UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 29, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7898
LOWE'S COMPANIES, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0578072
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
P. O. BOX 1111, NORTH WILKESBORO, N.C. 28656-0001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (336) 658-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
Which Registered
Common Stock $.50 Par Value New York Stock Exchange
Pacific Stock Exchange
The Stock Exchange (London)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 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 report(s), and (2) has been subject to
such filing requirements for the past 90 days. Yes x , No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ x ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant at April 2, 1999, based on a closing price of $61.31 per share, was
$21,994,116,483.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Class: COMMON STOCK, $.50 PAR VALUE, Outstanding at April 2, 1999:
359,217,081 shares.
Documents Incorporated by Reference
Annual Report to Security Holders for fiscal year ended January 29, 1999:
Parts I and II. With the exception of specifically referenced information, the
Annual Report to Security Holders for the fiscal year ended January 29, 1999
is not to be deemed filed as part of this report. Proxy Statement for the 1999
Annual Meeting which will be filed within 120 days after January 29, 1999:
Part III.
Part I
Item 1 - Business
General
Lowe's Companies, Inc. (Lowe's) is the second largest retailer of home
improvement products in the United States, with specific emphasis on do-it-
yourself (DIY) retail and commercial business customers. Lowe's specializes
in
offering products and services for home improvement, home decor, home
construction, repair and remodeling. Lowe's principal customer groups are DIY
retail customers and commercial business customers. At January 29, 1999,
Lowe's operated 484 stores in 27 states with more than 43 million square feet
of sales floor principally located in the eastern half of the United States.
Lowe's was incorporated in North Carolina in 1952 and has been a publicly
held company since 1961. Lowe's common stock is listed on the New York Stock
Exchange, the Pacific Stock Exchange, and the London Stock Exchange, with
shares trading under the ticker symbol "LOW." Lowe's general offices are
located in North Wilkesboro, North Carolina.
Lowe's has one reportable industry segment - the operation of home
improvement retail stores. Therefore, see Item 6 "Selected Financial Data"
for the historical data of revenues, profits and identifiable assets of the
Company.
Store Expansion
Since 1989, Lowe's has been implementing an aggressive store expansion
strategy, which has transformed Lowe's from a chain of small stores into a
chain of destination home improvement warehouses. Lowe's current prototype
store has a 115,000 square foot sales floor with a lawn and garden center
comprising approximately 35,000 additional square feet. Lowe's 1999 expansion
plan calls for opening 80 to 85 stores (including relocation of 30 to 35
older, smaller format stores). The following table illustrates the growth of
the Company over the last three years.
1998 1997 1996
Number of stores, beginning of year 446 402 365
New stores opened 45 42 47
Relocated stores opened 31 24 19
Stores closed (38) (22) (29)
Number of stores, end of year 484 446 402
In April 1998, Lowe's announced plans for a major expansion into the
western United States, with plans to build in excess of 100 new stores in
certain western markets over the next three to four years. The first of the
western stores are expected to open in Fall 1999. In November 1998, the
Company entered into a merger agreement with Eagle Hardware and Garden, Inc.
(Eagle), an operator of 36 home improvement centers in the western United
States. The acquisition of Eagle, which closed on April 2, 1999, enables
Lowe's to accelerate its West Coast expansion and provides an immediate
presence in a number of key metropolitan markets in the west. The Eagle
stores are in addition to Lowe's previously announced western market expansion
plans.
Customer Service
Lowe's serves both retail and commercial business customers. Retail
customers are primarily do-it-yourself homeowners and others buying for
personal and family use. Commercial business customers include building
contractors, repair and remodeling contractors, electricians, landscapers,
painters, plumbers and industrial purchasing agents. Each Lowe's store caters
to this broad array of customers by combining the merchandise, sales and
service of: a home fashions and interior design center; a lawn and garden
center; an appliance and home electronics dealer; a hard goods discounter;
a hardware store; an air conditioning, heating, plumbing and electrical
supply center; and a building materials supplier.
Lowe's is committed to providing superior customer satisfaction.
Customer expectations are being met by opening new stores in convenient
shopping locations, by supplying a large selection of in-stock merchandise, by
offering low prices and by providing knowledgeable assistance and fast
service. If a customer is searching for an item that is not carried in a
store, it is likely available through our special order system. The Everyday
Competitive Price ("ECP") strategy guarantees the lowest price in the market
and yet builds profitability for Lowe's by substantially increasing revenues
per store. ECP gives Lowe's customers the confidence to buy every day without
waiting for promotional sales. Customer questions, problems, returns and
exchanges are handled at a convenient service desk near the main entrance of
the store. Our customer-friendly return policy makes it simple to return or
exchange products. Most of our stores have a separate lumber and building
materials cashier and loading area available for both DIY and commercial
business customers. Additionally, Lowe's offers specific services such as
installation (through subcontractors), delivery, loading, assembly, free how-
to clinics, wood and glass cutting, free kitchen design and a project desk to
assist Lowe's customers in planning their home improvement tasks.
Lowe's offers two proprietary credit cards - one for individual retail
customers and the other for businesses. Lowe's commercial business customers
can also make purchases on credit by using Lowe's in-house accounts. In
addition, Lowe's accepts Visa, MasterCard, Discover and American Express
credit cards.
Products
A typical Lowe's home improvement warehouse stocks more than 40,000
items, with significantly more items available through our special order
system. Each Lowe's home improvement warehouse carries a wide selection of
high quality, nationally advertised brand name merchandise. The Company's
merchandise selection is broad enough to supply both the DIY retail and
commercial business customer with practically every item needed to complete
any home improvement, repair or construction project. See Note 13 on page 30
of the Annual Report to Security Holders for fiscal year ended January 29,
1999 for the table illustrating sales by product category for each of the last
three fiscal years.
The Company sources its products from approximately 5,500 merchandise
vendors worldwide, with no single vendor accounting for as much as 4% of total
purchases. The Company is not dependent upon any single vendor. To the
extent possible, the Company utilizes its global sourcing division to purchase
directly from foreign manufacturers and avoid third party importers.
Management believes that alternative and competitive suppliers are available
for virtually all its products.
In order to maintain appropriate inventory levels in stores and to
improve distribution efficiencies, the Company operates four regional
distribution centers (RDC's). The current RDC's are strategically located in
North Carolina, Georgia, Indiana and Texas. Each Lowe's store is now served
by one of these RDC's. The Company also operates nine smaller support
facilities in order to distribute merchandise that requires special handling
due to size or type of packaging, such as lumber, roofing, fencing or lawn
mowers. Approximately 60% of the merchandise purchased by the Company is
shipped through its distribution facilities while the remaining portion is
shipped directly to stores from vendors. A fifth RDC, currently under
construction, is expected to be operational in Spring 1999 and is located in
Pennsylvania.
Marketing
The Company reaches target customers through a mixture of television,
radio, direct mail, newspaper and NASCAR sponsorship. Each marketing
initiative is based on understanding current and prospective customers. The
Company has a strategic alliance with the HGTV network that allows it to
control a substantial portion of the airtime in which only the Company's and
its vendors' commercials are aired. This is only one example of how the
Company solicits vendor participation in its advertising programs.
Additionally, the Company participates in the Southern Living Show Homes
program, hosts customer hospitality events and supports the wide-ranging
activities of Lowe's Home Safety Council.
In 1998, the Company continued to introduce or redefine programs that
respond to the changing needs and lifestyles of targeted customers. Primary
to this effort is the Company's aggressive response to serve commercial
business customers. The Company has responded to the special needs of this
customer group by carrying more professional brands, increasing in-stock
quantities for bigger jobs and testing various marketing approaches to win the
loyalty of commercial customers. The Company added sixteen product categories
where customers can have installation arranged through our stores. Our
special order systems have been redesigned and we've added non-electronic
kiosks (electronic kiosks are currently being tested) in departments such as
appliances, flooring, lighting, millwork, outdoor power equipment, plumbing
and tools.
Competition
The home improvement retailing business is highly competitive. The
principal competitive factors are price, location, customer service, product
selection and name recognition. The Company competes with a number of
traditional hardware, plumbing, electrical and home supply retailers, as well
as other chains of warehouse home improvement stores and lumber yards in most
of its market areas. In addition, the Company competes, with respect to some
of its products, with discount stores, mail order firms, and warehouse clubs.
Lowe's is the second largest retailer of home improvement products in the
United States. Due to the large number and variety of competitors, management
is unable to precisely measure the Company's market share in its existing
market areas. However, its current share of the home center market, comprised
of the Repair/Remodeling and DIY markets, is estimated to be approximately 8%,
based on internal information and data published by the Home Improvement
Research Institute.
Information Systems
The Company is continuously assessing and upgrading its information
systems to support growth, control costs, and better enable decision-making.
During the last six years, the Company has made a substantial investment in
developing and purchasing new computer systems. These new applications
include Distribution, Electronic Data Interchange, Payroll and Human
Resources, General Ledger, Accounts Payable, Forecasting and Replenishment,
and Supply Services. Lowe's has a point of sale system, electronic bar code
scanning system, various design systems and a UNIX Server in each of its
stores. Store information is communicated to the support center's central
computer via satellite. These systems provide efficient customer check-out
with automated credit card approval, store-based inventory management with
automatic replenishment orders, labor planning and item movement experience.
These computers supply the general office functions with the information
needed to support the stores.
Employees
At the end of January 1999, the Company employed approximately 54,000
full-time and 12,000 part time employees, none of which are covered by any
collective bargaining agreements. Management considers its relations with its
employees to be good.
Item 2 - Properties
At January 29, 1999, the Company operated 484 stores with a total of 43.4
million square feet of selling space. The current prototype large store is a
115,000 square foot sales floor with a lawn and garden center comprising
approximately 35,000 additional square feet. Of the total stores operating at
January 29, 1999, 282 of the facilities are owned with the remainder being
leased. Approximately one-half of these leases are capital leases. The
Company also owns and operates four regional distribution centers and nine
smaller support facilities, four of which are reload centers for lumber and
building commodities. The Company's general offices are located in North
Wilkesboro, North Carolina and occupy several buildings, the majority of which
are owned.
See the "Lowe's Stores" map and table on page 11 of the Annual Report to
Security Holders for fiscal year ended January 29, 1999.
Item 3 - Legal Proceedings
See Note 12 on page 30 of the Annual Report to Security Holders for
fiscal year ended January 29, 1999.
Item 4 - Submission of Matters to a Vote of Security Holders
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following list is
included as an unnumbered item in Part I of this Report in lieu of being
included in the Proxy Statement for the Annual Meeting of Stockholders to be
held on May 28, 1999.
The following is a list of names and ages of all of the executive officers of
the registrant indicating all positions and offices with the registrant held
by each such person and each person's principal occupations or employment
during the past five years.
Robert L. Tillman, 55
Chairman of the Board since 1998 and President and Chief Executive Officer
since 1996; Senior Executive Vice President and Chief Operating Officer,
1994 - 1996.
Gregory M Bridgeford, 44
Senior Vice President, Marketing since 1998; Senior Vice President and
General Merchandise Manager, 1996 - 1998; Vice President and General
Merchandise Manager, 1994 - 1996.
Charles W. Canter, Jr., 48
Senior Vice President and General Merchandise Manager, Building Materials
since 1998; Vice President, Merchandising - Millwork, 1998; Regional Vice
President, Store Operations, 1993 - 1998.
Lee Herring, 45
Senior Vice President, Logistics since 1996; Vice President, Logistics,
1993 - 1996.
William L. Irons, 55
Senior Vice President, Management Information Services since 1992.
Perry G. Jennings, 41
Senior Vice President, Human Resources since 1999, Vice President,
Operations and Merchandising Support, 1998; Director, Merchandising
Support and Administration, 1996 - 1997; Vice President, Human Resources,
1992 - 1996.
Mark A. Kauffman, 40
Senior Vice President and General Merchandise Manager, Hardlines since
1998; Senior Vice President, Regional Merchandising and Product
Development, 1998; Vice President, Import Merchandising, 1996 - 1998;
Merchandise Manager, 1993 - 1996.
Michael K. Menser, 45
Senior Vice President and General Merchandise Manager, Home Decor since
1998; Vice President, Logistics, 1996 - 1998; Senior Director, Logistics,
1994 - 1996.
Robert A. Niblock, 36
Senior Vice President, Finance since 1999; Vice President and Treasurer,
1997 - 1998; Senior Director, Taxation, 1996 - 1997; Director, Taxation,
1993 - 1996.
William D. Pelon, 49
Senior Vice President, Store Operations - Western Division since 1998;
Senior Vice President, Store Operations 1997 - 1998; Regional Vice
President, Store Operations, 1996 - 1997; Senior Director, Sales
Communications in 1995; District Manager, 1991 - 1995.
Dale C. Pond, 53
Executive Vice President, Merchandising and Marketing since 1998; Senior
Vice President, Marketing 1993 - 1998.
David E. Shelton, 52
Senior Vice President, Real Estate/Engineering and Construction since
1997; Vice President, Store Operations, 1995 - 1997; Vice President,
Sales Operations, 1992 - 1995.
Larry D. Stone, 47
Executive Vice President and Chief Operating Officer since 1997; Executive
Vice President, Store Operations 1996 - 1997; Senior Vice President, Sales
Operations, 1995 - 1996; Vice President, General Merchandising, 1992 -
1995.
William C. Warden, Jr., 46
Executive Vice President, General Counsel, Chief Administrative Officer
and Secretary since 1996; Senior Vice President, General Counsel and
Secretary, 1993 - 1996.
Gregory J. Wessling, 47
Senior Vice President, Store Operations - Eastern Division since 1998;
Senior Vice President and General Merchandise Manager 1996 - 1998; Vice
President and General Merchandise Manager, 1994 - 1996.
Thomas E. Whiddon, 46
Executive Vice President and Chief Financial Officer since 1996; Senior
Vice President and Chief Financial Officer, 1995 - 1996 and Senior Vice
President and Treasurer, 1994 - 1995, Zale Corporation.
Part II
Item 5 - Market for the Registrant's Common Stock and Related Security Holder
Matters
The principal market for trading in Lowe's common stock is the New York
Stock Exchange, Inc. (NYSE). Lowe's common stock is also listed on the
Pacific Exchange in the United States and the Stock Exchange in London. The
ticker symbol for Lowe's is LOW. As of January 29, 1999, there were 13,499
holders of record of Lowe's common stock. The table, "Lowe's Quarterly Stock
Price Range and Cash Dividend Payment", on page 33 of the Annual Report to
Security Holders for fiscal year ended January 29, 1999 sets forth, for the
periods indicated, the high and low sales prices per share of the common stock
as reported by the NYSE Composite Tape, and the dividends per share declared
on the common stock during such periods.
Item 6 - Selected Financial Data
See page 32 of the Annual Report to Security Holders for fiscal year
ended January 29, 1999.
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 15 through 18 and "Disclosure Regarding
Forward-Looking Statements" on page 13 of the Annual Report to Security
Holders for fiscal year ended January 29, 1999.
Item 7a - Quantitative and Qualitative Disclosures about Market Risk
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Market Risk" beginning on page 16 of the Annual Report
to Security Holders for fiscal year ended January 29, 1999.
Item 8 - Financial Statements and Supplementary Data
See the "Independent Auditors' Report" of Deloitte & Touche LLP on page
14 and the financial statements and notes thereto on pages 19 through 31, and
the "Selected Quarterly Data" on page 32 of the Annual Report to Security
Holders for fiscal year ended January 29, 1999.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
Part III
Item 10 - Directors and Executive Officers of the Registrant
See "Election of Directors", "Information Concerning Class I Nominees"
and "Information Concerning Continuing Directors" included in the definitive
Proxy Statement which will be filed pursuant to regulation 14A, with the SEC
within 120 days after the fiscal year ended January 29, 1999.
Item 11 - Executive Compensation
See "Compensation of Executive Officers", "Option/SAR Grants in Last
Fiscal Year", "Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-end Option/SAR Values", and "Long-term Incentive Plans - Awards in Last
Fiscal Year" included in the definitive Proxy Statement which will be filed
pursuant to regulation 14A, with the SEC within 120 days after the fiscal year
ended January 29, 1999. Information included under the captions "Report of
the Compensation Committee" and "Performance Graph" is not incorporated by
reference herein.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
See "Security Ownership of Certain Beneficial Owners and Management"
included in the definitive Proxy Statement, which will be filed pursuant to
regulation 14A, with the SEC within 120 days after the fiscal year ended
January 29, 1999.
Item 13 - Certain Relationships and Related Transactions
See "Information about the Board of Directors and Committees of the
Board" included in the definitive Proxy Statement which will be filed pursuant
to regulation 14A, with the SEC within 120 days after the fiscal year ended
January 29, 1999.
Part IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
a) 1. Financial Statements
See the following items and page numbers appearing in the Annual
Report to Security Holders for fiscal year ended January 29, 1999:
Pages
Independent Auditors' Report 14
Consolidated Statements of Earnings for each of the three
fiscal years in the period ended January 29, 1999 19
Consolidated Balance Sheets at January 29, 1999
and January 30, 1998 20
Consolidated Statements of Shareholders' Equity for each of
the three fiscal years in the period ended January 29, 1999 21
Consolidated Statements of Cash Flows for each of the
three fiscal years in the period ended January 29, 1999 22
Notes to Consolidated Financial Statements for each of the
three fiscal years in the period ended January 29, 1999 23-31
2. Financial Statement Schedules
Schedules are omitted because of the absence of conditions under
which they are required or because information required is included
in financial statements or the notes thereto.
3. Exhibits
(3.1) Restated and Amended Charter (filed as Exhibit 3.1 to the Company's
Form 10-Q dated September 14, 1998 and incorporated by reference
herein).
(3.2) Bylaws, as amended.
(4.1) Rights Agreement dated as of September 8, 1998 between the Company
and Wachovia Bank, N.A., as Rights Agent (filed as Exhibit 4.1 to
the Company's Form 8-K filed on October 9, 1998 and incorporated by
reference herein).
(10.1) Lowe's Companies, Inc. 1985 Stock Option Plan (filed as Exhibit C
to the Company's Proxy Statement dated May 31, 1985 and
incorporated by reference herein).
(10.2) Post Effective Amendment No. 1 to Lowe's Companies, Inc. 1985
Stock Option Plan (filed on the Company's Form S-8 dated June 23,
1987 (No. 33-2618) and incorporated by reference herein).
(10.3) Lowe's Companies, Inc. 1989 Non-Employee Directors' Stock Option
Plan (filed as Exhibit A to the Company's Proxy Statement dated
June 9, 1989 and incorporated by reference herein).
(10.4) Lowe's Companies, Inc. 1990 Benefit Restoration Plan (filed as
Exhibit 10.4 to the Company's Annual Report on Form 10-K for the
year ended January 31, 1991, and incorporated by reference
herein).
(10.5) Indenture dated April 15, 1992 between the Company and Chemical
Bank, as Trustee (filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-3 (No. 33-47269) and incorporated
by reference herein).
(10.6) Lowe's Companies, Inc. Directors' Deferred Compensation Plan,
effective July 1, 1994
(10.7) Lowe's Companies, Inc. Director's Stock Incentive Plan (filed on
the Company's Form S-8 dated July 8, 1994 (No. 33-54497) and
incorporated by reference herein).
(10.8) Lowe's Companies, Inc. 1994 Incentive Plan (filed on the Company's
Form S-8 dated July 8, 1994 (No. 33-54499) and incorporated by
reference herein).
(10.9) Amendments to the Lowe's Companies, Inc. 1994 Incentive Plan dated
December 9, 1994.
(10.10) Amendments to the Lowe's Companies, Inc. 1994 Incentive Plan dated
September 17, 1998.
(10.11) Amendments to the Lowe's Companies, Inc. 1994 Incentive Plan dated
December 4, 1998.
(10.12) Amended and Restated Indenture, dated as of December 1, 1995,
between the Company and First National Bank of Chicago, as Trustee
(filed as Exhibit 4.1 on Form 8-K dated December 15, 1995, and
incorporated by reference herein).
(10.13) First Supplemental Indenture, dated as of February 23, 1999, to the
Amended and Restated Indenture dated as of December 1, 1995 between
the Company and First National Bank of Chicago, as Trustee.
(10.14) Form of the Company's 6 3/8 % Senior Note due December 15, 2005
(filed as Exhibit 4.2 on Form 8-K dated December 15, 1995, and
incorporated by reference herein).
(10.15) Lowe's Companies, Inc. 1997 Incentive Plan (filed on the Company's
Form S-8 dated August 29, 1997 (No. 333-34631) and incorporated by
reference herein).
(10.16) Amendments to the Lowe's Companies, Inc. 1997 Incentive Plan dated
January 25, 1998.
(10.17) Amendments to the Lowe's Companies, Inc. 1997 Incentive Plan dated
September 17, 1998.
(10.18) Form of the Company's 6 7/8 % Debenture due February 20, 2028
(filed as Exhibit 4.2 on Form 8-K dated February 20, 1998, and
incorporated by reference herein).
(10.19) Form of the Company's 6 1/2% Debenture due March 15, 2029.
(10.20) Lowe's/Eagle Stock Option Plan (filed as Exhibit 4.2 on the
Company's Form S-8 filed April 7, 1999 (No. 333-75793) and
incorporated by reference herein).
(13) Annual Report to Security Holders for fiscal year ended January 29,
1999.
(21) List of Subsidiaries.
(23) Consent of Deloitte & Touche LLP
(27) Financial Data Schedule
b)Reports on Form 8-K
A report on Form 8-K was filed on November 25, 1998 by the registrant.
Therein under Item 5, the Company filed a summary and an exhibit in connection
with the Company's Agreement and Plan of Merger with Eagle Hardware & Garden,
Inc.
Part IV
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.
Lowe's Companies, Inc.
April 2, 1999_ By: /s/ Thomas E. Whiddon__
Date Thomas E. Whiddon
Executive Vice President
and Chief Financial Officer
April 2, 1999 By: /s/ Kenneth W. Black, Jr.__
Date Kenneth W. Black, Jr.
Vice President and
Corporate Controller
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.
/s/Robert L. Tillman _ Chairman of the Board of Directors, 4/2/99__
Robert L. Tillman President, Chief Executive Officer Date
and Director
/s/Robert L. Strickland Director 4/2/99__
Robert L. Strickland Date
/s/William A. Andres Director 4/2/99__
William A. Andres Date
/s/ John M. Belk Director 4/2/99__
John M. Belk Date
/s/ Leonard L. Berry Director 4/2/99__
Leonard L. Berry Date
/s/Peter C. Browning Director 4/2/99__
Peter C. Browning Date
/s/Carol A Farmer Director 4/2/99__
Carol A. Farmer Date
/s/Paul Fulton Director 4/2/99__
Paul Fulton Date
/s/James F. Halpin Director 4/2/99__
James F. Halpin Date
Director _ _____
Leonard G. Herring Date
/s/ Richard K. Lochridge Director 4/2/99__
Richard K. Lochridge Date
/s/ Claudine B. Malone Director 4/2/99__
Claudine Malone Date
/s/Robert G. Schwartz Director 4/2/99__
Robert G. Schwartz Date
Exhibit 3.2
BYLAWS OF
LOWE'S COMPANIES, INC.
As Amended and Restated February 5, 1999
INDEX
ARTICLE I. OFFICES 1
ARTICLE II. SHAREHOLDERS 1
SECTION 1. ANNUAL MEETING 1
SECTION 2. SPECIAL MEETINGS 1
SECTION 3. PLACE OF MEETING 1
SECTION 4. NOTICE OF MEETING 2
SECTION 5. CLOSING OF TRANSFER BOOKS OR
FIXING OF RECORD DATE 2
SECTION 6. VOTING LISTS 2
SECTION 7. QUORUM 3
SECTION 8. PROXIES; ELECTRONIC AUTHORIZATION 3
SECTION 9. VOTING OF SHARES 4
SECTION 10. CONDUCT OF MEETINGS 4
ARTICLE III. BOARD OF DIRECTORS 5
SECTION 1. GENERAL POWERS 5
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS 5
SECTION 3. FOUNDING DIRECTOR 5
SECTION 4. QUARTERLY MEETINGS 5
SECTION 5. SPECIAL MEETINGS 6
SECTION 6. NOTICE 6
SECTION 7. QUORUM 6
SECTION 8. MANNER OF ACTING 6
SECTION 9. VACANCIES 6
SECTION 10. COMPENSATION 6
SECTION 11. PRESUMPTION OF ASSENT 6
SECTION 12. ACTION WITHOUT MEETING 7
SECTION 13. INFORMAL ACTION BY DIRECTORS 7
SECTION 14. COMMITTEES GENERALLY 7
SECTION 15. EXECUTIVE COMMITTEE 7
SECTION 16. AUDIT COMMITTEE 8
SECTION 17. COMPENSATION COMMITTEE 8
SECTION 18. GOVERNANCE COMMITTEE 8
SECTION 19. GOVERNMENT/LEGAL AFFAIRS COMMITTEE 8
SECTION 20. SALARY ADMINISTRATION; DIRECTORS
COMPENSATION 9
ARTICLE IV. INDEMNIFICATION 9
SECTION 1. INDEMNIFICATION 9
SECTION 2. LIMITATION ON INDEMNIFICATION 9
SECTION 3. BOARD DETERMINATION 9
SECTION 4. RELIANCE 9
SECTION 5. AGENTS AND EMPLOYEES 10
SECTION 6. EXPENSES 10
SECTION 7. INSURANCE 10
ARTICLE V. OFFICERS 10
SECTION 1. TITLES 10
SECTION 2. ELECTION AND TERM OF OFFICE 10
SECTION 3. REMOVAL 10
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS 11
SECTION 5. VICE CHAIRMEN OF THE BOARD OF DIRECTORS 11
SECTION 6. PRESIDENT 11
SECTION 7. VICE PRESIDENTS 11
SECTION 8. SECRETARY 11
SECTION 9. TREASURER 11
SECTION 10. CONTROLLER 11
ARTICLE VI. DEPARTMENTAL DESIGNATIONS 11
SECTION 1. DEPARTMENTAL DESIGNATIONS 11
ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER 12
SECTION 1. CERTIFICATES FOR SHARES; NON-CERTIFICATED
SHARES 12
SECTION 2. TRANSFER OF SHARES 12
SECTION 3. LOST CERTIFICATES 13
ARTICLE VIII. FISCAL YEAR 13
ARTICLE IX. DIVIDENDS 13
ARTICLE X. SEAL 13
ARTICLE XI. WAIVER OF NOTICE 14
ARTICLE XII. AMENDMENTS 14
BYLAWS
OF
LOWE'S COMPANIES, INC.
As Amended and Restated February 5, 1999
ARTICLE I. OFFICES
The principal and registered office of the corporation in the State of
North Carolina shall be located in the City of North Wilkesboro, County of
Wilkes. The corporation may have such other offices either within or without
the State of North Carolina, as the Board of Directors may designate or the
business of the corporation may require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders shall be
held on the last Friday in the month of May in each year, at an hour to be
designated by the Chairman of the Board, for the purpose of electing directors
and for the transaction of such other business as may come before the meeting.
The meeting shall be held on the following business day at the same time in the
event the last Friday in May shall be a legal holiday. If the annual meeting
shall not be held on the day designated by this Section 1, a substitute annual
meeting shall be called in accordance with the provisions of Section 2 of this
Article II. A meeting so called shall be designated and treated for all
purposes as the annual meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes may be called by the Chairman of the Board or by a
majority of the Board of Directors.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of North Carolina, as the place of
meeting for any annual meeting or for any special meeting called by the Board
of Directors. In the event the directors do not designate the place of meeting
for either an annual or special meeting of the shareholders, the Chairman of
the Board may designate the place of meeting. If the Chairman of the Board does
not designate the place of meeting, the meeting shall be held at the offices of
the corporation in North Wilkesboro, North Carolina.
SECTION 4. NOTICE OF MEETING. Written notice stating the place, day, and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given not less than 10 nor more than
60 days before the day of the meeting, by mail, by or at the direction of the
Secretary, or the officer or persons calling the meeting, to each shareholder
of record entitled to vote at such meeting. Such notice, when mailed, shall be
deemed to be delivered when deposited in the United States mail, addressed to
the shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid. When a meeting is adjourned it shall
not be necessary to give any notice of the adjourned meeting other than by
announcement at the meeting at which the adjournment is taken unless a new
record date for the adjourned meeting is or must be fixed, in which event
notice shall be given to shareholders as of the new record date.
SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining shareholders entitled to notice of or to
vote at the meeting or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, 60 days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least 10 days immediately preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case
to be not more than 70 days and, in case of a meeting of shareholders, not less
than 10 days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or of
shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this Section 5, such determination shall apply to
any adjournment thereof if the meeting is adjourned to a date not more than 120
days after the date fixed for the original meeting.
SECTION 6. VOTING LISTS. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make before each meeting of
shareholders a complete list of the shareholders entitled to vote at such
meeting arranged in alphabetical order and by voting group (and within each
voting group by class or series of shares), with the address of and the number
of shares held by each. For a period beginning two business days after notice
of the meeting is given and continuing through the meeting, this list shall be
available at the corporation's principal office for inspection by any
shareholder at any time during usual business hours. The list shall also be
produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such list or transfer books or to
vote any meeting of shareholders.
SECTION 7. QUORUM. Shares entitled to vote as a separate voting group may
take action on a matter at a meeting if a quorum of that voting group exists
with respect to that matter. In the absence of a quorum at the opening of any
meeting of shareholders, the meeting may be adjourned from time to time by the
vote of the majority of the votes cast on the motion to adjourn. A majority of
the votes entitled to be cast on the matter by the voting group constitutes a
quorum of that voting group for action on that matter. Once a share is
represented for any purpose at a meeting, it is deemed present for quorum
purposes for the remainder of the meeting and for any adjournment of the
meeting unless a new record date is or must be set for the adjourned meeting.
If a quorum exists, action on a matter (other than the election of directors)
by a voting group is approved if the votes cast within the voting group
favoring the action exceed the votes cast opposing the action, unless the
Articles of Incorporation, a Bylaw adopted by the shareholders, or the North
Carolina Business Corporation Act requires a greater number of affirmative
votes.
SECTION 8. PROXIES; ELECTRONIC AUTHORIZATION
(a) At all meetings of shareholders, a shareholder may vote by proxy
executed in writing by the shareholder or by his duly authorized attorney in
fact. Such proxy shall be filed with the secretary of the corporation before
or at the time of the meeting. No proxy shall be valid after 11 months from the
date of its execution, unless otherwise provided in the proxy. If a proxy for
the same shares confers authority upon two or more persons and does not
otherwise provide a majority of them present at the meeting or if only one is
present at the meeting then that one may exercise all the powers conferred by
the proxy; but if the proxy holders present at the meeting are divided as to
the right and manner of voting in any particular case, and there is no
majority, the voting of such shares shall be prorated.
(b) The secretary may approve procedures to enable a shareholder or a
shareholder's duly authorized attorney in fact to authorize another person or
persons to act for him or her as proxy by transmitting or authorizing the
transmission of a telegram, cablegram, internet transmission, telephone
transmission or other means of electronic transmission to the person who will
be the holder of the proxy or to a proxy solicitation firm, proxy support
service organization or like agent duly authorized by the person who will be
the holder of the proxy to receive such transmission, provided that any such
transmission must either set forth or be submitted with information from which
the inspectors of election can determine that the transmission was authorized
by the shareholder or the shareholder's duly authorized attorney in fact. If
it is determined that such transmissions are valid, the inspectors shall
specify the information upon which they relied. Any copy, facsimile
telecommunications or other reliable reproduction of the writing or
transmission created pursuant to this Section 8 may be substituted or used in
lieu of the original writing or transmission for any and all purposes for which
the original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
SECTION 9. VOTING OF SHARES. Except as otherwise provided by law, each
outstanding share of capital stock of the corporation entitled to vote shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. The vote of a majority of the shares voted on any matter at a
meeting of shareholders at which a quorum is present
shall be the act of the shareholders on that matter, unless the vote of a
greater number is required by law or by the Articles of Incorporation or
Bylaws. Voting on all substantive matters shall be by a ballot vote on that
particular matter. Voting on procedural matters shall be by voice vote or by a
show of hands unless the holders of one-tenth of the shares
represented at the meeting shall demand a ballot vote on procedural matters.
SECTION 10. CONDUCT OF MEETINGS. At each meeting of the stockholders,
the Chairman of the Board shall act as chairman and preside. In his absence,
the Chairman of the Board may designate another officer or director to
preside. The Secretary or an Assistant Secretary, or in their absence, a
person whom the Chairman of such meeting shall appoint, shall act as
secretary of the meeting.
At any meeting of stockholders, only business that is properly brought
before the meeting may be presented to and acted upon by stockholders. To be
properly brought before the meeting, business must be brought (a) by or at the
direction of the Board of Directors or (b) by a stockholder who has given
written notice of business he expects to bring before the meeting to the
Secretary not less than 15 days prior to the meeting. If mailed, such notice
shall be sent by certified mail, return receipt requested, and shall be deemed
to have been given when received by the Secretary. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the meeting (a) a brief description of the business to be brought
before the meeting and the reasons for conducting such business at the meeting,
(b) the name and address, as they appear on the corporation's books, of the
stockholder proposing such business, (c) the class and number of shares of the
corporation's stock beneficially owned by the stockholder, and (d) any material
interest of the stockholder in such business. No business shall be conducted at
a meeting of stockholders except in accordance with the procedures set forth in
this Section 10. The chairman of a meeting of stockholders shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section
10, and if he should so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
Any nomination for director made by a stockholder must be made in writing
to the Secretary not less than 15 days prior to the meeting of stockholders at
which Directors are to be elected. If mailed, such notice shall be sent by
certified mail, return receipt requested, and shall be deemed to have been
given when received by the Secretary. A stockholder's nomination for director
shall set forth (a) the name and business address of the stockholder's nominee,
(b) the fact that the nominee has consented to his name being placed in
nomination, (c) the name and address, as they appear on the corporation's
books, of the stockholder making the nomination, (d) the class and number of
shares of the corporation's stock beneficially owned by the stockholder, and
(e) any material interest of the stockholder in the proposed nomination.
Notwithstanding compliance with this Section 10, the chairman of a
meeting of stockholders may rule out of order any business brought before the
meeting that is not a proper matter for stockholder consideration. This Section
10 shall not limit the right of stockholders to speak at meetings of
stockholders on matters germane to the corporation's business, subject to any
rules for the orderly conduct of the meeting imposed by the Chairman of the
meeting. The corporation shall not have any obligation to communicate with
stockholders regarding any business or director nomination submitted by a
stockholder in accordance with this Section 10 unless otherwise required by
law.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by the Board of Directors except as otherwise provided by
law, by the Articles of Incorporation or by the Bylaws.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors
of the Corporation shall be 13, divided into three classes: Class I, (five),
Class II, (four), and Class III, (four). One director shall be designated and
elected by the Board as Chairman of the Board of Directors, and shall preside
at all meetings of the Board of Directors. The Board may elect a Vice-
Chairman whose only duties shall be to preside at Board meetings in the
absence of the Chairman. Directors need not be residents of the State of
North Carolina or shareholders of the corporation. Subject to the Articles
of Incorporation, the Board of Directors shall each year, prior to the annual
meeting, determine by appropriate resolution the number of directors which
shall constitute the Board of Directors for the ensuing year, and the number
of directors which shall constitute the class of directors being elected at
such annual meeting. The directors may amend the Bylaws between meetings of
shareholders to increase or decrease the number of directors to make vacancies
available for the election of new directors.
SECTION 3. FOUNDING DIRECTOR. A Founding Director is a person who was
a director when it became a public company in 1961, who was a director on
November 7, 1980, and who has served continuously as a director since 1961.
SECTION 4. QUARTERLY MEETINGS. Quarterly meetings of the Board of
Directors shall be held at a time and place determined by the Chairman of the
Board of Directors. Any one or more of the directors or members of a committee
designated by the directors may participate in a meeting of the Board or
committee by means of a conference telephone or similar communications device
which allows all persons participating in the meeting to hear each other and
such participation in a meeting will be deemed presence in person.
SECTION 5. SPECIAL MEETINGS. Special Meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board of Directors or
two of the directors. The person or persons authorized to call special meetings
of the Board of Directors may fix any place, either within or without the State
of North Carolina, as the place for holding any special meeting of the Board of
Directors called by them.
SECTION 6. NOTICE. Notice of any special meeting shall be given by either
mail, facsimile or telephone. Notice of any special meeting given by mail shall
be given at least five days previous thereto. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail properly
addressed, with postage thereon prepaid. If notice is given by facsimile or by
telephone, it shall be done so at least two days prior to the special meeting
and shall be deemed given at the time the facsimile is transmitted or of the
telephone call itself. Any director may waive notice of any meeting. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at nor the
purpose of any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors shall constitute
a quorum for the transaction of business at any meeting of the Board of
Directors, but if less than such majority is present at a meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
SECTION 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the
Board of Directors unless otherwise required by the Articles of Incorporation.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors
shall be filled as provided in the Articles of Incorporation.
SECTION 10. COMPENSATION. The directors may be paid such expenses as are
incurred in connection with their duties as directors. The Board of Directors
may also pay to the directors compensation for their service as directors.
SECTION 11. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as secretary of
the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
SECTION 12. ACTION WITHOUT MEETING. Action taken by a majority of the
Board, or a Committee thereof, without a meeting is nevertheless Board, or
Committee, action if written consent to the action in question is signed by
all of the directors, or Committee members, and filed with the minutes of the
proceedings of the Board, or Committee, whether done before or after the action
so taken.
SECTION 13. INFORMAL ACTION BY DIRECTORS. Action taken by a majority of
the directors without a meeting is action of the Board of Directors if written
consent to the action is signed by all of the directors and filed with the
minutes of the proceedings of the Board of Directors, whether done before or
after the action so taken.
SECTION 14. COMMITTEES GENERALLY. Committees of the Board of
Directors shall be reestablished annually at the first Board of Directors
Meeting held subsequent to the Annual Shareholders Meeting. Directors
designated to serve on committees shall serve as members of such committees
until the first Board of Directors Meeting following the next succeeding Annual
Shareholders Meeting or until their successors shall have been duly designated.
The Board of Directors may designate a committee chairman and a committee vice
chairman from the membership for each committee established. In the absence of
the designation of a committee chairman or vice chairman by the Board, a
committee by majority vote may elect a chairman or vice chairman from its own
membership.
SECTION 15. EXECUTIVE COMMITTEE. (a) The Board may establish an
Executive Committee comprising not less than three members. This Committee may
exercise all of the authority of the Board of Directors to the full extent
permitted by law, but shall not have power:
i) To declare dividends or authorize distributions;
ii) To approve or propose to shareholders any action that is required to
be approved by shareholders under the North Carolina Business
Corporation Act;
iii) To approve an amendment to the Articles of Incorporation of the
Corporation;
iv) To approve a plan of dissolution; merger or consolidation;
v) To approve the sale, lease or exchange of all or substantially all
of the property of the Corporation;
vi) To designate any other committee, or to fill vacancies in the Board
of Directors or other committees;
vii) To fix the compensation of directors for serving on the Board of
Directors or any committee;
viii) To amend or repeal the Bylaws, or adopt new Bylaws;
ix) To authorize or approve reacquisition of shares, except according to
a formula or method approved by the Board of Directors;
x) To authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, unless
the Board of Directors specifically authorizes the Executive
Committee to do so within limits established by the Board of
Directors;
xi) To amend, or repeal any resolution of the Board of Directors which
by its terms is not so amendable or repealable; or
xii) To take any action expressly prohibited in a resolution of the Board
of Directors.
SECTION 16. AUDIT COMMITTEE. The Board may establish an Audit
Committee comprising not less than three members, all of whom shall be non-
Employee directors. The Committee shall aid the Board in carrying out its
responsibilities for accurate and informative financial reporting, shall
assist the Board in making recommendations with respect to management's
efforts to maintain and improve financial controls, shall review
reports of examination by the independent auditors, and except as otherwise
required by law, shall have authority to act for the Board in any matter
delegated to this Committee by the Board of Directors. The Committee shall
recommend each year an independent certified public accounting firm as
independent auditors for the Corporation. The Corporation's Head of Internal
Audit shall report to the Audit Committee, and his employment may only be
terminated with the approval of the Committee.
SECTION 17. COMPENSATION COMMITTEE. The Board may establish a
Compensation Committee comprising not less than three members, all of whom
shall be non-employee directors. Except as otherwise required by law, the
Compensation Committee shall have authority to act for the Board in any matter
delegated to this Committee by the Board of Directors.
SECTION 18. GOVERNANCE COMMITTEE. The Board may establish a Governance
Committee comprising not less than three members, all of whom shall be non-
employee directors. Except as otherwise required by law, the Governance
Committee shall have authority to act for the Board in any matter delegated to
this Committee by the Board of Directors.
SECTION 19. GOVERNMENT/LEGAL AFFAIRS COMMITTEE. The Board may
establish a Government/Legal Affairs Committee to consist of not less than
three directors. Except as otherwise required by law, the Government/Legal
Affairs Committee shall have authority to act for the Board in any manner
delegated to this Committee by the Board of Directors.
SECTION 20. SALARY ADMINISTRATION; DIRECTORS COMPENSATION.
The compensation of employees not covered by the Compensation Committee duties
shall be the responsibility of the Chief Executive Officer. The compensation
of independent directors shall be recommended to the Board of Directors by the
Chief Executive Officer.
ARTICLE IV. INDEMNIFICATION
SECTION 1. INDEMNIFICATION. In addition to any indemnification required or
permitted by law, and except as otherwise provided in these Bylaws, any person
who at any time serves or has served as a director or officer of the
corporation, or in such capacity at the request of the corporation for any
other corporation, partnership, joint venture, trust or other enterprise, shall
have a right to be indemnified by the corporation to the fullest extent
permitted by law against (i) reasonable expenses, including attorneys' fees,
actually and necessarily incurred by him in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, seeking to hold him liable by reason of the
fact that he is or was acting in such capacity, and (ii) payments made by him
in satisfaction of any judgment, money decree, fine, penalty or reasonable
settlement for which he may have become liable in any such action, suit or
proceeding.
SECTION 2. LIMITATION ON INDEMNIFICATION. The corporation shall not
indemnify any person hereunder against liability or litigation expense he may
incur on account of his activities which were at the time taken known or
believed by him to be clearly in conflict with the best interests of the
corporation. The corporation shall not indemnify any director with respect to
any liability arising out of N.C.G.S. Section 55-8-33 (relating to unlawful
declaration of dividends) or any transaction from which the director derived an
improper personal benefit as provided in N.C.G.S. Section 55-2-02(b)(3).
SECTION 3. BOARD DETERMINATION. If any action is necessary or appropriate
to authorize the corporation to pay the indemnification required by this Bylaw
the Board of Directors shall take such action, including (i) making a good
faith evaluation of the manner in which the claimant for indemnity acted and of
the reasonable amount of indemnify due him, (ii) giving notice to, and
obtaining approval by, the shareholders of the corporation, and (iii) taking
any other action.
SECTION 4. RELIANCE. Any person who at any time after the adoption of this
Bylaw serves or has served in any of the capacities indicated in this Bylaw
shall be deemed to be doing or to have done so in reliance upon, and as
consideration for, the right of indemnification provided herein. Such right
shall inure to the benefit of the legal representatives of any such person and
shall not be exclusive of any other rights to which such person may be entitled
apart from the provision of this Bylaw.
SECTION 5. AGENTS AND EMPLOYEES. The provisions of this Bylaw shall not be
deemed to preclude the corporation from indemnifying persons serving as agents
or employees of the corporation, or in such capacity at the request of the
corporation for any other corporation, partnership, joint venture, trust or
other enterprise, to the extent permitted by law.
SECTION 6. EXPENSES. The corporation shall be entitled to pay the expenses
incurred by a director or officer in defending a civil or criminal action, suit
or proceeding in advance of final disposition upon receipt of an undertaking by
or on behalf of the director or officer to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation against such expenses.
SECTION 7. INSURANCE. As provided by N.C.G.S. Section 55-8-57, the
Corporation shall have the power to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or who is or was serving at the request of the corporation as a
director, officer or employee or agent of another corporation, partnership,
joint venture, trust or other enterprise or as a trustee or administrator
under an employee benefit plan against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation has the power to indemnify him against such
liability.
ARTICLE V. OFFICERS
SECTION 1. TITLES. The officers of the corporation may consist of the
Chairman of the Board of Directors, Vice Chairmen, the President, and such Vice
Presidents as shall be elected as officers by the Board of Directors. There
shall also be a Secretary, Treasurer, Controller and such assistants thereto as
may be elected by the Board of Directors. Any one person may hold one or more
offices in the corporation. No officer may act in more than one capacity where
action of two or more is required.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
corporation shall be elected annually by the Board of Directors at the first
meeting of the Board held after each annual meeting of the shareholders, or at
any other meeting of said Board. If the election of officers shall not be held
at such meeting, such election shall be held as soon thereafter as conveniently
may be. Each officer shall hold office until his successor shall have been duly
elected and shall have qualified or until his death or until he shall resign or
shall have been removed in the manner hereinafter provided.
SECTION 3. REMOVAL. Since officers serve at the pleasure of the Board, any
officer may be removed at any time by the Board of Directors, with or without
cause. Termination of an officer's employment with the Corporation by the
appropriate official (and by the Audit Committee for the Head of Internal
Audit) shall also end his term as an officer.
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. There shall be a Chairman
of the Board of Directors elected by the directors from their members. The
Chairman shall preside at meetings of the Board of Directors, shall be the
Chief Executive Officer of the corporation, and shall have direct supervision
and control of all of the business affairs of the corporation, subject to the
general supervision and control of the Board of Directors. The Chairman shall
have power to sign certificates for shares of the corporation and any deeds,
mortgages, bonds, contracts, or any other instruments or documents which may be
lawfully executed on behalf of the corporation. The Chairman shall vote as
agent for the corporation the capital stock held or owned by the corporation in
any corporation. The Chairman is authorized to delegate the authority to vote
capital stock held or owned by the corporation and to execute and deliver
agreements and other instruments to other officers of the corporation.
SECTION 5. VICE CHAIRMEN OF THE BOARD OF DIRECTORS. The Board of
Directors may elect one or more Vice Chairmen from their members. A Vice
Chairman shall preside at meetings of the Board of Directors in the absence
of the Chairman.
SECTION 6. PRESIDENT. The President perform such duties and have such
responsibilities as are assigned by the Board of Directors or the Chief
Executive Officer.
SECTION 7. VICE PRESIDENTS. The Vice Presidents shall perform such duties
and have such responsibilities as are assigned by the Board of Directors or the
Chief Executive Officer.
SECTION 8. SECRETARY. The Secretary shall perform such duties and have
such responsibilities as are assigned by the Board of Directors or the Chief
Executive Officer.
SECTION 9. TREASURER. The Treasurer shall perform such duties and have
such responsibilities as are assigned by the Board of Directors or the Chief
Executive Officer.
SECTION 10. CONTROLLER. The Controller shall perform such duties and
have such responsibilities as are assigned by the Board of Directors or the
Chief Executive Officer.
ARTICLE VI. DEPARTMENTAL DESIGNATIONS
SECTION 1. DEPARTMENTAL DESIGNATIONS. The Chief Executive Officer may
establish such departmental or functional designations or titles pertaining to
supervisory personnel as the Chief Executive Officer in his discretion deems
wise. The designations or titles may be that of Senior Vice President, Vice
President or such other term or terms as the Chief Executive Officer desires to
utilize. The designation or title contemplated by this section is for the
purpose of administration within the department or function concerned and is
not with the intent of designating those individuals bearing such titles as
general officers of the corporation. These individuals bearing these titles
shall be known as administrative managers of the corporation.
ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES; NON-CERTIFICATED SHARES
(a) Certificates representing shares of the corporation shall be in such
form as shall be determined by the Board of Directors. Such certificates shall
be signed by the Chairman of the Board and by the Secretary, provided that
where a certificate is signed by a transfer agent, assistant transfer agent or
co-transfer agent of the corporation or with the duly designated transfer agent
the signatures of such officers of the corporation upon the certificate may be
facsimile engraved or printed. Each certificate shall be sealed with the seal
of the corporation or a facsimile thereof. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and class and date of issue, shall be entered on the stock transfer
books of the corporation, as the transfer agent. All certificates surrendered
to the corporation for transfer shall be canceled and no new certificate shall
be issued until the former certificate for a like number of shares shall have
been surrendered and canceled, except that in case of a lost, destroyed, or
mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the corporation as the Board of Directors may prescribe.
(b) The Board of Directors may authorize the issuance of some or all of
the shares of any or all of the corporation's classes or series of stock
without certificates. Such authorization shall not affect shares already
represented by certificates until such shares are surrendered to the
corporation. Within a reasonable time after the issuance or transfer of shares
without certificates, the corporation shall send the shareholder a written
statement with information required on certificates by North Carolina General
Statutes 55-6-25(b) and (c), and, if applicable, North Carolina General
Statutes 55-6-27, or any successor law.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of records thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the
corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the corporation
shall be deemed by the corporation to be the owner thereof for all purposes. To
the extent that any provision of the Rights Agreement between the Company and
Wachovia Bank, N.A., Rights Agent, dated as of September 9, 1998, is deemed to
constitute a restriction on the transfer of any securities of the Company,
including, without limitation, the Rights, as defined therein, such restriction
is hereby authorized by the Bylaws of the Company.
Transfer of shares not represented by certificates shall be made in
accordance with such requirements with respect to transfer as appear in Article
8 of the Uniform Commercial Code as in effect from time to time in North
Carolina.
SECTION 3. LOST CERTIFICATES. The Board of Directors may authorize the
issuance of a new certificate in place of a certificate claimed to have been
lost or destroyed, upon receipt of an affidavit of such fact from the person
claiming the loss or destruction. In authorizing such issuance of a new
certificate, the Board may require the claimant to give the corporation a bond
in such sum as it may direct to indemnify the corporation against loss from any
claim with respect to the certificate claimed to have been lost or destroyed;
or the Board, by resolution reciting that the circumstances justify such
action, may authorize the issuance of the new certificate without requiring
such a bond. This function or duty on the part of the Board may be assigned by
the Board to the transfer agents of the common stock of the corporation.
ARTICLE VIII. FISCAL YEAR
The fiscal year of the Corporation shall end on the Friday nearest to
January 31 of each year. The fiscal year shall consist of four quarterly
periods, each comprising 13 weeks, with the 13-week periods divided into three
periods of four weeks, five weeks, and four weeks. Every six to eight years,
the fiscal year shall be a 53-week year, with the fourth period comprising four
weeks, five weeks, and five weeks, to reflect the 365th day of each year and
the 29th day of February in leap year.
ARTICLE IX. DIVIDENDS
The Board of Directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and as provided in a resolution of the Board of
Directors.
ARTICLE X. SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation,
the state of incorporation, and the word "Seal".
ARTICLE XI. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or director
of the corporation under the provisions of the charter or under the provisions
of applicable law, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
ARTICLE XII. AMENDMENTS
Unless otherwise prescribed by law or the charter, these Bylaws may be
amended or altered at any meeting of the Board of Directors by affirmative vote
of a majority of the directors. Unless otherwise prescribed by law or the
charter, the shareholders entitled to vote in respect of the election of
directors, however, shall have the power to rescind, amend, alter or repeal any
Bylaws and to enact Bylaws which, if expressly so provided, may not be amended,
altered or repealed by the Board of Directors.
ii
1
10
<PAGE> 1
Exhibit 10.6
LOWE'S COMPANIES, INC.
DIRECTORS' DEFERRED COMPENSATION PLAN
Effective July 1, 1994
<PAGE> 2
TABLE OF CONTENTS
Section Page
1. PURPOSE............................................................. 1
2. DEFINITIONS......................................................... 1
3. PARTICIPATION....................................................... 3
4. VESTING............................................................. 3
5. DEFERRAL ELECTION................................................... 3
6. EFFECT OF NO ELECTION............................................... 4
7. DEFERRED CASH BENEFITS.............................................. 4
8. DEFERRED STOCK BENEFITS............................................. 4
9. DISTRIBUTIONS....................................................... 5
10. COMPANY'S OBLIGATION................................................ 5
11. CONTROL BY PARTICIPANT.............................................. 6
12. CLAIMS AGAINST PARTICIPANT'S DEFERRED BENEFITS...................... 6
13. AMENDMENT OR TERMINATION............................................ 6
14. NOTICES............................................................. 6
15. WAIVER.............................................................. 6
16. CONSTRUCTION........................................................ 6
<PAGE> 3
1. PURPOSE. The Lowe's Companies, Inc. Directors' Deferred Compensation
Plan (the "Plan"), is intended to constitute a deferred compensation
plan for corporate directors' fees.
2. DEFINITIONS. The following definitions apply to this Plan and to the
Deferral Election Forms.
(a) Beneficiary or Beneficiaries means a person or persons or other
entity designated on a Beneficiary Designation Form by a
Participant as allowed in subsection 9(c) of this Plan to receive
Deferred Benefit payments. If there is no valid designation by
the Participant, or if the designated Beneficiary or Beneficiaries
fail to survive the Participant or otherwise fail to take the
Deferred Benefit, the Participant's Beneficiary is the first of
the following who survives the Participant: a Participant's
spouse (the person legally married to the Participant when the
Participant dies); the Participant's children in equal shares;
and the Participant's estate.
(b) Beneficiary Designation Form means a form acceptable to the
Chairman of the Committee or his designee used by a Participant
according to this Plan to name his Beneficiary or Beneficiaries
who will receive all Deferred Benefit payments under this Plan
if he dies.
(c) Board means the board of directors of the Company.
(d) Committee means the Independent Directors Compensation Committee.
(e) Committee Fees means the portion of a Director's Compensation
that is payable in cash for his service on committees of the
Board, according to the Company's established rules and
procedures for compensating Directors.
(f) Company means Lowe's Companies, Inc. and any successor business
by merger, purchase, or otherwise that maintains the Plan.
(g) Compensation means a Director's Committee Fees and Retainer Fees
for the Deferral Year.
(h) Deferral Election Form means a document governed by the
provisions of section 5 of this Plan, including the related
Beneficiary Designation Form that applies to all of that
Participant's Deferred Benefits under the Plan.
(i) Deferral Year means a calendar year for which a Director has an
operative Deferral Election Form.
(j) Deferred Benefit means either a Deferred Cash Benefit or a
Deferred Stock Benefit under the Plan for a Participant who
has submitted an operative Deferral Election Form pursuant to
section 5 of this Plan.
(k) Deferred Cash Account means that bookkeeping record established
for each Participant who elects a Deferred Cash Benefit under
this Plan. A Deferred Cash Account is established only for
purposes of measuring a Deferred Cash Benefit and not to
segregate assets or to identify assets that may or must be used
to satisfy a Deferred Cash Benefit. A Deferred Cash Account will
be credited with the Participant's Compensation deferred
according to a Deferral Election Form and according to section 7
of this Plan. A Deferred Cash Account will be credited
periodically with amounts based upon interest rates established
under subsection 7 of this Plan.
(l) Deferred Cash Benefit means the Deferred Cash Benefit elected by
a Participant under section 5 that results in payments governed
by sections 7 and 9.
(m) Deferred Stock Account means that bookkeeping record established
for each Participant who elects a Deferred Stock Benefit under
this Plan. A Deferred Stock Account is established only for
purposes of measuring a Deferred Stock Benefit and not to
segregate assets or to identify assets that may or must be used
to satisfy a Deferred Stock Benefit. A Deferred Stock Account
will be credited with the Participant's Compensation deferred as
a Deferred Stock Benefit according to a Deferral Election Form
and according to section 8 of this Plan. A Deferred Stock Account
will be credited periodically with amounts determined by the
Committee under subsection 8 of this Plan.
(n) Deferred Stock Benefit means the Deferred Benefit elected by
a Participant under section 5 that results in payments governed
by sections 8 and 9.
(o) Directors means those duly elected members of the Board who
are not employees of the Company.
(p) Election Date means the date established by this Plan as the
date before which a Director must submit a valid Deferral
Election Form to the Committee. A separate election will be
made for each calendar year. Directors will be eligible to defer
their Compensation payable for the third and fourth calendar
quarters of 1994. The deferral election for 1994 Compensation
must be made on or before July 1, 1994. For each Deferral Year
other than 1994, the Election Date is December 31 of the calendar
year preceding the calendar year in which the Compensation
otherwise would be payable following the date that he becomes a
Director. Despite the three preceding sentences, the Committee
may set an earlier date as the Election Date for any Deferral
Year. An individual who becomes a Director during a Deferral
Year may defer Compensation that would otherwise be payable in
the following calendar year by submitting a valid Deferral
Election Form by the applicable Election Date described in the
preceding sentences.
(q) Participant, with respect to any Deferral Year, means a Director
whose Deferral Election Form is operative for that Deferral Year
according to section 5 of this Plan.
(r) Plan means the Lowe's Companies, Inc. Directors' Deferred
Compensation Plan.
(s) Retainer Fee means that portion of a Director's Compensation
that is payable in cash and that is fixed and paid without regard
to his service on committees.
(t) Terminate, Terminating, or Termination, with respect to a
Participant, mean cessation of his relationship with the
Company as a Director whether by death, disability or severance
for any other reason. Unless the Committee determines otherwise
in it sole discretion, Terminate, Terminating, or Termination do
not include situations where the Participant becomes employed by
the Company or one of its subsidiaries.
3. PARTICIPATION. A Director becomes a Participant for any Deferral Year
by filing a valid Deferral Election Form according to section 5 on or
before the Election Date for that Deferral Year, but only if his
Deferral Election Form is operative according to section 5.
4. VESTING. Each Participant is immediately and fully vested in amounts
deferred under the program. Each Participant is also immediately and
fully vested on the "earnings" credited to his or her account.
5. DEFERRAL ELECTION. A deferral election is valid when a Deferral
Election Form is completed, signed by the electing Director, and
received by the Committee Chairman. Deferral elections are governed
by the provisions of this section.
(a) A Participant may elect a Deferred Benefit for any Deferral
Year if he is a Director at the beginning of that Deferral
Year or becomes a Director during that Deferral Year.
(b) Before each Deferral Year's Election Date, each Director
will be provided with a Deferral Election Form and a
Beneficiary Designation Form. Under the Deferral Election
Form for a single Deferral Year, a Participant may elect on or
before the Election Date to defer the receipt of all, but not
less than all, of his Compensation for the Deferral Year that
will be earned and payable after the Election Date.
(c) A Participant may complete a Deferral Election Form for either
a Deferred Cash Benefit or a Deferred Stock Benefit for amounts
deferred from his Compensation. Alternatively, a Participant may
complete a Deferral Election Form that provides that amounts
deferred from his Compensation will be allocated between a
Deferred Cash Benefit and a Deferred Stock Benefit in 25%
multiples.
(d) A Participant may not elect to convert a Deferred Cash Benefit
to a Deferred Stock Benefit. A Participant may not elect to
convert a Deferred Stock Benefit to a Deferred Cash Benefit.
(e) If it does so before the last business day of the Deferral Year,
the Committee may reject any Deferral Election Form, and the
Committee is not required to state a reason for any rejection.
However, the Committee's rejection of any Deferral Election Form
must be based upon action taken without regard to any vote of the
Director whose Deferral Election Form is under consideration, and
the Committee's rejections must be made on a uniform basis with
respect to similarly situated Directors. If the Committee rejects
a Deferral Election Form, the Director must be paid the amounts he
would then have been entitled to receive if he had not submitted
the rejected Deferral Election Form.
(f) A Director may not revoke a Deferral Election Form after the
Deferral Year begins. Any revocation before the beginning of the
Deferral Year is the same as a failure to submit a Deferral
Election Form. Any writing signed by a Director expressing an
intention to revoke his Deferral Election Form and delivered to a
member of the Committee before the close of business on the
relevant Election Date is a revocation.
6. EFFECT OF NO ELECTION. A Director who has not submitted a valid
Deferral Election Form to the Committee on or before the relevant
Election Date may not defer his Compensation for the Deferral Year
under this Plan. A decision to defer or not to defer one year's cash
Compensation will not affect a Director's previous deferrals or his
or her ability to defer future years' cash Compensation.
7. DEFERRED CASH BENEFITS. Deferred Cash Benefits will be set up in a
Deferred Cash Account for each Participant and credited with interest
at Wachovia Bank and Trust Company's prime rate plus 1%, adjusted
each quarter. Deferred Cash Benefits are credited to the applicable
Participant's Deferred Cash Account as of the day they would have
been paid but for the deferral. Interest is credited on the first
day of each month based on the Deferred Cash Account balance at the
end of the preceding day.
8. DEFERRED STOCK BENEFITS. Participants' Deferred Stock Benefits are
governed by this section.
(a) Deferred Stock Benefits shall be credited to a Deferred Stock
Account as of the date on which the Compensation would have been
paid. A Deferred Stock Account shall be credited with the number
of whole and fractional shares of Company common stock that a
Participant could have purchased with amounts deferred from his
Compensation based on the closing price of Company common stock
on the New York Stock Exchange on the day on which the deferred
Compensation would have been paid. The value of a Deferred
Stock Account on any date shall be the value of the Company
common stock (whole and fractional shares) credited to the
account based on the immediately preceding closing price of
Company common stock on the New York Stock Exchange.
(b) A Deferred Stock Account also shall be credited with any
dividends that would have been paid on the whole shares of
Company common stock credited to the account. A Deferred Stock
Account shall be credited with the number of whole and
fractional shares of Company common stock that a Participant
could have purchased with such dividends based on the closing
price of the Company common stock on the day before such
dividends are credited to the account.
9. DISTRIBUTIONS.
(a) All distributions will be made as soon as practicable after a
Participant ceases to be a Director for any reason; provided,
however, that no distributions will be made until at least six
months following the last date that deferred Compensation is
credited to a Participant's Deferred Stock Account.
(b) All Deferred Cash Benefits and all Deferred Stock Benefits,
less withholding for applicable income and employment taxes,
shall be paid in a single sum in cash. A Deferred Cash Benefit
will equal the balance standing to the credit of the Participant
in his Deferred Cash Account on the first day of the month in
which the distribution is paid. A Deferred Stock Benefit will
equal the fair market value of the Company common stock credited
to the Participant's account on the first day in which the
distribution is paid. The fair market value of the Company
common stock credited to the Participant's Deferred Stock
Account will be the closing price of the Company stock on the
first day of the month in which the distribution is made.
Amounts payable on account of the death of a Director will be
paid to the Beneficiary designated by the Director.
(c) Deferred Benefits may not be assigned by a Participant or
Beneficiary. A Participant may use only one Beneficiary
Designation Form to designate one or more Beneficiaries for all
of his Deferred Benefits under the Plan; such designations are
revocable. Each Beneficiary will receive his portion of the
Participant's Deferred Benefit as soon as practicable following
the Participant's death.
10. COMPANY'S OBLIGATION. The Plan is unfunded. The Company shall not be
required to segregate any assets that at any time may represent a
Deferred Benefit. Any liability of the Company to a Participant or
Beneficiary under this Plan shall be based solely on any contractual
obligations that may be created pursuant to this Plan. No such
obligation of the Company shall be deemed to be secured by a pledge of,
or other encumbrance on, any property of the Company.
11. CONTROL BY PARTICIPANT. A Participant has no control over Deferred
Benefits except according to his Deferral Election Forms and his
Beneficiary Designation Form.
12. CLAIMS AGAINST PARTICIPANT'S DEFERRED BENEFITS. A Deferred Cash
Account and a Deferred Stock Account relating to a Participant under
this Plan shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any attempt to do so is void. A Deferred Benefit is not
subject to attachment or legal process for a Participant's debts or
other obligations. Nothing contained in this Plan gives any
Participant any interest, lien, or claim against any specific asset
of the Company. A Participant or his Beneficiary has no rights other
than as a general creditor of the Company.
13. AMENDMENT OR TERMINATION. Except as otherwise provided in this
section, this Plan may be altered, amended, suspended, or terminated
at any time by the Board. No amendment or termination may adversely
affect any Participant's rights under the program without his or her
consent. Notwithstanding the preceding sentence, if any amendment to
the Plan, subsequent to the date the Plan becomes effective, adversely
affects Deferred Benefits elected hereunder, after the effective date
of any such amendment, and the Internal Revenue Service declines to
rule favorably on any such amendment or to rule favorably only if the
Board makes amendments to the Plan not acceptable to such Board, the
Board, in its sole discretion, may accelerate the distribution of part
or all of the amounts attributable to affected Deferred Benefits due
Participants and Beneficiaries hereunder.
14. NOTICES. Notices and elections under this Plan must be in writing.
A notice or election is deemed delivered if it is delivered personally
or if it is mailed by registered or certified mail to the person at
his last known business address.
15. WAIVER. The waiver of a breach of any provision in this Plan does
not operate as and may not be construed as a waiver of any later
breach.
16. CONSTRUCTION. This Plan is created, adopted, and maintained
according to the laws of the State of North Carolina (except its
choice-of-law rules). It is governed by those laws in all respects.
Headings and captions are only for convenience; they do not have
substantive meaning. If a provision of this Plan is not valid or not
enforceable, that fact in no way affects the validity or
enforceability of any other provision. Use of one gender includes
all, and the singular and plural include each other.
-6-
DECEMBER 9, 1994
AMENDMENTS TO THE
LOWE'S COMPANIES, INC. 1994 INCENTIVE PLAN
Effective December 9, 1994, the Lowe's Companies, Inc. 1994 Incentive Plan
(the "Plan") was amended as follows:
a. The phrase "that is an incentive stock option" was deleted from
section 6.02.
b. Section 8.02 was amended to read as follows:
8.02. Vesting. A Participant's rights in the Stock Award shall
be nontransferable and forfeitable for a period of time set forth
in the Agreement. Unless the Stock Award will become transferable
and nonforfeitable on account of performance objectives prescribed
by the Administrator, the period of restrictions shall not be less
than three years.
c. Article XIII was amended to add a comma after the word "Plan" and to
delete the word "or" in the fourth line of that Article and to add the
following language at the end of the first sentence:
(iii) the amendment would materially increase the benefits under
any outstanding Stock Award, Option, STAR, or Incentive Award or
(iv) the amendment affects the terms of any outstanding Stock
Award, Option, STAR or Incentive Award in a manner that, to a
material extent, makes it more likely that a benefit will be
earned, paid or retained under such grant or award.
SEPTEMBER 17, 1998
AMENDMENTS TO THE
LOWE'S COMPANIES, INC. 1994 INCENTIVE PLAN
On September 17, 1998, the Plan was amended as follows:
a. A new section 1.12, entitled "Deferred Stock Benefit," was added to
the Plan and reads as follows:
1.12. Deferred Stock Benefit means "Deferred Stock Benefit" as
defined in section 2(h) of the Program.
b. A new section 1.20, entitled "Program," was added to the Plan and
reads as follows:
1.20. Program means the Lowe's Companies, Inc.Deferred
Compensation Program, set forth as Exhibit I hereto.
c. The remaining sections of Article I were renumbered accordingly.
d. The second sentence of Article II was amended to read as follows:
The Plan is intended to permit the grant of Stock Awards, STARs,
the grant of both Options qualifying under Section 422 of the Code
("incentive stock options") and Options not so qualifying, the
grant of Incentive Awards, and the deferral of income in accordance
with the Program.
e. The fifth sentence of Article III was amended to read as follows:
In addition, the Administrator shall have complete authority to
interpret all provisions of this Plan; to prescribe the form of
Agreements and documents used in connection with the Program; to
adopt, amend, and rescind rules and regulations pertaining to the
administration of the Plan; and to make all other determinations
necessary or advisable for the administration of this Plan.
f. The following sentence was added at the end of Section 5.01:
On the distribution of Deferred Stock Benefits, the Company may
issue shares of Common Stock from its authorized but unissued
Common Stock
g. Section 5.02 was amended to read as follows:
The maximum aggregate number of shares of Common Stock that may be
issued under this Plan (including shares of Common Stock issued
under the Plan as in effect before January 31, 1994 and after giving
effect to the March 16, 1994 two-for-one stock split) is 5,000,000
shares, subject to adjustment as provided in Article X such that
2,423,640 shares of Common Stock will be available for issuance
under Options and Stock Awards granted on and after January 31,
1994, or as the portion of a Deferred Stock Benefit that represents
forfeited or deferred shares of Common Stock subject to such Options
and Stock Awards, or as earnings on any shares of Common Stock
deferred or forfeited under the Program. Subject to the limitation
set forth in the preceding sentence, the maximum aggregate number
of shares that may be issued under this Plan as Stock Awards (or as
the portion of a Deferred Stock Benefit that represents forfeited
shares of Common Stock subject to such awards) is 1,000,000 shares,
subject to adjustment as provided in Article X. Shares of Common
Stock issued in settlement of a Deferred Stock Benefit, and the
shares of Common Stock subject to the Option or Stock Award (or
portion thereof) with respect to which such Deferred Stock Benefit
was earned or elected, shall be counted toward the foregoing limits
only once (even in the case of shares subject to a Stock Award that
are canceled in connection with a Deferred Stock Benefit); provided,
however, that shares of Common Stock issued in settlement of a
Deferred Stock Benefit that constitute earnings on deferred or
forfeited shares of Common Stock shall be counted separately toward
the foregoing limits.
h. Section 5.03 was amended to read as follows:
If an Option is terminated, in whole or in part, for any reason
other than its exercise (including an exercise that results in a
Deferred Stock Benefit), the number of shares of Common Stock
allocated to the Option or portion thereof may be reallocated to
other Options and Stock Awards to be granted under this Plan and to
the settlement of Deferred Stock Benefits. If a Stock Award is
forfeited, in whole or in part, for any reason (other than a
cancellation that results in a Deferred Stock Benefit), the number
of shares of Common Stock allocated to the Stock Award or portion
thereof may be reallocated to other Options and Stock Awards to be
granted under this Plan, and to the settlement of Deferred Stock
Benefits. If a Deferred Stock Benefit is forfeited, in whole or in
part, the number of shares of Common Stock allocated to the Deferred
Stock Benefit or portion thereof may be reallocated to other Options
and Stock Awards to be granted under this Plan, and to the
settlement of other Deferred Stock Benefits.
i. Article X was amended to read as follows:
The maximum number of shares as to which Options and Stock Awards
may be granted under this Plan and the maximum number of shares that
may be distributed as Deferred Stock Benefits shall be
proportionately adjusted, and the terms of outstanding Stock Awards,
Options, STARs (including any limitation on the maximum amount
payable under a STAR award) and undistributed Deferred Stock
Benefits, and the per individual limitations on the number of shares
or Units for which Options, STARs, and Stock Awards may be granted
shall be adjusted as the Committee shall determine to be equitably
required, in the event that (a) the Company (i) effects one or more
stock dividends, stock split-ups, subdivisions or consolidations of
shares or (ii) engages in a transaction to which Section 424 of the
Code applies or (b) there occurs any other event which, in the
judgment of the Committee, necessitates such action. Any
determination made under this Article X by the Committee shall be
final and conclusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash
or property, or for labor or services, either upon direct sale or
upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the
maximum number of shares as to which Options and Stock Awards may
be granted or the maximum number of shares that may be distributed
as Deferred Stock Benefits; the per individual limitations on the
number of shares or Units for which Options, STARs and Stock Awards
may be granted; or the terms of outstanding Stock Awards, Options or
SARs or undistributed Deferred Stock Benefits.
The Committee may make Stock Awards and may grant Options and STARs
in substitution for performance shares, phantom shares, stock
awards, stock options, stock appreciation rights, or similar awards
held by an individual who becomes an employee of the Company or an
Affiliate in connection with a transaction described in the first
paragraph of this Article X. Notwithstanding any provision of the
Plan (other than the limitation of Article V), the terms of such
substituted Stock Awards or Option or STAR grants shall be as the
Committee, in its discretion, determines is appropriate.
j. The following sentence was added at the end of Article XIII:
No amendment shall, without the consent of a Program Participant
(as defined in the Program) adversely affect any rights of such
Program Participant under the Program as in effect at the time such
amendment is made, unless such amendment is made in accordance with
section 12 of the Program.
k. The following sentence was added at the end of Article XIV:
The Program shall remain in effect until all Deferred Stock Accounts
(as defined in the Program) have been distributed in full, unless
sooner terminated by the Board in accordance with section 12 of the
Program.
l. The Lowe's Companies, Inc. Deferred Compensation Program attached
hereto as Exhibit I was added to the Plan as Exhibit I.
Exhibit I
LOWE'S COMPANIES, INC.
1994 INCENTIVE PLAN
LOWE'S COMPANIES, INC.
DEFERRED COMPENSATION PROGRAM
TABLE OF CONTENTS
SECTION PAGE
1. PURPOSE 5
2. DEFINITIONS 5
3. PARTICIPATION 7
4. DEFERRAL ELECTION 7
5. EFFECT OF NO ELECTION 8
6. DEFERRED STOCK BENEFITS 8
7. DISTRIBUTIONS 9
8. HARDSHIP DISTRIBUTIONS 11
9. COMPANY'S OBLIGATION 12
10. CONTROL BY PROGRAM PARTICIPANT 12
11. CLAIMS AGAINST PROGRAM PARTICIPANT'S DEFERRED BENEFITS 12
12. AMENDMENT OR TERMINATION 12
13. NOTICES 12
14. WAIVER 13
15. CONSTRUCTION 13
1. PURPOSE.
The Program is intended to constitute a deferred compensation plan for a
select group of management and highly compensated employees of the
Company and its Affiliates.
2. DEFINITIONS.
The following definitions apply to this Program and to the Deferral
Election Forms. All capitalized terms not defined in this section 2
shall have the same meaning as given them in the Company's 1994 Incentive
Plan, of which this Program is a part.
(a) Beneficiary or Beneficiaries means a person or persons or other
entity designated on a Beneficiary Designation Form by a Program
Participant as allowed in section 7(d) to receive a Deferred
Benefit. If there is no valid designation by the Program
Participant, or if the designated Beneficiary or Beneficiaries fail
to survive the Program Participant or otherwise fail to take the
benefit, the Program Participant's Beneficiary is the first of the
following who survives the Program Participant: a Program
Participant's spouse (the person legally married to the Program
Participant when the Program Participant dies); the Program
Participant's children in equal shares; and the Program
Participant's estate.
(b) Beneficiary Designation Form means a form acceptable to the
Administrator or its designee used by a Program Participant
according to this Program to name his Beneficiary or Beneficiaries
who will receive his Deferred Benefits under this Program if he
dies.
(c) Compensation means either of the following types of compensation:
an Eligible Employee's Stock Award and Nonqualified Option Gain.
(d) Deferral Election Form means a document governed by the provisions
of section 4 of this Program, including the portion that is the
Distribution Election Form and the related Beneficiary Designation
Form that applies to all of that Program Participant's Deferred
Benefits under the Program.
(e) Deferral Year means a calendar year for which an Eligible Employee
has an operative Deferral Election Form or in which a Mandatory
Deferred Benefit is earned.
<PAGE> -2-
(f) Deferred Benefit means either a Mandatory Deferred Benefit, or the
benefit elected by a Program Participant under section 4 of this
Program, that results in payments governed by sections 6 and 7.
(g) Deferred Stock Account means that bookkeeping record established
for each Program Participant who elects or earns a Deferred Stock
Benefit attributable to deferred Stock Awards or Nonqualified
Option Gain under this Program. A Deferred Stock Account is
established only for purposes of measuring a Deferred Stock Benefit
and not to segregate assets or to identify assets that may or must
be used to satisfy a Deferred Stock Benefit. A Deferred Stock
Account will be credited with the Program Participant's
Compensation deferred according to a Deferral Election Form and
with Mandatory Deferred Benefits attributable to forfeited Stock
Awards, according to section 6(a) or (b) of this Program. A
Deferred Stock Account will be credited periodically with amounts
determined under section 6(c) of this Program.
(h) Deferred Stock Benefit means the Deferred Benefit elected by a
Program Participant under section 4 or earned under section 6(b)
that results in payments governed by sections 6 and 7.
(i) Distribution Election Form means that part of a Deferral Election
Form used by a Program Participant according to this Program to
establish the duration of deferral and the frequency of payments of
a Deferred Stock Benefit. If a Program Participant has no
Distribution Election Form that is operative according to section 4
of this Program, distribution of his Deferred Stock Benefit is
governed by section 7 of this Program.
(j) Election Date means the date established by this Program as the date
before which an Eligible Employee must submit a valid Deferral
Election Form to the Administrator. For each Deferral Year, the
Election Date is December 31 of the preceding calendar year.
However, for an individual who becomes an Eligible Employee during
a Deferral Year, the Election Date is the thirtieth day following
the date that he becomes an Eligible Employee. For Compensation
that is payable or that could become vested or earned in 1998, the
Election Date is the thirtieth day after the Board adopts this
Program as a Plan amendment. Despite the preceding sentences, the
Administrator may set an earlier date as the Election Date for any
Deferral Year.
(k) Eligible Employee means an employee of the Company or an Affiliate
who is a member of a select group of management or a highly
compensated employee (as such terms are used in Section 201(2) of
<PAGE> -3-
the Employee Retirement Income Security Act of 1974), and who is
designated by the Administrator as an individual who is eligible to
elect a Deferred Benefit under section 4 or who earns a Mandatory
Deferred Benefit under section 6(b). Once an individual is
designated by the Administrator as an individual who is eligible to
elect a Deferred Benefit under section 4, such employee shall
continue to be an Eligible Employee until the date he is no longer
a member of a select group of management or a highly compensated
employee or the date the Administrator declares he that is no longer
entitled to elect a Deferred Benefit.
(l) Mandatory Deferred Benefit means a Deferred Benefit earned by a
Program Participant in accordance with section 6(b) that results in
payments governed by sections 6 and 7 of this Program.
(m) Nonqualified Option Gain means gain attributable to the exercise of
Options not intended to qualify under Code section 422, stated as a
number of whole shares of Common Stock, where the Option price is
paid by the surrender of shares of Common Stock that have been held
by the Program Participant for at least six months.
(n) Program Participant means, with respect to any Deferral Year, an
Eligible Employee whose Deferral Election Form is operative, or who
has earned a Mandatory Deferred Benefit, for that Deferral Year.
(o) Terminate, Terminating, or Termination, with respect to a Program
Participant, means cessation of his relationship with the Company
and its Affiliates as an employee whether by death, disability or
severance for any other reason.
3. PARTICIPATION.
An Eligible Employee becomes a Program Participant for any Deferral Year
by filing a valid Deferral Election Form according to section 4 on or
before the Election Date for that Deferral Year, but only if his Deferral
Election Form is operative according to section 4. An Eligible Employee
also becomes a Program Participant for any Deferral Year if a Mandatory
Deferred Benefit is earned for that year in accordance with section 6(b).
4. DEFERRAL ELECTION.
A deferral election is valid when a Deferral Election Form is completed,
signed by the electing Eligible Employee, and received by the
Administrator. Deferral elections are governed by the provisions of this
section.
<PAGE> -4-
(a) A Program Participant may elect a Deferred Benefit for any Deferral
Year if he is an Eligible Employee at the beginning of that Deferral
Year or becomes an Eligible Employee during that Deferral Year.
(b) Before each Election Date for a Deferral Year, each Eligible
Employee will be provided with a Deferral Election Form and a
Beneficiary Designation Form. Under the Deferral Election Form or
Forms for a single Deferral Year, an Eligible Employee may elect on
or before the Election Date to defer the receipt of all or part of
his (i) Stock Awards that may vest during or after the Deferral Year
(specifying 100 or more whole shares subject to the election); or
(ii) Nonqualified Option Gain (specifying the Option, and 100 or
more whole shares of Common Stock, or a percentage of Nonqualified
Option Gain, subject to the election). The Compensation described
in the preceding sentence must be earned and payable after the
Election Date.
(c) A Distribution Election Form is part of the Deferral Election Form
on which it appears or to which it states that it is related.
A Program Participant may file one Distribution Election Form for
all of his Deferred Benefits at the time he files his initial
Deferral Election Form. In its sole discretion, the Administrator
may allow a Program Participant to change his Distribution Election
Form or file a Distribution Election Form after the time he files
his initial Deferral Election Form, in accordance with section 7(b)
and any other procedures established by the Administrator. The
provisions of section 7 of this Program apply to a Program
Participant's Deferred Benefits under this Program if there is no
operative Distribution Election Form for that Program Participant.
(d) If it does so before the last business day of the Deferral Year, the
Administrator may reject any Deferral Election Form or any
Distribution Election Form or both, and the Administrator is not
required to state a reason for any rejection. The Administrator may
modify any Distribution Election Form at any time to the extent
necessary to comply with any federal securities laws or regulations.
The Administrator's rejections must be made on a uniform basis with
respect to similarly situated Eligible Employees. If the
Administrator rejects a Deferral Election Form, the Eligible
Employee must be paid the amounts he would have been entitled to
receive if he had not submitted the rejected Deferral Election Form.
(e) An Eligible Employee may not revoke a Deferral Election Form or a
Distribution Election Form after the applicable Election Date. Any
revocation before the applicable Election Date is the same as a
failure to submit a Deferral Election Form or a Distribution
Election Form. Any writing signed by an Eligible Employee
expressing an intention to revoke his Deferral Election Form or
<PAGE> -5-
Distribution Election Form and delivered to the Administrator before
the close of business on the relevant Election Date is a revocation.
5. EFFECT OF NO ELECTION.
An Eligible Employee who has not submitted a valid Deferral Election
Form to the Administrator on or before the relevant Election Date may not
defer such Compensation for the Deferral Year under this Program. The
Deferred Benefit of an Eligible Employee who submits a valid Deferral
Election Form but fails to submit a valid Distribution Election Form with
his initial Deferral Election Form or who otherwise has no valid
Distribution Election Form is governed by section 7 of this Program.
6. DEFERRED STOCK BENEFITS.
(a) All Deferred Benefits, i.e., those attributable to deferred Stock
Awards (including Mandatory Deferred Benefits earned with respect to
forfeited Stock Awards under section 6(b)) and to Nonqualified
Option Gain, shall be Deferred Stock Benefits. Deferred Stock
Benefits will be set up in a Deferred Stock Account and credited
with earnings as described in section 6(c). Deferred Stock Benefits
will be credited as follows: (i) Stock Award deferrals (other than
Mandatory Deferred Benefits) will be credited on the day following
the Election Date; (ii) Mandatory Deferred Benefits attributable to
forfeited Stock Awards will be credited as soon as practicable after
the applicable award or portion thereof has been forfeited; and
(iii) Nonqualified Option Gain deferrals will be credited on the day
following the date of exercise of the related Option.
(b) A Mandatory Deferred Benefit will be earned by any Program
Participant whose applicable employee remuneration, as defined in
Code section 162(m)(4), would exceed the limit in Code
section 162(m)(1) (taking into account any reduction in applicable
employee remuneration required by procedures of the Administrator).
Such Mandatory Deferred Benefit shall consist of a credit equal to
the portion of a Stock Award that, pursuant to procedures
established by the Administrator, was forfeited because its vesting
or transferability would have caused the limit in Code section 162(m)
(1) to be exceeded.
(c) A Deferred Stock Account also shall be credited with any dividends
that would have been paid on the whole shares of Common Stock
credited to the Deferred Stock Account. A Deferred Stock Account
shall be credited with the number of whole and fractional shares of
Common stock that a Program Participant could have purchased with
such dividends based on the Fair Market Value on the day before such
<PAGE> -6-
dividends are credited to the account. The Deferred Stock Account
shall be credited on the days that dividends are paid on the Common
Stock.
(d) The portion of a Program Participant's Deferred Stock Benefit
attributable to Nonqualified Option Gain, and all Mandatory Deferred
Benefits, are immediately and fully vested. The portion of a
Program Participant's Deferred Stock Benefit attributable to
deferred Stock Awards (or a portion thereof), other than a Mandatory
Deferred Benefit, shall become vested as of the date the related
Stock Award (or portion thereof) would otherwise have become
nonforfeitable and transferable, provided any conditions for vesting
set forth in the Agreement relating to the Stock Award are
satisfied. To the extent a Program Participant Terminates under
circumstances that would allow for continued vesting of a Stock
Award, vesting of the related portion of the Program Participant's
Deferred Stock Account shall occur on the same basis and shall not
be affected by such Termination. Notwithstanding any other
provision of this section 6(d), a Program Participant's entire
Deferred Stock Benefit shall become fully vested upon a Control
Change Date.
7. DISTRIBUTIONS.
(a) According to a Program Participant's Distribution Election Form, but
subject to Plan Article V, a Deferred Stock Benefit must be
distributed in shares of Common Stock equal to the number of whole
shares of Common Stock credited to the Program Participant's
Deferred Stock Account on the last day of the month preceding the
month of distribution. Cash will be paid in lieu of a fractional
share of Common Stock credited to the Program Participant's Deferred
Stock Account on the last day of the month preceding the month of
distribution.
(b) Except for distributions of Mandatory Deferred Benefits and
distributions triggered by a Program Participant's disability,
Deferred Benefits will be paid in a lump sum unless the Program
Participant's Distribution Election Form specifies annual
installment payments over a period of up to 5 years. A Deferred
Benefit payable in installments will continue to accrue additional
credits under Program section 6(c) on the unpaid balance of a
Deferred Stock Account through the end of the month preceding the
month of distribution.
If a Program Participant Terminates as a result of his disability,
Deferred Benefits will be paid to such Program Participant in annual
installments over a period of 5 years commencing on the date his
disability is certified by the Administrator unless the
Administrator, in his sole discretion, approves a longer or shorter
payment period. If, after his Termination as a result of
disability, such Program Participant recovers before the balance of
his Deferred Stock Account under the Program is exhausted, his
distributions will be discontinued and any remaining Deferred
Benefits
<PAGE> -7-
under the Program will be governed by the provisions of this section
and his Distribution Election Form.
Unless otherwise specified in a Program Participant's Distribution
Election Form, any lump sum payment will be paid or installment
payments will begin to be paid on the March 15 after the Program
Participant's sixty-fifth birthday or on the March 15 after the
Program Participant's Termination, if earlier. For distributions
that would automatically be caused under the preceding sentence by
a Program Participant's Termination (other than by death or
disability) or for distributions that would otherwise automatically
begin because a Program Participant reaches age sixty-five, the
Program Participant may elect on his Distribution Election Form that
payments are to begin
(i) on the March 15 following his Termination, without regard to
his age; or
(ii) on the March 15 following his Termination and his attainment
of a specified age; or
(iii) even if the Program Participant does not Terminate, on the
March 15 following his attainment of a specified age.
For purposes of these distribution election alternatives, the
specified age must be not less than the Program Participant's age
two years from the Election Date pertaining to the applicable
Deferral Year. With the consent of the Administrator, as described
in section 4(c) above, a Program Participant may amend his
Distribution Election Form to postpone the commencement of benefit
payments if (i) the amendment is approved by the Administrator
before the calendar year in which benefit payments are scheduled to
begin and (ii) the amended payment date conforms to the requirements
of the Program.
(c) Notwithstanding section 7(b), above, to the extent a Program
Participant's Deferred Stock Benefit is not yet vested according
to section 6(d) at the time distribution is scheduled to occur,
because the deferred Stock Award to which such Deferred Stock
Benefit or portion thereof is attributable would not yet have
vested under the Agreement evidencing the award, distribution shall
be delayed until the date specified in the following sentence. Any
portion of a Deferred Stock Account that is subject to delayed
distribution under the preceding sentence will be distributed on the
March 15 next following such vesting date. No distribution will be
made, and all or a portion of a Program Participant's Deferred Stock
Account will be forfeited to the extent the conditions for vesting
specified in the Agreement relating to the deferred Stock Award are
<PAGE> -8-
not met, including the Program Participant's Termination under
circumstances which would have caused all or a portion of the award
to have been forfeited.
(d) Deferred Benefits may not be assigned by a Program Participant or
Beneficiary. A Program Participant may use only one Beneficiary
Designation Form to designate one or more Beneficiaries for all of
his Deferred Benefits under the Program; such designations are
revocable. Each Beneficiary will receive his portion of the Program
Participant's Deferred Account on the March 15 following the Program
Participant's death unless the Beneficiary's request for accelerated
payment is approved at the Administrator's discretion under
section 8 or unless the Beneficiary's request for a different
distribution schedule is received before distributions begin and is
approved at the Administrator's discretion. The Administrator may
insist that multiple Beneficiaries agree upon a single distribution
method.
(e) Notwithstanding any other provision of this section 7, a Program
Participant's entire Deferred Stock Account shall be distributed to
the Program Participant, or his Beneficiary following his death, as
of a Control Change Date.
(f) Mandatory Deferred Benefits will be paid in a single sum no later
than the last day of the Company's fiscal year in which the
distribution would not result in the Program Participant's
applicable employee remuneration, as defined in Code
section 162(m)(4), to exceed the limit in Code section 162(m)(1).
8. HARDSHIP DISTRIBUTIONS.
(a) At its sole discretion and at the request of a Program Participant
before or after the Program Participant's Termination, or at the
request of any of the Program Participant's Beneficiaries after the
Program Participant's death, the Administrator may accelerate and
pay all or part of any amount attributable to a Program
Participant's vested Deferred Benefits under this Program.
Accelerated distributions may be allowed only in the event of a
financial emergency beyond the Program Participant's or
Beneficiary's control and only if disallowance of a distribution
would create a severe hardship for the Program Participant or
Beneficiary. An accelerated distribution must be limited to the
amount determined by the Administrator to be necessary to satisfy
the financial emergency.
(b) For purposes of an accelerated distribution under this section, the
Deferred Benefit's value is determined by the value of the Deferred
Account at the time of the distribution.
<PAGE> -9-
(c) A distribution under this section is in lieu of that portion of the
Deferred Benefit that would have been paid otherwise. A Deferred
Benefit is adjusted for a distribution under this section by
reducing the Program Participant's Deferred Account by the amount of
the distribution.
9. COMPANY'S OBLIGATION.
The Program is unfunded. A Deferred Benefit is at all times a mere
contractual obligation of the Company. A Program Participant and his
Beneficiaries have no right, title, or interest in the Deferred Benefits
or any claim against them. The Company will not segregate any funds or
assets for Deferred Benefits nor issue any notes or security for the
payment of any Deferred Benefit.
10. CONTROL BY PROGRAM PARTICIPANT.
A Program Participant has no control over Deferred Benefits except
according to his Deferral Election Forms, his Distribution Election Forms,
and his Beneficiary Designation Forms.
11. CLAIMS AGAINST PROGRAM PARTICIPANT'S DEFERRED BENEFITS.
A Deferred Stock Account relating to a Program Participant under this
Program is not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt to
do so is void. Deferred Benefits are not subject to attachment or legal
process for a Program Participant's debts or other obligations. Nothing
contained in this Program gives any Program Participant any interest,
lien, or claim against any specific asset of the Company. A Program
Participant or his Beneficiary has no rights to receive Deferred Benefits
other than as a general creditor.
12. AMENDMENT OR TERMINATION.
Except as otherwise provided in this section, this Program may be altered,
amended, suspended, or terminated at any time by the Board. Except for a
termination of the Program caused by the determination of the Board that
the laws upon which the Program is based have changed in a manner that
negates the Program's objectives, the Board may not alter, amend, suspend,
or terminate this Program without the majority consent of all Eligible
Employees if that action would result either in a distribution of all
Deferred Benefits in any manner other than as provided in this Program or
that would result in immediate taxation of Deferred Benefits to Program
Participants. Notwithstanding the preceding sentence, if any amendment to
the Program, subsequent to the date the Program becomes effective,
adversely affects Deferred Benefits elected hereunder, after the effective
date of any such amendment, and the Internal Revenue Service declines to
rule
<PAGE> -10-
favorably on any such amendment or to rule favorably only if the Board
makes amendments to the Program not acceptable to the Board, the Board, in
its sole discretion, may accelerate the distribution of part or all
amounts attributable to affected Deferred Benefits due Program
Participants and Beneficiaries hereunder.
13. NOTICES.
Notices and elections under this Program must be in writing. A notice or
election to a Program Participant or Beneficiary is deemed delivered if it
is delivered personally or if it is mailed by registered or certified mail
to the person at his last known home address. A notice or election to the
Company or the Administrator is deemed delivered if it is delivered
personally or if it is mailed by registered or certified mail to the
Company's executive office.
14. WAIVER.
The waiver of a breach of any provision in this Program does not operate
as and may not be construed as a waiver of any later breach.
15. CONSTRUCTION.
This Program is created, adopted, and maintained according to the laws of
the State of North Carolina (except its choice-of-law rules). It is
governed by those laws in all respects. Headings and captions are only
for convenience; they do not have substantive meaning. If a provision of
this Program is not valid or not enforceable, that fact in no way affects
the validity or enforceability of any other provision. Use of the one
gender includes all, and the singular and plural include each other.
DECEMBER 4, 1998
AMENDMENTS TO THE
LOWE'S COMPANIES, INC. 1994 INCENTIVE PLAN
On December 4, 1998, the Lowe's Companies, Inc. 1994 Incentive Plan was amended
as follows:
a. A new Article X, entitled "Indemnification," was added to the Plan,
in the form attached hereto as Exhibit I, and the remaining Articles and
Sections of the Plan were renumbered accordingly.
b. Section 12.04 of the Plan, entitled "Limitation on Awards," was
deleted.
Exhibit I
ARTICLE X
INDEMNIFICATION
A Participant shall be entitled to a payment under this Article X if (i)
any benefit, payment, accelerated vesting or other right under this Plan
constitutes a "parachute payment" (as defined in Code section 280G(b)(2)(A),
but without regard to Code section 280G(b)(2)(A)(ii)), with respect to such
Participant and (ii) the Participant incurs a liability under Code section
4999. The amount payable to a Participant described in the preceding sentence
shall be the amount required to indemnify the Participant and hold him harmless
from the application of Code sections 280G and 4999. To effect this
indemnification, the Company must pay such Participant an amount sufficient to
pay the excise tax imposed on Participant under Code section 4999 with respect
to benefits, payments, accelerated vesting and other rights under this Plan and
any other plan or agreement and any income, employment, hospitalization, excise
or other taxes attributable to the indemnification payment. The benefit
payable under this Article X shall be paid in a single cash sum not later than
twenty days after the date (or extended filing date) on which the tax return
reflecting liability for the Code section 4999 excise tax is required to be
filed with the Internal Revenue Service. Notwithstanding the foregoing, to the
extent the terms of any other plan or agreement also require that a Participant
be indemnified and held harmless from the application of Code sections 280G and
4999, any such indemnification and the amount required to be paid to a
Participant under this Article X shall be coordinated so that such
indemnification is paid only once, and the Company's obligation under
this Article X shall be satisfied to the extent of any such other payment.
Exhibit 10.9
First Supplemental Indenture
Dated as of February 23, 1999
LOWE'S COMPANIES, INC.
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
_______________
First Supplemental Indenture to the
Amended and Restated Indenture
dated as of December 1, 1995
FIRST SUPPLEMENTAL INDENTURE, dated as of February 23, 1999 (herein called the
"Supplemental Indenture"), between LOWE'S COMPANIES, INC., a corporation duly
organized and existing under the laws of the State of North Carolina (herein
called the "Company"), having its principal office at Highway 268 East, North
Wilkesboro, North Carolina 28656, and THE FIRST NATIONAL BANK OF CHICAGO, a
national banking association duly organized and existing under the laws of the
United States, as Trustee (herein called the "Trustee"),
WITNESSETH:
WHEREAS, the Company has heretofore executed and delivered to the Trustee an
Amended and Restated Indenture, dated as of December 1, 1995 (as supplemented
and amended from time to time, the "Indenture"), providing for the issuance
from time to time of its unsecured unsubordinated debentures, notes or other
evidences of indebtedness (herein called the "Securities"), to be issued in
one or more series as provided in the Indenture; and
WHEREAS, it is provided in Section 901 of the Indenture that without the
consent of any Holders, the Company, when authorized by a Board Resolution,
and the Trustee may enter into indentures supplemental thereto (1) to add to,
change or eliminate any of the provisions of the Indenture in respect of one
or more series of Securities, provided that any such addition, change or
elimination (i) shall neither (A) apply to any Security of any series created
prior to the execution of such supplemental indenture and entitled to the
benefit of such provision nor (B) modify the rights of the Holder of any such
Security with respect to such provision or (ii) shall become effective only
when there is no such Security Outstanding, (2) to add to the covenants of the
Company for the benefit of the Holders of all or any series of Securities (and
if such covenants are to be for the benefit of less than all series of
Securities, stating that such covenants are expressly being included solely
for the benefit of such series) and (3) to establish the form or terms of
Securities of any series as permitted by Sections 201 and 301 of the
Indenture; and
WHEREAS, the Company desires to supplement and amend the Indenture to allow
for the issuance of Securities to be initially sold within the United States
to U.S. Persons that are Qualified Institutional Buyers and issued in the form
of one or more Restricted Global Securities deposited with the Trustee, as
custodian for the Depositary, and registered in the name of a nominee of the
Depositary; and
WHEREAS, the Company desires to set forth the terms and form of a Restricted
Global Security to be sold within the United States to Qualified Institutional
Buyers pursuant to Rule 144A to be known as the Company's 6 1/2% Debentures Due
March 15, 2029, in an aggregate principal amount of FOUR HUNDRED MILLION
DOLLARS ($400,000,000) (herein called the "Rule 144A 6 1/2 Debentures"); and
WHEREAS, the Rule 144A 6 1/2% Debentures and the certificate of authentication
to be borne by the Rule 144A 6 1/2% Debentures are to be substantially in the
form set forth in Exhibit A hereto; and
NOW, THEREFORE, for consideration, the adequacy and sufficiency of which are
hereby acknowledged by the parties hereto, each party agrees as follows, for
the benefit of the other parties and for the equal and proportionate benefit
of all Holders of the Securities, as follows:
ARTICLE ONE
AMENDMENTS
SECTION 101. Article One of the Indenture shall be amended by inserting in
Section 101 the following new terms with the following definitions in the
appropriate alphabetic positions:
"Closing Time" means, with respect to the Rule 144A 6 1/2% Debentures,
February 23, 1999, the date of initial issuance of the Securities issued
hereunder.
"Exchange Certificate" means a certificate substantially in the form of
Exhibit C hereto, as such form may be revised or modified with respect
to any series of Securities by a Board Resolution or indenture
supplemental hereto creating such series.
"Exchange Securities" means Securities that are issued and exchanged for any
series of Restricted Securities in accordance with an Exchange Offer, as
provided for in a registration rights agreement related to such series and
this Indenture, containing substantially identical terms as such series of
Restricted Securities, except that (i) such Exchange Securities shall not
contain terms with respect to transfer restrictions and shall be registered
under the Securities Act and (ii) certain provisions relating to an increase
in the stated rate of interest thereon shall be eliminated.
Exchange Offer" means an offer by the Company to Holders of any series of
Restricted Securities to exchange all of such Restricted Securities for
Exchange Securities, as provided for in a related registration rights
agreement.
"Qualified Institutional Buyer" means a "qualified institutional buyer" as
such term is defined in Rule 144A.
"Registration Rights Agreement" means, with respect to the Rule 144A 6 1/2%
Debentures, the Registration Rights Agreement dated as of February 23, 1999,
among the Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Goldman, Sachs & Co. and Lehman Brothers Inc., as initial
purchasers.
"Restricted Global Security" means Securities initially sold within the United
States in reliance on Rule 144A.
"Restricted Physical Security" means any Restricted Security in permanent
certificated form.
"Restricted Security" means any Security issued pursuant to an exemption from
the Securities Act and bearing a Restrictive Legend.
"Restrictive Legend" has the meaning set forth in Section 204.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A 6 1/2% Debenture" has the meaning set forth in Section 201.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Shelf Registration Statement" means, with respect to any series of Restricted
Securities, the Shelf Registration Statement specified in the registration
rights agreement related to such series.
"Transfer Certificate" means a certificate substantially in the form of
Exhibit B hereto and to be attached as Annex A to the Form of Rule 144A 6 1/2%
Debenture, as such form may be varied or modified with respect to any series
of Securities by a Board Resolution or indenture supplemental hereto.
SECTION 102. Article Two of the Indenture shall be amended by adding to the
end of Section 203 the following:
"Securities offered and sold in reliance on Rule 144A under the Securities Act
may be issued in the form of one or more permanent global Securities in
substantially the form set forth in Exhibit A and containing the legend set
forth in Section 204 (each, a "Restricted Global Security"), deposited with
the Depositary or with the Trustee, as custodian for the Depositary or its
nominee, duly executed by the Company and authenticated by the Trustee as
herein provided. The aggregate principal amount of a Restricted Global
Security may from time to time be increased or decreased by adjustments made
on the records of the Depositary or the Trustee, as custodian for the
Depositary or its nominee, as hereinafter provided.
Restricted Securities issued pursuant to Sections 305 and 312 in exchange for
or upon transfer of beneficial interests in a Restricted Global Security may
be in the form of Restricted Physical Securities containing the Restrictive
Legend as set forth in Section 204 (a "Restricted Physical Security") until
such time as the conditions set forth in Section 204 are satisfied, in
substantially the form set forth in Exhibit A, as provided in Section 312.
Exchange Securities shall be issued in substantially the form set forth in
Exhibit A, but without any Restrictive Legend."
Section 103. Article Two of the Indenture shall be amended by adding to the
end of such Article the following:
"Section 204. Restrictive Legends.
Unless and until (i) a Restricted Security is sold pursuant to an effective
Shelf Registration Statement or (ii) a Restricted Security is exchanged for an
Exchange Security in an Exchange Offer pursuant to an effective Exchange Offer
Registration Statement, in each case pursuant to an applicable registration
rights agreement, each Restricted Global Security and Restricted Physical
Security shall bear the following legend set forth below (the "Restrictive
Legend") on the face thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACQUISITION HEREOF
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO
RULE 903 OR 904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE
DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE
144 UNDER THE SECURITIES ACT AND ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS
SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y)
SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE
RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO
A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR
(D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
PURSUANT TO RULE 904 OF REGULATION S, OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY,
THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON
THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR
TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT."
SECTION 104. Article Three of the Indenture shall be amended by adding the
following to the end of Section 305:
"Any Physical Security delivered in exchange for an interest in the Global
Security pursuant to this Section shall bear the Restrictive Legend unless
such exchange is made on or after (i) a Restricted Security is sold under an
effective Shelf Registration Statement, (ii) a Restricted Security is
exchanged for an Exchange Security in an Exchange Offer under an effective
Exchange Offer Registration Statement or (iii) two years after the later of
the original issue date of a Restricted Security and the last date on which
the Company or any affiliate of the Company was the owner of such Restricted
Security (the "Resale Restriction Termination Date") and except as otherwise
provided in Section 312."
SECTION 105. Article Three of the Indenture shall be amended by adding the
following to the end of such Article:
"Section 312. Transfer Provisions.
Unless and until (i) a Restricted Security is sold pursuant to an effective
Shelf Registration Statement, or (ii) a Restricted Security is exchanged for
an Exchange Security in an Exchange Offer under an effective Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The provisions of this Section 312 shall apply to all transfers
involving any Restricted Physical Security and any beneficial interest in any
Restricted Global Security.
(b) As used in this Section 312 only, "delivery" of a certificate by
a transferee or transferor means the delivery to the Security Registrar by
such transferee or transferor of the applicable certificate duly completed;
"holding" includes both possession of a Physical Security and ownership of a
beneficial interest in a Global Security, as the context requires;
"transferring" a Global Security means transferring that portion of the
principal amount of the transferor's beneficial interest therein that the
transferor has notified the Security Registrar that it has agreed to transfer;
and "transferring" a Physical Security means transferring that portion of the
principal amount thereof that the transferor has notified the Security
Registrar that it has agreed to transfer.
As used in this Indenture, "Exchange Certificate" means a certificate
substantially in the form set forth as Exhibit C; and "Non-Registration
Opinion and Supporting Evidence" means a written opinion of counsel reasonably
acceptable to the Company to the effect that, and such other certification or
information as the Company may reasonably require to confirm that, the
proposed transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act.
(c) An Exchange Certificate, if not actually delivered, shall be
deemed delivered if (i) (A) the transferor advises the Company and the Trustee
in writing that the relevant offer and sale were made in accordance with the
provisions of Rule 144A (or, in the case of a transfer of a Restricted
Physical Security, the transferor checks the box provided on such Security to
that effect) and (B) the transferee advises the Company and the Trustee in
writing that (x) it and, if applicable, each account for which it is acting in
connection with the relevant transfer, is a "Qualified Institutional Buyer,"
(y) it is aware that the transfer of Restricted Securities to it is being made
in reliance on the exemption from the provisions of Section 5 of the
Securities Act provided by Rule 144A and (z) prior to the proposed date of
transfer it has been given the opportunity to obtain from the Company the
information referred to in Rule 144A(d)(4), and has either declined such
opportunity or has received such information (or, in the case of a transfer of
a Restricted Physical Security, the transferee signs the certification
provided on the such Security to that effect); or (ii) the transferor holds
the Restricted Global Security and is transferring to a transferee that shall
take delivery in the form of the Restricted Global Security.
(d) If the proposed transferor holds:
(1) a Restricted Physical Security which is surrendered to the
Security Registrar, and the proposed transferee or transferor, as applicable:
(A) delivers (or is deemed to have delivered pursuant
to clause (c) above) an Exchange Certificate and the proposed transferee
requests delivery in the form of a Restricted Physical Security, then the
Security Registrar shall (x) register such transfer in the name of such
transferee and record the date thereof in its books and records, (y) cancel
such surrendered Restricted Physical Security and (z) deliver a new Restricted
Physical Security to such transferee duly registered in the name of such
transferee in principal amount equal to the principal amount being transferred
of such surrendered Restricted Physical Security; or
(B) delivers (or is deemed to have delivered pursuant
to clause (c) above) an Exchange Certificate and the proposed transferee is or
is acting through a Participant and requests that the proposed transferee
receive a beneficial interest in the Restricted Global Security, then the
Security Registrar shall (x) cancel such surrendered Restricted Physical
Security, (y) record an increase in the principal amount of the Global
Security equal to the principal amount being transferred of such surrendered
Restricted Physical Security and (z) notify the Depositary in accordance with
the procedures of the Depositary that it has effected such transfer.
In any of the cases described in this Section 312(d)(1), the Security
Registrar shall deliver to the transferor a new Restricted Physical Security
in principal amount equal to the principal amount not being transferred of
such surrendered Restricted Physical Security, as applicable.
(2) a beneficial interest in the Global Security, and the
proposed transferee or transferor, as applicable:
(A) delivers (or is deemed to have delivered pursuant
to clause (c) above) an Exchange Certificate and the proposed transferee
requests delivery in the form of a Restricted Physical Security, then the
Security Registrar shall (w) register such transfer in the name of such
transferee and record the date thereof in its books and records, (x) record a
decrease in the principal amount of the Restricted Global Security in an
amount equal to the beneficial interest therein being transferred, (y) deliver
a new Restricted Physical Security to such transferee duly registered in the
name of such transferee in principal amount equal to the amount of such
decrease and (z) notify the Depositary in accordance with the procedures of
the Depositary that it has effected such transfer; or
(B) delivers (or is deemed to have delivered pursuant
to clause (c) above) an Exchange Certificate and the proposed transferee is or
is acting through a Participant and requests that the proposed transferee
receive a beneficial interest in the Restricted Global Security, then the
transfer shall be effected in accordance with the procedures of the Depositary
therefor.
(e) In any case in which the Security Registrar is required to
deliver a Restricted Physical Security to a transferee or transferor, the
Company shall execute, and the Trustee shall authenticate and make available
for delivery, such Restricted Physical Security.
(f) Any transferee entitled to receive a Restricted Physical Security
may request that the principal amount thereof be evidenced by one or more
Restricted Physical Securities in any authorized denomination or denominations
and the Security Registrar shall comply with such request if all other
transfer restrictions are satisfied.
(g) The Security Registrar shall effect and record, upon receipt of a
written request from the Company so to do, a transfer not otherwise permitted
by Section 312(d), such recording to be done in accordance with the otherwise
applicable provisions of Section 312(d), upon the furnishing by the proposed
transferor or transferee of a Non-Registration Opinion and Supporting
Evidence.
(h) By its acceptance of any Security bearing the Restrictive Legend,
each Holder of such Security acknowledges the restrictions on transfer of such
Security set forth in this Indenture and in the Restrictive Legend and agrees
that it shall transfer such Security only as provided in this Indenture. The
Security Registrar shall not register a transfer of any Security unless such
transfer complies with the restrictions with respect thereto set forth in this
Indenture. The Security Registrar shall not be required to determine (but may
rely upon a determination made by the Company) the sufficiency of any such
certifications, legal opinions or other information.
(i) Upon the transfer, exchange or replacement of Securities not
bearing the Restrictive Legend, the Security Registrar shall deliver
Securities that do not bear the Restrictive Legend. Upon the transfer,
exchange or replacement of Securities bearing the Restrictive Legend, the
Security Registrar shall deliver only Securities that bear the Restrictive
Legend unless (i) the requested transfer is at least two years after the
original issue date of the Restricted Security (with respect to any Restricted
Physical Security), (ii) there is delivered to the Security Registrar an
Opinion of Counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provisions of the
Securities Act or (iii) such Securities are exchanged for Exchange Securities
pursuant to an Exchange Offer.
Section 313. CUSIP Numbers.
The Company may use "CUSIP" numbers (if then generally in use) in issuing the
Securities and, if so, the Trustee shall use "CUSIP" numbers in notices to
Holders as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice and that reliance may
be placed only on the other identification numbers printed on the Securities.
The Company shall promptly notify the Trustee of any change in the CUSIP
numbers."
SECTION 106. Article Seven of the Indenture shall be amended by adding the
following paragraph immediately following the paragraph contained in Section
704:
"The Company will take all actions necessary to permit resales of any
Securities issued pursuant to Rule 144A of the Securities Act including,
without limitation, furnishing upon request of a Holder of such Security to
such Holder and a prospective purchaser designated by such Holder financial
and other information of the Company required to be delivered under Rule
144A(d)(4) of the Securities Act if at the time of such request the Company is
not a reporting company under Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended."
SECTION 107. The Indenture shall be amended by adding an exhibit titled
"Exhibit B" immediately following Exhibit A of the Indenture. Exhibit B shall
be the form of Transfer Certificate attached as Exhibit B hereto.
SECTION 108. The Indenture shall be amended by adding an exhibit titled
"Exhibit C" immediately following Exhibit B of the Indenture. Exhibit C shall
be the form of Exchange Certificate attached as Exhibit C hereto.
SECTION 109. The Indenture shall be amended by adding an exhibit titled
"Exhibit D" immediately following Exhibit C of the Indenture. Exhibit D shall
be in the Form of Transfer attached as Exhibit D hereto.
ARTICLE TWO
PROVISIONS FOR THE RULE 144A 6 1/2% DEBENTURES
SECTION 201. There shall be a series of Securities entitled "6 1/2% Debentures
Due March 15, 2029" (herein designated the "Rule 144A 6 1/2% Debentures"). The
form of the Rule 144A 6 1/2% Debentures and the Trustee's certificate of
authentication to be borne thereby shall be substantially in the forms set
forth in Exhibit A hereto and shall be executed, authenticated and delivered
in accordance with the provisions of, and shall in all respects be subject to,
all of the terms, conditions and covenants of the Indenture and this
Supplemental Indenture. The aggregate principal amount of the Rule 144A 6 1/2%
Debentures that may be executed by the Company and authenticated by the
Trustee hereunder shall be limited to FOUR HUNDRED MILLION DOLLARS
($400,000,000).
SECTION 202. In accordance with the terms and conditions of the Indenture,
the Company may issue and sell the Rule 144A 6 1/2% Debentures inside the
United States without registration under the Securities Act in reliance on
Rule 144A thereunder.
SECTION 203. The Rule 144A 6 1/2% Debentures shall be represented initially by
permanent global debentures in definitive, fully registered form without
interest coupons (the "Restricted Global Security"). Each Restricted Global
Security shall be registered in the name of a nominee of the Depositary and
deposited on behalf of the purchasers of the Rule 144A 6 1/2% Debentures
represented thereby with a custodian for the Depositary for credit to the
respective accounts of the purchasers (or to such other accounts as they may
direct). Except as set forth below, each Restricted Global Security shall be
in the form of the Rule 144A 6 1/2% Debenture attached hereto as Exhibit A and
may be transferred, in whole and not in part, only to another nominee of the
Depositary or to a successor of the Depositary or its nominee.
SECTION 204. (a) Each Restricted Global Security, or any Rule 144A 6 1/2%
Debenture that may be issued in exchange for an interest in a Restricted
Global Security, shall be dated as provided in Section 303 of the Indenture,
shall mature on March 15, 2029 and shall bear interest at the rate of 6 1/2%
per annum from February 23, 1999, payable semiannually on March 15 and
September 15 in each year, commencing with September 15, 1999, until payment
of the principal amount shall have been made or duly provided for. The Record
Dates with respect to the interest payment dates for the Rule 144A 6 1/2%
Debentures shall be March 1 and September 1 (whether or not a business day),
respectively. The holder of record of a Rule 144A 6 1/2% Debenture on any
Record Date for the payment of interest shall be entitled to receive the
interest payable on such interest payment date.
(b) Both principal of and interest on the Rule 144A 6 1/2% Debentures
shall be payable at the office of the Company in the Borough of Manhattan, The
City of New York, New York or the City of North Wilkesboro, North Carolina or
at any other office of the Company maintained by the Company for such purpose;
provided that interest may be payable, at the option of the Company, by check
mailed to the registered address of the person entitled thereto as such
address shall appear on the registry books of the Company. On each interest
payment date the Trustee shall pay to the registered holder interest accrued
in respect of such Rule 144A 6 1/2% Debenture. Payment of principal on a Rule
144A 6 1/2% Debenture shall be paid to the registered holder or upon his order
only upon presentation and surrender for payment of such Rule 144A 6 1/2%
Debenture on or after the payment date at the office of the Company in the
Borough of Manhattan, The City of New York, New York or the City of North
Wilkesboro, North Carolina or at any other office of the Company maintained by
the Company for such purpose.
(c) The Rule 144A 6 1/2% Debentures shall not be convertible into or
exchangeable for equity securities of the Company.
(d) The Rule 144A 6 1/2% Debentures shall not be subject to any
sinking fund.
(e) The Company shall not have any redemption or repayment rights
with respect to the Rule 144A 6 1/2% Debentures.
(f) The Rule 144A 6 1/2% Debentures shall not be included for listing
on any national securities exchange.
SECTION 205. (a) So long as a nominee of the Depositary is the registered
owner of any Restricted Global Security, such nominee shall be considered the
sole owner and holder of the Rule 144A 6 1/2% Debentures represented by such
Restricted Global Security under the Indenture, as supplemented and amended
hereby. Except as herein provided, owners of beneficial interests in any
Restricted Global Security shall not be entitled to have Rule 144A 6 1/2%
Debentures represented by the such Restricted Global Security registered in
their names, shall not receive or be entitled to receive physical delivery of
Rule 144A 6 1/2% Debentures in certificated form and shall not be considered
the owners or holders thereof under the Indenture.
(b) Neither the Company nor the Trustee shall have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in any Restricted
Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
ARTICLE THREE
MISCELLANEOUS
SECTION 301. Capitalized terms used but not defined herein shall have the
respective meanings set forth in the Indenture.
SECTION 302. Except as supplemented and amended hereby, the Indenture is in
all respects ratified and confirmed, and all of the terms, provisions and
conditions thereof shall be and remain in full force and effect, and this
Supplemental Indenture and all its provisions shall be deemed a part thereof.
SECTION 303. In case any provision in this Supplemental Indenture shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 304. If any provision of this Supplemental Indenture limits,
qualifies or conflicts with any other provision hereof or of the Indenture
which provision is required to be included in the Indenture by any of the
provisions of the Trust Indenture Act, such required provision shall control.
SECTION 305. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAWS AND RULES OF SAID STATE.
SECTION 306. This Supplemental Indenture has been simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
Delivery by telecopier of an executed signature page hereto shall be effective
as delivery of a manually executed counterpart hereof.
SECTION 307. This Supplemental Indenture shall be deemed to have been
executed on the date of the acknowledgment thereof by the officer of the
Trustee who signed it on behalf of the Trustee.
IN WITNESS WHEREOF, the Company and the Trustee have caused their names to be
signed hereto by their respective officers thereunto duly authorized and their
respective corporate seals, duly attested, to be hereunto affixed, all as of
the day and year first above written.
[CORPORATE SEAL] LOWE'S COMPANIES, INC.
Attest: /s/ William C. Warden, Jr. By /s/ Marshall A. Croom
Name: William C. Warden, Jr. Name: Marshall A. Croom
Title: Executive Vice President Title: Assistant Treasurer
and Secretary
[CORPORATE SEAL] THE FIRST NATIONAL BANK OF
CHICAGO,
Trustee
Attest: /s/ Mark J. Frye By /s/ Somsri Helmer
Name: Somsri Helmer
Title: Trust Officer
STATE OF NORTH CAROLINA: )
) SS.:
COUNTY OF WILKES: )
On this 23rd day of February, 1999, before me personally came Marshall A.
Croom, to me known, who, being by me duly sworn, did depose and say that he is
the Assistant Treasurer of LOWE'S COMPANIES, INC., one of the corporations
described in and which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument bearing the
name of said corporation is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed
his name thereto by like authority.
[Notarial Seal]
/s/ Cynthia Reins
Notary Public, State of North Carolina
No.
Qualified in the County of Wilkes
Commission Expires 11-16-2003
STATE OF ILLINOIS: )
) SS.:
COUNTY OF COOK: )
On this 23rd day of February, 1999, before me personally came Somsri Helmer,
to me known, who, being by me duly sworn, did depose and say that he/she
resides at 4250 N. Marine Drive, Chicago, Illinois 60613; that he/she is a
duly elected or appointed, qualified and serving officer of THE FIRST NATIONAL
BANK OF CHICAGO, one of the corporations described in and which executed the
foregoing instrument; that he/she knows the seal of said corporation; that the
seal affixed to said instrument bearing the name of said corporation is such
corporate seal; that it was so affixed by authority of the Board of Directors
of said corporation, and that he/she signed his/her name thereto by like
authority.
[Notarial Seal]
/s/ Maria C.Birrueta
Notary Public, State of Illinois
No.
Qualified in the County of Cook
Commission Expires 11-13-2000
<PAGE> A-1
EXHIBIT A
[FORM OF DEBENTURES]
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Lowe's Companies,
Inc. or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or to such other
entity or in such other name as is requested by an authorized representative
of DTC (and any payment hereon is made to Cede & Co. or to such other entity
as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
since the registered owner hereof, Cede & Co., has an interest herein.
Transfers of this Global Security shall be limited to transfers in whole, but
not in part, to nominees of Cede & Co. or to a successor thereof or such
successor's nominee and transfers of portions of this Global Security shall be
limited to transfers made in accordance with the restrictions set forth in
Section 303 of the Indenture referred to in this Global Security.
<PAGE> A-2
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACQUISITION HEREOF
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO
RULE 903 OR 904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE
DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE
144 UNDER THE SECURITIES ACT AND ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS
SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y)
SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE
RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO
A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR
(D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
PURSUANT TO RULE 904 OF REGULATION S, OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY,
THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON
THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR
TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
LOWE'S COMPANIES, INC.
6 1/2% DEBENTURES
DUE MARCH 15, 2029
CUSIP No. 548661AJ6
No. _____
$____________________
Original Principal Amount
Lowe's Companies, Inc., a corporation duly organized and existing under the
laws of the State of North Carolina (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to Cede & Co. or registered
assigns, the principal sum of ________________________________________
($ ) on March 15, 2029, at the office or agency of the
Company referred to below, in such coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public
and private debts, and to pay interest thereon in like coin or currency from
February 23, 1999, or from the most recent Interest Payment Date on which
interest has been paid or duly provided for, semi-annually in arrears on March
15 and September 15 in each year, commencing September 15, 1999, at the rate
of 6 1/2% per annum, until the principal hereof is paid or made available for
payment, and (to the extent lawful) to pay interest at the same rate per annum
on any overdue principal and premium and on any overdue installment of
interest until paid.
Interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date, as provided in the Indenture, shall be paid to the Person in
whose name this Debenture (or one or more predecessor Debentures) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the March 1 or September 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to
be payable to the Person in whose name this Debenture is registered on such
Regular Record Date and may either be paid to the Person in whose name this
Debenture is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to the Person in whose name this Debenture is
registered not less than ten days prior to such Special Record Date, or be
paid at any time in any other lawful manner, all as more fully provided in the
Indenture.
This Debenture is a "book-entry" debenture and is being registered in the name
of Cede & Co. as nominee of The Depository Trust Company ("DTC"), a clearing
agency. Subject to the terms of the Amended and Restated Indenture, dated as
<PAGE> A-4
of December 1, 1995 (as supplemented by the First Supplemental Indenture dated
as of February 23, 1999 and as supplemented and amended from time to time, the
"Indenture"), between the Company and The First National Bank of Chicago, as
trustee (the "Trustee"), this Debenture will be held by a clearing agency or
its nominee, and beneficial interests will be held by beneficial owners
through the book-entry facilities of such clearing agency or its nominee in
minimum denominations of $1,000 and increments of $1,000 in excess thereof.
The statements set forth in the restrictive legend above are an integral part
of the terms of this Debenture and by acceptance hereof each holder of this
Debenture agrees to be subject to and bound by the terms and provisions set
forth in such legend.
As long as this Debenture is registered in the name of DTC or its nominee, the
Trustee will make payments of principal of and interest on this Debenture by
wire transfer of immediately available funds to DTC or its nominee.
Notwithstanding the above, the final payment on this Debenture will be made
after due notice by the Trustee of the pendency of such payment and only upon
presentation and surrender of this Debenture at its principal corporate trust
office or such other offices or agencies appointed by the Trustee for that
purpose and such other locations provided in the Indenture.
Payments of principal of (and premium, if any) and interest on this Debenture
will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payments of public and private debts; provided, however, that at
the option of the Company payment of interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security Register.
This Debenture is one of a duly authorized issue of debentures of the Company,
designated 6 1/2% Debentures due March 15, 2029 (the "Debentures"), limited in
aggregate principal amount at any time Outstanding to FOUR HUNDRED MILLION
DOLLARS ($400,000,000) which may be issued under the First Supplemental
Indenture. Reference is hereby made to the Indenture, the First Supplemental
Indenture and all indentures supplemental thereto for a statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee and the Holders of the Debentures, and
the terms upon which the Debentures are, and are to be, authenticated and
delivered. All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Holder of this Debenture is entitled to the benefits of the Registration
Rights Agreement, dated as of February 23, 1999 (the "Registration Rights
Agreement"), between the Company and the Initial Purchasers named therein. In
the event that (i) the Company fails to file an Exchange Offer Registration
<PAGE> A-5
Statement with respect to the Debentures with the Commission on or prior to
the 150th calendar day following the Closing Time, (ii) the Commission does
not declare such Exchange Offer Registration Statement effective on or prior
to the 180th calendar day following the Closing Time, (iii) the Exchange Offer
is not consummated on or prior to the 30th calendar day following the
effective date of the Exchange Offer Registration Statement or (iv) if
required, a Shelf Registration Statement with respect to the Debentures is not
declared effective by the Commission on or prior to the 210th calendar day
following the Closing Time (each, a "Registration Default"), the per annum
interest rate borne by the Debentures shall be increased by one-quarter of one
percent (0.25%) per annum from the end of the applicable period giving rise to
such Registration Default. The interest rate borne by the Debentures will be
increased by an additional one-quarter of one percent (0.25%) per annum for
each subsequent 90-day period (or portion thereof) during which any such
Registration Default continues up to a maximum aggregate increase in the
annual interest rate of one-half of one percent (0.50%) per annum. Following
the cure of all Registration Defaults, the interest rate borne by the
Debentures shall be reduced to the original interest rate borne by the
Debentures. All accrued additional interest shall be paid to Holders by the
Company in the same manner as interest is paid pursuant to the Indenture. All
terms used in this Debenture that are defined in the Registration Rights
Agreement shall have the meanings assigned to them in the Registration Rights
Agreement.
The Debentures do not have the benefit of any sinking fund obligations and
shall not be redeemable at the option of the Company or repayable at the
option of the Holder prior to maturity.
If an Event of Default shall occur and be continuing, the principal of all the
Debentures may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (a) the entire
indebtedness of the Company under this Debenture and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Debenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debentures under the Indenture at
any time by the Company, the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Debentures at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Debentures at the
time Outstanding, on behalf of the Holders of all Debentures, to waive
compliance by the Company with certain provisions of the Indenture and certain
past Defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Debenture shall be conclusive and binding upon
<PAGE> A-6
such Holder and upon all future Holders of this Debenture and of any Debenture
issued upon the registration of transfer thereof or in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon
this Debenture.
No reference herein to the Indenture and provision of this Debenture or of the
Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Debenture at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations on transfer of
this Debenture by DTC or its nominee, the transfer of this Debenture is
registrable in the Security Register, upon surrender of this Debenture for
registration of transfer at the office or agency of the Company in the Borough
of Manhattan, The City of New York, duly endorsed by, or accompanied by the
written instrument of transfer attached hereto duly executed by the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more
new Debentures, of authorized denominations and for the same aggregate
principal amount, shall be issued to the designated transferee or transferees.
The Debentures are issuable only in fully registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Debentures
are exchangeable for a like aggregate principal amount of Debentures of
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer or
exchange of Debentures, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to due presentment of this Debenture for registration of transfer, the
Company, the Trustee and any agent of the Company, or the Trustee may treat
the Person in whose name this Debenture is registered as the owner hereof for
all purposes, whether or not this Debenture be overdue, and none of the
Company, the Trustee or any such agent shall be affected by notice to the
contrary.
Interest on this Debenture shall be computed on the basis of a 360-day year of
twelve 30-day months.
The Company shall furnish to any Holder of record of Debentures, upon written
request and without charge, a copy of the Indenture.
The Indenture and this Debenture each shall be governed by and construed in
<PAGE> A-7
accordance with the laws of the State of New York without regard to principles
of conflicts of law.
Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Debenture shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.
<PAGE> A-8
IN WITNESS WHEREOF, LOWE'S COMPANIES, INC. has caused this Debenture to be
signed, manually or in facsimile, by a duly elected or appointed, qualified
and serving officer and has caused a facsimile of its corporate seal to be
imprinted hereon, attested by the manual or facsimile signature of a duly
elected or appointed, qualified and serving officer.
LOWE'S COMPANIES, INC.
By.............................
Name:
Title:
Dated: February ___, 1999
[SEAL]
Attest:.....................................
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE SECURITIES OF THE SERIES DESIGNATED THEREIN REFERRED
TO IN THE WITHIN-MENTIONED INDENTURE.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By.....................................
Authorized Officer
<PAGE> B-1
EXHIBIT B
Annex A
[FORM OF TRANSFER CERTIFICATE]
Lowe's Companies, Inc. (the "Company")
The First National Bank of Chicago,
as Trustee (the "Trustee")
Re: 6 1/2% Debentures Due March 15, 2029
Reference is hereby made to the Amended and Restated Indenture, dated as of
December 1, 1995 (as supplemented by the First Supplemental Indenture dated as
of February 23, 1999, and as supplemented and amended from time to time, the
"Indenture"), between the Company and the Trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
Other terms shall have the meanings given to them in Rule 144A ("Rule 144A")
under the Securities Act of 1933, as amended (the "Securities Act").
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s)
and transfer(s) unto
________________________________________________________
________________________________________________________
________________________________________________________
(Print or type name and address of transferee, including ZIP code)
________________________________________________________
(Taxpayer Identification Number of transferee)
the within Debenture and all rights thereunder, hereby irrevocably
constituting and appointing ____________________ attorney-in-fact to transfer
said Debenture on the books of the Company with full power of substitution in
the premises.
In connection with any transfer of this Debenture occurring prior to the date
that is the earlier of the date of an effective Shelf Registration Statement
or the Resale Restriction Termination Date, the undersigned confirms that
without utilizing any general solicitation or general advertising:
<PAGE> B-2
B-2
[Check One]
____ Such Debenture is being transferred in accordance with (i) the
transfer restrictions set forth in the Indenture and the Debentures
and (ii) Rule 144A under the Securities Act to a Transferee that the
Transferor reasonably believes is purchasing the Debentures for its
own account or an account with respect to which the Transferee
exercises sole investment discretion, and the Transferee and any such
account is a "Qualified Institutional Buyer" within the meaning of
Rule 144A, and such Transferee is aware that the sale to it is being
made in reliance upon Rule 144A, in each case in a transaction
meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States or any
other jurisdiction.
or
____ Such Debenture is being transferred pursuant to an exemption from
registration under the Securities Act provided by Rule 144 thereunder
upon provision of an opinion of counsel and such other evidence
acceptable to the Company that such offer, sale, pledge or transfer
is in compliance with the Securities Act and other applicable laws,
in each case in a form satisfactory to the Company.
or
____ Such Debenture is being transferred in a transaction other than in
accordance with the above upon provision of a legal opinion and other
evidence requested by the Company in form and substance satisfactory
to the Company, to the effect that the proposed transfer is being
made pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or other Security
Registrar shall not be obligated to register this Debenture in the name of any
Person other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein and in Section 312 of the
Indenture shall have been satisfied.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Initial Purchaser named in the Offering Memorandum
distributed by the Company in connection with the sale of the Debentures.
You are entitled to rely upon this letter and are irrevocably authorized to
produce this letter or a copy hereof to any interested party in any
<PAGE> B-3
B-3
administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
[Insert Name of Transferor]
By:________________________
Name:
Title:
Dated: ____________________
(N.B.: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever)
TO BE COMPLETED BY PURCHASER IF THE FIRST OPTION ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Security Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Security Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
The undersigned represents and warrants that it is purchasing this Debenture
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date:
(NOTICE: To be executed by an executive officer)
<PAGE> B-4 B-4
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payment shall be made, by wire transfer or otherwise, in immediately available
funds, to _____________________, for the account of ______________________,
account number ___________, or, if mailed, by check to _____________________.
Applicable reports and statements should be mailed to _____________________.
This information is provided by _____________________, the assignee named
above, or _____________________, as its agent.
<PAGE> C-1
EXHIBIT C
FORM OF EXCHANGE CERTIFICATE
Lowe's Companies, Inc. (the "Company")
The First National Bank of Chicago,
as Trustee (the "Trustee")
Re: Lowe's Companies, Inc. 6 1/2% Debentures
Due March 15, 2029 (the "Debentures")
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Indenture, dated as of
December 1, 1995 (as supplemented by the First Supplemental Indenture dated as
of February 23, 1999 and as further supplemented and amended from time to
time, the "Indenture"), between the Company and the Trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture. Other terms shall have the meanings given to them in Rule 144A
("Rule 144A") under the Securities Act of 1933, as amended (the "Securities
Act").
In connection with our proposed sale of $______________ aggregate principal
amount of Debentures, we confirm that such sale has been effected pursuant to
and in accordance with Rule 144A. We are aware that the transfer of
Debentures to us is being made in reliance on the exemption from the
provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to
the date of this Certificate, we have been given the opportunity to obtain
from the Company the information referred to in Rule 144A(d)(4), and have
either declined such opportunity or have received such information.
Each of you is entitled to rely upon this Certificate and is irrevocably
authorized to produce this Certificate or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of PURCHASER]
By:
Name:
Title:
Address:
Date of this Certificate: __________________
<PAGE> D-1
EXHIBIT D
FORM OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby transfers to
(PRINT NAME AND ADDRESS OF TRANSFEREE)
U.S.$_______________ principal amount of this Security, and all rights with
respect thereto, and irrevocably constitutes and appoints
_____________________________ as attorney to transfer this Security on the
books kept for registration thereof, with full power of substitution.
Dated
Certifying signature
Signed:
Note:
(i) The signature on this transfer form must correspond to the name as it
appears on the face of this Security.
(ii) A representative of the holder of the Security should state the
capacity in which he or she signs (e.g., executor).
(iii) The signature of the person effecting the transfer shall conform to
any list of duly authorized specimen signatures supplied by the
registered holder or shall be certified by a bank which is a member of
the Security Transfer Agent Medallion Program or in such other manner
as the paying agent, acting in its capacity as transfer agent or the
Trustee, acting in its capacity as Trustee, may require.
Exhibit 10.16
JANUARY 25, 1998
AMENDMENTS TO THE
LOWE'S COMPANIES, INC. 1997 INCENTIVE PLAN
On January 25, 1998, the Lowe's Companies, Inc. 1997 Incentive Plan (the
"Plan") was amended as follows:
a. Section 8.06 was amended to read as follows:
Shareholder Rights. Prior to their forfeiture in accordance
with the terms of the applicable Agreement and while the shares
of Common Stock granted pursuant to the Stock Award may be
forfeited, a Participant will have all rights of a shareholder
with respect to a Stock Award, including the right to receive
dividends and vote the shares; provided, however, that during
such period (i) except as provided in Section 8.07, a
Participant may not sell, transfer, pledge, exchange,
hypothecate, or otherwise dispose of shares of Common Stock
granted pursuant to a Stock Award, (ii) the Company shall
retain custody of the certificates evidencing the shares of
Common Stock granted pursuant to a Stock Award, and (iii) the
Participant will deliver to the Company a stock power, endorsed
in blank, with respect to each Stock Award. The limitations
set forth in the preceding sentence shall not apply after the
shares Common Stock granted under the Stock Award are
transferable and are no longer forfeitable.
b. A new section 8.07 was added to the Plan and reads as follows:
Transferable Stock Awards. Section 8.06 to the contrary
notwithstanding, if the Agreement provides, a Stock Award that
maybe forfeited may be transferred by a Participant to the
Participant's children, grandchildren, spouse, one or more
trusts for the benefit of such family members or a partnership
in which such family members are the only partners, on such
terms and conditions as maybe permitted under Securities
Exchange Commission Rule 16b-3 as in effect from time to time.
The holder of a Stock Award transferred pursuant to this
section shall be bound by the same terms and conditions that
governed the Stock Award during the period that it was held by
the Participant; provided, however, that such transferee may
not transfer the Stock Award except by will or the laws of
descent and distribution.
Exhibit 10.17
SEPTEMBER 17, 1998
AMENDMENTS TO THE
LOWE'S COMPANIES, INC. 1997 INCENTIVE PLAN
On September 17, 1998, the Lowe's Companies, Inc. 1997 Incentive Plan was
amended as follows:
a. A new section 1.13, entitled "Deferred Stock Benefit," was added to
the Plan and reads as follows:
1.13 Deferred Stock Benefit means "Deferred
Stock Benefit" as defined in section 2(j) of the Program.
b. A new section 1.22, entitled "Program," was added to the Plan and
reads as follows:
1.22 Program means the Lowe's Companies, Inc. Deferred
Compensation Program, set forth as Exhibit I hereto.
c. The remaining sections of Article I were renumbered accordingly.
d. The second sentence of Article II was amended to read as follows:
The Plan is intended to permit the grant of Options qualifying under
section 422 of the Code ("incentive stock options") and Options not so
qualifying, the grant of SARs, Stock Awards, Performance Shares and
Incentive Awards, and the deferral of income in accordance with the
Program.
e. The fifth sentence of Article III was amended to read as follows:
In addition, the Administrator shall have complete authority
to interpret all provisions of this Plan; to prescribe the form of
Agreements and documents used in connection with the Program; to adopt,
amend, and rescind rules and regulations pertaining to the administration
of the Plan; and to make all other determinations necessary or advisable
for the administration of this Plan.
f. The following sentence was added at the end of Section 5.01:
On the distribution of Deferred Stock Benefits, the Company may issue
shares of Common Stock from its authorized but unissued Common Stock.
g. Section 5.02 was amended to read as follows:
The maximum aggregate number of shares of Common Stock that may be
issued under this Plan pursuant to the exercise of SARs and
Options, the grant of Stock Awards and the settlement of Performance
Shares and Deferred Stock Benefits is 5,000,000 shares. The maximum
aggregate number of shares that may be issued under this Plan as Stock
Awards and in settlement of Performance Shares (or as the portion of a
Deferred Stock Benefit that represents forfeited or deferred shares of
Common Stock subject to such awards) is 1,650,000 shares. Shares of
Common Stock issued in settlement of a Deferred Stock Benefit, and the
shares of Common Stock subject to the Option, Stock Award or Performance
Share award (or portion thereof) with respect to which such Deferred
Stock Benefit was earned or elected, shall be counted toward the
foregoing limits only once (even in the case of a shares subject to a
Stock Award that are cancelled in connection with the Deferred Stock
Benefit); provided, however, that shares of Common Stock issued in
settlement of a Deferred Stock Benefit that constitute earnings on
deferred or forfeited shares of Common Stock shall be counted separately
toward the foregoing limits. The maximum aggregate number of shares that
may be issued under this Plan and the maximum number of shares that may
be issued as Stock Awards, and in settlement of Performance Shares (or as
the portion of a Deferred Stock Benefit that represents forfeited or
deferred shares of Common Stock subject to such awards) shall be subject
to adjustment as provided in Article XII.
h. Section 5.03 was amended to read as follows:
If an Option is terminated, in whole or in part, for any reason other
than its exercise (including an exercise that results in a Deferred Stock
Benefit) or the exercise of a Corresponding SAR that is settled with
Common Stock, the number of shares of Common Stock allocated to the
Option or portion thereof may be reallocated to other Options, SARs,
Performance Shares and Stock Awards to be granted under this Plan and to
the settlement of Deferred Stock Benefits. If an SAR is terminated, in
whole or in part, for any reason other than its exercise that is settled
with Common Stock or the exercise of a related Option, the number of
shares of Common Stock allocated to the SAR or portion thereof may be
reallocated to other Options, SARs, Performance Shares and Stock Awards
to be granted under this Plan and to the settlement of Deferred Stock
Benefits. If an award of Performance Shares is terminated, in whole or
in part, for any reason other than its settlement with Common Stock
(including a settlement that results in a Deferred Stock Benefit), the
number of shares of Common Stock allocated to the Performance Shares or
portion thereof may be reallocated to other Options, SARs, Performance
Shares and Stock Awards to be granted under this Plan and to the
settlement of Deferred Stock Benefits. If a Stock Award is forfeited, in
whole or in part, for any reason (other than a cancellation that results
in a Deferred Stock Benefit), the number of shares of Common Stock
allocated to the Stock Award or portion thereof may be reallocated to
other Options, SARs, Performance Shares and Stock Awards to be granted
under this Plan, and to the settlement of Deferred Stock Benefits. If a
Deferred Stock Benefit is forfeited, in whole or in part, the number of
shares of Common Stock allocated to the Deferred Stock Benefit or portion
thereof may be reallocated to other Options, SARs, Performance Shares and
Stock Awards to be granted under this Plan, and to the settlement of
other Deferred Stock Benefits.
i. Article XII was amended to read as follows:
The maximum number of shares as to which Options, SARs, Performance
Shares and Stock Awards may be granted under this Plan, and the maximum
number of shares that may be distributed as Deferred Stock Benefits; the
terms of outstanding Stock Awards, Options, Performance Shares, Incentive
Awards, SARs, and undistributed Deferred Stock Benefits; and the per
individual limitations on the number of shares or for which Options,
SARs, Performance Shares, and Stock Awards may be granted shall be
adjusted as the Committee shall determine to be equitably required in
the event that (a) the Company (i) effects one or more stock dividends,
stock split-ups, subdivisions or consolidations of shares or (ii) engages
in a transaction to which Section 424 of the Code applies or (b) there
occurs any other event which, in the judgment of the Committee
necessitates such action. Any determination made under this Article XII
by the Committee shall be final and conclusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion
of shares or obligations of the Company convertible into such shares or
other securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the maximum number of shares as to which
Options, SARs, Performance Shares and Stock Awards may be granted or the
maximum number of shares that may be distributed as Deferred Stock
Benefits; the per individual limitations on the number of shares for
which Options, SARs, Performance Shares and Stock Awards may be granted;
or the terms of outstanding Stock Awards, Options, Performance Shares,
Incentive Awards or SARs or undistributed Deferred Stock Benefits.
The Committee may make Stock Awards and may grant Options, SARs,
Performance Shares, and Incentive Awards in substitution for performance
shares, phantom shares, stock awards, stock options, stock appreciation
rights, or similar awards held by an individual who becomes an employee
of the Company or an Affiliate in connection with a transaction described
in the first paragraph of this Article XII. Notwithstanding any
provision of the Plan (other than the limitation of Section 5.02), the
terms of such substituted Stock Awards or Option, SAR, Performance Shares
or Incentive Award grants shall be as the Committee, in its discretion,
determines is appropriate.
j. The following sentence was added at the end of Article XV:
No amendment shall, without the consent of a Program Participant (as
defined in the Program) adversely affect any rights of such Program
Participant under the Program as in effect at the time such amendment is
made, unless such amendment is made in accordance with section 13 of the
Program.
k. The following sentence was added at the end of Article XVI:
The Program shall remain in effect until all Deferred Cash Accounts and
Deferred Stock Accounts (each, as defined in the Program) have been
distributed in full, unless sooner terminated by the Board in accordance
with section 13 of the Program.
l. The Lowe's Companies, Inc. Deferred Compensation Program attached
hereto as Exhibit I was added to the Plan as Exhibit I.
Exhibit I
LOWE'S COMPANIES, INC.
1997 INCENTIVE PLAN
LOWE'S COMPANIES, INC.
DEFERRED COMPENSATION PROGRAM
TABLE OF CONTENTS
Section Page
1. PURPOSE 1
2. DEFINITIONS 1
3. PARTICIPATION 3
4. DEFERRAL ELECTION 4
5. EFFECT OF NO ELECTION 5
6. DEFERRED CASH BENEFITS 5
7. DEFERRED STOCK BENEFITS 5
9. HARDSHIP DISTRIBUTIONS 9
10. COMPANY'S OBLIGATION 9
11. CONTROL BY PROGRAM PARTICIPANT 9
12. CLAIMS AGAINST PROGRAM PARTICIPANT'S DEFERRED BENEFITS 9
13. AMENDMENT OR TERMINATION 10
14. NOTICES 10
15. WAIVER 10
16. CONSTRUCTION 10
1. PURPOSE. The Program is intended to constitute a deferred compensation
plan for a select group of management and highly compensated employees of the
Company and its Affiliates.
2. DEFINITIONS. The following definitions apply to this Program and to the
Deferral Election Forms. All capitalized terms not defined in this section 2
shall have the same meaning as given them in the Company's 1997 Incentive Plan,
of which this Program is a part.
(a) Beneficiary or Beneficiaries means a person or persons or other
entity designated on a Beneficiary Designation Form by a Program Participant as
allowed in section 8(d) to receive a Deferred Benefit. If there is no valid
designation by the Program Participant, or if the designated Beneficiary or
Beneficiaries fail to survive the Program Participant or otherwise fail to take
the benefit, the Program Participant's Beneficiary is the first of the
following who survives the Program Participant: a Program Participant's spouse
(the person legally married to the Program Participant when the Program
Participant dies); the Program Participant's children in equal shares; and the
Program Participant's estate.
(b) Beneficiary Designation Form means a form acceptable to the
Administrator or its designee used by a Program Participant according to this
Program to name his Beneficiary or Beneficiaries who will receive his Deferred
Benefits under this Program if he dies.
(c) Compensation means any of the following types of compensation: an
Eligible Employee's Salary, Stock Award, Performance Share award, and
Nonqualified Option Gain.
(d) Deferral Election Form means a document governed by the provisions
of section 4 of this Program, including the portion that is the Distribution
Election Form and the related Beneficiary Designation Form that applies to all
of that Program Participant's Deferred Benefits under the Program.
(e) Deferral Year means a calendar year for which an Eligible
Employee has an operative Deferral Election Form or in which a Mandatory
Deferred Benefit is earned.
(f) Deferred Benefit means either a Mandatory Deferred Benefit, or
the benefit elected by a Program Participant under section 4 of this Program,
that results in payments governed by sections 6 or 7 and 8.
(g) Deferred Cash Account means that bookkeeping record established
for each Program Participant who earns a Deferred Cash Benefit under this
Program. A Deferred Cash Account is established only for purposes of
measuring a Deferred Cash Benefit and not to segregate assets or to identify
assets that may or must be used to satisfy a Deferred Cash Benefit. A
Deferred Cash Account will be credited with the Program Participant's Salary
deferred as a Mandatory Deferred Benefit attributable to forfeited Salary,
according to section 6(b) of this Program. A Deferred Cash Account will be
credited periodically with amounts based upon interest rates established under
section 6(a) of this Program.
(h) Deferred Cash Benefit means the Deferred Benefit earned under
section 6(b) that results in payments governed by sections 6 and 8.
(i) Deferred Stock Account means that bookkeeping record established
for each Program Participant who elects or earns a Deferred Stock Benefit
attributable to deferred Stock Awards, Performance Share awards, or
Nonqualified Option Gain, under this Program. A Deferred Stock Account is
established only for purposes of measuring a Deferred Stock Benefit and not to
segregate assets or to identify assets that may or must be used to satisfy a
Deferred Stock Benefit. A Deferred Stock Account will be credited with the
Program Participant's Compensation (other than Salary) deferred according to a
Deferral Election Form and with Mandatory Deferred Benefits attributable to
forfeited Stock Awards and Performance Share awards, according to section 7(a)
or (b) of this Program. A Deferred Stock Account will be credited periodically
with amounts determined under section 7(c) of this Program.
(j) Deferred Stock Benefit means the Deferred Benefit elected by a
Program Participant under section 4 or earned under section 7(b) that results
in payments governed by sections 7 and 8.
(k) Distribution Election Form means that part of a Deferral Election
Form used by a Program Participant according to this Program to establish the
duration of deferral and the frequency of payments of a Deferred Benefit. If
a Program Participant has no Distribution Election Form that is operative
according to section 4 of this Program, distribution of his Deferred Benefit
is governed by section 8 of this Program.
(l) Election Date means the date established by this Program as the
date before which an Eligible Employee must submit a valid Deferral Election
Form to the Administrator. For each Deferral Year, the Election Date is
December 31 of the preceding calendar year. However, for an individual who
becomes an Eligible Employee during a Deferral Year, the Election Date is the
thirtieth day following the date that he becomes an Eligible Employee. For
Compensation that is payable or that could become vested or earned in 1998,
the Election Date is the thirtieth day after the Board adopts this Program as
a Plan amendment. Despite the preceding sentences, the Administrator may set
an earlier date as the Election Date for any Deferral Year.
(m) Eligible Employee means an employee of the Company or an
Affiliate who is a member of a select group of management or a highly
compensated employee (as such terms are used in Section 201(2) of the Employee
Retirement Income Security Act of 1974), and who is designated by the
Administrator as an individual who is eligible to elect a Deferred Benefit
under section 4 or who earns a Mandatory Deferred Benefit under section 6(b)
or 7(b). Once an individual is designated by the Administrator as an
individual who is eligible to elect a Deferred Benefit under section 4, such
employee shall continue to be an Eligible Employee until the date he is no
longer a member of a select group of management or a highly compensated
employee or the date the Administrator declares he that is no longer entitled
to elect a Deferred Benefit.
(n) Mandatory Deferred Benefit means a Deferred Benefit earned by a
Program Participant in accordance with section 6(b) or 7(b) that results in
payments governed by sections 6 or 7 and 8 of this Program. A Program
Participant's Salary will be forfeited and earned as a Mandatory Deferred
Benefit only after the Program Participant's Stock Awards and then Performance
Share Awards are earned as Mandatory Deferred Benefits.
(o) Nonqualified Option Gain means gain attributable to the exercise
of Options not intended to qualify under Code section 422, stated as a number
of whole shares of Common Stock, where the Option price is paid by the
surrender of shares of Common Stock that have been held by the Program
Participant for at least six months.
(p) Program Participant means, with respect to any Deferral Year, an
Eligible Employee whose Deferral Election Form is operative, or who has earned
a Mandatory Deferred Benefit, for that Deferral Year.
(q) Salary means an Eligible Employee's base salary and does not
include bonuses or other payments from the Company or an Affiliate that are
not made on a regular basis.
(r) Terminate, Terminating, or Termination, with respect to a Program
Participant, means cessation of his relationship with the Company and its
Affiliates as an employee whether by death, disability or severance for any
other reason.
3. PARTICIPATION. An Eligible Employee becomes a Program Participant for
any Deferral Year by filing a valid Deferral Election Form according to
section 4 on or before the Election Date for that Deferral Year, but only if
his Deferral Election Form is operative according to section 4. An Eligible
Employee also becomes a Program Participant for any Deferral Year if a
Mandatory Deferred Benefit is earned for that year in accordance with section
6(b) or 7(b).
4. DEFERRAL ELECTION. A deferral election is valid when a Deferral
Election Form is completed, signed by the electing Eligible Employee, and
received by the Administrator. Deferral elections are governed by the
provisions of this section.
(a) A Program Participant may elect a Deferred Benefit for any Defer
ral Year if he is an Eligible Employee at the beginning of that Deferral Year
or becomes an Eligible Employee during that Deferral Year.
(b) Before each Election Date for a Deferral Year, each Eligible
Employee will be provided with a Deferral Election Form and a Beneficiary
Designation Form. Under the Deferral Election Form or Forms for a single
Deferral Year, an Eligible Employee may elect on or before the Election Date
to defer the receipt of all or part of his (i) Stock Awards that may vest
during or after the Deferral Year (specifying 100 or more whole shares subject
to the election); (ii) Performance Share awards that may be earned during or
after the Deferral Year (specifying 100 or more whole shares subject to the
election); or (iii) Nonqualified Option Gain (specifying the Option, and 100 or
more whole shares of Common Stock subject to the election). The Compensation
described in the preceding sentence must be earned and payable after the
Election Date.
(c) A Distribution Election Form is part of the Deferral Election Form
on which it appears or to which it states that it is related. A Program
Participant may file one Distribution Election Form for all of his Deferred
Benefits at the time he files his initial Deferral Election Form. In its sole
discretion, the Administrator may allow a Program Participant to change his
Distribution Election Form or file a Distribution Election Form after the time
he files his initial Deferral Election Form, in accordance with section 8(b)
and any other procedures established by the Administrator. The provisions of
section 8 of this Program apply to a Program Participant's Deferred Benefits
under this Program if there is no operative Distribution Election Form for that
Program Participant.
(d) If it does so before the last business day of the Deferral Year,
the Administrator may reject any Deferral Election Form or any Distribution
Election Form or both, and the Administrator is not required to state a reason
for any rejection. The Administrator may modify any Distribution Election Form
at any time to the extent necessary to comply with any federal securities laws
or regulations. The Administrator's rejections must be made on a uniform basis
with respect to similarly situated Eligible Employees. If the Administrator
rejects a Deferral Election Form, the Eligible Employee must be paid the
amounts he would have been entitled to receive if he had not submitted the
rejected Deferral Election Form.
(e) An Eligible Employee may not revoke a Deferral Election Form or a
Distribution Election Form after the applicable Election Date. Any revocation
before the applicable Election Date is the same as a failure to submit a
Deferral Election Form or a Distribution Election Form. Any writing signed by
an Eligible Employee expressing an intention to revoke his Deferral Election
Form or Distribution Election Form and delivered to the Administrator before
the close of business on the relevant Election Date is a revocation.
5. EFFECT OF NO ELECTION.. An Eligible Employee who has not submitted a
valid Deferral Election Form to the Administrator on or before the relevant
Election Date may not defer such Compensation for the Deferral Year under this
Program. The Deferred Benefit of an Eligible Employee who submits a valid
Deferral Election Form but fails to submit a valid Distribution Election Form
with his initial Deferral Election Form or who otherwise has no valid
Distribution Election Form is governed by section 8 of this Program.
6. DEFERRED CASH BENEFITS.
(a) Mandatory Deferred Benefits earned with respect to forfeited
Salary under section 6(b) shall be Deferred Cash Benefits. Deferred Cash
Benefits will be set up in a Deferred Cash Account for each Program Participant
and credited with interest at the prime rate of the bank specified by the
Administrator for this purpose from time to time, plus 1%, adjusted each
quarter. Deferred Cash Benefits will be credited to a Deferred Cash Account as
of the day that the forfeited Salary would otherwise have been paid. Interest
will credited on the first day of each month based on the Deferred Cash Account
balance at the end of the preceding day.
(b) A Mandatory Deferred Benefit will be earned by any Program
Participant whose applicable employee remuneration, as defined in Code section
162(m)(4), would exceed the limit in Code section 162(m)(1) if the Program
Participant were paid his entire Salary for the Deferral Year, (taking into
account any reduction in applicable employee remuneration required by
procedures of the Administrator described in section 7(b) of this Program).
Such Mandatory Deferred Benefit earned under this section 6(b) shall consist of
a credit equal the portion of the Program Participant's Salary that, pursuant
to procedures established by the Administrator, is forfeited because its
payment would have caused the limit in Code section 162(m)(1) to be exceeded.
(c) A Program Participant's Deferred Cash Benefit is immediately and
fully vested.
7.DEFERRED STOCK BENEFITS
(a) Deferred Benefits attributable to deferred Stock Awards,
Performance Share awards (including Mandatory Deferred Benefits earned with
respect to forfeited Stock Awards and Performance Share awards under section
7(b)) and Nonqualified Option Gain shall be Deferred Stock Benefits. Deferred
Stock Benefits will be set up in a Deferred Stock Account and credited with
earnings as described in section 7(b). Deferred Stock Benefits will be
credited as follows: (i) Stock Award and Performance Share award deferrals
(other than Mandatory Deferred Benefits) will be credited on the day following
the Election Date; (ii) Mandatory Deferred Benefits attributable to forfeited
Stock Awards and Performance Share awards will be credited as soon as
practicable after the applicable award or portion thereof has been forfeited;
and (iii) Nonqualified Option Gain deferrals will be credited on the day
following the date of exercise of the related Option.
(b) A Mandatory Deferred Benefit will be earned by any Program
Participant whose applicable employee remuneration, as defined in Code section
162(m)(4), would exceed the limit in Code section 162(m)(1) (taking into
account any reduction in applicable employee remuneration required by
procedures of the Administrator described in section 6(b) of this Program).
Such Mandatory Deferred Benefit shall consist of a credit equal to the portion
of a Stock Award or Performance Share award that, pursuant to procedures
established by the Administrator, was forfeited because its vesting or
transferability, or its settlement, would have caused the limit in Code section
162(m)(1) to be exceeded.
(c) A Deferred Stock Account also shall be credited with any dividends
that would have been paid on the whole shares of Common Stock credited to the
Deferred Stock Account. A Deferred Stock Account shall be credited with the
number of whole and fractional shares of Common stock that a Program
Participant could have purchased with such dividends based on the Fair Market
Value on the day before such dividends are credited to the account. The
Deferred Stock Account shall be credited on the days that dividends are paid on
the Common Stock.
(d) The portion of a Program Participant's Deferred Stock Benefit
attributable to Nonqualified Option Gain, and all Mandatory Deferred Benefits,
are immediately and fully vested. The portion of a Program Participant's
Deferred Stock Benefit attributable to deferred Stock Awards or deferred
Performance Share awards (or a portion thereof), other than a Mandatory
Deferred Benefit, shall become vested as of the date the related (i) Stock
Award (or portion thereof) would otherwise have become nonforfeitable and
transferable, or (ii) Performance Share award (or portion thereof) would
otherwise have been earned, provided any conditions for vesting or earning the
award set forth in the Agreement relating to the Stock Award or Performance
Share award are satisfied. To the extent a Program Participant Terminates
under circumstances that would allow for continued vesting or earn-out of a
Stock Award or Performance Share award, vesting of the related portion of the
Program Participant's Deferred Stock Account shall occur on the same basis and
shall not be affected by such Termination. Notwithstanding any other provision
of this section 7(d), a Program Participant's entire Deferred Stock Benefit
shall become fully vested upon a Control Change Date.
8. DISTRIBUTIONS.
(a) According to a Program Participant's Distribution Election Form,
but subject to Program section 4(d), a Deferred Cash Benefit will be
distributed in cash. According to a Program Participant's Distribution Election
Form, but subject to Plan Article V, a Deferred Stock Benefit must be
distributed in shares of Common Stock equal to the number of whole shares of
Common Stock credited to the Program Participant's Deferred Stock Account on
the last day of the month preceding the month of distribution. Cash will be
paid in lieu of a fractional share of Common Stock credited to the Program
Participant's Deferred Stock Account on the last day of the month preceding the
month of distribution.
(b) Except for distributions of Mandatory Deferred Benefits and
distributions triggered by a Program Participant's disability, Deferred
Benefits will be paid in a lump sum unless the Program Participant's
Distribution Election Form specifies annual installment payments over a period
of up to 5 years. A Deferred Benefit payable in installments will continue to
accrue additional credits under Program section 6(a) or 7(c), as applicable, on
the unpaid balance of a Deferred Cash Account or Deferred Stock Account through
the end of the month preceding the month of distribution.
If a Program Participant Terminates as a result of his disability,
Deferred Benefits will be paid to such Program Participant in annual
installments over a period of 5 years commencing on the date his disability is
certified by the Administrator unless the Administrator, in his sole
discretion, approves a longer or shorter payment period. If, after his
Termination as a result of disability, such Program Participant recovers
before the balance of his Deferred Cash Account or Deferred Stock Account under
the Program is exhausted, his distributions will be discontinued and any
remaining Deferred Benefits under the Program will be governed by the
provisions of this section and his Distribution Election Form.
Unless otherwise specified in a Program Participant's Distribution
Election Form, any lump sum payment will be paid or installment payments will
begin to be paid on the March 15 after the Program Participant's sixty-fifth
birthday or on the March 15 after the Program Participant's Termination, if
earlier. For distributions that would automatically be caused under the
preceding sentence by a Program Participant's Termination (other than by death
or disability) or for distributions that would otherwise automatically begin
because a Program Participant reaches age sixty-five, the Program Participant
may elect on his Distribution Election Form that payments are to begin
(i) on the March 15 following his Termination, without
regard to his age; or
(ii) on the March 15 following his Termination and his
attainment of a specified age; or
(iii) even if the Program Participant does not Terminate, on
the March 15 following his attainment of a specified age.
For purposes of these distribution election alternatives, the
specified age must be not less than the Program Participant's age two years
from the Election Date pertaining to the applicable Deferral Year. With the
consent of the Administrator, as described in section 4(c) above, a Program
Participant may amend his Distribution Election Form to postpone the
commencement of benefit payments if (i) the amendment is approved by the
Administrator before the calendar year in which benefit payments are scheduled
to begin and (ii) the amended payment date conforms to the requirements of the
Program.
(c) Notwithstanding section 8(b), above, to the extent a Program
Participant's Deferred Stock Benefit is not yet vested according to section
7(d) at the time distribution is scheduled to occur, because the deferred Stock
Award or Performance Share award to which such Deferred Stock Benefit or
portion thereof is attributable would not yet have vested or been earned under
the Agreement evidencing the award, distribution shall be delayed until the
date specified in the following sentence. Any portion of a Deferred Stock
Account that is subject to delayed distribution under the preceding sentence
will be distributed on the March 15 next following such vesting or earn-out
date. No distribution will be made, and all or a portion of a Program
Participant's Deferred Stock Account will be forfeited to the extent the
conditions for vesting or earn-out specified in the Agreement relating to the
deferred Stock Award or Performance Share award are not met, including the
Program Participant's Termination under circumstances which would have caused
all or a portion of the award to have been forfeited.
(d) Deferred Benefits may not be assigned by a Program Participant or
Beneficiary. A Program Participant may use only one Beneficiary Designation
Form to designate one or more Beneficiaries for all of his Deferred Benefits
under the Program; such designations are revocable. Each Beneficiary will
receive his portion of the Program Participant's Deferred Account on the March
15 following the Program Participant's death unless the Beneficiary's request
for accelerated payment is approved at the Administrator's discretion under
section 9 or unless the Beneficiary's request for a different distribution
schedule is received before distributions begin and is approved at the
Administrator's discretion. The Administrator may insist that multiple
Beneficiaries agree upon a single distribution method.
(e) Notwithstanding any other provision of this section 8, a Program
Participant's entire Deferred Cash Account and Deferred Stock Account shall be
distributed to the Program Participant, or his Beneficiary following his death,
as of a Control Change Date.
(f) Mandatory Deferred Benefits will be paid in a single sum no later
than the last day of the Company's fiscal year in which the distribution would
not result in the Program Participant's applicable employee remuneration, as
defined in Code section 162(m)(4), to exceed the limit in Code section
162(m)(1).
9. HARDSHIP DISTRIBUTIONS.
(a) At its sole discretion and at the request of a Program Participant
before or after the Program Participant's Termination, or at the request of any
of the Program Participant's Beneficiaries after the Program Participant's
death, the Administrator may accelerate and pay all or part of any amount
attributable to a Program Participant's vested Deferred Benefits under this
Program. Accelerated distributions may be allowed only in the event of a
financial emergency beyond the Program Participant's or Beneficiary's control
and only if disallowance of a distribution would create a severe hardship for
the Program Participant or Beneficiary. An accelerated distribution must be
limited to the amount determined by the Administrator to be necessary to
satisfy the financial emergency.
(b) For purposes of an accelerated distribution under this section,
the Deferred Benefit's value is determined by the value of the Deferred Account
at the time of the distribution.
(c) A distribution under this section is in lieu of that portion of
the Deferred Benefit that would have been paid otherwise. A Deferred Benefit
is adjusted for a distribution under this section by reducing the Program
Participant's Deferred Account by the amount of the distribution.
10. COMPANY'S OBLIGATION. The Program is unfunded. A Deferred Benefit is
at all times a mere contractual obligation of the Company. A Program
Participant and his Beneficiaries have no right, title, or interest in the
Deferred Benefits or any claim against them. The Company will not segregate
any funds or assets for Deferred Benefits nor issue any notes or security for
the payment of any Deferred Benefit.
11. CONTROL BY PROGRAM PARTICIPANT. A Program Participant has no control
over Deferred Benefits except according to his Deferral Election Forms, his
Distribution Election Forms, and his Beneficiary Designation Forms.
12. CLAIMS AGAINST PROGRAM PARTICIPANT'S DEFERRED BENEFITS. A Deferred
Cash Account or Deferred Stock Account relating to a Program Participant under
this Program is not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so
is void. Deferred Benefits are not subject to attachment or legal process for
a Program Participant's debts or other obligations. Nothing contained in this
Program gives any Program Participant any interest, lien, or claim against any
specific asset of the Company. A Program Participant or his Beneficiary has
no rights to receive Deferred Benefits other than as a general creditor.
13. AMENDMENT OR TERMINATION. Except as otherwise provided in this
section, this Program may be altered, amended, suspended, or terminated at any
time by the Board. Except for a termination of the Program caused by the
determination of the Board that the laws upon which the Program is based have
changed in a manner that negates the Program's objectives, the Board may not
alter, amend, suspend, or terminate this Program without the majority consent
of all Eligible Employees if that action would result either in a distribution
of all Deferred Benefits in any manner other than as provided in this Program
or that would result in immediate taxation of Deferred Benefits to Program
Participants. Notwithstanding the preceding sentence, if any amendment to the
Program, subsequent to the date the Program becomes effective, adversely
affects Deferred Benefits elected hereunder, after the effective date of any
such amendment, and the Internal Revenue Service declines to rule favorably on
any such amendment or to rule favorably only if the Board makes amendments to
the Program not acceptable to the Board, the Board, in its sole discretion, may
accelerate the distribution of part or all amounts attributable to affected
Deferred Benefits due Program Participants and Beneficiaries hereunder.
14. NOTICES. Notices and elections under this Program must be in writing.
A notice or election to a Program Participant or Beneficiary is deemed
delivered if it is delivered personally or if it is mailed by registered or
certified mail to the person at his last known home address. A notice or
election to the Company or the Administrator is deemed delivered if it is
delivered personally or if it is mailed by registered or certified mail to the
Company's executive office.
15. WAIVER. The waiver of a breach of any provision in this Program does
not operate as and may not be construed as a waiver of any later breach.
16. CONSTRUCTION. This Program is created, adopted, and maintained
according to the laws of the State of North Carolina (except its choice-of-law
rules). It is governed by those laws in all respects. Headings and captions
are only for convenience; they do not have substantive meaning. If a
provision of this Program is not valid or not enforceable, that fact in no way
affects the validity or enforceability of any other provision. Use of the one
gender includes all, and the singular and plural include each other.
<PAGE>
Exhibit 10.19
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Lowe's Companies,
Inc. or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or to such other
entity or in such other name as is requested by an authorized representative
of DTC (and any payment hereon is made to Cede & Co. or to such other entity
as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
since the registered owner hereof, Cede & Co., has an interest herein.
Transfers of this Global Security shall be limited to transfers in whole, but
not in part, to nominees of Cede & Co. or to a successor thereof or such
successor's nominee and transfers of portions of this Global Security shall be
limited to transfers made in accordance with the restrictions set forth in
Section 303 of the Indenture referred to in this Global Security.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACQUISITION HEREOF
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION"
PURSUANT TO RULE 903 OR 904 OF REGULATION S, (2) AGREES THAT IT WILL NOT
PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME
AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT AND ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
(OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY
BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR
(D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
PURSUANT TO RULE 904 OF REGULATION S, OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY,
THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON
THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR
TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
<PAGE>
LOWE'S COMPANIES, INC.
6 1/2% DEBENTURES
Due March 15, 2029
CUSIP No. 548661AJ6
No. 1
$200,000,000
Original Principal Amount
Lowe's Companies, Inc., a corporation duly organized and existing under
the laws of the State of North Carolina (herein called the "Company", which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to Cede & Co. or registered
assigns, the principal sum of TWO HUNDRED MILLION DOLLARS ($200,000,000) on
March 15, 2029, at the office or agency of the Company referred to below, in
such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts, and to
pay interest thereon in like coin or currency from February 23, 1999, or from
the most recent Interest Payment Date on which interest has been paid or duly
provided for, semi-annually in arrears on March 15 and September 15 in each
year, commencing September 15, 1999, at the rate of 6 1/2% per annum, until
the principal hereof is paid or made available for payment, and (to the
extent lawful) to pay interest at the same rate per annum on any overdue
principal and premium and on any overdue installment of interest until paid.
Interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date, as provided in the Indenture, shall be paid to the
Person in whose name this Debenture (or one or more predecessor Debentures) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the March 1 or September 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to
be payable to the Person in whose name this Debenture is registered on such
Regular Record Date and may either be paid to the Person in whose name this
Debenture is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to the Person in whose name this Debenture is
registered not less than ten days prior to such Special Record Date, or be
paid at any time in any other lawful manner, all as more fully provided in
the Indenture.
This Debenture is a "book-entry" debenture and is being registered in the
name of Cede & Co. as nominee of The Depository Trust Company ("DTC"), a
clearing agency. Subject to the terms of the Amended and Restated Indenture,
dated as of December 1, 1995 (as supplemented by the First Supplemental
Indenture dated as of February 23, 1999 and as supplemented and amended from
time to time, the "Indenture"), between the Company and The First National
Bank of Chicago, as trustee (the "Trustee"), this Debenture will be held by a
clearing agency or its nominee, and beneficial interests will be held by
beneficial owners through the book-entry facilities of such clearing agency or
its nominee in minimum denominations of $1,000 and increments of $1,000 in
excess thereof.
The statements set forth in the restrictive legend above are an integral
part of the terms of this Debenture and by acceptance hereof each holder of
this Debenture agrees to be subject to and bound by the terms and provisions
set forth in such legend.
As long as this Debenture is registered in the name of DTC or its
nominee, the Trustee will make payments of principal of and interest on this
Debenture by wire transfer of immediately available funds to DTC or its
nominee. Notwithstanding the above, the final payment on this Debenture will
be made after due notice by the Trustee of the pendency of such payment and
only upon presentation and surrender of this Debenture at its principal
corporate trust office or such other offices or agencies appointed by the
Trustee for that purpose and such other locations provided in the Indenture
Payments of principal of (and premium, if any) and interest on this
Debenture will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York, in such coin
or currency of the United States of America as at the time of payment is legal
tender for payments of public and private debts; provided, however, that at
the option of the Company payment of interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security Register.
This Debenture is one of a duly authorized issue of debentures of the
Company, designated 6 1/2% Debentures due March 15, 2029 (the "Debentures"),
limited in aggregate principal amount at any time Outstanding to FOUR HUNDRED
MILLION DOLLARS ($400,000,000) which may be issued under the First
Supplemental Indenture. Reference is hereby made to the Indenture, the First
Supplemental Indenture and all indentures supplemental thereto for a statement
of the respective rights, limitations of rights, duties, obligations and
immunities thereunder of the Company, the Trustee and the Holders of the
Debentures, and the terms upon which the Debentures are, and are to be,
authenticated and delivered. All terms used in this Debenture that are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.
The Holder of this Debenture is entitled to the benefits of the
Registration Rights Agreement, dated as of February 23, 1999 (the
"Registration Rights Agreement"), between the Company and the Initial
Purchasers named therein. In the event that (i) the Company fails to file an
Exchange Offer Registration Statement with respect to the Debentures with the
Commission on or prior to the 150th calendar day following the Closing Time,
(ii) the Commission does not declare such Exchange Offer Registration
Statement effective on or prior to the 180th calendar day following the
Closing Time, (iii) the Exchange Offer is not consummated on or prior to the
30th calendar day following the effective date of the Exchange Offer
Registration Statement or (iv) if required, a Shelf Registration Statement
with respect to the Debentures is not declared effective by the Commission on
or prior to the 210th calendar day following the Closing Time (each, a
"Registration Default"), the per annum interest rate borne by the Debentures
shall be increased by one-quarter of one percent (0.25%) per annum from the
end of the applicable period giving rise to such Registration Default. The
interest rate borne by the Debentures will be increased by an additional one-
quarter of one percent (0.25%) per annum for each subsequent 90-day period (or
portion thereof) during which any such Registration Default continues up to a
maximum aggregate increase in the annual interest rate of one-half of one
percent (0.50%) per annum. Following the cure of all Registration Defaults,
the interest rate borne by the Debentures shall be reduced to the original
interest rate borne by the Debentures. All accrued additional interest shall
be paid to Holders by the Company in the same manner as interest is paid
pursuant to the Indenture. All terms used in this Debenture that are defined
in the Registration Rights Agreement shall have the meanings assigned to them
in the Registration Rights Agreement.
The Debentures do not have the benefit of any sinking fund obligations
and shall not be redeemable at the option of the Company or repayable at the
option of the Holder prior to maturity.
If an Event of Default shall occur and be continuing, the principal of
all the Debentures may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company under this Debenture and (b) certain
restrictive covenants and the related defaults and Events of Default
applicable to the Company, in each case, upon compliance by the Company with
certain conditions set forth in the Indenture, which provisions apply to this
Debenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debentures under the Indenture at
any time by the Company, the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Debentures at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Debentures at the
time Outstanding, on behalf of the Holders of all Debentures, to waive
compliance by the Company with certain provisions of the Indenture and certain
past Defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Debenture shall be conclusive and binding upon
such Holder and upon all future Holders of this Debenture and of any Debenture
issued upon the registration of transfer thereof or in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon
this Debenture.
No reference herein to the Indenture and provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Debenture at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations on
transfer of this Debenture by DTC or its nominee, the transfer of this
Debenture is registrable in the Security Register, upon surrender of this
Debenture for registration of transfer at the office or agency of the Company
in the Borough of Manhattan, The City of New York, duly endorsed by, or
accompanied by the written instrument of transfer attached hereto duly
executed by the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Debentures, of authorized denominations and for the
same aggregate principal amount, shall be issued to the designated transferee
or transferees.
The Debentures are issuable only in fully registered form without coupons
in denominations of $1,000 and any integral multiple thereof. As provided in
the Indenture and subject to certain limitations therein set forth, the
Debentures are exchangeable for a like aggregate principal amount of
Debentures of different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange of Debentures, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to due presentment of this Debenture for registration of transfer,
the Company, the Trustee and any agent of the Company, or the Trustee may
treat the Person in whose name this Debenture is registered as the owner
hereof for all purposes, whether or not this Debenture be overdue, and none of
the Company, the Trustee or any such agent shall be affected by notice to the
contrary.
Interest on this Debenture shall be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall furnish to any Holder of record of Debentures, upon
written request and without charge, a copy of the Indenture.
The Indenture and this Debenture each shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of law.
Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Debenture shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.
In Witness Whereof, Lowe's Companies, Inc. has caused this Debenture to
be signed, manually or in facsimile, by a duly elected or appointed, qualified
and serving officer and has caused a facsimile of its corporate seal to be
imprinted hereon, attested by the manual or facsimile signature of a duly
elected or appointed, qualified and serving officer.
Lowe's Companies, Inc.
By...............................
Name:
Title:
Dated: February ___, 1999
[Seal]
Attest:...........................
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE SECURITIES OF THE SERIES DESIGNATED THEREIN REFERRED
TO IN THE WITHIN-MENTIONED INDENTURE.
THE FIRST NATIONAL BANK OF CHIGAGO,
as Trustee
By................................
Authorized Officer
<PAGE>
Annex A
[FORM OF TRANSFER CERTIFICATE]
Lowe's Companies, Inc. (the "Company")
The First National Bank of Chicago,
as Trustee (the "Trustee")
Re: 6 1/2% Debentures Due March 15, 2029
Reference is hereby made to the Amended and Restated Indenture, dated as
of December 1, 1995 (as supplemented by the First Supplemental Indenture dated
as of February 23, 1999, and as supplemented and amended from time to time,
the "Indenture"), between the Company and the Trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
Other terms shall have the meanings given to them in Rule 144A ("Rule 144A")
under the Securities Act of 1933, as amended (the "Securities Act").
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
(Print or type name and address of transferee, including ZIP code)
__________________________________________________________________
(Taxpayer Identification Number of transferee)
the within Debenture and all rights thereunder, hereby irrevocably
constituting and appointing ____________________ attorney-in-fact to transfer
said Debenture on the books of the Company with full power of substitution in
the premises.
In connection with any transfer of this Debenture occurring prior to the
date that is the earlier of the date of an effective Shelf Registration
Statement or the Resale Restriction Termination Date, the undersigned confirms
that without utilizing any general solicitation or general advertising:
[Check One]
____ Such Debenture is being transferred in accordance with (i) the transfer
restrictions set forth in the Indenture and the Debentures and (ii) Rule
144A under the Securities Act, to a Transferee that the Transferor
reasonably believes is purchasing the Debentures for its own account or
an account with respect to which the Transferee exercises sole
investment discretion, and the Transferee and any such account is a
"Qualified Institutional Buyer" within the meaning of Rule 144A, and
such Transferee is aware that the sale to it is being made in reliance
upon Rule 144A, in each case in a transaction meeting the requirements
of Rule 144A and in accordance with any applicable securities laws of
any state of the United States or any other jurisdiction.
or
____ Such Debenture is being transferred pursuant to an exemption from
registration under the Securities Act provided by Rule 144 thereunder
upon provision of an opinion of counsel and such other evidence
acceptable to the Company that such offer, sale, pledge or transfer is
in compliance with the Securities Act and other applicable laws, in each
case in a form satisfactory to the Company.
or
____ Such Debenture is being transferred in a transaction other than in
accordance with the above upon provision of a legal opinion and other
evidence requested by the Company in form and substance satisfactory to
the Company, to the effect that the proposed transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or other Security
Registrar shall not be obligated to register this Debenture in the name of any
Person other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein and in Section 312 of the
Indenture shall have been satisfied.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Initial Purchaser named in the Offering
Memorandum distributed by the Company in connection with the sale of the
Debentures.
You are entitled to rely upon this letter and are irrevocably authorized
to produce this letter or a copy hereof to any interested party in any
administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
Dated: ____________________
(N.B.: The signature to this assignment must
correspond with the name as written upon the
face of the within-mentioned instrument in
every particular, without alteration or any
change whatsoever)
TO BE COMPLETED BY PURCHASER IF THE FIRST OPTION ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Security Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Security Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
The undersigned represents and warrants that it is purchasing this
Debenture for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date: _____________ ___________________________________________________
(NOTICE: To be executed by an executive officer)
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of payment:
Payment shall be made, by wire transfer or otherwise, in immediately
available funds, to _____________________, for the account of
______________________, account number ___________, or, if mailed, by check to
_____________________. Applicable reports and statements should be mailed to
_____________________. This information is provided by _____________________,
the assignee named above, or _____________________, as its agent.
Path: DOCSOPEN\RICHMOND\08322\23797\000282\7H5201!.DOC
Doc #: 348806; V. 1
Doc Name: Exhibit 10.13 (Debenture) to 10-K
Author: McCullough, Michael, 08322
Last Edit: 03/26/99 10:54 AM
2
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A-5
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EXHIBIT 13
Page 11:
United States map showing states with Lowe's and Eagle stores shaded.
"Lowe's Stores" table showing number of Lowe's stores in each applicable
state.
State Number of stores
Alabama 19
Arkansas 8
Connecticut 3
Delaware 4
Florida 25
Georgia 22
Illinois 14
Indiana 19
Iowa 5
Kansas 2
Kentucky 20
Louisiana 12
Maryland 11
Michigan 9
Mississippi 7
Missouri 5
North Carolina 69
New Jersey 1
New York 8
Ohio 39
Oklahoma 9
Pennsylvania 25
South Carolina 28
Tennessee 32
Texas 41
Virginia 36
West Virginia 11
"Eagle Stores" table showing number of Eagle stores in each applicable
state.
State Number of stores
Alaska 1
California 3
Colorado 4
Hawaii 2
Idaho 1
Montana 1
Nevada 1
Oregon 1
Utah 4
Washington 18
Page 13:
Disclosure Regarding Forward-Looking Statements
Our Annual Report talks about our future, particularly in the "Letter to
Shareholders" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." While we believe our expectations are reasonable,
we can't guarantee them and you should consider this when thinking about
statements we make that aren't historical facts. Some of the things that
could cause our actual results to differ substantially from our expectations
are:
* Our sales are dependent upon the general economic health of the country,
variations in the number of new housing starts, the level of repairs,
remodeling and additions to existing homes, commercial building activity, and
the availability and cost of financing. An economic downturn can impact sales
because much of our inventory is purchased for discretionary projects, which
can be delayed.
* Our expansion strategy may be impacted by environmental regulations,
local zoning issues and delays, availability and development of land, and more
stringent land use regulations than we have traditionally experienced.
* Many of our products are commodities whose prices fluctuate erratically
within an economic cycle, a condition true of lumber and plywood.
* Our business is highly competitive, and as we expand to larger
markets we may face new forms of competition which do not exist in some of the
markets we have traditionally served.
* The ability to continue our everyday competitive pricing strategy and
provide the products that consumers want depends on our vendors providing a
reliable supply of inventory at competitive prices.
* On a short-term basis, weather may impact sales of product groups like
lawn and garden, lumber, and building materials.
Page 14:
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Of Lowe's Companies, Inc.
We have audited the accompanying consolidated balance sheets of Lowe's
Companies, Inc. and subsidiaries as of January 29, 1999 and January 30, 1998,
and the related consolidated statements of earnings, shareholders' equity,
and cash flows for each of the three fiscal years in the period ended January
29, 1999. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 Lowe's Companies, Inc. and
subsidiaries at January 29, 1999 and January 30, 1998, and the results of
their operations and their cash flows for each of the three fiscal years in
the period ended January 29, 1999 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Charlotte, North Carolina
February 19, 1999
Pages 15 - 18:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion summarizes the significant factors affecting the
Company's consolidated operating results and liquidity and capital resources
during the three-year period ended January 29, 1999 (i.e., fiscal years 1998,
1997 and 1996). This discussion should be read in conjunction with the
Letter to Shareholders, financial statements, and financial statement
footnotes included in this annual report.
OPERATIONS
Net earnings for 1998 increased 35% to $482.4 million or 3.9% of sales
compared to $357.5 million or 3.5% of sales for 1997. Net earnings,
calculated on a FIFO basis, would show an increase of 31% for 1998. Diluted
earnings per share were $1.36 for 1998 compared to $1.03 for 1997 and $.86
for 1996. Return on beginning assets was 9.2% for 1998 compared to 8.1% for
1997; and return on beginning shareholders' equity was 18.6% for 1998
compared to 16.1% for 1997.
The Company's sales were $12.2 billion in 1998, a 21% increase over 1997
sales of $10.1 billion. Sales for 1997 were 18% higher than 1996 levels.
Comparable store sales increased 6% in 1998 and large store (stores exceeding
80,000 square feet) comparable sales increased 7% for the year. The
increases in sales are attributable to the Company's ongoing store expansion
and relocation program along with the growth in comparable store sales.
Comparable store sales increases are driven by the Company's continued
strategy of employing an expanded inventory assortment, everyday competitive
prices, and an emphasis on customer service. The following table presents
sales and store information:
1998 1997 1996
Sales (in millions) $12,245 $10,137 $8,600
Sales Increases 21% 18% 22%
Comparable Store Sales Increases 6% 4% 7%
At end of year:
Stores 484 446 402
Sales Floor Square Feet (in millions) 43.4 36.5 30.4
Average Store Size Square
Feet (in thousands) 90 82 76
Gross margin in 1998 was 26.9% of sales compared to 26.5% in 1997. Both
of these years showed improvement over the 25.9% rate achieved in 1996.
Adherence to careful pricing disciplines in the execution of the Company's
everyday competitive pricing strategy continued to provide margin
improvements. Also, changes in product mix resulting from the expanded
merchandise selection available in larger stores has contributed to gross
margin improvements. Additionally, in 1996, the Company reduced its exposure
in lower margin consumer electronics and replaced these items with less
seasonal, higher margin, products, which has increased gross margin. The
Company recorded a LIFO credit of $29.0 million in 1998, compared to a $7.0
million credit in 1997 and a $1.4 million charge in 1996, increasing gross
margin by 17 basis points and 6 basis points in 1998 and 1997, respectively,
and decreasing gross margin by 1 basis point in 1996.
Selling, general and administrative expenses (SG&A) were $2.1 billion or
17.3% of sales in 1998. SG&A in the two previous years were $1.8 and $1.5
billion or 17.3% and 17.0% of sales, respectively. The 30 basis point
increase in 1997 resulted primarily from higher payroll levels at stores that
were new or relocated and increased costs relating to relocating or closing
stores.
Store opening costs were $71.7 million for 1998 compared to $70.0 and
$59.2 million in 1997 and 1996, respectively, and were expensed as incurred.
As a percentage of sales, store opening costs were 0.6% for 1998 and 0.7% for
both 1997 and 1996. These costs averaged approximately $900 thousand per
store in 1998.
Depreciation, reflecting continued fixed asset expansion, increased 13%
to $271.8 million in 1998, compared to increases of 22% and 32% in 1997 and
1996, respectively. Depreciation as a percentage of sales was 2.2% for 1998,
a slight decrease from 2.4% in 1997 and 2.3% in 1996. Approximately 39% of
new stores opened in the last three years have been leased, of which
approximately 44%, 30% and 93% in 1998, 1997 and 1996 were under capital
leases. Property, less accumulated depreciation, increased to $3.64 billion
at January 29, 1999 compared to $3.01 billion at January 30, 1998. The
increase in property resulted primarily from the Company's store expansion
program, including land, building, store equipment, fixtures and displays,
and investment in new distribution equipment.
Interest costs as a percent of sales were 0.6% for 1998, 1997 and 1996.
Interest costs totaled $75 million in 1998, $66 million in 1997 and $49
million in 1996. Interest costs relating to capital leases were $39.1, $38.3
and $29.1 million for 1998, 1997 and 1996, respectively. See the discussion
of liquidity and capital resources below.
The Company's effective income tax rates were 36.4%, 36.0% and 35.6% in
1998, 1997 and 1996, respectively. The higher rate in 1998 was primarily
related to expansion into states with higher state income tax rates. The
lower rate in 1996 was primarily due to the utilization of available state
net operating losses.
LIQUIDITY AND CAPITAL RESOURCES
Primary sources of liquidity are cash flows from operating activities
and the sale of debt securities. Net cash provided by operating activities
was $696.8 million for 1998. This compared to $664.9 and $543.0 million in
1997 and 1996, respectively. The increase in net cash provided by operating
activities for 1998 is primarily related to increased earnings and various
operating liabilities offset by an increase in inventory, net of accounts
payable. The increase during 1997 resulted primarily from increased earnings
and smaller increases in inventory, net of accounts payable, from year to
year. Working capital at January 29, 1999 was $820.3 million compared to
$660.3 million at January 30, 1998.
The primary component of net cash used in investing activities continues
to be new store facilities in connection with the Company's expansion plan.
Cash acquisitions of fixed assets were $928 million for 1998. This compares
to $773 million and $677 million for 1997 and 1996, respectively. Retail
selling space as of January 29, 1999, totaling 43.4 million square feet,
represents an 18.8% increase over the selling space as of January 30, 1998.
The January 30, 1998 selling space total of 36.5 million square feet
represents a 20.3% increase over the 1996 total of 30.4 million square feet.
Financing and investing activities also include noncash transactions of
capital leases for new store facilities and equipment, the result of which is
to increase long-term debt and property. During 1998, 1997 and 1996, the
Company acquired fixed assets (primarily new store facilities) under capital
leases of $47.3, $32.7 and $182.7 million, respectively.
Cash flows provided by financing activities were $236.5, $221.7 and
$11.9 million in 1998, 1997 and 1996, respectively. The major cash
components of financing activities in 1998 included the issuance of $300
million principal amount of 6.875% Debentures due February 15, 2028, $50.8
million of cash dividend payments and $15.5 million of scheduled debt
repayments. In 1997, financing activities included the issuance of $268
million aggregate principal of Medium Term Notes (MTN's) with final
maturities ranging from September 1, 2007 to May 15, 2037, cash dividend
payments of $28.7 million and $32.8 million of scheduled debt repayments.
The interest rates on the MTN's range from 6.07% to 7.61% and approximately
37% of these MTN's may be put to the Company at the option of the holder on
either the tenth or twentieth anniversary date of the issue. The major
financing activities for 1996 included the non-cash conversion of $284.7
million principal amount of 3% Convertible Subordinated Notes into common
stock and $34.7 million in cash dividend payments. The ratio of long-term
debt to equity plus long-term debt was 29.0%, 28.7% and 25.7% as of year-end
1998, 1997 and 1996, respectively. The increases in 1998 and 1997 were
primarily due to the issuance of debt securities as previously described.
In February 1999, the Company issued $400 million principal of 6.5%
Debentures due March 15, 2029 in a private offering. In March 1999, the
Company also issued 6,206,895 shares of common stock in a public offering.
The net proceeds from the stock offering were approximately $348.1 million.
The shares were issued under a shelf registration statement filed with the
Securities and Exchange Commission in December 1997.
At January 29, 1999, the Company had a $300 million revolving credit
facility with a syndicate of eleven banks, available lines of credit
aggregating $278 million for the purpose of issuing documentary letters of
credit and standby letters of credit and $80 million available, on an
unsecured basis, for the purpose of short-term borrowings on a bid basis from
various banks. At January 29, 1999, outstanding letters of credit aggregated
$80.1 million. The revolving credit facility has $100 million expiring in
November 1999, with the remaining $200 million expiring in November 2001. In
addition, the Company has a $100 million revolving credit and security
agreement from a financial institution with $92.5 million outstanding at
January 29, 1999.
The Company's 1999 capital budget is currently at $1.6 billion,
inclusive of approximately $214 million of operating or capital leases. More
than 80% of this planned commitment is for store expansion. Expansion plans
for 1999 consist of approximately 80 to 85 stores (including the relocation
of 30 to 35 older, smaller format stores). This planned expansion is
expected to increase sales floor square footage by approximately 18%.
Approximately 15% of the 1999 projects will be leased and 85% will be owned.
Additionally, the Company has entered into an agreement with a lessor to
build a one million square foot regional distribution center in Pennsylvania,
which is expected to be operational in Spring 1999. In addition, a 195
thousand square foot specialty distribution center will be located at the
same site. At January 29, 1999, the Company operated four regional
distribution centers and nine smaller support facilities. The Company
believes that funds from operations, funds from equity and debt issuances,
leases and existing short-term credit agreements will be adequate to finance
the 1999 expansion plan and other operating needs.
In November 1998, the Company entered into a merger agreement to
acquire Eagle Hardware and Garden, Inc. (Eagle) in a stock-for-stock
acquisition, which was completed April 2, 1999. The transaction was valued
at approximately $1 billion, structured as a tax-free exchange of the
Company's common stock for Eagle's common stock, and accounted for as a
pooling of interests. Summary, combined company, pro forma financial
information for 1998, 1997 and 1996 is included in Note 14 of the
consolidated financial statements.
General inflation has not had a material impact on the Company during
the past three years. As noted above, the LIFO credit was $29.0 and $7.0
million in 1998 and 1997, respectively. This compares to a charge of $1.4
million in 1996. Overall inventory deflation was 1.69% and .99% for 1998 and
1997, respectively. There was overall inventory inflation of .15% for 1996.
MARKET RISK
The Company had no derivative financial instruments at January 29, 1999
or January 30, 1998.
The Company's major market risk exposure is the potential loss arising
from changing interest rates and its impact on long-term investments and
long-term debt. The Company's policy is to manage interest rate risks by
maintaining a combination of fixed and variable rate financial instruments.
At January 29, 1999, long-term investments consisted of $28.7 million in
municipal obligations, classified as available-for-sale securities. Although
the fair value of these securities, like all fixed income securities, would
fall if interest rates increase, the Company has the ability to hold its
fixed income investments until maturity and not experience an adverse impact
on earnings or cash flows. The following table summarizes the Company's
market risks associated with long-term debt. The table presents principal
cash outflows and related interest rates by year of maturity. Fair values
included below were determined using quoted market rates or interest rates
that are currently available to the Company on debt with similar terms and
remaining maturities.
<TABLE>
<CAPTION>
Long-Term Debt Maturities by Fiscal Year
(Dollars in Millions)
There- Fair
1999_ 2000 2001 2002 2003 after _Total _Value_
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate $98.7 $49.7 $31.8 $60.7 $19.4 $1,125.1 $1,385.4 $1,522.0
Average interest rate 7.25% 7.15% 7.99% 7.98% 8.46% 7.57%
Variable Rate $ 0.3 $ 0.2 $ 0.1 $ 0.1 $ 0.1 $ 2.3 $ 3.2 $ 3.2
Average interest rate 5.13% 4.25% 4.25% 4.25% 3.66%
</TABLE>
YEAR 2000
The Year 2000 problem arose because many existing computer programs
and embedded computer chips use only the last two digits to refer to a year.
If not addressed, computer programs that are date sensitive may not have the
ability to properly recognize dates in year 2000 and beyond. The result
could be a disruption of operations and the processing of transactions.
In 1997 and 1998, the Company completed an analysis of the impact and
costs relating to the Year 2000 problem and developed an implementation plan
to address information technology (IT), non-information technology (non-IT)
and third party readiness issues.
In preparing IT systems for the Year 2000, the Company has utilized both
internal and external resources. Contracted programming costs to convert the
Company's IT systems during 1997, 1998 and 1999 are estimated to total
approximately $5 million and are being expensed as incurred, the majority of
which had been incurred through January 29, 1999. In addition, approximately
$19 million of computer hardware is being purchased to replace non-compliant
computer hardware. These purchases are expected to be completed by May 1999.
The cost of new hardware is being capitalized and depreciated over useful
lives ranging from 3 to 5 years. Cash flow from operations is the Company's
source of funding all Year 2000 costs. The incremental cost to convert
systems has been mitigated by substantial investments in new computer systems
over the past six years. During this period, new computer systems have been
developed or purchased including, but not limited to, these applications:
Distribution, Electronic Data Interchange, Payroll and Human Resources,
General Ledger, Accounts Payable, Forecasting and Replenishment, and Supply
Services. All of these new systems are Year 2000 compliant. At January 29,
1999, the Company's conversion of internally developed legacy systems was
completed with certification testing planned to be completed by the fall of
1999.
Regarding non-IT related risks, each functional area of the Company is
responsible for identifying these issues. Within each business function,
objectives are being prioritized and evaluated for risk of Year 2000
problems. Examples of potential non-IT risks of Year 2000 problems would be
power outages and failures of communication systems, bar code readers and
security devices. For most of the Company's stores, back-up generators are
already in place, which would mitigate temporary power outages. By mid 1999,
similar remediation and/or contingency plans will be developed by the
respective business functions for non-IT Year 2000 risks impacting all high
priority and critical business objectives.
In regards to third party readiness, the Company mailed Year 2000
questionnaires to all identified third parties (merchandise vendors and other
entities with which the Company conducts business) in order to assess whether
they are Year 2000 compliant or have adequately addressed their system
conversion requirements. Of the approximate six thousand questionnaires
mailed, 33% of the recipients have currently responded. Specific follow-up
letters are being sent to those with unacceptable responses and a second
mailing to non-respondents will be conducted in April 1999 followed by phone
calls for those not responding within thirty days. The Company cannot
predict how many of the responses received may prove later to be inaccurate
or overly optimistic. To address this uncertainty, the Company is developing
contingency plans to address unanticipated interruptions or down time in both
the Company's and third parties' systems and services.
The Company is continuing to closely monitor adherence to the remainder
of its Year 2000 implementation plan and is currently satisfied that it will
be completed by Fall 1999. For the remainder of the project, the Company's
efforts will be devoted to five primary areas:
* certification testing of IT systems to ensure Year 2000 compliance,
* contingency plan development for business areas as well as IT systems,
* continued follow-up to questionnaires sent to third parties,
* replacement of certain older model personal computers and point-of-
sale equipment, and
* updating some of the purchased software packages with Year 2000
compliant upgrades.
If the Company encounters unforeseen complications or issues not previously
addressed in the comprehensive plan, additional resources from internal and
external sources will be committed to complete the project by the planned
completion time of Fall 1999. Since the use of these additional resources is
considered unlikely, no estimates as to their costs have been made at this
time.
The Company believes that its compliance plan should mitigate any adverse
effect on its business from the Year 2000 problem. However, if:
* the implementation of the plan is not completed on time,
* the Company has failed to identify and fix material non-complying
equipment or software, or
* third parties are unable to fulfill significant commitments to the
Company as a result of their failure to effectively address their
Year 2000 problems,
the Company's ability to carry out its business could be adversely affected.
For example, if the Company's IT and non-IT systems are unable to process
transactions in the stores or on a regional or company-wide basis, the
Company could be forced to process these transactions manually. The volume
of business the Company could transact, and its sales and income, would be
reduced until it was able to develop alternatives to defective systems or
non-complying vendors. These reductions could occur at individual stores or
in clusters of stores sharing defective systems or non-complying vendors.
The effect of any failures on the Company's results of operations would
depend, of course, upon the extent of any non-compliance and its impact on
critical business systems and sources of supply, but could be significant.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133) was issued in June
1998. SFAS 133 is effective for the Company in the year beginning January
29, 2000. SFAS 133 requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those
instruments at fair value. Management is currently evaluating the impact of
the adoption of SFAS 133 and its effect on the Company's financial
statements.
Pages 19 - 31:
<TABLE>
Lowe's Companies, Inc.
Consolidated Statements of Earnings
In Thousands, Except Per Share Data
Years Ended on
<CAPTION>
January 29, % January 30, % January 31, %
1999 Sales 1998 Sales 1997 Sales
<S> <C> <C> <C> <C> <C> <C>
Net Sales $12,244,882 100.0% $10,136,890 100.0% $8,600,241 100.0%
Cost of Sales 8,950,156 73.1 7,447,117 73.5 6,376,482 74.1
Gross Margin 3,294,726 26.9 2,689,773 26.5 2,223,759 25.9
Expenses:
Selling, General and Administrative 2,118,149 17.3 1,754,780 17.3 1,463,812 17.0
Store Opening Costs 71,651 0.6 69,999 0.7 59,159 0.7
Depreciation 271,769 2.2 240,880 2.4 198,115 2.3
Interest (Note 13) 74,735 0.6 65,567 0.6 49,067 0.6
Total Expenses 2,536,304 20.7 2,131,226 21.0 1,770,153 20.6
Pre-Tax Earnings 758,422 6.2 558,547 5.5 453,606 5.3
Income Tax Provision (Note 11) 276,000 2.3 201,063 2.0 161,456 1.9
Net Earnings $ 482,422 3.9 $357,484 3.5% $292,150 3.4%
Basic Earnings Per Share (Note 7) $ 1.37 $1.03 $0.87
Diluted Earnings Per Share (Note 7) $ 1.36 $1.03 $0.86
Cash Dividends Per Share $ .12 $ .11 $ .10
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Lowe's Companies, Inc.
Consolidated Balance Sheets
In Thousands
<CAPTION>
January 29, % January 30, %
1999 Total 1998 Total
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents $ 222,709 3.5% $ 195,146 3.7%
Short-Term Investments (Note 2) 20,343 0.3 16,155 0.3
Accounts Receivable - Net (Note 4) 143,928 2.3 118,408 2.3
Merchandise Inventory (Note 1) 2,104,845 33.2 1,714,592 32.8
Deferred Income Taxes (Note 11) 56,124 0.9 34,116 0.7
Other Current Assets 37,734 0.5 31,185 0.6
Total Current Assets 2,585,683 40.7 2,109,602 40.4
Property, Less Accumulated
Depreciation (Notes 3 and 5) 3,636,917 57.3 3,005,199 57.6
Long-Term Investments (Note 2) 28,716 0.5 35,161 0.7
Other Assets (Note 1) 93,335 1.5 69,315 1.3
Total Assets $6,344,651 100.0% $5,219,277 100.0%
Liabilities and Shareholders' Equity
Current liabilities:
Short-Term Borrowings (Note 4) $ 92,475 1.4% $ 98,104 1.9%
Current Maturities
of Long-Term Debt (Note 5) 99,019 1.6 12,478 0.2
Accounts Payable 1,133,177 17.9 969,777 18.7
Employee Retirement Plans (Note 10) 80,104 1.3 64,669 1.2
Accrued Salaries and Wages 112,749 1.8 83,377 1.6
Other Current Liabilities 247,820 3.9 220,915 4.2
Total Current Liabilities 1,765,344 27.9 1,449,320 27.8
Long-Term Debt, Excluding Current
Maturities (Notes 5, 6 and 9) 1,283,092 20.2 1,045,570 20.0
Deferred Income Taxes (Note 11) 160,263 2.5 123,778 2.4
Total Liabilities 3,208,699 50.6 2,618,668 50.2
Shareholders' Equity (Note 8)
Preferred Stock -
$5 Par Value, none issued - -
Common Stock - $.50 Par Value;
Issued and Outstanding
January 29, 1999 352,643
January 30, 1998 350,632 176,321 2.8 175,316 3.3
Capital in Excess of Par 983,217 15.5 892,666 17.1
Retained Earnings 2,006,384 31.6 1,565,133 30.0
Unearned Compensation-
Restricted Stock Awards (30,387) (0.5) (32,694) (0.6)
Accumulated Other
Comprehensive Income 417 - 188 -
Total Shareholders' Equity $3,135,952 49.4 $2,600,609 49.8
Total Liabilities and
Shareholders' Equity $6,344,651 100.00% $5,219,277 100.0%
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Lowe's Companies, Inc.
Consolidated Statements of Shareholders' Equity
In Thousands
<CAPTION>
Unearned Accumulated
Capital in Compensation Other
Common Stock Excess of Retained Restricted Comprehensive Total
Shares Amount Par Value Earnings Stock Awards Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 31, 1996 321,836 $160,918 $516,369 $988,447 $(8,076) $(943) $1,656,715
Comprehensive Income:
Net Earnings 292,150
Other comprehensive
income, net of income
taxes ($325) and
reclassification
adjustments:
Unrealized Gain on
Available-for-Sale
Securities 602
Total Comprehensive Income 292,752
Cash Dividends (34,709) (34,709)
Stock Issued to ESOP (Note 10) 2,430 1,214 42,676 43,890
Conversion of 3% Notes 21,794 10,896 245,902 256,798
Shares Issued to Directors 8 4 133 137
Unearned Compensation-
Restricted Stock
Awards (Note 8) 740 372 11,879 (10,358) 1,893
Balance January 31, 1997 346,808 173,404 816,959 1,245,888 (18,434) (341) 2,217,476
Comprehensive Income:
Net Earnings 357,484
Other comprehensive
income, net of income
taxes ($268) and
reclassification
adjustments:
Unrealized Gain on
Available-for-Sale
Securities 529
Total Comprehensive Income 358,013
Tax Effect of
Non-qualified Stock
Options Exercised 87 87
Cash Dividends (38,239) (38,239)
Stock Options
Exercised (Note 8) 28 14 221 235
Stock Issued to
ESOP (Note 10) 2,984 1,492 55,138 56,630
Shares issued to Directors 8 4 153 157
Unearned Compensation-
Restricted Stock
Awards (Note 8) 804 402 20,108 (14,260) 6,250
Balance January 30, 1998 350,632 175,316 892,666 1,565,133 (32,694) 188 2,600,609
Comprehensive Income:
Net Earnings 482,422
Other comprehensive
income, net of income
taxes and reclassification
adjustments:
Unrealized Gain on
Available-for-Sale
Securities (Note 8) 229
Total Comprehensive Income 482,651
Tax Effect of
Non-qualified Stock
Options Exercised 3,796 3,796
Cash Dividends (41,171) (41,171)
Stock Options
Exercised (Note 8) 610 305 11,835 12,140
Stock Issued to
ESOP (Note 10) 1,652 826 59,248 60,074
Shares issued to Directors 12 6 469 475
Unearned Compensation-
Restricted Stock
Awards (Note 8) (263) (132) 15,203 2,307 17,378
Balance January 29, 1999 352,643 $176,321 $983,217 $2,006,384 (30,387) $417 $3,135,952
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Lowe's Companies, Inc.
Consolidated Statements of Cash Flows
In Thousands
Years Ended on
<CAPTION>
January 29, January 30, January 31,
1999 1998 1997
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Earnings $482,422 $357,484 $292,150
Adjustments to Reconcile Net Earnings to Net
Cash Provided by Operating Activities:
Depreciation 271,769 240,880 198,115
Amortization of Original Issue Discount 445 192 1,671
Increase in Deferred Income Taxes 14,337 7,637 17,043
Loss on Disposition/Writedown of
Fixed and Other Assets 23,540 14,263 9,892
Changes in Operating Assets and Liabilities:
Accounts Receivable - Net (25,520) (846) (4,079)
Merchandise Inventory (390,253) (108,712) (338,803)
Other Operating Assets (6,313) 6,732 (4,788)
Accounts Payable 163,400 55,610 258,768
Employee Retirement Plans 75,508 60,527 59,736
Other Operating Liabilities 87,513 31,103 53,288
Net Cash Provided by Operating Activities 696,848 664,870 542,993
Cash Flows from Investing Activities:
(Increase) Decrease in Investment Assets:
Short-Term Investments 19,848 25,773 98,754
Purchases of Long-Term Investments (19,866) (15,384) (27,259)
Proceeds from Sale/Maturity of Long-Term
Investments 2,644 4,811 12,203
(Increase) Decrease in Other Long-Term Assets (18,528) (5,472) 3,456
Fixed Assets Acquired (928,040) (772,792) (677,160)
Proceeds from the Sale of Fixed and
Other Long-Term Assets 38,202 31,183 11,615
Net Cash Used in Investing Activities (905,740) (731,881) (578,391)
Cash Flows from Financing Activities:
Net Increase (Decrease) in Short-Term Borrowings (5,629) 17,199 64,288
Long-Term Debt Borrowings 296,159 265,795 -
Repayment of Long-Term Debt (15,458) (32,781) (17,662)
Proceeds from Stock Options Exercised 12,140 210 -
Cash Dividend Payments (50,757) (28,653) (34,709)
Net Cash Provided by Financing Activities 236,455 221,770 11,917
Net Increase (Decrease) in Cash and Cash Equivalents 27,563 154,759 (23,481)
Cash and Cash Equivalents, Beginning of Year 195,146 40,387 63,868
Cash and Cash Equivalents, End of Year $222,709 $195,146 $40,387
See accompanying notes to consolidated financial statements.
</TABLE>
LOWE'S COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 29, 1999, JANUARY 30, 1998 AND JANUARY 31, 1997
NOTE 1 - Summary of Significant Accounting Policies:
The Company is one of the largest retailers serving the do-it-yourself home
improvement, home decor, and home construction markets in the United States.
The Company operated 484 stores in 27 states at January 29, 1999 predominantly
located in the eastern half of the United States. Below are those accounting
policies considered to be significant.
Stock Split - On May 29, 1998, the Board of Directors declared a two-for-one
stock split on the Company's common stock. One additional share was issued on
June 26, 1998 for each share held by shareholders of record on June 12, 1998.
The accompanying consolidated financial statements, including per share data,
have been adjusted to reflect the effect of the stock split.
Fiscal Year - Effective February 1, 1997, the Company adopted a 52 or 53 week
fiscal year, changing the year-end date from January 31 to the Friday nearest
January 31. The fiscal years ended January 29, 1999 and January 30, 1998 each
had 52 weeks. All references herein for the years 1998, 1997 and 1996
represent the fiscal years ended January 29, 1999, January 30, 1998 and
January 31, 1997, respectively.
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its subsidiaries, all of which are wholly
owned. All material intercompany accounts and transactions have been
eliminated.
Use of Estimates - The preparation of the Company's 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 reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents - Cash and cash equivalents include cash on hand,
demand deposits, and short-term investments with original maturities of three
months or less when purchased.
Investments - The Company has a cash management program which provides for the
investment of excess cash balances in financial instruments which have
maturities of up to five years. Investments, exclusive of cash equivalents,
with a maturity date of one year or less from the balance sheet date are
classified as short-term investments. Investments with maturities greater than
one year are classified as long-term. Investments consist primarily of tax-
exempt notes and bonds, municipal preferred tax-exempt stock and repurchase
agreements.
The Company has classified all investment securities as available-for-sale,
and they are carried at fair market value. Unrealized gains and losses on such
securities are included in accumulated other comprehensive income in
shareholders' equity.
Derivatives - The Company does not use derivative financial instruments for
trading purposes. Interest rate swap and cap agreements, which are
occasionally used by the Company in the management of interest rate exposure,
are accounted for on a settlement basis. Income and expense are recorded in
the same category as that arising from the related liability. The Company had
no such derivative financial instruments as of January 29, 1999 or January 30,
1998.
Accounts Receivable - The majority of the accounts receivable arise from sales
to professional building contractors. The allowance for doubtful accounts is
based on historical experience and a review of existing receivables. The
allowance for doubtful accounts was $2.0 and $1.6 million at January 29, 1999
and January 30, 1998, respectively.
Sales generated through the Company's private label credit card are not
reflected in receivables. Under an agreement with Monogram Credit Card Bank
of Georgia (the Bank), a wholly owned subsidiary of General Electric Capital
Corporation, consumer credit is extended directly to customers by the Bank and
all credit program related services are performed directly by the Bank.
Merchandise Inventory - Inventory is stated at the lower of cost or market. In
an effort to more closely match cost of sales and related sales, cost is
determined using the last-in, first-out (LIFO) method. Included in inventory
Costs are certain costs associated with the preparation of inventory for
resale. If the FIFO method had been used, inventories would have been $38.6
and $67.6 million higher at January 29, 1999 and January 30, 1998,
respectively.
Property and Depreciation - Property is recorded at cost. Costs associated
with major additions are capitalized and depreciated. Upon disposal, the cost
of properties and related accumulated depreciation is removed from the
accounts with gains and losses reflected in earnings.
Depreciation is provided over the estimated useful lives of the depreciable
assets. Assets are generally depreciated on the straight-line method.
Leasehold improvements are depreciated over the shorter of their estimated
useful lives or term of the related lease.
Leases - Assets under capital leases are amortized in accordance with the
Company's normal depreciation policy for owned assets or over the lease term,
if shorter, and the charge to earnings is included in depreciation expense in
the consolidated financial statements.
Income Taxes - Income taxes are provided for temporary differences between the
tax and financial accounting bases of assets and liabilities using the
liability method. The tax effects of such differences are reflected in the
balance sheet at the enacted tax rates expected to be in effect when the
differences reverse.
Store Pre-opening Costs - Costs of opening new retail stores are charged to
operations as incurred.
Impairment/Store Closing Costs - Losses related to impairment of long-lived
assets and for long-lived assets to be disposed of are recognized when
expected future cash flows are less than the assets' carrying value. At the
time management commits to close or relocate a store location, the Company
evaluates the carrying value of the assets in relation to its expected future
cash flows. If the carrying value of the assets is greater than the expected
future cash flows, a provision is provided for the impairment of the assets.
When a leased location becomes impaired, a provision is provided for the
present value of future lease obligations, net of anticipated sublease income.
Provisions for impairment and store closing costs are included in selling,
general and administrative expenses.
The estimated realizable value of closed store real estate is included in other
assets and amounted to $62.3 and $45.4 million at January 29, 1999 and January
30, 1998, respectively.
Advertising - Costs associated with advertising are charged to operations as
incurred. Advertising expenses were $110.1, $125.6 and $99.8 million for
1998, 1997 and 1996, respectively.
Recent Accounting Pronouncements - Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133) was issued in June 1998. SFAS 133 is effective for the Company in the
year beginning January 29, 2000. SFAS 133 requires that an entity recognize
all derivatives as either assets or liabilities in the balance sheet and
measure those instruments at fair value. Management is currently evaluating
the impact of the adoption of SFAS 133 and its effect on the Company's
financial statements.
<TABLE>
NOTE 2 - Investments:
The amortized cost, gross unrealized holding gains and losses and fair values of investment securities, all of
which are classified as available-for-sale securities, at January 29, 1999 and January 30, 1998 are as follows:
<CAPTION>
January 29, 1999 January 30, 1998
(In Thousands) Amortized Gross Unrealized Fair Amortized Gross Unrealized Fair
Type Cost Gains Losses Value Cost Gains Losses Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Obligations $20,211 $132 - $20,343 $14,557 - - $14,557
Adjustable Rate Preferred Stock - - - - 1,614 - $(16) 1,598
Classified as Short-Term 20,211 132 - 20,343 16,171 - (16) 16,155
Municipal Obligations -
Classified as Long-Term 28,207 554 $(45) 28,716 34,904 $291 (34) 35,161
Total $48,418 $686 $(45) $49,059 $51,075 $291 $(50) $51,316
The proceeds from sales of available-for-sale securities were $37.5, $14.3 and $15.1 million for 1998, 1997
and 1996, respectively. Gross realized gains on the sale of available-for-sale securities were $47,
$89 and $80 thousand for 1998, 1997 and 1996, respectively. Gross realized losses on the sale of
available-for-sale securities were $30, $26 and $535 thousand for 1998, 1997 and 1996, respectively.
Municipal obligations classified as long-term at January 29, 1999 will mature in 1 to 5 years.
</TABLE>
NOTE 3 - Property and Accumulated Depreciation:
Property is summarized below by major class:
January 29, January 30,
1999 1998
(In Thousands)
Cost:
Land $ 946,203 $ 711,930
Buildings 1,841,658 1,533,954
Store, Distribution and Office Equipment 1,638,264 1,393,718
Leasehold Improvements 182,636 155,392
Total Cost 4,608,761 3,794,994
Accumulated Depreciation and Amortization (971,844) (789,795)
Net Property $3,636,917 $3,005,199
The estimated depreciable lives, in years, of the Company's property are:
buildings, 20 to 40; store, distribution and office equipment, 3 to 10;
leasehold improvements, generally the life of the related lease.
Net property includes $464.0 and $438.4 million in assets under capital leases
at January 29, 1999 and January 30, 1998, respectively.
NOTE 4 - Short-Term Borrowings and Lines of Credit:
The Company has a $300 million revolving credit facility with a syndicate of
11 banks. The facility has $100 million expiring November 1999, with the
remaining $200 million expiring November 2001. The facility is used to
support the Company's commercial paper program and for short-term borrowings.
Facility fees ranging from .06% to .075% are paid on the unused amount of
these facilities. The revolving credit facility contains certain restrictive
covenants including maintenance of specific financial ratios. There were no
borrowings outstanding under this revolving credit facility as of January 29,
1999 or January 30, 1998.
Five banks have extended lines of credit aggregating $278.2 million for the
purpose of issuing documentary letters of credit and standby letters of
credit. These lines do not have termination dates but are reviewed
periodically. Commitment fees ranging from .19% to .50% per annum are paid on
the amounts of standby letters of credit used. At January 29, 1999,
outstanding letters of credit totaled $80.1 million.
A $100 million revolving credit and security agreement, expiring in September
1999 and renewable annually, is available from a financial institution.
Interest rates under this agreement are determined at the time of borrowing.
Under the current terms of the agreement, borrowings are based upon commercial
paper rates plus 21 basis points. At January 29, 1999 and January 30, 1998,
respectively, there were $92.5 and $98.1 million outstanding under this
credit and security agreement and $132.1 and $105.3 million of the Company's
accounts receivable were pledged as collateral.
In addition, $80 million is available, on an unsecured basis, for the purpose
of short-term borrowings on a bid basis from various banks. These lines are
uncommitted and are reviewed periodically by both the banks and the Company.
There were no borrowings outstanding under these lines of credit as of January
29, 1999 or January 30, 1998.
The weighted average interest rate on short-term borrowings outstanding at
January 29, 1999 and January 30, 1998 was 4.96% and 5.73%, respectively.
<TABLE>
NOTE 5 - Long-Term Debt:
<CAPTION>
Fiscal Year
of Final January 29, January 30,
Debt Category Interest Rates Maturity 1999 1998
(In Thousands)
<S> <C> <C> <C> <C>
Secured Debt:1
Industrial Revenue Bonds 2.85% to 6.25%* 2020 $ 2,536 $ 4,314
Industrial Revenue Bonds 2 3.55%* 2005 900 2,700
Other Notes 3.87% to 9.50% 2006 7,826 2,501
Unsecured Debt:
Debentures 6.88% 2028 296,284 -
Medium Term Notes - Series A 6.50% to 8.20% 2022 238,999 238,992
Medium Term Notes3 - Series B 6.70% to 7.61% 2037 266,004 265,795
Senior Notes 6.38% 2005 99,282 99,177
Capital Leases 6.58% to 13.31% 2018 470,280 444,569
Total Long-Term Debt 1,382,111 1,058,048
Less Current Maturities 99,019 12,478
Long-Term Debt, Excluding
Current Maturities $1,283,092 $1,045,570
*Interest rate varies as a percentage of prime rate or other interest index. Interest rates
shown are as of January 29, 1999. Prime rate was 7.75% at January 29, 1999.
Debt maturities, exclusive of capital leases, for the next five fiscal years are as
follows (in millions): 1999, $86.0; 2000, $35.9; 2001, $16.6; 2002, $43.9; 2003, $0.9.
The Company's debentures, senior notes and medium term notes contain certain financial
covenants, including the maintenance of specific financial ratios.
Notes:
1Real properties pledged as collateral for secured debt had net book values at January 29,
1999, as follows: industrial revenue bonds - $11.5 million and other notes - $7.8 million.
2With certain restrictions, the floating rate demand industrial revenue bonds can be
converted to a fixed interest rate based on a fixed interest index at the Company's
option.
3Approximately 37% of these Medium Term Notes may be put at the option of the holder on
either the tenth or twentieth anniversary date of the issue.
</TABLE>
NOTE 6 - Financial Instruments:
The following are financial instruments whose estimated fair value amounts are
different from their carrying amounts. Estimated fair values have been
determined using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that 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.
January 29, 1999 January 30, 1998___
Carrying Fair Carrying Fair
(In Thousands) Amount Value Amount Value
Liabilities:
Long-Term Debt $1,382,111 $1,525,208 $1,058,048 $1,146,434
Long-term debt - Interest rates that are currently available to the Company
for issuance of debt with similar terms and remaining maturities are used to
estimate fair value for debt issues that are not quoted on an exchange.
NOTE 7 - Earnings Per Share:
Basic earnings per share (EPS) excludes dilution and is computed by dividing
net earnings by the weighted-average number of common shares outstanding for
the period. Diluted EPS includes the dilutive effects of common stock
equivalents and convertible debt, as applicable. Following is the
reconciliation of EPS for 1998, 1997 and 1996.
(In Thousands, Except Per Share Data)
1998 1997 1996
Basic Earnings per Share:
Net Earnings $482,422 $357,484 $292,150
Weighted Average Shares Outstanding 352,104 348,554 335,199
Basic Earnings per Share $1.37 $1.03 $.87
Diluted Earnings per Share:
Net Earnings $482,422 $357,484 $292,150
Interest (After Taxes) on
Convertible Debt - - 3,620
Net Earnings, as Adjusted $482,422 $357,484 $295,770
Weighted Average Shares Outstanding 352,104 348,554 335,199
Dilutive Effect of Stock Options 1,691 205 158
Dilutive Effect of Convertible Debt - - 10,012
Weighted Average Shares, as Adjusted 353,795 348,759 345,369
Diluted Earnings per Share $1.36 $1.03 $.86
NOTE 8 - Shareholders' Equity:
Authorized shares of common stock were 1.4 billion at January 29, 1999 and
700 million at January 30, 1998 and January 31, 1997.
The Company has 5 million authorized shares of preferred stock ($5 par), none
of which have been issued. The preferred stock may be issued by the Board of
Directors (without action by shareholders) in one or more series, having such
voting rights, dividend and liquidation preferences and such conversion and
other rights as may be designated by the Board of Directors at the time of
issuance of the preferred shares.
The Company has a shareholder rights plan, which provides for a dividend
distribution of one preferred share purchase right on each outstanding share
of common stock. Each purchase right will entitle shareholders to buy one
unit of a newly authorized series of preferred stock for $152.50. Each unit
is intended to be the equivalent of one share of common stock. The purchase
rights will be exercisable only if a person or group acquires or commences a
tender offer for 15% or more of Lowe's common stock. The purchase rights are
not exercisable or transferable by the person or group acquiring the stock or
commencing the tender offer. The rights will expire on September 9, 2008,
unless the Company redeems or exchanges them earlier.
The Company has two stock incentive plans, referred to as the "1994" and
"1997" Incentive Plans, under which incentive and non-qualified stock options,
stock appreciation rights, restricted stock awards and incentive awards may be
granted to key employees. No awards may be granted after January 31, 2004
under the 1994 plan and 2007 under the 1997 plan. Stock options generally
have terms ranging from 5 to 10 years, vest evenly over 3 years and are
assigned an exercise price of not less than the fair market value on the date
of grant. At January 29, 1999, there were 285,050 and 6,869,614 shares
available for grants under the 1994 and 1997 plans, respectively.
Option information is summarized as follows:
Key Employee Stock Option Plans Weighted-Average
Shares Exercise Price Per Share
(In Thousands)
Outstanding at January 31, 1996 40 $19.38
Granted 2,430 $19.56
Canceled or Expired (20) $19.38
Outstanding at January 31, 1997 2,450 $19.56
Granted 1,494 $22.55
Canceled or Expired (20) $19.56
Exercised (4) $19.56
Outstanding at January 30, 1998 3,920 $20.70
Granted 1,736 $44.35
Canceled or Expired (249) $20.78
Exercised (621) $19.77
Outstanding at January 29, 1999 4,786 $29.40
Exercisable at January 29, 1999 1,620 $20.41
Of the 4,786,000 options outstanding at January 29, 1999, 3,054,000 options
had exercise prices per share ranging from $19.38 to $23.66 with a
weighted-average remaining term of 3.2 years. The remaining options
outstanding, totaling 1,732,000, had exercise prices per share ranging from
$34.78 to $45.00 with a weighted-average remaining term of 6.8 years. The
exercise prices per share of those options exercisable at January 29, 1999
range from $19.38 to $23.66.
Stock appreciation rights were denominated in units, which were comparable to
a share of common stock for purposes of determining the amount payable under
an award. An award entitled the participant to receive the excess of the
final value of the unit over the fair market value of a share of common stock
on the first day of the performance period, generally three years. The final
value was the average closing price of a share of common stock during the last
month of the performance period. Limits were established with respect to the
amount payable on each unit. A total of 253,700 stock appreciation rights
were paid out at the maximum level of $1,902,750 during 1998 with no remaining
awards outstanding at January 29, 1999. The costs of these rights were
expensed over the performance periods and have reduced pre-tax earnings by
$0.3, $0.9 and $1.0 million in 1998, 1997 and 1996, respectively.
Restricted stock awards of 10,000, 870,700 and 777,100 shares, with per share
weighted-average fair values of $35.13, $24.80 and $16.57, were granted to
certain executives in 1998, 1997 and 1996, respectively. These shares are
nontransferable and subject to forfeiture for periods prescribed by the
Company. These shares may become transferable and vested earlier based on
achievement of certain performance measures. During 1998, a total of 280,100
shares were forfeited and 164,950 shares became vested. At January 29, 1999,
grants totaling 1,548,750 shares are included in Shareholder's Equity and are
being amortized as earned over periods not exceeding seven years. Related
expense (charged to compensation expense) for 1998, 1997 and 1996 was $18.5,
$6.2 and $1.9 million, respectively.
The Company has a Directors' Stock Incentive Plan. This Plan provides that at
the first Board meeting following each annual meeting of shareholders, the
Company shall issue each non-employee Director 500 shares of common stock. Up
to 50,000 shares may be issued under this Plan. In 1998, 1997 and 1996,
12,000, 8,000 and 8,000 shares, respectively, were issued under this Plan.
Prior to its expiration in 1994, 280,000 stock options were granted under a
Non-Employee Directors' Stock Option Plan. In 1998 and 1997, 40,000 and
24,000 shares, respectively, were exercised under this Plan. There were no
exercises under the Plan in 1996. No shares were canceled under the Plan in
1998, 1997 or 1996. At January 29, 1999, 104,000 shares were exercisable. Of
the remaining outstanding options at January 29, 1999, the exercise price per
share ranges from $3.19 to $9.44 and their weighted-average remaining term is
2.6 years.
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its stock option
plans. Accordingly, no compensation expense has been recognized for
stock-based compensation where the option price of the stock approximated the
fair market value of the stock on the date of grant, other than for restricted
stock grants and stock appreciation rights. Had compensation for 1998, 1997
and 1996 stock options granted been determined consistent with Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation," the Company's net earnings and earnings per share (EPS) amounts
for 1998, 1997 and 1996 would approximate the following pro forma amounts
(in thousands, except per share data):
<TABLE>
<CAPTION>
1998 1997 1996
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
<S> <C> <C> <C> <C> <C> <C>
Net Earnings $482,422 $474,533 $357,484 $352,217 $292,150 $291,411
Basic EPS $1.37 $1.35 $1.03 $1.01 $.87 $.87
Diluted EPS $1.36 $1.34 $1.03 $1.01 $.86 $.85
The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts.
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the assumptions listed below.
1998 1997 1996_
Weighted average fair value per option $18.38 $9.30 $8.50
Assumptions used:
Weighted average expected volatility 31.6% 34.8% 38.3%
Weighted average expected dividend yield 0.35% 0.60% 0.66%
Weighted average risk-free interest rate 4.71% 6.04% 6.01%
Weighted average expected life, in years 6.9 5.0 5.0
During 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income (SFAS 130)." The Company reports
comprehensive income in its consolidated statement of shareholders' equity.
SFAS 130 requires the reporting of comprehensive income in addition to net
earnings from operations. Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of certain financial
information that has not been historically recognized in the calculation of
net earnings.
For the three years ended January 29, 1999, unrealized holding gains
(losses) on available-for-sale securities is the only other comprehensive
income component for the Company. As required by SFAS 130 in the year of
adoption and forward, the following disclosures of unrealized net holding
gains are made for 1998.
Pre- Tax After
(In Thousands) Tax Expense Tax
Unrealized net holding gains
arising during the year $417 $177 $240
Less: Reclassification adjustment for
gains included in net earnings 17 6 11
Unrealized net gains on available-for-sale
securities, net of reclassification adjustment $400 $171 $229
NOTE 9 - Leases:
The Company leases certain store facilities under agreements with original
terms generally of twenty years. Agreements generally provide for contingent
rental based on sales performance in excess of specified minimums. To date,
contingent rentals have been nominal. The leases typically contain provisions
for four renewal options of five years each. Certain equipment is also leased
by the Company under agreements ranging from two to five years. These
agreements typically contain renewal options providing for a renegotiation of
the lease, at the Company's option, based on the fair market value at that
time.
In August 1998, the Company entered into a $100 million operating lease
agreement for a distribution facility and store facilities. The initial lease
term is three years with two 1-year renewal options. The agreement contains
significant guaranteed residual values and purchase options at original cost
for all properties under the agreement.
The future minimum rental payments required under capital and operating leases
having initial or remaining noncancelable lease terms in excess of one year
are summarized as follows:
<TABLE>
<CAPTION>
Operating Leases Capital Leases
Fiscal Year Real Estate Equipment Real Estate Equipment Total
(In Thousands)
<S> <C> <C> <C> <C> <C>
1999 $ 104,771 $1,110 $ 52,945 $291 $ 159,117
2000 108,482 673 52,963 218 162,336
2001 105,759 194 52,981 98 159,032
2002 102,263 43 52,981 98 155,385
2003 101,657 - 52,981 49 154,687
Later Years 1,314,657 - 634,626 - 1,949,283
Total Minimum Lease Payments $1,837,589 $2,020 $899,477 $754 $2,739,840
Total Minimum Capital
<S> <C>
Lease Payments $900,231
Less Amount Representing
Interest 429,951
___________________________________________________________________________________________________________
Present Value of Minimum
Lease Payments 470,280
Less Current Maturities 12,952
___________________________________________________________________________________________________________
Present Value of Minimum
Lease Payments,
Less Current Maturities $457,328
Rental expenses under operating leases for real estate and equipment were $89.3, $65.4 and $59.2 million
in 1998, 1997 and 1996, respectively.
</TABLE>
NOTE 10 - Employee Retirement Plans:
The Company's contribution to its Employee Stock Ownership Plan (ESOP) is
determined annually by the Board of Directors. The ESOP covers all employees
after completion of one year of employment and 1,000 hours of service during
that year. Contributions are allocated to participants based on their eligible
compensation relative to total eligible compensation. Contributions may be
made in cash or shares of the Company's common stock and are generally made in
the following year. ESOP expense for 1998, 1997 and 1996 was $80.3, $63.1 and
$61.1 million, respectively.
At January 29, 1999, the Employee Stock Ownership Trust held approximately
9.3% of the outstanding common stock of the Company. Shares allocated to ESOP
participants' accounts are voted by the trustee according to participants'
voting instructions.
The Board of Directors determines contributions to the Company's Employee
Savings and Investment Plan (ESIP) each year based upon a matching formula
applied to employee contributions. All employees are eligible to participate in
the ESIP on the first day of the month following completion of one year of
employment. Company contributions to the ESIP for 1998, 1997 and 1996 were
$10.6, $8.7 and $7.2 million, respectively. The Company's common stock is an
investment option for participants in the ESIP. Shares held in the ESIP are
voted by the trustee as directed by an administrative committee of the ESIP.
<TABLE>
NOTE 11 - Income Taxes:
<CAPTION>
1998 1997 1996
______________Statutory Rate Reconciliation__________________
<S> <C> <C> <C>
Statutory Federal Income Tax Rate 35.0% 35.0% 35.0%
State Income Taxes-Net of Federal
Tax Benefit 2.4 2.2 1.8
Other, Net (1.0) (1.2) (1.2)
Effective Tax Rate 36.4% 36.0% 35.6%_______
<CAPTION>
(In Thousands) ____________Components of Income Tax Provision_______________
Current
<S> <C> <C> <C> <C> <C> <C>
Federal $235,827 85.4% $175,649 87.4% $135,075 83.7%
State 25,836 9.4 17,777 8.8 9,338 5.8
Total Current 261,663 94.8 193,426 96.2 144,413 89.5
Deferred
Federal 11,880 4.3 6,328 3.1 14,122 8.7
State 2,457 0.9 1,309 0.7 2,921 1.8
Total Deferred 14,337 5.2 7,637 3.8 17,043 10.5
Total Income Tax Provision $276,000 100.0% $201,063 100.0% $161,456 100.0%
The tax effect of cumulative temporary differences and carryforwards that gave rise to
the deferred tax assets and liabilities and the related valuation allowance at January 29,
1999 and January 30, 1998 is as follows (in thousands):
<CAPTION>
January 29, 1999 January 30, 1998
Assets Liabilities Total Assets Liabilities Total___
<S> <C> <C> <C> <C> <C> <C>
Accrued Excess Property and
Store Closing Costs $20,046 - $20,046 $16,208 - 16,208
Insurance 15,120 - 15,120 11,338 - 11,338
Depreciation - $(179,060) (179,060) - (144,601) (144,601)
Property Taxes 1,561 - 1,561 3,140 - 3,140
Other, Net 42,431 (4,237) 38,195 36,001 (11,748) 24,253
Total $79,158 $(183,297) $(104,139) $66,687 $(156,349) $(89,662)
There was no valuation allowance at January 29, 1999 or January 30, 1998. The valuation allowance decreased
$0.3 million in 1997 and decreased $1.3 million in 1996.
</TABLE>
NOTE 12 - Litigation:
The Company is a defendant in legal proceedings considered to be in the normal
course of business, none of which, singularly or collectively, are considered
material to the Company.
<TABLE>
NOTE 13 - Other Information:
Net interest expense is composed of the following:
<CAPTION>
1998 1997 1996
(In Thousands)
<S> <C> <C> <C>
Long-Term Debt $63,592 $34,936 $31,300
Capitalized Leases 39,104 38,255 29,076
Short-Term Debt 5,506 7,913 4,368
Amortization of Loan Costs 779 527 403
Interest Income (20,218) (7,741) (8,765)
Interest Capitalized (14,028) (8,323) (7,315)
Net Interest Expense $74,735 $65,567 $49,067
______________________________________________________________________________________
Supplemental Disclosures of Cash Flow Information:
1998 1997 1996
(In Thousands)
Cash Paid for Interest
(Net of Amount Capitalized) $99,574 $74,005 $66,350
Cash Paid for Income Taxes $262,583 $196,144 $125,266
Noncash Investing and Financing Activities:
Fixed Assets Acquired under
Capital Leases $47,303 $32,738 $182,676
Termination of Capital Leases 10,401 - -
Common Stock Issued to ESOP (Note 10) 60,074 56,630 43,890
Common Stock Issued to Executives and
Directors, net of Unearned Compensation 17,853 6,407 2,030
Conversion of Debt to Common Stock - - $256,798
Notes Received in Exchange for Assets - 600 -
Notes Issued in Exchange for Assets $ 6,014 $ 2,200 -
_____________________________________________________________________________________
Sales by Product Category:
<CAPTION>
1998 1997 1996
(Dollars in Millions) Total Total Total
Product Category Sales % Sales % Sales %_
<S> <C> <C> <C> <C> <C> <C>
Fashion Plumbing & Electrical $1,388 11% $1,161 12% $ 908 11%
Tools 1,234 10 1,002 10 793 9
Building Materials 1,207 10 1,034 10 1,008 12
Lumber 1,186 10 1,124 11 1,014 12
Outdoor Hardlines 1,165 10 929 9 803 9
Major Appliances/Kitchens 1,115 9 842 8 619 7
Hardware 922 8 745 8 636 7
Millwork 908 8 748 8 664 8
Floors, Windows & Walls 790 6 594 6 448 5
Rough Plumbing & Electrical 784 6 655 6 584 7
Paint & Sundries 752 6 624 6 511 6
Nursery & Gardening Products 669 5 546 5 420 5
Electronics 125 1 133 1 192 2
Totals $12,245 100% $10,137 100% $8,600 100%
________________________________________________________________________________________________
</TABLE>
<TABLE>
NOTE 14 - Merger Agreement (Unaudited):
In November 1998, the Company entered into a merger agreement to acquire Eagle Hardware and
Garden, Inc. (Eagle). Eagle is a leading operator of home improvement centers in the
western United States. The transaction, which was effected as a stock-for-stock transaction,
was completed April 2, 1999. The transaction was structured as a tax-free reorganization
and was accounted for as a pooling of interests.
Following is selected unaudited pro forma combined financial data for the Company and Eagle
for 1998, 1997 and 1996. The results of operations assume that the companies had always
been combined for accounting purposes, and the balance sheet data assumes the merger was
completed on January 29, 1999. The year ended January 31, 1997 was a 53-week year for Eagle
and a 52-week year for the Company. The stockholders' equity figure has been adjusted by
tax effected merger related expenses of $10 million.
<CAPTION>
(In Thousands) _____1998 1997 1996___
Results of Operations Data:
<S> <C> <C> <C>
Net Sales $13,330,540 $11,108,378 $9,361,204
Gross Margin 3,602,071 2,963,125 2,435,339
Net Earnings 518,754 387,400 313,887
Basic Earnings Per Share 1.40 1.05 .89
Diluted Earnings Per Share 1.39 1.05 .87
Cash Dividends Per Share $ .12 $ .11 $ .10
Balance Sheet Data (as of January 29, 1999):
Total Assets $ 7,064,404
Long-Term Debt, Excluding Current
Maturities $ 1,364,278
Shareholders' Equity $ 3,587,289
_________________________________________________________________________________________________
</TABLE>
NOTE 15 - Subsequent Events (Unaudited):
In February 1999, the Company issued $400 million principal of 6.5% Debentures
due March 15, 2029. The debentures were issued at an original price of
$986.47 per $1000 principal amount, which represented an original discount of
.478% and underwriters' discount of .875%. The debentures may not be redeemed
prior to maturity.
In March 1999, the Company issued 6,206,895 shares of common stock in a public
offering. The net proceeds from the stock offering were approximately $348.1
million. The shares were issued under a shelf registration statement filed
with the Securities and Exchange Commission in December 1997.
Page 32:
<TABLE>
LOWE'S COMPANIES, INC.
SELECTED FINANCIAL DATA
(Unaudited)
(In Thousands, Except Per Share Data)
<CAPTION>
1998 1997 1996 1995 1994
Selected Statement of Earnings Data:
<S> <C> <C> <C> <C> <C>
Net Sales $12,244,882 $10,136,890 $8,600,241 $7,075,442 $6,110,521
Gross Margin 3,294,726 2,689,773 2,223,759 1,763,247 1,512,544
Net Earnings 482,422 357,484 292,150 226,027 223,560
Basic Earnings Per Share 1.37 1.03 .87 .71 .72
Diluted Earnings Per Share 1.36 1.03 .86 .68 .70
Dividends Per Share $ .12 $ .11 $ .10 $ .10 $ .09
___________________________________________________________________________________________________________
Selected Balance Sheet Data:
Total Assets $6,344,651 $5,219,277 $4,434,954 $3,556,386 $3,105,992
Long-Term Debt, Excluding
Current Maturities $1,283,092 $1,045,570 $ 767,338 $ 866,183 $ 681,184
___________________________________________________________________________________________________________
<CAPTION>
Selected Quarterly Data* First Second Third Fourth
<S> <C> <C> <C> <C>
1998
Net Sales $2,899,540 $3,425,685 $3,003,993 $2,915,664
Gross Margin 760,038 903,036 812,319 819,333
Net Earnings 94,465 165,378 116,367 106,212
Basic Earnings Per Share .27 .47 .33 .30
Diluted Earnings Per Share $ .27 $ .47 $ .33 $ .30
1997
Net Sales $2,400,754 $2,808,086 $2,530,481 $2,397,568
Gross Margin 623,703 731,093 670,886 664,090
Net Earnings 70,383 126,496 88,099 72,507
Basic Earnings Per Share .20 .36 .25 .21
Diluted Earnings Per Share $ .20 $ .36 $ .25 $ .21
*LIFO Adjustment:
1998 - The total LIFO effect for the year was a credit of $29.0 million. A credit of $11.1 million
was made against earnings through the first nine months and a credit of $17.9 million was made in
the fourth quarter.
1997 - The total LIFO effect for the year was a credit of $7.0 million. A charge of $5.5 million was
made against earnings through the first nine months, resulting in a fourth quarter credit of $12.5 million.
</TABLE>
Page 33:
<TABLE>
Lowe's Quarterly Stock Price Range and Cash Dividends
<CAPTION>
Fiscal 1998 Fiscal 1997 Fiscal 1996
High Low Dividend High Low Dividend High Low Dividend
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st
Quarter $36 7/32 $25 7/8 $.028 $20 1/8 $16 3/16 $.028 $18 1/8 $14 11/16 $.025
2nd
Quarter 45 1/8 33 7/8 .030 19 15/16 16 27/32 .028 19 1/2 14 5/16 .025
3rd
Quarter 42 1/4 24 15/16 .030 22 5/32 16 31/32 .028 21 21/32 16 3/16 .025
4th
Quarter $58 5/16 $34 7/16 $.030 $25 25/32 $20 25/32 .028 $21 3/4 $15 13/16 $.028
</TABLE>
EXHIBIT 21 - SCHEDULE OF SUBSIDIARIES
LOWE'S COMPANIES, INC. AND SUBSIDIARY COMPANIES
NAME AND DOING BUSINESS AS: STATE OF INCORPORATION
Lowe's Home Centers, Inc. North Carolina
The Contractor Yard, Inc. North Carolina
Sterling Advertising, Ltd. North Carolina
LF Corporation Delaware
Lowe's Home Centres (Canada), Inc. Canada
LG Sourcing, Inc. North Carolina
Lowe's H I W, Inc. Virginia
Eagle Hardware & Garden, Inc. Washington
Eagle Hardware & Garden Distribution Services, Inc. Washington
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Lowe's Companies, Inc.
We consent to the incorporation by reference in Post-Effective Amendment
No. 1 to Registration Statement No. 33-2618 on Form S-8, Registration
Statement No. 33-54497 on Form S-8, Registration Statement No. 33-54499 on
Form S-8, Registration Statement No. 333-34631 on Form S-8, and
Registration Statement No. 333-75793 of our report dated February 19, 1999
appearing in or incorporated by reference in this Annual Report on Form
10-K of Lowe's Companies, Inc. for the year ended January 29, 1999.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
April 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000060667
<NAME> LOWE'S COMPANIES, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-29-1999
<PERIOD-START> JAN-31-1998
<PERIOD-END> JAN-29-1999
<CASH> 222,709
<SECURITIES> 20,343
<RECEIVABLES> 143,928
<ALLOWANCES> 0
<INVENTORY> 2,104,845
<CURRENT-ASSETS> 2,585,683
<PP&E> 3,636,917
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,344,651
<CURRENT-LIABILITIES> 1,765,344
<BONDS> 0
0
0
<COMMON> 176,321
<OTHER-SE> 2,959,631
<TOTAL-LIABILITY-AND-EQUITY> 6,344,651
<SALES> 12,244,882
<TOTAL-REVENUES> 12,244,882
<CGS> 8,950,156
<TOTAL-COSTS> 8,950,156
<OTHER-EXPENSES> 2,461,569
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,735
<INCOME-PRETAX> 758,422
<INCOME-TAX> 276,000
<INCOME-CONTINUING> 482,422
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 482,422
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.36
</TABLE>
