Exhibit 10(a)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of July 21, 2000,
between Donald S. Shaffer (the "Executive") and Heilig-Meyers Company, a
Virginia corporation (the "Company"), recites and provides as follows:
WHEREAS, the Board of Directors of the company (the "Board") expects that
the Executive will continue to make substantial contributions to the growth and
prospects of the Company, and
WHEREAS, the Board desires that the Company retain the services of the
Executive, and the Executive desires to continue his employment with the
Company, all on the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the Company and the Executive agree as follows:
1. Employment Period.
The Executive's term of employment shall continue until December 31, 2003,
unless terminated in accordance with the terms hereof. The term shall be
automatically renewed for successive one (1) year periods thereafter (the
"Employment Period"), unless either party gives notice to the other that
the terms shall not be renewed at least six (6) months before the
Employment Period (including automatic renewal thereof) expires.
2. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, the Executive shall serve as the
Chief Executive Officer of the Company as well as in such other
executive positions as directed by the Board.
(ii) The Board agrees that during the Employment Period it shall
nominate the Executive for election to the Board at each annual
meeting of shareholders and use its best efforts to cause the
Executive to be duly elected to the Board at each such meeting.
(iii)During the Employment Period, and excluding any periods of
vacation and leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period it shall not
be a violation of this Agreement for the Executive to (A) serve
on corporate, civic, charitable, furniture industry association
or professional association boards or committees (provided the
Executive obtains prior approval of the Board), (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of
the Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and
agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to the
Company.
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(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive shall
receive an annual base salary of seven hundred thousand dollars
($700,000.00) ("Annual Base Salary"), which shall be paid in
equal installments on a monthly basis. During the Employment
Period, the Annual Base Salary shall be reviewed at least
annually and shall be increased at any time and from time to time
as shall be substantially consistent with increases in base
salary generally awarded in the ordinary course of business to
other peer executives of the Company and its affiliated
companies. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As
used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus opportunity (the "Annual
Bonus") under the Company's Annual Performance-Based Bonus Plan
at least equal to his bonus opportunity immediately preceding the
Effective Date or, if more favorable to the Executive, under any
plans, practices, programs and policies of the Company and its
affiliates in effect generally from time to time after the
Effective Date with respect to other peer executives of the
Company and its affiliated companies.
(iii)Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all
incentive (including, without limitation, stock incentive),
savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and
retirement benefit opportunities, in each case, less favorable,
in the aggregate, than the most favorable of those provided by
the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any
time during the 90-day period immediately preceding the Effective
Date or if more favorable to the Executive, those provided
generally from time to time after the Effective Date to other
peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide
the Executive with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, those provided generally
from time to time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
employment expenses incurred by the Executive in accordance with
the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally from time to time after the Effective Date with
respect to other peer executives of the Company and its
affiliated companies.
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(vi) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect
generally from time to time after the Effective Date with respect
to other peer executives of the Company and its affiliated
companies.
(vii)Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the Executive by the
Company and its affiliated companies at any time during the
90-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally from time
to time after the Effective Date with respect to other peer
executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect generally
from time to time after the Effective Date with respect to other
peer executives of the Company and its affiliated companies.
3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the
Executive has occurred during the Employment Period (pursuant tot he
definition of Disability set forth below), it may give to the
Executive written notice in accordance with Section 11(b) of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive's duties with the
Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the
Executive's legal representative (such agreement as to acceptability
not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean (i) a material breach by the Executive of the Executive's
obligations under Section 2(a) (other than as a result of incapacity
due to physical or mental illness) which is demonstrably willful and
deliberate on the Executive's part, which is committed in bad faith or
without reasonable belief that such breach is in the best interests of
the Company and which is not remedied in a reasonable period of time
after receipt of written notice from the Company specifying such
breach or (ii) the conviction of the Executive of a felony involving
moral turpitude.
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(c) Notice of Termination. Any termination by the Company for Cause, or by
the Executive, shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 11(b). For
purposes of this Agreement, a "Notice of Termination" means a written
notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than 15
days after the giving of such notice). The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or
circumstance shall not waive any right of the Executive or the Company
hereunder or preclude the Executive or the Company from asserting such
fact or circumstance in enforcing the Executive's or the Company's
rights hereunder.
(d) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by
the Executive, the date of receipt of the Notice of Termination or any
later date specified therein, as the case may be, (ii) if the
Executive's employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on
which the Company notifies the Executive of such termination and (iii)
if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be.
4. Obligations of the Company upon Termination.
(a) Termination by Company Other than for Cause or Death. The Company may
terminate the Executive's employment during the Employment Period for
other than Cause or Death. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for
Cause or death:
(i) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the sum of (1) the
Executive's Annual Base Salary through the Date of Termination to
the extent not theretofore paid; (2) to the extent not
theretofore paid, the product of (A) the greater of (x) the
Annual Bonus paid or payable, including by reason of any
deferral, to the Executive (and annualized for any fiscal year
consisting of less than twelve full months or for which the
Executive has been employed for less than twelve full months) for
the most recently completed fiscal year during the Employment
Period, if any, and (y) the average annualized (for any fiscal
year consisting of less than twelve full months or with respect
to which the Executive has been employed for less than twelve
full months) bonus paid or payable, including by reason of any
deferral, to the Executive by the Company and its affiliated
companies in respect of the three fiscal years immediately
preceding the fiscal year in which the Date of Termination occurs
(such greater amount shall be hereinafter referred to as the
"Highest Annual Bonus") and (B) a fraction, the numerator of
which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365; (3)
any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) to the extent not
theretofore paid; and (4) any accrued vacation pay, to the extent
not theretofore paid (the sum of the amounts described in clauses
(1), (2), (3) and (4) shall be hereinafter referred to as the
"Accrued Obligations"); and
(ii) The Company shall pay to the Executive in lump sum in cash within
30 days after the Date of Termination the greater of (1) the Base
Salary otherwise payable to the Executive for the remainder of
the Employment Period or (2) one million nine hundred fifty
thousand dollars ($1,950,000.00), being the amount to which he
was entitled under his prior contract in the event of termination
by the Company other than for Cause; and
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(iii)For the remainder of the Employment Period, or such longer period
as any plan, program, practice or policy may provide, the Company
shall continue benefits to the Executive and/or the Executive's
family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and
policies described in Section 2(b)(iv) if the Executive's
employment had not been terminated in accordance with the most
favorable plans, practices, programs or policies of the Company
and its affiliated companies as in effect and applicable
generally to other peer executives and their families during the
90-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the
Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other
welfare benefits under another employer-provided plan, the
medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such
applicable period of eligibility (such continuation of such
benefits for the applicable period herein set forth shall be
hereinafter referred as to "Welfare Benefit Continuation"). For
purposes of determining eligibility of the Executive for retiree
benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained
employed until the end of the Employment Period and to have
retired on the last day of such period; and
(iv) To the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive and/or the Executive's
family any other amounts or benefits required to be paid or
provided or which the Executive and/or the Executive's family is
eligible to receive pursuant to this Agreement and under any
plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies as in effect and applicable
generally to other peer executives and their families during the
90-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally
thereafter with respect to other peer executives of the Company
and its affiliated companies and their families (such other
amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) Failure to Renew. In the event that the Employment Period shall end as
a result of the failure of either party to renew this Agreement, then
the Company shall pay to the Executive within thirty (30) days after
the end of the Employment Period a cash lump sum of one million nine
hundred fifty thousand dollars ($1,950,000.00) as a severance benefit.
(c) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of
Accrued Obligations (which shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination) and the timely payment or provision of the
Welfare Benefit Continuation and Other Benefits.
(d) Resignation. If Executive's employment is terminated by Executive
during the Employment Period, the Company shall pay him his Base
Salary to the date of termination and pro rata bonus for the year of
termination as determined under section 4(a)(i).
(e) Cause. If the Executive's employment shall be terminated for Cause
during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay
to the Executive his Annual Base Salary through the Date of
Termination plus the amount of any compensation previously deferred by
the Executive, in each case to the extent theretofore unpaid.
(f) Time of Payment. The Company shall make all payments required by this
Section 4 within the time periods provided in Section 4(a), 4(b) and
4(c); provided, however, that in the event that any such payments
would become non-deductible to the Company under the provisions of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Executive is a "covered employee" as defined in
Treas. Reg. Section 1.162-27(c)(2) for the taxable year of the Company
during which the Date of Termination occurred or for the immediately
preceding year, the Company shall make any such payment not earlier
than 90 days following the end of the Company's taxable year during
which the Executive last was a "covered employee."
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5. Nonexclusivity of Rights.
Except as provided in Sections 4(a)(iii), 4(b) and 4(c), nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company or
any of its affiliated companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any
of this affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program
or contract or agreement except as explicitly modified by this Agreement.
6. Full Settlement; Resolution of Disputes.
(a) The Company's obligation to make the payment provided for in this
Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions of
this Agreement and, except as provided in Section 4(a)(iii) with
respect to Welfare Benefit Continuation and Section 8(a) with respect
to non-competition, such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company agrees to pay, to
the full extent permitted by law, all reasonable legal fees and
expenses that the Executive may incur to enforce this Agreement and
that result from a breach of this Agreement by the Company; provided,
however that the reasonableness of the fees and expenses must be
determined by an independent arbitrator, using standard legal
principles, mutually agreed upon by the Company and the Executive in
accordance with rules set forth by the American Arbitration
Association.
(b) If there shall be any dispute between the Company and the Executive in
the event of any termination of the Executive's employment by the
Company or by the Executive, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring
that such termination was for Cause, the Company shall pay all
amounts, and provide all benefits, to the Executive and/or the
Executive's family or other beneficiaries, as the case may be, that
the Company would be required to pay or provide pursuant to Section
4(a) as though such termination were by the Company without Cause or
by the Executive; provided, however, that the Company shall not be
required to pay any disputed amounts pursuant to this paragraph except
upon receipt of an undertaking (which may be unsecured) by or on
behalf of the Executive to repay all such amounts to which the
Executive is ultimately adjudged by such court not to be entitled.
7. Confidential Information.
The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating
to the Company or any of this affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies
and which shall not be or become public knowledge (other than by acts by
the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or except as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section 7 constitute a basis
for deferring or withholding any amounts otherwise payable to the Executive
under this Agreement.
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8. Non-Compete; Non-Solicitation.
(a) Except as is set forth below, for a period commencing on the date
hereof and ending on the date 36 months after the Executive ceases to
be employed by the Company (the "Non-Competition Period"), the
Executive shall not in the United States of America, directly or
indirectly, either for himself or any other person, own, manage,
control, materially participate in, invest in, permit his name to be
used by, act as consultant or advisor to, render material services for
(along or in association with any person, firm, corporation or other
business organization) or otherwise assist in any manner any entity
that engages in or owns, invests in, manages or controls any venture
or enterprise engaged in the retail furniture industry (or any other
business of the type that constitutes a substantial portion of the
Company's business at the date the Executive ceases to be employed by
the Company) (collective, a "Competitor"); provided, however, that the
restrictions set forth above shall immediately terminate and shall be
of no further force or effect (i) in the event of a default by the
Company in the payment of any compensation or benefits to which the
Executive is entitled hereunder, which default is not cured within ten
(10) days after written notice thereof, or (ii) at the election of the
Executive if the Executive's employment has been terminated by the
Company other than for Cause and if the Executive (A) gives written
notice to the Company during the Non-Competition Period that he
desires to accept employment with a Competitor; and (B) agrees that
the severance payment specified in Section 4(a)(i) hereof shall be
mitigated by the amount of salary and pro rata target bonus payable to
the Executive by the Competitor and attributable to employment during
the Non-Competition Period (it being understood that the amount of
such mitigated severance shall be paid by the Executive to the Company
in a lump-sum payment within thirty (30) days after the Executive
commences employment with the Competitor). Nothing herein shall
prohibit the Executive from being a passive owner of not more than 2%
of the equity securities of a corporation engaged in such business
which is publicly traded, so long as he has no active participation in
the business of such corporation.
(b) During the Non-Competition Period, the Executive shall not, directly
or indirectly, (i) induce or attempt to induce or aid others in
inducing an employee of the Company to leave the employ of the
Company, or in any way interfere with the relationship between the
Company and an employee of the Company except in the proper exercise
of the Executive's authority, or (ii) in any way interfere with the
relationship between the Company and any customer, supplier, licensee
or other business relation of the Company.
(c) If, at the time of enforcement of this Section 8, a court shall hold
that the duration, scope, area or other restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that
the maximum duration, scope, area or other restrictions reasonable
under such circumstances shall be substituted for the stated duration,
scope, area or other restrictions.
(d) The covenants made in this Section 8 shall be construed as an
agreement independent of any other provision of this Agreement, and
shall survive the termination of this Agreement. Moreover, the
existence of any claim or cause of action of the Executive against the
Company or any of its affiliates, whether or not predicated upon the
terms of this Agreement, shall not constitute a defense to the
enforcement of these covenants.
9. Indemnity.
The Company will indemnify the Executive, in his capacity as an officer and
director of the Company, to the fullest extent permitted by the Company's
Articles of Incorporation and Bylaws.
10. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
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(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company to assume expressly
and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
11. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive to: If to the Company to:
Donald S. Shaffer Heilig-Meyers Company
c/o Heilig-Meyers Company 12560 West Creek Parkway
12560 West Creek Parkway Richmond, Virginia 23238
Richmond, Virginia 23238 Attention: Corporate Secretary
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amount payable under this Agreement
such Federal, state or local taxes as shall be required to be withhold
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the
Company may have hereunder, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
(f) Any entitlements to the Executive created under Section 2(b) shall be
contract rights to the extent not prohibited by law. However, the
Company shall not be required to amend, or refrain from amending, any
of its plans to so provide the contract rights.
(g) The Executive and the Company agree that as of the date hereof, this
Agreement supersedes and terminates the Employment Agreement between
the Company and the Executive dated September 22, 1999.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
HEILIG-MEYERS COMPANY
/s/ Robert M. Freeman
-----------------------------
By: Robert M. Freeman
Title: Chairman, Compensation
Committee of the Board of Directors
/s/ Donald S. Shaffer
-----------------------------
Donald S. Shaffer
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