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, 1999 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.)
12560 West Creek Parkway, Richmond, Virginia 23238
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 784-7300
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 Exchange
Rights to purchase Preferred New York Stock Exchange
Stock, Series A, $10.00 Pacific Exchange
Par Value
Securities registered pursuant to Section 12(g)of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days. Yes X No .
---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of May 27, 1999 was approximately $329,240,770.
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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 27, 1999
by (ii) the number of shares of the registrant's common stock not held by the
executive 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 27, 1999, there were outstanding 59,861,182 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 16, 1999, 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 5
Competition 5
D. Store Operations
General 6
Merchandising 7
Advertising and Promotion 7
Credit Operations 8
Distribution 9
Customer Service 9
E. Corporate Expansion 10
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 12
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 15
ITEM 6. SELECTED FINANCIAL DATA 16
ITEM 7. MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS 18
ITEM 7A. QUANTITATIVE and QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 26
ITEM 8. FINANCIAL STATEMENTS and SUPPLEMENTARY DATA 27
ITEM 9. CHANGES in and DISAGREEMENTS with ACCOUNTANTS
on ACCOUNTING and FINANCIAL DISCLOSURE 52
PART III
ITEM 10. DIRECTORS and EXECUTIVE OFFICERS of the REGISTRANT 52
ITEM 11. EXECUTIVE COMPENSATION 52
ITEM 12. SECURITY OWNERSHIP of CERTAIN BENEFICIAL OWNERS
and MANAGEMENT 52
ITEM 13. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS 52
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, and
REPORTS on FORM 8-K 53
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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 and
bedding. 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 acquisitions are 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, the December 1996
acquisition of the Atlanta, Georgia-based Rhodes, Inc., a publicly traded home
furnishings retailer with, at the time of acquisition, 105 stores in 15 states,
and the February 1997 acquisition of certain assets relating to the 10 stores of
The RoomStore, Inc. of Fort Worth, Texas. The Company also acquired the assets
of the 19-store Star Furniture chain based in North Carolina in February 1997.
The Company acquired Mattress Discounters Corporation and a related corporation
in July 1997, with 169 stores in 10 states and Washington, D.C. The Company also
acquired The Bedding Experts, Inc. with 54 stores in Chicago, Illinois and the
surrounding area in January 1998. The Company also acquired the assets of 5 John
M. Smyth's Homemakers stores, a Chicago, Illinois furniture chain in January
1998, and the 24-store Hub Furniture chain based in Columbia, Maryland in
February 1998 which both currently operate under The RoomStore division. In
addition, the Company acquired substantially all of the operating assets and
liabilities of Guardian Protection Products in September 1998. The Rhodes,
RoomStore, and Mattress Discounters chains continue to operate under their
respective names and formats.
On March 24, 1999, the Company announced that in an effort to
substantially improve the overall financial position of the Company and to
refocus on its core home furnishings operation, a review of strategic
divestiture options of all non-core operating assets is being made. This review
includes the retention of third parties to advise on possible divestiture of the
Rhodes and Mattress Discounters divisions. On May 28, 1999, the Company entered
into a definitive agreement to sell substantially all of its interest in its
Mattress Discounters division. The transaction, which is subject to certain
closing conditions, is expected to close in the second quarter of fiscal 2000.
The Company will retain a 7% interest in Mattress Discounters. The cash proceeds
from the sale, net of transaction costs, are estimated at $206.7 million and
will be used to pay down debt. The Company has continued its evaluation of the
possible divestiture of all or part of its Rhodes division.
B. Industry Segments
The Company has significant operations aligned in four operating
divisions: Heilig-Meyers, The RoomStore, Rhodes and Mattress Discounters. For
the financial results of the Company's operating divisions, see Note 15 of Notes
to Consolidated Financial Statements in Item 8 of Part II found on page 47 of
this annual report.
The Company's "Heilig-Meyers" division is associated with the Company's
historical operations. The majority of the Heilig-Meyers stores operate in
smaller markets with a broad line of merchandise. The "Rhodes" division is
comprised of 97 stores as of April 30, 1999. The Rhodes division's retailing
strategy is selling quality furniture to a broad base of middle income
customers. Stores under "The RoomStore" division 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. The RoomStore also includes the 32
stores operating in Puerto Rico under the "Berrios" name, which like the
Heilig-Meyers stores, offer a broad line of furniture. The "Mattress
Discounters" division was acquired in fiscal 1998 and includes 236 stores as of
April 30, 1999. Mattress Discounters is the Nation's largest retail bedding
specialist. Stores are classified by operating format rather than by the name
under which a store is operated.
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C. Nature of Business
General
The Company is the Nation's largest specialty retailer of furniture,
bedding and related items with 1,253 stores (as of April 30, 1999), 1,221 of
which are located in 35 states and Washington, D.C., with the remainder in
Puerto Rico. The Company's Heilig-Meyers stores are primarily located in small
towns and rural markets in the southern, mid-western and western Continental
United States. The 97 Rhodes stores are primarily located in the mid-sized
markets and metropolitan areas of 14 southern and midwestern states. The 107
stores of The RoomStore are primarily located in 7 states, including Texas,
Illinois and Maryland and in Puerto Rico. The 236 Mattress Discounters stores
are primarily located in 11 eastern states, Washington D.C., California and
Colorado.
The Company's operating strategies include: (1) offering a broad
selection of competitively priced home furnishings, including furniture and
accessories, and bedding, and in the Heilig-Meyers stores and in the Berrios
stores in Puerto Rico, 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 and repair service for
consumer electronics and other mechanical items.
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.
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.
The RoomStore and Rhodes formats compete in mid-to-large metropolitan
markets and serve middle income customers. The Mattress Discounters stores also
operate in metropolitan markets.
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.
5
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D. Store Operations
General
The Company's Heilig-Meyers stores generally range in size from 12,000
to 35,000 square feet, with the average being approximately 25,000 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
added 8 of these stores in fiscal 1997, 16 in fiscal 1998 and 3 in fiscal 1999.
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
1999, the Company remodeled 26 existing stores and plans to remodel
approximately 20 existing stores in fiscal 2000. The existing Rhodes, The
RoomStore, and Mattress Discounters stores average approximately 34,000, 35,000,
and 4,000 square feet, respectively. The Company does not have significant
remodeling activities planned for these formats during fiscal 2000.
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. For executive management purposes, stores are
grouped by operating format. For operational purposes, stores are generally
grouped within their format by geographic market.
The Company has an 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, store administration, and
where applicable, credit extension and collection. 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 with
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. In fiscal
1995, the Company made improvements to inventory management by use of
just-in-time ordering and backhauling. In fiscal 1995, the Company completed the
installation of a new satellite system. This system provides immediate
communication between the Company's corporate headquarters and the 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, for the Heilig-Meyers stores, its new inventory
reservation system and enhanced target marketing programs during fiscal 1997.
The Rhodes, The RoomStore, and Mattress Discounters formats have operating
systems in place that provide similar operating capabilities.
6
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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. The RoomStore and Rhodes stores primarily sell
mid-price-point furniture and accessories, and bedding. The Mattress Discounters
stores are specialty bedding retailers and sell across the full spectrum of
bedding price points. During the three most recent fiscal years, the percentage
of store sales derived from the various merchandising categories were as follows
(by format):
1999 1998 1997
---- ---- ----
Heilig-Meyers Furniture:
Furniture and accessories 64% 60% 60%
Consumer electronics 7 9 10
Bedding 13 13 12
Appliances 7 7 8
Other (e.g. jewelry and
seasonal goods) 9 11 10
Rhodes:
Furniture and accessories 90 89 89
Bedding 10 11 11
The RoomStore:
Furniture and accessories 90 90 n/a
Bedding 10 10 n/a
Mattress Discounters:
Furniture and accessories 10 10 n/a
Bedding 90 90 n/a
The Company's stores carry a wide variety of items within each
merchandise category to appeal to individual tastes and preferences. The Company
believes this broad selection of products has enabled it to expand its customer
base and increase repeat sales to existing customers. By carrying seasonal
merchandise (heaters, air conditioners, lawn mowers, outdoor furniture, etc.) in
its Heilig-Meyers stores, the Company has been able to moderate the seasonal
fluctuations in its sales that are common to the industry and, in particular,
small towns.
While the basic merchandise mix within each operating format remained
fairly constant during fiscal 1999, the Company continued to refine its
merchandise selections to capitalize on variations in customer preferences.
During fiscal 1999, the Company continued to strengthen its vendor
relationships. In addition to providing purchasing advantages, these
relationships provide warehousing and distribution arrangements that 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 for its
Heilig-Meyers stores, which accounted for approximately 38% of the Company's
Heilig-Meyers store advertising expenses in fiscal 1999. In fiscal 1999, the
Heilig-Meyers format distributed over 210 million direct mail circulars. This
included monthly circulars sent by direct mail to over fifteen million
households on the Heilig-Meyer's mailing list and special private sale circulars
mailed to approximately 1.3 million of these households each month, as well as
during special promotional periods. In its Rhodes stores, direct mailing
comprised approximately 20% of total advertising expenses in fiscal 1999, with
circulars being mailed to approximately six million households per promotion.
Included are amounts associated with the two color catalogues distributed by
Rhodes in the May-June and October-November time frame of fiscal 1999. Direct
mailing expenses accounted for approximately 15% of advertising expenses at The
RoomStore during fiscal 1999, with circulars being mailed to approximately
900,000 customers per month. Direct mailing expenses comprised approximately 40%
of total advertising expenses at Mattress Discounters during fiscal 1999, with
approximately fourteen million circulars mailed each month.
In addition to the Company's utilization of direct mail circulars,
television and radio commercials are produced for each format 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
regularly conducts approximately 42 Heilig-Meyers store promotional events each
year. In addition to these events, individual stores periodically conduct
promotional events locally. The Company generally conducts promotions twice each
month in its The RoomStore format and weekly in its Rhodes and Mattress
Discounters formats.
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During fiscal 1999, the Company continued to utilize market
segmentation techniques 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 at its Heilig-Meyers
stores, and therefore, promotes credit availability by disclosing monthly
payment terms in those 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.
The Company believes its credit program fosters customer loyalty and
repeat business. Approximately 70% to 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
installment contracts at origination for the fiscal year ended February 28,
1999, was approximately 18 months. The Company accepts major credit cards in all
of its stores and, in addition, offers a revolving credit program featuring its
private label credit cards. The Company promotes this program by direct mailings
to revolving credit customers of acquired stores and potential new customers in
targeted areas. For the first seven months of fiscal 1999, credit extension and
collection of Heilig-Meyers revolving accounts were handled centrally from the
Company's Credit Center located in Richmond, Virginia. In October 1998, the
Company completed a reorganization of the Heilig-Meyers revolving credit
program. At that point, a new third party was engaged to provide this credit
option and to service the accounts. The Company does not have any recourse
obligation related to these accounts.
The Company also offers revolving credit programs, which are
underwritten by third parties, in The RoomStore, Rhodes and Mattress Discounters
formats. The Company does not service or generally provide recourse on these
accounts. Credit applications, sales, and many payments on account are generally
processed electronically through the point-of-sale systems. Approximately 50% of
The RoomStore, 55% of Rhodes, and 10% of Mattress Discounters fiscal 1999 sales
were made through the revolving credit programs.
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 has been immaterial. Finance charges are included in revenues on a monthly
basis as earned. During fiscal 1999, finance income amounted to $231,369,000, or
approximately 8.5% 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 in all formats except
Mattress Discounters: 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.
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Distribution
As of April 30, 1999, the Company operates eight Heilig-Meyers
distribution centers in the Continental U.S. These centers are located in
Orangeburg, South Carolina; Rocky Mount, North Carolina; Russellville, Alabama;
Mount Sterling, Kentucky; Thomasville, Georgia; Moberly, Missouri; Hesperia,
California; and Athens, Texas. The Company relocated the Fontana, CA
Distribution Center during fiscal 1998 to a larger, 400,000 square foot facility
located in Hesperia, CA. The new distribution center also contains the relocated
Fontana Service Center as well as an outlet store. Currently, the Company's
Heilig-Meyers distribution network has the capacity to service over 900 stores
in the Continental U.S. The Company also operates six Rhodes distribution
centers, which collectively have more than 870,000 square feet and include home
delivery operations in certain markets. The RoomStore has twelve distribution
centers, including two centers in Puerto Rico, which collectively have
approximately 1,600,000 square feet. Mattress Discounters has nine distribution
centers which collectively have approximately 390,000 square feet.
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 25% of its purchased inventory in the Heilig-Meyers stores during
fiscal 1999.
Typically, each of the Company's Heilig-Meyers stores is located within
250 miles of one of the eight distribution centers, each Rhodes store is within
100 miles of one of the six Rhodes distribution centers, each of The RoomStore
stores is located within 35 miles of the twelve The RoomStore distribution and
delivery centers, and each Mattress Discounters store is located within 30 miles
of the nine Mattress Discounters distribution and delivery centers. The Company
operates a fleet of trucks which generally delivers merchandise to each
Heilig-Meyers store at least twice a week. In the Rhodes, The RoomStore and
Mattress Discounters formats, which are located in larger cities, the Company
also utilizes centralized delivery centers for home delivery. 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 Heilig-Meyers stores. The
Company operates Heilig-Meyers service centers in Fayetteville, North Carolina;
Moberly, Missouri; Hesperia, California and Athens, Texas. The Fayetteville
Service Center occupies approximately 32,000 square feet and has the capacity to
process 2,000 repairs 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 repairs a week. The Hesperia Service Center occupies 35,000
square feet and has the capacity to process 2,500 repairs a week. The Athens
Service Center occupies 30,000 square feet and has the capacity to process 2,000
repairs a week. The service centers provide service for all consumer electronic
items, most mechanical items (except major appliances, which are serviced
locally) and watches. The service centers are also authorized to perform repair
work under certain manufacturers' warranties. Service center trucks visit
Heilig-Meyers stores weekly, allowing one-week turnaround on most repair orders.
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E. Corporate Expansion
The Company has grown from 570 stores at February 28, 1994, to 1,253
stores at April 30, 1999. Over this time period the Company has acquired new
operating formats as a result of the Rhodes, The RoomStore and Mattress
Discounters acquisitions.
The following table lists the Company's stores by state and format as
of April 30, 1999:
Heilig- The Mattress
State Meyers Rhodes RoomStore Discounters Total
Alabama 33 10 43
Arizona 15 15
California 82 73 155
Colorado 4 6 10
District of Columbia 2 2
Florida 35 20 6 61
Georgia 57 18 75
Idaho 4 4
Iowa 19 19
Illinois 25 2 21 50 98
Indiana 22 1 4 27
Kansas 1 1
Kentucky 30 3 33
Louisiana 20 20
Maryland 2 14 26 42
Massachusetts 18 18
Michigan 14 14
Mississippi 29 1 30
Missouri 29 6 35
Montana 2 2
Nevada 5 5
New Hampshire 3 3
New Mexico 10 10
North Carolina 109 11 120
Ohio 33 9 42
Oklahoma 11 11
Oregon 2 5 7
Pennsylvania 22 8 30
Puerto Rico 32 32
Rhode Island 1 1
South Carolina 44 6 50
Tennessee 53 7 60
Texas 33 25 58
Virginia 45 2 5 24 76
Washington 12 1 13
West Virginia 26 26
Wisconsin 4 1 5
--- --- --- ---- -----
813 97 107 236 1,253
=== === === ==== =====
Stores listed under the RoomStore format include:1)former Heilig-Meyers
stores in Illinois which have been converted to the RoomStore format, but
continue to operate under Heilig-Meyers signage, 2) 3 acquired stores in
Illinois that operate under the John M. Smyth's Homemakers name and 3) 32 stores
operated under the Berrios name. All of these stores are under the supervision
of the RoomStore management team.
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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, 1999, the
Company opened 52 stores and closed 56 stores for a net decrease of 4 stores. Of
the 52 new stores, 49 were operations begun by the Company in vacant existing
buildings and 3 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 continue its slower, selective growth
strategy for the Heilig-Meyers division. In selecting new Heilig-Meyers
locations, the Company intends to follow its established strategy of generally
locating stores within 250 miles of a distribution center and in towns with
populations of 5,000 to 50,000 that are over 25 miles from the closest
metropolitan market. The Company believes that it has substantial growth
potential in certain of its other formats. Growth opportunities of The RoomStore
format is being evaluated. The Company plans to expand this format as the
appropriate markets are identified. As noted in the introduction, however, the
Company is evaluating the possible divestiture of the Rhodes division and has
entered into an agreement to sell substantially all of its interest in the
Mattress Discounters division.
F. Other Factors Affecting the Business of the Company
Suppliers
During the fiscal year ended February 28, 1999, the Company's ten
largest suppliers accounted for approximately 33% of consolidated merchandise
purchases. 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.
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.
The marks "Mattress Discounters" and "Bedding Experts" are federally
registered service marks of the Company which were acquired in fiscal year 1998.
These registrations can be kept in force in perpetuity through
continued use of the marks and timely applications for renewal.
Seasonality
Quarterly fluctuations in the Company's sales are insignificant.
Employees
As of April 30, 1999, the Company employed approximately 22,500 persons
full- or part-time in the Continental United States, of whom approximately
21,400 worked in the Company's stores, distribution centers and service centers,
with the balance in the Company's corporate offices. As of February 28, 1999,
the Company employed approximately 1,000 persons full- or part-time in Puerto
Rico, of whom approximately 900 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.
11
<PAGE>
ITEM 2. PROPERTIES
As of April 30, 1999, 975 of the Company's stores are on a single
level, with floor space devoted to sales as well 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 278 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.
As of April 30, 1999, the Company owned 73 of its Heilig- Meyers, 11 of
its Rhodes stores and 1 of its Mattress Discounters stores, six of its
Heilig-Meyers and three 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 12560 West
Creek Parkway, 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, 1999, were
approximately $137,900,000. Most vehicles, a majority of the distribution
centers' material handling equipment, and a majority of the Company's data
processing equipment are also leased. In addition, Mattress Discounters operates
a 102,000-square-foot mattress manufacturing facility in Maryland and a
54,000-square-foot mattress manufacturing facility in California. The Company
believes that its facilities are adequate at present levels of operations.
12
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company previously reported involvement in two cases pending in state
court 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. Eubanks v.
Heilig-Meyers Company and Heilig-Meyers Furniture Company (alleging violation of
Georgia statutes and seeking certification of a class of Georgia residents) was
filed on March 5, 1997 in Georgia State Court, subsequently removed to United
States District Court for the Southern District of Georgia, and on July 7, 1997,
remanded to the Superior Court of Liberty County, Georgia. On March 25, 1998,
the court in Eubanks entered an order dismissing the case. The Eubanks case was
refiled on June 23, 1998 and on March 23, 1999, the court in Eubanks entered an
order dismissing the case with prejudice. Wahl v. Heilig-Meyers Company and
Heilig-Meyers Furniture Company (alleging violations of Tennessee statutes and
seeking certification of a class of certain individuals who made purchase in the
Company's Tennessee stores) was filed on June 23, 1997 in Memphis, Tennessee
Chancery Court. The Company's motion to dismiss is pending in the Wahl 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.
13
<PAGE>
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, 1999:
Positions with the Company
or Occupation for the Past
Years with Five Years and Other
Name Age the Company Information
William C. DeRusha 49 30 Chairman of the Board since April
1986. Chief Executive Officer since
April 1984. Director since January
1983.
Donald S. Shaffer 52 - President since April 1999. Chairman
and Chief Executive Officer, Western
Auto Supply Company, a division of
Sears, Roebuck and Company from 1996
to 1999. President and Chief
Executive Officer, Sears Canada from
1994 to 1996.
James F. Cerza, Jr. 51 11 Executive Vice President, Heilig-
Meyers since April 1998. Executive
Vice President, Operations from June
1996 until April 1998. Executive Vice
President, from April 1995 to June
1996. Executive Vice President,
Operations from August 1989 to April
1995.
Irwin L. Lowenstein 63 2 Executive Vice President, Rhodes since
April 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.
James R. Riddle 57 14 Executive Vice President,
The RoomStore / Berrios since April
1998. Executive Vice President, from
April 1995 to April 1998. Executive
Vice President, Marketing from January
1988 to April 1995.
Patrick D. Stern 42 1 Executive Vice President,
The RoomStore / Berrios since April
1998. Executive Vice President, The
RoomStore from June 1997 to April
1998. Vice President, Merchandising,
Value City Furniture (retailer) from
April 1994 to April 1997. Vice
President, Sales and Marketing,
SilverOaks Furniture Manufacturing
prior to 1994.
Roy B. Goodman 41 18 Executive Vice President, Chief
Financial Officer since December 1998.
Senior Vice President, Chief Financial
Officer from July 1997 to December
1998. Senior Vice President, Finance
from April 1995 to July 1997. Vice
President, Secretary and Treasurer
prior to April 1995.
William J. Dieter 59 26 Senior Vice President, Accounting
since April 1986. Chief Accounting
Officer since 1975.
14
<PAGE>
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 Stock and Pacific
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
----------- ------ ----- ---------
1999
4th Quarter $ 8 7/16 $ 6 1/16 $ .07
3rd Quarter 11 1/4 5 5/8 .07
2nd Quarter 14 5/16 11 3/8 .07
1st Quarter 15 15/16 11 3/4 .07
1998
4th Quarter $ 15 3/4 $ 11 15/16 $ .07
3rd Quarter 17 3/16 12 9/16 .07
2nd Quarter 20 14 3/4 .07
1st Quarter 17 7/8 13 3/4 .07
There were approximately 3,300 shareholders of record as of February 28,
1999.
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 $74,576,000 plus 75% of net earnings
adjusted for dividend payouts subsequent to February 28, 1999.
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 under
Rule 506 of Regulation D under the Act.
On September 1, 1998, the Company acquired substantially all of the
operating assets and liabilities of Guardian Protection Products ("Guardian") in
a transaction in which the shareholder of Guardian received 666,667 shares of
the Company's common stock. Unless the Company's common stock trades for at
least ten consecutive trading days during the period from September 1, 1998,
through August 31, 1999, at a per share price of $15.00 or more, additional
shares will be issued so that the acquisition price equals $10 million divided
by the average closing price per share for the Company's common stock for the
ten trading days ending on August 31, 1999, or such earlier date as may be
selected by the Company. The Company has also agreed to issue additional shares
to the former shareholder of Guardian in the event that certain earnings targets
are met over the next two years, however the aggregate purchase price will not
exceed $14.5 million.
15
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<S> <C> <C> <C> <C> <C>
Fiscal Year 1999(1) 1998(1) 1997(1) 1996 1995
(Dollar amounts in thousands except per share data)
Operations Statement Data:
Sales $2,431,152 $2,160,223 $1,342,208 $1,138,506 $ 956,004
Annual growth in sales 12.5% 60.9% 17.9% 19.1% 32.1%
Other income $ 295,206 $ 309,513 $ 250,911 $ 220,843 $ 196,135
Total revenues 2,726,358 2,469,736 1,593,119 1,359,349 1,152,139
Annual growth in revenues 10.4% 55.0% 17.2% 18.0% 33.4%
Costs of sales $1,637,901 $1,451,560 $ 876,142 $ 752,317 $ 617,839
Gross profit margin 32.6% 32.8% 34.7% 33.9% 35.4%
Selling, general and
administrative expense $ 907,913 $ 828,105 $ 526,369 $ 436,361 $ 350,093
Interest expense 75,676 67,283 47,800 40,767 32,889
Provision for doubtful
accounts 107,916 181,645 80,908 65,379 45,419
Store closing and other
charges -- 25,530 -- -- --
Provision (benefit) for
income taxes (1,081) (29,244) 21,715 23,021 39,086
Effective income tax rate (35.5)% (34.7)% 35.1% 35.7% 36.9%
Net earnings (loss) $ (1,967) $ (55,143) $ 40,185 $ 41,504 $ 66,813
Earnings (loss) margin (0.1)% (2.6)% 3.0% 3.7% 7.0%
Net earnings (loss) per share:
Basic(2) $ (0.03) $ (0.98) $ 0.81 $ 0.85 $ 1.38
Diluted(2) (0.03) (0.98) 0.80 0.84 1.34
Cash dividends per share
of common stock 0.28 0.28 0.28 0.28 0.24
Balance Sheet Data:
Total assets $1,947,752 $2,097,513 $1,837,158 $1,288,960 $1,208,937
Average assets per store 1,559 1,674 1,946 1,800 1,869
Accounts receivable, net 254,282 392,765 380,879 518,969 538,208
Retained interest in
securitized receivables
at fair value 190,970 182,158 243,427 -- --
Inventories 493,463 542,868 433,277 293,191 253,529
Property and equipment, net 400,686 398,151 366,749 216,059 203,201
Additions to property and
equipment 87,505 70,921 84,137 40,366 49,101
Short-term debt 377,486 282,365 256,413 207,812 167,925
Long-term debt 547,344 715,271 561,489 352,631 370,432
Average debt per store 740 796 866 783 832
Stockholders' equity 605,102 609,154 642,621 518,983 490,390
Stockholders' equity
per share 10.11 10.36 11.81 10.69 10.10
16
<PAGE>
SELECTED FINANCIAL DATA, cont.
Fiscal Year 1999(1) 1998(1) 1997(1) 1996 1995
(Dollar amounts in thousands except per share data)
Other Financial Data:
Working capital $380,333 $591,397 $550,137 $527,849 $554,096
Current ratio 1.5 1.8 1.9 2.4 2.9
Debt to equity ratio 1.53 1.64 1.27 1.08 1.10
Percentage of debt to debt
and equity 60.4% 62.1% 56.0% 51.9% 52.3%
Rate of return on average
assets(3) 2.3% (0.6)% 4.6% 5.4% 7.8%
Rate of return on average
equity (0.3)% (8.8)% 6.9% 8.2% 14.5%
Number of stores 1,249 1,253 944 716 647
Number of employees 23,352 24,374 19,131 14,383 13,063
Average sales per employee $ 103 $ 99 $ 84 $ 83 $ 81
Weighted average common shares outstanding (in thousands):
Basic 59,331 56,312 49,360 48,560 48,459
Diluted 59,331 56,312 50,146 49,604 49,954
Price range on common stock per share:
High $ 15 15/16 $ 20 $ 24 1/8 $ 27 1/4 $ 36
Low 5 5/8 11 15/16 12 5/8 13 1/2 23 1/4
Close 6 1/2 15 1/2 14 1/8 14 23 5/8
</TABLE>
(1) Operations statement data include operating results of acquisitions
subsequent to the dates of acquisition. Balance sheet data include the financial
position of acquisitions as of fiscal year ends subsequent to the dates of
acquisition. See the description of such acquisitions in the Notes to
Consolidated Financial Statements.
(2) The earnings per share amounts prior to 1998 have been restated as required
to comply with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share." For further discussion of earnings per share and the impact of
Statement No. 128, see the Notes to Consolidated Financial Statements.
(3) Calculated using earnings before interest, net of tax.
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and
RESULTS of OPERATIONS
Heilig-Meyers Company (the "Company") is the Nation's largest retailer of
furniture, bedding and related items and operates under four business segments:
Heilig-Meyers Furniture ("Heilig-Meyers"), Rhodes Furniture, The RoomStore and
Mattress Discounters. This combination of business segments (referred to as
"divisions") has been achieved over the last three fiscal years through
acquisitions and the reformatting of existing stores between segments.
The Heilig-Meyers division is considered the Company's core business. This
division locates its stores primarily in small towns and rural markets in the
southern, mid-western and western Continental United States. The Heilig-Meyers
Furniture division offers its customers the broadest selection of competitively
priced merchandise of the four divisions and approximately 70% to 80% of its
sales have been made through the Company's installment credit program.
The Rhodes division locates its stores primarily in mid-sized markets and
metropolitan areas of 15 southern, midwestern and western states. The Company
acquired the Rhodes division on December 31, 1996. In fiscal 1997, eight stores
and the related support facilities in the South Texas region were converted to
the RoomStore division. Management has completed a thorough review of the Rhodes
operations and has implemented a plan to improve the operating results going
forward. In the third quarter of fiscal 1999, the eight stores in Colorado,
which were not performing at an acceptable level, were divested. For
substantially all of fiscal 1999, the Rhodes division offered a merchandise
selection that was considered higher end and more upscale as compared to the
other divisions. The promotional strategy for Rhodes has been refocused in order
to strengthen and expand its middle-income customer base. Initiatives have been
implemented to provide a stronger focus on major media advertising, more
aggressive price points and event driven promotions.
The RoomStore division employs a room-packaging concept to value-conscious
families in large metropolitan markets and in Puerto Rico. The RoomStore
division originated with the acquisition of stores in the central Texas region
in February 1997 that operated under the RoomStore name. This division was
expanded through the conversion of stores acquired in January 1998 in the
Chicago area and in February 1998 in the Washington-Baltimore area.
Additionally, stores formerly operated as part of the Heilig-Meyers division in
Chicago and Puerto Rico were transferred to the RoomStore division in the fourth
quarter of fiscal 1998. The former Heilig-Meyers stores and the Puerto Rican
stores, which operate under the "Berrios" name, offer in-house installment
credit programs to their customers. Historical information presented in
managements discussion and analysis has been restated to reflect the current
division alignment.
Mattress Discounters, the Nation's largest specialty bedding retailer,
offers a broad selection of bedding and bedding related merchandise at a wide
range of price points to consumers at all income levels. These stores are
located in major urban markets across the Continental United States. This
division resulted from the acquisition of Mattress Discounters in July 1997, and
was expanded into the Chicago market in January 1998 with the acquisition of The
Bedding Experts, Inc.
On March 24, 1999, the Company announced that in an effort to substantially
improve the overall financial position of the Company and to refocus on its core
home furnishings operation, a review of strategic divestiture options of all
non-core operating assets is being made. This review includes the retention of
third parties to advise on possible divestiture of the Rhodes and Mattress
Discounters divisions. On May 28, 1999 the Company entered into a definitive
agreement to sell substantially all of its interest in its Mattress Discounters
division. The transaction, which is subject to certain closing conditions, is
expected to close in the second quarter of fiscal 2000. The Company will retain
a 7% interest in Mattress Discounters. The cash proceeds from the sale, net of
transaction costs, are estimated at $206.7 million and will be used to pay down
debt. The likelihood of completing the divestiture of all or part of the Rhodes
division will be dependent on several factors not controllable by Heilig-Meyers
management and is uncertain at this time. As such, the related assets of the
Rhodes division were considered "held for use" as of February 28, 1999 and are
presented on a consolidated basis. If an agreement to sell the Rhodes division's
is executed, the transaction may result in a loss and, depending on the terms of
such an agreement, the loss may be material to results of operations. Management
believes that, under a held for use classification, the Rhodes divison's future
undiscounted cash flows will be in excess of the related carrying value of its
assets as of February 28, 1999.
18
<PAGE>
Results of Operations
For the twelve months ended February 28, 1999 (fiscal 1999), Heilig-Meyers
Company reported a net loss of $2.0 million or $.03 per share. This compares to
a net loss of $55.1 million, or $.98 per share for the year ended February 28,
1998 (fiscal 1998) and net income of $40.2 million, or $.81 per share, for the
year ended February 28, 1997 (fiscal 1997). The loss before benefit for income
taxes for fiscal 1999 decreased to .1% of sales from the loss before benefit for
income taxes of 3.9% of sales in the prior year, and was below the earnings
before income taxes of 4.6% of sales reported in fiscal 1997. Results of
operations expressed as a percentage of sales are as follows:
Fiscal Year
1999 1998 1997
---------------------------------------
Other income 12.1% 14.3% 18.7%
Costs of sales 67.4 67.2 65.3
Selling, general and
administrative expense 37.3 38.3 39.2
Interest expense 3.1 3.1 3.6
Provision for doubtful accounts 4.4 8.4 6.0
Store closing and other charges -- 1.2 --
Earnings (loss) before provision
(benefit) for income taxes (0.1) (3.9) 4.6
Provision (benefit) for income
taxes -- (1.4) 1.6
Net earnings (loss) (0.1) (2.6) 3.0
A significant component of the decrease in the loss reported in fiscal 1999
compared to fiscal 1998 relates to pre-tax charges of approximately $45.4
million recorded in fiscal 1998, which are more fully described below, and a
$73.7 million decrease in the provision for doubtful accounts. Also contributing
to the decrease was a $9.5 million increase in the earnings before interest and
income taxes of the Mattress Discounters division, which had twelve months of
operations in fiscal 1999 compared to seven months in fiscal 1998. The earnings
before interest and income taxes of the Rhodes division, however, decreased by
$38.5 million. The remainder of the change is primarily due to an increase in
interest expense and additional selling, general and administrative expenses
recorded by the Heilig-Meyers division related to costs associated with
corporate downsizing and early retirement benefits.
The Company recorded charges during the fourth quarter of fiscal 1998
related to a plan (the "Profit Improvement Plan") to close approximately 40
Heilig-Meyers stores, downsize office and support facilities, and reorganize the
Heilig-Meyers private label credit card program. In connection with this plan,
the Company recorded a pre-tax charge in the fourth quarter of fiscal 1998 of
approximately $25.5 million, or 1.2% of sales. Related initiatives caused raw
selling margins in the fourth quarter of fiscal 1998 to be negatively impacted
by approximately $5.1 million, or .2% of sales, due to inventory liquidations.
Also, approximately $14.8 million, or .7% of sales, in selling, general and
administrative expenses were incurred in the fourth quarter of fiscal 1998
related to asset write-downs and other reserves.
During fiscal 1999, the Company completed the store closing plan and the
reorganization of the private label credit card program. Of the $19.5 million
reserve balance in place at the end of fiscal 1998, $14.7 million was utilized
during fiscal 1999, with the remaining portion related to severance and lease
obligations that will extend into fiscal 2000. Included in the fiscal 1999
results are operating losses of approximately $5.8 million incurred as these
stores were closed in an orderly fashion. In the third quarter of fiscal 1999,
the Company's private label credit card program was reorganized through the
establishment of a new agreement with a third party to offer a revolving credit
financing option to certain of the Company's customers. The Company is not
responsible for servicing these accounts or for any related credit losses. The
elimination of the previous program does not have a material impact on the
Company's financial statements.
The net loss for fiscal 1998 of $55.1 million compared to earnings of $40.2
million for fiscal 1997. The decrease between years was caused primarily by the
charges recorded in the fourth quarter of fiscal 1998 discussed above, as well
as a $100.7 million increase in the provision for doubtful accounts. The
remaining decrease between the years is the result of the additional factors
noted in the discussion below.
19
<PAGE>
Revenues
Sales for fiscal 1999 compared to the previous periods are shown below:
Fiscal Year
1999 1998 1997
------------------------------------------
Sales (in thousands) $2,431,152 $2,160,223 $1,342,208
Sales percentage increase
over prior period 12.5% 60.9% 17.9%
Portion of increase from
existing (comparable)
stores 3.0 2.8 (0.6)
Portion of increase from
new stores 9.5 58.1 18.5
The following table shows a comparison of sales by division for the last
three fiscal years:
Fiscal Year
1999 1998 1997
------------------------------------------------------------------
(Sales amounts in millions)
# of % of # of % of # of
Stores Sales Total Stores Sales Total Stores Sales Total
------------------------------------------------------------------
Heilig-Meyers 815 $1,296 53.3 833 $1,269 58.8 829 $1,262 94.1
Rhodes 96 457 18.8 102 479 22.2 105 78 5.8
The RoomStore 102 440 18.1 93 279 12.9 10 2 0.1
Mattress
Discounters 236 238 9.8 225 133 6.1 -- -- --
-----------------------------------------------------------------
Total 1,249 $2,431 100.0 1,253 $2,160 100.0 944 $1,342 100.0
=================================================================
As noted above, the overall growth rate in sales decreased in fiscal 1999
as compared to the two previous years. This trend is reflective of the current
operating strategy of limiting the new store growth in the Heilig-Meyers and
Rhodes divisions and the impact of acquisitions and new store growth in the
RoomStore and Mattress Discounters divisions. Sales in comparable stores, which
are stores that were open for at least 12 months, increased at a higher rate in
fiscal 1999 compared to the two previous years. The growth in total sales from
fiscal 1997 to fiscal 1998 is primarily attributable to the growth in operating
units through acquisitions. The impact of price changes on sales growth over the
last three fiscal years has been insignificant.
Other income
The Heilig-Meyers division and part of the RoomStore division offer
installment credit as a financing option to its customers. The substantial
majority of receivables generated by this program are transferred to a special
purpose entity and provide a source of financing to the Company through an asset
securitization program, which is more fully described in the notes to the
consolidated financial statements. Included in other income is the compensation
received by the Company for servicing these accounts, the finance and related
income earned on the accounts that have not been securitized, and other income
earned related to non-home furnishings merchandise. The remaining stores in the
RoomStore, Rhodes and Mattress Discounters divisions do not offer in-house
credit programs and, accordingly, make limited contributions to the other income
category.
On a consolidated basis, other income decreased to 12.1% of sales for
fiscal 1999 from 14.3% of sales in fiscal 1998 and 18.7% of sales for fiscal
1997. This trend is primarily a result of the growth in the divisions in which
the installment credit program is not offered. The following table shows other
income as a percentage of sales for each division:
Fiscal Year
1999 1998 1997
--------------------------------
Heilig-Meyers 18.2% 19.7% 19.6%
Rhodes 4.8% 6.2% 5.5%
The RoomStore 8.4% 10.9% 17.9%
Mattress Discounters .2% .2% --
20
<PAGE>
The decrease in other income as a percentage of sales in fiscal 1999
compared to fiscal 1998 in the Heilig-Meyers division is due to an increase in
the amount of receivables that have been securitized and the elimination of the
previous revolving credit card program. Since the proceeds generated by the sale
of accounts under the securitization program are used to reduce debt levels, the
reduction in finance income is offset by lower interest expense. Additionally,
the loss of other income from the revolving credit program is substantially
offset by the elimination of administrative expenses associated with the
servicing of those accounts as well as fees and commissions earned under the new
revolving credit program.
The Rhodes division experienced a decrease in other income compared to the
last two fiscal years as a result of the repositioning effort in fiscal 1999. As
part of this change in strategy, less selling emphasis was place on
non-furniture sales. As a result of plans implemented in late fiscal 1999,
management expects other income generated in the Rhodes division to increase as
a percentage of sales in fiscal 2000.
The declining trend in other income as a percentage of sales in the
RoomStore division is a result of the increase in stores over the last three
years that do not offer an in-house installment credit program. The stores
acquired in central Texas in February 1997, in Chicago in January 1998, and in
the Washington-Baltimore area in February 1998 do not offer an in-house
installment credit program. Management expects other income as a percentage of
sales in this division to be consistent with the fiscal 1999 levels in the
future.
Costs and expenses
On a consolidated basis, costs of sales increased slightly in fiscal 1999
to 67.4% of sales from 67.2% of sales in fiscal 1998. Reduced costs of sales in
the Heilig-Meyers and Mattress Discounters divisions compared to the prior year
were offset by higher costs in the Rhodes and RoomStore divisions. The following
table shows costs of sales as a percentage of sales for each division:
Fiscal Year
1999 1998 1997
--------------------------------
Heilig-Meyers 66.3% 66.6% 66.0%
Rhodes 72.6% 70.5% 63.2%
The RoomStore 67.6% 65.9% 63.3%
Mattress Discounters 62.6% 63.7% --
The costs of sales in the Heilig-Meyers division include the impact of
liquidation sales held in stores closed during the year. The net effect of these
liquidation events increased cost of sales by approximately .2% of sales in
fiscal 1999. The remaining decrease in costs of sales was a result of cost
control efforts primarily in the delivery area.
As Rhodes was repositioned to the higher end merchandise assortment in the
first quarter of fiscal 1999, selling margins were negatively impacted as goods
from the previous assortment continued to be liquidated. Selling margins in this
division were further reduced during the repositioning period in order to spur
consumer demand, which was below managements expectation. As discussed in the
overview section, the Rhodes promotional strategy has been refocused in order to
expand its middle-income customer base. Based on this plan, management expects
the costs of sales in the Rhodes division to decrease in fiscal 2000.
The increase in costs of sales in the RoomStore division reflects the
growth in major metropolitan markets over the past three fiscal years.
Management expects these levels of cost, as a percentage of sales, to be
consistent in fiscal 2000.
Mattress Discounters reported lower costs of sales in fiscal 1999 compared
to fiscal 1998 as a result of improved buying power and increased sales of
private label merchandise.
Selling, general and administrative expenses decreased to 37.3% of sales in
fiscal 1999 from 38.3% of sales in fiscal 1998 and 39.2% in fiscal 1997. The
following table displays selling, general and administrative expenses as a
percentage of the applicable divisions sales:
Fiscal Year
1999 1998 1997
--------------------------------
Heilig-Meyers 39.4% 41.1% 39.8%
Rhodes 38.7% 33.7% 25.4%
The RoomStore 34.9% 39.5% 40.5%
Mattress Discounters 27.9% 26.3% --
21
<PAGE>
Selling, general and administrative expenses as a percentage of sales for
the Heilig-Meyers division in fiscal 1999 decreased approximately 1.1% of sales
from the prior year as a result of asset write-downs and other reserves recorded
in fiscal 1998 related to the Profit Improvement Plan. The remaining portion of
the decrease is the result of corporate downsizing actions taken in late fiscal
1998 and other cost cutting programs aimed at reducing discretionary spending.
The increase in selling, general and administrative expenses as a percentage of
sales in fiscal 1998 over fiscal 1997 was the result of the 1998 charges noted
above.
The Rhodes division experienced an increase in selling, general and
administrative expenses as a percentage of sales in fiscal 1999 compared to
fiscal 1998 primarily due to increased costs associated with the repositioning
initiative discussed above. Major components of these expenditures included
employee training programs, costs to develop color merchandise catalogs,
customer amenities and the sponsorship of a professional race car team.
Management has eliminated these programs and as a result expects selling,
general and administrative expenses in this division to be reduced by
approximately $10 million, or 2.2% of sales, on an annual basis.
The decreasing trend in selling, general and administrative expenses of the
RoomStore division, as a percentage of sales, reflects the lower cost structures
of the recent additions to this division. These operations generally have lower
cost structures because they do not administer installment credit programs.
Selling, general and administrative expenses as a percentage of sales in
the Mattress Discounters division increased over fiscal 1998 primarily as a
result of costs associated with new store growth.
Interest expense was 3.1% of sales in fiscal 1999 and 1998 and 3.6% of
sales in fiscal 1997. Weighted average long-term debt increased to $714.6
million in fiscal 1999 compared to $675.7 million in fiscal 1998 due to the
issuance of $175 million in public debt during the second quarter of fiscal 1998
and the paydown of approximately $22.4 million in the third quarter of fiscal
1999. Weighted average long-term interest rates for fiscal 1998 remained
relatively consistent at 7.7%, compared to 7.8% during the prior year. Weighted
average short-term debt increased to $235.0 million in fiscal 1999 from $229.2
million in fiscal 1998. Weighted average short-term interest rates also remained
consistent at 6.2% compared to 6.1% in the prior year. The decrease in interest
expense as a percentage of sales in fiscal 1998 compared to fiscal 1997 is
mainly due to leverage on the sales by Rhodes, The RoomStore and Mattress
Discounters, which were purchased with common stock.
The provision for doubtful accounts was 4.4% of sales in fiscal 1999
compared to 8.4% and 6.0% in fiscal 1998 and 1997, respectively. The decrease in
the provision for doubtful accounts as a percentage of sales in fiscal 1999
compared to fiscal 1998 is a result of charges totaling 4.1% of sales recorded
in fiscal 1998 that did not recur in fiscal 1999. In fiscal 1998, the Company
provided an additional $38.0 million for doubtful bankrupt accounts. The Company
also provided for increased write-offs of approximately $36.3 million related to
a more critical evaluation of accounts for write-off in fiscal 1998 and to cover
the impact of transferring the servicing of accounts from stores that were
designated to close. In addition, the Company provided $15.0 million in fiscal
1998 for an increase in estimated losses under the recourse provision of the
Heilig-Meyers private label credit card program that was planned for
reorganization. Excluding the charges described above, the decrease in the
provision as a percentage of sales from fiscal 1997 to fiscal 1998 resulted from
an increase in sales in the Rhodes, RoomStore and Mattress Discounters
divisions, which utilized third party credit and, therefore, do not incur credit
losses.
The volume of accounts declaring bankruptcy was $35.3 million in fiscal
1999 as compared to the prior two years of $34.4 million and $30.6 million.
Write-offs and repossession losses for the on-balance sheet portfolio for
fiscal years 1999, 1998 and 1997 were $68.8 million, $106.0 million and $70.4
million, respectively. Of these amounts, $4.3 million, $21.2 million and $6.9
million were for purchased accounts. Management believes that the allowance for
doubtful accounts at February 28, 1999, is adequate.
The Profit Improvement Plan implemented in fiscal 1998 has positively
impacted the portfolios credit loss performance. The stores that were closed in
the past two years included many of the poorest performers related to credit
losses. Management believes the elimination of these stores will continue to
positively impact credit losses going forward. The Company is continuing to
fully implement risk-based scoring models to provide local store management with
better tools in making credit decisions.
Provision for Income Taxes
The income tax benefit for fiscal 1999 was calculated by applying a
percentage of 35.5% compared to 34.7% in fiscal 1998. The income tax rate in
fiscal 1997 was 35.1%. The lower rate for fiscal 1998 compared to fiscal 1999
and fiscal 1997 was primarily due to the loss incurred during 1998. Overall, the
income tax rate has increased from the fiscal 1997 level as a result of the
carryover tax attributes of acquired assets and liabilities.
22
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company increased its cash position $18.5 million to $67.3 million at
February 28, 1999 from $48.8 million at February 28, 1998, which was $33.8
million higher than the $15.0 million position at February 28, 1997.
Net cash inflow from operating activities during fiscal 1999 was $194.7
million, compared to an outflow of $22.8 million in fiscal 1998. The Company has
continued to slow the expansion of its store base, which has resulted in
improved cash flows provided by operating activities. Additionally, proceeds
from the sales of interests in the Company's installment accounts receivable
through the asset securitization program provided cash inflows of $159.3 million
in fiscal 1999 compared to $60.0 million in fiscal 1998. Absent proceeds from
securitizations, the Company traditionally produces minimal or negative cash
flow from operating activities because it extends in-house credit in its
Heilig-Meyers stores and certain RoomStore stores. During fiscal 1999,
installment accounts receivable increased at a slower rate than the prior year
period primarily due to the closing of certain Heilig-Meyers stores pursuant to
the Profit Improvement Plan. During fiscal 1999, inventory decreased compared to
an increase in the prior year period. The variation in the change in inventory
between years is primarily the result of the closing of certain Heilig-Meyers
stores pursuant to the Profit Improvement Plan, prior year purchases related to
newly acquired stores and generally lower inventory levels compared to the prior
year across all divisions.
Investing activities produced negative cash flows of $87.1 million during
the twelve months ended February 28, 1999 compared to negative cash flows of
$106.5 million in the prior year period. The decrease in negative cash flows
from investing activities resulted from a decrease in cash used for
acquisitions. Pursuant to the Profit Improvement Plan, management has taken
steps to slow the growth of the capital intensive Heilig-Meyers division and
lower overall spending on capital projects. Additions to property and equipment
during fiscal 1999 include the acquisition of properties and equipment totaling
$46.9 million that were previously leased under operating lease agreements.
During the prior year period cash used for additions to property and equipment
for fiscal 1998 resulted from the opening of 36 new Heilig-Meyers store
locations and related support facilities as well as the remodeling and
improvement of existing and acquired locations. Capital expenditures will
continue to be financed by cash flows from operations and external sources of
funds.
Financing activities produced negative cash flows of $89.1 million during
the twelve months ended February 28, 1999 compared to a $163.1 million positive
cash flow in the prior year period. The negative cash flow from financing
activities in the current year is due to the decrease in notes payable and
payments of long-term debt. In June 1997, 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. There were no issuances of debt pursuant to the joint
Registration Statement during the twelve months ended February 28, 1999. As of
February 28, 1999, long-term notes payable with an aggregate principal amount of
$175.0 million have been issued to the public under this Registration Statement.
As of February 28, 1999, the Company had a $400.0 million revolving credit
facility in place, which expires in July 2000. This facility includes ten banks
and had $210.0 million outstanding and $190.0 million unused as of February 28,
1999. Subsequent to February 28, 1999, this facility was reduced to $298.1
million. During the year, the Company had additional lines of credit with banks
that totaled $60.0 million. These lines of credit were eliminated during the
fourth quarter of fiscal 1999.
As a result of losses incurred during fiscal years 1999 and 1998, the
Company obtained amendments to its bank debt agreements in order to maintain
covenant compliance. The most recent amendment includes a revised covenant
package and a provision whereby the revolving credit facility commitment will be
reduced, on a dollar for dollar basis, with proceeds from asset sales until the
commitment is reduced to $200.0 million. In addition, current senior note
maturities of $95.5 million were extended and become payable in September 1999.
The Company expects to repay these notes with the proceeds from the sale of
assets or other financing activities.
Total debt as a percentage of debt and equity was 60.4% at February 28,
1999, compared to 62.1% at February 28, 1998. The decrease in total debt as a
percentage of debt and equity is primarily the result of the use of cash
generated from operating activities including securitizations to reduce notes
payable outstanding. The current ratio was 1.5X at February 28, 1999, compared
to 1.8X at February 28, 1998. The decrease in the current ratio from February
28, 1998 to February 28, 1999 is primarily attributed to the reclassification of
an additional $145.1 million from long-term notes payable to the current portion
as a result of the maturity of these amounts within the next twelve months.
23
<PAGE>
OTHER INFORMATION
Year 2000 Issue
The Year 2000 issue arises because many computer programs use two digits
rather than four to define the applicable year. Using two digits could result in
system failure or miscalculations that cause disruptions of operations. In
addition to computer systems, any equipment with embedded technology that
involves date sensitive functions is at risk if two digits have been used rather
than four.
During fiscal year 1997, management established a team to oversee the
Company's Year 2000 date conversion project. The project is composed of the
following stages: 1) assessment of the problem, 2) prioritization of systems, 3)
remediation activities and 4) compliance testing. A plan of corrective action
using both internal and external resources to enhance or replace the systems for
Year 2000 compliance has been implemented. Internal resources consist of
permanent employees of the Company's Information Systems department, whereas
external resources are composed of contract programming personnel that are
directed by the Company's management. The team has continued to assess the
systems of subsidiaries as the Company has expanded. Management completed the
remediation stage for the critical systems of the Heilig-Meyers operations
during fiscal year 1999. Completion of remediation for all other subsidiaries
critical systems is expected in the second quarter of fiscal year 2000. The
testing stage for critical systems within the entire Company is planned for the
first and second quarters of fiscal year 2000. The Company is in the middle
stage of inventorying and making an assessment of its non-information technology
systems (such as telephone and alarm systems). Managers of such systems have
been instructed to contact the appropriate third party vendors to determine
their Year 2000 compliance.
Since the project's beginning in fiscal 1997, the Company has incurred
approximately $1.2 million in expenses in updating its management information
system to alleviate potential Year 2000 problems. These expenditures represent
personnel costs related to software remediation of major impact systems. The
Company had previously initiated a hardware upgrade plan for desktop computers
that was independent of the Year 2000 issue, and, therefore, most hardware
upgrades were completed under this plan. The remaining expenditures are expected
to be approximately $1.69 million, which will be expensed as incurred. Expected
future expenditures can be broken down as follows:
(Amounts in thousands)
Task:
Hardware Remediation $ 700 42%
Internal Personnel Resources 640 38%
Software Upgrades-Remediation/
Auditing/Testing 350 20%
----------------
Total $1,690 100%
================
The remaining cost of the Company's Year 2000 project and the dates on
which the Company plans to complete the Year 2000 compliance program are based
on managements current estimates, which are derived utilizing numerous
assumptions. Such assumptions include, but are not limited to, the continued
availability of certain resources, the readiness of third-parties through their
own remediation plans, the absence of costs associated with implementation of
any contingency plan and the lack of acquisitions by the Company requiring
additional remediation efforts. These assumptions are inherently uncertain and
actual events could differ significantly from those anticipated.
The team is communicating with other companies, on which the Company's
systems rely and is planning to obtain compliance letters from these entities.
There can be no assurance, however, that the systems of these other companies
will be converted in a timely manner, or that any such failure to convert by
another company would not have an adverse effect on the Company's systems.
Management believes the Year 2000 compliance issue is being addressed
properly by the Company to prevent any material adverse operational or financial
impacts. However, if such enhancements are not completed in a timely manner, the
Year 2000 issue may have a material adverse impact on the operations of the
Company. The Company is currently assessing the consequences of its Year 2000
project not being completed on schedule or its remediation efforts not being
successful. Management is developing contingency plans to mitigate the effects
of problems experienced by the Company, key vendors or service providers related
to the Year 2000. Management is ranking suppliers based on how critical each
supplier is believed to be to the Company's operations. The Company is
requesting a copy of the Year 2000 project plan under which these suppliers are
operating. The Company's Year 2000 project team will review these plans. If a
supplier is deemed to be critical and has a project plan that does not meet the
24
<PAGE>
Company's expectations for completion, the Company will examine all of the
circumstances and develop a contingency plan. Contingency plans may include the
identification and use of an alternate supplier of the product or service that
is Year 2000 compliant or the purchase of additional levels of inventory as a
precaution based on the Company's expected needs. Management expects to complete
its Year 2000 contingency planning during the second quarter of fiscal 2000.
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,"
"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., "Managements Discussion and Analysis of Financial Condition
and Results of Operations," "Business" and "Legal Proceedings." 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 customers 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 and format realignments, the Company's ability to
realize cost savings and other synergies from recent acquisitions, the Company's
ability to complete asset sales at reasonable valuations, the ability of the
investment group acquiring Mattress Discounters to obtain satisfactory financing
for their purchase of substantially all of the Company's interest in Mattress
Discounters, as well as the Company's access to, and cost of, capital. Other
factors such as changes in tax laws, consumer credit and bankruptcy trends,
recessionary or expansive trends in the Company's markets, the ability of the
Company, its key vendors and service providers to effectively correct the Year
2000 issue, and 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.
25
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates. The Company's policy is to manage interest rate risk
through the strategic use of fixed rate debt, variable rate debt, and interest
rate derivatives. As a means of reducing the risk of credit-related losses on
interest rate derivatives, the Company as a matter of policy only enters into
transactions with counterparties rates "A" or higher. Weighted average variable
rates are based on rates in effect at the most recent reset date. For interest
rate derivatives, the table presents notional amounts and weighted average
interest rates by contractual maturity dates. The fair value of the Company's
long-term, fixed rate debt is based on the discounted cash flow of the debt
using current rates and remaining maturities. The fair value of interest rate
derivative financial instruments is the estimated amount that the Company would
receive or pay upon termination of the agreements, based on estimates obtained
from counterparties. The carrying amounts of notes payable and long-term,
variable rate debt approximate fair value. All items described in the table
below are non-trading.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fair Value
(Amounts in thousands) 2000 2001 2002 2003 2004 Thereafter Total at 2/28/99
- ----------------------------------------------------------------------------------------------------------------------
Liabilities:
Notes payable $210,000 -- -- -- -- -- $210,000 $210,000
Average interest rate 5.7% -- -- -- -- -- 5.7% --
Long-term debt
Fixed rate $130,000 -- $160,000 -- $200,000 $175,000 $655,000 $571,861
Average interest rate 10.04% -- 9.12% -- 7.88% 7.60% 8.59% --
Variable rate $ 35,745 $ 204 $ 89 $ 82 $ 82 $ 123 $ 36,325 $ 501
Average interest rate 7.2% 7.4% 7.1% 7.2% 6.7% 6.5% 7.2% --
Interest Rate Derivative
Financial Instruments
Relating to Debt:
Pay fixed/receive variable $ 74,000 -- -- -- -- -- $ 74,000 $ (824)
Average pay rate 7.6% -- -- -- -- -- -- --
Average receive rate 5.2% -- -- -- -- -- -- --
Interest Rate Derivative
Financial Instruments
Relating to Asset
Securitizations:
Pay fixed/receive variable $145,000 $100,000 -- -- -- -- $245,000 $ (2,270)
Average pay rate 6.9% 7.0% -- -- -- -- -- --
Average receive rate 5.0% 4.9% -- -- -- -- -- --
</TABLE>
26
<PAGE>
ITEM 8. FINANCIAL STATEMENTS and SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share data)
Fiscal Year 1999 1998 1997
------ ------ ------
Revenues:
Sales $2,431,152 $2,160,223 $1,342,208
Other income 295,206 309,513 250,911
---------- ---------- ----------
Total revenues 2,726,358 2,469,736 1,593,119
Costs and expenses:
Costs of sales 1,637,901 1,451,560 876,142
Selling, general and
administrative 907,913 828,105 526,369
Interest 75,676 67,283 47,800
Provision for doubtful accounts 107,916 181,645 80,908
Store closing and other charges -- 25,530 --
---------- ---------- ----------
Total costs and expenses 2,729,406 2,554,123 1,531,219
---------- ---------- ----------
Earnings (loss) before provision
(benefit) for income taxes (3,048) (84,387) 61,900
Provision (benefit) for income taxes (1,081) (29,244) 21,715
----------- ----------- ----------
Net earnings (loss) $ (1,967) $ (55,143) $ 40,185
=========== =========== ==========
Net earnings (loss) per share:
Basic $ (0.03) $ (0.98) $ 0.81
=========== =========== ==========
Diluted $ (0.03) $ (0.98) $ 0.80
=========== =========== ==========
Weighted average common shares outstanding:
Basic 59,331 56,312 49,360
Diluted 59,331 56,312 50,146
========== ========= ==========
Cash dividends per share of common
stock $ 0.28 $ 0.28 $ 0.28
========== ========== ==========
See notes to consolidated financial statements.
27
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value data)
February 28, 1999 1998
------ ------
Assets:
Current assets:
Cash $ 67,254 $ 48,779
Accounts receivable, net 254,282 392,765
Retained interest in securitized
receivables at fair value 190,970 182,158
Inventories 493,463 542,868
Other current assets 124,305 126,978
---------- ----------
Total current assets 1,130,274 1,293,548
Property and equipment, net 400,686 398,151
Other assets 72,632 55,321
Excess costs over net assets acquired, net 344,160 350,493
---------- ----------
$1,947,752 $2,097,513
========== ==========
Liabilities And Stockholders' Equity:
Current liabilities:
Notes payable $ 210,000 $ 260,000
Long-term debt due within one year 167,486 22,365
Accounts payable 193,799 203,048
Accrued expenses 178,656 216,738
---------- ----------
Total current liabilities 749,941 702,151
Long-term debt 547,344 715,271
Deferred income taxes 45,365 70,937
Stockholders' equity:
Preferred stock, $10 par value -- --
Common stock, $2 par value (250,000
shares authorized; 59,861 and
58,808 shares issued and
outstanding, respectively) 119,722 117,616
Capital in excess of par value 242,346 230,580
Unrealized gain on investments 5,228 4,548
Retained earnings 237,806 256,410
---------- ----------
Total stockholders' equity 605,102 609,154
---------- ----------
$1,947,752 $2,097,513
========== ==========
See notes to consolidated financial statements.
28
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Number of Accumulated
Common Capital in Other Total
Shares Common Excess of Comprehensive Retained Stockholders'
Outstanding Stock Par Value Income Earnings Equity
- -------------------------------------------------------------------------------------------
Balances at
February 29, 1996 48,571 $ 97,143 $120,769 $ -- $301,071 $518,983
Net earnings -- -- -- -- 40,185 40,185
Unrealized gain
on investments -- -- -- 10,797 -- 10,797
--------
Comprehensive income 50,982
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
----------------------------------------------------------------------
Balances at
February 28, 1997 54,414 108,828 195,352 10,797 327,644 642,621
Net loss -- -- -- -- (55,143) (55,143)
Change in
unrealized gain
on investments -- -- -- (6,249) -- (6,249)
--------
Comprehensive loss (61,392)
Cash dividends -- -- -- -- (16,249) (16,249)
Common stock issued
for acquisitions 4,279 8,558 34,578 -- -- 43,136
Exercise of stock
options, net 115 230 650 -- -- 880
Other -- -- -- -- 158 158
----------------------------------------------------------------------
Balances at
February 28, 1998 58,808 117,616 230,580 4,548 256,410 609,154
Net loss -- -- -- -- (1,967) (1,967)
Change in
unrealized gain
on investments -- -- -- 680 -- 680
--------
Comprehensive loss (1,287)
Cash dividends -- -- -- -- (16,637) (16,637)
Common stock issued
for acquisitions 931 1,862 11,336 -- -- 13,198
Exercise of stock
options, net 122 244 430 -- -- 674
----------------------------------------------------------------------
Balances at
February 28, 1999 59,861 $119,722 $242,346 $ 5,228 $237,806 $605,102
======================================================================
See notes to consolidated financial statements.
</TABLE>
29
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Fiscal Year 1999 1998 1997
-----------------------------------------
Cash flows from operating activities:
Net earnings (loss) $ (1,967) $ (55,143) $ 40,185
Adjustments to reconcile net earnings (loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 58,840 54,043 33,874
Provision for doubtful accounts 107,914 181,645 80,908
Store closing and other charges
provision -- 25,530 --
Store closing and other charges
payments (10,013) (1,452) --
Other, net (2,525) 2,616 588
Change in operating assets and
liabilities, net of the effects
of acquisitions:
Accounts receivable 25,342 (195,141) (4,331)
Sale of accounts receivable -- -- 60,500
Retained interest in securitized
receivables at cost (7,784) 50,533 (198,786)
Inventories 51,601 (77,115) (35,154)
Other current assets 10,050 (65,218) (11,749)
Accounts payable (9,819) 14,788 18,017
Accrued expenses (26,958) 42,106 12,948
-------------------------------------------
Net cash provided (used)
by operating activities 194,681 (22,808) (3,000)
-------------------------------------------
Cash flows from investing activities:
Acquisitions, net of cash acquired -- (40,186) (58,842)
Additions to property and equipment (87,505) (70,921) (84,137)
Disposals of property and equipment 22,797 15,107 3,423
Miscellaneous investments (22,416) (10,467) (6,907)
-------------------------------------------
Net cash used by
investing activities (87,124) (106,467) (146,463)
-------------------------------------------
Cash flows from financing activities:
Issuance of stock 697 912 683
Proceeds from long-term debt -- 174,767 299,444
Increase (decrease) in notes
payable, net (50,000) 104,000 (34,000)
Payments of long-term debt (23,142) (100,335) (104,110)
Dividends paid (16,637) (16,249) (13,612)
-------------------------------------------
Net cash provided (used)
by financing activities (89,082) 163,095 148,405
-------------------------------------------
Net increase (decrease) in cash 18,475 33,820 (1,058)
Cash at beginning of year 48,779 14,959 16,017
-------------------------------------------
Cash at end of year $ 67,254 $ 48,779 $ 14,959
===========================================
See notes to consolidated financial statements.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
Nature of Operations
Heilig-Meyers Company and subsidiaries (the "Company") is a retailer of
home furnishings that operated 1,249 stores as of February 28, 1999 of which
1,217 are located in 35 states and Washington, D.C. and 32 are located in Puerto
Rico. The Company has four primary retail formats operating as Heilig-Meyers
Furniture ("Heilig-Meyers"), Rhodes Furniture, The RoomStore and Mattress
Discounters. The Company's operating strategy includes offering a broad
selection of home furnishings and bedding. The Company offers third party
private label credit card programs to provide financing to its customers. The
Heilig-Meyers format also offers consumer electronics, appliances, and floor
coverings as well as an in-house installment credit program.
Principles of Consolidation
The consolidated financial statements include the accounts of Heilig-Meyers
Company and its subsidiaries, 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 1999, 1998 and 1997 represent the years ended February 28, 1999, February
28, 1998 and February 28, 1997, respectively. Certain amounts in the fiscal 1997
consolidated financial statements have been reclassified to conform to the
fiscal 1999 and 1998 presentation.
Segment Information
Effective December 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company has significant operations
aligned in four operating formats: Heilig-Meyers, The RoomStore, Rhodes and
Mattress Discounters divisions. Accordingly, data with respect to industry
segments has been reported separately 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 amounts 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
Accounts receivable arise primarily from closed-end installment sales
contracts used by customers to finance purchases of merchandise and services
offered by the Company. These contracts are at fixed rates and terms with level
payments of principal and interest. In accordance with trade practice, payments
due after one year are included in current assets. Provisions for doubtful
accounts are made to maintain an adequate allowance to cover anticipated losses.
Credit operations are generally maintained at each store to evaluate the credit
worthiness of its customers and to manage the collection process. 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 generally requires down payments on
credit sales and offers credit insurance to its customers, both of which lessen
credit risk.
The Company also offers certain of its customers revolving credit through
private label credit facilities with various commercial banks. Where applicable,
provisions for recourse obligations are made to maintain an adequate allowance
to cover anticipated losses.
The Company operates its 1,249 stores throughout 35 states, Washington,
D.C., 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.
31
<PAGE>
Retained Interest in Securitized Receivables
As part of its accounts receivable securitization program, the Company
transfers a portion of installment accounts receivable to a Master Trust
("Trust") in exchange for certificates representing undivided interests in such
receivables. The Company retains an undivided interest in the securitized
receivables through its ownership of the seller's certificate, which represents
both contractually required seller's interest and excess seller's interest in
the receivables in the Trust. Retained interests also include an interest-only
strip, which arises due to estimated excess cash flow from the Trust that
reverts to the Company. The Company continues to service the receivables in the
Trust.
Inventories
Merchandise inventories are stated at the lower of cost or market as
primarily 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, 1999 and 1998, there were 59,861,000 and
58,808,000 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.
On February 10, 1998 the Board of Directors of the Company declared a
dividend distribution of one preferred share purchase right (a "Right") on each
outstanding share of Common Stock pursuant to a Shareholders' Rights Plan. The
action replaced a similar plan expiring in fiscal 1998. The Rights are
exercisable only after the attainment of, or the commencement of a tender offer
to attain, a specified ownership interest in the Company by a person or group.
When exercisable, each Right would entitle its holder to purchase one-hundredth
of a newly issued share of Cumulative Participating Preferred Stock, Series A,
par value $10.00 per share (the "Series A Preferred Stock") at an initial price
of $110, subject to adjustment. A total of 750,000 shares of Series A Preferred
Stock have been reserved. Each share of Series A Preferred Stock will entitle
the holder to 100 votes and has an aggregate dividend rate of 100 times the
amount paid to holders of the Common Stock. Upon occurrence of certain events,
each holder of a Right (other than those which are void pursuant to the terms of
the plan) will become entitled to purchase shares of Common Stock having a value
of twice the Right's then current exercise price in lieu of Series A Preferred
Stock.
32
<PAGE>
New Accounting Standards
During fiscal year 1999, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," which
requires presentation of total nonowner changes in equity for all periods
displayed. This information is displayed in the consolidated statements of
stockholders' equity.
During fiscal year 1999, the Company also adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
redefines how operating segments are determined and requires disclosure of
certain financial and descriptive information about a company's operating
segments. The adoption of this statement did not affect the Company's
consolidated financial position, results of operations or cash flows, and is
limited to the form and content of its disclosures. This information is provided
in Note 15.
The Company also adopted SFAS No. 132, "Employers Disclosures about
Pensions and Other Postretirement Benefits," during fiscal 1999. This statement
changes disclosure requirements related to pension and other postretirement
benefit obligations. Adoption of this statement did not impact the Company's
consolidated financial position, results of operations or cash flows. The effect
of the new statement is limited to the form and content of disclosures.
In June 1998 the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. The new statement requires that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires the changes in the
derivative's fair value to be recognized currently in earnings unless specific
hedge accounting criteria are met. The Company has not yet determined the effect
this statement will have on the consolidated financial position or results of
operations of the Company.
In March 1998 the AICPA issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," which is effective for fiscal years beginning after December 15,
1998. SOP 98-1 requires certain software development costs to be capitalized.
Generally, once the capitalization criteria of the SOP have been met, external
direct costs of materials and services used in the development of internal-use
software, payroll and payroll related costs for employees directly involved in
the development of internal-use software, and interest costs incurred when
developing software for internal use are to be capitalized. Management does not
expect the adoption of the SOP to have a material effect on the Company's
consolidated financial position, results of operations or cash flows.
In April 1998 the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which is effective for fiscal years beginning after
December 15, 1998. SOP 98-5 requires costs of start-up activities and
organization costs to be expensed as incurred. Management does not expect the
adoption of the SOP to have a material effect on the Company's consolidated
financial position, results of operations or cash flows.
Revenues and Costs of Sales
Sales revenue is generally recognized upon determination that merchandise
is in stock and establishment of a delivery date, and, if applicable, upon
approval of customer credit. Sales are presented net of returns. The effect of
sales returns prior to shipment date has been immaterial. Other income consists
primarily of finance and other income earned on accounts receivable. Finance
charges were $231,369,000, $231,612,000, and $209,491,000 during fiscal 1999,
1998 and 1997, respectively. Finance charges are included in revenues on a
monthly basis as earned. The Company sells substantially all of its service
policies to third parties and recognizes service policy income on these at the
time of sale. 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 Per Share
Basic earnings per share is computed based on the weighted average number
of common shares outstanding. Diluted earnings per share also includes the
effect of dilutive potential common shares outstanding during the period.
Dilutive potential common shares are additional common shares (dilutive stock
options) assumed to be earned.
33
<PAGE>
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 1999 and 1998, the Company made the acquisitions
described below. All acquisitions, except for the Bedding Experts transaction,
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 1999 and 1998 are not discussed
below because they are not considered material to the consolidated financial
statements.
On September 1, 1998 the Company acquired substantially all of the
operating assets and liabilities of Guardian Protection Products ("Guardian") in
a transaction in which the shareholder of Guardian received 666,667 shares of
the Company's common stock. Unless the Company's common stock trades for at
least ten consecutive trading days during the period from September 1, 1998,
through August 31, 1999, at a per share price of $15.00 or more, additional
shares will be issued so that the acquisition price equals $10 million divided
by the average closing price per share for the Company's common stock for the
ten trading days ending on August 31, 1999, or such earlier date as may be
selected by the Company. The Company has also agreed to issue additional shares
to the former shareholder of Guardian in the event that certain earnings targets
are met over the next two years, however the aggregate purchase price will not
exceed $14.5 million. The unamortized excess of purchase price over the fair
market value of the net assets acquired from Guardian, as of February 28, 1999
was $9,575,000.
During July 1997, the Company acquired all of the outstanding capital stock
of Mattress Discounters Corporation and a related corporation ("Mattress
Discounters") with 169 stores in 10 states and Washington, D.C. The initial
purchase price was valued at approximately $42,900,000. The Company issued
2,269,839 shares of its common stock at the time of closing and 264,550 shares
of common stock twelve months after the time of closing to the former
shareholders of Mattress Discounters, in accordance with the purchase agreement,
based on the achievement by the acquired stores of certain earnings targets. The
unamortized excess of purchase price over the fair market value of the net
assets acquired, as of February 28, 1999 was $58,136,000. Adjustments made to
the preliminary purchase price allocation were not material.
During January 1998, the Company acquired all of the outstanding capital
stock of Bedding Experts, Inc. with 54 stores in Chicago, Illinois and the
surrounding area. The Company issued 2,019,182 shares of its common stock in the
transaction valued at $25,000,000. The transaction was recorded as a
pooling-of-interests, however prior periods have not been restated as the effect
is not considered material to the consolidated financial statements.
During January 1998, the Company acquired certain assets related to 5
stores, 3 of which will remain in operation, of John M. Smyth's Homemakers
("Homemakers") in Chicago, Illinois. The purchase price of these assets was
approximately $11,959,000. The unamortized excess of purchase price over the
fair market value of the net assets acquired from Homemakers as of February 28,
1999 was not significant.
During February 1998, the Company acquired certain assets related to 24
stores of Reliable, Inc. of Columbia, Maryland. The purchase price of these
assets was approximately $18,164,000. The unamortized excess of purchase price
over the fair market value of the net assets acquired from Reliable, Inc. as of
February 28, 1999 was $4,939,000.
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 $344,160,000 and $350,493,000, net of
accumulated amortization of $38,248,000 and $29,050,000, at February 28, 1999
and 1998, respectively.
34
<PAGE>
(3) Store Closing & Other Charges
- --------------------------------------------------------------------------------
In the fourth quarter of fiscal 1998, the Company recorded a pre-tax charge
of $25,530,000 related to specific plans to close approximately 40 Heilig-Meyers
stores, downsize office and support facilities, and reorganize the Heilig-Meyers
private label credit card program. The charge reduced 1998 net earnings
$16,683,000 or $.30 per share. The pre-tax charge is summarized as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Amount Remaining Amount Remaining
Utilized Reserve Utilized Reserve
through as of through as of
Pre-Tax February 28, February 28, February 28, February 28,
(Amounts in thousands) Charge 1998 1998 1999 1999
------------------------------------------------------------
Severance $ 8,100 $1,452 $ 6,648 $ 5,150 $1,498
Lease & facility exit cost 7,680 -- 7,680 4,386 3,294
Fixed asset impairment 7,250 2,117 5,133 5,133 --
Goodwill impairment 2,500 2,500 -- -- --
-----------------------------------------------------------
Total $25,530 $6,069 $19,461 $14,669 $4,792
===========================================================
</TABLE>
The Company completed the store closings, office downsizing, and private
label credit card program reorganization associated with this plan during fiscal
1999. The substantial majority of the remaining reserves are expected to be
utilized during fiscal 2000 with some amounts related to long-term lease
obligations extending beyond fiscal 2000.
Operations of stores closed during fiscal 1999 generated a net loss of $5.8
million on sales of $4.8 million. These amounts are reported in the fiscal 1999
statement of operations.
Charges associated with actions taken during fiscal 1999 to close stores
and related support facilities totaled $2.1 million. Because these charges were
not associated with a comprehensive restructuring plan, this amount is reported
as selling, general and administrative expense in the fiscal 1999 statement of
operations.
(4) Accounts Receivable and Retained Interest in Securitized Receivables
- --------------------------------------------------------------------------------
Accounts receivable are shown net of an allowance for doubtful accounts and
unearned finance income. The allowance for doubtful accounts was $42,745,000 and
$60,306,000 and unearned finance income was $31,775,000 and $46,980,000 at
February 28, 1999 and 1998, respectively. Accounts receivable having balances
due after one year were $64,496,000 and $94,676,000 at February 28, 1999 and
1998, respectively.
As discussed in Note 1, the Company transfers a portion of its installment
accounts receivable to a Master Trust ("Trust") in exchange for certificates
representing undivided interests in such receivables. Certificates that have
been sold to third parties are as follows:
(Amounts in thousands) 1999 1998
- --------------------------------------------------------------
Series 1997-1
Senior class floating
rate certificates $100,000 $252,000
Series 1998-1
Class A 6.125% certificates 307,000 307,000
Class B 6.35% certificates 61,000 61,000
Floating rate collateral
indebtedness interest 32,000 32,000
Series 1998-2
Class A floating rate certificates 230,000 --
Class B floating rate certificates 50,000 --
Floating rate collateral
indebtedness interest 31,300 --
------------------------
$811,300 $652,000
========================
35
<PAGE>
The rates in effect on the Series 1997-1 Senior class certificates were
5.2% and 6.1% as of February 28, 1999 and 1998, respectively. Unless extended,
the commitment termination date related to the Series 1997-1 certificates is
September 30,1999. The rates in effect on the Series 1998-1 floating rate
Collateral Indebtedness Interest were 6.3% and 6.5% as of February 28, 1999 and
1998 respectively. With respect to the Series 1998-1 certificates, the final
distribution date for the Class A certificates is scheduled to occur in December
2002, at which time the Class A certificate holders will begin to receive
principal payments. The final distribution date for the Class B certificates is
scheduled to occur in February 2003, at which time the Class B certificate
holders will begin to receive principal payments provided that Class A
certificates have been paid in full. The holder of the Collateral Indebtedness
Interest will receive principal payments beginning one month subsequent to the
final principal payment to Class B certificate holders. The rates in effect on
the Series 1998-2 Class A floating rate certificates, Class B floating rate
certificates, and the floating rate Collateral Indebtedness certificates were
5.5%, 5.7% and 6.4%, respectively, as of February 28, 1999. With respect to the
Series 1998-2 certificates, the final distribution date for the Class A
certificates is scheduled to occur in August 2001. The final distribution date
for the Class B certificates is scheduled to occur in October 2001 provided that
the Class A certificates have been paid in full. The holder of the Collateral
Indebtedness Interest will receive principal payments beginning one month
subsequent to the final payment to Class B certificate holders.
The Company, through a bankruptcy-remote special purpose entity, retained
the remaining undivided interests in the Trust's receivables. This remaining
undivided interest is not available to the creditors of the Company. The Company
will continue to service all accounts in the Trust. No servicing asset resulted
because contractual rates are at estimated market rates and are considered
adequate compensation for servicing. The cost of retained interests are based on
an allocation of the total cost of accounts securitized in accordance with SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities." Quoted market prices are not available for these
retained interests. The fair value of the contractually required and excess
seller's interest is based on the present value of future cash flows associated
with the underlying receivables. The fair value of the interest only strip is
based on the present value of estimated future cash flows to be received in
excess of contractually specified servicing fees less estimated losses,
discounted at 12% over the estimated remaining term of the underlying
receivables. Retained interests are carried at fair value and are summarized
below:
Unrealized Unrealized
(Amounts in thousands) Cost Gain Loss Fair Value
----------------------------------------------
February 28, 1999:
Contractually required
seller's interest $112,967 $ 5,163 $ -- $118,130
Excess seller's interest 41,071 -- -- 41,071
Interest-only strip 28,500 3,269 -- 31,769
----------------------------------------------
$182,538 $ 8,432 $ -- $190,970
==============================================
February 28, 1998:
Contractually required
seller's interest $110,193 $ 7,242 $ -- $117,435
Excess seller's interest 36,706 -- -- 36,706
Interest-only strip 27,925 92 -- 28,017
----------------------------------------------
$174,824 $ 7,334 $ -- $182,158
==============================================
36
<PAGE>
(5) Property and Equipment
- --------------------------------------------------------------------------------
Property and equipment consists of the following:
1999 1998
--------------------
(Amounts in thousands)
Land and buildings $184,127 $135,857
Fixtures, equipment and vehicles 158,383 150,259
Leasehold improvements 249,238 254,363
Construction in progress 14,210 30,998
--------------------
605,958 571,477
Less accumulated depreciation 205,272 173,326
--------------------
$400,686 $398,151
====================
(6) Notes Payable and Long-Term Debt
- --------------------------------------------------------------------------------
The Company is currently in the fourth year of a five-year revolving credit
facility dated July 19, 1995. Comprised of ten banks, the facility had
$210,000,000 outstanding and $190,000,000 unused as of February 28, 1999.
Subsequent to the balance sheet date this facility which was $400,000,000 at
February 28, 1999 was reduced to $298,063,000. Going forward, the facility will
be reduced on a dollar for dollar basis with proceeds from asset sales until the
amount available reached $200.0 million. During fiscal 1999, the Company had
additional lines of credit with banks that totaled $60,000,000. These lines of
credit were eliminated during the fourth quarter of fiscal 1999. The Company's
maximum short-term borrowings were $288,500,000 during fiscal 1999 and
$342,100,000 during fiscal 1998. The average short-term debt outstanding for
fiscal 1999 was $235,018,000 compared to $229,213,000 for fiscal 1998. The
approximate weighted average interest rates were 6.2%, 6.1% and 5.8% in fiscal
1999, 1998 and 1997, respectively.
At February 28, 1999, the Company had $210,000,000 of outstanding
short-term borrowings compared to $260,000,000 at February 28, 1998. The average
interest rate on this debt was approximately 5.7% at February 28, 1999, and 6.2%
and 5.8% at February 28, 1998 and 1997, respectively. There were no compensating
balance requirements.
Long-term debt consists of the following:
1999 1998
-----------------------
(Amounts in thousands)
Shelf registration issues:
7.60% unsecured notes due 2007 $175,000 $175,000
7.88% unsecured notes due 2003 200,000 200,000
7.40% unsecured notes due 2002 100,000 100,000
Other issues:
Notes payable to insurance
companies and banks, maturing
through 2002, interest ranging
from 5.74% to 8.99%,unsecured 225,000 245,000
Notes, collateralizing industrial development revenue bonds, maturing through
2005, interest ranging from a floating rate of 67% of prime to an 8.50% fixed
rate 495 906
Term loans, maturing through
2007, interest ranging to 9.80%,
primarily collateralized by deeds
of trust 830 1,026
Capital lease obligations, maturing
through 2009, interest ranging
from 76% of prime to 12.80% 13,505 15,704
--------------------
714,830 737,636
Less amounts due within one year 167,486 22,365
--------------------
$547,344 $715,271
====================
37
<PAGE>
Principal payments are due for the four years after February 28, 2000 as
follows: 2001, $1,053,000; 2002, $160,200,000; 2003, $209,000; and 2004,
$200,204,000. The aggregate net carrying value of property and equipment
collateralization at February 28, 1999, was $9,267,000. The Company has on file
a shelf registration to issue up to $400,000,000 of common stock, warrants and
debt securities. The $175,000,000 unsecured 7.60% notes due 2007 were issued
under the shelf registration with the remaining $225,000,000 unissued at
February 28, 1999. During fiscal 1997, the Company issued $200,000,000 unsecured
7.88% notes due 2003 and $100,000,000 unsecured 7.40% notes due 2002 under a
previous shelf registration.
Notes payable to insurance companies and banks contain certain restrictive
covenants. Under these covenants, the payment of cash dividends is limited to
$74,576,000 plus 75% of net earnings adjusted for dividend payouts subsequent to
February 28, 1999. Other covenants relate to the maintenance of working capital,
pre-tax earnings coverage of fixed charges, limitations on total and funded
indebtedness and maintenance of stockholders' equity. As a result of the losses
incurred during fiscal years 1999 and 1998, the Company obtained amendments to
its bank debt agreements in order to maintain covenant compliance.
Interest payments of $77,743,000, $65,404,000 and $46,710,000 net of
capitalized interest of $1,658,000, $3,762,000 and $2,360,000 were made during
fiscal 1999, 1998 and 1997, respectively.
(7) Income Taxes
- --------------------------------------------------------------------------------
The provision (benefit) for income taxes consists of the following:
1999 1998 1997
(Amounts in thousands)
--------------------------------
Current:
Federal $(12,711) $(21,250) $ 5,481
State (1,910) (4,911) 3,006
Puerto Rico (740) 2,238 2,160
--------------------------------
(15,361) (23,923) 10,647
Deferred:
Federal 8,138 (2,178) 7,758
State 4,951 ( 573) 1,618
Puerto Rico 1,191 (2,570) 1,692
--------------------------------
14,280 (5,321) 11,068
--------------------------------
$ (1,081) $(29,244) $21,715
================================
38
<PAGE>
The income tax effects of temporary differences that gave rise to
significant portions of the net deferred tax liability as of February 28, 1999
and 1998, consist of the following:
1999 1998
(Amounts in thousands)
----------------------
Deferred tax assets:
Allowance for doubtful accounts $ 20,672 $ 20,613
Store closing and other charges 7,537 15,521
Accrued liabilities 13,318 12,400
Alternative minimum tax credit
carryforward 2,689 7,973
Federal tax credits 10,429 6,655
Net operating loss carryforward 26,539 1,977
Other 806 247
----------------------
81,990 65,386
----------------------
Deferred tax liabilities:
Excess costs over net assets
acquired 60,135 46,536
Accounts receivable 28,034 20,586
Depreciation 13,339 17,520
Asset securitizations 20,625 17,436
Inventory 9,107 9,264
Deferred revenues 6,598 8,962
Costs capitalized on constructed
assets 8,322 6,525
Other 6,045 3,580
----------------------
152,205 130,409
----------------------
$ 70,215 $ 65,023
======================
Balance sheet classification:
Other current assets $ -- $ 5,914
Other current liabilities 24,850 --
Deferred income tax liability 45,365 70,937
----------------------
$ 70,215 $ 65,023
======================
A reconciliation of the statutory federal income tax rate to the Company's
effective rate is provided below:
1999 1998 1997
---------------------------------
Statutory federal income
tax rate (35.0)% (35.0)% 35.0%
State income taxes, net of
federal income tax benefit (3.8) (2.8) 3.7
Tax credits (131.8) (4.9) (5.3)
Goodwill amortization and
other, net 135.1 8.0 1.7
---------------------------------
(35.5)% (34.7)% 35.1%
=================================
39
<PAGE>
Federal and state income tax payments of $5,762,000, $8,427,000 and
$18,447,000 were made during fiscal 1999, 1998 and 1997, respectively. The
Company has an alternative minimum tax and other federal tax credit
carryforwards of approximately $2,690,000 and $10,429,000, respectively.
Additionally, the Company has a federal net operating loss carryforward of
approximately $36,872,000. The federal net operating loss and tax credit
carryforwards will expire fiscal year 2019.
(8) Retirement Plans
- --------------------------------------------------------------------------------
During 1999, the Company adopted FASB No. 132, "Employer's Disclosures
about Pensions and Other Postretirement Benefits," which revised the Company's
disclosure about pension and other postretirement benefit plans.
The Company has a qualified profit sharing and retirement savings plan,
which includes a cash or deferred arrangement under Section 401(k) of the
Internal Revenue Code (the "Code") and covers substantially all the Company's
employees. Eligible employees may elect to contribute specified percentages of
their compensation to the plan. The Company guarantees a dollar-for-dollar match
on the first two percent of the employee's compensation contributed to the plan.
The Company will make an additional matching contribution if and to the extent
that four percent of the Company's estimated consolidated income before taxes
exceeds the two percent dollar-for-dollar match described above. The Company
may, at the discretion of its Board of Directors, make additional Company
matching contributions subject to certain limitations. The plan may be
terminated at the discretion of the Board of Directors. If the plan is
terminated, the Company will not be required to make any further contributions
to the plan and participants will become 100% vested in any Company
contributions made to the plan. The plan expense recognized in fiscal 1999, 1998
and 1997 was $3,958,000, $3,052,000 and $2,507,000, 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 1999, 1998 and 1997 was $489,000, $445,000 and
$283,000, respectively.
The Company has an executive income continuation plan which covers certain
executive officers. The plan is intended to provide certain supplemental
pre-retirement death benefits and retirement benefits to its key executives. In
the event an executive dies prior to age 65 in the employment of the Company,
the executive's beneficiary will receive annual benefits of 100% of salary for a
period of two years and 50% of salary for a period of eight years. If the
executive retires at age 65, either the executive or his beneficiary will
receive an annual retirement benefit of 20% to 25% of the executive's salary
increased 4% annually for a period of 15 years. This plan has been funded
through the purchase of life insurance contracts covering the executives and
owned by the Company. For the fiscal year 1999, the Company recognized expense
of $540,000, and for fiscal years 1998 and 1997, there was no charge to
earnings.
As of February 28, 1999, 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, a non-qualified unfunded defined benefit plan, and a qualified
defined contribution savings plan. During fiscal 1998, these three plans were
amended in order to cease future benefit accruals and contributions. As of that
date, no new participants could be added.
40
<PAGE>
The following tables represent activity in the Company's qualified defined
benefit plan:
1999 1998
(Amounts in thousands)
------------------------
Change in projected benefits obligation:
Projected benefit obligation at beginning of year $15,280 $14,811
Service cost -- 355
Interest cost 1,077 1,109
Actuarial loss (gain) 729 (199)
Benefits paid (1,188) (796)
---------------------
Projected benefit obligation at end of year $15,898 $15,280
=====================
Change in plan assets:
Fair value of plan assets at beginning of year $15,205 $13,020
Actual return on plan assets 1,590 2,316
Employer contribution -- 665
Benefits paid (1,188) (796)
---------------------
Fair value of plan assets at end of year $15,607 $15,205
=====================
Funded status $ (291) $ (75)
Unrecognized net transition asset (862) (1,059)
Unrecognized net actuarial loss 389 178
---------------------
Accrued benefit cost $ (764) $ (956)
=====================
Weighted-average assumptions as of February 28:
Discount Rate 7.25% 7.25%
Expected return on plan assets 7.25% 8.50%
Components of net periodic benefit cost:
Service cost $ -- $ 355
Interest cost 1,077 1,109
Expected return on plan assets (1,072) (1,100)
Amortization of transition asset (197) (197)
Amortization of prior service cost -- 5
---------------------
Charge (benefit) to operations $ (192) $ 172
=====================
Assets of the plan are generally invested in equities and fixed income
instruments.
The projected benefit obligation of the non-qualified pension plan totaled
$1,935,000 and $1,796,000 at February 28, 1999 and 1998, respectively. There are
no plan assets in the non-qualified plan due to the nature of the plan.
41
<PAGE>
(9) Stock Options
- --------------------------------------------------------------------------------
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations 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, 1994 and 1998 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.
Options granted during fiscal years 1999 and 1998 immediately vested and became
exercisable when granted. Previously granted 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 1999, 1998 and 1997, respectively: risk-free interest
rates of 5.2%, 6.5% and 6.1%; a dividend yield of 1.9%; volatility factors of
the expected market price of the Company's common stock of 48%, 46% and 41%; and
a weighted-average expected option life of 4.55, 3.61 and 3.48 years.
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:
1999 1998 1997
(Amounts in thousands except per share data)
--------------------------------------------
Pro forma net income (loss) $(3,494) $(55,837) $37,072
Pro forma earnings (loss) per share:
Basic (.06) (.99) .75
Diluted (.06) (.99) .74
A summary of the Company's stock option activity and related information
for the years ended February 28, 1999, 1998 and 1997 follows:
Weighted
Average
Options Exercise Price
---------- --------------
Outstanding at March 1, 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
Granted 28,008 15.53
Exercised (116,435) 7.81
Forfeited (100,000) 15.63
---------- -------
Outstanding at February 28, 1998 5,008,457 15.98
Granted 385,030 6.72
Exercised (122,155) 5.52
Forfeited (44,862) 17.55
---------- -------
Outstanding at February 28, 1999 5,226,470 $15.53
========== =======
42
<PAGE>
Range of $6.02 $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, 1999 1,774,134 743,596 2,696,740 12,000
Weighted average remaining
contract life, outstanding
options 3.98 7.98 4.95 4.95
Weighted average exercise
price,outstanding options $ 8.42 $14.41 $20.43 $35.06
Options exercisable at
February 28, 1999 1,774,134 743,596 2,696,740 12,000
Weighted average exercise
price, exercisable options $ 8.42 $14.41 $20.43 $35.06
Options exercisable at year end and the respective weighted average
exercise prices were 5,226,470 at $15.53, 4,831,095 at $15.96 and 4,762,846 at
$15.50 for fiscal 1999, 1998 and 1997, respectively.
The weighted average fair values of options granted were $2.68, $5.82 and
$4.88 for fiscal 1999, 1998 and 1997, respectively.
(10) 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:
1999 1998
(Amounts in thousands)
----------------------
Land and buildings $12,098 $12,098
Fixtures and equipment 2,164 1,955
----------------------
14,262 14,053
Less accumulated depreciation
and amortization 7,095 5,219
----------------------
$ 7,167 $ 8,834
======================
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, 1999, are as follows:
Capital Leases Operating Leases
Fiscal Years (Amounts in thousands)
---------------------------
2000 $ 3,521 $ 160,360
2001 3,516 153,204
2002 3,010 143,557
2003 2,965 133,534
2004 2,229 112,044
After 2004 2,912 587,404
--------------------------
Total minimum lease payments $18,153 $1,290,103
==========
Less:
Executory costs 77
Imputed interest 4,571
-------
Present value of minimum
lease payments $13,505
=======
43
<PAGE>
Total rental expense under operating leases for fiscal 1999, 1998 and 1997
was $165,005,000, $138,128,000 and $83,888,000, respectively. Contingent rentals
and sublease rentals are negligible.
Payments to affiliated entities under capital and operating leases were
$269,000 for fiscal 1999, which included payments to limited partnerships in
which the Company has equity interests. Lease payments to affiliated entities
for fiscal 1998 and 1997 were $327,000 and $314,000, respectively.
Litigation
The Company is party to various legal actions and administrative
proceedings and subject to various claims arising in the ordinary course of
business. Based on the best information presently available, the Company
believes that the disposition of these matters will not have a material effect
on the financial statements.
(11) 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, were as follows:
1999 1998
(Amounts in thousands)
-----------------------
On notes payable and other $ 74,000 $168,300
On securitized receivables 145,000 185,000
Interest rates that the Company paid per the swap agreements related
primarily to notes payable were fixed at an average rate of 7.6% and 7.0% at
February 28, 1999 and 1998, respectively. The variable rates received per these
agreements were tied to LIBOR or commercial paper rates and averaged 5.2% and
5.7% at February 28, 1999 and 1998, respectively. All of these agreements expire
in fiscal 2000.
Interest rates that the Company paid on swap agreements related to
securitized receivables were fixed at an average rate of 6.9% and 6.8% at
February 28, 1999 and 1998, respectively. The variable rates received per these
agreements were tied to LIBOR and averaged 5.0% and 5.7% at February 28, 1999
and 1998, respectively. The remaining terms for these agreements are up to
approximately one year.
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.
44
<PAGE>
(12) 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, 1999 and 1998 are as follows:
1999 1998
------------------ ------------------
Carrying Fair Carrying Fair
(Amounts in thousands) Amount Value Amount Value
Assets:
Cash $ 67,254 $ 67,254 $ 48,779 $ 48,779
Accounts receivable, net 254,282 254,282 392,765 392,765
Retained interest in
securitized receivables 190,970 190,970 182,158 182,158
Liabilities:
Accounts payable 193,799 193,799 203,048 203,048
Notes payable 210,000 210,000 260,000 260,000
Long-term debt 701,325 572,362 721,932 725,997
Off-balance-sheet financial
instruments:
Interest rate swap agreements:
Assets -- -- -- 86
Liabilities -- 3,095 -- 6,570
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.
Retained Interest in Securitized Receivables
The carrying amount approximates fair value, based upon customer payment
experience and discounted at the market rate.
Accounts Payable and Notes Payable
The carrying amount 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.
45
<PAGE>
(13) Earnings (Loss) Per Share
- --------------------------------------------------------------------------------
The Company was required to adopt in the fourth quarter of fiscal 1998 SFAS
No. 128, "Earnings Per Share," which superceded APB Opinion No. 15. Earnings
(loss) per share for all periods presented have been restated to reflect the
adoption of SFAS No. 128. SFAS No. 128 requires companies to present basic and
diluted earnings (loss) per share, instead of primary and fully diluted earnings
(loss) per share. Basic earnings (loss) per share is computed by dividing the
net earnings (loss) by the weighted average number of shares outstanding.
Diluted earnings (loss) per share reflects the potential dilution that could
occur if options or other contingencies to issue common stock were exercised.
The following is a reconciliation of the number of shares (denominator)
used in the basic and diluted earnings (loss) per share computations:
(Amounts in thousands except 1999 1998 1997
per share data) --------------------------------
Numerator:
Net earnings (loss) $ (1,967) $(55,143) $ 40,185
Denominator:
Denominator for
basic earnings (loss)
per share - average
common shares
outstanding 59,331 56,312 49,360
Effect of potentially
dilutive stock options -- -- 786
Denominator for
diluted earnings
(loss) per share 59,331 56,312 50,146
Basic EPS $ (0.03) $ (0.98) $ 0.81
Diluted EPS (0.03) (0.98) 0.80
The computation for fiscal 1999 does not assume the conversion of
outstanding options to purchase 5,226,000 shares of common stock at prices
ranging from $6.02 to $35.06, with expiration dates between February 2000 and
February 2009 and 911,000 contingently issuable shares, since the result would
be antidilutive due to the loss from operations. Options to purchase 5,008,000
shares of common stock at prices ranging from $5.52 to $35.06, with expiration
dates between January 1999 and June 2007 and 265,000 contingently issuable
shares were outstanding during fiscal 1998, however, were excluded from the
diluted EPS calculation since the result would be antidilutive due to the loss
from operations. Options to purchase 1,723,000 shares of common stock at prices
ranging from $20.29 to $35.06, with expiration dates between February 2003 and
August 2004, were outstanding during fiscal 1997, however, were excluded from
the diluted EPS calculation because the options' exercise prices were greater
than the average market price of the common shares.
46
<PAGE>
(14) Quarterly Financial Data (Unaudited)
- --------------------------------------------------------------------------------
The following is a summary of quarterly financial data for fiscal 1999 and
1998:
Three months ended May 31 August 31 November 30 February 28
- --------------------------------------------------------------------------------
(Amounts in thousands except per share data)
1999
Revenues $668,939 $675,007 $728,209 $654,203
Gross profit(1) 200,363 190,529 219,697 182,662
Earnings (loss) before taxes 15,872 13,761 9,896 (42,577)
Net earnings (loss) 10,194 8,758 6,274 (27,193)
Earnings (loss) per share of common stock(2):
Basic 0.17 0.15 0.11 (0.45)
Diluted 0.17 0.15 0.10 (0.45)
Cash dividends per share of
common stock 0.07 0.07 0.07 0.07
1998
Revenues $566,325 $590,212 $678,468 $634,732
Gross profit(1) 169,058 171,201 202,796 165,609
Store closing and other charges -- -- -- 25,530
Earnings (loss) before taxes 22,000 14,402 (75,467) (45,322)
Net earnings (loss) 13,761 9,279 (49,122) (29,061)
Earnings (loss) per share of common stock(2):
Basic 0.25 0.17 (0.87) (0.50)
Diluted 0.25 0.16 (0.87) (0.50)
Cash dividends per share of
common stock 0.07 0.07 0.07 0.07
(1) Gross profit is sales less costs of sales.
(2) Total of quarterly earnings (loss) per common share may not equal the annual
amount because net income (loss) per common share is calculated independently
for each quarter.
(15) Segment Information
- --------------------------------------------------------------------------------
Effective December 1, 1998, the Company adopted the provisions of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information." The Company has significant operations aligned in four
operating formats: Heilig-Meyers, The RoomStore, Rhodes and Mattress Discounters
divisions.
The Company's Heilig-Meyers division is associated with the Company's
historical operations. The majority of the Heilig-Meyers stores operate in
smaller markets with a broad line of merchandise. The Rhodes division comprises
the 96 stores operating under the "Rhodes" name. The Rhodes retailing strategy
is selling quality furniture to a broad base of middle income customers. Stores
operating under The RoomStore division include the 70 stores primarily operating
in Texas, Oregon, Maryland and Illinois and the 32 stores in Puerto Rico
operating under the "Berrios" name. The Mattress Discounters division is the
Nation's largest retail bedding specialist.
47
<PAGE>
The accounting policies of the segments are the same as those described in
Note 1 to the Consolidated Financial Statements. The Company evaluates
performance based on earnings (loss) before interest and income taxes (based
upon generally accepted accounting principles). The Company generally accounts
for intersegment sales and transfers at current market prices as if the sales or
transfers were to unaffiliated third parties. General corporate expenses are
allocated between the divisions.
(Amounts in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Revenues:
Heilig-Meyers $1,531,766 $1,518,415 $1,333,468
Rhodes 479,620 509,474 82,409
The RoomStore 476,324 309,664 177,242
Mattress Discounters 238,648 132,183 --
---------- ---------- ----------
Total revenues from external
customers $2,726,358 $2,469,736 $1,593,119
========== ========== ==========
Earnings (loss) before interest and taxes:
Heilig-Meyers $ 66,634 $ (17,648) $ 88,660
Rhodes (29,279) 9,181 2,944
The RoomStore 12,855 3,705 18,096
Mattress Discounters 22,971 13,479 --
Intersegment earnings (loss) (553) (291) --
---------- ---------- ----------
Total earnings (loss) before
interest and taxes $ 72,628 $ 8,426 $ 109,700
---------- ---------- ----------
Store closing and other charges -- (25,530) --
Interest expense (75,676) (67,283) (47,800)
---------- ---------- ----------
Consolidated earnings (loss)
before provision (benefit)
for income taxes $ (3,048) $ (84,387) $ 61,900
========== ========== ==========
Depreciation expense:
Heilig-Meyers $ 35,774 $ 32,739 $ 30,226
Rhodes 12,468 13,998 2,116
The RoomStore 5,836 4,909 1,532
Mattress Discounters 4,762 2,397 --
---------- ---------- ----------
Total depreciation expense $ 58,840 $ 54,043 $ 33,874
========== ========== ==========
Capital expenditures:
Heilig-Meyers $ 57,486 $ 51,871 $ 79,369
Rhodes 12,784 3,381 869
The RoomStore 12,086 14,046 3,899
Mattress Discounters 5,149 1,623 --
---------- ---------- ----------
Total capital expenditures $ 87,505 $ 70,921 $ 84,137
========== ========== ==========
Total identifiable assets:
Heilig-Meyers $1,292,770 $1,417,834 $1,383,912
Rhodes 287,595 331,845 261,895
The RoomStore 269,906 254,801 191,351
Mattress Discounters 97,481 93,033 --
---------- ---------- ----------
Total identifiable assets $1,947,752 $2,097,513 $1,837,158
========== ========== ==========
48
<PAGE>
(16) 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 the Company, 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. MacSaver
also transfers the substantial majority of its installment accounts receivable,
through a wholly-owned subsidiary, to a Master Trust which issues certificates
representing undivided interests in such certificates (See Notes 1 and 4).
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 June 1997, 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 $175,000,000 in aggregate principal amount of its notes
at 7.60% due 2007. In fiscal 1997, MacSaver issued $300,000,000 in aggregate
principal amount of its notes under a previous Registration Statement filed
jointly by the Company and MacSaver; $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 Operations
Twelve months ended February 28,
1999 1998 1997
--------------------------------
(Amounts in thousands)
Net revenues $302,418 $267,386 $158,306
Operating expenses 252,699 292,493 102,706
--------------------------------
Earnings (loss) before
taxes 49,719 (25,107) 55,600
--------------------------------
Net earnings (loss) $ 32,317 $(16,320) $ 36,140
================================
MacSaver Financial Services Summarized Balance Sheets
February 28,
1999 1998
----------------------
(Amounts in thousands)
Current assets $ 57,151 $ 29,545
Accounts receivable, net 145,211 295,405
Retained interest in securitized
receivables at fair value 190,967 182,158
Due from affiliates 714,372 645,291
----------------------
Total assets $1,107,701 $1,152,399
======================
Current liabilities $ 186,255 $ 48,951
Notes payable 210,000 260,000
Long-term debt 535,000 700,000
Stockholders' equity 176,446 143,448
----------------------
Total liabilities and
stockholders' equity $1,107,701 $1,152,399
======================
49
<PAGE>
(17) Subsequent Event
- --------------------------------------------------------------------------------
On May 28, 1999, the Company entered into a definitive agreement to sell
substantially all of its interest in its Mattress Discounters division to an
investment group, including certain key managers of Mattress Discounters, led by
Bain Capital, a Boston based capital investment group. The sale price is
approximately $225.5 million, subject to final adjustment, including net cash
proceeds of approximately $206.7 million. The transaction, which is subject to
certain closing conditions, is expected to close in the second quarter of fiscal
2000 and result in a gain, net of income taxes, of approximately $68.0 million,
or $1.12 per share. The Company will retain a 7% interest in Mattress
Discounters. The net cash proceeds will be used to pay down debt.
The Company has continued its evaluation of the possible divestiture of all
or part of its Rhodes division. Because of the uncertainties surrounding the
ability of the Company to consummate a sale of the Rhodes division within the
fiscal year ending February 29, 2000, the related assets of the Rhodes division
were considered "held for use" as of February 28, 1999 and are presented on a
consolidated basis. If an agreement to sell the Rhodes division is executed, the
transaction may result in a loss and, depending on the terms of such an
agreement, the loss may be material to results of operations. Management
believes that, under a held for use classification, the Rhodes division's future
undiscounted cash flows will be in excess of the related carrying value of its
assets as of February 28, 1999.
50
<PAGE>
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, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three fiscal years in the period ended February 28, 1999.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a)2. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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, 1999 and 1998, and the results of their
operations and their cash flows for each of the three fiscal years in the period
ended February 28, 1999 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 24, 1999, except for note 17, as to which the date is June 1, 1999.
51
<PAGE>
ITEM 9. CHANGES in and DISAGREEMENTS with ACCOUNTANTS on ACCOUNTING and
FINANCIAL DISCLOSURE
None.
PART III
With the exception of the information incorporated by reference from the
Company's Proxy Statement in Items 10, 11 and 12 of Part III of this Form 10-K,
the Company's Proxy Statement dated May 19, 1999 (the "1999 Proxy Statement"),
is not to be deemed filed as a part of this Report.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company's directors required by this Item is
incorporated by reference to the section entitled "Election of Directors"
appearing on pages 2-4 of the 1999 Proxy Statement.
The information concerning the Company's executive officers required by
this Item is incorporated by reference to the section in Part I hereof entitled
"Executive Officers of the Registrant."
The information concerning compliance with Section 16(a) of the Securities
Exchange Act of 1934 required by this Item is incorporated by reference to the
section entitled "Section 16(a) Beneficial Ownership Reporting Compliance"
appearing on page 6 of the 1999 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
sections entitled "Executive Compensation" appearing on pages 7-8 of the 1999
Proxy Statement, "Executive Supplemental Retirement Plan" and "Executive
Severance Plan" appearing on pages 14-15 of the 1999 Proxy Statement, and
"Director's Compensation" and "Compensation Committee Interlocks and Insider
Participation" appearing on pages 15-16 of the 1999 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
section entitled "Election of Directors" appearing on pages 2-5 of the 1999
Proxy Statement and "Principal Shareholders" appearing on page 18 of the 1999
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by the item is incorporated by reference to the
section entitled "Certain Transactions" appearing on pages 16-17 of the 1999
Proxy Statement and the last paragraph under the section entitled "Election of
Directors - Nominees" on page 5.
52
<PAGE>
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 1999 Annual
Report to Shareholders are included in item 8 herein:
Independent Auditors' Report
Consolidated Balance Sheets -
February 28, 1999 and 1998
Consolidated Statements of Operations -
Year Ended February 28, 1999,
Year Ended February 28, 1998, and
Year Ended February 28, 1997
Consolidated Statements of Stockholders' Equity -
Year Ended February 28, 1999,
Year Ended February 28, 1998, and
Year Ended February 28, 1997
Consolidated Statements of Cash Flows -
Year Ended February 28, 1999,
Year Ended February 28, 1998, and
Year Ended February 28, 1997
Notes to Consolidated Financial Statements
(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) Reports on Form 8-K Filed During Last Quarter of Year Ended
February 28, 1999.
There were three Current Reports on Form 8-K filed during the
last quarter of the fiscal year ended February 28, 1999. On
December 3, 1998, Registrant filed a Form 8-K in which it
reported that Troy A. Perry, Jr., President and Chief Operating
Officer, would retire from the Company and its Board of Directors
effective March 1, 1999. On December 8, 1998, Registrant filed an
8-K in which it reported November 1998 sales. On December 17,
1998, Registrant filed a Form 8-K in which it reported the
results for the third quarter of fiscal 1999 and announced the
retirement of certain officers.
53
<PAGE>
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: June 1, 1999 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: June 1, 1999 /s/William C. DeRusha
---------------------
William C. DeRusha
Chairman of the Board
Principal Executive Officer
Director
Date: June 1, 1999 /s/Roy B. Goodman
-----------------
Roy B. Goodman
Executive Vice President
Principal Financial Officer
Date: June 1, 1999 /s/William J. Dieter
--------------------
William J. Dieter
Senior Vice President,
Accounting and Principal
Accounting Officer
Date: June 1, 1999 /s/Alexander Alexander
-----------------------
Alexander Alexander, Director
Date: June 1, 1999 /s/Robert L. Burrus, Jr.
------------------------
Robert L. Burrus, Jr., Director
Date: June 1, 1999 /s/Beverley E. Dalton
---------------------
Beverley E. Dalton, Director
Date: June 1, 1999 /s/Charles A. Davis
----------------------
Charles A. Davis, Director
Date: June 1, 1999
-----------------------------
Benjamin F. Edwards, III, Director
Date: June 1, 1999 /s/Alan G. Fleischer
--------------------
Alan G. Fleischer, Director
54
<PAGE>
Date: June 1, 1999 /s/Nathaniel Krumbein
------------------------
Nathaniel Krumbein, Director
Date: June 1, 1999 /s/Hyman Meyers
-------------------
Hyman Meyers, Director
Date: June 1, 1999 /s/S. Sidney Meyers
--------------------
S. Sidney Meyers, Director
Date: June 1, 1999 /s/Lawrence N. Smith
---------------------
Lawrence N. Smith, Director
Date: June 1, 1999 /s/Eugene P. Trani
------------------
Eugene P. Trani, Director
Date: June 1, 1999 /s/L. Douglas Wilder
--------------------
L. Douglas Wilder, Director
55
<PAGE>
<TABLE>
HEILIG-MEYERS COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
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,
1999 $60,306 $108,216 $ 3,470 (A) $ 68,779 $ 4,295(C) $47,947 $42,745
$(8,226)(B)
Year Ended
February 28,
1998 $41,120 $181,136 $ 1,817(A) $106,029 $21,156(C) $38,148 $60,306
$ 1,566(B)
Year Ended
February 28,
1997 $54,714 $ 80,908 $ 1,330(A) $ 70,438 $ 6,912(C) $33,940 $41,120
$15,458(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:
1999 1998 1997
-------- -------- ------
Write-offs of Uncollectible Accounts $ 4,295 $21,156 $ 6,912
</TABLE>
56
<PAGE>
Index to Exhibits
3. Articles of Incorporation and Bylaws.
a. Registrant's Restated Articles of Incorporation, as amended,
filed as Exhibit 3a to Registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1998, is hereby
incorporated by this reference.
b. Registrant's Amended and Restated Bylaws, filed as Exhibit 3a
to Registrant's Quarterly Report on Form 10-Q for the quarter
ended November 30, 1997, are incorporated herein by this
reference.
4. Instruments defining the rights of security holders, including
indentures.
a. The long-term debt as shown on the consolidated balance sheet
of the Registrant at February 28, 1999 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)
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 Agreement filed as Exhibit 10(b) to Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1991(No. 1-8484) is incorporated herein by this reference:
(1) Lease dated as of January 1, 1980 between Hyman Myers,
Agent, 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. *
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<PAGE>
(3) Executive Employment and Deferred Compensation
Agreement made January 12, 1982 between
Nathaniel Krumbein and the Registrant. *
d. Intentionally omitted.
e. 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.*
f. 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.*
g. 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.*
h. 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.*
i. 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.*
j. 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.*
k. Deferred Compensation Agreement between Lawrence N. Smith and
the Registrant filed as Exhibit 10(p) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1987 (No. 1-8484) is incorporated herein by this
reference.*
l. 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.*
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<PAGE>
m. 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.*
n. 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.*
o. Employees Supplemental Profit-Sharing and Retirement Savings
Plan, adopted effective as of March 1, 1991, amended and
restated effective as of January 1, 1999.*
p. 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.*
q. 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.*
r. 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.*
s. 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.*
t. 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.*
u. Form of Executive Supplemental Retirement Agreement between
the Registrant and each of William C. DeRusha and Troy A.
Peery, Jr. dated January 1, 1996 filed as Exhibit 10(y) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1997 (No. 1-8484) is incorporated herein by
this reference. *
v. Form of Executive Supplemental Retirement Agreement between
the Registrant and each of James F. Cerza, Jr. and James R.
Riddle dated January 1, 1996 filed as Exhibit 10(z) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1997 (No. 1-8484) is incorporated herein by
this reference. *
w. Form of Executive Supplemental Retirement Agreement between
the Registrant and William J. Dieter dated January 1, 1996
filed as Exhibit 10(aa) to Registrant's Annual Report on Form
10-K for the fiscal year ended February 28, 1997 (No. 1-8484)
is incorporated herein by this reference. *
x. Employment Agreement made as of November 1, 1996 between
William C. DeRusha and the Registrant filed as Exhibit 10(bb)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1997 (No. 1-8484) is incorporated herein by
this reference. *
59
<PAGE>
y. Employment Agreement made as of November 1, 1996 between Troy
A. Peery, Jr. and the Registrant filed as Exhibit 10(cc) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1997 (No. 1-8484) is incorporated herein by
this reference. *
z. 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
James C. Cerza, Jr. and the Registrant.*
(2) Employment Agreement dated April 10, 1991 between
James R. Riddle and the Registrant.*
aa. 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.*
bb. 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.*
cc. 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.*
dd. 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.*
ee. 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.*
ff. 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.*
gg. Letter Agreement, dated August 26, 1993, amending employment
agreement between James F. Cerza and the Registrant filed as
exhibit 10(nn) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1994 (No. 1-8484) is
incorporated herein by this reference.*
60
<PAGE>
hh. $400,000,000 Credit Agreement dated July 18, 1995 (the
"Credit Facility") 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.
ii. 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.*
jj. 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.*
kk. Amended and Restated Merchant Agreement by and between
Beneficial National Bank USA, HMY RoomStore, Inc. and Rhodes,
Inc., dated as of May 9, 1997 filed as Exhibit 10(qq) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1997 (No. 1-8484) is incorporated herein by
this reference.
ll. 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.*
mm. 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.*
nn. First Amendment and Restatement of Credit Agreement dated as
of May 14, 1996, filed as Exhibit 10(oo) to Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1998, is incorporated herein by this reference.
oo. Second Amendment and Restatement of Credit Agreement dated as
of January 8, 1997, filed as Exhibit 10(pp) to Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1998, is incorporated herein by this reference.
pp. Third Amendment and Restatement of Credit Agreement dated as
of May 23, 1997, filed as Exhibit 10(qq) to Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1998, is incorporated herein by this reference.
qq. Amendment No. 4 to the Credit Facility, dated as of November
30, 1997 filed as Exhibit 10(a) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended November 30, 1997,
is incorporated herein by this reference.
rr. Amendment No. 5 to the Credit Facility dated as of April 22,
1998, filed as Exhibit 10(ss) to Registrant's Annual
Report on Form 10-K for the fiscal year ended February 28,
1998, is incorporated herein by this reference.
ss. Amended and Restated Guaranty by the Registrant, dated as of
May 9, 1997, of certain obligations under the Amended and
Restated Merchant Agreement by and among Beneficial National
Bank USA, HMY RoomStore, Inc. and Rhodes, Inc., dated as of
May 9, 1997, filed as Exhibit 10(a) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1997, is
incorporated herein by this reference.
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<PAGE>
tt. Rhodes Inc. Supplemental Employees Pension Plan, effective as
of March 1, 1995, filed as Exhibit 10(uu) to Registrant's
Annual Report on Form 10-K for the fiscal year ended February
28, 1998, is incorporated herein by this reference.
uu. Amendment No. 6 to the Credit Facility dated as of February
24, 1999.
vv. Amendment No. 7 to the Credit Facility dated as of April 15,
1999.
ww. Agreement of Lease commencing November 1, 1990 between Hyman
Meyers, Agent and the Registrant.
xx. Agreement of Lease commencing November 1, 1990 between Hyman
Meyers, Agent and the Registrant.
yy. Lease dated August 30, 1986 between Meyers-Thornton Investment
Co. and Registrant.
zz. Agreement of Lease dated December 16, 1997 between Meyers-
Thornton Investment Co. and Registrant.
aaa. Lease dated August 30, 1986 between Meyers-Thornton Investment
Co. and Registrant.
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 Forms S-8 and S-3.
27. Financial Data Schedule
* Management contract or compensatory plan or arrangement of the Company
required to be filed as an exhibit.
62
<PAGE>
EXHIBIT 10.o
HEILIG-MEYERS
EMPLOYEES' SUPPLEMENTAL PROFIT SHARING
AND RETIREMENT SAVINGS PLAN
The Heilig-Meyers Employees' Supplemental Profit Sharing and Retirement
Savings Plan, originally adopted effective as of March 1, 1991, is hereby
amended and restated effective as of January 1, 1999.
PURPOSE
This Plan is established and maintained solely for the purpose of providing
a select group of highly-compensated and management employees with the
opportunity to defer that portion of their compensation that they are precluded
from deferring under the Heilig-Meyers Employees' Profit Sharing and Retirement
Plan as a result of limitations imposed under the Internal Revenue Code of 1986.
The Plan is also intended to provide eligible employees with deferred
compensation equal to the amount of matching contributions that cannot be
allocated to their accounts under the Employees' Profit Sharing and Retirement
Savings Plan. The Board has determined that the benefits to be paid under this
Plan constitute reasonable compensation for the services rendered and to be
rendered by eligible employees.
DEFINITIONS
Whenever used in this Plan, unless the context clearly indicates otherwise,
the following terms shall have the following meanings:
2.01 Account: A Participant's Deferrals Account and Matching Credits
Account, collectively.
2.02 Adjustment Date: The last day of each Plan Year. The Committee may
establish more frequent Adjustment Dates, if the Committee deems it appropriate.
2.03 Beneficiary: Any person, persons or entity designated by a Participant
or otherwise entitled to receive Benefits payable to the Participant following
his or her death. Beneficiary designations shall be made as part of 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 may designate primary and secondary Beneficiaries.
2.04 Benefits: The aggregate amount of Deferrals, Matching Credits and
Earnings that have been credited to a Participant's Account with respect to a
Deferral Election.
2.05 Board: The Board of Directors of the Company.
2.06 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.
2.07 Committee: The administrative committee established pursuant to the
terms of the Qualified Plan.
2.08 Company: Heilig-Meyers Company and any other Related Company that
adopts the Qualified Plan with the consent of the Company.
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2.09 Company Matching Contributions: Has the meaning given to that term
under the Qualified Plan.
2.10 Company Matching Contributions Account: Has the meaning given to that
term under the Qualified Plan.
2.11 Compensation: The total amounts paid by the Company during the Plan
Year to an Eligible Employee for personal services, but excluding payment of
relocation expenses and compensation received in connection with stock option
plans, stock purchase plans and fringe benefit arrangements. Compensation shall
be determined before taking into account any reduction resulting from a
Participant's election to have Salary Reduction Contributions or Deferrals made
on his or her behalf pursuant to the Qualified Plan or under this Plan.
2.12 Deferral Election: An election filed with the Company by a Participant
to defer Compensation under the Qualified Plan and this Plan.
2.13 Deferrals: Amounts credited to a Participant's Deferrals Account under
Section 4.01.
2.14 Deferrals Account: The bookkeeping account established and maintained
for each Participant to record such Participant's Deferrals and Earnings
thereon.
2.15 Earnings: The amount of earnings, if any, that accrue on Participants'
Deferrals and Matching Credits pursuant to Section 4.06.
2.16 Eligible Employee: Any employee who:
(i) is a management or highly compensated employee (within the
meaning of section 201(2) of the Employee Retirement Income Security
Act of 1974);
(ii) is designated by the Committee as eligible for participation
in the Plan; and
(iii) is a participant in the Qualified Plan.
2.17 Matching Credits: Amounts credited to a Participant's Matching Credits
Account under Section 4.02.
2.18 Matching Credits Account: The bookkeeping account established and
maintained for each Participant to record such Participant's Matching Credits,
and Earnings thereon.
2.19 Participant: Each Eligible Employee who elects to participate in this
Plan.
2.20 Payment Election: An election filed with the Company by a Participant
that specifies the date on which payment of his or her Benefits is to commence,
and the form in which such Benefits are to be paid. The timing and form of
payment selected by the Participant must be consistent with the provisions of
Section V of the Plan. Except in the case of a Participant's death or
disability, payment of Benefits may not commence before a Participant attains
age 50.
2.21 Plan: The "Heilig-Meyers Employees' Supplemental Profit Sharing and
Retirement Savings Plan," as set forth herein and as amended from time to time.
2.22 Plan Year: The calendar year.
2.23 Qualified Plan: The Heilig-Meyers Employees' Profit Sharing and
Retirement Savings Plan, as amended from time to time.
2.24 Related Company: Has the meaning given to that term under the
Qualified Plan.
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: Has the meaning given to that term
under the Qualified Plan.
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<PAGE>
2.28 Salary Reduction Contributions Account: Has the meaning given to that
term under the Qualified Plan.
2.29 Tax Limits: The limitations on compensation and contributions imposed
under the Qualified Plan pursuant to Code Sections 401(a)(17), 402(g), 415,
401(k) and 401(m), and any limitations adopted by the Committee to comply with
such Code Sections.
2.30 Termination Date: The date on which a Participant terminates
employment with the Company other than on account of his or her Retirement or
death.
2.31 Termination of Employment: A Participant's termination of employment
with the Company other than on account of his or her Retirement or death.
PARTICIPATION
3.01 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 individual first becomes an Eligible Employee after January
1 of a Plan Year because he or she has been designated by the Committee as
eligible for participation in the Plan, the Eligible Employee may become a
Participant by filing a Deferral Election with the Company within 15 days
after the date on which the Participant 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.
3.02 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 and shall be irrevocable
while in effect. 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.
3.03 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
3.01. 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 3.01 (provided
that he or she is an Eligible Employee).
3.04 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. All other provisions
of this Plan shall remain in effect, and the Participant shall continue to be
entitled to receive credits pursuant to Section 4.03 and to receive Earnings,
until his or her Benefits are fully distributed pursuant to Section V.
65
<PAGE>
SECTION IV
DEFERRALS, MATCHING CREDITS AND ACCOUNTS
4.01 Participant Deferrals: A Participant will be entitled to make
Deferrals under this Plan in accordance with procedures established by the
Committee. By making a Deferral Election, a Participant shall elect to defer
Compensation that he or she is not permitted to contribute to the Qualified Plan
because of the Tax Limits. 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 Qualified Plan permitted under Code Section 402(g) or under
the terms of the Qualified Plan. The aggregate amount of Deferrals that a
Participant may make under this Section 4.01 in any given Plan Year shall not
exceed the excess of (a) the amount that the Participant would have been able to
contribute to the Qualified Plan for the Plan Year if there were no Tax Limits,
over (b) the amount of any Salary Reduction Contributions contributed to the
Participant's Salary Reduction Contributions Account under the Qualified Plan
for the Plan Year (including any Salary Reduction Contributions returned to the
Participant as excess contributions under the Qualified Plan).
4.02 Matching Credits: Each Plan Year, the Company shall credit to the
Matching Credits Account of each eligible Participant an amount equal to the
excess of (a) the Company Matching Contributions that the Participant would have
had credited to his Company Matching Contributions Account under the Qualified
Plan if there were no Tax Limits and if the Participant had made Salary
Reduction Contributions to the Qualified Plan equal to the sum of his actual
Salary Reduction Contributions under the Qualified Plan and his Deferrals under
this Plan for the Plan Year, over (b) any Company Matching Contributions
contributed to the Participant's Company Matching Contributions Account under
the Qualified Plan for the 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
Qualified Plan.
4.03 Change of Status: Participant Deferrals pursuant to Section 4.01 and
Matching Credits pursuant to Section 4.02 for a Participant who changes his or
her status will be governed by the following provisions:
(a) A Participant who elects not to participate in the Plan for a
subsequent Plan Year will be credited with Deferrals and Matching Credits
through and ending with the last payroll period of the Plan Year to which
his or her current Deferral Election relates.
(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.
4.04 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.
4.05 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.
4.06 Earnings on Accounts. Before the beginning of each Plan Year, the
Committee shall establish an interest rate ("Applicable Interest Rate") for
computing earnings on the amount of Deferrals and Matching Credits that each
Participant has credited to his or her Account for that Plan Year. The
Applicable Interest Rate shall continue to apply to those Deferrals and Matching
Credits in all subsequent Plan Years. The Committee shall establish a separate
Applicable Interest Rate for each Plan Year in which Deferrals and Matching
Credits are first credited to Participants' Accounts. The Committee may, in its
sole discretion, make changes to an Applicable Interest Rate after it is
established.
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SECTION V
PAYMENT OF BENEFITS
5.01 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 is made in accordance with the provisions 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.
(c) Subject to the limitations described in subsection (d) below, a
Participant may change a Payment Election or correct a failure to make a
complete Payment Election by filing a new Payment Election with the
Company. Such new Payment Election shall become 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 or be paid in a
form of payment different from the form of payment specified in the
Participant's current Payment Election provided that (i) 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 is 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 only once during a Plan Year and up to a maximum of three (3)
times. A Participant may not change a Payment Election after payments have
commenced under such Payment Election.
5.02 Timing of Payment:
(a) A Participant's Benefits shall begin to be distributed as soon as
practicable following the date specified in the Participant's Payment
Election and effective as of the first day of a calendar month. The date
specified in the Payment Election 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. If a Participant has a Termination of
Employment prior to the payment date specified in his Payment Election, his
Benefit shall be paid as soon as practicable following his Termination Date
in the form prescribed in Section 5.03 below.
(b) In the event a Participant fails to designate a date in the
Payment Election, a Participant's Benefits automatically shall be
distributed as soon as practicable following the earliest of (i) the
Participant's death, (ii) the Participant's Retirement Date, or (iii) the
Participant's Termination Date.
5.03 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. In
all cases other than the Participant's death, Benefits shall be paid in the form
designated by the Participant in 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.
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If a Participant has not designated the form in which his or her Benefits are to
be paid before 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.
5.04 Method of Payment: All payments to any Participant or Beneficiary
under this Plan shall be made in cash.
5.05 Death Benefits:
(a) In the event of a Participant's death, the Participant's
Beneficiary shall receive Benefits equal to the greater of (i) seventy-five
percent (75%) of the total Benefits that would have been paid to the
Participant had the Participant survived to age 65 (calculated in a manner
determined by the Committee) or (ii) the Participant's total Benefits as of
the date of his or her death. The Beneficiary shall be entitled to elect to
receive such Benefits under one of the optional forms of payment described
in Section 5.03.
(b) Notwithstanding the foregoing, if a Participant dies prior to the
second December 31 following the effective date of a 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.
5.06 Disability: If a 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 5.06 only if (i)
the Participant has been determined to be permanently disabled under the
provisions of the Qualified 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 5.06 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. Without affecting its
obligations to or rights of Participants and Beneficiaries under the Plan, the
Company may establish a grantor trust (within the meaning of Sections 671
through 679 of the Code) for Participants and Beneficiaries and deposit funds
with the trustee of such trust to provide the Benefits to which Participants and
Beneficiaries may be entitled under the Plan. The funds deposited with the
trustee or trustees of any such trust, and the earnings thereon, will be
dedicated to the payment of the Benefits under the Plan but shall remain subject
to the claims of the general creditors of the Company. If the Company, acting in
its sole discretion, 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
7.01 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.
7.02 Rights Under Qualified Plan: Nothing in this Plan shall be construed
to limit, broaden, restrict, or grant any right to a Participant or Beneficiary
under the Qualified Plan, nor in any way to limit, modify, repeal or otherwise
affect the Company's right to amend or modify the Qualified Plan.
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7.03 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.
7.04 Restrictions on Transfer: Any benefits to which a Participant or
Beneficiary may become entitled under this Plan are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, garnishment by
creditors or encumbrance, 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 a Participant or Beneficiary. This Plan does not give a
Participant or Beneficiary any interest, lien, or claim in or against any
specific assets of the Company. Participants and their Beneficiaries have only
the rights of general creditors of the Company.
7.05 Administration:
(a) This Plan shall be administered by the Committee. The Committee
may adopt such rules, regulations and bylaws and may make such decisions as
it deems necessary or desirable for the proper administration of the Plan.
The Committee shall have the express discretionary authority to determine
eligibility for Benefits and to interpret the provisions of this Plan. All
rules and decisions of the Committee shall be uniformly and consistently
applied to all Participants in similar circumstances. The determinations of
the Committee shall be final and binding on all persons for all purposes,
and there shall be no appeal from any ruling of the Committee that is
within its authority, except as otherwise provided herein.
(b) Prior to paying any benefit under the Plan, the Committee may
require the Participant, former Participant or Beneficiary to provide such
information or material as the Committee, in its sole discretion, shall
deem necessary for it to make any determination it may be required to make
under the Plan. The Committee may withhold payment of any benefit under the
Plan until it receives all such information and material and is reasonably
satisfied of its correctness and genuineness.
(c) If for any reason a benefit payable under this Plan is not paid
when due, the Participant or Beneficiary may file a written claim with the
Committee. If the claim is denied or no response is received within ninety
(90) days after the date on which the claim was filed with the Committee
(in which case the claim will be deemed to have been denied), the
Participant or Beneficiary may appeal the denial to the Board within ninety
(90) days of receipt of written notification of the denial or the end of
the ninety (90) day period specified above, whichever occurs first. In
pursuing an appeal, the Participant or Beneficiary may request that the
Board review the denial, may review pertinent documents, and may submit
issues and documents in writing to the Board. A decision on appeal will be
made within sixty (60) days after the appeal is made, unless special
circumstances require the Board to extend the period for another sixty (60)
days.
7.06 Withholding of Taxes, etc.: All amounts payable hereunder shall be
reduced for the amounts required to be withheld pursuant to any applicable
federal, state or local withholding tax requirements or any similar provisions.
7.07 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.
7.08 Governing Law: This Plan shall be construed and enforced in accordance
with, and governed by, the laws of the Commonwealth of Virginia, to the extent
not preempted by applicable federal law.
* * * * *
IN WITNESS WHEREOF, Heilig-Meyers Company has caused this Plan to be
executed the 4th day of May, 1999.
HEILIG-MEYERS COMPANY
By: /s/ William J. Dieter
Title: Senior Vice President, Accounting
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EXHIBIT 10.uu
AMENDMENT NO. 6
THIS AMENDMENT NO. 6 (the "Amendment") dated as of February 24, 1999, to
the Credit Agreement referenced below, is by and among MACSAVER FINANCIAL
SERVICES, INC., a Delaware corporation, (the "Borrower"), HEILIG-MEYERS COMPANY,
a Virginia corporation (the "Company"), the Lenders identified therein, WACHOVIA
BANK, N.A. (formerly, Wachovia Bank of Georgia, N.A.), as Administrative Agent,
NATIONSBANK, N.A., as Documentation Agent, and CRESTAR BANK and FIRST UNION
NATIONAL BANK (formerly, First Union National Bank of Virginia), as Co-Agents.
Terms used but not otherwise defined shall have the meanings provided in the
Credit Agreement.
W I T N E S S E T H
WHEREAS, the Lenders have established a $400 million credit facility for
the benefit of the Borrower pursuant to the terms of that Credit Agreement dated
as of July 18, 1995 (as amended and modified, the "Credit Agreement") among the
Borrower, the Company, the Lenders identified therein and Wachovia Bank of
Georgia, N.A., as Administrative Agent;
WHEREAS, the Borrower has requested certain modifications to the Credit
Agreement;
WHEREAS, the modifications requested hereby require the consent of the
Required Lenders; and
WHEREAS, the Required Lenders have consented to the requested modifications
on the terms and conditions set forth herein and have authorized the
Administrative Agent to enter into this Amendment on their behalf to give effect
to this Amendment;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Amendment. The Credit Agreement is amended and modified in the following
respects:
1.1 The following definitions are amended or added in Section 1.1 to
read as follows:
"Amendment Date" means February 24, 1999 (being the date of
Amendment No. 6).
"Committed Loans" means, collectively, Revolving Loans, Swingline
Loans and LOC Obligations.
"Interest Payment Date" means (i) as to any Swingline Loan, the
last day of each Interest Period for such Swingline Loan or such other
dates as the Swingline Lender may agree or require, (ii) as to any
Base Rate Loan, the last day of each March, June, September and
December, the date of repayment of principal of such Loan and the
Termination Date, and (iii) as to any Eurodollar Loan or Competitive
Loan, the last day of each Interest Period for such Loan, the date of
repayment of principal of such Loan and on the Termination Date, and
in addition where the applicable Interest Period is more than three
months, then also on the date three months from the beginning of the
Interest Period, and each three months thereafter until the end of
such Interest Period. If an Interest Payment Date falls on a date
which is not a Business Day, such Interest Payment Date shall be
deemed to be the next succeeding Business Day, except that in the case
of Eurodollar Loans where the next succeeding Business Day falls in
the next succeeding calendar month, then on the next preceding
Business Day.
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"Interest Period" means (i) with respect to any Eurodollar Loan,
a period of one, two, three or six months' duration, as the Borrower
may elect, commencing in each case on the date of the borrowing
(including extensions and conversions), (ii) with respect to any
Swingline Loan, a period of such duration as the Borrower may request
and the Swingline Lender may agree in accordance with the provisions
of Section 2.4(b)(i), commencing in each case on the date of
borrowing, and (iii) with respect to any Competitive Loan, a period
beginning on the date of borrowing and ending on the date specified in
the respective Competitive Bid whereby the offer to make such
Competitive Loan was extended, which shall be not less than 7 days nor
more than 180 days' duration; provided, however, (A) if any Interest
Period would end on a day which is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day (except
that where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day),
(B) no Interest Period shall extend beyond the Termination Date, and
(C) in the case of Eurodollar Loans, where an Interest Period begins
on a day for which there is no numerically corresponding day in the
calendar month in which the Interest Period is to end, such Interest
Period shall end on the last Business Day of such calendar month.
"Issuing Lender" means Wachovia Bank, N.A., or any other Lender
which may agree to issue Letters of Credit hereunder.
"Letters of Credit" means any letter of credit issued under
Section 2.3(a).
"LOC Committed Amount" means such term as defined in Section
2.3(a).
"LOC Documents" means any Letter of Credit, together with
amendments and modifications relating thereto, documents delivered in
connection therewith, applications relating thereto, and agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to a particular Letter of Credit)
governing or providing for (i) the rights and obligations of the
parties concerned or at risk, or (ii) any collateral security for such
obligations.
"LOC Obligations" means, at any time, the sum of (i) the
aggregate maximum amount available to be drawn under Letters of
Credit, assuming compliance with all requirements for drawings
thereunder, and (ii) the aggregate amount of all drawings under
Letters of Credit which have not been reimbursed.
"Note" or "Notes" means the Committed Notes, the Competitive
Notes and/or the Swingline Note, collectively, separately or
individually, as appropriate.
"Participation Interest" means the purchase by a Lender of a
participation in LOC Obligations as provided in Section 2.3(c), in
Swingline Loans as provided in Section 2.4(b)(iii) and in Loans as
provided in Section 3.12.
"Quoted Rate" means, with respect to a Quoted Rate Swingline
Loan, the fixed or floating percentage rate per annum, if any, offered
by the Swingline Lender and accepted by the Borrower in accordance
with the provisions hereof.
"Quoted Rate Swingline Loan" means a Swingline Loan bearing
interest at the Quoted Rate.
"Swingline Committed Amount" means the amount of the Swingline
Lender's Commitment as specified in Section 2.4(a).
"Swingline Lender" means Wachovia Bank, N.A., or any other Lender
which may agree to make Swingline Loans hereunder, and their
respective successors.
"Swingline Loan" means a swingline revolving loan made by the
Swingline Lender pursuant to the provisions of Section 2.4.
"Swingline Note" means the promissory note of the Borrower in
favor of the Swingline Lender evidencing the Swingline Loans in
substantially the form attached as Schedule 2.4(a), as such promissory
note may be amended, modified, supplemented, extended, renewed or
replaced from time to time.
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1.2 Section 2 is amended and restated to read as follows:
SECTION 2
CREDIT FACILITIES
2.1 Revolving Loans.
(a) Revolving Commitment. During the Commitment Period, subject to the
terms and conditions hereof, each Lender severally agrees to make revolving
credit loans (the "Revolving Loans") to the Borrower for the purposes
hereinafter set forth; provided that (i) with regard to each Lender
individually, such Lender's Commitment Percentage of Committed Loans shall
not exceed such Lender's Revolving Committed Amount, and (ii) with regard
to the Lenders collectively, the aggregate amount of outstanding Committed
Loans plus the aggregate amount of outstanding Competitive Loans shall not
exceed FOUR HUNDRED MILLION DOLLARS (as such aggregate maximum amount may
be reduced from time to time, the "Revolving Committed Amount"). Revolving
Loans may consist of Base Rate Loans or Eurodollar Loans, or a combination
thereof, as the Borrower may request, and may be repaid and reborrowed in
accordance with the provisions hereof.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. The Borrower shall request a Revolving
Loan borrowing by written notice (or telephone notice promptly
confirmed in writing) to the Administrative Agent not later than 11:00
A.M. (Atlanta, Georgia time) on the Business Day of the requested
borrowing in the case of Base Rate Loans, and on the third Business
Day prior to the date of the requested borrowing in the case of
Eurodollar Loans. Each such request for borrowing shall be irrevocable
and shall specify (A) that a Revolving Loan is requested, (B) the date
of the requested borrowing (which shall be a Business Day), (C) the
aggregate principal amount to be borrowed, and (D) whether the
borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a
combination thereof, and if Eurodollar Loans are requested, the
Interest Period(s) therefor. A form of Notice of Borrowing (a "Notice
of Borrowing") is attached as Schedule 2.1(b)(i). If the Borrower
shall fail to specify in any such Notice of Borrowing (I) an
applicable Interest Period in the case of a Eurodollar Loan, then such
notice shall be deemed to be a request for an Interest Period of one
month, or (II) the type of Revolving Loan requested, then such notice
shall be deemed to be a request for a Base Rate Loan hereunder. The
Administrative Agent shall give notice to each Lender promptly upon
receipt of each Notice of Borrowing pursuant to this Section
2.1(b)(i), the contents thereof and each such Lender's share of any
borrowing to be made pursuant thereto.
(ii) Minimum Amounts. Each Revolving Loan borrowing shall be in a
minimum aggregate amount of $2,000,000 (or the remaining amount of the
Revolving Committed Amount, if less), in the case of Base Rate Loans,
and $5,000,000, in the case of Eurodollar Loans, and in each case
integral multiples of $1,000,000 in excess thereof.
(iii) Advances. Each Lender will make its Commitment Percentage
of each Revolving Loan borrowing available to the Administrative Agent
for the account of the Borrower at the office of the Administrative
Agent specified in Schedule 2.1(a), or at such other office as the
Administrative Agent may designate in writing, by 1:00 P.M. (Atlanta,
Georgia time) on the date specified in the applicable Notice of
Borrowing in Dollars and in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to
the Borrower by the Administrative Agent by crediting the account of
the Borrower on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Lenders and
in like funds as received by the Administrative Agent.
(c) Repayment. The principal amount of all Revolving Loans shall be
due and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1, Revolving
Loans shall bear interest a per annum rate equal to:
(i) Base Rate Loans. During such periods as Revolving Loans shall
be comprised of Base Rate Loans, the sum of the Base Rate plus the
Applicable Percentage;
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(ii) Eurodollar Loans. During such periods as Revolving Loans
shall be comprised of Eurodollar Loans, the sum of the Adjusted
Eurodollar Rate plus the Applicable Percentage.
Interest on Revolving Loans shall be payable in arrears on each
applicable Interest Payment Date.
(e) Committed Notes. The Revolving Loans shall be evidenced by a duly
executed Committed Note in favor of each Lender.
(f) Maximum Number of Eurodollar Loans. The Borrower will be limited
to a maximum number of ten (10) Eurodollar Loans outstanding at any time.
For purposes hereof, Eurodollar Loans with separate or different Interest
Periods will be considered as separate Eurodollar Loans even if their
Interest Periods expire on the same date.
2.2 Competitive Loan Subfacility.
(a) Competitive Loans. During the Commitment Period, subject to the
terms and conditions hereof, from such time as the Company shall have
attained, and for so long as the Company shall maintain
(A) Pricing Level I or II status, where the Company does not have
a senior unsecured (non-credit enhanced) long term debt rating from
both S&P and Moody's, or
(B) Pricing Level I, II, III or IV status, where the Company has
a senior unsecured (non-credit enhanced) long term debt rating from
both S&P and Moody's,
the Borrower may from time to time request and each Lender may, in its
sole discretion, agree to make, Competitive Loans to the Borrower;
provided, however, (i) the aggregate amount of Competitive Loans shall
not at any time exceed the aggregate Revolving Committed Amount (the
"Competitive Loan Maximum Amount"), and (ii) the sum of the aggregate
amount of Committed Loans plus the aggregate amount of Competitive
Loans shall not at any time exceed the aggregate Revolving Committed
Amount. Each Competitive Loan shall be not less than $10,000,000 in the
aggregate and integral multiples of $1,000,000 in excess thereof.
(b) Competitive Bid Requests. The Borrower may solicit
Competitive Bids by delivery of a Competitive Bid Request
substantially in the form of Schedule 2.2(b)-1 to the Administrative
Agent by 11:00 A.M. (Atlanta, Georgia time) on a Business Day not less
than one (1) nor more than four (4) Business Days prior to the date of
a requested Competitive Loan borrowing. A Competitive Bid Request
shall specify (i) the date of the requested Competitive Loan borrowing
(which shall be a Business Day), (ii) the amount of the requested
Competitive Loan borrowing and (iii) the applicable Interest Periods
requested and shall be accompanied by payment of the Competitive Bid
Request Fee, if any. The Administrative Agent shall promptly notify
the Lenders of its receipt of a Competitive Bid Request and the
contents thereof and invite the Lenders to submit Competitive Bids in
response thereto. A form of such notice is provided in Schedule
2.2(b)-2. No more than one Competitive Bid Request shall be submitted
at any one time and Competitive Bid Requests may be made no more
frequently than once every five (5) Business Days.
(c) Competitive Bid Procedure. Each Lender may, in its sole
discretion, make one or more Competitive Bids to the Borrower in
response to a Competitive Bid Request. Each Competitive Bid must be
received by the Administrative Agent not later than 10:00 A.M.
(Atlanta, Georgia time) on the Business Day next succeeding the date
of receipt by such Lender of a related Competitive Bid Request;
provided, however, in the event the Administrative Agent (or an
Affiliate of the Administrative Agent), in its capacity as a Lender,
should elect to submit a Competitive Bid in response to a related
Competitive Bid Request, it shall submit such Competitive Bid directly
to the Borrower by 9:45 A.M. (Atlanta, Georgia time) on the date such
Competitive Bid is due. A Lender may offer to make all or part of the
requested Competitive Loan borrowing and may submit multiple
Competitive Bids in response to a Competitive Bid Request. The
Competitive Bid shall specify (i) the particular Competitive Bid
Request as to which the Competitive Bid is submitted, (ii) the minimum
(which shall be not less than $1,000,000 and integral multiples of
$500,000 in excess thereof) and maximum principal amounts of the
requested Competitive Loan or Loans which the Lender is willing to
make, and (iii) the applicable interest rate or rates and Interest
Period or Periods therefor. A form of such Competitive Bid is provided
in Schedule 2.2(c). A Competitive Bid submitted by a Lender in
accordance with the provisions hereof shall be irrevocable. The
Administrative Agent shall promptly notify the Borrower of all
Competitive Bids made and the terms thereof. The Administrative Agent
shall send a copy of each of the Competitive Bids to the Borrower for
its records as soon as practicable.
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(d) Acceptance of Competitive Bids. The Borrower may, in its sole
and absolute discretion, subject only to the provisions of this
subsection (d), accept or refuse any Competitive Bid offered to it. To
accept a Competitive Bid, the Borrower shall give written notification
(or telephone notice promptly confirmed in writing) substantially in
the form of Schedule 2.2(e) of its acceptance of any or all such
Competitive Bids to the Administrative Agent by 11:00 A.M. (Atlanta,
Georgia time) on the date on which notice of election to make a
Competitive Bid is required to be given by the Lenders pursuant to the
terms of subsection (c) above; provided, however, (i) the failure by
the Borrower to give timely notice of its acceptance of a Competitive
Bid shall be deemed to be a refusal thereof, (ii) the Borrower may
accept Competitive Bids only in ascending order of rates, (iii) the
aggregate amount of Competitive Bids accepted by the Borrower shall
not exceed the principal amount specified in the Competitive Bid
Request, (iv) the Borrower may accept a portion of a Competitive Bid
in the event, and to the extent, acceptance of the entire amount
thereof would cause the Borrower to exceed the principal amount
specified in the Competitive Bid Request, subject however to the
minimum amounts provided herein (and provided that where two or more
such Lenders may submit such a Competitive Bid at the same such
Competitive Bid Rate, then pro rata between or among such Lenders) and
(v) no bid shall be accepted for a Competitive Loan unless such
Competitive Loan is in a minimum principal amount of $1,000,000 and
integral multiples of $500,000 in excess thereof, except that where a
portion of a Competitive Bid is accepted in accordance with the
provisions of subsection (iv) hereof, then in a minimum principal
amount of $100,000 and integral multiples thereof (but not in any
event less than the minimum amount specified in the Competitive Bid),
and in calculating the pro rata allocation of acceptances of portions
of multiple bids at a particular Competitive Bid Rate pursuant to
subsection (iv) hereof, the amounts shall be rounded to integral
multiples of $100,000 in a manner which shall be in the discretion of
the Borrower. A notice of acceptance of a Competitive Bid given by the
Borrower in accordance with the provisions hereof shall be
irrevocable. The Administrative Agent shall, not later than 12:00 Noon
(Atlanta, Georgia time) on the date on which notice of the election to
make a Competitive Bid is required to be given, notify the
Administrative Agent and each bidding Lender whether or not its
Competitive Bid has been accepted (and if so, in what amount and at
what Competitive Bid Rate), and each successful bidder will thereupon
become bound, subject to the other applicable conditions hereof, to
make the Competitive Loan in respect of which its bid has been
accepted.
(e) Funding of Competitive Loans. Each Lender which is to make a
Competitive Loan shall make its Competitive Loan borrowing available
to the Administrative Agent for the account of the Borrower at the
office of the Administrative Agent specified in Schedule 2.1(a), or at
such other office as the Administrative Agent may designate in
writing, by 1:30 P.M. (Atlanta, Georgia time) on the date specified in
the Competitive Bid Request in Dollars and in funds immediately
available to the Administrative Agent. Such borrowing will then be
made available to the Borrower by crediting the account of the
Borrower on the books of such office with the aggregate of the amount
made available to the Administrative Agent by the Competitive Lenders
and in like funds as received by the Administrative Agent.
(f) Maturity of Competitive Loans. Each Competitive Loan shall
mature and be due and payable in full on the last day of the Interest
Period applicable thereto. Unless the Borrower shall give notice to
the Administrative Agent otherwise, the Borrower shall be deemed to
have requested a Base Rate Loan borrowing in the amount of the
maturing Competitive Loan, the proceeds of which will be used to repay
such Competitive Loan.
(g) Interest on Competitive Loans. Subject to the provisions of
Section 3.1, Competitive Loans shall bear interest in each case at the
Competitive Bid Rate applicable thereto. Interest on Competitive Loans
shall be payable in arrears on each Interest Payment Date.
(h) Competitive Loan Notes. The Competitive Loans shall be
evidenced by a duly executed promissory note of the Borrower to each
Lender in an original principal amount equal to the Competitive Loan
Maximum Amount and substantially in the form of Schedule 2.2(h).
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2.3 Letter of Credit Subfacility.
(a) Issuance. During the Commitment Period, subject to the terms
and conditions hereof and of the LOC Documents, if any, and such other
terms and conditions which the Issuing Lender may reasonably require,
the Issuing Lender shall issue, and the Lenders shall participate in,
such Letters of Credit as the Borrower may request for its own account
or for the account of a subsidiary or affiliate as provided herein, in
a form reasonably acceptable to the Issuing Lender, for the purposes
hereinafter set forth; provided that (i) the aggregate amount of LOC
Obligations shall not exceed THIRTY-FIVE MILLION DOLLARS ($35,000,000)
at any time (the "LOC Committed Amount"), (ii) with regard to the
Lenders collectively, the aggregate amount of outstanding Committed
Loans plus the aggregate amount of outstanding Competitive Loans shall
not exceed the Revolving Committed Amount, and (iii) with regard to
each Lender individually, such Lender's Commitment Percentage of
Committed Loans shall not exceed such Lender's Revolving Committed
Amount. Letters of Credit issued hereunder shall not have an original
expiry date more than one year from the date of issuance or extension.
If any Letter of Credit issued hereunder shall have an expiry date,
whether as originally issued or by extension, extending beyond the
Termination Date, the Borrower shall, on the Termination Date, either
(i) cause such Letter of Credit to be surrendered to the Issuing
Lender, (ii) provide to the Issuing Lender a back-to-back letter of
credit in respect thereof reasonably satisfactory to the Issuing
Lender or (iii) provide cash collateral to the Issuing Lender in an
amount equal to the maximum amount available to be drawn under such
Letter of Credit. Each Letter of Credit shall comply with the related
LOC Documents. The issuance date of each Letter of Credit shall be a
Business Day.
(b) Notice and Reports. Any request for the issuance of a Letter
of Credit shall be submitted by the Borrower to the Issuing Lender at
least three (3) Business Days prior to the requested date of issuance
(or such shorter period as may be agreed by the Issuing Lender). The
Issuing Lender will provide to the Administrative Agent at least
monthly, and more frequently upon request, a detailed summary report
on its Letters of Credit and the activity thereon, in form and
substance acceptable to the Administrative Agent. In addition, the
Issuing Lender will provide to the Administrative Agent for
dissemination to the Lenders at least quarterly, and more frequently
upon request, a detailed summary report on its Letters of Credit and
the activity thereon, including, among other things, the name of the
party for whose account the Letter of Credit is issued, the
beneficiary, the face amount, and the expiry date. The Issuing Lender
will provide copies of the Letters of Credit to the Administrative
Agent and the Lenders promptly upon request.
(c) Participation. Each Lender, upon issuance of a Letter of
Credit, shall be deemed to have purchased without recourse a
participation interest from the Issuing Lender in such Letter of
Credit and the obligations arising thereunder, in each case in an
amount equal to its pro rata share of the obligations under such
Letter of Credit (based on the respective Commitment Percentages of
the Lenders) and shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and be obligated to pay
to the Issuing Lender therefor and discharge when due, its pro rata
share of the obligations arising under such Letter of Credit. Without
limiting the scope and nature of each Lender's participation in any
Letter of Credit, to the extent that the Issuing Lender has not been
reimbursed as required hereunder or under any such Letter of Credit,
each such Lender shall pay to the Issuing Lender its pro rata share of
such unreimbursed drawing in same day funds on the day of notification
by the Issuing Lender of an unreimbursed drawing pursuant to the
provisions of subsection (d) hereof. The obligation of each Lender to
so reimburse the Issuing Lender shall be absolute and unconditional
and shall not be affected by the occurrence of a Default, an Event of
Default or any other occurrence or event. Any such reimbursement shall
not relieve or otherwise impair the obligation of the Borrower to
reimburse the Issuing Lender under any Letter of Credit, together with
interest as hereinafter provided.
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(d) Reimbursement. In the event of any drawing under any Letter
of Credit, the Issuing Lender will promptly notify the Borrower.
Unless the Borrower shall immediately notify the Issuing Lender that
the Borrower intends to otherwise reimburse the Issuing Lender for
such drawing, the Borrower shall be deemed to have requested that the
Lenders make a Revolving Loan in the amount of such drawing as
provided in subsection (e) hereof, the proceeds of which will be used
to satisfy the related reimbursement obligations. The Borrower
promises to reimburse the Issuing Lender on the day of drawing under
any Letter of Credit (either with the proceeds of a Revolving Loan
obtained hereunder or otherwise) in same day funds. If the Borrower
notifies the Issuing Lender that it intends to reimburse the Issuing
Lender other than through a Revolving Loan and thereafter shall fail
to reimburse the Issuing Lender as provided hereinabove, the
unreimbursed amount of such drawing shall bear interest at a per annum
rate equal to the Base Rate plus the sum of (i) the Applicable
Percentage and (ii) two percent (2%). The Borrower's reimbursement
obligations hereunder shall be absolute and unconditional under all
circumstances irrespective of any rights of setoff, counterclaim or
defense to payment the Borrower may claim or have against the Issuing
Lender, the Administrative Agent, the Lenders, the beneficiary of the
Letter of Credit drawn upon or any other Person, including without
limitation any defense based on any failure of the Borrower to receive
consideration or the legality, validity, regularity or
unenforceability of the Letter of Credit, but excluding any defense
based upon the gross negligence or willful misconduct of the Issuing
Lender. The Issuing Lender will promptly notify the other Lenders of
the amount of any unreimbursed drawing and each Lender shall promptly
pay to the Administrative Agent for the account of the Issuing Lender
in Dollars and in immediately available funds, the amount of such
Lender's pro rata share of such unreimbursed drawing. Such payment
shall be made on the day such notice is received by such Lender from
the Issuing Lender if such notice is received at or before 2:00 P.M.
(Atlanta, Georgia time) otherwise such payment shall be made at or
before 12:00 Noon (Atlanta, Georgia time) on the Business Day next
succeeding the day such notice is received. If such Lender does not
pay such amount to the Issuing Lender in full upon such request, such
Lender shall, on demand, pay to the Administrative Agent for the
account of the Issuing Lender interest on the unpaid amount during the
period from the date of such drawing until such Lender pays such
amount to the Issuing Lender in full at a rate per annum equal to, if
paid within two (2) Business Days of the date that such Lender is
required to make payments of such amount pursuant to the preceding
sentence, the Federal Funds Rate and thereafter at a rate equal to the
Base Rate. Each Lender's obligation to make such payment to the
Issuing Lender, and the right of the Issuing Lender to receive the
same, shall be absolute and unconditional, shall not be affected by
any circumstance whatsoever and without regard to the termination of
this Credit Agreement or the Commitments hereunder, the existence of a
Default or Event of Default or the acceleration of the obligations of
the Borrower hereunder and shall be made without any offset,
abatement, withholding or reduction whatsoever. Simultaneously with
the making of each such payment by a Lender to the Issuing Lender,
such Lender shall, automatically and without any further action on the
part of the Issuing Lender or such Lender, acquire a participation in
an amount equal to such payment (excluding the portion of such payment
constituting interest owing to the Issuing Lender) in the related
unreimbursed drawing portion of the LOC Obligation and in the interest
thereon and in the related LOC Documents, and shall have a claim
against the Borrower with respect thereto.
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(e) Repayment with Revolving Loans. On any day on which the
Borrower shall have requested, or been deemed to have requested, a
Revolving Loan advance to reimburse a drawing under a Letter of
Credit, the Administrative Agent shall give notice to the Lenders that
a Revolving Loan has been requested or deemed requested by the
Borrower to be made in connection with a drawing under a Letter of
Credit, in which case a Revolving Loan advance comprised of Base Rate
Loans (or Eurodollar Loans to the extent the Borrower has complied
with the procedures of Section 2.1(b)(i) with respect thereto) shall
be immediately made to the Borrower by all Lenders (notwithstanding
any termination of the Commitments pursuant to Section 9) pro rata
based on the respective Commitment Percentages of the Lenders
(determined before giving effect to any termination of the Commitments
pursuant to Section 9) and the proceeds thereof shall be paid directly
to the Issuing Lender for application to the respective LOC
Obligations. Each Lender hereby irrevocably agrees to make its pro
rata share of each such Revolving Loan immediately upon any such
request or deemed request in the amount, in the manner and on the date
specified in the preceding sentence notwithstanding (i) the amount of
such borrowing may not comply with the minimum amount for advances of
Revolving Loans otherwise required hereunder, (ii) whether any
conditions specified in Section 5.2 are then satisfied, (iii) whether
a Default or an Event of Default then exists, (iv) failure of any such
request or deemed request for Revolving Loan to be made by the time
otherwise required hereunder, (v) whether the date of such borrowing
is a date on which Revolving Loans are otherwise permitted to be made
hereunder or (vi) any termination of the Commitments relating thereto
immediately prior to or contemporaneously with such borrowing. In the
event that any Revolving Loan cannot for any reason be made on the
date otherwise required above (including, without limitation, as a
result of the commencement of a bankruptcy or insolvency proceeding
with respect to the Borrower or any guarantor), then each such Lender
hereby agrees that it shall forthwith purchase (as of the date such
borrowing would otherwise have occurred, but adjusted for any payments
received from the Borrower on or after such date and prior to such
purchase) from the Issuing Lender such Participation Interests in the
outstanding LOC Obligations as shall be necessary to cause each such
Lender to share in such LOC Obligations ratably (based upon the
respective Commitment Percentages of the Lenders (determined before
giving effect to any termination of the Commitments pursuant to
Section 9)), provided that in the event such payment is not made on
the day of drawing, such Lender shall pay in addition to the Issuing
Lender interest on the amount of its unfunded Participation Interest
at a rate equal to, if paid within two (2) Business Days of the date
of drawing, the Federal Funds Rate, and thereafter at the Base Rate.
(f) Designation of Subsidiaries and Affiliates as Account
Parties. Notwithstanding anything to the contrary set forth in this
Credit Agreement, including without limitation Section 2.3(a) hereof,
a Letter of Credit issued hereunder may contain a statement to the
effect that such Letter of Credit is issued for the account of a
subsidiary or affiliate, provided that notwithstanding such statement,
the Borrower shall be deemed to be the account party for all purposes
of this Credit Agreement for such Letter of Credit and such statement
shall not affect the Borrower's reimbursement obligations hereunder
with respect to such Letter of Credit.
(g) Renewal, Extension. The renewal or extension of any Letter of
Credit shall, for purposes hereof, be treated in all respects the same
as the issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have
the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP
may be incorporated therein and deemed in all respects to be a part
thereof.
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(i) Indemnification; Nature of Issuing Lender's Duties.
(i) In addition to its other obligations under this Section
2.3, the Borrower hereby agrees to protect, indemnify, pay and
save the Issuing Lender harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) that the Issuing
Lender may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any Letter of Credit or (B) the
failure of the Issuing Lender to honor a drawing under a Letter
of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government
or Governmental Authority (all such acts or omissions, herein
called "Government Acts").
(ii) As between the Borrower and the Issuing Lender, the
Borrower shall assume all risks of the acts, omissions or misuse
of any Letter of Credit by the beneficiary thereof. The Issuing
Lender shall not be responsible: (A) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if it
should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, that may prove to be invalid or ineffective
for any reason; (C) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in
cipher; (D) for any loss or delay in the transmission or
otherwise of any document required in order to make a drawing
under a Letter of Credit or of the proceeds thereof; and (E) for
any consequences arising from causes beyond the control of the
Issuing Lender, including, without limitation, any Government
Acts. None of the above shall affect, impair, or prevent the
vesting of the Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken
or omitted by the Issuing Lender, under or in connection with any
Letter of Credit or the related certificates, if taken or omitted
in good faith, shall not put such Issuing Lender under any
resulting liability to the Borrower. It is the intention of the
parties that this Credit Agreement shall be construed and applied
to protect and indemnify the Issuing Lender against any and all
risks involved in the issuance of the Letters of Credit, all of
which risks are hereby assumed by the Borrower (on behalf of
itself and any subsidiary or affiliate for whom a Letter of
Credit is issued), including, without limitation, any and all
Government Acts. The Issuing Lender shall not, in any way, be
liable for any failure by the Issuing Lender or anyone else to
pay any drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of the
Issuing Lender.
(iv) Nothing in this subsection (i) is intended to limit the
reimbursement obligations of the Borrower contained in subsection
(d) above. The obligations of the Borrower under this subsection
(i) shall survive the termination of this Credit Agreement. No
act or omissions of any current or prior beneficiary of a Letter
of Credit shall in any way affect or impair the rights of the
Issuing Lender to enforce any right, power or benefit under this
Credit Agreement.
(v) Notwithstanding anything to the contrary contained in
this subsection (i), the Borrower shall have no obligation to
indemnify the Issuing Lender in respect of any liability incurred
by the Issuing Lender (A) arising out of the gross negligence or
willful misconduct of the Issuing Lender, or (B) caused by the
Issuing Lender's failure to pay under any Letter of Credit after
presentation to it of a request strictly complying with the terms
and conditions of such Letter of Credit, unless such payment is
prohibited by any law, regulation, court order or decree.
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(j) Responsibility of Issuing Lender. It is expressly understood
and agreed that the obligations of the Issuing Lender hereunder to the
Lenders are only those expressly set forth in this Credit Agreement
and that the Issuing Lender shall be entitled to assume that the
conditions precedent set forth in Section 5.2 have been satisfied
unless it shall have acquired actual knowledge that any such condition
precedent has not been satisfied; provided, however, that nothing set
forth in this Section 2.3 shall be deemed to prejudice the right of
any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this
Section 2.3 in the event that it is determined by a court of competent
jurisdiction that the payment with respect to a Letter of Credit
constituted gross negligence or willful misconduct on the part of the
Issuing Lender.
(k) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document (including any
letter of credit application), this Credit Agreement shall control.
(l) Requirements of Law. The provisions of Section 3.8 shall
apply with equal effect to Letters of Credit and the Borrower will
promptly pay any such additional amounts owing in respect of Letters
of Credit by operation thereof.
2.4 Swingline Loan Subfacility.
(a) Swingline Commitment. During the Commitment Period, subject to the
terms and conditions hereof, the Swingline Lender, in its individual
capacity, agrees to make certain revolving credit loans (each a "Swingline
Loan" and, collectively, the "Swingline Loans") to the Borrower from time
to time for the purposes hereinafter set forth; provided, however, (i) the
aggregate principal amount of Swingline Loans outstanding at any time shall
not exceed TEN MILLION DOLLARS ($10,000,000) (the "Swingline Committed
Amount"), and (ii) with regard to the Lenders collectively, the aggregate
amount of outstanding Committed Loans plus the aggregate amount of
Competitive Loans shall not exceed the Revolving Committed Amount.
Swingline Loans hereunder shall be made as Base Rate Loans or Quoted Rate
Swingline Loans, as the Borrower may request, and may be repaid or
reborrowed in accordance with the provisions hereof.
(b) Swingline Loan Advances.
(i) Notices; Disbursement. Whenever the Borrower desires a
Swingline Loan advance hereunder it shall give written notice (or
telephonic notice promptly confirmed in writing) to the Swingline
Lender not later than 11:00 A.M. (Atlanta, Georgia time) on the
Business Day of the requested Swingline Loan advance. Each such notice
shall be irrevocable and shall specify (A) that a Swingline Loan
advance is requested, (B) the date of the requested Swingline Loan
advance (which shall be a Business Day) and (C) the principal amount
of and Interest Period for the Swingline Loan advance requested. Each
Swingline Loan shall have such maturity date as the Swingline Lender
and the Borrower shall agree upon receipt by the Swingline Lender of
any such notice from the Borrower. The Swingline Lender shall initiate
the transfer of funds representing the Swingline Loan advance to the
Borrower by 3:00 P.M. (Atlanta, Georgia time) on the Business Day of
the requested borrowing.
(ii) Minimum Amounts. Each Swingline Loan advance shall be in a
minimum principal amount of $1,000,000 and in integral multiples of
$100,000 in excess thereof (or the remaining amount of the Swingline
Committed Amount, if less).
(iii) Repayment of Swingline Loans. The principal amount of all
Swingline Loans shall be due and payable on the earlier of (A) the
maturity date agreed to by the Swingline Lender and the Borrower with
respect to such Loan or (B) the Termination Date. The Swingline Lender
may, at any time, in its sole discretion, by written notice to the
Borrower and the Lenders, demand repayment of its Swingline Loans by
way of a Revolving Loan advance, in which case the Borrower shall be
deemed to have requested a Revolving Loan advance comprised solely of
Base Rate Loans in the amount of such Swingline Loans; provided,
however, that any such demand shall be deemed to have been given one
Business Day prior to the Termination Date and on the date of the
occurrence of any Event of Default described in Section 9 and upon
acceleration of the indebtedness hereunder and the exercise of
remedies in accordance with the provisions of Section 9. Each Lender
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hereby irrevocably agrees to make its pro rata share of each such
Revolving Loan in the amount, in the manner and on the date specified
in the preceding sentence notwithstanding (I) the amount of such
borrowing may not comply with the minimum amount for advances of
Revolving Loans otherwise required hereunder, (II) whether any
conditions specified in Section 5.2 are then satisfied, (III) whether
a Default or an Event of Default then exists, (IV) failure of any such
request or deemed request for Revolving Loan to be made by the time
otherwise required hereunder, (V) whether the date of such borrowing
is a date on which Revolving Loans are otherwise permitted to be made
hereunder or (VI) any termination of the Commitments relating thereto
immediately prior to or contemporaneously with such borrowing. In the
event that any Revolving Loan cannot for any reason be made on the
date otherwise required above (including, without limitation, as a
result of the commencement of a bankruptcy or insolvency proceeding
with respect to the Borrower or any guarantor), then each Lender
hereby agrees that it shall forthwith purchase (as of the date such
borrowing would otherwise have occurred, but adjusted for any payments
received from the Borrower on or after such date and prior to such
purchase) from the Swingline Lender such Participation Interests in
the outstanding Swingline Loans as shall be necessary to cause each
such Lender to share in such Swingline Loans ratably based upon its
Commitment Percentage of the Revolving Committed Amount (determined
before giving effect to any termination of the Commitments pursuant to
Section 9), provided that (A) all interest payable on the Swingline
Loans shall be for the account of the Swingline Lender until the date
as of which the respective Participation Interest is purchased and (B)
at the time any purchase of Participation Interests pursuant to this
sentence is actually made, the purchasing Lender shall be required to
pay to the Swingline Lender, to the extent not paid to the Swingline
Lender by the Borrower in accordance with the terms of subsection (c)
below, interest on the principal amount of Participation Interests
purchased for each day from and including the day upon which such
borrowing would otherwise have occurred to but excluding the date of
payment for such Participation Interests, at the rate equal to the
Federal Funds Rate.
(c) Interest on Swingline Loans.
Subject to the provisions of Section 3.1, each Swingline Loan shall
bear interest at a per annum rate equal to (i) if such Swingline Loan is a
Base Rate Loan, the Base Rate plus the Applicable Percentage, or (ii) if
such Swingline Loan is a Quoted Rate Swingline Loan, the Quoted Rate.
Interest on Swingline Loans shall be payable in arrears on each applicable
Interest Payment Date (or at such other times as may be specified herein),
unless accelerated sooner pursuant to Section 9.
(d) Swingline Note. The Swingline Loans shall be evidenced by the
Swingline Note.
1.3 Sections 3.3 and 3.4 are amended and restated to read as follows:
3.3 Reductions in Commitments and Prepayments.
(a) Voluntary Reduction of Commitments. The Borrower may from time to
time permanently reduce the Commitments hereunder in whole or in part (in
each such case in a minimum aggregate amount of $10,000,000 and integral
multiples of $1,000,000 in excess thereof) upon three (3) Business Days'
prior written notice to the Administrative Agent.
(b) Voluntary Prepayments. The Borrower shall have the right to prepay
Loans in whole or in part from time to time without premium or penalty;
provided, however, that (i) Competitive Loans and Committed Loans which are
Eurodollar Loans may only be prepaid on three Business Days' prior written
notice to the Agent and any prepayment of such Competitive Loans or
Committed Loans which are Eurodollar Loans will be subject to Section 3.10;
and (ii) each such partial prepayment of Committed Loans shall be in the
minimum principal amount of $2,000,000, in the case of Committed Loans
which are Base Rate Loans and $5,000,000, in the case of Committed Loans
which are Eurodollar Loans and $10,000,000, in the case of Competitive
Loans, and in each case integral multiples of $1,000,000 in excess thereof.
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(c) Mandatory Prepayments. If at any time (i) the sum of the aggregate
principal amount of Committed Loans plus the aggregate principal amount of
Competitive Loans shall exceed the aggregate Revolving Committed Amount,
(ii) the aggregate principal amount of LOC Obligations shall exceed the LOC
Committed Amount, (iii) the aggregate principal amount of Swingline Loans
shall exceed the Swingline Committed Amount, or (iv) the aggregate
principal amount of Competitive Loans shall exceed the Competitive Loan
Maximum Amount, the Borrower shall immediately make payment on the Loans
and/or to a cash collateral account in respect of the LOC Obligations in an
amount sufficient to eliminate the deficiency.
(d) Application. Unless otherwise specified by the Borrower, amounts
prepaid on the Loans shall be applied first to Swingline Loans, then to
Revolving Loans which are Base Rate Loans, then to Revolving Loans which
are Eurodollar Loans in direct order of Interest Period maturities, then to
a cash collateral account to secure LOC Obligations, and then to
Competitive Loans in direct order of Interest Period maturities. In the
case of a mandatory prepayment required in respect of Competitive Loans
pursuant to subsection (c)(iv) hereinabove, the amount required to be
prepaid hereunder shall serve to temporarily reduce the aggregate Revolving
Committed Amount (for purposes of borrowing availability hereunder, but not
for purposes of computation of fees) by the amount of the payment required
until such time as the situation described in subsection (c)(iv) shall no
longer exist.
(e) Notice. The Borrower will provide notice to the Administrative
Agent of any prepayment by 11:00 A.M. (Atlanta, Georgia time) on the day
prior to the date of prepayment. Amounts paid on the Loans under subsection
(b) and (c)(i) hereof may be reborrowed in accordance with the provisions
hereof.
3.4 Fees.
(a) Facility Fee. In consideration of the Commitments by the Lenders
hereunder, the Borrower agrees to pay to the Administrative Agent for the
ratable benefit of the Lenders a facility fee (the "Facility Fee") equal to
the Applicable Percentage per annum on the aggregate Revolving Committed
Amount in effect from time to time for the applicable period. The Facility
Fee shall accrue from the date hereof and shall be payable quarterly in
arrears on the 15th day following the end of each calendar quarter.
(b) Letter of Credit Fees.
(i) Letter of Credit Fee. In consideration of the LOC Commitment
hereunder, the Borrower agrees to pay to the Administrative Agent for
the ratable benefit of the Lenders a fee (the "Letter of Credit Fee")
equal to the Applicable Percentage for Eurodollar Loans per annum on
the average daily maximum amount available to be drawn under Letters
of Credit from the date of issuance to the date of expiration. The
Letter of Credit Fee shall be payable quarterly in arrears on the 15th
day following the last day of each calendar quarter for the
immediately preceding quarter (or portion thereof) beginning with the
first such date to occur after the Amendment Date.
(ii) Issuing Lender Fee. In addition to the Letter of Credit Fee,
the Borrower agrees to pay to the Issuing Lender for its own account
without sharing by the other Lenders a fronting and negotiation fee of
.125% per annum on the average daily maximum amount available to be
drawn under Letters of Credit issued by it from the date of issuance
to the date of expiration (collectively, the "Issuing Lender Fees").
(c) Administrative Agent's Fees. The Borrower agrees to pay to the
Administrative Agent, for its own account, an annual administrative fee and
such other fees, if any, referred to in the Administrative Agent's Fee
Letter.
1.4 Section 7.9(b) is amended and restated to read as follows:
(b) Fixed Charge Coverage Ratio. As of the end of the fiscal quarter
ending February 28, 1999, there shall be maintained a Fixed Charge Coverage
Ratio of at least 1.15:1.00; provided, however, that compliance with this
covenant shall not be tested until March 31, 1999 (for the period ending
February 28, 1999); provided, further, that the Company shall not be deemed
to have defaulted in the due performance or observance of this Section
7.9(b) prior to March 31, 1999.
1.5 A new Section 8.7 is added to read as follows:
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8.7 Modifications and Prepayments in respect of Other Funded Debt. The
Company will not, without the prior written consent of the Required
Lenders, (i) amend or modify the terms of repayment of any other Funded
Debt in an aggregate principal amount in excess of $5,000,000 in a manner
adverse to the Lenders (including the shortening of any maturity or average
life to maturity, any requirement for prepayment or other provision
providing for payment of principal prior to stated maturity) or (ii) make
any unscheduled prepayment, redemption, defeasance or acquisition for value
(including by way of deposit of money or securities for the purpose of
payment when due) of any other Funded Debt in an aggregate principal amount
in excess of $5,000,000.
1.6 A new subsection (l) is added to Section 9 to read as follows:
(l) The Borrower shall fail to pay when due (either with the
proceeds of a Revolving Loan obtained hereunder or otherwise) any
reimbursement obligation owing in respect of LOC Obligations;
1.7 At the end of clause (ii) of the first sentence in the
continuation paragraph at the end of Section 9 there shall be inserted the
phrase ", and the Administrative Agent shall have the right, among other
things, to demand immediate cash collateral in the amount of LOC
Obligations then outstanding".
2. This Amendment shall be effective upon satisfaction of the
following conditions:
(a) execution of this Amendment by the Borrower, the Company, the
Administrative Agent and the Required Lenders;
(b) receipt by the Bank of legal opinions of counsel to the
Borrower and the Company relating to this Amendment in form and
substance satisfactory to the Administrative Agent and the Required
Lenders;
(c) receipt by the Administrative Agent for the ratable benefit
of the consenting Lenders of an Amendment Fee of five (5) basis points
on the aggregate amount of Commitments held by each of the Lenders
consenting to this Amendment.
3. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (including Schedules and Exhibits) shall remain in full
force and effect.
4. The Borrower agrees to pay all reasonable costs and expenses of the
Administrative Agent in connection with the preparation, execution and
delivery of this Amendment, including without limitation the reasonable
fees and expenses of Moore & Van Allen, PLLC.
5. This Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and it
shall not be necessary in making proof of this Amendment to produce or
account for more than one such counterpart.
6. This Amendment shall be deemed to be a contract made under, and for
all purposes shall be construed in accordance with the laws of the State of
North Carolina.
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed under seal and delivered as of the date
and year first above written.
BORROWER: MACSAVER FINANCIAL SERVICES, INC.,
a Delaware corporation
By:_______________________________
Name:
Title:
COMPANY: HEILIG-MEYERS COMPANY,
a Virginia corporation
By:_______________________________
Name:
Title:
ADMINISTRATIVE
AGENT: WACHOVIA BANK, N.A., as Administrative Agent
for and on behalf of the Lenders
By:_______________________________
Name:
Title:
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CONSENT TO AMENDMENT NO. 6
Wachovia Bank, N.A., as Administrative Agent
191 Peachtree Street, N.E.
29th Floor, MC-3490
Atlanta, Georgia 30303
Attn: Syndication Services
Re:
Credit Agreement dated as of July 18, 1995 (as amended and modified,
the "Credit Agreement") among MacSaver Financial Services, Inc.,
Heilig-Meyers Company, Inc., the Lenders identified therein and
Wachovia Bank of Georgia, N.A. (now known as Wachovia Bank, N.A.), as
Administrative Agent. Terms used but not otherwise defined shall have
the meanings provided in the Credit Agreement.
Amendment No. 6 dated February 24, 1999 (the "Subject Amendment")
relating to the Credit Agreement
Ladies and Gentlemen:
This should serve to confirm our receipt of, and consent to, the
Subject Amendment. We hereby authorize and direct you, as Administrative Agent
for the Lenders, to enter into the Subject Amendment on our behalf in accordance
with the terms of the Credit Agreement upon your receipt of such consent and
direction from the Required Lenders, and agree that the Borrower and the Company
may rely on such authorization.
Sincerely,
-----------------------------
[Name of Lender]
By:__________________________
Name:
Title:
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Schedule 2.4(d)
Form of Swingline Note
FORM OF SWINGLINE NOTE
$10,000,000 February 24, 1999
FOR VALUE RECEIVED, MACSAVER FINANCIAL SERVICES, INC., a
Delaware corporation (the "Borrower"), hereby promises to pay to the order of
WACHOVIA BANK, N.A., its successors and permitted assigns (the "Lender"), at the
office of Wachovia Bank, N.A., as Administrative Agent (the "Administrative
Agent"), at 191 Peachtree Street, N.E., 29th Floor, MC-3940, Atlanta, Georgia
30303, Attn: Syndication Services (or at such other place or places as the
holder hereof may designate), at the times set forth in the Credit Agreement
dated as of July 18, 1995 among the Borrower, Heilig-Meyers Company, the
Lenders, the Administrative Agent and NationsBank, N.A., as Documentation Agent
(as it may be amended, modified, extended or restated from time to time, the
"Credit Agreement"; all capitalized terms not otherwise defined herein shall
have the meanings set forth in the Credit Agreement), but in no event later than
July 18, 2000, in Dollars and in immediately available funds, the principal
amount of TEN MILLION DOLLARS ($10,000,000) or, if less than such principal
amount, the aggregate unpaid principal amount of all Swingline Loans made by the
Lender to the Borrower pursuant to the Credit Agreement, and to pay interest
from the date hereof on the unpaid principal amount hereof, in like money, at
said office, on the dates and at the rates selected in accordance with Section
2.4(d) of the Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default
the balance outstanding hereunder shall bear interest as provided in Section 3.1
of the Credit Agreement. Further, in the event the payment of all sums due
hereunder is accelerated under the terms of the Credit Agreement and this Note,
and all other indebtedness of the Borrower to the Lender owing under the Credit
Agreement shall become immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.
All borrowings evidenced by this Note and all payments and prepayments
of the principal hereof and interest hereon and the respective dates thereof
shall be endorsed by the holder hereof on Schedule A attached hereto and
incorporated herein by reference, or on a continuation thereof which shall be
attached hereto and made a part hereof; provided, however, that any failure to
endorse such information on such schedule or continuation thereof shall not in
any manner affect the obligation of the Borrower to make payments of principal
and interest in accordance with the terms of this Note.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed by its duly authorized officer as of the day and year first above
written.
MACSAVER FINANCIAL SERVICES, INC.
By _______________________________
Title _______________________________
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EXHIBIT 10.vv
AMENDMENT NO. 7
THIS AMENDMENT NO. 7 (the "Amendment") dated as of April 15, 1999, to
the Credit Agreement referenced below, is by and among MACSAVER FINANCIAL
SERVICES, INC., a Delaware corporation, (the "Borrower"), HEILIG-MEYERS COMPANY,
a Virginia corporation (the "Company"), the Lenders identified therein, WACHOVIA
BANK, N.A. (formerly, Wachovia Bank of Georgia, N.A.), as Administrative Agent,
NATIONSBANK, N.A., as Documentation Agent, and CRESTAR BANK and FIRST UNION
NATIONAL BANK (formerly, First Union National Bank of Virginia), as Co-Agents.
Terms used but not otherwise defined shall have the meanings provided in the
Credit Agreement.
W I T N E S S E T H
WHEREAS, the Lenders have established a $400 million credit facility for
the benefit of the Borrower pursuant to the terms of that Credit Agreement dated
as of July 18, 1995 (as amended and modified, the "Credit Agreement") among the
Borrower, the Company, the Lenders identified therein and Wachovia Bank of
Georgia, N.A., as Administrative Agent;
WHEREAS, the Required Lenders agreed pursuant to that Term Sheet for
Amendment No. 7 to the Bank Credit Agreement dated March 23, 1999 (the "Term
Sheet for the Bank Credit Agreement (Amendment No. 7)"), (i) to certain
modifications to the Credit Agreement (including extension of the waiver
relating to the Fixed Charge Coverage Ratio, permanent reduction in the
aggregate Commitments to $325 million and modification of the Applicable
Percentage) and (ii) in principle to the general terms of Amendment No. 7;
WHEREAS, this Amendment is intended to evidence the agreement of the
parties pursuant to the terms of the Term Sheet for the Bank Credit Agreement
(Amendment No. 7);
WHEREAS, the modifications requested hereby require the consent of the
Required Lenders; and
WHEREAS, the Required Lenders have consented to the requested modifications
on the terms and conditions set forth herein and have authorized the
Administrative Agent to enter into this Amendment on their behalf to give effect
to this Amendment;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Amendment. The Credit Agreement is amended and modified in the following
respects:
1.1 The following definitions are amended or added in Section 1.1 to
read as follows:
"Applicable Percentage" means for any day (from March 23, 1999),
(a) in the case of Eurodollar Loans, two percent (2.0%), (b) in the
case of Base Rate Loans, one percent (1.0%), and (c) in the case of
the Facility Fee, one-quarter of one percent (0.25%).
"Berrios" means the assets and business operations of HMPR, Inc.,
a Puerto Rico corporation, and MacManufacturing, Inc., a Delaware
corporation.
"Consolidated Adjusted Fixed Charge Coverage Ratio" means the
ratio of Consolidated EBITR to Consolidated Adjusted Fixed Charges.
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"Consolidated Adjusted Fixed Charges" means for the Company and
its Subsidiaries for any period, the sum of (i) Consolidated Interest
Expense plus (ii) rent expense, in each case on a consolidated basis
determined in accordance with GAAP. Except as otherwise expressly
provided, the applicable period shall be the four consecutive fiscal
quarters ending as of the date of determination; provided that for the
first annual period following February 28, 1999, Consolidated Adjusted
Fixed Charges and its components shall be determined by a roll-up on a
quarter-by-quarter basis from February 28, 1999, such that (i) for the
first fiscal quarter ending thereafter (May 31, 1999), the applicable
period shall be the fiscal quarter then ending, (ii) for the second
fiscal quarter ending thereafter (August 31, 1999), the applicable
period shall be for the two (2) consecutive fiscal quarters then
ending, (iii) for the third fiscal quarter ending thereafter (November
30, 1999), the applicable period shall be for the three (3)
consecutive fiscal quarters then ending, and (iv) for the fourth
fiscal quarter ending thereafter (February 29, 2000) and each fiscal
quarter thereafter, the applicable period shall be for the four (4)
consecutive fiscal quarters then ending.
"Consolidated EBIT" means for the Company and its Subsidiaries
for any period, the sum of (i) Consolidated Net Income plus (ii), to
the extent deducted in determining net income, (A) Consolidated
Interest Expense and (B) any Federal, state or other income taxes, in
each case on a consolidated basis determined in accordance with GAAP.
Except as otherwise expressly provided, the applicable period shall be
for the four consecutive fiscal quarters ending as of the date of
determination.
"Consolidated EBITDA" means for the Company and its Subsidiaries
for any period, the sum of (i) Consolidated EBIT plus (ii), to the
extent deducted in determining net income, depreciation, amortization
and non-recurring non-cash charges and expenses associated with a sale
of assets (subject to the limitations on such exclusion for certain
losses as provided in the definition of "Consolidated Net Income") or
refinancing of Indebtedness or leases permitted hereunder, in each
case on a consolidated basis determined in accordance with GAAP.
Except as otherwise expressly provided, the applicable period shall be
for the four consecutive fiscal quarters ending as of the date of
determination; provided that for the first annual period following
February 28, 1999, (A) Consolidated EBITDA shall be determined by
annualization from February 28, 1999 to provide for a
quarter-by-quarter roll-up on a Pro Forma Basis, and (B) in the case
of the sale or disposition for value of all or any portion of Berrios,
Mattress Discounters or Rhodes, Consolidated EBITDA and its components
shall be adjusted to exclude for the applicable period provided in the
foregoing clause (A), income statement items directly attributable to
the assets, property and/or operations which were the subject of such
sale or disposition.
"Consolidated EBITR" means for the Company and its Subsidiaries
for any period, the sum of (i) Consolidated EBIT plus (ii), to the
extent deducted in determining net income, rent expense, in each case
on a consolidated basis determined in accordance with GAAP. Except as
otherwise expressly provided, the applicable period shall be the four
consecutive fiscal quarters ending as of the date of determination;
provided that for the first annual period following February 28, 1999,
Consolidated EBITR and its components shall be determined by a roll-up
on a quarter-by-quarter basis from February 28, 1999, such that (i)
for the first fiscal quarter ending thereafter (May 31, 1999), the
applicable period shall be the fiscal quarter then ending, (ii) for
the second fiscal quarter ending thereafter (August 31, 1999), the
applicable period shall be for the two (2) consecutive fiscal quarters
then ending, (iii) for the third fiscal quarter ending thereafter
(November 30, 1999), the applicable period shall be for the three (3)
consecutive fiscal quarters then ending, and (iv) for the fourth
fiscal quarter ending thereafter (February 29, 2000) and each fiscal
quarter thereafter, the applicable period shall be for the four (4)
consecutive fiscal quarters then ending.
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"Consolidated Funded Debt" means Funded Debt of the Company and
its Subsidiaries on a consolidated basis determined in accordance with
GAAP.
"Consolidated Interest Expense" means for the Company and its
Subsidiaries for any period, all interest expense, including the
amortization of debt discount and premium, the interest component
under Capital Leases (including interest payments on Subordinated
Debentures), determined in each case on a consolidated basis in
accordance with GAAP. Except as otherwise expressly provided, the
applicable period shall be for the four consecutive fiscal quarters
ending as of the date of determination.
"Consolidated Leverage Ratio" means the ratio of Consolidated
Funded Debt to Consolidated EBITDA.
"Consolidated Net Income" means for the Company and its
Subsidiaries for any period, consolidated net income determined in
accordance with GAAP, provided that, (i) for purposes of determining
compliance with the Consolidated Leverage Ratio covenant in Section
7.9(b) and the Consolidated Adjusted Fixed Charge Coverage Ratio
covenant in Section 7.9(c), there shall be excluded from Consolidated
Net Income the net after-tax amount of any gain realized from the sale
or disposition of Rhodes, Berrios or Mattress Discounters, and any
charge to earnings on account of the sale or disposition at a loss of
up to $160 million in the case of Rhodes and up to $60 million in the
case of Berrios; provided, that additional charges in respect of store
closings may also be excluded after the sale or disposition of Mattress
Discounters in an amount up to 5% of the gain realized from the sale or
disposition of Mattress Discounters, but only if, and to the extent
that, the gain realized from the sale or disposition of Mattress
Discounters exceeds the aggregate charges taken in connection with any
such store closings and with the sale or disposition of Rhodes and (ii)
for purposes of determining compliance with the Consolidated Net Worth
covenant in Section 7.9(a), there shall be included the amount of any
gain, but there shall be excluded the amount of any loss, realized from
the sale or disposition of Rhodes, Berrios or Mattress Discounters.
Except as otherwise expressly provided, the applicable period shall be
the four consecutive fiscal quarters ending as of the date of
determination.
"Consolidated Net Worth" means for the Company and its
Subsidiaries on any day, consolidated shareholders' equity or net
worth determined in accordance with GAAP.
"Credit Documents" means this Credit Agreement, the Note, the Fee
Letter, the Sharing Agreement and all other related agreements and
documents issued or delivered hereunder or thereunder or pursuant
hereto or thereto.
"LTCB Term Loan" means that $35 million term loan made to the
Borrower pursuant to a Term Loan Agreement dated as of February 28,
1995, as amended, among the Borrower, the Company, The Long-Term Credit
Bank of Japan, Limited and the other lenders named therein.
"Mattress Discounters" means the assets and business operations
of Mattress Discounters Corporation, a Delaware corporation, Bedding
Experts, Inc., an Illinois corporation, and T.J.B., Inc., a Maryland
corporation.
"Pro Forma Basis" means, with regard to determination of
Consolidated EBITDA for the first annual period following February 28,
1999, annualization of such items and their respective components to
provide that (i) for the first fiscal quarter ending thereafter (May
31, 1999) such items and their respective components for the one
quarter period then ending shall be multiplied by four (4); (ii) for
the second fiscal quarter ending thereafter (August 31, 1999) such
items and their respective components for the two (2) consecutive
fiscal quarters then ending shall be multiplied by two (2); (iii) for
the third fiscal quarter ending thereafter (November 30, 1999) such
items and their respective components for the three (3) consecutive
fiscal quarters then ending shall be multiplied by one and one-third
(1-1/3rd); and (iv) for the fourth fiscal quarter ending thereafter
(February 29, 2000) and each fiscal quarter thereafter, such items and
their respective components shall be for the four (4) consecutive
fiscal quarters then ending.
"Rhodes" means the assets and business operations of Rhodes,
Inc., a Georgia corporation.
"Senior Notes" means those $80 million 6.91% Senior Notes
originally due April 28, 1999, those $15 million 8.84% Senior Notes
originally due April 28, 1999, those $25 million 7.62% Senior Notes
originally due April 28, 1999 and those $10 million 8.31% Senior Notes
originally due April 28, 1999, as more particularly described in the
Sharing Agreement.
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"Sharing Agreement" means that Intercreditor and Sharing
Agreement dated as of April 16, 1999 (being the date of Amendment No.
7), as amended and modified, among Wachovia Bank, N.A., as
Administrative Agent for and on behalf of the Lenders under this
Credit Agreement; First Union National Bank; as issuer of the FUNB
Letter of Credit (as referenced and defined therein); The Long-Term
Credit Bank of Japan, Limited, as lender under the LTCB Term Loan (as
referenced and defined therein); The Prudential Insurance Company of
America, Metropolitan Life Insurance Company and the other holders of
the Senior Notes (as referenced and defined therein); and the Company
and the Borrower.
1.2 Section 3.3(c) regarding Mandatory Prepayments is amended to read
as follows:
(c) Mandatory Prepayments.
(i) In respect of Commitments. If at any time (i) the sum of the
aggregate principal amount of Committed Loans plus the aggregate
principal amount of Competitive Loans shall exceed the aggregate
Revolving Committed Amount, (ii) the aggregate principal amount of LOC
Obligations shall exceed the LOC Committed Amount, (iii) the aggregate
principal amount of Swingline Loans shall exceed the Swingline
Committed Amount, or (iv) the aggregate principal amount of
Competitive Loans shall exceed the Competitive Loan Maximum Amount,
the Borrower shall immediately make payment on the Loans and/or to a
cash collateral account in respect of the LOC Obligations in an amount
sufficient to eliminate the difference.
(ii) In respect of Asset Sales, Excess Cash Flow and Debt or
Equity Offerings. The Borrower will make, or cause to be made,
prepayments on the loans and obligations hereunder in respect of asset
sales, excess cash flow and debt or equity offerings as provided in
the Sharing Agreement and the Commitments hereunder will be reduced as
provided in the Sharing Agreement.
1.3 Section 6.11 is amended in its entirety to read as follows:
6.11 Purpose of Loans and Extensions of Credit.
Extensions of credit hereunder (including the proceeds of
Loans and issuance or extension of Letters of Credit) may be used
only (i) for general working capital purposes (which general
working capital purposes shall not include acquisitions (except
to the extent permitted by subclause (ii) hereof) or the payment
of dividends (other than regular quarterly dividends on common
stock) or any other similar payments), and (ii) to repay the LTCB
Term Loan at maturity. Extensions of credit hereunder may not be
used to repay or prepay in whole or in part the principal amount
of any other Funded Debt having an outstanding principal balance
in excess of $5,000,000.
1.4 Section 7.9 is amended in its entirety to read as follows:
7.9 Financial Covenants.
(a) Consolidated Net Worth. There shall be maintained at all
times a Consolidated Net Worth of not less than the sum of an amount
equal to eighty-five percent (85%) of Consolidated Net Worth as of
February 28, 1999 plus, on the last day of each fiscal quarter
thereafter, an amount equal to fifty percent (50%) of Consolidated Net
Income for the fiscal quarter then ending (but not less than zero),
such increases to be cumulative.
(b) Consolidated Leverage Ratio. As of the end of each fiscal
quarter to occur after February 28, 1999, there shall be maintained a
Consolidated Leverage Ratio of not greater than (i) 5.0:1.0, for the
first two fiscal quarters of fiscal year 1999 ending May 31, 1999 and
August 31, 1999; and (ii) 4.5:1.0, for each fiscal quarter thereafter.
(c) Consolidated Adjusted Fixed Charge Coverage Ratio. As of the
end of each fiscal quarter to occur after February 28, 1999, there
shall be maintained a Consolidated Adjusted Fixed Charge Coverage
Ratio of not less than (i) 1.1:1.0, for the first two fiscal quarters
of fiscal year 1999 ending May 31, 1999 and August 31, 1999; and (ii)
1.15:1.0, for each fiscal quarter thereafter.
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1.5 A new subsection (m) is added to Section 9 to read as
follows:
(m) The Borrower shall fail to repay the Senior Notes in full by
September 30, 1999 (or any later maturity date as to which the holders
of the Senior Notes may agree) with the proceeds from excess cash flow
or proceeds from asset sales or offerings as provided in the Sharing
Agreement.
2. The Lenders, pursuant to the terms of the Term Sheet for the Bank Credit
Agreement (Amendment No. 7), and the holders of the Senior Notes, pursuant to
the terms of the Senior Noteholder Term Sheet (as hereafter referenced and
defined), agreed with the Company and the Borrower as to sharing of the proceeds
from asset sales and certain other amounts. The Required Lenders hereby request
and direct the Administrative Agent, for and on behalf of the Lenders hereunder,
to enter into an intercreditor agreement with the holders of the Senior Notes
giving effect to the agreements set forth in the respective Term Sheets
referenced above, in substantially the form attached.
3. The Borrower and the Company hereby acknowledge and agree that (i) the
aggregate Commitments under the Credit Agreement were permanently reduced to
$325 million and were further permanently reduced to $298,063,003 in connection
with the application of the $65 million in excess cash on hand to the loans and
obligations owing under the Credit Agreement, to the Senior Notes and to the
FUNB LOC Obligations (as defined in the Sharing Agreement), and the Applicable
Percentage modified as of March 23, 1999 pursuant to the terms of the Term Sheet
for the Bank Credit Agreement (Amendment No. 7), and (ii) the aggregate
Commitments under the Credit Agreement will be permanently reduced on a
dollar-for-dollar basis by amounts received from the excess cash or the net
proceeds from asset sales and debt or equity offerings, for application to the
loans and obligations under the Bank Credit Agreement until the aggregate
Commitments shall be permanently reduced to $200 million, as provided in Section
4 of the Sharing Agreement.
4. This Amendment shall be effective upon satisfaction of the following
conditions:
(a) execution of this Amendment by the Borrower, the Company, the
Administrative Agent and the Required Lenders;
(b) receipt of the amendment and modification documentation relating to the
Senior Notes giving effect to the provisions of Term Sheet dated March 23, 1999
(the "Senior Noteholder Term Sheet") among the Company, the Borrower and the
holders of the Senior Notes, in form and substance satisfactory to the
Administrative Agent; and
(c) receipt of a fully executed copy of the Sharing Agreement.
5. Except as modified hereby, all of the terms and provisions of the Credit
Agreement (including Schedules and Exhibits) shall remain in full force and
effect.
6. The Borrower agrees to pay all reasonable costs and expenses of the
Administrative Agent in connection with the preparation, execution and delivery
of this Amendment, including without limitation the reasonable fees and expenses
of Moore & Van Allen, PLLC.
7. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, and it shall
not be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
8. This Amendment shall be deemed to be a contract made under, and for all
purposes shall be construed in accordance with the laws of the State of North
Carolina.
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed under seal and delivered as of the date
and year first above written.
BORROWER: MACSAVER FINANCIAL SERVICES, INC.,
a Delaware corporation
By:_______________________________
Name:
Title:
COMPANY: HEILIG-MEYERS COMPANY,
a Virginia corporation
By:_______________________________
Name:
Title:
ADMINISTRATIVE
AGENT: WACHOVIA BANK, N.A., as Administrative Agent
for and on behalf of the Lenders
By:_______________________________
Name:
Title:
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CONSENT TO AMENDMENT NO. 7
Wachovia Bank, N.A., as Administrative Agent
191 Peachtree Street, N.E.
29th Floor, MC-3490
Atlanta, Georgia 30303
Attn: Syndication Services
Re:
Credit Agreement dated as of July 18, 1995 (as amended and modified,
the "Credit Agreement") among MacSaver Financial Services, Inc.,
Heilig-Meyers Company, Inc., the Lenders identified therein and
Wachovia Bank of Georgia, N.A. (now known as Wachovia Bank, N.A.), as
Administrative Agent. Terms used but not otherwise defined shall have
the meanings provided in the Credit Agreement.
Amendment No. 7 dated April 15, 1999 (the "Subject Amendment")
relating to the Credit Agreement
Ladies and Gentlemen:
This should serve to confirm our receipt of, and consent to, the
Subject Amendment. We hereby authorize and direct you, as Administrative Agent
for the Lenders, to enter into the Subject Amendment on our behalf in accordance
with the terms of the Credit Agreement upon your receipt of such consent and
direction from the Required Lenders, and agree that the Borrower and the Company
may rely on such authorization.
Sincerely,
-----------------------------
[Name of Lender]
By:__________________________
Name:
Title:
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EXHIBIT 10.ww
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE (the "Lease") made this ______ day of
__________, 1990, by and between HYMAN MEYERS, S. SIDNEY MEYERS and AMY M.
KRUMBEIN, having an address c/o Hyman Meyers, Agent, 2235 Staples Mill Road,
Richmond, Virginia 23230, (collectively the "Landlord"), and HEILIG-MEYERS
FURNITURE COMPANY, a North Carolina corporation having an address at 2235
Staples Mill Road, Richmond, Virginia 23230 (the "Tenant'),
WHEREAS, Landlord is the owner of property consisting of 1.24
acres located on the southern line of Highway 264 Bypass (Greenville Road),
Greenville (Pitt County), North Carolina, shown as Lot 2 on a Map for Record by
Rivers and Associates, Inc. entitled "Three Lots at Eastern Corner Intersection
264 Bypass and Red Banks Road, Greenville TWP, Pitt County, North Carolina"
dated March 12, 1985, a copy of which is attached hereto and made a part hereof
as Exhibit A (the "Property").
WHEREAS, Tenant desires to lease the Property and Landlord is
willing to rent Tenant the Property, upon the terms, conditions, covenants and
agreements set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained the parties hereto agree as follows:
1. DEMISED PREMISES
Subject to all easements, restrictions, covenants, encumbrances and
conditions of record and upon the terms, covenants and conditions set forth
herein, Landlord hereby leases the Property to Tenant and Tenant hereby releases
the Property from Landlord.
2. TERM
2.1. Length. The Term shall commence on November 1, 1990 (the "Commencement
Date") and expire at midnight local time on October 31, 2008 (the "Expiration
Date").
2.2. Surrender. Tenant shall, at its expense, at the expiration of the Term or
any earlier termination of this Lease, (a) promptly surrender to Landlord
possession of the Property (including any fixtures or other improvements which,
under the provisions of Section 7, are owned by Landlord) in good order and
repair (ordinary wear and tear excepted) and broom clean, (b) remove therefrom
Tenant's signs, goods and effects and any machinery, trade fixtures and
equipment used in conducting Tenant's trade or business and not owned by
Landlord, and (c) repair any damage to the Property caused by such removal.
2.3. Holding Over. If Tenant continues to occupy the Property after the
expiration of the Term or any earlier termination of this Lease:
2.3.1. Such occupancy shall be deemed to be under a month-to-month tenancy,
which shall continue until either party hereto notifies the other in writing at
least thirty (30) days before the end of any calendar month that the notifying
party elects to terminate such tenancy at the end of such calendar month, in
which event such tenancy shall so terminate;
2.3.2. Anything contained in this Lease to the contrary notwithstanding, the
rent payable for each such monthly period shall equal one hundred and fifty
percent (150%) of the monthly installment of Base Rent (as hereinafter defined)
payable immediately prior to such expiration or earlier termination, together
with such Additional Rent (as hereinafter defined) as is otherwise required by
the terms of this Lease; and 2.3.3. Otherwise such month-to-month tenancy shall
be upon the same terms and subject to the same conditions as those set forth in
the provisions of this Lease except there will be no options to extend the term
of this Lease.
2.4. Option to Extend. Provided Tenant is not in default under the terms and
conditions of this Lease, Tenant shall have the right and option to extend the
Term of this Lease for three (3) successive periods of six (6) years each by
giving notice to Landlord as hereinafter provided at least six (6) months prior
to the expiration date of the Term (or any extended Term, as the case may be,)
that Tenant is exercising its right to extend the Term of the Lease. During the
extended Term or Terms, all terms and provisions of this Lease shall continue in
full force and effect except that no additional options to extend the Term shall
belong to Tenant. Notwithstanding the above, no option to extend the term of
this Lease may be exercised by Tenant unless prior to, or simultaneous with,
such exercise Tenant has exercised a similar six (6) year extension option for
the property contiguous to the Property, namely that certain property with
improvements thereon consisting of 1.87 acres located on the southern line of
Highway 264 Bypass (Greenville Road) Greenville (Pitt County), North Carolina,
shown as Lot 3 on a Map for Record by Rivers and Associates, Inc. entitled
"Three Lots at Eastern Corner Intersection 264 Bypass and Red Banks Road,
Greenville TWP, Pitt County, North Carolina" dated March 12, 1985, all in
accordance with a lease of even date herewith between Landlord and Tenant for
such property.
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3. RENT.
3.1. Amount. As rent for the Property (all of which is hereinafter referred to
collectively as "Rent"), Tenant hereby agrees and promises to pay to Landlord
all of the following:
3.1.1. Base Rent during the Term shall be FIFTEEN THOUSAND THREE HUNDRED
TWENTY-THREE DOLLARS ($15,323.00) per annum, payable in advance in equal monthly
installments of ONE THOUSAND TWO HUNDRED SEVENTY-SIX and 92/100 DOLLARS
($1,276.92). The first monthly installment of Base Rent shall be payable
beginning November 1, 1990 and the remaining installments shall be payable in
advance on the first day of each and every month thereafter during the Term
hereof at the office of Landlord herein designated (or at such other place as
Landlord may designate in a notice to Tenant). If the Term of this Lease begins
on a date other than the first day of a month, Base Rent from such other date to
the first day of the following month shall be prorated at the rate of
one-thirtieth (1/30) of the monthly installment of Base Rent for each day and
shall be payable in advance. The base rent shall, at all times, including
extension terms of the Lease, be the minimum amount of rent, not including any
additional rent, to be paid to Landlord by Tenant.
Base Rent during the option periods, if the same are exercised by Tenant shall
be increased as follows:
After the third (3rd) year of the Term of this Lease and after
each successive three (3) year period of the Term of this Lease thereafter, the
Base Rent per annum for the following three (3) years of the Term of this Lease
will be an amount equal to the sum of (i) the Base Rent for the last year of the
immediately preceding three (3) year period and (ii) an amount equal to the Base
Rent for the last year of the immediately preceding three (3) year period
multiplied by the Percentage of Increase, as hereinafter defined, in the Index,
as hereinafter defined. The term "Index" as used herein shall mean the "Consumer
Price Index for Urban Wage Earners and Clerical Workers (Revised Series)
(CPI-W), U.S. City Average, All Items (1982-1984 = 100)", issued by the Bureau
of Labor Statistics of the United States Department of Labor in the Current
Labor Statistics Section of the Monthly Labor Review (final publication only.)
The term "Percentage of Increase" as used herein shall mean the fraction of
increase in the Index, which fraction shall be determined by subtracting the
Base Index, as hereinafter defined, from the average of the Consumer Price
Monthly Indices for the immediately preceding twelve (12) months and that
difference resulting therefrom shall be the numerator and the Base Index shall
be the denominator. The average of the Consumer's Price Monthly Indices for the
immediately preceding twelve (12) months shall be ascertained by dividing the
total of the Consumer's Price Monthly Indices for the preceding twelve shall be
ascertained by dividing the total of the Consumer/s Price Monthly Indices for
the preceding twelve (12) months by the number twelve (12). The term "Base
Index" as used herein shall mean the Index for the month immediately preceding
the date of this Agreement of Lease. In the event that the Index shall cease to
use the 1982 - 1984 average of 100 as the basis of calculation, or if a
substantial change is made in the terms or number of items contained in the
Index, then the Index shall be adjusted to the figure that would have been
arrived at had the change in the manner of computing the Index on the date of
this Agreement of Lease not been altered. In the event that the Index shall be
discontinued or no longer published, Landlord shall substitute a comparable
price index or formula and such substitute price index or formula shall have the
same effect as if originally designated herein as the Index. If (ii) in the
immediately preceding sentence is zero or less than zero, then the new Base Rent
shall be the amount set forth in (i) of the same sentence.
3.1.2. Additional rent (the "Additional Rent") in the amount of any payment
referred to as such in any provision of this Lease which accrues while this
Lease is in effect. Except as is otherwise set forth herein, any Additional Rent
shall be due and payable with the installment of Base Rent next falling due
after such Additional Rent accrues.
3.2. Payment. Except as otherwise specifically provided for herein, all Rent
shall be payable without demand therefor and without any setoff or deductions
whatsoever. Any payment made by Tenant to Landlord on account of Rent may be
credited by Landlord to the payment of any Rent then past due before being
credited to Rent currently falling due. Any such payment which is less than the
amount of Rent then due shall constitute a payment made on account thereof, the
parties hereto hereby agreeing that Landlord's acceptance of such payment shall
not alter or impair Landlord's rights hereunder to be paid all of such amount
then due, or in any other respect.
3.3. Late Penalties and Interest. Tenant hereby recognizes and acknowledges that
if payments of Rent are not received when due, Landlord will suffer damages and
additional expenses and Tenant therefore agrees to pay as Additional Rent a late
penalty equal to five (5%) of the Rent then due and payable under this Lease if
such Rent is not received by Landlord within seven (7) days after such amount is
due and payable. In addition, all Rent not paid within seven (7) days shall bear
interest at the rate of eighteen percent (18%) per annum.
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3.4. Lease Year. As used in the provisions of this Lease, the term "Lease Year"
means (a) the period commencing on the Commencement Date and terminating on the
first (1st) anniversary of the Commencement Date, and (b) each successive period
of twelve (12) calendar months thereafter during the Term.
3.5. Taxes.
3.5.1. (i) As used herein, the term "Taxes" shall mean all real estate taxes,
assessments and other governmental levies and charges, general and special,
ordinary and extraordinary, unforeseen as well as foreseen, of any kind and
nature (including any interest on such assessments whenever the same are
permitted to be paid in installments) which may be imposed, levied, assessed or
confirmed by any lawful taxing authorities or which may become due and payable
out of or for, or which may become a lien or charge upon or against the whole,
or any part, of the Property, or any taxes in lieu thereof, which are measured
by the value of the Property, including any substitution in whole or in part
therefor due to a future change in the method of taxation, and also all
reasonable costs and fees (including attorney's fees and any fees of Lessor's
tax consultants) incurred by Lessor in contesting any such taxes, levies,
charges or assessments and/or in negotiating with the public authorities as to
the same. Nothing contained in this Lease, however, shall require Tenant to pay
any share of any estate, inheritance, succession, gift, capital levy, excess
profits, revenue, corporation, franchise, occupancy, gross receipts, income,
payroll or stamp tax imposed upon Landlord or any tax upon the sale, transfer
and/or assignment of the title or estate of Landlord, nor shall any of the same
be deemed Real Estate Taxes. If by law any general assessment or like charge may
be paid in installments, such assessment shall be so paid, and Tenant shall only
be liable for Tenant's Pro Rata Share of the portion thereof that is payable
within the then-current term of this Lease.
3.5.1. (ii) If Landlord shall fail or refuse, upon the request of Tenant, to
take any necessary steps to contest the validity or amount of the assessed
valuation or of the Taxes for any real estate fiscal tax year, Tenant may
undertake, by appropriate proceedings in the name of Landlord or Tenant, to
contest the same. Within a reasonable time after demand therefor, Landlord shall
execute, acknowledge and deliver any documents reasonably required to enable
Tenant to prosecute any such proceeding all of which shall be at no expense to
Landlord. Landlord shall inform Tenant, in time to permit Tenant to undertake
such contest, of all pertinent data required to undertake such contest. The
rights of contest afforded Tenant according to this subsection 3.5.1 (ii) are
subject to Tenant providing Landlord with adequate security for the payment of
any and all Taxes that are involved while any such contest by Tenant is ongoing
which security must be acceptable to Landlord in the reasonable exercise of its
discretion and in all events such security must be acceptable to all mortgagees
of Landlord.
3.5.1. (iii) If Landlord or Tenant shall obtain a remission or a refund of all
or any part of the Taxes for any real estate fiscal tax year, Landlord shall
promptly refund to Tenant (or credit Tenant with) Tenant's Pro Rata Share of
such remission or refund.
3.5.2. As used herein, the term "fiscal tax year" shall mean the twelve (12)
month period used by the county and/or city having jurisdiction over the
Property or any other lawful taxing authority, from time to time to assess Taxes
on the Property, or any part thereof.
3.5.3. Tenant shall pay as Additional Rent the amount of the Taxes for every
fiscal tax year or part thereof falling within the Term. Landlord agrees to
promptly furnish to Tenant all bills received by Landlord for Taxes and Tenant
shall pay the same before such payments are due and shall promptly thereafter
deliver to Landlord receipts evidencing full payment.
3.5.4. If only part of any fiscal tax year falls within the Term, the amount
computed as Additional Rent for such fiscal tax year under the foregoing
provisions of this subsection shall be prorated in proportion to the portion of
such fiscal tax year falling within the Term. The expiration of the Term before
the end of a fiscal tax year shall not impair Tenant's obligation hereunder to
pay such prorated portion of such Additional Rent with respect to that portion
of such fiscal tax year falling within the Term.
3.5.5. Anything contained in the foregoing provisions of this subsection
regarding Taxes to the contrary notwithstanding, Landlord may, at its discretion
(but only if Landlord is required to escrow Taxes by its first mortgagee), (a)
make from time to time during the Term a reasonable estimate of the Additional
Rent which may become due under such provisions with respect to any fiscal tax
year, (b) require Tenant to pay to Landlord each calendar month during such year
one-twelfth (1/12) of such estimate, at the time and in the manner that Tenant
is required hereunder to pay the monthly installment of the Base Rent for such
month, and (c) increase or decrease from time to time during such fiscal year
the amount initially so estimated for Taxes, based upon the most recently
available actual assessment and tax rate. In such event, Landlord shall deliver
to Tenant within sixty (60) days after the end of such fiscal tax year, a
statement showing a determination of the Taxes for such fiscal tax year. Tenant
shall within thirty (30) days after delivery of Landlord's statement, pay to
Landlord the amount of any deficiency. If such statement shows that Tenant's
monthly aggregate payments pursuant to this Section exceeded the actual Taxes
for the preceding fiscal tax year, such overpayment shall be applied to the next
ensuing monthly installment(s) of Base Rent.
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3.6. Tax on Lease. If federal, state or local law now or hereafter imposes any
tax, assessment, levy or other charge (other than any income, inheritance or
estate tax) directly or indirectly upon (a) Landlord with respect to this Lease
or the value thereof, (b) Tenant's use or occupancy of the Property, (c) the
Base Rent, Additional Rent or any other sum payable under this Lease, or (d)
this transaction, then Tenant shall pay the amount thereof as Additional Rent to
Landlord upon demand, unless Tenant is prohibited by law from doing so, in which
event Landlord may, at its election, terminate this Lease by giving written
notice thereof to Tenant.
3.7. Net Lease. It is the propose and intent of the parties hereto that the Rent
payable hereunder shall be absolutely net to Landlord, so that this Lease shall
yield, net to Landlord, the Base Rent and the Additional Rent described herein
in each Lease Year during the Term of this Lease. All costs, fees, interest,
charges, expenses, reimbursements and obligations of every kind and nature
whatsoever relating to the Property (excepting only any taxes, costs or other
obligations arising prior to the Commencement Date of this Lease), which may
arise or become due during the Term, shall be paid and discharged by Tenant as
Additional Rent. Landlord shall be indemnified and saved harmless by Tenant from
and against all such costs, fees, interest, charges, expenses, reimbursements
and obligations relating to the Property or this Lease. However, Tenant shall be
under no obligation to pay interest or principal on any Mortgage (as hereinafter
defined) encumbering the Property or any income, franchise, gift, inheritance or
capital levy tax hereafter payable by or imposed upon Landlord.
4. SECURITY DEPOSIT
Landlord has not received a Security Deposit from Tenant and none is
due and owing.
5. USE OF PROPERTY
5.1. Use. Tenant shall occupy and use the Property for and only for parking for
a furniture sales facility and warehouse. The Property shall not be used for any
illegal purposes or in any manner to create any nuisance or trespass.
5.2. Improvements. Both Landlord and Tenant understand and agree that as of the
date of this Lease, no improvements exist on the Property except those
improvements usually associated with a parking lot; however, if Landlord permits
Tenant to make any other improvements to the Property, which Landlord shall be
under no obligation to do, all terms and conditions of this Lease which apply to
improvements will then become applicable to such requirements.
5.3. Compliance with Laws.
5.3.1. In its use of the Property, Tenant shall not violate the certificates of
occupancy issued therefor, any applicable law, ordinance or regulation or any
regulation of the National Board of Fire Underwriters. Tenant shall not create
or allow to exist on the Property any nuisance or trespass, nor do any act in or
about the Property or bring anything on or in the Property which will in any way
materially deface or injure the Property or any part thereof or overload the
floor of the building.
5.3.2. Tenant hereby agrees that Tenant, its employees, agents, contractors or
invitees shall not, at any time, cause or permit asbestos, asbestos related
products or any petroleum products or hazardous, toxic or dangerous wastes,
substances or material defined as such in (or for the purposes of) the
Comprehensive Environmental Response, Compensation and Liability Act, as amended
(any of the same being hereinafter defined as "Hazardous Material"), to be
brought installed or used in, about or from the Property. If Tenant breaches any
of the provisions of this subsection or if the presence of Hazardous Material is
found in the Property, the Tenant agrees to indemnify, defend and hold Landlord,
and/or any fee owner or ground or underlying landlords of the Property, harmless
from and against any and all claims, judgments, damages, penalties, fines,
costs, liability or losses in connection therewith, including, without
limitation, (i) diminution in value of the Property, (ii) damages for the loss
or restriction of use of the Property, (iii) damages arising from any adverse
impact on marketing of space, and (iv) sums paid in settlement of claims,
attorneys' fees, consulting fees and expert fees which arise during or after the
lease term as a result of the same. This indemnification of Landlord by Tenant
shall include, without limitation, all costs incurred in connection with any
investigation of conditions or any clean up, remedial, removal or restoration
work required by any court or by any federal, state or local governmental
authority because of Hazardous Material present in, on or under the Property.
Further, Tenant shall promptly and at its sole cost and expense, take all action
necessary to remove said Hazardous Material from the Property; provided,
however, that Landlord's approval of such actions shall first be obtained.
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6. INSURANCE AND INDEMNIFICATION
6.1. Increase in Risk.
6.1.1. Tenant shall not do or permit to be done any act or thing as a result of
which either (a) any policy of insurance of any kind covering (i) any or all of
the Property or (ii) any liability of Landlord in connection therewith, may
become void or suspended, or (b) the insurance risk under any such policy would
(in the opinion of the insurer thereunder) be made greater unless Tenant shall
pay as Additional Rent the amount of any increase in any premium for such
insurance resulting from any such increased risk.
6.2. Insurance to be Maintained by Tenant.
6.2.1. Tenant shall maintain at its expense, throughout the Term, insurance
covering the building and other improvements now or hereafter existing upon the
Property against loss or damage by fire or such other risk now or hereafter
embraced by the term "extended coverage" and by vandalism and malicious
mischief, in an amount not less than the full insurable value as determined by
Tenant's insurer. As used in this subsection, the term "full insurable value"
shall mean the actual replacement cost, excluding foundation and excavation
costs, without deduction for physical depreciation as such replacement cost
shall be adjusted by Tenant's insurer every year due to changes in the cost of
construction and other relevant factors.
6.2.2. Tenant shall maintain at its expense, through the Term, insurance against
loss or liability in connection bodily injury, death, property damage or
destruction, occurring on or about the Property or arising out of the use
thereof by Tenant or its agents, employees, officers or invitees, visitors and
guests, under one or more policies of comprehensive public liability insurance,
including insurance against assumed or contractual liability under this Lease,
having such limits as to each as are reasonably required by Landlord from time
to time, but in any event of not less than Two Million Five Hundred Thousand
Dollars ($2,500,000.00) for bodily injury to or death of all persons and for
property damage or destruction in any one occurrence.
6.2.3. Each policy referenced above shall (a) name as the insureds thereunder
Landlord and Tenant (and, at Landlord's request, any mortgagee of Landlord
holding a note secured by a deed of trust or other security instrument
encumbering the Property), except that for the policies described in subsection
6.2.2 Landlord shall be named as an additional insured (b) by its terms, not be
cancellable without at least thirty (30) days prior written notice to Landlord
(and, at Landlord's request, any mortgagee), and (c) be issued by an insurer of
recognized responsibility licensed to issue such policy in the state where the
Property is located. At least five (5) days before the Commencement Date, Tenant
shall deliver to Landlord each such policy for each such policy, and at least
thirty (30) days before any such policy expires, Tenant shall deliver to
Landlord a replacement policy.
6.3. Indemnification. Except as otherwise provided for in this Lease.
6.3.1. Tenant will indemnify Landlord and save Landlord harmless from and
against any and all claims, actions, damages, liability and expenses in
connection with loss of life, personal injury and damage to property arising in,
at, upon, or involving the occupancy or use of any part of the Property by
Tenant, or occasioned wholly or in part by any act or omission of Tenant or its
agents, contractors, employees, servants, lessees, invitees or concessionaires.
In case Landlord shall, without fault on its part, be made party to any
litigation commenced by or against Tenant relating to the Tenant's
indemnification as set forth in the immediately preceding sentence of this
subsection 6.3.2, then Tenant shall protect and hold Landlord harmless and shall
pay all reasonable costs, expenses and attorney's fees incurred or paid by
Landlord in connection with such litigation.
6.4. Compliance with Authority. Tenant agrees, at its own expense, to promptly
comply with all requirements of any legally constituted public authority.
6.4.1. Waiver of Subrogation. To the extent that they are insured and reimbursed
by their respective insurance companies, Landlord and Tenant hereby waive any
and all rights of recovery against the other for or arising out of the damage to
or destruction of their property, whether or not such damage or destruction
shall have been caused by the negligence of the other, its agents, servants or
employees.
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7. CONDITION OF IMPROVEMENTS
7.1. As Is. Tenant acknowledges and agrees to accept delivery and possession of
the Property on November 1, 1990 in the "AS IS" condition of the Property on the
date of this Agreement of Lease, it being understood that Landlord has no other
obligation to perform any work in connection with the preparation of the
Property for Tenant's occupancy, except to so deliver such possession to Tenant.
7.2. Landlord's Property. Any and all improvements, repairs, additions,
fixtures, alterations and all other property attached to, used in connection
with or otherwise installed within the Property by Landlord or Tenant shall,
immediately on the completion of its installation and without compensation or
payment to Tenant by Landlord, become Landlord's property, except that any
machinery, equipment, or trade fixtures installed by Tenant and used in the
conduct of Tenant's trade or business (rather than to service the Property
generally) shall remain Tenant's property.
8. MAINTENANCE AND SERVICES
8.1. Maintenance and Alteration by Tenant.
8.1.1. Tenant at its expense shall maintain (including all replacements when
necessary) the Property, including, without limitation, the roof, the foundation
and all other structural elements, all plumbing, heating, air conditioning,
ventilating, electrical and mechanical equipment, the parking areas and all
non-structural parts of the Property in good repair and condition, ordinary wear
and tear excepted. In addition, Tenant, at its expense, shall keep the Property
free of termites and other wood boring insects and shall keep the Property in a
clean and orderly condition, free of dirt, rubbish, snow, ice and unlawful
obstructions. If Tenant refuses or neglects to repair or maintain the Property
as required hereunder as soon as reasonably possible after written demand,
Landlord may make such repairs, without liability to Tenant for any loss or
damage that may accrue to Tenant's equipment, merchandise, trade fixtures, or
other property or to Tenant's business by reason thereof, and upon completion
thereof and presentation of the bill therefor, Tenant shall pay Landlord's cost
for making such repairs as Additional Rent payable with the next installment of
Base Rent due under this Lease. Such bill shall include interest at the rate of
eighteen percent (18%) per annum on such cost beginning on the fifth (5th) day
after presentation of the bill for such repairs is made by Landlord.
8.1.2. Tenant may make non-structural alterations or improvements to the
Property aggregating not more than Twenty-five Thousand Dollars ($25,000) in any
Lease Year without Landlord's consent thereto. Tenant shall not make any
non-structural alterations or improvements to the Property in excess of
Twenty-five Thousand Dollars ($25,000) in any Lease Year or any structural
alteration, addition or improvement to the Property without first obtaining
Landlord's consent thereto, which consent shall not be unreasonably withheld or
delayed, so long as the value of the Property is not materially decreased
thereby. If Landlord so consents to any such proposed alteration, addition or
improvements in excess of Twenty-five Thousand Dollars ($25,000), Landlord
covenants and agrees they will consider participating in the payment of costs
for same but will not be obligated to participate; if they agree to so
participate, it shall be on terms and conditions which in all events must be
satisfactory to Landlord. All such alterations, additions, and improvements will
be done in a good and workmanlike manner in keeping with all building codes and
regulations and will in no way materially harm the structure of the Property.
8.1.3. Tenant shall (a) within thirty (30) days after notice, bond or have
released any mechanic's, materialman's or other lien filed or claimed against
any or all of the Property by reason of labor or materials provided for Tenant
or any of its contractors or subcontractors, or otherwise arising out of
Tenant's use or occupancy of the Property, and (b)defend, indemnify and hold
harmless Landlord against and from any and all liability, claim of liability or
expense (including, by way of example rather than of limitation, that of
reasonable attorney's fees) incurred by Landlord on account of any such lien or
claim.
8.1.4. Landlord shall not be required to make any repairs or improvements to the
Property or to furnish any services under this Lease. Notwithstanding any
provision in this Lease to the contrary, Landlord shall not be responsible or
liable to Tenant for any injury or damage resulting to Tenant, or its property,
from bursting, stoppage, or leaking of water, gas, sewer, or steam pipes, or
from any structural defect in the roof, exterior walls or the like.
8.1.5. Tenant shall pay promptly when due all charges, costs and expenses for
gas, water, electricity, heat, cooling, sewage and all other utilities furnished
to or used in connection with the Property during the Term.
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9. SIGNS
Tenant agrees that any sign, advertisement or notice that shall be
inscribed, painted or affixed on any part of the Property shall be in compliance
with all governmental laws, ordinances, rules and regulations, including,
without limitation, all zoning ordinances.
10. LANDLORD'S RIGHT OF ENTRY
Landlord and its agents shall be entitled to enter the Property at any
reasonable time (a) to inspect the Property, (b) to exhibit the Property to any
existing or prospective purchaser or mortgagee, or during the last six (6)
months of the term to any prospective Tenant, or (c) to make any alteration,
improvement or repair to the Property which Landlord is authorized to make
pursuant to this Agreement of Lease; provided, that Landlord shall (i) (unless
doing so is impractical or unreasonable because of emergency) give Tenant at
least twenty-four (24) hours prior notice of its intention to enter the
Property, and (ii) use reasonable efforts to avoid interfering more than is
reasonably necessary with Tenant's use and enjoyment thereof.
11. FIRE AND OTHER CASUALTIES
11.1. General. In the event that, at any time during the term of this Agreement
of Lease, the buildings and improvements portion of the Property (i) are
destroyed or (ii) are damaged to the extent of seventy-five percent (75%) or
more of their Gross Leaseable Area, then within sixty (60) days after such
damage or destruction, Tenant shall notify Landlord of its exercise of or its
desire not to exercise the hereby granted option to terminate this Agreement of
Lease not later than and effective on the end of such sixty (60) day period.
Failure to so exercise such option will obligate Tenant to repair and restore
the Property as hereinafter provided. In all other events, Tenant shall repair
and restore the Property as hereinafter provided.
11.2. Repair and Rebuilding. In the event that Tenant does not terminate this
Agreement of Lease as provided for in Section 11.1 above and in all other
events, then Tenant, at its own cost and expense, shall, subject to the other
provisions of this Section 11, cause the same to be repaired, replaced or
rebuilt as nearly as possible to its condition immediately prior to the damage
or destruction subject to such alterations or changes as Tenant may elect to
make in conformity with Section 8 hereof within a period of time which, under
all prevailing circumstances, shall be reasonable. If Tenant shall exercise its
option to terminate this Lease, this Lease shall expire automatically as
provided in subsection 11.1 in which event Tenant shall be under no obligation
to repair, replace or rebuild the buildings and improvements on the Property but
shall clear away the ruins and leave the Demised Premises in a clean, orderly
and sightly condition. In the event that (i) Tenant shall fail to give notice of
its exercise of its option to terminate within such period or (ii) if the
buildings and improvements on the Demised Premises shall not be damaged to the
extent of more than seventy-five percent (75%) of this Gross Leaseable Area,
then, Tenant shall, subject to the other provisions of this Section 11, cause
the same to be repaired, replaced or rebuilt at its own cost and expense as
herein provided. If Tenant does not repair, replace or rebuild any damaged or
destroyed buildings or improvements, all insurance proceeds that are payable as
a result of the destruction or damage to such buildings or improvements plus the
deductible (to be paid by Tenant), if any, shall be paid to Landlord and this
Agreement of Lease shall terminate on the date of such payment.
11.3. Insurance Trustee. Except as otherwise provided in this Lease, all
insurance policy proceeds provided for in subsection 6.2.1 shall be paid and
delivered to an Insurance Trustee designated by Landlord and shall be held and
used for the following purposes with the Insurance Trustee having the powers and
duties contained herein:
11.3.1. All proceeds received by the Insurance Trustee from any such insurance
policy shall first be used, by such Insurance Trustee as a fund (which fund
shall be deposited in a federally insured interest-bearing account, with any
interest accruing thereon becoming a part of the fund) for the restoration and
repair of any and all buildings, improvements and equipment located on the
Property which have become destroyed or damaged. Such proceeds in said trust
fund shall be used and applied by the Insurance Trustee in satisfaction and
discharge of the cost of the restoration of the destroyed or damaged buildings,
improvements and equipment.
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11.3.2. Said funds shall be paid out by the Insurance Trustee from time to time
to persons furnishing labor or materials, or both, including architects' fees
and contractors' compensation in the construction work, on vouchers approved by
a licensed architect or engineer (the "Project Architect or Engineer") selected
by Tenant and approved by Landlord's first mortgagee, and if none, then by
Landlord, and employed by Tenant to superintend the work. The reasonable
expenses or charges of such architect or engineer shall be paid by such
Insurance Trustee out of the trust fund.
11.3.3. In the event that the amount of the insurance proceeds is insufficient
to pay the actual cost of repair or reconstruction, such deficiency will be
borne and provided for by Tenant by depositing the same with the Insurance
Trustee within twenty (20) days following the request by the Insurance Trustee
to Tenant requesting a sum equal to the amount of such deficiency. The initial
sum to be deposited with the Insurance Trustee according to this Section 11.3.3
shall be all insurance proceeds that are payable and are then actually available
as a result of the destruction or damage to such building. Additionally the
Insurance Trustee shall have the right to require Tenant from time to time to
deposit such additional amounts as the Insurance Trustee in consultations with
the Project Architect or Engineer shall deem necessary for such repair or
reconstruction. Any surplus of funds deposited according to this Section 11.3.3
shall be returned to Tenant after repair or reconstruction is completed.
11.3.4. All reasonable fees, costs and charges of the Insurance Trustee shall be
paid out of the insurance proceeds to the extent that there are such proceeds
over and beyond the amounts required for repair and restoration as aforesaid;
otherwise Landlord and Tenant agree that each will bear one-half (1/2) of the
fees, costs and charges of the Insurance Trustee.
11.3.5. In the event that the Insurance Trustee shall resign or for nay reason
be unwilling to act or continue to act, then Landlord shall substitute a new
trustee in the place and stead of the former pre-existing Insurance Trustee.
11.3.6. Should a dispute arise between Landlord and Tenant as to any provision
of this Section 11.3, such dispute shall be submitted to the Circuit Court of
the City of Richmond, Virginia for resolution, and the non-prevailing party
shall pay the reasonable attorney's fees and court costs of the prevailing
party.
11.3.7. Notwithstanding the above, Landlord and Tenant may mutually agree not to
use an Insurance Trustee but may mutually agree to use some other method to
effect the repair of such damage and destruction.
11.4. Abatement of Rent. During the term of this Lease, unless Tenant terminates
this lease according to the option described in Section 11.1 hereof, destruction
or damage in whole or in part to the buildings and improvements on the Demised
Premises shall, during the period when the same are being repaired and rebuilt,
serve to abate the base rent to be paid to Landlord by Tenant hereunder and the
payment of any other sums, monies, costs, charges or expenses required to be
paid by Tenant hereunder with such abatements to be calculated by multiplying
such amounts by a fraction, the numerator of which is the square footage of the
Demised Premises that is being repaired or rebuilt and the denominator of which
is the total square footage of the Demised Premises.
11.5. Termination During Last Year of Lease Term. If during the last year of the
Term the Property is totally destroyed by fire or other casualty, or
substantially damaged thereby to the extent that it is unfeasible for Tenant, in
Tenant's reasonable business judgment, to conduct its business on the Property,
Tenant shall have the option, upon written notice to Landlord within thirty (30)
days from the date of such casualty, to elect to terminate this Lease as of the
date of such casualty, and the insurance proceeds plus the deductible (to be
paid by Tenant to Landlord), if any, shall be paid to Landlord. If Tenant does
not exercise such option, this Lease shall continue, and Tenant shall promptly
upon receipt of the proceeds of insurance commence to restore and shall
diligently proceed to restore said Property to as nearly as possible the
condition and character it was in immediately prior to the damage or destruction
with such variations and alterations as may be permitted under this Lease, all
as hereinabove provided.
11.6. Tenant's Losses. In the event of any such damage or destruction to the
Property, Landlord shall not be liable to Tenant for loss of profits, expenses,
or any other type of injury or damage resulting from the repair of any such
damage to the Property or any part thereof, or for the termination of the Lease
as provided herein. Tenant assumes the risk of any and all damage to its
personal property in or on the Property from any casualty whatsoever.
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12. CONDEMNATION.
12.1. Full Condemnation.
12.1.1. If all or substantially all of the Property or such portion of the
improvements located on the Property as to render the balance of such
improvements unsuitable in Landlord's reasonable judgment for the purposes of
Tenant is taken by the exercise of any power of eminent domain or is conveyed to
or at the direction of any governmental entity under a threat of any such
taking, Landlord shall be entitled to collect from such condemning authority the
entire amount of any award made in any such proceeding or as consideration for
such conveyance, without deduction therefrom for any leasehold or other estate
held by Tenant under this Lease, this lease shall terminate on the date that
possession of the Property is taken by such condemning authority and all Rent,
Taxes and other charges payable hereunder will be apportioned and paid to such
date.
12.1.2. Tenant hereby (a) assigns to Landlord all of Tenant's right, title and
interest, if any, in and to any such award (b) waives any right that it may
otherwise have in connection with such condemnation, against Landlord or such
condemning authority, to any payment for (i) the value of the then-unexpired
portion of the Term, (ii) leasehold damages, and (iii) any damage to or
diminution of the value of Tenant's leasehold interest hereunder or any portion
of the Property not covered by such Condemnation, and (c) agrees to execute any
and all further documents which may be required to facilitate Landlord's
collection of any and all such awards.
12.1.3. Subject in all events to the operation and effect of the foregoing
provisions of this Section, Tenant may seek a separate award on account of any
damages or costs incurred by Tenant as a result of such condemnation, so long as
such separate award in no way diminishes any award or payment which Landlord
would otherwise receive as a result of such Condemnation.
12.2. Partial Condemnation. If a (i) portion of the Property that is not
improved by buildings or structures as of the date of this Lease or (ii) a
portion of the improvements portion of the Property is so taken so that no
termination of this lease occurs according to subsection 12.1.1, then Landlord
is entitled to collect from such condemning authority the entire amount of any
award in any such proceeding or as consideration for any such conveyance, this
lease shall not terminate and Landlord shall, upon its receipt of such award in
condemnation, restore said building improvements to as complete a building as is
reasonably and practically possible in design, character and quality of the
conditions of the building immediately prior to the condemnation; provided
however, in any event, Landlord shall not be required to spend for any such
repair, restoration or alteration work an amount in excess of the amounts
received by Landlord as damage for the taking of such building improvements part
of the Property and Tenant, at its own cost and expense shall make all necessary
repairs and alterations to its trade fixtures, decoration, signs, machinery and
contents. During the term of this Lease, unless Tenant terminates this Lease
according to subsection 12.1.1, partial condemnation of the Property shall,
during the period when the same are being repaired, restored and altered, serve
to abate the base rent to be paid to Landlord by Tenant hereunder and the
payment of any other sums, monies, costs, charges or expenses required to be
paid by Tenant hereunder with such abatements to be calculated by multiplying
such amount by a fraction, the numerator of which is the square footage of the
Demised Property that is being repaired, restored and altered and the
denominator of which is the total square footage of the Demised Premises. Base
Rent payable after any such taking and after all such repairs and restoration
are effected by Landlord will thereafter be reduced in the same proportion as
the gross leaseable area of the improvements is reduced and not repaired and
restored as provided for above by or as a consequence of such condemnation.
12.3. Liability upon Condemnation. If there is a condemnation, Landlord shall
have no liability to Tenant on account of any (a) interruption of Tenant's
business upon the Property, (b) diminution in Tenant's ability to use the
Property, or (c) other injury or damage sustained by Tenant as a result of such
Condemnation.
12.4. Condemnation Proceedings. Except for any proceeding brought by Tenant
under the provisions of subsection 12.1.3, Landlord shall be entitled to conduct
any such condemnation proceeding and any settlement thereof free of interference
from Tenant, and Tenant hereby waives any right which it otherwise has to
participate therein.
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13. ASSIGNMENT AND SUBLETTING
13.1. Landlord's Consent. Tenant hereby acknowledges that Landlord has entered
into this Lease because of Tenant's financial strength, goodwill, ability and
expertise and that, accordingly, this Lease is one which is personal to Tenant,
and Tenant agrees that it will not directly or indirectly (a) assign its rights
under this Lease, or (b) make or permit any total or partial sale, lease, use,
sublease, assignment, conveyance, license, mortgage, pledge, encumbrance or
other transfer of this Lease, any interest of Tenant in this Lease, any or all
of the Property or the occupancy or use thereof (each of which is hereinafter
referred to as a "Transfer"), without first obtaining Landlord's written consent
thereto (which consent shall not be unreasonably withheld by Landlord). Any such
consent shall not constitute a consent to any subsequent Transfer, whether by
the person hereinabove named as "Tenant" or by any such transferee). Landlord
shall be entitled to condition such consent upon the entry by such assignee into
an agreement with Landlord providing for such assignee's assumption of all of
Tenant's obligations hereunder. Any person to whom any Transfer is attempted
without such consent shall have no claim, right or remedy whatsoever hereunder
against Landlord, and Landlord shall have no duty to recognize any person
claiming under or through the same. No such action taken with or without such
Landlord's consent shall in any way relieve or release Tenant and all guarantors
of Tenant's performance under this Lease from liability for the timely
performance of all of Tenant's obligations hereunder. If Tenant fails to obtain
the written consent of Landlord as provided in this Section 13.1 and undertakes
any of the activities described therein, then in addition to the same
constituting an Event of Default hereunder any and all options to extend the
term of this lease as set forth in Section 2.4 of this Lease shall automatically
terminate and thereafter to be null and void and of no further force and effect.
For purposes of the foregoing provisions of this subsection, a transfer by any
person or persons controlling Tenant on the date hereof, of such control to a
person or persons not controlling Tenant on the date hereof shall be deemed a
Transfer of this Lease except that public trading on the New York or American
Stock Exchange or in the NSDAQ over-the-counter market shall not constitute such
a Transfer. Landlord shall be entitled to be paid by Tenant one-half of any
profit derived by Tenant from any Transfer.
14. SUBORDINATION; ATTORNMENT AND NON-DISTURBANCE
14.1. Subordination of Lease. This Lease shall be subject and subordinate to the
lien of any and all mortgages, deeds of trust, ground leases and/or other
similar instrument of encumbrance heretofore or hereafter covering the Property
or any part thereof (and each renewal, modification, consolidation, replacement,
increase or extension thereof) (each of which is hereinafter referred to as a
"Mortgage"), all automatically and without the necessity of any action by either
party hereof; provided that such underlying landlord or the holder of such a
Mortgage in writing (in recordable form) will agree that in the event of the
termination of the underlying lease or foreclosure of the Mortgage (i) this
Lease shall not be terminated thereby and (ii) Tenant's right of possession
hereunder shall not be disturbed so long as Tenant is not in default under this
Lease. Documentation required by any such Landlord, the holder of such a
Mortgage or Tenant under this Section 14.1 shall be in a form as may be
reasonably requested by such landlord or the holder of such a Mortgage and shall
be executed by all appropriate parties to the extent required to give effect to
the subordination and other provisions provided for herein. Landlord represents
that as of the date of this Agreement of Lease there are no mortgages or deeds
of trusts encumbering the Property.
14.2. Tenant's Execution of Documents. Subject to the provisions of Section 15.1
Tenant shall, promptly at the request of Landlord or the holder of any such
Mortgage, execute, seal, acknowledge and deliver such further instrument or
instruments,
14.2.1. Evidencing such subordination and non-disturbance as contemplated in
Section 15.1 as Landlord or the holder of such Mortgage deems reasonably
necessary or desirable, and (at the request of the holder of such a Mortgage)
attorning to such holder,
14.2.2. Provided that such holder agrees with Tenant that such holder will, in
the event of foreclosure of any such Mortgage (or termination of any such
underlying lease) take no action to interfere with Tenant's rights hereunder,
except on the occurrence of an Event of Default as defined in Section 15 hereof.
14.3. Lease Made Superior Upon Request. Anything in this Section 14 to the
contrary notwithstanding, in the event any such underlying landlord or any
Mortgagee requests that this Lease be made superior, rather than subordinate, to
any such Mortgage, then Tenant, within ten (10) days following Landlord's
written request therefor, agrees to execute and deliver, without charge, any and
all documents (in form acceptable to Landlord and such underlying landlords or
Mortgagees) effectuating such priority.
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15. DEFAULT
15.1. Definition. As used in the provisions of this Lease each of the following
events shall constitute and is hereinafter referred to as an "Event of Default";
15.1.1. If Tenant fails (a) to pay any Rent or any other sum which it is
obligated to pay by any provision of this Lease, when and as due and payable
hereunder and without demand therefor, or (b) to perform any of its other
obligations under the provisions of this Lease; or
15.1.2. If Tenant (a) applies for or consents to the appointment of a receiver,
trustee or liquidator of Tenant or of all or a substantial part of its assets,
(b) files a voluntary petition in bankruptcy or admits in writing its inability
to pay its debts as they come due, (c) makes an assignment for the benefit of
its creditors, (d) files a petition or an answer seeking a reorganization or an
arrangement with creditors, or seeks to take advantage of any insolvency law,
(e) performs any other act of bankruptcy, or (f) files an answer admitting the
material allegation of a petition filed against Tenant in any bankruptcy,
reorganization or insolvency proceeding; or
15.1.3. If (a) an order, judgment or decree is entered by any court of competent
jurisdiction adjudicating Tenant as bankrupt or insolvent, approving a petition
seeking such reorganization, or appointing a receiver, trustee or liquidator of
Tenant or of all or a substantial part of its assets, or (b) there otherwise
commences as to Tenant or any of its assets any proceeding under any bankruptcy,
reorganization, arrangement, insolvency, readjustment, receivership, or similar
law, and if such order, judgment, decree or proceeding continues unstayed for
more than sixty (60) consecutive days after any stay thereof expires.
15.1.4. If Tenant (a) assigns its rights under this Lease or (b) makes or
permits any total or partial sale, lease, use, sublease, assignment, conveyance,
license, mortgage, pledge, encumbrance or other transfer of this Lease, any
interest of Tenant in this Lease, any and all of the Property or the occupancy
or use thereof without first obtaining Landlord's written permission.
15.1.5. If Tenant is deemed to have occasioned an Event of Default pursuant to
Paragraph 15.1 of the lease of even date herewith by and between Landlord and
Tenant for land and a building located at 518 East Greenville Boulevard,
Greenville, North Carolina 27834, adjacent to the parking lot described in this
Lease, subject to the cure provisions contained therein, if any.
15.2. Notice to Tenant: Grace Period. Anything contained in the provisions of
this Section to the contrary notwithstanding, on the occurrence of an Event of
Default Landlord shall not exercise any right or remedy which it holds under any
provision of this Lease or applicable law unless and until
15.2.1. Landlord has given written notice thereof to Tenant, and
15.2.2. Tenant has failed within five (5) days after its receipt of such notice
to cure any default described in Section 15.1.1(a) above default and thirty (30)
days after its receipt of such notice to cure any other Event of Default
described in Section 15.1.1(b) above; provided, that
15.2.3. No such notice shall be required, and Tenant shall be entitled to no
such grace period, (a) in any emergency situation in which Landlord acts to cure
an Event of Default or (b) in the case of any Event of Default enumerated in the
provisions of subsections 15.1.2, 15.1.3 or 15.1.4
15.3. Landlord's Rights on Event of Default. On the occurrence of any Event of
Default, Landlord may (subject to the operation and effect of the provisions of
Section 15.2)
15.3.1. Re-enter and repossess the Property and any and all improvements thereon
and additions thereto and remove all persons and property therefrom either by
summary dispossess proceedings or by a suitable action or proceeding at law or
in equity, or by force or otherwise, without being liable for any damage
therefor. No re-entry by Landlord shall be deemed an acceptance of a surrender
of this Lease;
15.3.2. Declare the entire balance of the Rent for the remainder of the Term to
be due and payable for which Tenant will immediately pay Landlord the present
value and worth of future rentals discounted to the date that would otherwise
have been the expiration of the Term at a rate equal to the prime rate announced
by Crestar Bank as its primate rate of lending on the date of such declaration
by Landlord; and, collect such amount in any manner not inconsistent with
applicable law;
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15.3.3. Terminate this Lease;
15.3.4. Relet any or all of the Property for Tenant's account for any or all of
the remainder of the Term or for a period exceeding such remainder, in which
event Tenant shall pay to Landlord, at the times and in the manner specified by
the provisions of Section 3, the Base Rent and any Additional Rent accruing
during such remainder, as well as the cost to Landlord of any reasonable
attorney's fees or for any repairs or cost of reletting or other action
(including those taken in exercising Landlord's rights under any provision of
this Lease) taken by Landlord on account of such Event of Default but in no
event shall Landlord be liable in any respect for failure to relet the Property
or in the event of such reletting, for failure to collect the Rent thereunder it
being agreed by Tenant that Landlord has no duty to mitigate Tenant's damages
and any sums received by Landlord on a reletting in excess of the rent reserved
for this Lease shall belong to the Landlord.
15.3.5. Cure such Event of Default in any other reasonable manner (after giving
Tenant written notice of Landlord's intention to do so except in the case of
emergency), in which event Tenant shall reimburse Landlord for all reasonable
expenses incurred by Landlord in doing so, plus interest thereon at a lesser of
the rate of twelve percent (12%) per annum or the highest rate then permitted on
account thereof by applicable law, which expenses and interest shall be
Additional Rent and shall be payable by Tenant immediately on demand therefor by
Landlord; and/or
15.3.6. Pursue any combination of such remedies and/or any other remedy
available to Landlord on account of such Event of Default at law or in equity.
15.4. Landlord's Right to Perform Tenant's Covenants. If Tenant shall default in
the performance of any covenant or condition in this Lease required to be
performed by Tenant, Landlord may, after thirty (30) days' notice for
non-monetary defaults, or after five (5) days' notice in the event of a monetary
default or if, in Landlord's opinion, an emergency exists, perform such covenant
or condition for the account and at the expense of Tenant. If Landlord shall
incur any expense, including reasonable attorney's fees, in instituting,
prosecuting, or defending any action or proceeding instituted by reason of any
default of Tenant, Tenant shall reimburse Landlord for the amount of such
expense. In the event Tenant, pursuant to this Lease, becomes obligated to
reimburse or otherwise pay Landlord any sum of money in addition to the specific
Rent, the amount thereof shall be deemed Additional Rent and may, at the option
of Landlord, be added to any subsequent installment of the Rent due and payable
under this Lease, in which event, Landlord shall have the remedies for default
in the payment thereof provided by this Lease. The provisions of this Section
shall survive the termination of this Lease.
15.5. No Waiver. No action taken by Landlord under the provisions of this
Section shall operate as a waiver of any right which Landlord would otherwise
have against Tenant for the Rent hereby reserved or otherwise, and Tenant shall
remain responsible to Landlord for any loss and/or damage suffered by Landlord
by reason of any Event of Default.
16. ESTOPPEL CERTIFICATE
Tenant shall from time to time, within five (5) days after
being requested to do so by Landlord or any mortgagee, execute, seal,
acknowledge and deliver to Landlord (or, at Landlord's request, to any existing
or prospective purchaser, transferee, assignee or mortgagee of any or all of the
Property, any interest therein or Landlord's rights under this Lease) an
estoppel certificate in recordable form which shall include the status of this
Lease: (a) certifying (i) that his Lease is unmodified and in full force and
effect (or, if there had been any modification hereof, that it is in full force
and effect as so modified, stating therein the nature of such modification);
(ii) the amount of the Base Rent; (iii) as to the dates to which the Base Rent
and any Additional Rent and other charges arising hereunder have been paid; (iv)
as to the amount of any security deposit or prepaid Rent or any credit due to
Tenant hereunder; (v) that Tenant has accepted possession of the Property, and
the date on which the Term commenced; (vi) as to whether, to the best knowledge,
information and belief of the signer of such certificate, Landlord or Tenant is
then in default in performing any of its obligations hereunder (and, if so,
specifying the nature of each such default); and (vii) as to any other factor
condition requested by Landlord or such other addressee; and (b) acknowledging
and agreeing that any statement contained in such certificate may be relied upon
by Landlord and any other addressee.
17. QUITE ENJOYMENT
So long as Tenant is in compliance with the terms of this
Lease, Tenant shall lawfully, peaceably and quietly have, hold, occupy and enjoy
the Demised Premises during the term of this Lease without hindrance or ejection
by Landlord.
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18. NOTICES
Any notice, demand, consent, approval, request or other
communication or document to be provided hereunder to a party hereto shall be
(a) given in writing, and (b) deemed to have been given (i) upon placement as
certified or registered mail in the United States mails, postage prepaid, return
receipt requested, or sent by Federal Express (or other express delivery
services which promise delivery the following business day) to the address of
such party set forth hereinabove or to such other address in the United States
of America as such party may designate from time to time by notice to the other
or (ii) (if such party's receipt thereof is acknowledged in writing) upon its
hand or other delivery to such party, but if directed to Tenant, to the
attention of its Corporate Secretary.
19. GENERAL
19.1. Effectiveness. This lease shall become effective upon and only upon its
execution and delivery by each party hereto.
19.2. Entire Agreement. This Lease represents the complete understanding between
the parties hereto as to the subject matter hereof, and supersedes all prior
written or oral negotiations, representations, warranties, statements or
agreements between the parties hereto as to the same.
19.3. Amendment. This Lease may be amended by and only by a written instrument
executed and delivered by each party hereto.
19.4. Applicable Law. This Lease shall given effect and construed by application
of the laws of the Commonwealth of Virginia, and any action or proceeding
arising hereunder shall be brought in the courts of said state; provided, that
if such action or proceeding arises under the Constitution, laws or treaties of
the United States of America, or there is a diversity of citizenship between the
parties thereto, so that it is to be brought in a United States District Court,
it shall be brought in the United States District Court for the Eastern District
of Virginia.
19.5. Waiver. Landlord shall not be deemed to have waived the exercise of any
right which it holds hereunder unless such waiver is made expressly and in
writing (and o delay or omissions by Landlord in exercising any such right shall
be deemed to be a waiver of its future exercise). No such waiver as to any
instance involving the exercise of any such right shall be deemed a waiver as to
any other such instance, or any other such right.
19.6. Time of Essence. Except as provided in Section 19.20 hereof, time shall be
of the essence of this Lease.
19.7. Headings. The headings of the Sections, subsections, paragraphs and
subparagraphs hereof are provided herein for and only for convenience of
reference, and shall not be considered in construing their contents.
19.8. Construction. As used herein,
19.8.1. The term "person" means a natural person, a trustee, a corporation, a
partnership and any other form of legal entity; and
19.8.2. All references made (a) in the neuter, masculine or feminine gender
shall be deemed to have been made in all such genders, (b) in the singular or
plural number shall be deemed to have been made, respectively, in the plural or
singular number as well, and (c) to any Section, subsection, paragraph or
subparagraph shall, unless therein expressly indicated to the contrary, be
deemed to have been made to such Section, subsection, paragraph or subparagraph
of this Lease.
19.9. Exhibits. Each writing or plat referred to herein as being attached hereto
as an exhibit or otherwise designated herein as an exhibit hereto is hereby made
a part hereof.
19.10. Severability. No determination by any court, governmental body or
otherwise that any provision of this Lease or any amendment hereof is invalid or
unenforceable in any instance shall affect the validity or enforceability of (a)
any other such provision, or by such provision in any circumstance not
controlled by such determination. Each such provision shall be valid and
enforceable to the fullest extent allowed by, and shall be construed wherever
possible as being consistent with, applicable law.
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19.11. Definition of "Landlord".
19.11.1. As used herein, the term "Landlord" means the person hereinabove named
as such, and its heirs, personal representatives, successors and assigns (each
of whom shall have the same rights, remedies, powers, authorities and privileges
as it would have had, had it originally signed this Lease as Landlord).
19.11.2. No person holding Landlord's interest hereunder (whether or not such
person is named as "Landlord" herein) shall have any liability hereunder after
such person ceases to hold such interest, except for any such liability accruing
while such person holds such interest.
19.11.3. Anything contained in this Lease to the contrary notwithstanding Tenant
agrees that it shall look solely to the estate and property of Landlord in the
Property for the collection of any judgment (or other judicial process)
requiring the payment of money by Landlord in the event of any default or breach
by Landlord with respect to any of the terms and provisions of this Lease to be
observed and/or performed by Landlord, subject, however, to the prior rights of
the holder of any Mortgage covering the Property, and no other assets of
Landlord shall be subject to levy, execution or other judicial process for the
satisfaction of Tenant's claim. This provision shall not be deemed, construed or
interpreted to be or constitute an agreement, express or implied, between
Landlord and Tenant that Landlord's interest hereunder and in the Property, or
any part thereof, shall be subject to impressment of an equitable lien.
19.11.4. In the event of the sale, assignment or transfer by Landlord of the
Property (other than a collateral assignment to secure a debt of Landlord) to a
successor in interest who expressly assumes the obligations of Landlord under
this Lease, Landlord shall thereupon be released or discharged from all of its
covenants and obligations under this Lease, except such obligations as shall
have accrued prior to any such sale, assignment or transfer; and Tenant agrees
to look solely to such successor in interest of Landlord for performance of such
obligations. Any securities given by Tenant to Landlord to secure the
performance of Tenant's obligations under this Lease may be assigned by Landlord
to such successor in interest of Landlord; and, upon acknowledgment by such
successor of receipt of such security and its express assumption of its
obligation to account to Tenant for such security in accordance with the terms
of this Lease, Landlord shall thereby be discharged of any further obligation
relating thereto. Landlord's assignment of the Lease or of any or all of its
rights herein shall in no manner affect Tenant's obligations hereunder. Tenant
shall thereafter attorn and look to such assignee as Landlord, provided Tenant
has first received written notice of such assignment of Landlord's interest.
19.12. Definition of "Tenant". As used herein, the term "Tenant" means each
person hereinabove named as such and such person's heirs, personal
representatives, successors and assigns, each of whom shall have the same
obligations, liabilities, rights and privileges as it would have possessed had
it originally executed this Lease as Tenant; provided, that no such right or
privilege shall inure to the benefit of any assignee of Tenant or other party
referenced in Section 13 hereof, immediate or remote, unless the assignment to
such assignee or transferee is made in accordance with the provisions of Section
13. Whenever two or more persons constitute Tenant, all such persons hall be
jointly and severally liable for performing Tenant's obligations hereunder.
19.13. Memorandum of Lease. Tenant will at any time, at the request of Landlord,
promptly execute duplicate originals of an instrument, in recordable form, which
will constitute a memorandum of lease, setting forth a description of the
Property, the term of this Lease, the addresses for the parties, all other
provisions or information required by applicable law, and, excepting the rental
provisions, any other information as Landlord may reasonably request. This Lease
or memorandum of this Lease may be recorded, at Landlord's or Tenant's option,
and the party so recording agrees to pay all recordation costs and taxes levied
thereon.
19.14. Attorneys' Fees. If any Rent or other debt owning by Tenant to Landlord
under this Lease is attempted to be collected by or through an attorney at law,
the losing party in any dispute regarding such Rent or debt agrees to pay the
reasonable attorneys' fees of the prevailing party in connection therewith.
19.15. Rights Cumulative. All rights, powers and privileges conferred hereunder
upon parties hereto shall be cumulative but not restricted to those given by
law.
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19.16. Brokers' Commission. Each party represents and warrants to the other that
there are no claims for brokerage commissions or finder's fees in connection
with the execution of this Lease, and each party agrees to indemnify the other
against, and hold it harmless from, all liabilities arising from any such claim
(including, without limitation, the cost of counsel fees) in connection with or
relating to brokers or finders.
19.17. Corporate Tenant. If Tenant is or will be a corporation, the persons
executing this Lease on behalf of Tenant hereby covenant, represent and warrant
that Tenant is a duly incorporated or a duly qualified (if a foreign
corporation) corporation and authorized to do business in the state in which the
Property is located; and that the person or persons executing this Lease on
behalf of Tenant is an officer or are officers of such Tenant, and the he or
they as such officers were duly authorized to sign and execute this Lease. Upon
request of Landlord to Tenant, Tenant shall deliver to Landlord documentation
satisfactory to Landlord evidencing Tenant's compliance with the provisions of
this Section 19.17.
19.18. Dower and Curtesy. Florence T. Meyers, Anne H. Meyers and Nathaniel
Krumbein join in this Lease for the sole purpose of subordinating their
respective dower and curtesy interest in the Property to the terms and
conditions of this Agreement of Lease.
19.19. Waiver of Jury Trial. Landlord and Tenant each waive trial by jury of any
or all issues arising in any action or proceeding between the parties hereto or
their successors in connection with its Lease or any of its provisions.
19.20. Force Majeur. Anything contained in this Lease to the contrary
notwithstanding, Landlord shall not be deemed in default with respect to the
performance of any of the terms, covenants and conditions of this Lease
incumbent on it to perform or be liable to the Tenant in damages if same shall
be due to any strike, lockout, civil commotion, labor controversy, war-like
operation, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulation or control, inability to obtain any material,
service, fuel, supply or financing, accidents, bombing threat, violence, threat
of violence, breach of peace, Act of God or other cause beyond the control of
Landlord.
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IN WITNESS WHEREOF, each party hereto has executed this Lease or caused
it to be executed on its behalf by its duly authorized representatives, as of
the day and year first above written.
LANDLORD:
/s/ Hyman Meyers
------------------------
HYMAN MEYERS
/s/ S. Sidney Meyers
------------------------
S. SIDNEY MEYERS
/s/ Amy M. Krumbein
------------------------
AMY M. KRUMBEIN
TENANT:
HEILIG-MEYERS FURNITURE COMPANY,
a North Carolina corporation
By: Troy A. Peery, Jr.
Name:
Title:
THIRD PARTY SIGNATORS:
/s/ Florence T. Meyers
-----------------------------
FLORENCE T. MEYERS
/s/ Anne H. Meyers
-----------------------------
ANNE H. MEYERS
/s/ Nathaniel Krumbein
-----------------------------
NATHANIEL KRUMBEIN
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EXHIBIT 10.xx
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE (the "Lease") made this ____ day of
__________, 1990, by and between HYMAN MEYERS, S. SIDNEY MEYERS and AMY M.
KRUMBEIN, having an address c/o Hyman Meyers, Agent, 2235 Staples Mill Road,
Richmond, Virginia 23230, (collectively the "Landlord"), and HEILIG-MEYERS
FURNITURE COMPANY, a North Carolina corporation having an address at 2235
Staples Mill Road, Richmond, Virginia 23230 (the "Tenant'),
WHEREAS, Landlord is the owner of property with improvements
thereon consisting of 1.87 acres located on the southern line of Highway 264
Bypass (Greenville Road), Greenville (Pitt County), North Carolina, shown as Lot
3 on a Map for Record by Rivers and Associates, Inc. entitled "Three Lots at
Eastern Corner Intersection 264 Bypass and Red Banks Road, Greenville TWP, Pitt
County, North Carolina" dated March 12, 1985, a copy of which is attached hereto
and made a part hereof as Exhibit A (the "Property").
WHEREAS, Tenant desires to lease the Property and Landlord is
willing to rent Tenant the Property, upon the terms, conditions, covenants and
agreements set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained the parties hereto agree as follows:
1. DEMISED PREMISES
Subject to all easements, restrictions, covenants, encumbrances and
conditions of record and upon the terms, covenants and conditions set forth
herein, Landlord hereby leases the Property to Tenant and Tenant hereby releases
the Property from Landlord.
2. TERM
2.1. Length. The Term shall commence on November 1, 1990 (the "Commencement
Date") and expire at midnight local time on October 31, 2008 (the "Expiration
Date").
2.2. Surrender. Tenant shall, at its expense, at the expiration of the Term or
any earlier termination of this Lease, (a) promptly surrender to Landlord
possession of the Property (including any fixtures or other improvements which,
under the provisions of Section 7, are owned by Landlord) in good order and
repair (ordinary wear and tear excepted) and broom clean, (b) remove therefrom
Tenant's signs, goods and effects and any machinery, trade fixtures and
equipment used in conducting Tenant's trade or business and not owned by
Landlord, and (c) repair any damage to the Property caused by such removal.
2.3. Holding Over. If Tenant continues to occupy the Property after the
expiration of the Term or any earlier termination of this Lease:
2.3.1. Such occupancy shall be deemed to be under a month-to-month tenancy,
which shall continue until either party hereto notifies the other in writing at
least thirty (30) days before the end of any calendar month that the notifying
party elects to terminate such tenancy at the end of such calendar month, in
which event such tenancy shall so terminate;
2.3.2. Anything contained in this Lease to the contrary notwithstanding, the
rent payable for each such monthly period shall equal one hundred and fifty
percent (150%) of the monthly installment of Base Rent (as hereinafter defined)
payable immediately prior to such expiration or earlier termination, together
with such Additional Rent (as hereinafter defined) as is otherwise required by
the terms of this Lease; and 2.3.3. Otherwise such month-to-month tenancy shall
be upon the same terms and subject to the same conditions as those set forth in
the provisions of this Lease except there will be no options to extend the term
of this Lease.
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2.4. Option to Extend. Provided Tenant is not in default under the terms and
conditions of this Lease, Tenant shall have the right and option to extend the
Term of this Lease for three (3) successive periods of six (6) years each by
giving notice to Landlord as hereinafter provided at least six (6) months prior
to the expiration date of the Term (or any extended Term, as the case may be,)
that Tenant is exercising its right to extend the Term of the Lease. During the
extended Term or Terms, all terms and provisions of this Lease shall continue in
full force and effect except that no additional options to extend the Term shall
belong to Tenant. Notwithstanding the above, no option to extend the term of
this Lease may be exercised by Tenant unless prior to, or simultaneously with,
such exercise Tenant has exercised a similar six (6) year extension option for
the property contiguous to the Property, namely that certain parcel of property
consisting of 1.24 acres located on the southern line of Highway 264 Bypass
(Greenville Road) Greenville, (Pitt County), North Carolina, shown as Lot 2 on a
Map for Record by Rivers and Associates, Inc. entitled "Three Lots at Eastern
Corner Intersection 264 Bypass and Red Banks Road, Greenville TBW, Pitt County,
North Carolina" dated March 12, 1985 all in accordance with a lease of even date
herewith between Landlord and Tenant for such property.
3. RENT.
3.1. Amount. As rent for the Property (all of which is hereinafter referred to
collectively as "Rent"), Tenant hereby agrees and promises to pay to Landlord
all of the following:
3.1.1. Base Rent during the Term shall be EIGHTY-SIX THOUSAND TWO HUNDRED TWENTY
DOLLARS ($86,220.00) per annum, payable in advance in equal monthly installments
of SEVEN THOUSAND ONE HUNDRED EIGHTY-FIVE 00/100 DOLLARS ($7,185.00). The first
monthly installment of Base Rent shall be payable beginning November 1, 1990 and
the remaining installments shall be payable in advance on the first day of each
and every month thereafter during the Term hereof at the office of Landlord
herein designated (or at such other place as Landlord may designate in a notice
to Tenant). If the Term of this Lease begins on a date other than the first day
of a month, Base Rent from such other date to the first day of the following
month shall be prorated at the rate of one-thirtieth (1/30) of the monthly
installment of Base Rent for each day and shall be payable in advance. The base
rent shall, at all times, including extension terms of the Lease, be the minimum
amount of rent, not including any additional rent, to be paid to Landlord by
Tenant.
Base Rent during the option periods, if the same are exercised by Tenant shall
be increased as follows:
(a) After the third (3rd) year of the Term of this Lease and
after each successive three (3) year period of the Term of this Lease
thereafter, the Base Rent per annum for the following three (3) years of the
Term of this Lease will be an amount equal to the sum of (i) the Base Rent for
the last year of the immediately preceding three (3) year period and (ii) four
percent (4%) of (a) the Gross Sales at the Property for the latest fiscal year
of Tenant ending during the last year of said immediately preceding three (3)
year period minus (b) the Gross Sales at the Property during the fiscal year of
Tenant ending February 28, 1990. If (ii) in the immediately preceding sentence
is zero or less than zero, then the new Base Rent shall be the amount set forth
in (i) of the same sentence.
(b) For purposes of this calculation, "Gross Sales" shall be
defined as the dollar aggregate of: (i) the entire amount of the price charged
for all goods, wares and merchandise sold, leased, licensed or delivered, and
all charges for all services sold or performed by Tenant from all business
conducted at, upon or from the Property by Tenant, whether made for cash, by
check, on credit, charge accounts or otherwise, without reserve or deduction for
inability or failure to collect the same, including, but not limited to,
transactions (a) where the orders therefor originated at or are accepted by
Tenant in the Property, but delivery or performance thereof is made from or at
any other place; all sales made and orders received in or at the Property shall
be deemed as made and completed therein, even though the payment of account may
be transferred to another office for collection, and all orders which result
from solicitation off the Property but which are conducted by personnel
operating from or reporting to or under the control or supervision of any
employee of Tenant at the Property shall be deemed part of Gross Sales; (b)
pursuant to mail, telephone, telegraph or other similar orders received or
billed at or from the Property; (c) by means of mechanical or other vending
devices; (d) originating from whatever source, and which Tenant in the normal
and customary course of Tenant's operations would credit or attribute to
Tenant's business conduced in the Property; and (ii) all monies or other things
of value received by Tenant from Tenant's operations at, upon or from the
Property which are neither included in nor excluded from Gross Sales by other
provisions of this definition, but without any duplications, including, without
limitation, finance charges, cost of gift or merchandise certificates and all
deposits not refunded to customers.
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(c) Each charge or sale upon installment or credit shall be
treated as a sale for the full price in the month during which such charge or
sale is made, irrespective of the time when Tenant shall receive payment
(whether full or partial) therefor. No deduction shall be allowed for
uncollectible credit accounts. Each lease or rental of merchandise shall be
treated as a sale in the month during which such lease or rental is made, for a
price equal to the total rent payable.
(d) For the purpose of ascertaining the amount of Gross Sales
hereunder, the following may be deducted from Gross Sales: (i) the exchange of
merchandise between stores of Tenant where such exchanges are made solely for
the convenient operation of Tenant's business and not for the purpose of
consummating a sale which has been made at, upon or from the Property; (ii)
returns to shippers or manufacturers; (iii) sales of fixtures after use thereof,
which are not part of Tenant's stock in trade and not sold in the regular course
of Tenant's business; (iv) cash or credit refunds made upon transactions
included within Gross Sales but not exceeding the selling price of the
merchandise returned by the purchaser and accepted by Tenant; or (v) the amount
of any city, county, state or federal sales, luxury or excise tax on such sales
provided such tax is both added to the selling price (or absorbed therein) and
paid to the taxiing authority by Tenant (but not by any vendor of Tenant);
however, no franchise or capital stock tax and no income or similar tax based
upon income, profits or Gross Sales as such, shall be deducted from Gross Sales
in any event whatsoever.
(e) For the purposes of this Paragraph the term "Tenant" shall
include any of Tenant's subtenants, concessionaires or licensees.
3.1.2. Additional rent (the "Additional Rent") in the amount of any payment
referred to as such in any provision of this Lease which accrues while this
Lease is in effect. Except as is otherwise set forth herein, any Additional Rent
shall be due and payable with the installment of Base Rent next falling due
after such Additional Rent accrues.
3.2. Payment. Except as otherwise specifically provided for herein, all Rent
shall be payable without demand therefor and without any setoff or deductions
whatsoever. Any payment made by Tenant to Landlord on account of Rent may be
credited by Landlord to the payment of any Rent then past due before being
credited to Rent currently falling due. Any such payment which is less than the
amount of Rent then due shall constitute a payment made on account thereof, the
parties hereto hereby agreeing that Landlord's acceptance of such payment shall
not alter or impair Landlord's rights hereunder to be paid all of such amount
then due, or in any other respect.
3.3. Late Penalties and Interest. Tenant hereby recognizes and acknowledges that
if payments of Rent are not received when due, Landlord will suffer damages and
additional expenses and Tenant therefore agrees to pay as Additional Rent a late
penalty equal to five (5%) of the Rent then due and payable under this Lease if
such Rent is not received by Landlord within seven (7) days after such amount is
due and payable. In addition, all Rent not paid within seven (7) days shall bear
interest at the rate of eighteen percent (18%) per annum.
3.4. Lease Year. As used in the provisions of this Lease, the term "Lease Year"
means (a) the period commencing on the Commencement Date and terminating on the
first (1st) anniversary of the Commencement Date, and (b) each successive period
of twelve (12) calendar months thereafter during the Term.
3.5. Taxes.
3.5.1. (i) As used herein, the term "Taxes" shall mean all real estate taxes,
assessments and other governmental levies and charges, general and special,
ordinary and extraordinary, unforeseen as well as foreseen, of any kind and
nature (including any interest on such assessments whenever the same are
permitted to be paid in installments) which may be imposed, levied, assessed or
confirmed by any lawful taxing authorities or which may become due and payable
out of or for, or which may become a lien or charge upon or against the whole,
or any part, of the Property, or any taxes in lieu thereof, which are measured
by the value of the Property, including any substitution in whole or in part
therefor due to a future change in the method of taxation, and also all
reasonable costs and fees (including attorney's fees and any fees of Lessor's
tax consultants) incurred by Lessor in contesting any such taxes, levies,
charges or assessments and/or in negotiating with the public authorities as to
the same. Nothing contained in this Lease, however, shall require Tenant to pay
any share of any estate, inheritance, succession, gift, capital levy, excess
profits, revenue, corporation, franchise, occupancy, gross receipts, income,
payroll or stamp tax imposed upon Landlord or any tax upon the sale, transfer
and/or assignment of the title or estate of Landlord, nor shall any of the same
be deemed Real Estate Taxes. If by law any general assessment or like charge may
be paid in installments, such assessment shall be so paid, and Tenant shall only
be liable for Tenant's Pro Rata Share of the portion thereof that is payable
within the then-current term of this Lease.
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3.5.1. (ii) If Landlord shall fail or refuse, upon the request of Tenant, to
take any necessary steps to contest the validity or amount of the assessed
valuation or of the Taxes for any real estate fiscal tax year, Tenant may
undertake, by appropriate proceedings in the name of Landlord or Tenant, to
contest the same. Within a reasonable time after demand therefor, Landlord shall
execute, acknowledge and deliver any documents reasonably required to enable
Tenant to prosecute any such proceeding all of which shall be at no expense to
Landlord. Landlord shall inform Tenant, in time to permit Tenant to undertake
such contest, of all pertinent data required to undertake such contest. The
rights of contest afforded Tenant according to this subsection 3.5.1 (ii) are
subject to Tenant providing Landlord with adequate security for the payment of
any and all Taxes that are involved while any such contest by Tenant is ongoing
which security must be acceptable to Landlord in the reasonable exercise of its
discretion and in all events such security must be acceptable to all mortgagees
of Landlord.
3.5.1. (iii) If Landlord or Tenant shall obtain a remission or a refund of all
or any part of the Taxes for any real estate fiscal tax year, Landlord shall
promptly refund to Tenant (or credit Tenant with) Tenant's Pro Rata Share of
such remission or refund.
3.5.2. As used herein, the term "fiscal tax year" shall mean the twelve (12)
month period used by the county and/or city having jurisdiction over the
Property or any other lawful taxing authority, from time to time to assess Taxes
on the Property, or any part thereof.
3.5.3. Tenant shall pay as Additional Rent the amount of the Taxes for every
fiscal tax year or part thereof falling within the Term. Landlord agrees to
promptly furnish to Tenant all bills received by Landlord for Taxes and Tenant
shall pay the same before such payments are due and shall promptly thereafter
deliver to Landlord receipts evidencing full payment.
3.5.4. If only part of any fiscal tax year falls within the Term, the amount
computed as Additional Rent for such fiscal tax year under the foregoing
provisions of this subsection shall be prorated in proportion to the portion of
such fiscal tax year falling within the Term. The expiration of the Term before
the end of a fiscal tax year shall not impair Tenant's obligation hereunder to
pay such prorated portion of such Additional Rent with respect to that portion
of such fiscal tax year falling within the Term.
3.5.5. Anything contained in the foregoing provisions of this subsection
regarding Taxes to the contrary notwithstanding, Landlord may, at its discretion
(but only if Landlord is required to escrow Taxes by its first mortgagee), (a)
make from time to time during the Term a reasonable estimate of the Additional
Rent which may become due under such provisions with respect to any fiscal tax
year, (b) require Tenant to pay to Landlord each calendar month during such year
one-twelfth (1/12) of such estimate, at the time and in the manner that Tenant
is required hereunder to pay the monthly installment of the Base Rent for such
month, and (c) increase or decrease from time to time during such fiscal year
the amount initially so estimated for Taxes, based upon the most recently
available actual assessment and tax rate. In such event, Landlord shall deliver
to Tenant within sixty (60) days after the end of such fiscal tax year, a
statement showing a determination of the Taxes for such fiscal tax year. Tenant
shall within thirty (30) days after delivery of Landlord's statement, pay to
Landlord the amount of any deficiency. If such statement shows that Tenant's
monthly aggregate payments pursuant to this Section exceeded the actual Taxes
for the preceding fiscal tax year, such overpayment shall be applied to the next
ensuing monthly installment(s) of Base Rent.
3.6. Tax on Lease. If federal, state or local law now or hereafter imposes any
tax, assessment, levy or other charge (other than any income, inheritance or
estate tax) directly or indirectly upon (a) Landlord with respect to this Lease
or the value thereof, (b) Tenant's use or occupancy of the Property, (c) the
Base Rent, Additional Rent or any other sum payable under this Lease, or (d)
this transaction, then Tenant shall pay the amount thereof as Additional Rent to
Landlord upon demand, unless Tenant is prohibited by law from doing so, in which
event Landlord may, at its election, terminate this Lease by giving written
notice thereof to Tenant.
3.7. Net Lease. It is the propose and intent of the parties hereto that the Rent
payable hereunder shall be absolutely net to Landlord, so that this Lease shall
yield, net to Landlord, the Base Rent and the Additional Rent described herein
in each Lease Year during the Term of this Lease. All costs, fees, interest,
charges, expenses, reimbursements and obligations of every kind and nature
whatsoever relating to the Property (excepting only any taxes, costs or other
obligations arising prior to the Commencement Date of this Lease), which may
arise or become due during the Term, shall be paid and discharged by Tenant as
Additional Rent. Landlord shall be indemnified and saved harmless by Tenant from
and against all such costs, fees, interest, charges, expenses, reimbursements
and obligations relating to the Property or this Lease. However, Tenant shall be
under no obligation to pay interest or principal on any Mortgage (as hereinafter
defined) encumbering the Property or any income, franchise, gift, inheritance or
capital levy tax hereafter payable by or imposed upon Landlord.
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4. SECURITY DEPOSIT
Landlord has not received a Security Deposit from Tenant and none is
due and owing.
5. USE OF PROPERTY
5.1. Use. Tenant shall occupy and use the Property for and only for parking for
a furniture sales facility and warehouse. The Property shall not be used for any
illegal purposes or in any manner to create any nuisance or trespass.
5.2. Compliance with Laws.
5.2.1. In its use of the Property, Tenant shall not violate the certificates of
occupancy issued therefor, any applicable law, ordinance or regulation or any
regulation of the National Board of Fire Underwriters. Tenant shall not create
or allow to exist on the Property any nuisance or trespass, nor do any act in or
about the Property or bring anything on or in the Property which will in any way
materially deface or injure the Property or any part thereof or overload the
floor of the building.
5.2.2. Tenant hereby agrees that Tenant, its employees, agents, contractors or
invitees shall not, at any time, cause or permit asbestos, asbestos related
products or any petroleum products or hazardous, toxic or dangerous wastes,
substances or material defined as such in (or for the purposes of) the
Comprehensive Environmental Response, Compensation and Liability Act, as amended
(any of the same being hereinafter defined as "Hazardous Material"), to be
brought installed or used in, about or from the Property. If Tenant breaches any
of the provisions of this subsection or if the presence of Hazardous Material is
found in the Property, the Tenant agrees to indemnify, defend and hold Landlord,
and/or any fee owner or ground or underlying landlords of the Property, harmless
from and against any and all claims, judgments, damages, penalties, fines,
costs, liability or losses in connection therewith, including, without
limitation, (i) diminution in value of the Property, (ii) damages for the loss
or restriction of use of the Property, (iii) damages arising from any adverse
impact on marketing of space, and (iv) sums paid in settlement of claims,
attorneys' fees, consulting fees and expert fees which arise during or after the
lease term as a result of the same. This indemnification of Landlord by Tenant
shall include, without limitation, all costs incurred in connection with any
investigation of conditions or any clean up, remedial, removal or restoration
work required by any court or by any federal, state or local governmental
authority because of Hazardous Material present in, on or under the Property.
Further, Tenant shall promptly and at its sole cost and expense, take all action
necessary to remove said Hazardous Material from the Property; provided,
however, that Landlord's approval of such actions shall first be obtained.
6. INSURANCE AND INDEMNIFICATION
6.1. Increase in Risk.
6.1.1. Tenant shall not do or permit to be done any act or thing as a result of
which either (a) any policy of insurance of any kind covering (i) any or all of
the Property or (ii) any liability of Landlord in connection therewith, may
become void or suspended, or (b) the insurance risk under any such policy would
(in the opinion of the insurer thereunder) be made greater unless Tenant shall
pay as Additional Rent the amount of any increase in any premium for such
insurance resulting from any such increased risk.
6.2. Insurance to be Maintained by Tenant.
6.2.1. Tenant shall maintain at its expense, throughout the Term, insurance
covering the building and other improvements now or hereafter existing upon the
Property against loss or damage by fire or such other risk now or hereafter
embraced by the term "extended coverage" and by vandalism and malicious
mischief, in an amount not less than the full insurable value as determined by
Tenant's insurer. As used in this subsection, the term "full insurable value"
shall mean the actual replacement cost, excluding foundation and excavation
costs, without deduction for physical depreciation as such replacement cost
shall be adjusted by Tenant's insurer every year due to changes in the cost of
construction and other relevant factors.
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6.2.2. Tenant shall maintain at its expense, through the Term, insurance against
loss or liability in connection bodily injury, death, property damage or
destruction, occurring on or about the Property or arising out of the use
thereof by Tenant or its agents, employees, officers or invitees, visitors and
guests, under one or more policies of comprehensive public liability insurance,
including insurance against assumed or contractual liability under this Lease,
having such limits as to each as are reasonably required by Landlord from time
to time, but in any event of not less than Two Million Five Hundred Thousand
Dollars ($2,500,000.00) for bodily injury to or death of all persons and for
property damage or destruction in any one occurrence.
6.2.3. Each policy referenced above shall (a) name as the insureds thereunder
Landlord and Tenant (and, at Landlord's request, any mortgagee of Landlord
holding a note secured by a deed of trust or other security instrument
encumbering the Property), except that for the policies described in subsection
6.2.2 Landlord shall be named as an additional insured (b) by its terms, not be
cancellable without at least thirty (30) days prior written notice to Landlord
(and, at Landlord's request, any mortgagee), and (c) be issued by an insurer of
recognized responsibility licensed to issue such policy in the state where the
Property is located. At least five (5) days before the Commencement Date, Tenant
shall deliver to Landlord each such policy for each such policy, and at least
thirty (30) days before any such policy expires, Tenant shall deliver to
Landlord a replacement policy.
6.3. Indemnification. Except as otherwise provided for in this Lease.
6.3.1. Tenant will indemnify Landlord and save Landlord harmless from and
against any and all claims, actions, damages, liability and expenses in
connection with loss of life, personal injury and damage to property arising in,
at, upon, or involving the occupancy or use of any part of the Property by
Tenant, or occasioned wholly or in part by any act or omission of Tenant or its
agents, contractors, employees, servants, lessees, invitees or concessionaires.
In case Landlord shall, without fault on its part, be made party to any
litigation commenced by or against Tenant relating to the Tenant's
indemnification as set forth in the immediately preceding sentence of this
subsection 6.3.2, then Tenant shall protect and hold Landlord harmless and shall
pay all reasonable costs, expenses and attorney's fees incurred or paid by
Landlord in connection with such litigation.
6.4. Compliance with Authority. Tenant agrees, at its own expense, to promptly
comply with all requirements of any legally constituted public authority.
6.4.1. Waiver of Subrogation. To the extent that they are insured and reimbursed
by their respective insurance companies, Landlord and Tenant hereby waive any
and all rights of recovery against the other for or arising out of the damage to
or destruction of their property, whether or not such damage or destruction
shall have been caused by the negligence of the other, its agents, servants or
employees.
7. CONDITION OF IMPROVEMENTS
7.1. As Is. Tenant acknowledges and agrees to accept delivery and possession of
the Property on November 1, 1990 in the "AS IS" condition of the Property on the
date of this Agreement of Lease, it being understood that Landlord has no other
obligation to perform any work in connection with the preparation of the
Property for Tenant's occupancy, except to so deliver such possession to Tenant.
7.2. Landlord's Property. Any and all improvements, repairs, additions,
fixtures, alterations and all other property attached to, used in connection
with or otherwise installed within the Property by Landlord or Tenant shall,
immediately on the completion of its installation and without compensation or
payment to Tenant by Landlord, become Landlord's property, except that any
machinery, equipment, or trade fixtures installed by Tenant and used in the
conduct of Tenant's trade or business (rather than to service the Property
generally) shall remain Tenant's property.
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8. MAINTENANCE AND SERVICES
8.1. Maintenance and Alteration by Tenant.
8.1.1. Tenant at its expense shall maintain (including all replacements when
necessary) the Property, including, without limitation, the roof, the foundation
and all other structural elements, all plumbing, heating, air conditioning,
ventilating, electrical and mechanical equipment, the parking areas and all
non-structural parts of the Property in good repair and condition, ordinary wear
and tear excepted. In addition, Tenant, at its expense, shall keep the Property
free of termites and other wood boring insects and shall keep the Property in a
clean and orderly condition, free of dirt, rubbish, snow, ice and unlawful
obstructions. If Tenant refuses or neglects to repair or maintain the Property
as required hereunder as soon as reasonably possible after written demand,
Landlord may make such repairs, without liability to Tenant for any loss or
damage that may accrue to Tenant's equipment, merchandise, trade fixtures, or
other property or to Tenant's business by reason thereof, and upon completion
thereof and presentation of the bill therefor, Tenant shall pay Landlord's cost
for making such repairs as Additional Rent payable with the next installment of
Base Rent due under this Lease. Such bill shall include interest at the rate of
eighteen percent (18%) per annum on such cost beginning on the fifth (5th) day
after presentation of the bill for such repairs is made by Landlord.
8.1.2. Tenant may make non-structural alterations or improvements to the
Property aggregating not more than Twenty-five Thousand Dollars ($25,000) in any
Lease Year without Landlord's consent thereto. Tenant shall not make any
non-structural alterations or improvements to the Property in excess of
Twenty-five Thousand Dollars ($25,000) in any Lease Year or any structural
alteration, addition or improvement to the Property without first obtaining
Landlord's consent thereto, which consent shall not be unreasonably withheld or
delayed, so long as the value of the Property is not materially decreased
thereby. If Landlord so consents to any such proposed alteration, addition or
improvements in excess of Twenty-five Thousand Dollars ($25,000), Landlord
covenants and agrees they will consider participating in the payment of costs
for same but will not be obligated to participate; if they agree to so
participate, it shall be on terms and conditions which in all events must be
satisfactory to Landlord. All such alterations, additions, and improvements will
be done in a good and workmanlike manner in keeping with all building codes and
regulations and will in no way materially harm the structure of the Property.
8.1.3. Tenant shall (a) within thirty (30) days after notice, bond or have
released any mechanic's, materialman's or other lien filed or claimed against
any or all of the Property by reason of labor or materials provided for Tenant
or any of its contractors or subcontractors, or otherwise arising out of
Tenant's use or occupancy of the Property, and (b)defend, indemnify and hold
harmless Landlord against and from any and all liability, claim of liability or
expense (including, by way of example rather than of limitation, that of
reasonable attorney's fees) incurred by Landlord on account of any such lien or
claim.
8.1.4. Landlord shall not be required to make any repairs or improvements to the
Property or to furnish any services under this Lease. Notwithstanding any
provision in this Lease to the contrary, Landlord shall not be responsible or
liable to Tenant for any injury or damage resulting to Tenant, or its property,
from bursting, stoppage, or leaking of water, gas, sewer, or steam pipes, or
from any structural defect in the roof, exterior walls or the like.
8.1.5. Tenant shall pay promptly when due all charges, costs and expenses for
gas, water, electricity, heat, cooling, sewage and all other utilities furnished
to or used in connection with the Property during the Term.
9. SIGNS
Tenant agrees that any sign, advertisement or notice that shall be
inscribed, painted or affixed on any part of the Property shall be in compliance
with all governmental laws, ordinances, rules and regulations, including,
without limitation, all zoning ordinances.
10. LANDLORD'S RIGHT OF ENTRY
Landlord and its agents shall be entitled to enter the Property at any
reasonable time (a) to inspect the Property, (b) to exhibit the Property to any
existing or prospective purchaser or mortgagee, or during the last six (6)
months of the term to any prospective Tenant, or (c) to make any alteration,
improvement or repair to the Property which Landlord is authorized to make
pursuant to this Agreement of Lease; provided, that Landlord shall (i) (unless
doing so is impractical or unreasonable because of emergency) give Tenant at
least twenty-four (24) hours prior notice of its intention to enter the
Property, and (ii) use reasonable efforts to avoid interfering more than is
reasonably necessary with Tenant's use and enjoyment thereof.
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11. FIRE AND OTHER CASUALTIES
11.1. General. In the event that, at any time during the term of this Agreement
of Lease, the buildings and improvements portion of the Property (i) are
destroyed or (ii) are damaged to the extent of seventy-five percent (75%) or
more of their Gross Leaseable Area, then within sixty (60) days after such
damage or destruction, Tenant shall notify Landlord of its exercise of or its
desire not to exercise the hereby granted option to terminate this Agreement of
Lease not later than and effective on the end of such sixty (60) day period.
Failure to so exercise such option will obligate Tenant to repair and restore
the Property as hereinafter provided. In all other events, Tenant shall repair
and restore the Property as hereinafter provided.
11.2. Repair and Rebuilding. In the event that Tenant does not terminate this
Agreement of Lease as provided for in Section 11.1 above and in all other
events, then Tenant, at its own cost and expense, shall, subject to the other
provisions of this Section 11, cause the same to be repaired, replaced or
rebuilt as nearly as possible to its condition immediately prior to the damage
or destruction subject to such alterations or changes as Tenant may elect to
make in conformity with Section 8 hereof within a period of time which, under
all prevailing circumstances, shall be reasonable. If Tenant shall exercise its
option to terminate this Lease, this Lease shall expire automatically as
provided in subsection 11.1 in which event Tenant shall be under no obligation
to repair, replace or rebuild the buildings and improvements on the Property but
shall clear away the ruins and leave the Demised Premises in a clean, orderly
and sightly condition. In the event that (i) Tenant shall fail to give notice of
its exercise of its option to terminate within such period or (ii) if the
buildings and improvements on the Demised Premises shall not be damaged to the
extent of more than seventy-five percent (75%) of this Gross Leaseable Area,
then, Tenant shall, subject to the other provisions of this Section 11, cause
the same to be repaired, replaced or rebuilt at its own cost and expense as
herein provided. If Tenant does not repair, replace or rebuild any damaged or
destroyed buildings or improvements, all insurance proceeds that are payable as
a result of the destruction or damage to such buildings or improvements plus the
deductible (to be paid by Tenant), if any, shall be paid to Landlord and this
Agreement of Lease shall terminate on the date of such payment.
11.3. Insurance Trustee. Except as otherwise provided in this Lease, all
insurance policy proceeds provided for in subsection 6.2.1 shall be paid and
delivered to an Insurance Trustee designated by Landlord and shall be held and
used for the following purposes with the Insurance Trustee having the powers and
duties contained herein:
11.3.1. All proceeds received by the Insurance Trustee from any such insurance
policy shall first be used, by such Insurance Trustee as a fund (which fund
shall be deposited in a federally insured interest-bearing account, with any
interest accruing thereon becoming a part of the fund) for the restoration and
repair of any and all buildings, improvements and equipment located on the
Property which have become destroyed or damaged. Such proceeds in said trust
fund shall be used and applied by the Insurance Trustee in satisfaction and
discharge of the cost of the restoration of the destroyed or damaged buildings,
improvements and equipment.
11.3.2. Said funds shall be paid out by the Insurance Trustee from time to time
to persons furnishing labor or materials, or both, including architects' fees
and contractors' compensation in the construction work, on vouchers approved by
a licensed architect or engineer (the "Project Architect or Engineer") selected
by Tenant and approved by Landlord's first mortgagee, and if none, then by
Landlord, and employed by Tenant to superintend the work. The reasonable
expenses or charges of such architect or engineer shall be paid by such
Insurance Trustee out of the trust fund.
11.3.3. In the event that the amount of the insurance proceeds is insufficient
to pay the actual cost of repair or reconstruction, such deficiency will be
borne and provided for by Tenant by depositing the same with the Insurance
Trustee within twenty (20) days following the request by the Insurance Trustee
to Tenant requesting a sum equal to the amount of such deficiency. The initial
sum to be deposited with the Insurance Trustee according to this Section 11.3.3
shall be all insurance proceeds that are payable and are then actually available
as a result of the destruction or damage to such building. Additionally the
Insurance Trustee shall have the right to require Tenant from time to time to
deposit such additional amounts as the Insurance Trustee in consultations with
the Project Architect or Engineer shall deem necessary for such repair or
reconstruction. Any surplus of funds deposited according to this Section 11.3.3
shall be returned to Tenant after repair or reconstruction is completed.
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11.3.4. All reasonable fees, costs and charges of the Insurance Trustee shall be
paid out of the insurance proceeds to the extent that there are such proceeds
over and beyond the amounts required for repair and restoration as aforesaid;
otherwise Landlord and Tenant agree that each will bear one-half (1/2) of the
fees, costs and charges of the Insurance Trustee.
11.3.5. In the event that the Insurance Trustee shall resign or for nay reason
be unwilling to act or continue to act, then Landlord shall substitute a new
trustee in the place and stead of the former pre-existing Insurance Trustee.
11.3.6. Should a dispute arise between Landlord and Tenant as to any provision
of this Section 11.3, such dispute shall be submitted to the Circuit Court of
the City of Richmond, Virginia for resolution, and the non-prevailing party
shall pay the reasonable attorney's fees and court costs of the prevailing
party.
11.3.7. Notwithstanding the above, Landlord and Tenant may mutually agree not to
use an Insurance Trustee but may mutually agree to use some other method to
effect the repair of such damage and destruction.
11.4. Abatement of Rent. During the term of this Lease, unless Tenant terminates
this lease according to the option described in Section 11.1 hereof, destruction
or damage in whole or in part to the buildings and improvements on the Demised
Premises shall, during the period when the same are being repaired and rebuilt,
serve to abate the base rent to be paid to Landlord by Tenant hereunder and the
payment of any other sums, monies, costs, charges or expenses required to be
paid by Tenant hereunder with such abatements to be calculated by multiplying
such amounts by a fraction, the numerator of which is the square footage of the
Demised Premises that is being repaired or rebuilt and the denominator of which
is the total square footage of the Demised Premises.
11.5. Termination During Last Year of Lease Term. If during the last year of the
Term the Property is totally destroyed by fire or other casualty, or
substantially damaged thereby to the extent that it is unfeasible for Tenant, in
Tenant's reasonable business judgment, to conduct its business on the Property,
Tenant shall have the option, upon written notice to Landlord within thirty (30)
days from the date of such casualty, to elect to terminate this Lease as of the
date of such casualty, and the insurance proceeds plus the deductible (to be
paid by Tenant to Landlord), if any, shall be paid to Landlord. If Tenant does
not exercise such option, this Lease shall continue, and Tenant shall promptly
upon receipt of the proceeds of insurance commence to restore and shall
diligently proceed to restore said Property to as nearly as possible the
condition and character it was in immediately prior to the damage or destruction
with such variations and alterations as may be permitted under this Lease, all
as hereinabove provided.
11.6. Tenant's Losses. In the event of any such damage or destruction to the
Property, Landlord shall not be liable to Tenant for loss of profits, expenses,
or any other type of injury or damage resulting from the repair of any such
damage to the Property or any part thereof, or for the termination of the Lease
as provided herein. Tenant assumes the risk of any and all damage to its
personal property in or on the Property from any casualty whatsoever.
12. CONDEMNATION.
12.1. Full Condemnation.
12.1.1. If all or substantially all of the Property or such portion of the
improvements located on the Property as to render the balance of such
improvements unsuitable in Landlord's reasonable judgment for the purposes of
Tenant is taken by the exercise of any power of eminent domain or is conveyed to
or at the direction of any governmental entity under a threat of any such
taking, Landlord shall be entitled to collect from such condemning authority the
entire amount of any award made in any such proceeding or as consideration for
such conveyance, without deduction therefrom for any leasehold or other estate
held by Tenant under this Lease, this lease shall terminate on the date that
possession of the Property is taken by such condemning authority and all Rent,
Taxes and other charges payable hereunder will be apportioned and paid to such
date.
12.1.2. Tenant hereby (a) assigns to Landlord all of Tenant's right, title and
interest, if any, in and to any such award (b) waives any right that it may
otherwise have in connection with such condemnation, against Landlord or such
condemning authority, to any payment for (i) the value of the then-unexpired
portion of the Term, (ii) leasehold damages, and (iii) any damage to or
diminution of the value of Tenant's leasehold interest hereunder or any portion
of the Property not covered by such Condemnation, and (c) agrees to execute any
and all further documents which may be required to facilitate Landlord's
collection of any and all such awards.
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12.1.3. Subject in all events to the operation and effect of the foregoing
provisions of this Section, Tenant may seek a separate award on account of any
damages or costs incurred by Tenant as a result of such condemnation, so long as
such separate award in no way diminishes any award or payment which Landlord
would otherwise receive as a result of such Condemnation.
12.2. Partial Condemnation. If a (i) portion of the Property that is not
improved by buildings or structures as of the date of this Lease or (ii) a
portion of the improvements portion of the Property is so taken so that no
termination of this lease occurs according to subsection 12.1.1, then Landlord
is entitled to collect from such condemning authority the entire amount of any
award in any such proceeding or as consideration for any such conveyance, this
lease shall not terminate and Landlord shall, upon its receipt of such award in
condemnation, restore said building improvements to as complete a building as is
reasonably and practically possible in design, character and quality of the
conditions of the building immediately prior to the condemnation; provided
however, in any event, Landlord shall not be required to spend for any such
repair, restoration or alteration work an amount in excess of the amounts
received by Landlord as damage for the taking of such building improvements part
of the Property and Tenant, at its own cost and expense shall make all necessary
repairs and alterations to its trade fixtures, decoration, signs, machinery and
contents. During the term of this Lease, unless Tenant terminates this Lease
according to subsection 12.1.1, partial condemnation of the Property shall,
during the period when the same are being repaired, restored and altered, serve
to abate the base rent to be paid to Landlord by Tenant hereunder and the
payment of any other sums, monies, costs, charges or expenses required to be
paid by Tenant hereunder with such abatements to be calculated by multiplying
such amount by a fraction, the numerator of which is the square footage of the
Demised Property that is being repaired, restored and altered and the
denominator of which is the total square footage of the Demised Premises. Base
Rent payable after any such taking and after all such repairs and restoration
are effected by Landlord will thereafter be reduced in the same proportion as
the gross leaseable area of the improvements is reduced and not repaired and
restored as provided for above by or as a consequence of such condemnation.
12.3. Liability upon Condemnation. If there is a condemnation, Landlord shall
have no liability to Tenant on account of any (a) interruption of Tenant's
business upon the Property, (b) diminution in Tenant's ability to use the
Property, or (c) other injury or damage sustained by Tenant as a result of such
Condemnation.
12.4. Condemnation Proceedings. Except for any proceeding brought by Tenant
under the provisions of subsection 12.1.3, Landlord shall be entitled to conduct
any such condemnation proceeding and any settlement thereof free of interference
from Tenant, and Tenant hereby waives any right which it otherwise has to
participate therein.
13. ASSIGNMENT AND SUBLETTING
13.1. Landlord's Consent. Tenant hereby acknowledges that Landlord has entered
into this Lease because of Tenant's financial strength, goodwill, ability and
expertise and that, accordingly, this Lease is one which is personal to Tenant,
and Tenant agrees that it will not directly or indirectly (a) assign its rights
under this Lease, or (b) make or permit any total or partial sale, lease, use,
sublease, assignment, conveyance, license, mortgage, pledge, encumbrance or
other transfer of this Lease, any interest of Tenant in this Lease, any or all
of the Property or the occupancy or use thereof (each of which is hereinafter
referred to as a "Transfer"), without first obtaining Landlord's written consent
thereto (which consent shall not be unreasonably withheld by Landlord). Any such
consent shall not constitute a consent to any subsequent Transfer, whether by
the person hereinabove named as "Tenant" or by any such transferee). Landlord
shall be entitled to condition such consent upon the entry by such assignee into
an agreement with Landlord providing for such assignee's assumption of all of
Tenant's obligations hereunder. Any person to whom any Transfer is attempted
without such consent shall have no claim, right or remedy whatsoever hereunder
against Landlord, and Landlord shall have no duty to recognize any person
claiming under or through the same. No such action taken with or without such
Landlord's consent shall in any way relieve or release Tenant and all guarantors
of Tenant's performance under this Lease from liability for the timely
performance of all of Tenant's obligations hereunder. If Tenant fails to obtain
the written consent of Landlord as provided in this Section 13.1 and undertakes
any of the activities described therein, then in addition to the same
constituting an Event of Default hereunder any and all options to extend the
term of this lease as set forth in Section 2.4 of this Lease shall automatically
terminate and thereafter to be null and void and of no further force and effect.
For purposes of the foregoing provisions of this subsection, a transfer by any
person or persons controlling Tenant on the date hereof, of such control to a
person or persons not controlling Tenant on the date hereof shall be deemed a
Transfer of this Lease except that public trading on the New York or American
Stock Exchange or in the NSDAQ over-the-counter market shall not constitute such
a Transfer. Landlord shall be entitled to be paid by Tenant one-half of any
profit derived by Tenant from any Transfer.
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14. SUBORDINATION; ATTORNMENT AND NON-DISTURBANCE
14.1. Subordination of Lease. This Lease shall be subject and subordinate to the
lien of any and all mortgages, deeds of trust, ground leases and/or other
similar instrument of encumbrance heretofore or hereafter covering the Property
or any part thereof (and each renewal, modification, consolidation, replacement,
increase or extension thereof) (each of which is hereinafter referred to as a
"Mortgage"), all automatically and without the necessity of any action by either
party hereof; provided that such underlying landlord or the holder of such a
Mortgage in writing (in recordable form) will agree that in the event of the
termination of the underlying lease or foreclosure of the Mortgage (i) this
Lease shall not be terminated thereby and (ii) Tenant's right of possession
hereunder shall not be disturbed so long as Tenant is not in default under this
Lease. Documentation required by any such Landlord, the holder of such a
Mortgage or Tenant under this Section 14.1 shall be in a form as may be
reasonably requested by such landlord or the holder of such a Mortgage and shall
be executed by all appropriate parties to the extent required to give effect to
the subordination and other provisions provided for herein. Landlord represents
that as of the date of this Agreement of Lease there are no mortgages or deeds
of trusts encumbering the Property.
14.2. Tenant's Execution of Documents. Subject to the provisions of Section 15.1
Tenant shall, promptly at the request of Landlord or the holder of any such
Mortgage, execute, seal, acknowledge and deliver such further instrument or
instruments,
14.2.1. Evidencing such subordination and non-disturbance as contemplated in
Section 15.1 as Landlord or the holder of such Mortgage deems reasonably
necessary or desirable, and (at the request of the holder of such a Mortgage)
attorning to such holder,
14.2.2. Provided that such holder agrees with Tenant that such holder will, in
the event of foreclosure of any such Mortgage (or termination of any such
underlying lease) take no action to interfere with Tenant's rights hereunder,
except on the occurrence of an Event of Default as defined in Section 15 hereof.
14.3. Lease Made Superior Upon Request. Anything in this Section 14 to the
contrary notwithstanding, in the event any such underlying landlord or any
Mortgagee requests that this Lease be made superior, rather than subordinate, to
any such Mortgage, then Tenant, within ten (10) days following Landlord's
written request therefor, agrees to execute and deliver, without charge, any and
all documents (in form acceptable to Landlord and such underlying landlords or
Mortgagees) effectuating such priority.
15. DEFAULT
15.1. Definition. As used in the provisions of this Lease each of the following
events shall constitute and is hereinafter referred to as an "Event of Default";
15.1.1. If Tenant fails (a) to pay any Rent or any other sum which it is
obligated to pay by any provision of this Lease, when and as due and payable
hereunder and without demand therefor, or (b) to perform any of its other
obligations under the provisions of this Lease; or
15.1.2. If Tenant (a) applies for or consents to the appointment of a receiver,
trustee or liquidator of Tenant or of all or a substantial part of its assets,
(b) files a voluntary petition in bankruptcy or admits in writing its inability
to pay its debts as they come due, (c) makes an assignment for the benefit of
its creditors, (d) files a petition or an answer seeking a reorganization or an
arrangement with creditors, or seeks to take advantage of any insolvency law,
(e) performs any other act of bankruptcy, or (f) files an answer admitting the
material allegation of a petition filed against Tenant in any bankruptcy,
reorganization or insolvency proceeding; or
15.1.3. If (a) an order, judgment or decree is entered by any court of competent
jurisdiction adjudicating Tenant as bankrupt or insolvent, approving a petition
seeking such reorganization, or appointing a receiver, trustee or liquidator of
Tenant or of all or a substantial part of its assets, or (b) there otherwise
commences as to Tenant or any of its assets any proceeding under any bankruptcy,
reorganization, arrangement, insolvency, readjustment, receivership, or similar
law, and if such order, judgment, decree or proceeding continues unstayed for
more than sixty (60) consecutive days after any stay thereof expires.
15.1.4. If Tenant (a) assigns its rights under this Lease or (b) makes or
permits any total or partial sale, lease, use, sublease, assignment, conveyance,
license, mortgage, pledge, encumbrance or other transfer of this Lease, any
interest of Tenant in this Lease, any and all of the Property or the occupancy
or use thereof without first obtaining Landlord's written permission.
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15.1.5. If Tenant is deemed to have occasioned an Event of Default pursuant to
Paragraph 15.1 of the lease of even date herewith by and between Landlord and
Tenant for land more particularly described in Paragraph 2.4 as a 1.24 acre
parcel of land adjacent to the furniture storage and warehouse described in this
Lease, subject to the cure provisions contained therein, if any.
15.2. Notice to Tenant: Grace Period. Anything contained in the provisions of
this Section to the contrary notwithstanding, on the occurrence of an Event of
Default Landlord shall not exercise any right or remedy which it holds under any
provision of this Lease or applicable law unless and until
15.2.1. Landlord has given written notice thereof to Tenant, and
15.2.2. Tenant has failed within five (5) days after its receipt of such notice
to cure any Event of Default described in Section 15.1.1(a) above and thirty
(30) days after its receipt of such notice to cure any other Event of Default
described in Section 15.1.1(b) above; provided, that
15.2.3. No such notice shall be required, and Tenant shall be entitled to no
such grace period, (a) in any emergency situation in which Landlord acts to cure
an Event of Default or (b) in the case of any Event of Default enumerated in the
provisions of subsections 15.1.2, 15.1.3 or 15.1.4
15.3. Landlord's Rights on Event of Default. On the occurrence of any Event of
Default, Landlord may (subject to the operation and effect of the provisions of
Section 15.2)
15.3.1. Re-enter and repossess the Property and any and all improvements thereon
and additions thereto and remove all persons and property therefrom either by
summary dispossess proceedings or by a suitable action or proceeding at law or
in equity, or by force or otherwise, without being liable for any damage
therefor. No re-entry by Landlord shall be deemed an acceptance of a surrender
of this Lease;
15.3.2. Declare the entire balance of the Rent for the remainder of the Term to
be due and payable for which Tenant will immediately pay Landlord the present
value and worth of future rentals discounted to the date that would otherwise
have been the expiration of the Term at a rate equal to the prime rate announced
by Crestar Bank as its primate rate of lending on the date of such declaration
by Landlord; and, collect such amount in any manner not inconsistent with
applicable law;
15.3.3. Terminate this Lease;
15.3.4. Relet any or all of the Property for Tenant's account for any or all of
the remainder of the Term or for a period exceeding such remainder, in which
event Tenant shall pay to Landlord, at the times and in the manner specified by
the provisions of Section 3, the Base Rent and any Additional Rent accruing
during such remainder, as well as the cost to Landlord of any reasonable
attorney's fees or for any repairs or cost of reletting or other action
(including those taken in exercising Landlord's rights under any provision of
this Lease) taken by Landlord on account of such Event of Default but in no
event shall Landlord be liable in any respect for failure to relet the Property
or in the event of such reletting, for failure to collect the Rent thereunder it
being agreed by Tenant that Landlord has no duty to mitigate Tenant's damages
and any sums received by Landlord on a reletting in excess of the rent reserved
for this Lease shall belong to the Landlord.
15.3.5. Cure such Event of Default in any other reasonable manner (after giving
Tenant written notice of Landlord's intention to do so except in the case of
emergency), in which event Tenant shall reimburse Landlord for all reasonable
expenses incurred by Landlord in doing so, plus interest thereon at a lesser of
the rate of twelve percent (12%) per annum or the highest rate then permitted on
account thereof by applicable law, which expenses and interest shall be
Additional Rent and shall be payable by Tenant immediately on demand therefor by
Landlord; and/or
15.3.6. Pursue any combination of such remedies and/or any other remedy
available to Landlord on account of such Event of Default at law or in equity.
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15.4. Landlord's Right to Perform Tenant's Covenants. If Tenant shall default in
the performance of any covenant or condition in this Lease required to be
performed by Tenant, Landlord may, after thirty (30) days' notice for
non-monetary defaults, or after five (5) days' notice in the event of a monetary
default or if, in Landlord's opinion, an emergency exists, perform such covenant
or condition for the account and at the expense of Tenant. If Landlord shall
incur any expense, including reasonable attorney's fees, in instituting,
prosecuting, or defending any action or proceeding instituted by reason of any
default of Tenant, Tenant shall reimburse Landlord for the amount of such
expense. In the event Tenant, pursuant to this Lease, becomes obligated to
reimburse or otherwise pay Landlord any sum of money in addition to the specific
Rent, the amount thereof shall be deemed Additional Rent and may, at the option
of Landlord, be added to any subsequent installment of the Rent due and payable
under this Lease, in which event, Landlord shall have the remedies for default
in the payment thereof provided by this Lease. The provisions of this Section
shall survive the termination of this Lease.
15.5. No Waiver. No action taken by Landlord under the provisions of this
Section shall operate as a waiver of any right which Landlord would otherwise
have against Tenant for the Rent hereby reserved or otherwise, and Tenant shall
remain responsible to Landlord for any loss and/or damage suffered by Landlord
by reason of any Event of Default.
16. ESTOPPEL CERTIFICATE
Tenant shall from time to time, within five (5) days after
being requested to do so by Landlord or any mortgagee, execute, seal,
acknowledge and deliver to Landlord (or, at Landlord's request, to any existing
or prospective purchaser, transferee, assignee or mortgagee of any or all of the
Property, any interest therein or Landlord's rights under this Lease) an
estoppel certificate in recordable form which shall include the status of this
Lease: (a) certifying (i) that his Lease is unmodified and in full force and
effect (or, if there had been any modification hereof, that it is in full force
and effect as so modified, stating therein the nature of such modification);
(ii) the amount of the Base Rent; (iii) as to the dates to which the Base Rent
and any Additional Rent and other charges arising hereunder have been paid; (iv)
as to the amount of any security deposit or prepaid Rent or any credit due to
Tenant hereunder; (v) that Tenant has accepted possession of the Property, and
the date on which the Term commenced; (vi) as to whether, to the best knowledge,
information and belief of the signer of such certificate, Landlord or Tenant is
then in default in performing any of its obligations hereunder (and, if so,
specifying the nature of each such default); and (vii) as to any other factor
condition requested by Landlord or such other addressee; and (b) acknowledging
and agreeing that any statement contained in such certificate may be relied upon
by Landlord and any other addressee.
17. QUITE ENJOYMENT
So long as Tenant is in compliance with the terms of this
Lease, Tenant shall lawfully, peaceably and quietly have, hold, occupy and enjoy
the Demised Premises during the term of this Lease without hindrance or ejection
by Landlord.
18. NOTICES
Any notice, demand, consent, approval, request or other
communication or document to be provided hereunder to a party hereto shall be
(a) given in writing, and (b) deemed to have been given (i) upon placement as
certified or registered mail in the United States mails, postage prepaid, return
receipt requested, or sent by Federal Express (or other express delivery
services which promise delivery the following business day) to the address of
such party set forth hereinabove or to such other address in the United States
of America as such party may designate from time to time by notice to the other
or (ii) (if such party's receipt thereof is acknowledged in writing) upon its
hand or other delivery to such party, but if directed to Tenant, to the
attention of its Corporate Secretary.
19. GENERAL
19.1. Effectiveness. This lease shall become effective upon and only upon its
execution and delivery by each party hereto.
19.2. Entire Agreement. This Lease represents the complete understanding between
the parties hereto as to the subject matter hereof, and supersedes all prior
written or oral negotiations, representations, warranties, statements or
agreements between the parties hereto as to the same.
19.3. Amendment. This Lease may be amended by and only by a written instrument
executed and delivered by each party hereto.
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19.4. Applicable Law. This Lease shall given effect and construed by application
of the laws of the Commonwealth of Virginia, and any action or proceeding
arising hereunder shall be brought in the courts of said state; provided, that
if such action or proceeding arises under the Constitution, laws or treaties of
the United States of America, or there is a diversity of citizenship between the
parties thereto, so that it is to be brought in a United States District Court,
it shall be brought in the United States District Court for the Eastern District
of Virginia.
19.5. Waiver. Landlord shall not be deemed to have waived the exercise of any
right which it holds hereunder unless such waiver is made expressly and in
writing (and o delay or omissions by Landlord in exercising any such right shall
be deemed to be a waiver of its future exercise). No such waiver as to any
instance involving the exercise of any such right shall be deemed a waiver as to
any other such instance, or any other such right.
19.6. Time of Essence. Except as provided in Section 19.20 hereof, time shall be
of the essence of this Lease.
19.7. Headings. The headings of the Sections, subsections, paragraphs and
subparagraphs hereof are provided herein for and only for convenience of
reference, and shall not be considered in construing their contents.
19.8. Construction. As used herein,
19.8.1. The term "person" means a natural person, a trustee, a corporation, a
partnership and any other form of legal entity; and
19.8.2. All references made (a) in the neuter, masculine or feminine gender
shall be deemed to have been made in all such genders, (b) in the singular or
plural number shall be deemed to have been made, respectively, in the plural or
singular number as well, and (c) to any Section, subsection, paragraph or
subparagraph shall, unless therein expressly indicated to the contrary, be
deemed to have been made to such Section, subsection, paragraph or subparagraph
of this Lease.
19.9. Exhibits. Each writing or plat referred to herein as being attached hereto
as an exhibit or otherwise designated herein as an exhibit hereto is hereby made
a part hereof.
19.10. Severability. No determination by any court, governmental body or
otherwise that any provision of this Lease or any amendment hereof is invalid or
unenforceable in any instance shall affect the validity or enforceability of (a)
any other such provision, or by such provision in any circumstance not
controlled by such determination. Each such provision shall be valid and
enforceable to the fullest extent allowed by, and shall be construed wherever
possible as being consistent with, applicable law.
19.11. Definition of "Landlord".
19.11.1. As used herein, the term "Landlord" means the person hereinabove named
as such, and its heirs, personal representatives, successors and assigns (each
of whom shall have the same rights, remedies, powers, authorities and privileges
as it would have had, had it originally signed this Lease as Landlord).
19.11.2. No person holding Landlord's interest hereunder (whether or not such
person is named as "Landlord" herein) shall have any liability hereunder after
such person ceases to hold such interest, except for any such liability accruing
while such person holds such interest.
19.11.3. Anything contained in this Lease to the contrary notwithstanding Tenant
agrees that it shall look solely to the estate and property of Landlord in the
Property for the collection of any judgment (or other judicial process)
requiring the payment of money by Landlord in the event of any default or breach
by Landlord with respect to any of the terms and provisions of this Lease to be
observed and/or performed by Landlord, subject, however, to the prior rights of
the holder of any Mortgage covering the Property, and no other assets of
Landlord shall be subject to levy, execution or other judicial process for the
satisfaction of Tenant's claim. This provision shall not be deemed, construed or
interpreted to be or constitute an agreement, express or implied, between
Landlord and Tenant that Landlord's interest hereunder and in the Property, or
any part thereof, shall be subject to impressment of an equitable lien.
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19.11.4. In the event of the sale, assignment or transfer by Landlord of the
Property (other than a collateral assignment to secure a debt of Landlord) to a
successor in interest who expressly assumes the obligations of Landlord under
this Lease, Landlord shall thereupon be released or discharged from all of its
covenants and obligations under this Lease, except such obligations as shall
have accrued prior to any such sale, assignment or transfer; and Tenant agrees
to look solely to such successor in interest of Landlord for performance of such
obligations. Any securities given by Tenant to Landlord to secure the
performance of Tenant's obligations under this Lease may be assigned by Landlord
to such successor in interest of Landlord; and, upon acknowledgment by such
successor of receipt of such security and its express assumption of its
obligation to account to Tenant for such security in accordance with the terms
of this Lease, Landlord shall thereby be discharged of any further obligation
relating thereto. Landlord's assignment of the Lease or of any or all of its
rights herein shall in no manner affect Tenant's obligations hereunder. Tenant
shall thereafter attorn and look to such assignee as Landlord, provided Tenant
has first received written notice of such assignment of Landlord's interest.
19.12. Definition of "Tenant". As used herein, the term "Tenant" means each
person hereinabove named as such and such person's heirs, personal
representatives, successors and assigns, each of whom shall have the same
obligations, liabilities, rights and privileges as it would have possessed had
it originally executed this Lease as Tenant; provided, that no such right or
privilege shall inure to the benefit of any assignee of Tenant or other party
referenced in Section 13 hereof, immediate or remote, unless the assignment to
such assignee or transferee is made in accordance with the provisions of Section
13. Whenever two or more persons constitute Tenant, all such persons hall be
jointly and severally liable for performing Tenant's obligations hereunder.
19.13. Memorandum of Lease. Tenant will at any time, at the request of Landlord,
promptly execute duplicate originals of an instrument, in recordable form, which
will constitute a memorandum of lease, setting forth a description of the
Property, the term of this Lease, the addresses for the parties, all other
provisions or information required by applicable law, and, excepting the rental
provisions, any other information as Landlord may reasonably request. This Lease
or memorandum of this Lease may be recorded, at Landlord's or Tenant's option,
and the party so recording agrees to pay all recordation costs and taxes levied
thereon.
19.14. Attorneys' Fees. If any Rent or other debt owning by Tenant to Landlord
under this Lease is attempted to be collected by or through an attorney at law,
the losing party in any dispute regarding such Rent or debt agrees to pay the
reasonable attorneys' fees of the prevailing party in connection therewith.
19.15. Rights Cumulative. All rights, powers and privileges conferred hereunder
upon parties hereto shall be cumulative but not restricted to those given by
law.
19.16. Brokers' Commission. Each party represents and warrants to the other that
there are no claims for brokerage commissions or finder's fees in connection
with the execution of this Lease, and each party agrees to indemnify the other
against, and hold it harmless from, all liabilities arising from any such claim
(including, without limitation, the cost of counsel fees) in connection with or
relating to brokers or finders.
19.17. Corporate Tenant. If Tenant is or will be a corporation, the persons
executing this Lease on behalf of Tenant hereby covenant, represent and warrant
that Tenant is a duly incorporated or a duly qualified (if a foreign
corporation) corporation and authorized to do business in the state in which the
Property is located; and that the person or persons executing this Lease on
behalf of Tenant is an officer or are officers of such Tenant, and the he or
they as such officers were duly authorized to sign and execute this Lease. Upon
request of Landlord to Tenant, Tenant shall deliver to Landlord documentation
satisfactory to Landlord evidencing Tenant's compliance with the provisions of
this Section 19.17.
19.18. Dower and Curtesy. Florence T. Meyers, Anne H. Meyers and Nathaniel
Krumbein join in this Lease for the sole purpose of subordinating their
respective dower and curtesy interest in the Property to the terms and
conditions of this Agreement of Lease.
19.19. Waiver of Jury Trial. Landlord and Tenant each waive trial by jury of any
or all issues arising in any action or proceeding between the parties hereto or
their successors in connection with its Lease or any of its provisions.
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19.20. Force Majeur. Anything contained in this Lease to the contrary
notwithstanding, Landlord shall not be deemed in default with respect to the
performance of any of the terms, covenants and conditions of this Lease
incumbent on it to perform or be liable to the Tenant in damages if same shall
be due to any strike, lockout, civil commotion, labor controversy, war-like
operation, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulation or control, inability to obtain any material,
service, fuel, supply or financing, accidents, bombing threat, violence, threat
of violence, breach of peace, Act of God or other cause beyond the control of
Landlord.
IN WITNESS WHEREOF, each party hereto has executed this Lease or caused
it to be executed on its behalf by its duly authorized representatives, as of
the day and year first above written.
LANDLORD:
/s/ Hyman Meyers
-------------------------------
HYMAN MEYERS
/s/ S. Sidney Meyers
-------------------------------
S. SIDNEY MEYERS
/s/ Amy M. Krumbein
-------------------------------
AMY M. KRUMBEIN
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TENANT:
HEILIG-MEYERS FURNITURE COMPANY,
a North Carolina corporation
By: /s/ Troy A. Peery, Jr.
Name:
Title:
THIRD PARTY SIGNATORS:
/s/ Florence T. Meyers
------------------------------
FLORENCE T. MEYERS
/s/ Anne H. Meyers
------------------------------
ANNE H. MEYERS
/s/ Nathaniel Krumbein
------------------------------
NATHANIEL KRUMBEIN
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EXHIBIT A
TRACT ONE: Beginning at a concrete monument in the southeastern right-of-way
line of U.S. Highway No. 264, the same being located North 62-07 East 200.44
feet from a concrete monument, the corner of the David A. Evans and Lyndale
property, and runs thence with the highway right-of-way North 62-07 East 200.44
feet to the corner of the First Christian Church lot; runs thence with the line
of said Church lot South 31-45 East 400 feet to a stake in said line; runs
thence South 58-15 West 200 feet to a concrete monument, David A. Evans corner;
runs thence North 31-45 West 412.87 feet to a concrete monument in the highway
right-of-way, the point of BEGINNING, containing 1.86 acres, more or less,
reference being made to that certain map prepared by William H. Utley, R.L.S.,
entitled "Hyman Meyers et al", of record in Map Book 20, page 5, Pitt County
Registry, and being the same property leased by Heilig-Meyers Company from Hyman
Meyers, Agent according to the Lease dated November 1, 1970, and; TRACT TWO:
Tracts "B" and "C" as shown on the Site Plan prepared June 3, 1985 attached and
made a part of this lease as Exhibit "B".
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EXHIBIT 10.yy
THIS LEASE, dated as of this 30th day of August, 1986 by and between
Meyers-Thornton Investment Co.("Landlord") and Heilig-Meyers Company ("Tenant").
W I T N E S S E T H:
1. Landlord hereby leases to Tenant, subject to the terms and conditions hereof,
the following described property together with all improvements thereon and
appurtenances thereunto belonging (the "Premises"):
TRACT #1: BEGINNING at an iron pipe in the south right-of-way line of
Hwy. #17, said beginning corner being located north 54-1/2 degrees east
303 feet as measured along the south right-of-way line of Hwy. #17 from
a highway right-of-way stone located at the intersection of the south
right-of-way of Hwy. #17 and the north right-of-way line of Hwy. #130;
thence from said beginning point along the south right-of-way line of
Hwy. #17 north 54-1/2 degrees east 125 feet to an iron pipe; thence
south 35-1/2 degrees east 200 feet to an iron pipe; thence south 54-1/2
degrees west 125 feet to an iron pipe; thence north 35-1/2 degrees west
200 feet to the point of BEGINNING, and containing 25,000 square feet,
more or less, and being that tract of land described in a deed from A.
Earl Milliken and wife, Clara R. Milliken, to Eli Kravitz and wife,
Jeanne C. Kravitz, dated April 14, 1964, and duly recorded in Book 178
at Page 387 of the Brunswick County Registry.
TRACT #2: BEGINNING at Eli Kravitz's northeast corner which is located
north 54-1/2 degrees east 428 feet from a right-of-way stone at the
intersection Hwy. #130 and U. S. Hwy. #17 known as the Holden Beach
Road; thence from the beginning corner runs north 54-1/2 degrees east
25 feet to an iron pipe; thence south 35-1/2 degrees east 200 feet to
an iron pipe; thence south 54-1/2 degrees west 25 feet to an iron pipe
and being Eli Kravitz's southeast corner; thence north 35-1/2 degrees
west 200 feet with Eli Kravitz's line to the place and point of
BEGINNING, and being that tract of land described in a deed from A.
Earl Milliken and wife, Clara R. Milliken, to Eli Kravitz and wife,
Jeanne C. Kravitz, dated May 17, 1965, and duly recorded in Book 172 at
Page 483 of the Brunswick County Registry.
TRACT #3: BEGINNING at an iron pipe, the northeast corner of a 25-foot
parcel of land previously conveyed to Eli Kravitz et ux, the said
beginning point also being north 54-1/2 degrees east 453 feet from the
right-of-way stone on the north side of the Holden Beach Road; thence
north 54-1/2 degrees east 25 feet to an iron rod, Eudores Edwards'
corner; thence south 35-1/2 degrees east 200 feet to said Edwards'
corner; thence south 54-1/2 degrees west 25 feet to Eli Kravitz's
corner iron pipe; thence with Eli Kravitz's line north 35-1/2 degrees
west 200 feet to the BEGINNING, containing 11/100 of an acre, more or
less, as surveyed by H. R. Hewett, Surveyor; and being that tract of
land described in a deed from A. Earl Milliken and wife, Clara R.
Milliken, to Eli Kravitz and wife, Jeanne C. Kravitz, dated June 17,
1965, and duly recorded in Book 172 at Page 532 of the Brunswick County
Registry.
TRACT #4: BEGINNING at an iron stake on the southside of U. S. Hwy. #17
being 60 feet from center, said beginning point also being north 54
degrees 30 minutes east 478 feet from highway right-of-way (marketer or
stone) in the northern right-of way line of U. S. Hwy. #17; runs thence
north 54 degrees 30 minutes east 50 feet to an iron stake; thence south
24 degrees 40 minutes east 200 feet to an iron stake; thence south
12.35 feet to an iron stake; thence north 35 degrees 30 minutes west
197.17 feet to the point of BEGINNING, containing 14/100 of an acre,
and being a part of the property described in a Deed from Brightie
Holden to A. Earl Milliken dated March 8, 1962, and recorded in Book
162, at Page 158, in the Office of the Register of Deeds for Brunswick
County, North Carolina.
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TRACT #5: BEGINNING at an iron pipe, said iron pipe being Jerry
Moore's southeast corner, said iron pipe also being located south 35
degrees 30 minutes east 200 feet from a railroad spike in the southern
right-of-way of U. S. Hwy. #17, said spike being located north 54
degrees 30 mints east 303 feet as measured along the southern
right-of-way line of U. S. Hwy. #17 from a right-of-way stone located
at the intersection of the southern right-of-way of U. S. Hwy. #17
with the northern right-of-way of N. C. Hwy. #130; thence running from
the beginning iron pipe south 35 degrees 30 minutes east 25 feet to an
iron pipe; thence running north 53 degrees 40 minutes east 187.35 feet
to an iron pipe; thence running north 35 degrees 30 minutes west 25
feet to an iron pipe, this being Heilig-Meyers existing southeast
corner; thence running with Heilig-Meyers southern property line south
53 degrees 40 minutes west 187.35 feet to the beginning iron. This
being a portion of the lands deeded by William E. Benton and wife,
Gwynella M. Benton, to Alvin E. Milliken, Jr. and being recorded in
Book 314 at Page 913 of the Brunswick Registry, Southport, N.C.
for a term of fifteen (15) years, commencing on April 15, 1986 and ending on
April 14, 2001 at 12:00 Midnight.
2. (a) Beginning with the commence date, Tenant shall pay to Landlord a monthly
rental of Two thousand seven hundred forty eight and 86/100 Dollars ($2,748.86)
payable in advance on the first day of every month.
(b) The annual rental shall be changed every three (3) years to an amount equal
to four (4) per cent of Tenant's net sales at the Premises for the previous
year. Previous year is defined as the last full fiscal year prior to the
anniversary date of this Lease. Net sales is defined as gross sales less
returned sales and sales taxes. Credit service charges, insurance and service
sales are not included in "Net Sales".
3. Tenant agrees that it shall:
(a) Pay all charges for water, electricity, gas an other utilities;
(b) Keep the interior and exterior of the Premises, together with all plumbing,
heating, air conditioning, ventilating, electrical and mechanical equipment in
good order and repair (including termite control) at its own expense; and upon
termination of this Lease surrender the same in as good condition as when
received, excepting depreciation caused by ordinary wear and tear and damage
caused by fire, accident, casualty or act of God;
(c) Cause the Premises to be insured against loss by fire with extended coverage
in an amount sufficient for replacement of the Premises in the event of total
loss by facilities of the same size and quality as existed prior to such loss;
(d) Pay when due all ad valorem real estate taxes and assessments against the
Premises. (All real estate taxes payable by Tenant shall be prorated as of the
commencement date and to the termination date of this Lease. Landlord shall
promptly forward to Tenant all bills received by Landlord for taxes which are to
be paid by Tenant, and Tenant shall deliver promptly thereafter to Landlord
receipts evidencing payment of all such taxes. Tenant may file in the name of
the Landlord all such protests or other instruments and institute and prosecute
proceedings for the purpose of contesting any of such taxes, but shall, at the
request of Landlord, furnish reasonable assurance to Landlord indemnifying it
against any loss or liability by reason of such contest. Landlord agrees to
cooperate in every respect in prosecuting such contest. Tenant shall not be
deemed to be in default hereunder so long as Tenant shall in good faith contest
such tax. Nothing herein contained shall be construed to obligate Tenant to pay
any part of any income, estate or inheritance taxes assessed by any governmental
authority against the Landlord, its successor or assigns.);
(e) Tenant agrees, at its own expense, to promptly comply with all requirements
of any legally constituted public authority,
(f) Not use or permit the Premises to be used for any unlawful or disorderly
purpose; and
(g) Permit Landlord to post one "For Rent" sign to and to exhibit the Premises
to prospective tenants during the last six (6) months of the Lease's duration
provided that Landlord shall cause the least possible disruption of Tenant's
business.
4. Tenant shall have the right to:
(a) At its own expense make such alternations, changes and improvements to the
Premises (including installation of signs) as Tenant may deem necessary;
provided, however, that no structural alterations to the Premises shall be made
without Landlord's consent;
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(b) Assign or sublet the Premises or any portion thereof without consent;
provided, however, that no such assignment or subletting shall relieve Tenant of
liability for the performance of the terms and conditions of this Lease; and
(c) Remove any equipment, improvements or fixtures installed by it, except that
Tenant may elect to leave the same, in which event they shall become the
property of Landlord upon termination of this Lease.
5. Landlord agrees that it shall:
(a) Take no action (except at Tenant's request) which would cause an increase in
the taxes or insurance premiums assessable with respect to the Premises;
(b) Reimburse Tenant for one half of the taxes and insurance premiums paid with
respect to the Premises; and
(c) Hold Tenant and its agents harmless from any and all claims and demands
resulting from acts or omissions of Landlord or its agents.
6. Landlord covenants, warrants and agrees:
(a) That Landlord has full and complete authority to make this Lease and that so
long as Tenant is not in default hereunder, Tenant shall have quiet peaceable
possession and enjoyment of the Premises for the duration of this Lease without
hindrance on the part of Landlord or any other parties and that Landlord shall
warrant and defend Tenant in such possession against the claim of all parties.
(b) That Landlord shall deliver to Tenant physical possession of the Premises
upon the commencement of the term, free and clear of all tenants and occupants
and the rights of either, and of all encumbrances and violations of laws
relating to the use and occupancy of the Premises; and
(c) That the Premises and all plumbing, heating, air conditioning, ventilating,
electrical and mechanical equipment are in good condition and operating order.
7. Landlord and Tenant hereby waive all claims against each other for loss or
damage caused by fire or perils capable of coverage by standard fire and
extended coverage insurance, regardless of the cause of such damage. Landlord
and Tenant will cause an appropriate waiver of subrogation provisions to be
inserted in their policies of insurance on the Premises.
8. (a) Tenant shall maintain at its expense, throughout the term, insurance
covering the building and other improvements now or hereafter existing upon the
property against loss or damage by fire or such other risk now or hereafter
embraced by the term "extended coverage" and by vandalism and malicious
mischief, in an amount not less than the full insurable value as determined by
Tenant's insurer. As used in this subsection, the term "full insurable value"
shall mean the actual replacement cost, excluding foundation and excavation
costs, without deduction for physical depreciation as such replacement cost
shall be adjusted by Tenant's insurer every year due to changes in the cost of
construction and other relevant factors.
(b) Tenant shall maintain at its expense, throughout the term, insurance against
loss or liability in connection with bodily injury, death, property damage or
destruction, occurring on or about the property or arising out of the use
thereof by Tenant or its agents, employees, officers or invitees, visitors and
guests, under one ore more policies of comprehensive public liability insurance,
including insurance against assumed or contractual liability under this Lease,
having such limits as to each as are reasonably required by Landlord from time
to time, but in any event of not less than Two Million Five Hundred Thousand
Dollars ($2,500,000.00) for bodily injury to or death of all persons and for
property damage or destruction in anyone occurrence.
(c) Each policy referenced above shall (a) name as the insureds thereunder
Landlord and Tenant (and, at Landlord's request, any mortgagee of Landlord
holding a note secured by a deed of trust or other security instrument
encumbering the Property); except that for the policies described in subsection
8(b) Landlord shall be named as an additional insured (b) by its terms, not be
cancellable without at least thirty (30) days prior written notice to Landlord
(and, at Landlord's request, any mortgagee), and (c) be issued by an insurer of
recognized responsibility licensed to issue such policy in the state where the
Property is located. At least five (5) days before the commencement date, Tenant
shall deliver to Landlord each such policy or a certificate of insurance for
each such policy, and at least thirty (30) days before any such policy expires,
Tenant shall deliver to Landlord a replacement policy or certificate therefor.
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(d) General. In the event that, at any time during the term of this Agreement of
Lease, the buildings and improvements portion of the property (i) are destroyed
or (ii) are damaged to the extent of fifty percent (50%) or more of their Gross
Leaseable Area, then within sixty (60) days after such damage or destruction,
Tenant shall notify Landlord of its excercise of or its desire not to exercise
the hereby granted option to terminate this Agreement of Lease not later than
and effective on the end of such sixty (60) day period. Failure to so exercise
such option will obligate Tenant to repair and restore the property as
hereinafter provided. In all other events, Tenant shall repair and restore the
property as hereinafter provided.
(e) Repair and Rebuilding. In the event that Tenant does not terminate this
Agreement of Lease as provided for in Section 8 above and in all other events,
the Tenant, at its own cost and expense, shall, subject to the other provisions
of this Section 8, cause the same to be repaired, replaced or rebuilt as nearly
as possible to its condition immediately prior to the damage or destruction
subject to such alterations or changes as Tenant may elect to make in conformity
with Section 8 hereof within a period of time which, under all prevailing
circumstances, shall be reasonable. If Tenant shall exercise its option to
terminate this Lease, this Lease shall expire automatically as provided in
subsection 8(d) in which event Tenant shall be under no obligation to repair,
replace or rebuild the building and improvements on the property but shall clear
away the ruins and leave the Demised Premises in a clean, orderly and sightly
condition. In the event that (i) Tenant shall fail to give notice of its
exercise of its option to terminate within such period or (ii) if the buildings
and improvements on the Demised Premises shall not be damaged to the extent of
more than fifty percent (50%) of this Gross Leaseable Area, the, Tenant shall,
subject to the other provisions of this Section 8, cause the same to be
repaired, replaced or rebuilt at its own cost and expense as herein provided. If
Tenant does not repair, replace or rebuild any damaged or destroyed buildings or
improvements, all insurance proceeds that are payable as a result of the
destruction or damage to such buildings or improvements plus the deductible, if
any, shall be paid to Landlord and this Agreement of Lease shall terminate on
the date of such payment.
9. (a) If all or substantially all of the Property or such portion of the
improvements located on the property as to render the balance of such
improvements unsuitable in Landlord's and Tenant's reasonable judgement for the
purposes of Tenant is taken by the exercise of any power of eminent domain or is
conveyed to or at the direction of any governmental entity under a threat of any
such taking, Landlord shall be entitled to collect from such condemning
authority the entire amount of any award made in any such proceeding or as
consideration for such conveyance, without deduction therefrom for any leasehold
or other estate held by Tenant under this Lease, except as specifically provided
for herein this Lease shall terminate on the date that possession of the
property is taken by such condemning authority and all Rent, Taxes and other
charges payale hereunder will be apportioned and paid to such date.
(b) Tenant hereby (a) assigns to Landlord all of Tenant's right, title and
interest, if any, in any to any such award (b) waives any right that it may
otherwise have in connection with such condemnation, against Landlord or such
condemning authority, to any payment for (i) the value of the then-unexpired
potrion of the Term, (ii) leasehold damages, and (iii) any damage to or
diminution of the value of Tenant's leasehold interest hereunder or any portion
of the Property not covered by such Condemnation, and (c) agrees to execute any
and all further documents which may be required to facilitate Landlord's
collection of any and all such awards; provided, however, that if Tenant shall
have made improvements or alterations to the property after the date hereof and
shall have not yet fully amortized its expenditures for such improvements or
alterations under generally accepted accounting procedures, then Landlord shall,
and hereby does, assign to Tenant out of any award paid to Landlord a sum equal
to the unamortized portion of any such expenditures subject, in all events, (i)
to all mortgagees of Landlord having been paid amounts due to them from such
award according to their loan documents and also (ii) to their being available
excess funds from the award to pay such amounts to Tenant after all amounts due
and owing to Landlord hereunder and its mortgagees are paid from such award.
(c) Subject in all events to the operation and effect of the foregoing
provisions of this Section, Tenant may seek a separate award on account of any
damages or costs incurred by Tenant as a result of such condemnation, so long as
such separate award in no way diminishes any award or payment which Landlord
would otherwise receive as a result of such Condemnation.
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(d) Partial Condemnation. If a (i) portion of the Property that is not improved
by buildings or structures as of the date of this Lease or (ii) a portion of the
improvements portion of the property is so taken so that no termination of this
lease occurs according to subsection 9(a), then Landlord is entitled to collect
from such condemning authority the entire amount of any award in any such
proceeding or as consideration for any such conveyance, this lease shall not
terminate and Landlord shall, upon its receipt of such award in condemnation,
restore said building improvements to as complete a building as is reasonably
and practically possible in design, character and quality of the conditions of
the building immediately prior to the condemnation; provided however, in any
event, Landlord shall not be required to spend for any such repair, restoration
or alteration work an amount in excess of the amounts received by Landlord as
damage for the taking of such building improvements part of the property and
Tenant, at its own cost and expense shall make all necessary repairs and
alterations to its trade fixtures, decoration, signs, machinery and contents.
Base rent payable after any such taking will thereafter be reduced in the same
proportion as the gross leaseable area of the improvement is reduced by or as a
consequence of such condemnation. There will be no reduction or abatement of
base rent or any other charges payable by Tenant hereunder in the even Tenant is
only temporarily deprived in whole or in part of the use of any portion of the
property, for a period not in excess of ninety (90) days.
(e) Liability Upon Condemnation. If there is a condemnation, Landlord shall have
no liability to Tenant on account of any (a) interruption of Tenant's business
upon the property, (b) diminution in Tenant's ability to use the property, or
(c) other injury or damage sustained by Tenant as a result of such condemnation.
(f) Condemnation Proceedings. Except for any proceeding brought by Tenant under
the provisions of subsection 9(c), Landlord shall be entitled to conduct any
such condemnation proceeding and any settlement thereof free of interference
from Tenant, and Tenant hereby waives any right which it otherwise has to
participate therein.
10. In the event Tenant shall default in the performance of any of the terms
herein contained and shall not remedy the same within thirty (3o) days after
written notice thereof by Landlord (or in the event Tenant cannot reasonably
remedy said default within thirty (30) days, if Tenant shall not commence to
cure within said thirty (30) day period and diligently pursue the same to
completion) or if Tenant shall be adjudicated a bankrupt or shall make a general
assignment for the benefit of creditors, or if a receiver shall be appointed for
Tenant and not removed within sixty (60) days, Landlord shall have the right to
re-enter and take possession of the Premises and to remove any property therein
and to terminate this Lease. In the event of such termination, Landlord may
relet the Premises or any part thereof on such terms as it may determine.
11. (a) All notices called for hereunder shall be in writing and shall be deemed
to have been given when sent postage prepaid by registered of certified mail,
return receipt requested, to the address stated beside signature, or to such
other address as the party to receive such notice may hereafter direct by
written notice.
(b) This Lease sets forth the entire agreement of the parties regarding the
Premises, and there are no promises, agreements, conditions or understandings,
either oral or implied, other than as set forth herein. No subsequent amendment
or modification of this Lease shall be binding unless in writing and signed by
both parties.
(c) This Lease shall be binding upon and enure to the benefit of the parties
hereto, their heirs, successors, assigns, and legal representatives.
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WITNESS the following signatures and seals:
TENANT:
HELIG-MEYERS COMPANY
By: /s/Troy A. Peery, Jr.
---------------------------
President
Address: 3228 West Cary Street
Richmond, VA 23221
(Corporate Seal)
ATTEST:
[signature illegible]
- ----------------------------
Secretary
LANDLORD:
MEYERS-THORNTON INVESTMENT CO.
By: /s/H. Meyers
--------------------------
Partner
Address:
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EXHIBIT 10.zz
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE (the "Lease") made this 16th day of
December, 1997, by and between HYMAN MEYERS, S. SIDNEY MEYERS and AMY M.
KRUMBEIN, having an address c/o Hyman Meyers, Agent, 2235 Staples Mill Road,
Richmond, Virginia 23230, (collectively the "Landlord"), and HEILIG-MEYERS
FURNITURE COMPANY, a North Carolina corporation having an address at 2235
Staples Mill Road, Richmond, Virginia 23230 (the "Tenant'),
WHEREAS, Landlord is the owner of property consisting of 1.24
acres located on the southern line of Highway 264 Bypass (Greenville Road),
Greenville (Pitt County), North Carolina, shown as Lot 2 on a Map for Record by
Rivers and Associates, Inc. entitled "Three Lots at Eastern Corner Intersection
264 Bypass and Red Banks Road, Greenville TWP, Pitt County, North Carolina"
dated March 12, 1985, a copy of which is attached hereto and made a part hereof
as Exhibit A (the "Property").
WHEREAS, Tenant desires to lease the Property and Landlord is
willing to rent Tenant the Property, upon the terms, conditions, covenants and
agreements set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained the parties hereto agree as follows:
1. DEMISED PREMISES
Subject to all easements, restrictions, covenants, encumbrances and
conditions of record and upon the terms, covenants and conditions set forth
herein, Landlord hereby leases the Property to Tenant and Tenant hereby releases
the Property from Landlord.
2. TERM
2.1. Length. The Term shall commence on November 1, 1990 (the "Commencement
Date") and expire at midnight local time on October 31, 2008 (the "Expiration
Date").
2.2. Surrender. Tenant shall, at its expense, at the expiration of the Term or
any earlier termination of this Lease, (a) promptly surrender to Landlord
possession of the Property (including any fixtures or other improvements which,
under the provisions of Section 7, are owned by Landlord) in good order and
repair (ordinary wear and tear excepted) and broom clean, (b) remove therefrom
Tenant's signs, goods and effects and any machinery, trade fixtures and
equipment used in conducting Tenant's trade or business and not owned by
Landlord, and (c) repair any damage to the Property caused by such removal.
2.3. Holding Over. If Tenant continues to occupy the Property after the
expiration of the Term or any earlier termination of this Lease:
2.3.1. Such occupancy shall be deemed to be under a month-to-month tenancy,
which shall continue until either party hereto notifies the other in writing at
least thirty (30) days before the end of any calendar month that the notifying
party elects to terminate such tenancy at the end of such calendar month, in
which event such tenancy shall so terminate;
2.3.2. Anything contained in this Lease to the contrary notwithstanding, the
rent payable for each such monthly period shall equal one hundred and fifty
percent (150%) of the monthly installment of Base Rent (as hereinafter defined)
payable immediately prior to such expiration or earlier termination, together
with such Additional Rent (as hereinafter defined) as is otherwise required by
the terms of this Lease; and 2.3.3. Otherwise such month-to-month tenancy shall
be upon the same terms and subject to the same conditions as those set forth in
the provisions of this Lease except there will be no options to extend the term
of this Lease.
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2.4. Option to Extend. Provided Tenant is not in default under the terms and
conditions of this Lease, Tenant shall have the right and option to extend the
Term of this Lease for three (3) successive periods of six (6) years each by
giving notice to Landlord as hereinafter provided at least six (6) months prior
to the expiration date of the Term (or any extended Term, as the case may be,)
that Tenant is exercising its right to extend the Term of the Lease. During the
extended Term or Terms, all terms and provisions of this Lease shall continue in
full force and effect except that no additional options to extend the Term shall
belong to Tenant. Notwithstanding the above, no option to extend the term of
this Lease may be exercised by Tenant unless prior to, or simultaneous with,
such exercise Tenant has exercised a similar six (6) year extension option for
the property contiguous to the Property, namely that certain property with
improvements thereon consisting of 1.87 acres located on the southern line of
Highway 264 Bypass (Greenville Road) Greenville (Pitt County), North Carolina,
shown as Lot 3 on a Map for Record by Rivers and Associates, Inc. entitled
"Three Lots at Eastern Corner Intersection 264 Bypass and Red Banks Road,
Greenville TWP, Pitt County, North Carolina" dated March 12, 1985, all in
accordance with a lease of even date herewith between Landlord and Tenant for
such property.
3. RENT.
3.1. Amount. As rent for the Property (all of which is hereinafter referred to
collectively as "Rent"), Tenant hereby agrees and promises to pay to Landlord
all of the following:
3.1.1. Base Rent during the Term shall be FIFTEEN THOUSAND THREE HUNDRED
TWENTY-THREE DOLLARS ($15,323.00) per annum, payable in advance in equal monthly
installments of ONE THOUSAND TWO HUNDRED SEVENTY-SIX and 92/100 DOLLARS
($1,276.92). The first monthly installment of Base Rent shall be payable
beginning November 1, 1990 and the remaining installments shall be payable in
advance on the first day of each and every month thereafter during the Term
hereof at the office of Landlord herein designated (or at such other place as
Landlord may designate in a notice to Tenant). If the Term of this Lease begins
on a date other than the first day of a month, Base Rent from such other date to
the first day of the following month shall be prorated at the rate of
one-thirtieth (1/30) of the monthly installment of Base Rent for each day and
shall be payable in advance. The base rent shall, at all times, including
extension terms of the Lease, be the minimum amount of rent, not including any
additional rent, to be paid to Landlord by Tenant.
Base Rent during the option periods, if the same are exercised by Tenant shall
be increased as follows:
After the third (3rd) year of the Term of this Lease and after
each successive three (3) year period of the Term of this Lease thereafter, the
Base Rent per annum for the following three (3) years of the Term of this Lease
will be an amount equal to the sum of (i) the Base Rent for the last year of the
immediately preceding three (3) year period and (ii) an amount equal to the Base
Rent for the last year of the immediately preceding three (3) year period
multiplied by the Percentage of Increase, as hereinafter defined, in the Index,
as hereinafter defined. The term "Index" as used herein shall mean the "Consumer
Price Index for Urban Wage Earners and Clerical Workers (Revised Series)
(CPI-W), U.S. City Average, All Items (1982-1984 = 100)", issued by the Bureau
of Labor Statistics of the United States Department of Labor in the Current
Labor Statistics Section of the Monthly Labor Review (final publication only.)
The term "Percentage of Increase" as used herein shall mean the fraction of
increase in the Index, which fraction shall be determined by subtracting the
Base Index, as hereinafter defined, from the average of the Consumer Price
Monthly Indices for the immediately preceding twelve (12) months and that
difference resulting therefrom shall be the numerator and the Base Index shall
be the denominator. The average of the Consumer's Price Monthly Indices for the
immediately preceding twelve (12) months shall be ascertained by dividing the
total of the Consumer's Price Monthly Indices for the preceding twelve shall be
ascertained by dividing the total of the Consumer/s Price Monthly Indices for
the preceding twelve (12) months by the number twelve (12). The term "Base
Index" as used herein shall mean the Index for the month immediately preceding
the date of this Agreement of Lease. In the event that the Index shall cease to
use the 1982 - 1984 average of 100 as the basis of calculation, or if a
substantial change is made in the terms or number of items contained in the
Index, then the Index shall be adjusted to the figure that would have been
arrived at had the change in the manner of computing the Index on the date of
this Agreement of Lease not been altered. In the event that the Index shall be
discontinued or no longer published, Landlord shall substitute a comparable
price index or formula and such substitute price index or formula shall have the
same effect as if originally designated herein as the Index. If (ii) in the
immediately preceding sentence is zero or less than zero, then the new Base Rent
shall be the amount set forth in (i) of the same sentence.
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3.1.2. Additional rent (the "Additional Rent") in the amount of any payment
referred to as such in any provision of this Lease which accrues while this
Lease is in effect. Except as is otherwise set forth herein, any Additional Rent
shall be due and payable with the installment of Base Rent next falling due
after such Additional Rent accrues.
3.2. Payment. Except as otherwise specifically provided for herein, all Rent
shall be payable without demand therefor and without any setoff or deductions
whatsoever. Any payment made by Tenant to Landlord on account of Rent may be
credited by Landlord to the payment of any Rent then past due before being
credited to Rent currently falling due. Any such payment which is less than the
amount of Rent then due shall constitute a payment made on account thereof, the
parties hereto hereby agreeing that Landlord's acceptance of such payment shall
not alter or impair Landlord's rights hereunder to be paid all of such amount
then due, or in any other respect.
3.3. Late Penalties and Interest. Tenant hereby recognizes and acknowledges that
if payments of Rent are not received when due, Landlord will suffer damages and
additional expenses and Tenant therefore agrees to pay as Additional Rent a late
penalty equal to five (5%) of the Rent then due and payable under this Lease if
such Rent is not received by Landlord within seven (7) days after such amount is
due and payable. In addition, all Rent not paid within seven (7) days shall bear
interest at the rate of eighteen percent (18%) per annum.
3.4. Lease Year. As used in the provisions of this Lease, the term "Lease Year"
means (a) the period commencing on the Commencement Date and terminating on the
first (1st) anniversary of the Commencement Date, and (b) each successive period
of twelve (12) calendar months thereafter during the Term.
3.5. Taxes.
3.5.1. (i) As used herein, the term "Taxes" shall mean all real estate taxes,
assessments and other governmental levies and charges, general and special,
ordinary and extraordinary, unforeseen as well as foreseen, of any kind and
nature (including any interest on such assessments whenever the same are
permitted to be paid in installments) which may be imposed, levied, assessed or
confirmed by any lawful taxing authorities or which may become due and payable
out of or for, or which may become a lien or charge upon or against the whole,
or any part, of the Property, or any taxes in lieu thereof, which are measured
by the value of the Property, including any substitution in whole or in part
therefor due to a future change in the method of taxation, and also all
reasonable costs and fees (including attorney's fees and any fees of Lessor's
tax consultants) incurred by Lessor in contesting any such taxes, levies,
charges or assessments and/or in negotiating with the public authorities as to
the same. Nothing contained in this Lease, however, shall require Tenant to pay
any share of any estate, inheritance, succession, gift, capital levy, excess
profits, revenue, corporation, franchise, occupancy, gross receipts, income,
payroll or stamp tax imposed upon Landlord or any tax upon the sale, transfer
and/or assignment of the title or estate of Landlord, nor shall any of the same
be deemed Real Estate Taxes. If by law any general assessment or like charge may
be paid in installments, such assessment shall be so paid, and Tenant shall only
be liable for Tenant's Pro Rata Share of the portion thereof that is payable
within the then-current term of this Lease.
3.5.1. (ii) If Landlord shall fail or refuse, upon the request of Tenant, to
take any necessary steps to contest the validity or amount of the assessed
valuation or of the Taxes for any real estate fiscal tax year, Tenant may
undertake, by appropriate proceedings in the name of Landlord or Tenant, to
contest the same. Within a reasonable time after demand therefor, Landlord shall
execute, acknowledge and deliver any documents reasonably required to enable
Tenant to prosecute any such proceeding all of which shall be at no expense to
Landlord. Landlord shall inform Tenant, in time to permit Tenant to undertake
such contest, of all pertinent data required to undertake such contest. The
rights of contest afforded Tenant according to this subsection 3.5.1 (ii) are
subject to Tenant providing Landlord with adequate security for the payment of
any and all Taxes that are involved while any such contest by Tenant is ongoing
which security must be acceptable to Landlord in the reasonable exercise of its
discretion and in all events such security must be acceptable to all mortgagees
of Landlord.
3.5.1. (iii) If Landlord or Tenant shall obtain a remission or a refund of all
or any part of the Taxes for any real estate fiscal tax year, Landlord shall
promptly refund to Tenant (or credit Tenant with) Tenant's Pro Rata Share of
such remission or refund.
3.5.2. As used herein, the term "fiscal tax year" shall mean the twelve (12)
month period used by the county and/or city having jurisdiction over the
Property or any other lawful taxing authority, from time to time to assess Taxes
on the Property, or any part thereof.
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3.5.3. Tenant shall pay as Additional Rent the amount of the Taxes for every
fiscal tax year or part thereof falling within the Term. Landlord agrees to
promptly furnish to Tenant all bills received by Landlord for Taxes and Tenant
shall pay the same before such payments are due and shall promptly thereafter
deliver to Landlord receipts evidencing full payment.
3.5.4. If only part of any fiscal tax year falls within the Term, the amount
computed as Additional Rent for such fiscal tax year under the foregoing
provisions of this subsection shall be prorated in proportion to the portion of
such fiscal tax year falling within the Term. The expiration of the Term before
the end of a fiscal tax year shall not impair Tenant's obligation hereunder to
pay such prorated portion of such Additional Rent with respect to that portion
of such fiscal tax year falling within the Term.
3.5.5. Anything contained in the foregoing provisions of this subsection
regarding Taxes to the contrary notwithstanding, Landlord may, at its discretion
(but only if Landlord is required to escrow Taxes by its first mortgagee), (a)
make from time to time during the Term a reasonable estimate of the Additional
Rent which may become due under such provisions with respect to any fiscal tax
year, (b) require Tenant to pay to Landlord each calendar month during such year
one-twelfth (1/12) of such estimate, at the time and in the manner that Tenant
is required hereunder to pay the monthly installment of the Base Rent for such
month, and (c) increase or decrease from time to time during such fiscal year
the amount initially so estimated for Taxes, based upon the most recently
available actual assessment and tax rate. In such event, Landlord shall deliver
to Tenant within sixty (60) days after the end of such fiscal tax year, a
statement showing a determination of the Taxes for such fiscal tax year. Tenant
shall within thirty (30) days after delivery of Landlord's statement, pay to
Landlord the amount of any deficiency. If such statement shows that Tenant's
monthly aggregate payments pursuant to this Section exceeded the actual Taxes
for the preceding fiscal tax year, such overpayment shall be applied to the next
ensuing monthly installment(s) of Base Rent.
3.6. Tax on Lease. If federal, state or local law now or hereafter imposes any
tax, assessment, levy or other charge (other than any income, inheritance or
estate tax) directly or indirectly upon (a) Landlord with respect to this Lease
or the value thereof, (b) Tenant's use or occupancy of the Property, (c) the
Base Rent, Additional Rent or any other sum payable under this Lease, or (d)
this transaction, then Tenant shall pay the amount thereof as Additional Rent to
Landlord upon demand, unless Tenant is prohibited by law from doing so, in which
event Landlord may, at its election, terminate this Lease by giving written
notice thereof to Tenant.
3.7. Net Lease. It is the propose and intent of the parties hereto that the Rent
payable hereunder shall be absolutely net to Landlord, so that this Lease shall
yield, net to Landlord, the Base Rent and the Additional Rent described herein
in each Lease Year during the Term of this Lease. All costs, fees, interest,
charges, expenses, reimbursements and obligations of every kind and nature
whatsoever relating to the Property (excepting only any taxes, costs or other
obligations arising prior to the Commencement Date of this Lease), which may
arise or become due during the Term, shall be paid and discharged by Tenant as
Additional Rent. Landlord shall be indemnified and saved harmless by Tenant from
and against all such costs, fees, interest, charges, expenses, reimbursements
and obligations relating to the Property or this Lease. However, Tenant shall be
under no obligation to pay interest or principal on any Mortgage (as hereinafter
defined) encumbering the Property or any income, franchise, gift, inheritance or
capital levy tax hereafter payable by or imposed upon Landlord.
4. SECURITY DEPOSIT
Landlord has not received a Security Deposit from Tenant and none is
due and owing.
5. USE OF PROPERTY
5.1. Use. Tenant shall occupy and use the Property for and only for parking for
a furniture sales facility and warehouse. The Property shall not be used for any
illegal purposes or in any manner to create any nuisance or trespass.
5.2. Improvements. Both Landlord and Tenant understand and agree that as of the
date of this Lease, no improvements exist on the Property except those
improvements usually associated with a parking lot; however, if Landlord permits
Tenant to make any other improvements to the Property, which Landlord shall be
under no obligation to do, all terms and conditions of this Lease which apply to
improvements will then become applicable to such requirements.
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5.3. Compliance with Laws.
5.3.1. In its use of the Property, Tenant shall not violate the certificates of
occupancy issued therefor, any applicable law, ordinance or regulation or any
regulation of the National Board of Fire Underwriters. Tenant shall not create
or allow to exist on the Property any nuisance or trespass, nor do any act in or
about the Property or bring anything on or in the Property which will in any way
materially deface or injure the Property or any part thereof or overload the
floor of the building.
5.3.2. Tenant hereby agrees that Tenant, its employees, agents, contractors or
invitees shall not, at any time, cause or permit asbestos, asbestos related
products or any petroleum products or hazardous, toxic or dangerous wastes,
substances or material defined as such in (or for the purposes of) the
Comprehensive Environmental Response, Compensation and Liability Act, as amended
(any of the same being hereinafter defined as "Hazardous Material"), to be
brought installed or used in, about or from the Property. If Tenant breaches any
of the provisions of this subsection or if the presence of Hazardous Material is
found in the Property, the Tenant agrees to indemnify, defend and hold Landlord,
and/or any fee owner or ground or underlying landlords of the Property, harmless
from and against any and all claims, judgments, damages, penalties, fines,
costs, liability or losses in connection therewith, including, without
limitation, (i) diminution in value of the Property, (ii) damages for the loss
or restriction of use of the Property, (iii) damages arising from any adverse
impact on marketing of space, and (iv) sums paid in settlement of claims,
attorneys' fees, consulting fees and expert fees which arise during or after the
lease term as a result of the same. This indemnification of Landlord by Tenant
shall include, without limitation, all costs incurred in connection with any
investigation of conditions or any clean up, remedial, removal or restoration
work required by any court or by any federal, state or local governmental
authority because of Hazardous Material present in, on or under the Property.
Further, Tenant shall promptly and at its sole cost and expense, take all action
necessary to remove said Hazardous Material from the Property; provided,
however, that Landlord's approval of such actions shall first be obtained.
6. INSURANCE AND INDEMNIFICATION
6.1. Increase in Risk.
6.1.1. Tenant shall not do or permit to be done any act or thing as a result of
which either (a) any policy of insurance of any kind covering (i) any or all of
the Property or (ii) any liability of Landlord in connection therewith, may
become void or suspended, or (b) the insurance risk under any such policy would
(in the opinion of the insurer thereunder) be made greater unless Tenant shall
pay as Additional Rent the amount of any increase in any premium for such
insurance resulting from any such increased risk.
6.2. Insurance to be Maintained by Tenant.
6.2.1. Tenant shall maintain at its expense, throughout the Term, insurance
covering the building and other improvements now or hereafter existing upon the
Property against loss or damage by fire or such other risk now or hereafter
embraced by the term "extended coverage" and by vandalism and malicious
mischief, in an amount not less than the full insurable value as determined by
Tenant's insurer. As used in this subsection, the term "full insurable value"
shall mean the actual replacement cost, excluding foundation and excavation
costs, without deduction for physical depreciation as such replacement cost
shall be adjusted by Tenant's insurer every year due to changes in the cost of
construction and other relevant factors.
6.2.2. Tenant shall maintain at its expense, through the Term, insurance against
loss or liability in connection bodily injury, death, property damage or
destruction, occurring on or about the Property or arising out of the use
thereof by Tenant or its agents, employees, officers or invitees, visitors and
guests, under one or more policies of comprehensive public liability insurance,
including insurance against assumed or contractual liability under this Lease,
having such limits as to each as are reasonably required by Landlord from time
to time, but in any event of not less than Two Million Five Hundred Thousand
Dollars ($2,500,000.00) for bodily injury to or death of all persons and for
property damage or destruction in any one occurrence.
6.2.3. Each policy referenced above shall (a) name as the insureds thereunder
Landlord and Tenant (and, at Landlord's request, any mortgagee of Landlord
holding a note secured by a deed of trust or other security instrument
encumbering the Property), except that for the policies described in subsection
6.2.2 Landlord shall be named as an additional insured (b) by its terms, not be
cancellable without at least thirty (30) days prior written notice to Landlord
(and, at Landlord's request, any mortgagee), and (c) be issued by an insurer of
recognized responsibility licensed to issue such policy in the state where the
Property is located. At least five (5) days before the Commencement Date, Tenant
shall deliver to Landlord each such policy for each such policy, and at least
thirty (30) days before any such policy expires, Tenant shall deliver to
Landlord a replacement policy.
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6.3. Indemnification. Except as otherwise provided for in this Lease.
6.3.1. Tenant will indemnify Landlord and save Landlord harmless from and
against any and all claims, actions, damages, liability and expenses in
connection with loss of life, personal injury and damage to property arising in,
at, upon, or involving the occupancy or use of any part of the Property by
Tenant, or occasioned wholly or in part by any act or omission of Tenant or its
agents, contractors, employees, servants, lessees, invitees or concessionaires.
In case Landlord shall, without fault on its part, be made party to any
litigation commenced by or against Tenant relating to the Tenant's
indemnification as set forth in the immediately preceding sentence of this
subsection 6.3.2, then Tenant shall protect and hold Landlord harmless and shall
pay all reasonable costs, expenses and attorney's fees incurred or paid by
Landlord in connection with such litigation.
6.4. Compliance with Authority. Tenant agrees, at its own expense, to promptly
comply with all requirements of any legally constituted public authority.
6.4.1. Waiver of Subrogation. To the extent that they are insured and reimbursed
by their respective insurance companies, Landlord and Tenant hereby waive any
and all rights of recovery against the other for or arising out of the damage to
or destruction of their property, whether or not such damage or destruction
shall have been caused by the negligence of the other, its agents, servants or
employees.
7. CONDITION OF IMPROVEMENTS
7.1. As Is. Tenant acknowledges and agrees to accept delivery and possession of
the Property on November 1, 1990 in the "AS IS" condition of the Property on the
date of this Agreement of Lease, it being understood that Landlord has no other
obligation to perform any work in connection with the preparation of the
Property for Tenant's occupancy, except to so deliver such possession to Tenant.
7.2. Landlord's Property. Any and all improvements, repairs, additions,
fixtures, alterations and all other property attached to, used in connection
with or otherwise installed within the Property by Landlord or Tenant shall,
immediately on the completion of its installation and without compensation or
payment to Tenant by Landlord, become Landlord's property, except that any
machinery, equipment, or trade fixtures installed by Tenant and used in the
conduct of Tenant's trade or business (rather than to service the Property
generally) shall remain Tenant's property.
8. MAINTENANCE AND SERVICES
8.1. Maintenance and Alteration by Tenant.
8.1.1. Tenant at its expense shall maintain (including all replacements when
necessary) the Property, including, without limitation, the roof, the foundation
and all other structural elements, all plumbing, heating, air conditioning,
ventilating, electrical and mechanical equipment, the parking areas and all
non-structural parts of the Property in good repair and condition, ordinary wear
and tear excepted. In addition, Tenant, at its expense, shall keep the Property
free of termites and other wood boring insects and shall keep the Property in a
clean and orderly condition, free of dirt, rubbish, snow, ice and unlawful
obstructions. If Tenant refuses or neglects to repair or maintain the Property
as required hereunder as soon as reasonably possible after written demand,
Landlord may make such repairs, without liability to Tenant for any loss or
damage that may accrue to Tenant's equipment, merchandise, trade fixtures, or
other property or to Tenant's business by reason thereof, and upon completion
thereof and presentation of the bill therefor, Tenant shall pay Landlord's cost
for making such repairs as Additional Rent payable with the next installment of
Base Rent due under this Lease. Such bill shall include interest at the rate of
eighteen percent (18%) per annum on such cost beginning on the fifth (5th) day
after presentation of the bill for such repairs is made by Landlord.
8.1.2. Tenant may make non-structural alterations or improvements to the
Property aggregating not more than Twenty-five Thousand Dollars ($25,000) in any
Lease Year without Landlord's consent thereto. Tenant shall not make any
non-structural alterations or improvements to the Property in excess of
Twenty-five Thousand Dollars ($25,000) in any Lease Year or any structural
alteration, addition or improvement to the Property without first obtaining
Landlord's consent thereto, which consent shall not be unreasonably withheld or
delayed, so long as the value of the Property is not materially decreased
thereby. If Landlord so consents to any such proposed alteration, addition or
improvements in excess of Twenty-five Thousand Dollars ($25,000), Landlord
covenants and agrees they will consider participating in the payment of costs
for same but will not be obligated to participate; if they agree to so
participate, it shall be on terms and conditions which in all events must be
satisfactory to Landlord. All such alterations, additions, and improvements will
be done in a good and workmanlike manner in keeping with all building codes and
regulations and will in no way materially harm the structure of the Property.
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8.1.3. Tenant shall (a) within thirty (30) days after notice, bond or have
released any mechanic's, materialman's or other lien filed or claimed against
any or all of the Property by reason of labor or materials provided for Tenant
or any of its contractors or subcontractors, or otherwise arising out of
Tenant's use or occupancy of the Property, and (b)defend, indemnify and hold
harmless Landlord against and from any and all liability, claim of liability or
expense (including, by way of example rather than of limitation, that of
reasonable attorney's fees) incurred by Landlord on account of any such lien or
claim.
8.1.4. Landlord shall not be required to make any repairs or improvements to the
Property or to furnish any services under this Lease. Notwithstanding any
provision in this Lease to the contrary, Landlord shall not be responsible or
liable to Tenant for any injury or damage resulting to Tenant, or its property,
from bursting, stoppage, or leaking of water, gas, sewer, or steam pipes, or
from any structural defect in the roof, exterior walls or the like.
8.1.5. Tenant shall pay promptly when due all charges, costs and expenses for
gas, water, electricity, heat, cooling, sewage and all other utilities furnished
to or used in connection with the Property during the Term.
9. SIGNS
Tenant agrees that any sign, advertisement or notice that shall be
inscribed, painted or affixed on any part of the Property shall be in compliance
with all governmental laws, ordinances, rules and regulations, including,
without limitation, all zoning ordinances.
10. LANDLORD'S RIGHT OF ENTRY
Landlord and its agents shall be entitled to enter the Property at any
reasonable time (a) to inspect the Property, (b) to exhibit the Property to any
existing or prospective purchaser or mortgagee, or during the last six (6)
months of the term to any prospective Tenant, or (c) to make any alteration,
improvement or repair to the Property which Landlord is authorized to make
pursuant to this Agreement of Lease; provided, that Landlord shall (i) (unless
doing so is impractical or unreasonable because of emergency) give Tenant at
least twenty-four (24) hours prior notice of its intention to enter the
Property, and (ii) use reasonable efforts to avoid interfering more than is
reasonably necessary with Tenant's use and enjoyment thereof.
11. FIRE AND OTHER CASUALTIES
11.1. General. In the event that, at any time during the term of this Agreement
of Lease, the buildings and improvements portion of the Property (i) are
destroyed or (ii) are damaged to the extent of seventy-five percent (75%) or
more of their Gross Leaseable Area, then within sixty (60) days after such
damage or destruction, Tenant shall notify Landlord of its exercise of or its
desire not to exercise the hereby granted option to terminate this Agreement of
Lease not later than and effective on the end of such sixty (60) day period.
Failure to so exercise such option will obligate Tenant to repair and restore
the Property as hereinafter provided. In all other events, Tenant shall repair
and restore the Property as hereinafter provided.
11.2. Repair and Rebuilding. In the event that Tenant does not terminate this
Agreement of Lease as provided for in Section 11.1 above and in all other
events, then Tenant, at its own cost and expense, shall, subject to the other
provisions of this Section 11, cause the same to be repaired, replaced or
rebuilt as nearly as possible to its condition immediately prior to the damage
or destruction subject to such alterations or changes as Tenant may elect to
make in conformity with Section 8 hereof within a period of time which, under
all prevailing circumstances, shall be reasonable. If Tenant shall exercise its
option to terminate this Lease, this Lease shall expire automatically as
provided in subsection 11.1 in which event Tenant shall be under no obligation
to repair, replace or rebuild the buildings and improvements on the Property but
shall clear away the ruins and leave the Demised Premises in a clean, orderly
and sightly condition. In the event that (i) Tenant shall fail to give notice of
its exercise of its option to terminate within such period or (ii) if the
buildings and improvements on the Demised Premises shall not be damaged to the
extent of more than seventy-five percent (75%) of this Gross Leaseable Area,
then, Tenant shall, subject to the other provisions of this Section 11, cause
the same to be repaired, replaced or rebuilt at its own cost and expense as
herein provided. If Tenant does not repair, replace or rebuild any damaged or
destroyed buildings or improvements, all insurance proceeds that are payable as
a result of the destruction or damage to such buildings or improvements plus the
deductible (to be paid by Tenant), if any, shall be paid to Landlord and this
Agreement of Lease shall terminate on the date of such payment.
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11.3. Insurance Trustee. Except as otherwise provided in this Lease, all
insurance policy proceeds provided for in subsection 6.2.1 shall be paid and
delivered to an Insurance Trustee designated by Landlord and shall be held and
used for the following purposes with the Insurance Trustee having the powers and
duties contained herein:
11.3.1. All proceeds received by the Insurance Trustee from any such insurance
policy shall first be used, by such Insurance Trustee as a fund (which fund
shall be deposited in a federally insured interest-bearing account, with any
interest accruing thereon becoming a part of the fund) for the restoration and
repair of any and all buildings, improvements and equipment located on the
Property which have become destroyed or damaged. Such proceeds in said trust
fund shall be used and applied by the Insurance Trustee in satisfaction and
discharge of the cost of the restoration of the destroyed or damaged buildings,
improvements and equipment.
11.3.2. Said funds shall be paid out by the Insurance Trustee from time to time
to persons furnishing labor or materials, or both, including architects' fees
and contractors' compensation in the construction work, on vouchers approved by
a licensed architect or engineer (the "Project Architect or Engineer") selected
by Tenant and approved by Landlord's first mortgagee, and if none, then by
Landlord, and employed by Tenant to superintend the work. The reasonable
expenses or charges of such architect or engineer shall be paid by such
Insurance Trustee out of the trust fund.
11.3.3. In the event that the amount of the insurance proceeds is insufficient
to pay the actual cost of repair or reconstruction, such deficiency will be
borne and provided for by Tenant by depositing the same with the Insurance
Trustee within twenty (20) days following the request by the Insurance Trustee
to Tenant requesting a sum equal to the amount of such deficiency. The initial
sum to be deposited with the Insurance Trustee according to this Section 11.3.3
shall be all insurance proceeds that are payable and are then actually available
as a result of the destruction or damage to such building. Additionally the
Insurance Trustee shall have the right to require Tenant from time to time to
deposit such additional amounts as the Insurance Trustee in consultations with
the Project Architect or Engineer shall deem necessary for such repair or
reconstruction. Any surplus of funds deposited according to this Section 11.3.3
shall be returned to Tenant after repair or reconstruction is completed.
11.3.4. All reasonable fees, costs and charges of the Insurance Trustee shall be
paid out of the insurance proceeds to the extent that there are such proceeds
over and beyond the amounts required for repair and restoration as aforesaid;
otherwise Landlord and Tenant agree that each will bear one-half (1/2) of the
fees, costs and charges of the Insurance Trustee.
11.3.5. In the event that the Insurance Trustee shall resign or for nay reason
be unwilling to act or continue to act, then Landlord shall substitute a new
trustee in the place and stead of the former pre-existing Insurance Trustee.
11.3.6. Should a dispute arise between Landlord and Tenant as to any provision
of this Section 11.3, such dispute shall be submitted to the Circuit Court of
the City of Richmond, Virginia for resolution, and the non-prevailing party
shall pay the reasonable attorney's fees and court costs of the prevailing
party.
11.3.7. Notwithstanding the above, Landlord and Tenant may mutually agree not to
use an Insurance Trustee but may mutually agree to use some other method to
effect the repair of such damage and destruction.
11.4. Abatement of Rent. During the term of this Lease, unless Tenant terminates
this lease according to the option described in Section 11.1 hereof, destruction
or damage in whole or in part to the buildings and improvements on the Demised
Premises shall, during the period when the same are being repaired and rebuilt,
serve to abate the base rent to be paid to Landlord by Tenant hereunder and the
payment of any other sums, monies, costs, charges or expenses required to be
paid by Tenant hereunder with such abatements to be calculated by multiplying
such amounts by a fraction, the numerator of which is the square footage of the
Demised Premises that is being repaired or rebuilt and the denominator of which
is the total square footage of the Demised Premises.
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11.5. Termination During Last Year of Lease Term. If during the last year of the
Term the Property is totally destroyed by fire or other casualty, or
substantially damaged thereby to the extent that it is unfeasible for Tenant, in
Tenant's reasonable business judgment, to conduct its business on the Property,
Tenant shall have the option, upon written notice to Landlord within thirty (30)
days from the date of such casualty, to elect to terminate this Lease as of the
date of such casualty, and the insurance proceeds plus the deductible (to be
paid by Tenant to Landlord), if any, shall be paid to Landlord. If Tenant does
not exercise such option, this Lease shall continue, and Tenant shall promptly
upon receipt of the proceeds of insurance commence to restore and shall
diligently proceed to restore said Property to as nearly as possible the
condition and character it was in immediately prior to the damage or destruction
with such variations and alterations as may be permitted under this Lease, all
as hereinabove provided.
11.6. Tenant's Losses. In the event of any such damage or destruction to the
Property, Landlord shall not be liable to Tenant for loss of profits, expenses,
or any other type of injury or damage resulting from the repair of any such
damage to the Property or any part thereof, or for the termination of the Lease
as provided herein. Tenant assumes the risk of any and all damage to its
personal property in or on the Property from any casualty whatsoever.
12. CONDEMNATION.
12.1. Full Condemnation.
12.1.1. If all or substantially all of the Property or such portion of the
improvements located on the Property as to render the balance of such
improvements unsuitable in Landlord's reasonable judgment for the purposes of
Tenant is taken by the exercise of any power of eminent domain or is conveyed to
or at the direction of any governmental entity under a threat of any such
taking, Landlord shall be entitled to collect from such condemning authority the
entire amount of any award made in any such proceeding or as consideration for
such conveyance, without deduction therefrom for any leasehold or other estate
held by Tenant under this Lease, this lease shall terminate on the date that
possession of the Property is taken by such condemning authority and all Rent,
Taxes and other charges payable hereunder will be apportioned and paid to such
date.
12.1.2. Tenant hereby (a) assigns to Landlord all of Tenant's right, title and
interest, if any, in and to any such award (b) waives any right that it may
otherwise have in connection with such condemnation, against Landlord or such
condemning authority, to any payment for (i) the value of the then-unexpired
portion of the Term, (ii) leasehold damages, and (iii) any damage to or
diminution of the value of Tenant's leasehold interest hereunder or any portion
of the Property not covered by such Condemnation, and (c) agrees to execute any
and all further documents which may be required to facilitate Landlord's
collection of any and all such awards.
12.1.3. Subject in all events to the operation and effect of the foregoing
provisions of this Section, Tenant may seek a separate award on account of any
damages or costs incurred by Tenant as a result of such condemnation, so long as
such separate award in no way diminishes any award or payment which Landlord
would otherwise receive as a result of such Condemnation.
12.2. Partial Condemnation. If a (i) portion of the Property that is not
improved by buildings or structures as of the date of this Lease or (ii) a
portion of the improvements portion of the Property is so taken so that no
termination of this lease occurs according to subsection 12.1.1, then Landlord
is entitled to collect from such condemning authority the entire amount of any
award in any such proceeding or as consideration for any such conveyance, this
lease shall not terminate and Landlord shall, upon its receipt of such award in
condemnation, restore said building improvements to as complete a building as is
reasonably and practically possible in design, character and quality of the
conditions of the building immediately prior to the condemnation; provided
however, in any event, Landlord shall not be required to spend for any such
repair, restoration or alteration work an amount in excess of the amounts
received by Landlord as damage for the taking of such building improvements part
of the Property and Tenant, at its own cost and expense shall make all necessary
repairs and alterations to its trade fixtures, decoration, signs, machinery and
contents. During the term of this Lease, unless Tenant terminates this Lease
according to subsection 12.1.1, partial condemnation of the Property shall,
during the period when the same are being repaired, restored and altered, serve
to abate the base rent to be paid to Landlord by Tenant hereunder and the
payment of any other sums, monies, costs, charges or expenses required to be
paid by Tenant hereunder with such abatements to be calculated by multiplying
such amount by a fraction, the numerator of which is the square footage of the
Demised Property that is being repaired, restored and altered and the
denominator of which is the total square footage of the Demised Premises. Base
Rent payable after any such taking and after all such repairs and restoration
are effected by Landlord will thereafter be reduced in the same proportion as
the gross leaseable area of the improvements is reduced and not repaired and
restored as provided for above by or as a consequence of such condemnation.
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12.3. Liability upon Condemnation. If there is a condemnation, Landlord shall
have no liability to Tenant on account of any (a) interruption of Tenant's
business upon the Property, (b) diminution in Tenant's ability to use the
Property, or (c) other injury or damage sustained by Tenant as a result of such
Condemnation.
12.4. Condemnation Proceedings. Except for any proceeding brought by Tenant
under the provisions of subsection 12.1.3, Landlord shall be entitled to conduct
any such condemnation proceeding and any settlement thereof free of interference
from Tenant, and Tenant hereby waives any right which it otherwise has to
participate therein.
13. ASSIGNMENT AND SUBLETTING
13.1. Landlord's Consent. Tenant hereby acknowledges that Landlord has entered
into this Lease because of Tenant's financial strength, goodwill, ability and
expertise and that, accordingly, this Lease is one which is personal to Tenant,
and Tenant agrees that it will not directly or indirectly (a) assign its rights
under this Lease, or (b) make or permit any total or partial sale, lease, use,
sublease, assignment, conveyance, license, mortgage, pledge, encumbrance or
other transfer of this Lease, any interest of Tenant in this Lease, any or all
of the Property or the occupancy or use thereof (each of which is hereinafter
referred to as a "Transfer"), without first obtaining Landlord's written consent
thereto (which consent shall not be unreasonably withheld by Landlord). Any such
consent shall not constitute a consent to any subsequent Transfer, whether by
the person hereinabove named as "Tenant" or by any such transferee). Landlord
shall be entitled to condition such consent upon the entry by such assignee into
an agreement with Landlord providing for such assignee's assumption of all of
Tenant's obligations hereunder. Any person to whom any Transfer is attempted
without such consent shall have no claim, right or remedy whatsoever hereunder
against Landlord, and Landlord shall have no duty to recognize any person
claiming under or through the same. No such action taken with or without such
Landlord's consent shall in any way relieve or release Tenant and all guarantors
of Tenant's performance under this Lease from liability for the timely
performance of all of Tenant's obligations hereunder. If Tenant fails to obtain
the written consent of Landlord as provided in this Section 13.1 and undertakes
any of the activities described therein, then in addition to the same
constituting an Event of Default hereunder any and all options to extend the
term of this lease as set forth in Section 2.4 of this Lease shall automatically
terminate and thereafter to be null and void and of no further force and effect.
For purposes of the foregoing provisions of this subsection, a transfer by any
person or persons controlling Tenant on the date hereof, of such control to a
person or persons not controlling Tenant on the date hereof shall be deemed a
Transfer of this Lease except that public trading on the New York or American
Stock Exchange or in the NSDAQ over-the-counter market shall not constitute such
a Transfer. Landlord shall be entitled to be paid by Tenant one-half of any
profit derived by Tenant from any Transfer.
14. SUBORDINATION; ATTORNMENT AND NON-DISTURBANCE
14.1. Subordination of Lease. This Lease shall be subject and subordinate to the
lien of any and all mortgages, deeds of trust, ground leases and/or other
similar instrument of encumbrance heretofore or hereafter covering the Property
or any part thereof (and each renewal, modification, consolidation, replacement,
increase or extension thereof) (each of which is hereinafter referred to as a
"Mortgage"), all automatically and without the necessity of any action by either
party hereof; provided that such underlying landlord or the holder of such a
Mortgage in writing (in recordable form) will agree that in the event of the
termination of the underlying lease or foreclosure of the Mortgage (i) this
Lease shall not be terminated thereby and (ii) Tenant's right of possession
hereunder shall not be disturbed so long as Tenant is not in default under this
Lease. Documentation required by any such Landlord, the holder of such a
Mortgage or Tenant under this Section 14.1 shall be in a form as may be
reasonably requested by such landlord or the holder of such a Mortgage and shall
be executed by all appropriate parties to the extent required to give effect to
the subordination and other provisions provided for herein. Landlord represents
that as of the date of this Agreement of Lease there are no mortgages or deeds
of trusts encumbering the Property.
14.2. Tenant's Execution of Documents. Subject to the provisions of Section 15.1
Tenant shall, promptly at the request of Landlord or the holder of any such
Mortgage, execute, seal, acknowledge and deliver such further instrument or
instruments,
14.2.1. Evidencing such subordination and non-disturbance as contemplated in
Section 15.1 as Landlord or the holder of such Mortgage deems reasonably
necessary or desirable, and (at the request of the holder of such a Mortgage)
attorning to such holder,
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14.2.2. Provided that such holder agrees with Tenant that such holder will, in
the event of foreclosure of any such Mortgage (or termination of any such
underlying lease) take no action to interfere with Tenant's rights hereunder,
except on the occurrence of an Event of Default as defined in Section 15 hereof.
14.3. Lease Made Superior Upon Request. Anything in this Section 14 to the
contrary notwithstanding, in the event any such underlying landlord or any
Mortgagee requests that this Lease be made superior, rather than subordinate, to
any such Mortgage, then Tenant, within ten (10) days following Landlord's
written request therefor, agrees to execute and deliver, without charge, any and
all documents (in form acceptable to Landlord and such underlying landlords or
Mortgagees) effectuating such priority.
15. DEFAULT
15.1. Definition. As used in the provisions of this Lease each of the following
events shall constitute and is hereinafter referred to as an "Event of Default";
15.1.1. If Tenant fails (a) to pay any Rent or any other sum which it is
obligated to pay by any provision of this Lease, when and as due and payable
hereunder and without demand therefor, or (b) to perform any of its other
obligations under the provisions of this Lease; or
15.1.2. If Tenant (a) applies for or consents to the appointment of a receiver,
trustee or liquidator of Tenant or of all or a substantial part of its assets,
(b) files a voluntary petition in bankruptcy or admits in writing its inability
to pay its debts as they come due, (c) makes an assignment for the benefit of
its creditors, (d) files a petition or an answer seeking a reorganization or an
arrangement with creditors, or seeks to take advantage of any insolvency law,
(e) performs any other act of bankruptcy, or (f) files an answer admitting the
material allegation of a petition filed against Tenant in any bankruptcy,
reorganization or insolvency proceeding; or
15.1.3. If (a) an order, judgment or decree is entered by any court of competent
jurisdiction adjudicating Tenant as bankrupt or insolvent, approving a petition
seeking such reorganization, or appointing a receiver, trustee or liquidator of
Tenant or of all or a substantial part of its assets, or (b) there otherwise
commences as to Tenant or any of its assets any proceeding under any bankruptcy,
reorganization, arrangement, insolvency, readjustment, receivership, or similar
law, and if such order, judgment, decree or proceeding continues unstayed for
more than sixty (60) consecutive days after any stay thereof expires.
15.1.4. If Tenant (a) assigns its rights under this Lease or (b) makes or
permits any total or partial sale, lease, use, sublease, assignment, conveyance,
license, mortgage, pledge, encumbrance or other transfer of this Lease, any
interest of Tenant in this Lease, any and all of the Property or the occupancy
or use thereof without first obtaining Landlord's written permission.
15.1.5. If Tenant is deemed to have occasioned an Event of Default pursuant to
Paragraph 15.1 of the lease of even date herewith by and between Landlord and
Tenant for land and a building located at 518 East Greenville Boulevard,
Greenville, North Carolina 27834, adjacent to the parking lot described in this
Lease, subject to the cure provisions contained therein, if any.
15.2. Notice to Tenant: Grace Period. Anything contained in the provisions of
this Section to the contrary notwithstanding, on the occurrence of an Event of
Default Landlord shall not exercise any right or remedy which it holds under any
provision of this Lease or applicable law unless and until
15.2.1. Landlord has given written notice thereof to Tenant, and
15.2.2. Tenant has failed within five (5) days after its receipt of such notice
to cure any default described in Section 15.1.1(a) above default and thirty (30)
days after its receipt of such notice to cure any other Event of Default
described in Section 15.1.1(b) above; provided, that
15.2.3. No such notice shall be required, and Tenant shall be entitled to no
such grace period, (a) in any emergency situation in which Landlord acts to cure
an Event of Default or (b) in the case of any Event of Default enumerated in the
provisions of subsections 15.1.2, 15.1.3 or 15.1.4
15.3. Landlord's Rights on Event of Default. On the occurrence of any Event of
Default, Landlord may (subject to the operation and effect of the provisions of
Section 15.2)
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15.3.1. Re-enter and repossess the Property and any and all improvements thereon
and additions thereto and remove all persons and property therefrom either by
summary dispossess proceedings or by a suitable action or proceeding at law or
in equity, or by force or otherwise, without being liable for any damage
therefor. No re-entry by Landlord shall be deemed an acceptance of a surrender
of this Lease;
15.3.2. Declare the entire balance of the Rent for the remainder of the Term to
be due and payable for which Tenant will immediately pay Landlord the present
value and worth of future rentals discounted to the date that would otherwise
have been the expiration of the Term at a rate equal to the prime rate announced
by Crestar Bank as its primate rate of lending on the date of such declaration
by Landlord; and, collect such amount in any manner not inconsistent with
applicable law;
15.3.3. Terminate this Lease;
15.3.4. Relet any or all of the Property for Tenant's account for any or all of
the remainder of the Term or for a period exceeding such remainder, in which
event Tenant shall pay to Landlord, at the times and in the manner specified by
the provisions of Section 3, the Base Rent and any Additional Rent accruing
during such remainder, as well as the cost to Landlord of any reasonable
attorney's fees or for any repairs or cost of reletting or other action
(including those taken in exercising Landlord's rights under any provision of
this Lease) taken by Landlord on account of such Event of Default but in no
event shall Landlord be liable in any respect for failure to relet the Property
or in the event of such reletting, for failure to collect the Rent thereunder it
being agreed by Tenant that Landlord has no duty to mitigate Tenant's damages
and any sums received by Landlord on a reletting in excess of the rent reserved
for this Lease shall belong to the Landlord.
15.3.5. Cure such Event of Default in any other reasonable manner (after giving
Tenant written notice of Landlord's intention to do so except in the case of
emergency), in which event Tenant shall reimburse Landlord for all reasonable
expenses incurred by Landlord in doing so, plus interest thereon at a lesser of
the rate of twelve percent (12%) per annum or the highest rate then permitted on
account thereof by applicable law, which expenses and interest shall be
Additional Rent and shall be payable by Tenant immediately on demand therefor by
Landlord; and/or
15.3.6. Pursue any combination of such remedies and/or any other remedy
available to Landlord on account of such Event of Default at law or in equity.
15.4. Landlord's Right to Perform Tenant's Covenants. If Tenant shall default in
the performance of any covenant or condition in this Lease required to be
performed by Tenant, Landlord may, after thirty (30) days' notice for
non-monetary defaults, or after five (5) days' notice in the event of a monetary
default or if, in Landlord's opinion, an emergency exists, perform such covenant
or condition for the account and at the expense of Tenant. If Landlord shall
incur any expense, including reasonable attorney's fees, in instituting,
prosecuting, or defending any action or proceeding instituted by reason of any
default of Tenant, Tenant shall reimburse Landlord for the amount of such
expense. In the event Tenant, pursuant to this Lease, becomes obligated to
reimburse or otherwise pay Landlord any sum of money in addition to the specific
Rent, the amount thereof shall be deemed Additional Rent and may, at the option
of Landlord, be added to any subsequent installment of the Rent due and payable
under this Lease, in which event, Landlord shall have the remedies for default
in the payment thereof provided by this Lease. The provisions of this Section
shall survive the termination of this Lease.
15.5. No Waiver. No action taken by Landlord under the provisions of this
Section shall operate as a waiver of any right which Landlord would otherwise
have against Tenant for the Rent hereby reserved or otherwise, and Tenant shall
remain responsible to Landlord for any loss and/or damage suffered by Landlord
by reason of any Event of Default.
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16. ESTOPPEL CERTIFICATE
Tenant shall from time to time, within five (5) days after
being requested to do so by Landlord or any mortgagee, execute, seal,
acknowledge and deliver to Landlord (or, at Landlord's request, to any existing
or prospective purchaser, transferee, assignee or mortgagee of any or all of the
Property, any interest therein or Landlord's rights under this Lease) an
estoppel certificate in recordable form which shall include the status of this
Lease: (a) certifying (i) that his Lease is unmodified and in full force and
effect (or, if there had been any modification hereof, that it is in full force
and effect as so modified, stating therein the nature of such modification);
(ii) the amount of the Base Rent; (iii) as to the dates to which the Base Rent
and any Additional Rent and other charges arising hereunder have been paid; (iv)
as to the amount of any security deposit or prepaid Rent or any credit due to
Tenant hereunder; (v) that Tenant has accepted possession of the Property, and
the date on which the Term commenced; (vi) as to whether, to the best knowledge,
information and belief of the signer of such certificate, Landlord or Tenant is
then in default in performing any of its obligations hereunder (and, if so,
specifying the nature of each such default); and (vii) as to any other factor
condition requested by Landlord or such other addressee; and (b) acknowledging
and agreeing that any statement contained in such certificate may be relied upon
by Landlord and any other addressee.
17. QUITE ENJOYMENT
So long as Tenant is in compliance with the terms of this
Lease, Tenant shall lawfully, peaceably and quietly have, hold, occupy and enjoy
the Demised Premises during the term of this Lease without hindrance or ejection
by Landlord.
18. NOTICES
Any notice, demand, consent, approval, request or other
communication or document to be provided hereunder to a party hereto shall be
(a) given in writing, and (b) deemed to have been given (i) upon placement as
certified or registered mail in the United States mails, postage prepaid, return
receipt requested, or sent by Federal Express (or other express delivery
services which promise delivery the following business day) to the address of
such party set forth hereinabove or to such other address in the United States
of America as such party may designate from time to time by notice to the other
or (ii) (if such party's receipt thereof is acknowledged in writing) upon its
hand or other delivery to such party, but if directed to Tenant, to the
attention of its Corporate Secretary.
19. GENERAL
19.1. Effectiveness. This lease shall become effective upon and only upon its
execution and delivery by each party hereto.
19.2. Entire Agreement. This Lease represents the complete understanding between
the parties hereto as to the subject matter hereof, and supersedes all prior
written or oral negotiations, representations, warranties, statements or
agreements between the parties hereto as to the same.
19.3. Amendment. This Lease may be amended by and only by a written instrument
executed and delivered by each party hereto.
19.4. Applicable Law. This Lease shall given effect and construed by application
of the laws of the Commonwealth of Virginia, and any action or proceeding
arising hereunder shall be brought in the courts of said state; provided, that
if such action or proceeding arises under the Constitution, laws or treaties of
the United States of America, or there is a diversity of citizenship between the
parties thereto, so that it is to be brought in a United States District Court,
it shall be brought in the United States District Court for the Eastern District
of Virginia.
19.5. Waiver. Landlord shall not be deemed to have waived the exercise of any
right which it holds hereunder unless such waiver is made expressly and in
writing (and o delay or omissions by Landlord in exercising any such right shall
be deemed to be a waiver of its future exercise). No such waiver as to any
instance involving the exercise of any such right shall be deemed a waiver as to
any other such instance, or any other such right.
19.6. Time of Essence. Except as provided in Section 19.20 hereof, time shall be
of the essence of this Lease.
19.7. Headings. The headings of the Sections, subsections, paragraphs and
subparagraphs hereof are provided herein for and only for convenience of
reference, and shall not be considered in construing their contents.
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19.8. Construction. As used herein,
19.8.1. The term "person" means a natural person, a trustee, a corporation, a
partnership and any other form of legal entity; and
19.8.2. All references made (a) in the neuter, masculine or feminine gender
shall be deemed to have been made in all such genders, (b) in the singular or
plural number shall be deemed to have been made, respectively, in the plural or
singular number as well, and (c) to any Section, subsection, paragraph or
subparagraph shall, unless therein expressly indicated to the contrary, be
deemed to have been made to such Section, subsection, paragraph or subparagraph
of this Lease.
19.9. Exhibits. Each writing or plat referred to herein as being attached hereto
as an exhibit or otherwise designated herein as an exhibit hereto is hereby made
a part hereof.
19.10. Severability. No determination by any court, governmental body or
otherwise that any provision of this Lease or any amendment hereof is invalid or
unenforceable in any instance shall affect the validity or enforceability of (a)
any other such provision, or by such provision in any circumstance not
controlled by such determination. Each such provision shall be valid and
enforceable to the fullest extent allowed by, and shall be construed wherever
possible as being consistent with, applicable law.
19.11. Definition of "Landlord".
19.11.1. As used herein, the term "Landlord" means the person hereinabove named
as such, and its heirs, personal representatives, successors and assigns (each
of whom shall have the same rights, remedies, powers, authorities and privileges
as it would have had, had it originally signed this Lease as Landlord).
19.11.2. No person holding Landlord's interest hereunder (whether or not such
person is named as "Landlord" herein) shall have any liability hereunder after
such person ceases to hold such interest, except for any such liability accruing
while such person holds such interest.
19.11.3. Anything contained in this Lease to the contrary notwithstanding Tenant
agrees that it shall look solely to the estate and property of Landlord in the
Property for the collection of any judgment (or other judicial process)
requiring the payment of money by Landlord in the event of any default or breach
by Landlord with respect to any of the terms and provisions of this Lease to be
observed and/or performed by Landlord, subject, however, to the prior rights of
the holder of any Mortgage covering the Property, and no other assets of
Landlord shall be subject to levy, execution or other judicial process for the
satisfaction of Tenant's claim. This provision shall not be deemed, construed or
interpreted to be or constitute an agreement, express or implied, between
Landlord and Tenant that Landlord's interest hereunder and in the Property, or
any part thereof, shall be subject to impressment of an equitable lien.
19.11.4. In the event of the sale, assignment or transfer by Landlord of the
Property (other than a collateral assignment to secure a debt of Landlord) to a
successor in interest who expressly assumes the obligations of Landlord under
this Lease, Landlord shall thereupon be released or discharged from all of its
covenants and obligations under this Lease, except such obligations as shall
have accrued prior to any such sale, assignment or transfer; and Tenant agrees
to look solely to such successor in interest of Landlord for performance of such
obligations. Any securities given by Tenant to Landlord to secure the
performance of Tenant's obligations under this Lease may be assigned by Landlord
to such successor in interest of Landlord; and, upon acknowledgment by such
successor of receipt of such security and its express assumption of its
obligation to account to Tenant for such security in accordance with the terms
of this Lease, Landlord shall thereby be discharged of any further obligation
relating thereto. Landlord's assignment of the Lease or of any or all of its
rights herein shall in no manner affect Tenant's obligations hereunder. Tenant
shall thereafter attorn and look to such assignee as Landlord, provided Tenant
has first received written notice of such assignment of Landlord's interest.
19.12. Definition of "Tenant". As used herein, the term "Tenant" means each
person hereinabove named as such and such person's heirs, personal
representatives, successors and assigns, each of whom shall have the same
obligations, liabilities, rights and privileges as it would have possessed had
it originally executed this Lease as Tenant; provided, that no such right or
privilege shall inure to the benefit of any assignee of Tenant or other party
referenced in Section 13 hereof, immediate or remote, unless the assignment to
such assignee or transferee is made in accordance with the provisions of Section
13. Whenever two or more persons constitute Tenant, all such persons hall be
jointly and severally liable for performing Tenant's obligations hereunder.
146
<PAGE>
19.13. Memorandum of Lease. Tenant will at any time, at the request of Landlord,
promptly execute duplicate originals of an instrument, in recordable form, which
will constitute a memorandum of lease, setting forth a description of the
Property, the term of this Lease, the addresses for the parties, all other
provisions or information required by applicable law, and, excepting the rental
provisions, any other information as Landlord may reasonably request. This Lease
or memorandum of this Lease may be recorded, at Landlord's or Tenant's option,
and the party so recording agrees to pay all recordation costs and taxes levied
thereon.
19.14. Attorneys' Fees. If any Rent or other debt owning by Tenant to Landlord
under this Lease is attempted to be collected by or through an attorney at law,
the losing party in any dispute regarding such Rent or debt agrees to pay the
reasonable attorneys' fees of the prevailing party in connection therewith.
19.15. Rights Cumulative. All rights, powers and privileges conferred hereunder
upon parties hereto shall be cumulative but not restricted to those given by
law.
19.16. Brokers' Commission. Each party represents and warrants to the other that
there are no claims for brokerage commissions or finder's fees in connection
with the execution of this Lease, and each party agrees to indemnify the other
against, and hold it harmless from, all liabilities arising from any such claim
(including, without limitation, the cost of counsel fees) in connection with or
relating to brokers or finders.
19.17. Corporate Tenant. If Tenant is or will be a corporation, the persons
executing this Lease on behalf of Tenant hereby covenant, represent and warrant
that Tenant is a duly incorporated or a duly qualified (if a foreign
corporation) corporation and authorized to do business in the state in which the
Property is located; and that the person or persons executing this Lease on
behalf of Tenant is an officer or are officers of such Tenant, and the he or
they as such officers were duly authorized to sign and execute this Lease. Upon
request of Landlord to Tenant, Tenant shall deliver to Landlord documentation
satisfactory to Landlord evidencing Tenant's compliance with the provisions of
this Section 19.17.
19.18. Dower and Curtesy. Florence T. Meyers, Anne H. Meyers and Nathaniel
Krumbein join in this Lease for the sole purpose of subordinating their
respective dower and curtesy interest in the Property to the terms and
conditions of this Agreement of Lease.
19.19. Waiver of Jury Trial. Landlord and Tenant each waive trial by jury of any
or all issues arising in any action or proceeding between the parties hereto or
their successors in connection with its Lease or any of its provisions.
19.20. Force Majeur. Anything contained in this Lease to the contrary
notwithstanding, Landlord shall not be deemed in default with respect to the
performance of any of the terms, covenants and conditions of this Lease
incumbent on it to perform or be liable to the Tenant in damages if same shall
be due to any strike, lockout, civil commotion, labor controversy, war-like
operation, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulation or control, inability to obtain any material,
service, fuel, supply or financing, accidents, bombing threat, violence, threat
of violence, breach of peace, Act of God or other cause beyond the control of
Landlord.
147
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed this Lease or caused
it to be executed on its behalf by its duly authorized representatives, as of
the day and year first above written.
LANDLORD:
------------------------------
HYMAN MEYERS
------------------------------
S. SIDNEY MEYERS
------------------------------
AMY M. KRUMBEIN
TENANT:
HEILIG-MEYERS FURNITURE COMPANY,
a North Carolina corporation
By:____________________________
Name:
Title:
THIRD PARTY SIGNATORS:
------------------------------
FLORENCE T. MEYERS
------------------------------
ANNE H. MEYERS
------------------------------
NATHANIEL KRUMBEIN
148
<PAGE>
EXHIBIT 10.aaa
THIS LEASE, dated as of this 30th day of August, 1986, by and between
Meyers-Thornton Investment Co.("Landlord")and Heilig-Meyers Company ("Tenant').
W I T N E S S E T H:
1. Landlord hereby leases to Tenant, subject to the terms and
conditions hereof, the following described property together with all
improvements thereon and appurtenances thereunto belonging (the "Premises"):
That certain described tract or parcel of land with all improvements
thereon and appurtenances thereunto belonging, lying and being in
Whiteville township, Columbus County, State of North Carolina bounded
and described as follows, to wit:
Beginning at an iron pin in the western edge of old U.S. Highway 701,
now a continuation of Madison Street in the town of Whiteville, said
beginning point being 180.65 feet southwardly from the southwestern
intersection of the western line of old U.S. Highway 701 and the
southern line of State N. C. Road No. 1949, thence from said point of
beginning southwardly along the western line of old U.S. route 701 (a
course of south 32(degree)m 49' west) a distance of 225.77 feet to a
concrete monument; thence north 60(degree) 37' west a distance of
300.45 feet to an iron pin; thence north 32(degree) 29' east a distance
of 243.6 feet to an iron pin; thence south 57(degree) 13' east a
distance of 301.34 feet to the point and place of beginning.
for a term of fifteen (15) years, commencing on August 1, 1986 and ending on
July 31, 2001 at 12:00 Midnight.
2. (a) Beginning with the commencement date, Tenant shall pay to
Landlord a monthly rental of Four thousand five hundred two and 08/100 dollars
($4,502.08) payable in advance on the first day of every month.
(b) The annual rental shall be changed every three (3) years to an
amount equal to four (4) percent of Tenant's net sales at the Premises for the
previous year. Previous year is defined as the last full fiscal year prior to
the anniversary date of this Lease. Net sales is defined as gross sales less
returned sales and sales taxes. Credit service charges, insurance and service
sales are not included in "Net Sales".
3. Tenant agrees that it shall:
(a) pay all charges for water, electricity, gas and other
utilities;
(b) Keep the interior ad exterior of the Premises, together with
all plumbing, heating, air conditioning, ventilating, electrical and mechanical
equipment in good order and repair (including termite control) at its own
expense; and upon termination of this Lease surrender the same in as good
condition as then received, expecting depreciation caused by ordinary wear and
tear and damage caused by fire, accident, casualty or act of God;
(c) Cause the Premises to be insured against loss by fire with
extended coverage in an amount sufficient for replacement of the Premises in the
event of total loss by facilities of the same size and quality as existed prior
to such loss;
149
<PAGE>
(d) Pay when due all ad valorem real estate taxes and assessments
against the Premises. (All real estate taxes payable by Tenant shall be prorated
as of the commencement date and to the termination date of this Lease. Landlord
shall promptly forward to Tenant all bills received by Landlord for taxes which
are to be paid be Tenant, and Tenant shall deliver promptly thereafter to
Landlord receipts evidencing payment of all such taxes. Tenant may file in the
name of Landlord all such protests or other instruments and institute and
prosecute proceedings for the purpose of contesting any of such taxes, but
shall, at the request of Landlord, furnish reasonable assurance to Landlord
indemnifying it against any loss or liability by reason of such contest. Tenant
shall not be deemed to be in default hereunder so long as Tenant shall in good
faith contest such tax. Nothing herein contained shall be construed to obligate
Tenant to pay any part of any income, estate or inheritance tax assessed any
governmental authority against the Landlord, its successors or assigns.);
(e) Tenant agrees, at its own expense, to promptly comply with all
requirements of any legally constituted public authority.
(f) Not use or permit the Premises to be used for any unlawful
or disorderly purpose; and
(g) Permit Landlord to post one "For Rent" sign to and to exhibit
the Premises to prospective tenants during the last six (6) months of the
Lease's duration provided that Landlord shall cause the least possible
disruption of Tenant's business.
4. Tenant shall have the right to:
(a) As its own expense make such alterations, changes and
improvements to the Premises (including installation of signs) as Tenant may
deem necessary; provided, however, that no structural alternations to the
Premises shall be made without Landlord's consent;
(b) Assign or sublet the Premises or any portion thereof without
consent; provided, however, that no such assignment or subletting shall relieve
Tenant of liability for the performance of the terms and conditions of this
Lease; and
(c) Remove any equipment, improvements or fixtures installed by
it, except that Tenant may elect to leave the same, in which event they shall
become the property of Landlord upon termination of this Lease.
5. Landlord agrees that it shall:
(a) Take no action (except at Tenant's request) which would cause
an increase in the taxes or insurance premiums assessable with respect to the
Premises;
(b) Reimburse Tenant for one half of the taxes and insurance
premiums paid with respect to the Premises; and
(c) Hold Tenant and its agents harmless for any and all claims and
demands resulting from acts or omissions of Landlord or its agents.
6. Landlord covenants, warrants and agrees:
(a) That Landlord has full and complete authority to make this
Lease and that so long as Tenant is not in default hereunder, Tenant shall have
quiet and peaceable possession and enjoyment of the Premises for the duration of
this Lease without hindrance on the part of Landlord or any other parties and
that Landlord shall warrant and defend Tenant in such possession against the
claim of al parties;
(b) That Landlord shall deliver to Tenant physical possession of
the Premises upon the commencement of the term, free and clear of all tenants
and occupants ad the rights of either, and of all encumbrances and violations of
laws relating to the use and occupancy of the Premises; and
(c) That the Premises and all plumbing, heating, air conditioning,
ventilating, electrical and mechanical equipment are in good condition and
operating order.
7. Landlord and Tenant hereby waive all claims against each other for
loss or damage caused by fire or perils capable of coverage by standard fire and
extended coverage insurance, regardless of the cause of such damage. Landlord
and Tenant will cause an appropriate waiver of subrogation provision to be
inserted in their policies of insurance on the Premises.
150
<PAGE>
8. (a) Tenant shall maintain at is expense, throughout the term,
insurance covering the building and other improvements now or hereafter existing
upon the property against loss or damage by fire or such other risk now or
hereafter embraced by the term "extended coverage" and by vandalism and
malicious mischief, in an amount not less than the full insurable value as
determined by Tenant's insurer. As used in this subsection, the term "full
insurable value" shall mean the actual replacement cost, excluding foundation an
excavation costs, without deduction for physical depreciation as such
replacement cost shall be adjusted by Tenant's insurer every year due to changes
in the cost of construction and other relevant factors.
(b) Tenant shall maintain at its expense, throughout the term,
insurance against loss or liability in connection with bodily injury, death,
property damage or destruction, occurring on or about the property or arising
out of the use thereof by Tenant or its agents, employees, officers or invitees,
visitors and guests, under on e or more policies of comprehensive public
liability insurance, including insurance against assumed or contractual
liability under this Lease, having such limits as to each as are reasonably
required by Landlord from time to time, but in any event of not less than Two
Million Five Hundred Thousand Dollars ($2,500,000.00) for bodily injury to or
death of all persons and for property damage or destruction in anyone
occurrence.
(c) Each policy referenced above shall (a) name as the insureds
thereunder Landlord and Tenant and, at landlord's request, any mortgagee of
Landlord holding a note secured by a deed of trust or other security instrument
encumbering the Property); except that for the policies described in subsection
8(b) Landlord shall be named as an additional insured (b) by its terms, not be
cancelable without at least thirty (3) days prior written notice to Landlord
(and, at Landlord's request, any mortgagee), and (c) be issued by an insurer of
recognized responsibility licensed to issue such policy in the state where the
Property is located. At least five (5) days before the commencement date, Tenant
shall deliver to Landlord each such policy or a certificate of insurance for
each such policy, and at least thirty (30) days before any such policy expires,
Tenant shall deliver to Landlord a replacement policy or certificate therefor.
(d) General. In the event that, at any time during the term of
this Agreement of Lease, the buildings and improvements portion of the property
(i) are destroyed or (ii) are damaged to the extent of fifty percent (50%) or
more of their Gross Leasable Area, then within sixty (60) days after such damage
or destruction, Tenant shall notify Landlord of its exercise of or its desire
not to exercise the hereby granted option to terminate this Agreement of Lease
not later than and effective on the end of such sixty (60) day period. Failure
to so exercise such option will obligate Tenant to repair and restore the
property as hereinafter rp4rovided. In all other events, Tenant shall repair and
restore the property as hereinafter provided.
(e) Repair and Rebuilding. In the event that Tenant does not
terminate this Agreement of Lease as provided for in Section 8 above and in all
other events, the Tenant, at its own cost and expense, shall, subject to the
other provisions of this Section 8, cause the same to be repaired, replaced or
rebuilt as nearly as possible to its condition immediately prior to the damage
or destruction subject to such alterations or changes as Tenant may elect to
make in conformity with Section 8 hereof within a period of time which, under
all prevailing circumstances, shall be reasonable. If Tenant shall exercise its
option to terminate this Lease, this Lease shall expire automatically as
provided in subsection 8(d) in which event Tenant shall be under no obligation
to repair, replace or rebuild the buildings and improvements on the property but
shall clear away the ruins and leave the Demised Premises in a clean, orderly
and slightly condition. In the event that (i) Tenant shall fail to give notice
of its exercise of its option to terminate within such period or (ii) if the
buildings and improvements on the demised Premises shall not be damaged to the
extent of more than fifty percent (505) of this gross leasable Area, then,
Tenant shall, subject to the other provisions of this Section 8, cause the same
to be repaired, replaced or rebuilt at its own cost and expense as herein
provided. If Tenant does not repair, replace or rebuild any damaged or destroyed
buildings or improvements, all insurance proceeds that are payable as a result
of the destruction or damage to such buildings or improvements plus the
deductible, if any, shall be paid to Landlord and this Agreement of Lease shall
terminate on the date of such payment.
151
<PAGE>
9. (a) If all or substantially all of the Property or such portion of
the improvements located on the property as to render the balance of such
improvements unsuitable in Landlord's and tenant's reasonable judgment for the
purposes of tenant is taken by the exercise of any power of eminent domain or is
conveyed to or at the direction of any governmental entity under a threat of any
such taking, Landlord shall be entitled to collect from such condemning
authority the entire amount of any award made in any such proceeding or as
consideration for such conveyance, without deduction therefrom for any leasehold
or other estate held by tenant under this lease, except as specifically provided
for herein this Lease shall terminate on the date that possession of the
property is taken by such condemning authority and all Rent, Taxes and other
charges payable hereunder will be apportioned and paid to such date.
(b) Tenant hereby (a) assigns to Landlord all of Tenant's right,
title and interest, if any, in any to any such award (b) waives any right that
it may otherwise have in connection with such condemnation, against Landlord or
such condemning authority, to any payment for (i) the value of the
then-unexpired portion of the Term, (ii) leasehold damages, and (iii) any damage
to or diminution of the value of Tenant's leasehold interest hereunder or any
portion of the Property not covered by such Condemnation, and (c) agrees to
execute any and all further documents which may be required to facilitate
Landlord's collection of any and all such awards; provided, however, that if
Tenant shall have made improvements or alterations to the property after the
date hereof and shall have not yet fully amortized its expenditures for such
improvements or alterations under generally accepted accounting procedures, then
Landlord shall, and hereby does, assign to Tenant out of any award paid to
Landlord a sum equal to the unamortized portion of any such expenditures
subject, in all events, (i) to all mortgagees of Landlord having been paid
amounts due to them form such award according to their loan documents and also
(ii) to their being available excess funds form the award to pay such amounts to
Tenant after all amounts due and owing to Landlord hereunder and its mortgagees
are paid from such award.
(c) Subject in all events to the operation and effect of the
foregoing provision of this Section, Tenant may seek a separate award on account
of any damages or costs incurred by Tenant as a result of such condemnation, so
long as such separate award in no way diminishes any award or payment which
Landlord would otherwise receive as a result of such Condemnation.
(d) Partial Condemnation. If a (i) portion of the Property that is
not improved by buildings or structures as of the date of this Lease or (ii) a
portion of the improvements portion of the property is so taken so that no
termination of this Lease occurs according to subsection 9(a), then Landlord is
entitled to collect form such condemning authority the entire amount of any
award in any such proceeding or as consideration for any such conveyance, this
Lease shall not terminate and Landlord shall, upon its receipt of such award in
condemnation, restore said building improvements to as complete a building as is
reasonable and practically possible in design, character and quality of the
conditions of the building immediately prior to the condemnation; provided
however, in any event, Landlord shall not be required to spend for any such
repair, restoration or alteration work an amount in excess of the amounts
received by Landlord as damage for the taking of such building improvements part
of the property and Tenant, at its own cost and expense shall make all necessary
repairs and alterations to its trade fixtures, decoration, signs, machinery and
contents. Base rent payable after any such taking will thereafter be reduced in
the same proportion as the gross leasable area of the improvement is reduced by
or as a consequence of such condemnation. There will be no reduction or
abatement of base rent or any other charges payable by Tenant hereunder in the
event Tenant is only temporarily deprived in whole or in part of the use of any
portion of the property, for a period not in excess of ninety (90) days.
(e) Liability Upon Condemnation. If there is a condemnation,
Landlord shall have no liability to Tenant on account of any (a) interruption of
tenant's business upon the property, (b) diminution in Tenant's ability to use
Th property, or (c) other injury or damage sustained by Tenant as a result of
such condemnation.
(f) Condemnation Proceedings. Except for any proceeding brought by
Tenant under the provisions of subsection 9(c), Landlord shall be entitled to
conduct any such condemnation proceeding and any settlement thereof free of
interference from Tenant, and Tenant hereby waives any right which it otherwise
has to participate therein.
152
<PAGE>
10. In the event Tenant shall default in the performance of any of the
terms herein contained and shall not remedy the same within thirty (30) days
after written notice thereof by Landlord or in the event Tenant cannot
reasonably remedy said default within thirty (30) days, if Tenant shall not
commence to cure within said thirty (30) day period and diligently pursue the
same to completion) or, if Tenant shall be adjudicated a bankrupt or shall make
a general assignment for the benefit of creditors, or if a receiver shall be
appointed for Tenant and not removed within sixty (60) days, Landlord shall have
the right to re-enter and take possession of the Premises and to remove any
property therein and to terminate this Lease. In he event of such termination,
Landlord may relet the Premises or any part thereof on such terms as it may
determine.
11. (a) All notices called hereunder shall be in writing and shall be
deemed to have been given when sent postage prepaid by registered of certified
mail, return receipt requested, to the address stated beside signature, or to
such other address as the party to receive such notice may hereafter direct by
written notice.
(b) This Lease sets forth the entire agreement of the parties
regarding the Premises, and there are no promises, agreement, conditions or
understandings, either oral or implied, other than as set forth herein. No
subsequent amendment or modification of this Lease shall be binding unless in
writing and signed by both parties.
(c) This Lease shall be binding upon and enure to the benefit of
the parties hereto, their heirs, successors, assigns, and legal representatives
WITNESS the following signatures and seals.:
TENANT:
HEILIG-MEYERS COMPANY
By: _____________________________
President
Address: 3228 West Cary Street
Richmond, VA 23221
(Corporate Seal)
ATTEST:
- -------------------------------
Secretary
LANDLORD:
MEYERS-THORNTON INVESTMENT CO.
By: _____________________________
Partner
Address:
153
<PAGE>
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;
HMY - RoomStore, Inc., incorporated under the laws of Virginia;
MacSaver Financial Services, Inc., incorporated under the laws of Delaware;
MacSaver Funding Corporation, Inc., incorporated under the laws of Delaware;
MacSaver Insurance Services, Ltd., incorporated under the laws of Bermuda;
Mattress Discounters Corporation, incorporated under the laws of Delaware;
Rhodes, Inc., incorporated under the laws of Georgia.
154
<PAGE>
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
Prospectuses of Heilig-Meyers Company relating to Common Stock issued and
issuable under the 1990 Stock Option Plan 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 Statements No. 33-54261 and No. 333-29105
on Form S-8 and related Prospectuses of Heilig-Meyers Company relating to
Common Stock issued and issuable under the 1994 Stock Option Plan of the
Company, and (v) the Registration Statements No. 333-07753, No. 333-29929,
No. 333-45129, No. 333-320825 and No. 333-64447 on Form S-3 and the related
Prospectuses of Heilig-Meyers Company of our report dated March 24, 1999,
except for note 17, as to which the date is June 1, 1999, 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, 1999.
/s/ Deloitte & Touche LLP
Richmond, Virginia
June 1, 1999
155
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Heilig-Meyers Company's Consolidated Statements of Operations and Consolidated
Balance Sheets and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> FEB-28-1999 FEB-28-1998 FEB-28-1997
<PERIOD-END> FEB-28-1999 FEB-28-1998 FEB-28-1997
<CASH> 67254 48779 14959
<SECURITIES> 190970<F1> 182158<F1> 243427<F1>
<RECEIVABLES> 297027 453071 638079
<ALLOWANCES> 42745 60306 41120
<INVENTORY> 493463 542868 433277
<CURRENT-ASSETS> 1130274 1293548 1134057
<PP&E> 605958 571477 497132
<DEPRECIATION> 205272 173326 130383
<TOTAL-ASSETS> 1947752 2097513 1837158
<CURRENT-LIABILITIES> 749941 702151 583920
<BONDS> 547344 715271 561489
0 0 0
0 0 0
<COMMON> 119722 117616 108828
<OTHER-SE> 485380 491538 533793
<TOTAL-LIABILITY-AND-EQUITY> 1947752 2097513 1837158
<SALES> 2431152 2160223 1342208
<TOTAL-REVENUES> 2726358 2469736 1593119
<CGS> 1637901 1451560 876142
<TOTAL-COSTS> 1637901 1451560 876142
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 107916 181645 80908
<INTEREST-EXPENSE> 75676 67283 47800
<INCOME-PRETAX> (3048) (84387) 61900
<INCOME-TAX> (1081) (29244) 21715
<INCOME-CONTINUING> (1967) (55143) 40185
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (1967) (55143) 40185
<EPS-BASIC> (0.03)<F2> (0.98)<F2> 0.81<F2>
<EPS-DILUTED> (0.03) (0.98) 0.80
<FN>
<F1> Represents retained interests in securitized receivables <F2> Represents
basic earnings per share </FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Heilig-Meyers Company's Consolidated Statements of Operations and Consolidated
Balance Sheets and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> FEB-28-1999 FEB-28-1999 FEB-28-1999
<PERIOD-END> NOV-30-1998 AUG-31-1998 MAY-31-1998
<CASH> 18804 35166 28056
<SECURITIES> 208670<F1> 174592<F1> 193078<F1>
<RECEIVABLES> 324399 415745 462176
<ALLOWANCES> 57021 61003 73121
<INVENTORY> 532264 539648 543763
<CURRENT-ASSETS> 1177853 1272620 1286903
<PP&E> 585788 571656 564854
<DEPRECIATION> 199965 182480 176144
<TOTAL-ASSETS> 1982933 2070056 2090121
<CURRENT-LIABILITIES> 695592 794839 817768
<BONDS> 583303 583926 584709
0 0 0
0 0 0
<COMMON> 119530 118154 117625
<OTHER-SE> 514674 503078 497613
<TOTAL-LIABILITY-AND-EQUITY> 1982933 2070056 2090121
<SALES> 1844849 1190155 593795
<TOTAL-REVENUES> 2072155 1343946 668939
<CGS> 1234260 799263 393432
<TOTAL-COSTS> 1234260 799263 393432
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 76338 45693 23199
<INTEREST-EXPENSE> 57247 38126 19140
<INCOME-PRETAX> 39529 29633 15872
<INCOME-TAX> 14303 10861 5678
<INCOME-CONTINUING> 25226 18952 10194
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 25226 18952 10194
<EPS-BASIC> 0.43<F2> 0.32<F2> 0.17<F2>
<EPS-DILUTED> 0.42 0.32 0.17
<FN>
<F1> Represents retained interest in securitized receivables
<F2> Represents basic earnings per share
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Heilig-Meyers Company's Consolidated Statements of Operations and Consolidated
Balance Sheets and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> FEB-28-1998 FEB-28-1998 FEB-28-1998
<PERIOD-END> NOV-30-1997 AUG-31-1997 MAY-31-1997
<CASH> 17370 16400 21848
<SECURITIES> 0 0 0
<RECEIVABLES> 760130 682981 671112
<ALLOWANCES> 113166 37985 47149
<INVENTORY> 513599 464604 443259
<CURRENT-ASSETS> 1320779 1229254 1169988
<PP&E> 558266 575419 532678
<DEPRECIATION> 161488 154971 138249
<TOTAL-ASSETS> 2121581 2058153 1906309
<CURRENT-LIABILITIES> 709064 573612 638889
<BONDS> 715345 735607 560912
0 0 0
0 0 0
<COMMON> 113573 113569 108830
<OTHER-SE> 533501 586609 543557
<TOTAL-LIABILITY-AND-EQUITY> 2121581 2058153 1906309
<SALES> 1606205 1004202 489040
<TOTAL-REVENUES> 1835004 1156537 566325
<CGS> 1063151 663943 319982
<TOTAL-COSTS> 1063151 663943 319982
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 149528 44861 22928
<INTEREST-EXPENSE> 48023 31529 15428
<INCOME-PRETAX> (39065) 36402 22000
<INCOME-TAX> (12983) 13362 8239
<INCOME-CONTINUING> (26082) 23040 13761
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (26082) 23040 13761
<EPS-BASIC> (0.47)<F2> 0.42<F2> 0.25<F2>
<EPS-DILUTED> (0.47) 0.41 0.25
<FN>
<F2> Represents basic earnings per share
</FN>
</TABLE>
