to the Executive or a Beneficiary
who is receiving payments pursuant to Section 4.
(c) This Agreement may not be amended or terminated if (i)
the Company's common stock is no longer publicly traded, or (ii) as a
result of, or in connection with, any cash tender or exchange offer,
merger or other business combination, sale of assets or contested
election, or any combination of the foregoing
(page 92)
transactions, the persons who were directors of the Company before such
transaction shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company.
10. Successors and Assigns. This Agreement shall be binding on the Company,
its successors, and assigns. Should there be a consolidation or merger
of the Company with or into another corporation, or a purchase of all
or substantially all of the asset of the Company by another entity, the
surviving or acquiring corporation will succeed to the rights and
obligations of the Company under this Agreement.
11. Enforcement by Executive. If litigation shall be brought by the Company
or Executive in good faith to enforce or interpret any provision of
this Agreement, or if Executive shall have to institute litigation
brought in good faith to enforce any of his rights under the Agreement,
the Company shall indemnify Executive for his reasonable attorney's
fees and disbursements incurred in any such litigation.
12. Computations. The computation of the amount of any payment or
benefit under this Agreement shall be made by the Company's then
independent public accountants.
13. Construction. For construction, one gender includes the other, and
the singular and plural include each other where the meaning would
be appropriate. This Agreement is construed in accordance with the
laws of the Commonwealth of Virginia (other than its choice-of-law
rules), except to the extent that the laws of the United States of
America have superseded those laws. The headings in this Agreement
have been inserted for convenience of reference only and are to be
ignored in any construction of the provisions. If a provision of
this Agreement is not valid, that invalidity does not affect other
provisions.
HEILIG-MEYERS COMPANY
Date: ____________________ By_______________________________
Date: ____________________ _________________________________
Executive Name
(page 93)
Exhibit 10.bb.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement "), dated as of November 1,
1996, between William C. DeRusha (the "Executive") and Heilig-Meyers Company, a
Virginia corporation (the "Company"), recites and provides as follows:
WHEREAS, the Board of Directors of the Company (the "Board") expects
that the Executive will continue to make substantial contributions to the growth
and prospects of the Company; and
WHEREAS, the Board desires that the Company retain the services of the
Executive, and the Executive desires to continue his employment with the
Company, all on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the Company and the Executive agree as
follows:
1. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company, in accordance with the terms and provisions of this Agreement, for the
period commencing on the date of this Agreement (the "Effective Date") and
ending on the third anniversary of such date (the "Employment Period"). Subject
to the provisions of Section 3 hereof, the Employment Period shall be a constant
rolling period of three (3) years, commencing on the Effective Date, with the
result that, for each day after the Effective Date the Executive's term of
employment shall be extended for an additional day so that at all times the
remaining period of the Executive's term of employment shall be three (3) years.
2. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 90-day period immediately preceding the Effective Date and (B)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office which is
less than 35 miles from such location.
(page 94)
(ii) The Board agrees that during the Employment Period it shall
(A) nominate the Executive for election to the Board at each annual meeting of
shareholders and use its best efforts to cause the Executive to be duly elected
to the Board at each such meeting; and (B) elect the Executive to the position
of Chairman of the Board.
(iii) During the Employment Period, and excluding any periods of
vacation and leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the executive to (A) serve on corporate, civic, charitable,
furniture industry association or professional association boards or committees
(provided the Executive obtains prior approval of the Board), (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
in equal installments on a monthly basis, at least equal to twelve times the
highest monthly base salary paid or payable to the Executive by the Company and
its affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs. During the Employment
Period, the Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially consistent
with increases in base salary generally awarded in the ordinary course of
business to other peer executives of the Company and its affiliated companies.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased. As used in
this Agreement, the term "affiliated companies" shall include any company
controlled by, controlling or under common control with the Company.
(page 95)
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, in cash an annual bonus (the "Annual Bonus") under the Company's Annual
Performance-Based Bonus Plan or, if more favorable to the Executive, under any
plans, practices, programs and policies of the Company and its affiliates in
effect generally at any time after the Effective Date with respect to other peer
executives of the Company and its affiliated companies.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive (including, without limitation, stock incentive), savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but in no event
shall such plans, practices, policies and programs provide the Executive with
incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
90-day period immediately preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medial, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable employment
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company and its affiliated companies
in effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(page 96)
(vi) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the executive at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 90-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as provided generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 11(b) of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from the Executive's duties with the Company on a full-time basis
for 180 consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative (such agreement as to acceptability not to be
withheld unreasonably).
(page 97)
(b) Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean (i) a material breach by the Executive of the Executive's obligations under
Section 2(a) (other than as a result of incapacity due to physical or mental
illness) which is demonstrably willful and deliberate on the Executive's part,
which is committed in bad faith or without reasonable belief that such breach is
in the best interests of the Company and which is not remediated in a reasonable
period of time after receipt of written notice from the Company specifying such
breach or (ii) the conviction of the Executive of a felony involving moral
turpitude.
(c) Notice of Termination. Any termination by the Company for Cause,
or by the Executive, shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 11(b). For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 15 days after the giving of
such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance shall not waive any right of the
Executive or the Company hereunder or preclude the Executive or the Company from
asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(d) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
4. Obligations of the Company upon Termination.
(a) Other than for Cause or Death. The Company may terminate the
Executive's employment during the Employment Period for other than Cause or
Death. If, during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or death or the Executive shall
terminate employment:
(page 98)
(i) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the sum of (1) the Executive's
Annual Base Salary through the Date of Termination to the extent not theretofore
paid; (2) to the extent not theretofore paid, the product of (A) the greater of
(x) the Annual Bonus paid or payable, including by reason of any deferral, to
the Executive (and annualized for any fiscal year consisting of less than twelve
full months or for which the Executive has been employed for less than twelve
full months) for the most recently completed fiscal year during the Employment
Period, if any, and (y) the average annualized (for any fiscal year consisting
of less than twelve full months or with respect to which the Executive has been
employed for less than twelve full months) bonus paid or payable, including by
reason of any deferral, to the Executive by the Company and its affiliated
companies in respect of the three fiscal years immediately preceding the fiscal
year in which the Date of Termination occurs (such greater amount shall be
hereinafter referred to as the "Highest Annual Bonus") and (B) a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365; (3) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) to the extent not theretofore paid; and (4) any accrued
vacation pay, to the extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), (3) and (4) shall be hereinafter referred to as
the "Accrued Obligations"); and
(ii) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the sum of the Executive's Annual
Base Salary and Highest Annual Bonus payable to the Executive from the Date of
Termination to the end of the Employment Period; and
(iii) For the remainder of the Employment Period, or such longer
period as any plan, program, practice or policy may provide, the Company shall
continue benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 2(b)(iv) if the
Executive's employment had not been terminated in accordance with the most
favorable plans, practices, programs or policies of the Company and its
affiliated companies as in effect and applicable generally to other peer
executives and their families during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive
medial or other welfare benefits under another employer provided plan, the
medial and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility
(such continuation of such benefits for the applicable period herein set forth
shall be hereinafter referred to as "Welfare Benefit Continuation"). For
purposes of determining eligibility of the Executive
(page 99)
for retiree benefits pursuant to such plans, practices, programs and policies,
the Executive shall be considered to have remained employed until the end of the
Employment Period and to have retired on the last day of such period; and
(iv) To the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive and/or the Executive's family any
other amounts or benefits required to be paid or provided or which the Executive
and/or the Executive's family is eligible to receive pursuant to this Agreement
and under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies as in effect and applicable generally to
other peer executives and their families during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally thereafter with respect to other peer executives of the Company
and its affiliated companies and their families (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations (which shall
be paid to the Executive's estate or beneficiary, as applicable, in a lump sum
in cash within 30 days of the Date of Termination) and the timely payment or
provision of the Welfare Benefit Continuation and Other Benefits.
(c) Cause. If the Executive's employment shall be terminated for Cause
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive
his Annual Base Salary through the Date of Termination plus the amount of any
compensation previously deferred by the Executive, in each case to the extent
theretofore unpaid.
(d) Time of Payment. The Company shall make all payments required by
this Section 4 within the time periods provided in Sections 4(a), 4(b) and 4(c);
provided, however, that in the event that any such payments would become
non-deductible to the Company under the provisions of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the Executive is a
"covered employee" as defined in Treas. Reg. Section 1.162-27(c)(2) for the
taxable year of the Company during which the Date of Termination occurred or for
the immediately preceding year, the Company shall make any such payment not
earlier than 90 days following the end of the Company's taxable year during
which the Executive last was a "covered employee."
5. Nonexclusivity of Rights. Except as provided in Sections
4(a)(iii), 4(b) and 4(c), nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan,
(page 100)
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
6. Full Settlement; Resolution of Disputes.
(a) The Company's obligation to make the payment provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
4(a)(iii) with respect to Welfare Benefit Continuation and Section 8(a) with
respect to non-competition, such amounts shall not be reduced whether or not the
Executive obtains other employment. The Company agrees to pay, to the full
extent permitted by law, all reasonable legal fees and expenses that the
Executive may incur to enforce this Agreement and that result from a breach of
this Agreement by the Company; provided, however, that the reasonableness of the
fees and expenses must be determined by an independent arbitrator, using
standard legal principles, mutually agreed upon by the Company and the Executive
in accordance with rules set forth by the American Arbitration Association.
(b) If there shall be any dispute between the Company and the
Executive in the event of any termination of the Executive's employment by the
Company or by the Executive, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring that such
termination was for Cause, the Company shall pay all amounts, and provide all
benefits, to the Executive and/or the Executive's family or other beneficiaries,
as the case may be, that the Company would be required to pay or provide
pursuant to Section 4(a) as though such termination were by the Company without
Cause or by the Executive; provided, however, that the Company shall not be
required to pay any disputed amounts pursuant to this paragraph except upon
receipt of an undertaking (which may be unsecured) by or on behalf of the
Executive to repay all such amounts to which the Executive is ultimately
adjudged by such court not to be entitled.
(page 101)
7. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or
except as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 7 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
8. Non-Compete; Non-Solicitation.
(a) Except as is set forth below, for a period commencing on the date
hereof and ending on the date 36 months after the Executive ceases to be
employed by the Company (the "Non-Competition Period"), the Executive shall not
in the United States of America, directly or indirectly, either for himself or
any other person, own, manage, control, materially participate in, invest in,
permit his name to be used by, act as consultant or advisor to, render material
services for (along or in association with any person, firm, corporation or
other business organization) or otherwise assist in any manner any entity that
engages in or owns, invests in, manages or controls any venture or enterprise
engaged in the retail furniture industry (or any other business of the type that
constitutes a substantial portion of the Company's business at the date the
Executive ceases to be employed by the Company ) (collectively, a "Competitor");
provided, however, that the restrictions set forth above shall immediately
terminate and shall be of no further force or effect (i) in the event of a
default by the Company in the payment of any compensation or benefits to which
the Executive is entitled hereunder, which default is not cured within ten (10)
days after written notice thereof, or (ii) at the election of the Executive if
the Executive's employment has been terminated by the Company other than for
Cause and if the Executive (A) gives written notice to the Company during the
Non-Competition Period that he desires to accept employment with a Competitor;
and (B) agrees that the severance payment specified in Section 4(a)(i) hereof
shall be mitigated by the amount of salary and pro rata target bonus payable to
the Executive by the Competitor and attributable to employment during the
Non-Competition Period (it being understood that the amount of such mitigated
severance shall be paid by the Executive to the Company in a lump-sum payment
within thirty (30) days after the Executive commences employment with the
Competitor). Nothing herein shall prohibit the Executive from being a passive
owner of
(page 102)
not more than 2% of the equity securities of a corporation engaged in such
business which is publicly traded, so long as he has no active participation in
the business of such corporation.
(b) During the Non-Competition Period, the Executive shall not,
directly or indirectly, (i) induce or attempt to induce or aid others in
inducing an employee of the Company to leave the employ of the Company, or in
any way interfere with the relationship between the Company and an employee of
the Company except in the proper exercise of the Executive's authority, or (ii)
in any way interfere with the relationship between the Company and any customer,
supplier, licensee or other business relation of the Company.
(c) If, at the time of enforcement of this Section 8, a court shall
hold that the duration, scope, area or other restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope, area or other restrictions reasonable under such
circumstances shall be substituted for the stated duration, scope, area or other
restrictions.
(d) The covenants made in this Section 8 shall be construed as an
agreement independent of any other provisions of this Agreement, and shall
survive the termination of this Agreement. Moreover, the existence of any claim
or cause of action of the Executive against the Company or any of its
affiliates, whether or not predicated upon the terms of this Agreement, shall
not constitute a defense to the enforcement of these covenants.
9. Indemnity. The Company will indemnify the Executive, in his
capacity as an officer and director of the Company, to the fullest extent
permitted by the Company's Articles of Incorporation and Bylaws.
10. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company"
(page 103)
shall mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
11. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive to: If to the Company to:
William C. DeRusha Heilig-Meyers Company
South Ceres 2235 Staples Mill Road
1686 Broad Street Road Richmond, Virginia 23230
P.O. Box 212
Oilville, Virginia 23129 Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amount payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) Any entitlements to the Executive created under Section 2(b) shall
be contract rights to the extent not prohibited by law. However, the Company
shall not be required to amend, or refrain from amending, any of its plans to so
provide the contract rights.
(page 104)
(g) The Executive and the Company agree that as of the date hereof,
this Agreements supersedes and terminates the Employment Agreement between the
Company and the Executive dated September 11, 1989, as amended August 26, 1993.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
HEILIG-MEYERS COMPANY
By:/s/ Robert L. Burrus, Jr.
Title:Chairman, Compensation
Committee of the Board of Directors
/s/ William C. DeRusha
William C.DeRusha
(page 105)
Exhibit 10.cc.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement "), dated as of November
1, 1996, between Troy A. Peery, Jr. (the "Executive") and Heilig-Meyers
Company, a Virginia corporation (the "Company"), recites and provides as
follows:
WHEREAS, the Board of Directors of the Company (the "Board") expects
that the Executive will continue to make substantial contributions to the growth
and prospects of the Company; and
WHEREAS, the Board desires that the Company retain the services of the
Executive, and the Executive desires to continue his employment with the
Company, all on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the Company and the Executive agree as
follows:
1. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company, in accordance with the terms and provisions of this Agreement, for the
period commencing on the date of this Agreement (the "Effective Date") and
ending on the third anniversary of such date (the "Employment Period"). Subject
to the provisions of Section 3 hereof, the Employment Period shall be a constant
rolling period of three (3) years, commencing on the Effective Date, with the
result that, for each day after the Effective Date the Executive's term of
employment shall be extended for an additional day so that at all times the
remaining period of the Executive's term of employment shall be three (3) years.
2. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 90-day period immediately preceding the Effective Date and (B)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office which is
less than 35 miles from such location.
(page 106)
(ii) The Board agrees that during the Employment Period it shall
nominate the Executive for election to the Board at each annual meeting of
shareholders and use its best efforts to cause the Executive to be duly elected
to the Board at each such meeting.
(iii) During the Employment Period, and excluding any periods of
vacation and leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the executive to (A) serve on corporate, civic, charitable,
furniture industry association or professional association boards or committees
(provided the Executive obtains prior approval of the Board), (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
in equal installments on a monthly basis, at least equal to twelve times the
highest monthly base salary paid or payable to the Executive by the Company and
its affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs. During the Employment
Period, the Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially consistent
with increases in base salary generally awarded in the ordinary course of
business to other peer executives of the Company and its affiliated companies.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased. As used in
this Agreement, the term "affiliated companies" shall include any company
controlled by, controlling or under common control with the Company.
(page 107)
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, in cash an annual bonus (the "Annual Bonus") under the Company's Annual
Performance-Based Bonus Plan or, if more favorable to the Executive, under any
plans, practices, programs and policies of the Company and its affiliates in
effect generally at any time after the Effective Date with respect to other peer
executives of the Company and its affiliated companies.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive (including, without limitation, stock incentive), savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but in no event
shall such plans, practices, policies and programs provide the Executive with
incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
90-day period immediately preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medial, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable employment
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company and its affiliated companies
in effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter
(page 108)
with respect to other peer executives of the Company and its affiliated
companies.
(vi) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the executive at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 90-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as provided generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 11(b) of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from the Executive's duties with the Company on a full-time basis
for 180 consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the
(page 109)
Company or its insurers and acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean (i) a material breach by the Executive of the Executive's obligations under
Section 2(a) (other than as a result of incapacity due to physical or mental
illness) which is demonstrably willful and deliberate on the Executive's part,
which is committed in bad faith or without reasonable belief that such breach is
in the best interests of the Company and which is not remediated in a reasonable
period of time after receipt of written notice from the Company specifying such
breach or (ii) the conviction of the Executive of a felony involving moral
turpitude.
(c) Notice of Termination. Any termination by the Company for Cause,
or by the Executive, shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 11(b). For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 15 days after the giving of
such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance shall not waive any right of the
Executive or the Company hereunder or preclude the Executive or the Company from
asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(d) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
4. Obligations of the Company upon Termination.
(a) Other than for Cause or Death. The Company may terminate
the Executive's employment during the Employment Period for other than
Cause or Death. If, during the Employment Period, the Company shall
(page 110)
terminate the Executive's employment other than for Cause or death or the
Executive shall terminate employment:
(i) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the sum of (1) the Executive's
Annual Base Salary through the Date of Termination to the extent not theretofore
paid; (2) to the extent not theretofore paid, the product of (A) the greater of
(x) the Annual Bonus paid or payable, including by reason of any deferral, to
the Executive (and annualized for any fiscal year consisting of less than twelve
full months or for which the Executive has been employed for less than twelve
full months) for the most recently completed fiscal year during the Employment
Period, if any, and (y) the average annualized (for any fiscal year consisting
of less than twelve full months or with respect to which the Executive has been
employed for less than twelve full months) bonus paid or payable, including by
reason of any deferral, to the Executive by the Company and its affiliated
companies in respect of the three fiscal years immediately preceding the fiscal
year in which the Date of Termination occurs (such greater amount shall be
hereinafter referred to as the "Highest Annual Bonus") and (B) a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365; (3) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) to the extent not theretofore paid; and (4) any accrued
vacation pay, to the extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), (3) and (4) shall be hereinafter referred to as
the "Accrued Obligations"); and
(ii) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the sum of the Executive's Annual
Base Salary and Highest Annual Bonus payable to the Executive from the Date of
Termination to the end of the Employment Period; and
(iii) For the remainder of the Employment Period, or such longer
period as any plan, program, practice or policy may provide, the Company shall
continue benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 2(b)(iv) if the
Executive's employment had not been terminated in accordance with the most
favorable plans, practices, programs or policies of the Company and its
affiliated companies as in effect and applicable generally to other peer
executives and their families during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive
medial or
(page 111)
other welfare benefits under another employer provided plan, the medial and
other welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility (such
continuation of such benefits for the applicable period herein set forth shall
be hereinafter referred to as "Welfare Benefit Continuation"). For purposes of
determining eligibility of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be considered to
have remained employed until the end of the Employment Period and to have
retired on the last day of such period; and
(iv) To the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive and/or the Executive's family any
other amounts or benefits required to be paid or provided or which the Executive
and/or the Executive's family is eligible to receive pursuant to this Agreement
and under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies as in effect and applicable generally to
other peer executives and their families during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally thereafter with respect to other peer executives of the Company
and its affiliated companies and their families (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations (which shall
be paid to the Executive's estate or beneficiary, as applicable, in a lump sum
in cash within 30 days of the Date of Termination) and the timely payment or
provision of the Welfare Benefit Continuation and Other Benefits.
(c) Cause. If the Executive's employment shall be terminated for Cause
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive
his Annual Base Salary through the Date of Termination plus the amount of any
compensation previously deferred by the Executive, in each case to the extent
theretofore unpaid.
(d) Time of Payment. The Company shall make all payments required by
this Section 4 within the time periods provided in Sections 4(a), 4(b) and 4(c);
provided, however, that in the event that any such payments would become
non-deductible to the Company under the provisions of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the Executive is a
"covered employee" as defined in Treas. Reg. Section 1.162-27(c)(2) for the
taxable year of the Company during which the Date of Termination occurred or for
the immediately preceding year, the Company shall make any such payment not
earlier than 90 days
(page 112)
following the end of the Company's taxable year during which the
Executive last was a "covered employee."
5. Nonexclusivity of Rights. Except as provided in Sections 4(a)(iii), 4(b)
and 4(c), nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
6. Full Settlement; Resolution of Disputes.
(a) The Company's obligation to make the payment provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
4(a)(iii) with respect to Welfare Benefit Continuation and Section 8(a) with
respect to non-competition, such amounts shall not be reduced whether or not the
Executive obtains other employment. The Company agrees to pay, to the full
extent permitted by law, all reasonable legal fees and expenses that the
Executive may incur to enforce this Agreement and that result from a breach of
this Agreement by the Company; provided, however, that the reasonableness of the
fees and expenses must be determined by an independent arbitrator, using
standard legal principles, mutually agreed upon by the Company and the Executive
in accordance with rules set forth by the American Arbitration Association.
(b) If there shall be any dispute between the Company and the
Executive in the event of any termination of the Executive's employment by the
Company or by the Executive, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring that such
termination was for Cause, the Company shall pay all amounts, and provide all
benefits, to the Executive and/or the Executive's family or other beneficiaries,
as the case may be, that the Company would be required to pay or provide
pursuant to Section 4(a) as though such termination were by the Company without
Cause or by the Executive; provided, however, that the Company shall not be
required to
(page 113)
pay any disputed amounts pursuant to this paragraph except upon receipt of an
undertaking (which may be unsecured) by or on behalf of the Executive to repay
all such amounts to which the Executive is ultimately adjudged by such court not
to be entitled.
7. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or
except as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 7 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
8. Non-Compete; Non-Solicitation.
(a) Except as is set forth below, for a period commencing on the date
hereof and ending on the date 36 months after the Executive ceases to be
employed by the Company (the "Non-Competition Period"), the Executive shall not
in the United States of America, directly or indirectly, either for himself or
any other person, own, manage, control, materially participate in, invest in,
permit his name to be used by, act as consultant or advisor to, render material
services for (along or in association with any person, firm, corporation or
other business organization) or otherwise assist in any manner any entity that
engages in or owns, invests in, manages or controls any venture or enterprise
engaged in the retail furniture industry (or any other business of the type that
constitutes a substantial portion of the Company's business at the date the
Executive ceases to be employed by the Company ) (collectively, a "Competitor");
provided, however, that the restrictions set forth above shall immediately
terminate and shall be of no further force or effect (i) in the event of a
default by the Company in the payment of any compensation or benefits to which
the Executive is entitled hereunder, which default is not cured within ten (10)
days after written notice thereof, or (ii) at the election of the Executive if
the Executive's employment has been terminated by the Company other than for
Cause and if the Executive (A) gives written notice to the Company during the
Non-Competition Period that he desires to accept employment with a Competitor;
and (B) agrees that the severance payment specified in Section 4(a)(i) hereof
shall be mitigated by the amount of salary and pro rata target bonus payable to
the Executive by the Competitor and
(page 114)
attributable to employment during the Non-Competition Period (it being
understood that the amount of such mitigated severance shall be paid by the
Executive to the Company in a lump-sum payment within thirty (30) days after the
Executive commences employment with the Competitor). Nothing herein shall
prohibit the Executive from being a passive owner of not more than 2% of the
equity securities of a corporation engaged in such business which is publicly
traded, so long as he has no active participation in the business of such
corporation.
(b) During the Non-Competition Period, the Executive shall not,
directly or indirectly, (i) induce or attempt to induce or aid others in
inducing an employee of the Company to leave the employ of the Company, or in
any way interfere with the relationship between the Company and an employee of
the Company except in the proper exercise of the Executive's authority, or (ii)
in any way interfere with the relationship between the Company and any customer,
supplier, licensee or other business relation of the Company.
(c) If, at the time of enforcement of this Section 8, a court shall
hold that the duration, scope, area or other restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope, area or other restrictions reasonable under such
circumstances shall be substituted for the stated duration, scope, area or other
restrictions.
(d) The covenants made in this Section 8 shall be construed as an
agreement independent of any other provisions of this Agreement, and shall
survive the termination of this Agreement. Moreover, the existence of any claim
or cause of action of the Executive against the Company or any of its
affiliates, whether or not predicated upon the terms of this Agreement, shall
not constitute a defense to the enforcement of these covenants.
9. Indemnity. The Company will indemnify the Executive, in his
capacity as an officer and director of the Company, to the fullest extent
permitted by the Company's Articles of Incorporation and Bylaws.
10. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(page 115)
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
11. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive to: If to the Company to:
Troy A. Peery, Jr. Heilig-Meyers Company
14 Broad Run Road 2235 Staples Mill Road
Manakin Sabot, Virginia 23103 Richmond, Virginia 23230
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amount payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
(page 116)
(f) Any entitlements to the Executive created under Section
2(b) shall be contract rights to the extent not prohibited by law. However, the
Company shall not be required to amend, or refrain from amending, any of its
plans to so provide the contract rights.
(g) The Executive and the Company agree that as of the date
hereof, this Agreements supersedes and terminates the Employment Agreement
between the Company and the Executive dated September 11, 1989, as amended
August 26, 1993.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
HEILIG-MEYERS COMPANY
By:/s/ William C. DeRusha
Title:Chairman and CEO
/s/ Troy A. Peery, Jr.
Troy A. Peery, Jr.
(page 117)
Exhibit 10.qq.
AMENDED AND RESTATED MERCHANT AGREEMENT
(REVOLVING CREDIT PLANS)
This AMENDED AND RESTATED MERCHANT AGREEMENT is entered into as of the 9th day
of May, 1997, by and between BENEFICIAL NATIONAL BANK USA, a national banking
association ("BNB USA"), RHODES, INC., a corporation of the State of Georgia
("Rhodes") and H Y ROOM STORES, INC., a corporation of the State of Virginia
("Room Stores"). Rhodes and Room Stores may be hereinafter referred to jointly
and severally as "Merchant."
WHEREAS, BNB USA and Rhodes entered into a Merchant Agreement dated as of May
15, 1992 and amended by amendments dated as of August 15, 1992, November 6,
1992, September 28, 1993, April 3, 1994, July 16, 1994, December 31, 1996 and
February 25, 1997;
WHEREAS, the parties wish to amend and restate the Merchant Agreement and
amendments in this Amended and Restated Merchant Agreement;
WHEREAS, the parties desire that BNB USA shall be the primary lender for
selected Customers of Merchant who participate in a private label revolving
credit program for Merchant;
NOW, THEREFORE, in consideration of the mutual covenants herein expressed, the
parties mutually agree as follows:
1. Definitions. The following terms have the following meanings:
(A) Amount Financed - the total price paid for the Merchandise minus
the total down payment.
(B) Authorization Facility - refers to the facility operated by BNB USA
to provide authorization to Merchant electronically or via a toll free telephone
number to permit Customer to purchase Merchandise under a revolving credit
account opened for Customer by BNB USA, and for which Merchandise BNB USA has
agreed to extend credit.
(C) BNB USA - an abbreviation for Beneficial National Bank USA, a
national banking association. BNB USA is a subsidiary of Beneficial Corporation.
(D) Credit Slip - the document used to record a credit; the term also
includes its electronic data processing equivalent.
(E) Customer - any person who is obligated to pay for
Merchandise.
(page 118)
(F) Merchandise - property or services sold to a Customer, including
any accessories.
(G) Net Sales Slips - Sales Slips minus Credit Sips.
(H) Rhodes - Rhodes, Inc., trading as Rhodes, Mark Fitzgerald's, and
Fowler's and which may, in the future, trade under other business names, is the
party which sells Merchandise to a Customer.
(I) Room Stores - the party which sells Merchandise to a Customer and
is so identified in this Agreement.
(J) Sales Slip - the document used to record a purchase and the debt
evidenced thereby; the term also includes its electronic data processing
equivalent.
(K) SNAP - the acronym for System for New Account Processing operated
by BNB USA and used to process applications for revolving credit accounts.
2. Scope. Merchant agrees that the terms and conditions of the private label
credit card program contemplated hereunder shall be in full force and effect for
the term of this Agreement at all Rhodes stores and at the Room Stores stores
located in San Antonio, El Paso, Temple, Waco, Austin, and Seguin, Texas, as
well as any other Room Stores stores hereafter designated by the parties, for
those Customers who choose to participate in the private label credit card
program contemplated hereunder on or after the Effective Date. Merchant agrees
that BNB USA shall be the primary lender for Merchant's private label revolving
credit program at the aforementioned stores. Merchant agrees that it shall first
solicit and encourage Customers to obtain a Merchant credit card issued by BNB
USA, and that it shall first submit all Sales Slips for purchase to BNB USA. If
BNB USA does not purchase such Sales Slips, Merchant may then submit the Sales
Slips to any other third party for purchase.
3. Compensation. BNB USA agrees to purchase from Merchant, and Merchant agrees
to sell and assign to BNB USA, Net Sales Slips acceptable to BNB USA on the
terms and conditions contained in this Agreement. The purchase price for Net
Sales Slips under the standard revolving plan and under the special revolving
plans and terms governing other compensation and adjustments are set forth on
Schedule A attached hereto and by this reference made a part hereof.
4. Credit Cards. Private label credit cards, with either the name
"Rhodes," "Fowler's," "Mark Fitzgerald's," "Room Stores," or some other
trade name for Rhodes, Inc. or H Y Room Stores, Inc., embossed thereon,
will be issued by BNB USA in its discretion to certain creditworthy
Customers and also to those persons who have not yet purchased
(page 119)
Merchandise from Merchant. Merchant agrees to honor at its stores those credit
cards that are issued and used in accordance with the terms of this Agreement.
The credit cards shall bear a name and a design developed by Merchant and
approved by BNB USA.
5. Refund and Adjustment Policy. Rhodes shall continue to maintain its refund
and adjustment policy as set forth in Schedule B and Room Stores shall maintain
a similar policy. If Merchant accepts the return of Merchandise which has been
or will be reflected as a debit to the Customer's account, Merchant shall make
no cash refund to the Customer, and Merchant shall promptly (in no case later
than three (3) bank business days from the date the return is accepted) transmit
a Credit Slip with respect thereto to BNB USA. Merchant shall deliver a true
copy of the Credit Slip to the Customer at the time of the adjustment. Such
transmission shall be made through normal channels by Merchant transmitting such
Credit Slip to BNB USA. The transmittal of the Credit Slip shall constitute
authority to BNB USA to charge the amount of such Credit Slip to Merchant's
account with BNB USA or delivery of the Credit Slip shall be accompanied by a
cash remittance. Merchant shall maintain a policy that shall not discriminate
against persons making purchases through use of a private-label revolving credit
card with respect to the exchange of, return of, or adjustment on Merchandise
obtained through such purchases.
6. Merchant's Representations. Merchant makes the following
representations which shall survive any termination of this Agreement:
(A) All Merchandise and warranties will be provided and have been
provided to the satisfaction of the Customer and in accordance with the terms of
the Sales Slip.
(B) To the best of its knowledge, all signatures purporting to be that
of the Customer on applications, sales slips, or other documents are genuine,
not forged, unauthorized or fraudulent.
(C) All documents are legible and filled in completely and, to the best
of Merchant's knowledge, correctly.
(D) All contracts and related documents utilized by Merchant in
connection with the financing of Merchandise pursuant to this Agreement are
those supplied by BNB USA, unless otherwise authorized by BNB USA.
(E) Merchant will comply with and has complied with all applicable laws
and legal requirements of federal, state, and local governments or agencies with
respect to the solicitation, handling, and processing of credit related
insurance payments made by its Customers. All insurance provided has been
voluntarily chosen by Customer and was not made a condition of granting credit
to Customer.
(page 120)
(F) Merchant presently intends to stay in business and continue to
operate its business in substantially the same manner as it has operated
immediately prior to the date of this Agreement, and it has no knowledge of any
facts which would indicate otherwise. Merchant presently intends (a) not to
apply for or agree to the appointment of a receiver or trustee in liquidation of
Merchant or any of its assets, (b) not to make a general assignment for the
benefit of creditors, (c) not to file a voluntary petition in bankruptcy or a
petition seeking reorganization or an arrangement with creditors under any
bankruptcy law, and (d) not to be adjudicated a bankrupt under any bankruptcy
law. Merchant also has no knowledge of any other party that intends or has
threatened to file an involuntary petition in bankruptcy against Merchant.
7. Merchant's Covenants. As long as there is any outstanding balance
due BNB USA from a Customer, Merchant shall:
(A) Permit BNB USA representatives at any reasonable time to examine
Merchant's books and records relating to transactions contemplated hereunder and
make copies of those books and records.
(B) Deliver the quarterly and annual profit and loss statements and
balance sheets of Heilig-Meyers Company to BNB USA.
(C) Comply with the terms, conditions, and guidelines of this Agreement
and any addenda applicable to this Agreement, which addenda are hereby made a
part of this Agreement.
8. Merchant's Warranties. Merchant warrants, with respect to each
Sales Slip or Credit Slip, as the case may be, that:
(A) Merchant has good title to the Sales Slip and the Sales Slip
represents a bona fide transaction in the ordinary course of business in which
Merchant has given value, and, to Merchant's knowledge, no defense, set-off or
counterclaim exists as to such transaction.
(B) The Sales Slip or Credit Sip involves no advance of cash and no
other transaction than described therein.
(C) The Sales Slip or Credit Slip has not been materially altered
subsequent to its signature by Customer and, if any blanks in such Sales Slip or
Credit Slip were completed or filled in by Merchant, they were filled in
accordance with authority granted by Customer.
(D) To Merchant's knowledge, the Customer has no claim or defense
against Merchant which said Customer may be entitled by law to assert against
BNB USA.
(E) Merchant has no knowledge or notice that would impair
enforceability or collection thereof as against the named Customer.
(page 121)
(F) Merchant will comply with and has complied with all procedures
specified by BNB USA and requirements of this Agreement with respect to such
Sales Slip or Credit Slip and the transaction it evidences.
(G) In the transaction represented by the Sales Slip or Credit Slip,
Merchant will comply with and has complied with all applicable laws and
regulations.
9. Operational Guidelines: The Operational Guidelines established by
BNB USA with respect to the handling and processing of accounts submitted
to BNB USA by Merchant for purpose of approval and purchase are as
follows:
(A) New Account Processing with Initial Purchase.
(1) Merchant must verify the Customer's identification with a
valid form of picture identification acceptable to BNB USA.
(2) Merchant must confirm that the information given to and
recorded by BNB USA corresponds with the information on the Customer's written
application.
(3) Merchant must obtain new account credit approval either
through SNAP or the BNB USA Credit Processing Department.
(4) Merchant shall retain all hard copies of all applications
for the term of this Agreement. At BNB USA's request, Merchant shall forward the
hard copy of an application to BNB USA within ten (10) days of the request.
(B) Add-On Authorizations.
(1) Programming instructions for authorization terminals will
be provided by BNB USA, which instructions must be followed by Merchant.
(2) After an account is opened, the minimum amount of any
purchase of Merchandise added-on to the account shall be one dollar ($1).
(3) Authorization for any add-on purchase must be obtained
electronically or through the Authorization Facility.
(4) Before requesting an add-on purchase authorization,
Merchant must confirm that a valid credit card issued by BNB USA, with Merchant
named thereon, is being used by an authorized user of the BNB USA account in
connection with the purchase of Merchandise.
(C) Sales Slips and Credit Slips.
(page 122)
(1) Delivery and acceptance of Merchandise by the Customer,
as evidenced by a Sales Slip, will usually occur within seven (7) days, and in
no case more than thirty (30) days, after the date of sale.
(2) The Sales Slip must be legible and contain the following:
- Amount of Purchase
- Credit Plan Number
- Authorization Number
- Customer's Account Number
- Date of Purchase
- Description of the Purchased Goods or Services, including
model and serial number, if applicable.
(3) In the event a discrepancy exists between the purchase or
return amount recorded on a Sales Slip or Credit Slip and the records of either
the SNAP Center or the Authorization Facility, BNB USA's records will prevail
unless the discrepancy results from a clear error made by BNB USA or its
employees.
(4) On a daily basis within thirty (30) days following the
completion of Merchant's responsibilities related to the sales, sales draft
information shall be transmitted to BNB USA. If sales draft information is not
transmitted to BNB USA within thirty (30) days, BNB USA will be under no
obligation to purchase the affected Sales Slip. Merchant shall maintain Sales
Slips for a period of twenty-five (25) months. Within ten (10) days of a request
by BNB USA for any reason, including, but not limited to, Customer disputes,
Merchant shall produce and give to BNB USA the Sales Slip requested. BNB USA
shall make a good faith effort to resolve all Customer disputes. If Merchant is
unable to produce such Sales Slip within ten (10) days, Merchant agrees that BNB
USA may automatically credit the applicable Customer account in the amount of
the purchase price, charge Merchant the amount of the purchase price, and, if
the total dollar amount of all such Sales Slips exceeds a reasonable amount, as
determined by BNB USA, BNB USA may charge Merchant accrued interest on all such
Sales Slips.
(D) Second Look Program. If a new account application is declined, it
may be reviewed for secondary credit approval as part of a Second Look Program,
subject to the following special guidelines:
(1) BNB USA and Merchant shall mutually agree upon the
criteria for Selecting the declined account applications which will be included
in the Second Look Program.
(2) Declined account applications in the Second Look Program
will be placed in a separate queue, which may be accessed by Merchant's
employees. Merchant's employees may approve applications in this queue as they
deem appropriate. (Accounts approved under the Second Look Program will
hereinafter be referred to as "Recourse Accounts").
(page 123)
(3) If a Recourse Account becomes one hundred twenty (120)
days delinquent on a recency basis, if a bankruptcy petition is filed by or
against a Cardholder with a Recourse Account, or if a Recourse Account is
affected by fraud, Merchant will purchase the Account and the receivables
thereon. The purchase amount will include the total balance, including any
accrued interest, late fees and other fees, whether accrued or assessed to the
Account, and may be implemented by BNB USA debiting the daily settlement payment
to Merchant for the amount of the purchase. If there are insufficient funds from
which to draw such payment, Merchant must reimburse BNB USA within three (3)
business days. If Merchant does not reimburse BNB USA, BNB USA may draw such
payment from a reserve or letter of credit as set forth in Section 9(D)(7)
below. On a quarterly basis, BNB USA will reimburse Merchant for .75% of the
average receivables outstanding from Recourse Accounts during each quarter, not
to exceed the amount purchased by Merchant pursuant to this Section 9(D)(3).
(4) Recourse Accounts which are purchased by Merchant
pursuant to Section 9(D)(3) will be sent to the appropriate collection agencies,
and shall be treated in the same manner and billed at the same rates as other
accounts sent to collection agencies by BNB USA. Any amount collected on
Recourse Accounts purchased by Merchant may be used by BNB USA to offset any
amounts owed to BNB USA by Merchant under Section 9(D)(3). Merchant shall be
responsible for all expenses associated with the collection efforts described in
this Section 9(D)(4), including BNB USA's expense for maintaining files on the
Recourse Accounts which are in collection.
(5) Recourse Accounts will be subject to a credit limit not
to exceed the amount of the initial sale. Recourse Accounts will not be eligible
for automatic credit limit increases, however, Merchant or its Cardholders may
request increases on particular accounts through normal channels. Upon such a
request, if BNB USA deems a Recourse Account worthy of an increase based upon
BNB USA's standard underwriting guidelines, BNB USA will increase the credit
limit. If the credit limit on a Recourse Account is increased, the account will
still be subject to the special guidelines in this Section 9(D).
(6) Merchant shall not contact any Cardholders with Recourse
Accounts about any delinquency unless and until it has purchased the account.
(7) For Recourse Accounts for both Rhodes and Room Stores,
Rhodes shall establish and maintain a reserve or secure and maintain an
irrevocable letter of credit in favor of BNB USA for as long as a balance
remains on any Recourse Account owned by BNB USA. The reserve or letter of
credit must be in a form acceptable to BNB USA in the amount of 2.5 million
dollars or 25% of the total receivables outstanding from Recourse Accounts,
whichever is greater. The reserve or letter of credit shall be
(page 124)
reevaluated on a quarterly basis, and at any other time upon BNB USA's
reasonable request, and if necessary, shall be immediately adjusted in
accordance with this Section 9(D)(7). BNB USA may also request an increase in
the reserve or letter of credit above 25% of the total receivables outstanding
from Recourse Accounts to the extent its actual or projected losses for the
Second Look Program exceed 25%.
(8) Upon thirty (30) days advance written notice, either BNB
USA or Merchant may elect to terminate the Second Look Program. If the Program
is terminated, no declined account applications may be reviewed and approved on
a secondary basis. However, existing Recourse Accounts will still be subject to
the special guidelines in this Section 9(D), which will remain in effect until
no Recourse Accounts are owned by BNB USA.
10. Remedies for Breach of a Representation, Covenant, Warranty, or
Guideline by Merchant. In addition to any remedies at law or equity,
upon the occurrence of a breach of a representation, covenant, warranty
or guideline by Merchant:
(A) Merchant shall hold BNB USA harmless from any claim or demand
arising out of this Agreement. If any claim is asserted against BNB USA, BNB USA
may retain attorneys of its own selection to represent BNB USA at Merchant's
expense. BNB USA shall direct the defense of the claim; provided, however, that
BNB USA shall not compromise or settle any such claim or demand without the
prior written approval of Merchant, which approval shall not be unreasonably
withheld.
(B) Merchant shall repurchase at BNB USA's request a Sales Slip not
paid or subject to a payment dispute because of the breach, by paying the unpaid
balance due from the Customer, plus interest equal to the rate that would have
been charged to the Customer, beginning on the thirtieth (30) day after the date
of the Sales Slip.
(C) BNB USA may offset an amount determined by BNB USA from any funds
owed Merchant by BNB USA after BNB USA first requests that such amount be paid
voluntarily and Merchant does not pay such amount within seven (7) days.
(D) BNB USA may terminate this Agreement if the breach is material;
provided, however, that BNB USA may only terminate this Agreement pursuant to
this Section 10(D) after it has given Merchant notice of its intent to terminate
hereunder and Merchant has failed to cure its breach within thirty (30) days of
said notice.
11. BNB USA Covenants.
(A) During the term of this Agreement, BNB USA will comply with and has
complied with the terms and conditions of this Agreement and any addenda and
schedules applicable to this Agreement.
(page 125)
(B) During the term of this Agreement, BNB USA shall permit Merchant's
representatives at any reasonable time to examine BNB USA books and records
relating to transactions contemplated hereunder and make copies of those books
and records.
12. BNB USA Warranties.
(A) To BNB USA's knowledge, the Customer has no claim or defense
against BNB USA which said Customer may be entitled by law to assert against
Merchant.
(B) In connection with its performance under this Agreement, BNB USA
has complied with all applicable laws and regulations.
(C) BNB USA presently intends to stay in business and to continue to
operate its business in substantially the same manner as it has operated
immediately prior to the date of this Agreement, and it has no knowledge of any
facts which would indicate otherwise. BNB USA presently intends (a) not to apply
for or agree to the appointment of a receiver or trustee in liquidation of
Merchant or any of its assets, (b) not to make a general assignment for the
benefit of creditors, (c) not to file a voluntary petition in bankruptcy or a
petition seeking reorganization or an arrangement with creditors under any
bankruptcy law, and (d) not to be adjudicated a bankrupt under any bankruptcy
law. BNB USA also has no knowledge of any other party that intends or has
threatened to file an involuntary petition in bankruptcy against BNB USA.
13. Remedies for Breach of a Covenant or Warranty by BNB USA. In the
event of a breach of a covenant or warranty by BNB USA:
(A) BNB USA shall hold Merchant harmless from any claim or demand
arising out of this Agreement. If any claim is asserted against Merchant,
Merchant may retain attorneys of its own selection to represent Merchant at BNB
USA's expense. Merchant shall direct the defense of the claim; provided,
however, that Merchant shall not compromise or settle any such claim or demand
without the prior written approval of BNB USA, which approval shall not be
unreasonably withheld.
(B) Merchant may offset the amount due based on mutually agreed upon
operating procedures from any funds owed BNB USA by Merchant after Merchant
first requests that such an amount be paid voluntarily and BNB USA does not pay
such amount within seven (7) days.
(C) Merchant may terminate this Agreement if the breach is material
immediately upon notice; provided, however, that Merchant may only terminate
this Agreement pursuant to this Section 13(C), after it has given BNB USA notice
of its intent to terminate hereunder and BNB USA has failed to cure its breach
within thirty (30) days of said notice.
(page 126)
14. New Account Approval by BNB USA. In the ordinary course of business, SNAP
will provide Merchant with credit decisions for purchases in typically less than
two minutes. Upon successful data entry of the required information by Merchant,
BNB USA's SNAP will perform functions similar to the following functions:
* Duplicate screen validation file * Pre-bureau guideline
screen * In-house credit scoring (CAP)
* Credit Bureau Bankruptcy model scoring (BAP) or other risk
model scoring
* Post-bureau guideline screen
* Credit limit assignment
15. Credit Scoring. Generally, the following provisions relating to
credit scoring will be followed by BNB USA. These provisions, however,
may be modified by BNB USA over the term of the Agreement.
(A) BNB USA shall obtain credit reports in connection with all
applications passing the Operational Guidelines. Three major credit bureaus will
be used with each zip code being assigned a primary, secondary and emergency
back-up credit bureau.
(B) All applications are credit scored using BNB USA's in-house scoring
model. BNB USA's scoring model, referred to as CAP, is comprised of 12 scoreable
characteristics, eight of which are based on information from the application
and four of which are based upon information from the credit report. CAP cutoffs
will be customized for Merchant and will differ based upon the age of the
applicant.
(C) BNB USA shall utilize all three of the credit bureaus' bankruptcy
score models or other risk scoring models. BNB USA's risk scoring model is
referred to as FICO. FICO score cutoffs will be customized for Merchant and will
vary based upon the applicant's age, depth of credit file, type of residence,
and/or other determining criteria.
16. Credit Limit Assignment. Credit limits are assigned by BNB USA by utilizing
a matrix approach that currently considers the applicant's age, credit file
depth, type of housing, income, and the credit bureau bankruptcy score. For the
first ninety (90) days after the Effective Date, it is BNB USA's intent not to
change the credit limits solely as a result of the bankruptcy score obtained on
the Customers; provided, however, that BNB USA may change the credit limits if
circumstances warrant such a change. BNB USA will make a good faith effort to
approximate Merchant's matrix approach in assigning credit limits; provided,
however, that BNB USA may change such approach if circumstances warrant such a
change. Applications are referred to a credit analyst when the recommended
credit is less than the amount requested. When SNAP
(page 127)
approves an application, an account number and credit limit is immediately
established and returned to store personnel.
17. Credit Line Processing. Credit Line Processing by BNB USA is
available during the same hours as new account processing to handle
credit line increases and questions regarding credit decisions.
18. Payment to Merchant.
(A) BNB USA shall transfer funds in the normal course of business
through the Automated Clearing House (ACH) system to such bank account as may be
designated by Merchant in payment for Net Sales Slips, net of adjustments, on
the date following the date of receipt of evidence of the sales transaction,
provided Merchant completes the transmission of sales data by 10:00 p.m. Eastern
Time.
(B) A detailed settlement report by store number will accompany the
payment. The report will include the following:
- Posted transactions detail and summary - Rejected
transactions detail and summary - Reject/Re-entry
transactions detail and summary - Chargeback detail and
summary
Rejected transactions will be sent directly to Merchant for correction;
corrected entries may be retransmitted to BNB USA for posting. If this
information has been posted successfully, it will appear on the Posted
Transaction Detail and Summary portion of the report.
19. Settlement Processing. BNB USA's Settlement Processing Staff is
available Monday through Friday, 9:00 a.m. to 5:00 p.m. Eastern Time, to
respond to Merchant's inquiries regarding settlement, reconciliation,
payment and program service.
20. Customer Service for Cardholders.
(A) The Customer Service Department will service both telephone and
written inquiries generated by Merchant's cardholders. Merchant's cardholders
will utilize a unique toll-free number. Billing statements for all cardholder
accounts will be mailed normally within two days of statement date. BNB USA
Customer Service Representatives are trained to provide service in both
telephone and written inquiries, with specific representatives designated to
perform certain functions within the department.
(B) Customer Service Representatives will be on duty to receive
cardholder calls from 8:00 a.m. until 8:00 p.m. Eastern Time, Monday
through Friday. Automated account information, including account
balance, credit limit, available credit, date and amount of last payment,
(page 128)
amount due and due date of next payment, are available from 8:00 a.m.
until Midnight (Monday through Saturday) and 8:00 a.m. until 10:00 p.m.
Sundays. This information is provided through a voice response system
which interfaces with BNB USA's operating system and accesses account
information after it has been entered through a touch tone telephone.
(C) Service response levels are tracked through the use of the AT&T
Call Management System. This system provides for reporting of departmental
performance at half hour intervals during the day and gives updates every 10
seconds on current performance (number of calls in queue, agents available,
oldest call waiting, number of calls abandoned, etc.). The system also provides
daily statistical information on each representative including number of calls
handled, average talk time, percentage of time spent on calls, and total hours
staffed. Reporting for virtually any time period is easily accessible through
the system. Service targets for the department are to answer each call in 25
seconds or less and to service a minimum of 95% of all agent calls received on
Mondays and 97% of all calls for the remainder of the week.
(D) A correspondence and research item tracking system is utilized to
insure that any cardholder dispute or inquiry which requires investigation is
tracked until resolved. Basically, any inquiry (either written or received via
telephone) which requires research is entered into the system. It is assigned a
tracking number which identifies it by type of inquiry and date received. The
item remains in the system until it has been resolved. Items which do not
require research (account updates, insurance cancellation, etc.) are batched and
processed on a first-in, first-out basis. At Merchant's request, an agreed upon
procedure will be put into place to allow designated representatives of Merchant
to handle customer disputes in conjunction with BNB USA.
(E) If there is a Customer dispute relating to the quality or quantity
of Merchandise or resulting from anything other than an act or omission of BNB
USA, and interest is waived because of that Customer dispute, BNB USA shall
charge the interest waived, which Merchant agrees to pay, beginning on the
thirtieth day after the date of the Sales Slip and ending on the date of
payment.
21. Marketing.
(A) Merchant agrees to market the private label credit card program
contemplated hereunder to its Customers in substantially the same manner as it
has done for the two years previous to the Effective Date of this Agreement.
Examples of marketing promotions to be performed by Merchant include, but are
not limited to, the "Not One Penny More" Promotion, the Credit Limit Increase
Promotion and the Purchase Power Certificates Promotion.
(B) At Merchant's reasonable request, the following marketing services
will be provided by BNB USA at no additional cost to Merchant:
(page 129)
(1) Customized credit cards, credit card carriers and
applications. In connection therewith, Merchant will provide camera ready
artwork within size specifications.
(2) Lists and/or mailing labels of Merchant cardholders.
These lists can be provided on paper, floppy disk or magnetic tape. As
requested, special criteria can be used to pull specific Customer groups such as
zero balance accounts or Customers with a specific line of credit available.
(3) Customized billing statements which host the Merchant
logo. A description of merchandise can be generated on the Customer statement if
department codes or SKU descriptions are captured and provided on daily
transmissions.
(4) Statement messages, including messages which notify
Customers of sale dates, sale items and special features, and also which send
good wishes for a particular holiday. A message may be sent with up to 220
characters.
(5) Statement inserts. Two inserts per statement are
allowed. Legal disclosures will take precedence over statements.
(6) An extensive series of management reports, which include
monthly and year-to-date data. BNB USA will provide special management reports,
such as zero-balance activation reports or frequent user reports. Reports are
available in hard copy, magnetic tape, and floppy disk, and mailing labels can
also be provided.
(C) BNB USA can coordinate a direct mail program, from obtaining a
mailing list to processing and tracking responses. The cost of such a program
will be paid as mutually agreed between the parties.
22. Terms of Cardholder Agreements.
(A) A factor of not more than 2.8% of the amount financed or $10,
whichever is greater, is used to determine a Customer's monthly payment. The
Customer payment does not change in tandem with the balance.
(B) An annual percentage rate of the Prime Rate of BNB USA plus not
more than 13.4% will be charged using the two-cycle average daily balance
method. The minimum annual percentage rate, however, shall be 18.9%.
23. Term and Termination of the Agreement.
(A) Term. This Agreement shall become effective on May 1, 1997 (the
"Effective Date") and shall terminate one hundred eighty (180) days after either
party provides notice to the other party of its intention to terminate. The
termination of this Agreement shall not terminate, affect
(page 130)
or impair any rights, obligations or liabilities of either party hereto which
may accrue prior to such termination or which, under the terms of this
Agreement, continue after the termination.
(B) Notwithstanding the foregoing, if a bankruptcy filing is made by or
against Merchant, all of Merchant's obligations to BNB USA shall, at BNB USA's
option, become immediately due and payable, and BNB USA shall have the option to
terminate this Agreement immediately. Further, if there is any material change
in any law or regulation or in the operation, assets, condition (financial or
otherwise), business or ownership of Merchant, BNB USA may terminate this
Agreement upon written notice, such termination to be effective thirty (30) days
after delivery of such notice. In the event of termination, BNB USA shall have
no further obligation to Merchant and may cease purchasing Sales Slips.
(C) Upon termination, BNB USA agrees to purchase those Sales Slips
properly generated as a result of transactions prior to or on date of
termination, and Merchant's representations, covenants, warranties and
undertakings with respect to all Sales Slips purchased on or before such date
shall remain in full force and effect. Upon termination, all Sales Slips,
cardholder agreements, and other documents provided by BNB USA for use in
connection with the program contemplated hereunder then in Merchant's possession
shall be returned to BNB USA. The right of Merchant to make sales and to use
advertising displays, Sales Slips, and other items and materials developed for
use in the program shall continue only so long as this Agreement remains in
effect and unterminated. Termination of this Agreement will not in any way
relieve Merchant of its obligations hereunder.
(D) Merchant shall honor, unless BNB USA directs otherwise, the credit
card for cardholders existing on the date of termination who are covered by this
Agreement after termination of this Agreement until all accounts are liquidated
or until twelve (12) months after termination of this Agreement, whichever is
sooner (the "Liquidation Period"). If the credit card is so honored during the
Liquidation Period, the pertinent provisions of this Agreement relating thereto
shall survive termination.
24. Securitization. BNB USA shall have the right to securitize and sell the
portfolio or any part thereof by itself or as part of a larger offering at any
time; provided, however, that BNB USA shall retain the servicing rights and
obligations of the portfolio during the term of this Agreement. BNB USA shall
give prior notice to Merchant if it intends to securitize and sell the portfolio
hereunder.
25. Merger with, Consolidation with, or Purchase of, a Retailer of Furniture. If
Rhodes proposes to merge with, consolidate with, or purchase the stock or assets
of, another retailer of furniture, Rhodes will first contact BNB USA to inquire
as to whether BNB USA would have an interest in purchasing the receivables of
that retailer of furniture. Rhodes will not contact any other third party for
the purpose of inquiring as to whether that party has an interest in purchasing
such
(page 131)
receivables until notified by BNB USA that BNB USA is not interested in
purchasing such receivables. If BNB USA proposes to purchase said receivables
after investigation, BNB USA must so notify Rhodes within thirty (30) days of
the date BNB USA was notified of the proposed purchase by Rhodes. If BNB USA is
first notified of a possible purchase of such receivables through Rhodes, BNB
USA agrees that it may only purchase such receivables through Rhodes.
26. Credit Insurance.
(A) Payment of Premiums. Rhodes has entered into an Agency Agreement
with Union Security Life Insurance Company ("Union Security"), dated as of April
1, 1979, as amended, and another Agency Agreement with Union Security, dated as
of April 1, 1979, as amended, and an Agency Agreement with Union Security dated
as of August 1, 1984, as amended, an Insurance Service Agreement with Bonnie S.
Connel, dated as of August 1, 1984, as amended, and an Agency Agreement with
American Bankers dated as of November 1, 1994 (collectively, the "Insurance
Agreements"), which are the only credit life insurance agreements between Rhodes
and any insurance carriers in effect at the Effective Date of this Agreement,
under which Rhodes is obligated to remit credit insurance premiums received from
its Customers to Union Security and American Bankers. After the Closing Date,
BNB USA shall remit any insurance premiums received to Rhodes, and Rhodes shall
remit those premiums directly to Union Security and American Bankers.
(B) Right of First Refusal. BNB USA is affiliated with certain
corporations that provide credit-related insurance ("Affiliates"). If Rhodes
proposes to terminate any of the Insurance Agreements and enter into an
agreement with a third party to provide credit-related insurance for its
customers, BNB USA's Affiliates shall have the right to enter into such an
agreement on the same terms and conditions as offered to the third party. Within
fifteen (15) days after receipt of a bona fide offer from a third party, Rhodes
shall notify BNB USA's Affiliates, as then designated by BNB USA, and those
Affiliates may exercise the right granted hereunder by written notice within
fifteen (15) days after receipt of said notice from Rhodes.
27. Miscellaneous.
(A) Notices. Notices are effective when mailed, postage prepaid, by
registered or certified mail, return receipt requested, to the last known
address of either Merchant or BNB USA.
(B) Binding Effect. This Agreement shall bind Merchant and BNB USA and
their successors or assigns; provided, however, that this Agreement may not be
assigned by either party without the written consent of the other parties.
(page 132)
(C) Attorney's Fees. In the event either party institutes legal
proceedings to enforce its rights under this Agreement, the successful party
shall be entitled to reasonable attorney's fees from the other party.
(D) Changing this Agreement. BNB USA shall have the right to change
this Agreement and any applicable schedule at any time by mailing Merchant a
written notice at least ninety (90) days before the changes are to become
effective. Merchant hereby agrees to abide by any changes made that are not
material. Merchant shall only have the right to accept or reject material
changes within forty-five (45) days after receipt of notice. If Merchant does
not respond in the forty-five (45) day period, such material changes will become
effective. In the event that Merchant rejects material changes in the forty-five
(45) day period, such changes will not be made, and BNB USA may, at its option,
terminate this Agreement immediately upon notice at the end of the ninety (90)
day (or longer) notice period.
(E) Grant of Authority. Merchant authorizes and grants its power of
attorney to BNB USA to endorse Merchant's name upon and/or to deposit in BNB
USA's account any check, money order, or other forms of payment made by a
Customer on a BNB USA account.
(F) Entire Agreement. This Agreement (including any Addenda and
Schedules) expresses the entire agreement of BNB USA and Merchant and may be
changed or supplemented only as set forth in Section 27(D) above.
(G) Snap Center. During the term of this Agreement, BNB USA will make
SNAP available to Merchant seven (7) days a week during the following hours:
Monday - Saturday 8:00 a.m. - 12:00 Midnight Eastern Time
Sunday 10:00 a.m. - 9:00 p.m. Eastern Time
Should the SNAP Center be unavailable, BNB USA will not be
held responsible for any losses that Merchant might suffer as a result of
non-access to SNAP.
(H) Authorization Facility. During the term of this Agreement, BNB USA
will make the Authorization Facility available to Merchant. Merchant will remain
solely responsible for any appropriate maintenance service necessary to maintain
in working order the credit authorization terminals and data processing systems
located in Merchant's branches. Merchant will remain solely responsible for any
damage or loss borne by such terminals and systems. Should any state or local
sales or use taxes, or taxes of a similar nature be levied on the access granted
by BNB USA to Merchant, Merchant shall be responsible for payment of such taxes
whether directly to the taxing authority or as reimbursement to BNB
(page 133)
USA. BNB USA shall not be held responsible for any losses that Merchant might
suffer as a result of non-access to the Authorization Facility. If the
Authorization Facility is unavailable, BNB USA shall provide authorization via a
toll free telephone number. A voice response authorization system is also
available as a back-up to the electronic authorization process. Voice
authorization is available seven days a week during the following hours:
Monday - Saturday 8:00 a.m. - Midnight Eastern Time
Sunday 9:00 a.m. - Midnight Eastern Time
(I) BNB USA will install a dedicated line and a connecting modem at
Merchant's headquarters at no additional cost to Merchant.
(J) Sale or Exchange of Account Information. Merchant shall not,
without BNB USA's consent, sell, provide, or exchange account information in the
form of imprinted sales slips, carbon copies of imprinted sales slips, mailing
lists, tapes, or any other media obtained by reason of a transaction hereunder
to any third party other than to (i) Merchant's agent for the purpose of
assisting Merchant in connection with the BNB USA revolving credit program or
pursuant to a government request, (ii) Bencharge or another third party pursuant
to Section 2, or (iii) the credit insurer(s) on the cardholders' accounts.
(K) Advertising and Promotional Material.
(1) Any advertising related to BNB USA credit programs that
is descriptive of terms must be reviewed and authorized in writing by BNB USA.
(2) Promotional advertising materials should be displayed in
highly visible locations throughout the place(s) of business.
(3) Customization of promotional and advertising materials or
the use of BNB USA logos and service marks must be reviewed and authorized in
writing by BNB USA and Merchant, which authorization by either party shall not
be unreasonably withheld.
(4) Customized promotional and advertising materials must be
updated whenever updates to the related non-customized materials are made by BNB
USA.
(L) Right to Remove An Account: BNB USA reserves the right to remove a
Customer's revolving credit account from its system after a period of inactivity
of twenty-four (24) months or on any other reasonable basis.
(M) Acceptance of Payments: Merchant may solicit and accept a
payment made by a Customer on a BNB USA account; provided, however, that
(page 134)
if Merchant accepts such a payment, Merchant shall either (i) notify BNB USA of
its acceptance of such payment, whereupon BNB USA shall deduct such payment from
the funds which would be transferred to Merchant in accordance with Section
18(A); provided, however, that this option (i) may only be chosen by Merchant if
there are sufficient funds from which a deduction may be made, or (ii) within
three (3) days of acceptance, remit to BNB USA such payments; provided, however,
that Merchant may no longer solicit and accept payments hereunder if notified to
cease doing so by BNB USA.
(N) Effect of Statutes and Regulations. Notwithstanding any of the
provisions of the Agreement to the contrary, this Agreement shall be deemed to
be amended to conform with the applicable laws of the State of Delaware and of
the United States, now or hereafter enacted or decided, or as amended from time
to time, and all rules and regulations from time to time promulgated under the
authority of such laws.
(O) Solicitation. Merchant authorizes BNB USA to do the following: 1)
solicit a Customer for any other products or services BNB USA offers; 2) provide
information on a Customer's account, consumer report information, and any other
information BNB USA may have about a Customer to affiliates, subsidiaries, or
agents for possible solicitation for financial products or services they offer.
However, upon a Customer's written request to the address shown on his monthly
billing statement, BNB USA will not make this type of information about that
Customer available to others.
(P) Trademarks and Licenses. During the term of this Agreement, BNB USA
is authorized to use Merchant's tradenames, trademarks, or servicemarks in its
advertising, signs, brochures, credit cards, forms and the like, provided that
BNB USA uses such tradenames, trademarks, or servicemarks only in connection
with the financing program contemplated by this Agreement in a manner consistent
with the preservation of such rights under any applicable law, upon the approval
of Merchant, which approval shall not be unreasonably withheld. BNB USA
recognizes that at the end of the Liquidation Period, BNB USA shall immediately
cease and discontinue to use any of Merchant's tradenames, trademarks, or
servicemarks and shall have no interest or right to use any of Merchant's
tradenames, trademarks, or servicemarks for any purpose thereafter, except as to
collection of accounts.
(Q) Applicable Law. To the extent federal law does not otherwise
govern, this Agreement will be governed by and interpreted in accordance with
the laws of the State of Delaware.
(PAGE)
Dated: May 12, 1997
(page 135)
RHODES, INC.
By: /s/ Joel H. Dugan
(signature of officer)
Title:
Senior Vice President
Address:
4370 Peachtree Rd.
Atlanta, GA 30319
H Y ROOM STORES, INC.
By: /s/ Roy B. Goodman
(signature of officer)
Title:
Senior Vice President
Address:
2235 Staples Mill Rd.
Richmond, VA 23230
BENEFICIAL NATIONAL BANK USA
By: /s/ Richard Klesse
(signature of officer)
Title:
Executive Vice President
Address:
200 Beneficial Center
Peapack, NJ 07977
(page 136)
Schedule A
I. Standard Plan. The purchase price for Net Sales Slips under the
Standard Plan shall be the unpaid balance of the Amount Financed due from
a Customer to Rhodes plus a participation of 1.40%.
II. 90 Days - Same as Cash with Payments Plan. The purchase price for
Net Sales Slips under the 90 Days - Same as Cash with Payments Plan shall
be the unpaid balance of the Amount Financed due from a Customer to
Rhodes less a discount of 1.05%.
III. 90 Days - Same as Cash without Payments Plan. The purchase price
for Net Sales Slips under the 90 Days - Same as Cash without Payments
Plan shall be the unpaid balance of the Amount Financed due from a
Customer to Rhodes less a discount of 1.05%.
IV. 180 Days - Same as Cash with Payments Plan. The purchase price for
Net Sales Slips under the 180 Days - Same as Cash with Payments Plan
shall be the unpaid balance of the Amount Financed due from a Customer to
Rhodes less a discount of 1.26%.
V. 180 Days - Same as Cash without Payments Plan. The purchase price
for Net Sales Slips under the 180 Days - Same as Cash without Payments
Plan shall be the unpaid balance of the Amount Financed due from a
Customer to Rhodes less a discount of 1.64%.
VI. 12 Months - Same as Cash with Payments Plan. The purchase price
for Net Sales Slips under the 12 Months - Same as Cash with Payments Plan
shall be the unpaid balance of the Amount Financed due from a Customer to
Rhodes less a discount of 5.94%.
VII. 12 Months - Same as Cash without Payments Plan. The purchase price
for Net Sales Slips under the 12 Months - Same as Cash without Payments
Plan shall be the unpaid balance of the Amount Financed due from a
Customer to Rhodes less a discount of 4.24%.
VIII. 24 Months - Same as Cash with Payments Plan. The purchase price for Net
Sales Slips under the 24 Months - Same as Cash with Payments Plan shall be the
unpaid balance of the Amount Financed due from a Customer to Rhodes less a
discount of 15.90%.
IX. 6 Months Deferred Payment and Interest Plan. The purchase price
for Net Sales Slips under the 6 Months Deferred Payment and Interest Plan
shall be the unpaid balance of the Amount Financed due from a Customer to
Rhodes less a discount of 6.35%.
X. 90 Days - No Interest and No Payment Plan. The purchase price for
Net Sales Slips under the 90 Days - No Interest and No Payment Plan shall
be the unpaid balance of the Amount Financed due from a Customer to
Rhodes less a discount of 1.59%.
(page 137)
XI. 120 Days - No Interest and No Payment Plan. The purchase price for
Net Sales Slips under the 120 Days - No Interest and No Payment Plan
shall be the unpaid balance of the Amount Financed due from a Customer to
Rhodes less a discount of 2.12%.
XII. 180 Days - No Interest and No Payment Plan. The purchase price for
Net Sales Slips under the 180 Days - No Interest and No Payment Plan
shall be the unpaid balance of the Amount Financed due from a Customer to
Rhodes less a discount of 6.35%.
XIII. Payment to BNB USA by Rhodes or to Rhodes by BNB USA Based on Volume
Generated under the 12 Months - Same as Cash Plan. On or around July 1, 1995,
BNB USA shall calculate the volume generated under the 12 Months - Same as Cash
Plan for June, 1994, and the percentage of volume under that Plan that has been
paid in full within the specified time period (12 months). This calculation
shall be repeated each subsequent month for volume generated under this plan
through December 31, 1996. After the calculation is completed, BNB USA shall
promptly pay Rhodes the following amounts rounded off to the nearest of the
following percentages:
A. If the percentage of volume that has been paid in full is at
least 35% but less than 45%, neither party will be required to pay the
other party under this Section XIV.
B. If the percentage of volume that has been paid in full is less than
35%, BNB USA shall promptly pay Rhodes the following amounts rounded off to the
nearest of the following percentages:
Percentage Payoff Amount Owed
30% .96% of volume
20% 1.91% of volume
10% 2.86% of volume
0% 3.81% of volume
C. If the percentage of volume that has been paid in full is 45% or
more, Rhodes shall promptly pay BNB USA the following amount rounded off to the
nearest of the following percentages:
Percentage Payoff Amount Owed
100% 5.71% of volume
90% 4.75% of volume
80% 3.80% of volume
70% 2.85% of volume
60% 1.90% of volume
50% .95% of volume
XIV. Payment to BNB USA by Rhodes or to Rhodes by BNB USA Based on
Volume Generated under the 24 Months - Same as Cash Plan. On or around
October 1, 1994, BNB USA shall calculate the volume generated under the
(page 138)
24 Months - Same as Cash Plan for September, 1992, and the percentage of volume
under that Plan that has been paid in full within the specified time period (24
Months). This calculation shall be repeated each subsequent month for volume
generated under this plan through December 31, 1996. After the calculation is
completed, BNB USA shall promptly pay Rhodes the following amounts rounded off
to the nearest of the following percentages:
Percentage Payoff Amount Owed
100% 0% of volume
90% 1.61% of volume
80% 3.23% of volume
70% 4.84% of volume
60% 6.45% of volume
50% 8.07% of volume
40% 9.68% of volume
30% 11.30% of volume
20% 12.91% of volume
10% 14.52% of volume
XV. Adjustments to Credit Criteria or Purchase Price for Sales Slips.
Periodically, BNB USA will monitor the delinquency roll rates and score
distributions to determine if net charge-offs are projected to be greater than
5% of the loans outstanding. If the delinquency roll rates and score
distributions are projected to be more than 5% of the loans outstanding, BNB USA
and Merchant shall enter into good faith discussions to adjust the credit
criteria or the premium or discount percentages, or a combination of both, that
apply to the purchase price for Net Sales Slips under Sections I through XII. If
the parties cannot agree on an adjustment to the credit criteria or premium or
discount percentages within thirty (30) days after notice by BNB USA of a
proposed adjustment hereunder, BNB USA may change said criteria or percentages
in its discretion upon notice to Merchant.
XVI. Accounting. BNB USA shall provide to Rhodes an accounting of the
total purchase price paid for all Net Sales Slips submitted under each
Plan on a monthly basis.
XVII. Credit Card Enhancement Programs. BNB USA may not contract with any third
party to provide credit card enhancement programs to the cardholders, such as
travel programs and credit card registration programs, without the prior written
approval of Merchant, which approval shall not be unreasonably withheld. BNB USA
agrees to negotiate with Merchant on the amount of the net income from such
programs that BNB USA will remit to Merchant if BNB USA contracts with any such
third party in accordance with this Section XVII. If the parties cannot agree on
the amount to be remitted to Merchant by BNB USA, BNB USA shall not contract
with that third party or parties to provide said programs.
(page 139)
XVIII. Payment to Merchant for Approved Applications. BNB USA shall pay Merchant
the amount of $4.00 for each new application submitted pursuant to this
Agreement which BNB USA approves. Within the first ten (10) business days of
each month, BNB USA shall calculate and pay Merchant for the prior month's total
of such approved applications. Second Look applications are excluded from this
calculation.
(page 140)
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
FISCAL YEAR ENDED
February 28, February 29, February 28,
1997 1996 1995
Primary Earnings Per Share:
Average number
shares outstanding 49,360,120 48,559,901 48,458,905
Net effect of stock
options 786,119 1,043,736 1,494,894
Average number of
shares as adjusted 50,146,239 49,603,637 49,953,799
Net earnings $40,185,000 $41,504,000 $66,813,000
Per share amount $0.80 $0.84 $1.34
Fully Diluted Earnings Per Share:
Average number of
shares outstanding 49,360,120 48,559,901 48,458,905
Net effect of stock
options 796,990 1,084,671 1,494,894
Average number of
shares as adjusted 50,157,110 49,644,572 49,953,799
Net earnings $40,185,000 $41,504,000 $66,813,000
Per share amount $0.80 $0.84 $1.34
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.
(page 141)
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 Funding Corporation, Inc., incorporated under the laws of
Delaware;
MacSaver Insurance Company, Ltd., incorporated under the laws of
Bermuda;
Rhodes, Inc., incorporated under the laws of Georgia.
(page 142)
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, (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, and (v) the Registration Statement No.
333-07753 on Form S-3 of Heilig-Meyers Company of our report dated March 25,
1997 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 28, 1997.
/s/ Deloitte & Touche LLP
Richmond, Virginia
May 27, 1997
(page 143)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> FEB-28-1997
<CASH> 14959000
<SECURITIES> 0
<RECEIVABLES> 638079000
<ALLOWANCES> 41120000
<INVENTORY> 433277000
<CURRENT-ASSETS> 1134057000
<PP&E> 497132000
<DEPRECIATION> 130383000
<TOTAL-ASSETS> 1837158000
<CURRENT-LIABILITIES> 583920000
<BONDS> 561489000
0
0
<COMMON> 108828000
<OTHER-SE> 533793000
<TOTAL-LIABILITY-AND-EQUITY> 1837158000
<SALES> 1342208000
<TOTAL-REVENUES> 1593119000
<CGS> 876142000
<TOTAL-COSTS> 876142000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 80908000
<INTEREST-EXPENSE> 47800000
<INCOME-PRETAX> 61900000
<INCOME-TAX> 21715000
<INCOME-CONTINUING> 40185000
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<EXTRAORDINARY> 0
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