<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-22702
ROBERDS, INC.
(Exact name of registrant as specified in its charter)
Ohio 31-0801335
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1100 East Central Avenue
Dayton, Ohio 45449-1888
(Address of principal executive offices)
(937) 859-5127
(Registrant's telephone number, including area code)
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 reports), and (2) has been subject to such requirements
for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. On July 30, 1998, 6,043,615
common shares, without par value, were outstanding.
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ROBERDS, INC. AND SUBSIDIARY
INDEX
PAGE
NUMBER
------
PART 1. FINANCIAL INFORMATION:
ITEM 1. Financial Statements:
Condensed Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements Of
Earnings - Three and Six Months Ended
June 30, 1998 and 1997 4
Condensed Consolidated Statements
of Cash Flows - Six Months Ended
June 30, 1998 and 1997 5
Notes to Condensed Consolidated
Financial Statements 6
ITEM 2. Management's Discussion
and Analysis of Financial
Condition and Results
of Operations 8
ITEM 3. Quantitative and Qualitative
Disclosures About Market Risk 13
PART II. OTHER INFORMATION
ITEMS 1-3. Inapplicable 14
ITEM 4. Submission of Matters to a
Vote of Security Holders 14
ITEM 5. Inapplicable 14
ITEM 6. Exhibits and Reports
on Form 8-K 14
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ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1998 1997
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,741 $ 2,494
Receivables:
Customers 1,127 1,311
Vendors and other 1,836 2,693
Merchandise inventories 43,089 51,173
Refundable income taxes 4,037 2,025
Prepaid expenses and other 2,556 1,792
Deferred tax assets 3,217 3,375
-------- --------
Total current assets 59,603 64,863
Property and equipment, net 95,748 99,364
Deferred tax assets 4,143 4,381
Certificates of deposit, restricted 2,917 2,541
Other assets 1,605 1,542
-------- --------
$164,016 $172,691
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,654 $ 16,871
Accrued expenses 8,545 8,885
Customer deposits 10,317 11,686
Litigation 2,270 2,992
Current maturities of long-term debt 2,836 2,731
-------- --------
Total current liabilities 36,622 43,165
Long-term debt including capital leases 76,065 73,309
Deferred warranty revenue and other 8,661 10,448
SHAREHOLDERS' EQUITY:
Common stock 604 601
Additional paid-in capital 32,177 32,091
Retained earnings 9,887 13,077
-------- --------
Total shareholders' equity 42,668 45,769
======== ========
$164,016 $172,691
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES AND SERVICE REVENUES $ 73,894 $ 80,235 $ 152,406 $ 163,387
COST OF SALES 50,798 53,629 104,629 110,140
-------- -------- --------- ---------
Gross profit 23,096 26,606 47,777 53,247
SELLING, DELIVERY AND ADMINISTRATIVE EXPENSES 24,778 28,362 52,466 54,788
INTEREST EXPENSE, NET 1,799 1,961 3,484 3,834
FINANCE PARTICIPATION INCOME (743) (788) (1,543) (1,380)
OTHER INCOME, NET (890) (906) (1,750) (1,757)
-------- -------- --------- ---------
LOSS BEFORE TAX BENEFIT (1,848) (2,023) (4,880) (2,238)
INCOME TAX BENEFIT (630) (710) (1,690) (780)
-------- -------- --------- ---------
NET (LOSS) ($ 1,218) ($ 1,313) ($ 3,190) ($ 1,458)
======== ======== ========= =========
BASIC AND DILUTED NET (LOSS) PER COMMON SHARE ($ 0.20) ($ 0.22) ($ 0.53) ($ 0.24)
======== ======== ========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC 6,044 5,965 6,037 5,962
======== ======== ========= =========
DILUTED 6,044 5,965 6,037 5,962
======== ======== ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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ROBERDS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS JUNE 30
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ($ 3,190) ($ 1,458)
Adjustments to reconcile net (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 4,425 4,535
(Gain) loss on sales of fixed assets (25) 19
Changes in assets and liabilities, net (1,690) 4,742
------- --------
Net cash (used in) provided by operating activities (480) 7,838
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (769) (2,726)
Proceeds from sales of fixed assets 42 48
Other (465) (83)
------- --------
Net cash (used in) investing activities (1,192) (2,761)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (4,139) (14,806)
Proceeds from long-term debt 7,000 8,080
Net proceeds from issuance of common shares 89 131
Debt issuance costs (31) (128)
------- --------
Net cash (used in) provided by financing activities 2,919 (6,723)
------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,247 (1,646)
CASH AND CASH EQUIVALENTS - Beginning of period 2,494 2,794
------- --------
CASH AND CASH EQUIVALENTS - End of period $ 3,741 $ 1,148
======= ========
CASH PAID (REFUNDED)FOR:
Interest, net of $38 capitalized in 1997 $ 3,506 $ 3,985
======= ========
Income taxes $ (75) $ 863
======= ========
</TABLE>
See notes to the condensed consolidated financial statements
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ROBERDS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE DATA)
A. BASIS OF PRESENTATION
The consolidated balance sheet at December 31, 1997 is condensed from the
audited financial statements. The accompanying unaudited condensed consolidated
balance sheet at June 30, 1998, the condensed consolidated statements of
operations for the three and six months ended June 30, 1998 and 1997, and the
condensed consolidated statements of cash flows for the six months ended June
30, 1998 and 1997, have been prepared by the Company in accordance with
generally accepted accounting principles and in the opinion of management
include all adjustments (which consist only of normal recurring adjustments)
necessary for a fair presentation of results of operations for the periods
presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted or condensed. These financial statements should be read in
conjunction with the financial statements and the notes thereto for the year
ended December 31, 1997 included in Form 10-K. The results of operations for the
six months ended June 30, 1998 may not be indicative of the results for the year
ending December 31, 1998.
B. DEBT
JUNE 30 DECEMBER 31
1998 1997
---- ----
Mortgage notes payable $45,140 $46,308
Revolving line of credit 22,000 15,000
Term loan agreement 2,800
Capital lease obligations 11,761 11,932
------- -------
78,901 76,040
Less current maturities 2,836 2,731
------- -------
$76,065 $73,309
======= =======
In February 1998, the Company utilized the revolving line of credit to repay the
balance outstanding under the term loan prior to its maturity.
The revolving bank line of credit, which was amended as of June 30, 1998,
expires in January 2000. The amount available under the line is limited to the
lesser of: (a) $30,000 or (b) an amount based upon a percentage of eligible
accounts receivable and inventory less excess customer deposits. At June 30,
1998, $26,298 was available under the line of which $22,000 was outstanding. The
line of credit bears interest at the prime rate plus 1% (9.50% at June 30,
1998).
The line of credit includes certain restrictive covenants including, among
others, limitations on capital expenditures and the payment of dividends,
maintenance of minimum current, fixed-charge-coverage, funded-debt-to-earnings,
and debt-to-tangible-net-worth ratios. Certain of the covenants contained in the
revolving credit agreement become increasingly restrictive over time.
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C. INCOME TAXES
Income tax benefit consists of the following:
SIX MONTHS ENDED
JUNE 30
1998 1997
---- ----
Currently payable (refundable):
Federal $(2,016) $(495)
State and local (70) 78
------- -----
(2,086) (417)
Deferred 396 (363)
======= =====
($1,690) ($780)
======= =====
The disproportionate provision for income taxes reflects minimum taxes imposed
by certain jurisdictions, and a valuation reserve for certain state operating
loss carryforwards for which the Company has determined that it is more likely
than not will not yield a benefit in the future.
D. WORKERS' COMPENSATION DISPUTE
During 1994, the Ohio Bureau of Workers' Compensation ("Bureau") completed an
examination of the Company's 1992 and 1993 Ohio workers' compensation tax
returns. As a result of that audit, the Bureau issued an assessment against the
Company for approximately $1,000. As a result of the Company's appeals and an
adjustment received in 1995, the assessment was reduced to $871. The assessment
was based on the Bureau's reclassification of the majority of the Company's Ohio
employees into higher rate classifications. In January 1997, the Company lost
its appeal of the assessment in the Ohio Court of Appeals. The Company has filed
another appeal of right with the Ohio Supreme Court. If the Company is
unsuccessful in this final appeal, the Company would likely be liable not only
for the $871 assessment but also for a similar adjustment for the years
subsequent to 1993.
In May 1998, Bureau declared a one-time refund of premiums to all participants
in the workers' compensation fund. As part of the refund process, any
outstanding balances due to the Bureau were set off against the refund,
including the $871 assessment against the Company. As a result, the amount
accrued by the Company for the 1992-1993 assessment has been paid. The Company
continues to accrue the estimated amount of additional taxes that would be
caused by a reclassification of employees for the periods subsequent to 1993.
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ROBERDS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS)
RESULTS OF OPERATIONS
The first six months of 1998 resulted in a net loss of $(3,190), compared to a
net loss of $(1,458) for the first six months of 1997. Sales for the three
months ended June 1998 declined to $73,894 from $80,235 for the three months
ended June 1997, a 7.9 percent decrease. Sales for the first half of 1998
declined to $152,406 from $163,387 for the first half of 1997, a 6.7 percent
decrease. The decline in total sales includes the effect of closing the Decatur,
Georgia store in December 1997 and, to a much lesser extent, the withdrawal from
the personal computer business in Dayton and Cincinnati. These factors will
continue to have an unfavorable effect on total store sales throughout 1998.
Comparable store sales decreased 5.9 percent for the three months ended June
1998, and decreased 4.8 percent for the first six months of 1998. The percentage
increases (decreases) in sales by market area were as follows:
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
TOTAL COMPARABLE TOTAL COMPARABLE
STORES STORES STORES STORES
------ ------ ------ ------
Dayton (6)% (6)% (2)% (2)%
Cincinnati (15) (15) (16) (16)
Atlanta (5) 3 (5) 3
Tampa (10) (10) (8) (8)
Overall, the Company believes that a highly competitive retail environment for
big ticket goods, combined with an industry wide softness in consumer
electronics and high consumer debt, also contributed to the decrease in
comparable store sales.
Sales by major product category as a percentage of total sales follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Furniture 39% 38% 40% 38%
Bedding 14 13 14 13
Major Appliances 27 27 25 25
Consumer Electronics 14 17 16 18
Extended Warranty Contracts and Other 6 5 5 6
=== === === ===
100% 100% 100% 100%
=== === === ===
</TABLE>
Sales of consumer electronics products continued to decline as a percentage of
total Company sales due to rapidly declining retail prices in that product
category, continued industry softness, a highly competitive retailing
environment, continuing technological
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advances resulting in lower product prices, and the lack of new products, at
higher prices, to offset the effect of mature products with declining prices.
The Company expects retail price declines in the electronics category to
continue for the foreseeable future.
In late March 1997, the Company entered into an agreement to sell third-party
extended warranty contracts. Revenues and the related costs of the contracts
entered into after the effective date of the agreement are being recognized at
the time the third-party contracts are sold. Revenues and selling costs related
to contracts sold prior to the effective date of the agreement will be
recognized over the remaining lives of the contracts, and the expenses related
to service costs will be recognized as incurred. Total sales were positively
affected by this agreement by approximately 1.0 percent during the first six
months of 1998. Sales of third-party warranty contracts became comparable in the
second quarter of 1998.
For the three months ended June 1998, gross profit was $23,096, or 31.3 percent
of sales, as compared to $26,606, or 33.2 percent of sales, for the three months
ended June 1997. Gross profit for the six months ended June 1998 was $47,777, or
31.3 percent of sales, as compared to $53,247, or 32.6 percent of sales, for the
six months ended June 1997. The majority of the decline in gross profit margin
percentage in 1998 reflects the liquidation at reduced selling prices of certain
aged inventories and inventories from certain vendors that are being
de-emphasized or discontinued. Partially offsetting the decline in gross margin
percentage were the above-mentioned sales of third-party extended warranty
contracts, which favorably affected gross margins as a percentage of sales by
approximately 0.5 percent in the first six months of 1998. The effect of the
sale of third-party warranty contracts on gross margin as a percentage of sales
became comparable in the second quarter of 1998.
Gross margin percentages for the first six months of 1998 by category were
approximately 35 percent for furniture, 44 percent for bedding, 21 percent for
major appliances and 17 percent for consumer electronics. The gross margin
percentages for the first half of 1998, as compared to the first half of 1997,
remained steady for bedding, while furniture, major appliances and consumer
electronics gross margins declined considerably. Contributing to the decline in
gross margin percentage for furniture and consumer electronics was the above
mentioned liquidation of certain aged and de-emphasized merchandise. Although
progress in liquidating the inventory associated with the discontinued vendors
and product lines has been somewhat slower than anticipated, the majority has
been liquidated. The Company expects these lower margins to continue through the
third quarter of 1998, as it continues to further reduce aged and de-emphasized
merchandise, and to begin to return more normal levels later in the year.
Product prices and margins in consumer electronics and appliances continued to
be under pressure during the first half of 1998, as a result of competitive
conditions in these categories.
For the three months ended June 1998, selling, delivery, and administrative
expenses, which include occupancy costs, were $24,778, or 33.5 percent of sales,
as compared to $28,362, or 35.3 percent of sales, for the comparable period in
1997. Selling, delivery, and administrative expenses for the six months ended
June 1998 were $52,466, or 34.4 percent of sales, as compared to $54,788, or
33.5 percent of sales, for the comparable period in 1997. The decrease in
expenses as a percentage of sales for the three months ended June 30 1998, as
compared to the comparable period in 1997, was primarily due to a one-time
refund of premiums of $1,053 and a 75 percent rate reduction to all participants
in the State of Ohio workers' compensation fund. Selling, delivery and
administrative expenses for the three months ended June 1998 reflect reduced
levels of advertising and the use of different media mixes; reduced use of
same-as-cash financing programs; and reduced property and casualty premiums due
to a change in insurance carriers. These decreases were offset in part for both
the three and six months ended June 1998 by increases in warehouse expense, net
of delivery fees, and increases in sales commissions to support the sale of aged
and discontinued merchandise. Selling, delivery and administrative expenses for
the six months ended June 1998 increased as a percentage of sales due to
increased finance charges for extended financing programs offered during the
first quarter of 1998, which were offset in part by a decrease in advertising
and promotion expenses.
Interest expense, net of interest income, decreased to $1,799, or 2.4 percent of
sales, for the three months ended June 1998 compared to $1,961, or 2.5 percent
of sales, for the comparable period in 1997. For the six months ended June 1998
and 1997, net interest expense was $3,484, or 2.3 percent of sales, and $3,834,
or 2.3 percent of sales. The decrease in 1998 resulted primarily from a
reduction in merchandise inventories, which resulted in a decrease in the
related indebtedness incurred to carry such inventories. No interest expense was
capitalized in 1998, while net expense was partially offset by the
capitalization of $38 of interest during the first quarter of 1997.
Finance participation income, which consists of income from participation in the
Company's private label credit card program, was $743, or 1.0 percent of sales,
for the three months ended June 1998, as compared to $788, or 1.0 percent of
sales, for the
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comparable period in 1998, and was $1,543, or 1.0 percent of sales, for the six
months ended June 1998, as compared to $1,380, or 0.8 percent of sales, for the
comparable period in 1998. The increase in participation for the six months
ended June 1998, as compared to 1997, resulted from the Company's decision to
reduce its use of core financing programs offered to customers during the first
three months of 1998. This shift between financing programs reduced the balances
that do not yield income during the initial grace period, which increased the
Company's participation income for the first three months of 1998. Such shifts
may occur again in the future, thereby affecting the Company's finance
participation income and the relative mix of income-generated finance programs
compared to longer-term, same-as-cash programs that generate financing expense.
Other income decreased to $890, or 1.2 percent of sales, for the three months
ended June 1998 as compared to $906, or 1.1 percent of sales, for the comparable
period in 1997. For the six months ended June 1998, other income decreased to
$1,750, or 1.1 percent of sales, as compared to $1,757, or 1.1 percent of sales,
for the comparable period in 1996. The majority of other income consists of cash
discounts and rental income from tenants.
Income tax benefit for the six months ended June 1998 was $1,690, or
approximately 35% of the loss before taxes, as compared to $780, or 35% of the
loss before taxes, in 1997. The disproportionate provision for income taxes
reflects minimum taxes imposed by certain jurisdictions, and a valuation reserve
for certain state operating loss carryforwards for which the Company has
determined that it is more likely than not will not yield a benefit in the
future.
LIQUIDITY AND CAPITAL RESOURCES
The Company utilized $480 of cash in operating activities during the first six
months of 1998. Cash of $8,084 was provided from a reduction in merchandise
inventories as the Company continued to review its assortment and stocking
requirements in an effort to better match consumer demand and increase inventory
turns. Funds generated from the reduction of merchandise inventories were offset
in part by a decline in accounts payable and customer deposits, a reduction in
the balance of deferred warranty revenue, and an increase in refundable income
taxes. The Company's accounts payable balance has declined as the result of
reduced levels of purchasing and as the Company has taken advantage of various
cash discount offers made by its vendors. As the result of the Company's
operating losses, the changes in the balance sheet described above, and the
Company's decision to pay off its term loan prior to its maturity, the balance
outstanding on the Company's bank line of credit has increased during the first
six months of 1998.
During the first six months of 1998, capital expenditures totaled $769. These
expenditures primarily represented normal replacement and upgrade projects. The
Company has no significant expansion or capital expenditure plans for 1998 other
than normal replacement, repair, and upgrade projects, and existing store
refurbishment. Capital expenditures in the first half of 1997 included those for
the completion of the expansion of the West Carrollton store.
In order to extend the maturity and to reduce the rate of interest, the Company
refinanced the mortgage on its Vandalia, Ohio store in February 1998. The
refinanced amount requires monthly principal and interest payments of $29 over a
15 year period, and bears interest at 7.64%.
The revolving bank line of credit agreement, which was amended as of June 30,
1998, expires in January 2000. The amount available under the line is limited to
the lesser of: (a) $30,000, or (b) an amount based upon a percentage of eligible
accounts receivable and inventory less excess customer deposits. At June 30,
1998, $26,298 was available under the line of which $22,000 was outstanding. The
line of credit bears interest at the prime rate plus 1% (9.50% at June 30,
1998).
The amendments to the bank line of credit relaxed certain covenants in order for
the Company to remain in compliance with those covenants. At the Company's
request, the maximum amount of the line was reduced from $35,000 to $30,000,
because the additional capacity was no longer needed in light of the Company's
reduced capital expenditures and it reduced the Company's fees on the unused
portion of the line. The amendment increased the interest rate from: the lower
of (a) the prime rate or (b) various LIBOR rates plus 1.55 percent, to prime
plus 1%.
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The line includes certain restrictive covenants including, among others,
limitations on capital expenditures and the payment of dividends, maintenance of
minimum current, fixed-charge-coverage, funded-debt-to-earnings, and
debt-to-tangible-net-worth ratios. Certain of the covenants become increasingly
restrictive over time. In order to remain in compliance with the amended
covenants, the Company's operations and cash flow will have to improve over the
actual results experienced during the first half of 1998. If the Company is
unable to improve its operating results in the third quarter of 1998 over those
experienced in the first half of 1998, it is likely that the Company would need
to seek amended covenants in order to remain in compliance at September 30,
1998. The Company has no assurance that such approvals, if necessary, will be
granted. If such approvals are not obtained, the Company will seek alternative
financing sources. While the Company believes that such financing can be
obtained, there can be no assurance that it can be obtained at all, or that it
can be obtained on terms or at rates comparable to those in the existing
agreement or acceptable to the Company.
SEASONALITY
The Company typically experiences an increase in overall sales in the fourth
quarter. This increase is driven by an increase in the sales of consumer
electronics and furniture products associated with the holiday season. At the
same time, major appliance sales typically decline in the fourth quarter. The
Company's operating results for the full year are highly dependent upon the
success of the Company's operations in the fourth quarter.
OUTLOOK
The Company engaged one of the national management consulting firms to review
its operations and identify opportunities for performance improvement, and the
firm delivered its report in November 1997. Since then, the Company has devoted
considerable time and attention to the implementation of many of the
recommendations put forth in the report. A number of the initiatives have been
completed; however, the Company is still actively assessing many of the
recommendations and actively implementing many others. These efforts are
expected to continue into 1999.
Since there are no expansion plans for 1998, the Company will continue to focus
on improving business operations and customer service. Areas of focus include
improving the management of inventory, improving warehouse operations and
reducing expenses, improving asset utilization, reducing store operating
expenses, and turning around comparable store sales. Many of these efforts have
required operating expenditures that adversely affected the Company's financial
results for the first six months of 1998 and will continue to affect them
through the second half of 1998. Thus, the Company expects to sustain a loss in
the third quarter of 1998. The Company believes these initiatives will
eventually yield significant improvement in the Company's operations and
profitability. They will, however, take time to implement and may require
capital and operating expenditures to implement.
The Company's financial performance is influenced by consumer confidence,
interest rates, consumer debt, the general level of housing activity, and the
general level of economic activity in the United States. Consumer demand for
big-ticket goods has continued to be sluggish. Although the Company has seen a
modest reduction in our competitors' use of same-as-cash promotions, consumers
continue to respond best to deep-discount price and finance promotions. This
competitive situation is expected to continue to put pressure on comparable
store sales, product prices and margins, and operating results.
There are a number of changes occurring in the competitive situation in the
Company's market areas. A national retailer of furniture is completing its
withdrawal from the Cincinnati and Atlanta markets, and has announced its
withdrawal from the Tampa market. A regional furniture retailer has announced
its expansion in the Cincinnati market and entry into the Dayton market. These
expansions will likely continue to put pressure on sales and gross margins.
Further, the labor strike in the automotive industry, which was settled in late
July 1998, could have a continuing adverse effect on the Company's operating
results, particularly in the Dayton market.
On July 10, 1998, the Company announced the appointment of Mr. Melvin H. Baskin
as Chief Executive Officer and President, succeeding Mr. James F. Robeson, who
had served as interim Chief Executive Officer and President since December 1997.
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YEAR 2000 ISSUE
The Company has reviewed its primary and secondary information systems for Year
2000 issues. The Company's primary management information and credit-card
processing systems are provided by third-party vendors that have assured the
Company that their systems will be Year 2000 compliant by the end of 1998. The
Company believes that the costs related to the conversion of the credit-card
processing system will be insignificant. The Company expects the costs to
upgrade the software and hardware for its primary management information system
to be less than $100,000. The majority of the expenditures will be for hardware
upgrades to accommodate new software. No expenditures have occurred to date. The
Company expects to make all of the expenditures in 1998.
The Company has identified several secondary information systems, such as
payroll, delivery, telephone, personal computer, and service department systems,
that will require software and hardware upgrades and conversions to be Year 2000
compliant. The Company expects these costs to be less than $400,000. The
majority of the costs are expected to be incurred on software to incorporate the
Company's service departments into the primary management information system. No
expenditures have occurred to date. The Company expects to make all such
expenditures by mid-1999.
Because the Company is engaged in the sale of consumer products, it does not
believe that it has any material risk with respect to Year 2000 issues for its
customers. The Company has not assessed the impact of Year 2000 issues on its
merchandise suppliers; however, the Company is not aware of any material Year
2000 risks with respect to them. The Company does not rely on electronic data
interchange ("EDI") systems to deal with its suppliers. Because no single
merchandise supplier represents more than approximately six percent of the
Company's purchases, the Company does not believe that there is any material
Year 2000 risk with respect to its suppliers, but is assessing its suppliers'
compliance activities.
The capital expenditures described above will be funded from the Company's
on-going maintenance and replacements budget, and are not expected to result in
the deferral of any planned expenditures. Based on its assessment of the Year
2000 issue to date, the Company has not developed any contingency plans for the
failure of major or secondary information systems. In the event one or more
merchandise suppliers are not Year 2000 compliant, the Company would shift its
purchasing to those suppliers that are compliant.
FORWARD LOOKING STATEMENTS
In the interest of providing the Company's shareholders and potential investors
with information concerning management's assessment of the outlook for the
Company, this report contains certain "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Readers should bear in
mind that statements relating to the Company's business prospects, as distinct
from historical facts, are forward-looking statements which, by their very
nature, involve numerous risks and uncertainties. Factors that could cause the
Company's actual results to differ materially from management's expectations
include, but are not limited to:
A. Changes in economic conditions in the United States, including but not
limited to the general level of economic activity, levels of housing activity,
interest rates, the availability of consumer credit, consumer confidence, and
inflation.
B. Changes in the economic conditions in the market areas in which the Company
operates, such as a strike or shutdown of a major employer or industry.
C. Unusual weather patterns, such as unusually hot or cool summers, which can
affect the sale of refrigeration products, or unusually cold winters, which can
affect consumers' desire and ability to shop for the Company's products. Acts of
God, such as floods, hurricanes, or tornadoes, that interrupt the Company's
ability to sell or deliver merchandise, interrupt consumers' ability to shop, or
destroy a major Company facility, in particular a warehouse or computer
facility.
D. Changes in the competitive environment in the Company's market areas,
including the bankruptcy or liquidation of existing competitors.
Page 12
<PAGE> 13
E. The entry into the Company's lines of business and market areas by new,
larger, well-financed competitors, which may have the ability to withstand
intense price competition over extended periods of time.
F. The availability and cost of adequate, appropriate newspaper, television, and
pre-printed advertising. A strike or work stoppage affecting the Company's media
outlets.
G. Adverse results in litigation matters.
H. Difficulties in hiring, training, and retaining a capable work force at
reasonable levels of compensation, in both existing market areas and in
expansion locations. Difficulties in hiring and retaining an effective senior
management group, particularly as the Company expands. An attempt to organize a
significant portion of the Company's work force.
I. The availability of appropriate sites for expansion, on favorable terms, and
the long-term receptivity of consumers to new store formats and locations.
J. Access to bank lines of credit and real estate mortgage financing sources at
favorable rates of interest, terms, and conditions.
K. Access to additional equity capital to fund the Company's long-term
expansion.
L. Access to extended-payment financing sources (e.g., "twelve months same as
cash") at a favorable cost to the Company and with favorable rates of approval
by the financing source. Access to private-label financing sources (e.g.,
"Roberds charge card") that provide favorable rates of interest to the customer,
favorable rates of return to the Company, and favorable rates of approval by the
financing source.
M. Rapid changes in products, particularly electronics products, such that the
Company bears the risk of obsolescence or the consumer withdraws from the market
until such time as the product category has stabilized.
N. Shifts in the mix of the Company's sales between its higher-margin products
(bedding and furniture) and its lower-margin products (electronics and
appliances), which may result from changes in consumer priorities, competitive
factors, or other factors.
O. The absence of new products in the Company's product categories that would
drive additional consumer interest and purchases.
P. Adverse changes in the cost or availability of the products the Company
sells. Rapid increases in the price of the Company's products, which cannot be
passed on to consumers as the result of competitive pressures.
Q. The loss, or significant reduction in the availability, of certain key
name-brand products. Decisions by vendors to curtail the availability of certain
product presently sold by the Company, or to make products that are presently
sold by the Company available to certain competitors that do not presently have
access to such products. Changes in import duties or restrictions affecting the
Company's ability to import certain products.
R. Changes in income tax rates or structures that may affect the Company's tax
burden or consumers' ability to purchase or finance big-ticket goods or new
housing. Significant increases in real estate tax rates affecting the Company's
properties.
S. Changes in government regulations affecting the Company, its products, its
advertising, or its work force, including changes in the minimum wage. Changes
in government regulations affecting the Company's employee benefit plans or
workers' compensation arrangements.
T. New competition from alternative sales media and channels of distribution,
such as catalog mail order, telemarketing, television shopping services, and
online media.
Page 13
<PAGE> 14
U. Changes in highway or street configurations such that the Company's stores
become less accessible to consumers. Changes in consumer use or ownership of
"second homes," particularly in the Tampa, Florida market.
V. Changes in the cost or availability of liability, property, and health
insurance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
Page 14
<PAGE> 15
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting
of the Company's shareholders was held on May 5, 1998. Four of the Company's
directors were re-elected to two-year terms ending in 2000 upon a vote as
follows:
<TABLE>
<CAPTION>
NAME FOR WITHHELD ABSTAIN BROKER NON-VOTE
---- --- -------- ------- ---------------
<S> <C> <C> <C> <C>
Jerry L. Kirby 3,861,603 None 48,440 2,133,572
Howard W. Smith 3,862,103 None 47,940 2,133,572
Gilbert P. 3,858,803 None 51,240 2,133,572
Williamson
Donald C. Wright 3,861,303 None 48,740 2,133,572
</TABLE>
The following directors' terms of office continue until the annual meeting of
the Company's shareholders to be held in 1999: Messrs. Kenneth W. Fletcher, C.E.
Gunter, James F. Robeson, and Robert M. Wilson.
ITEM 5. OTHER INFORMATION None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See exhibit index.
(b) There were no reports filed by the Company on Form 8-K during
the quarter ended June 30, 1998.
Page 15
<PAGE> 16
SIGNATURES
Pursuant to the requirements 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.
Roberds, Inc.
(Registrant)
Date August 3, 1998 /s/ Robert M. Wilson
---------------------- ---------------------
Robert M. Wilson
Executive Vice President
Chief Financial Officer
Date August 3, 1998 /s/ Michael A. Bruns
---------------------- ---------------------
Michael A. Bruns
Vice President
Controller
Chief Accounting Officer
Page 16
<PAGE> 17
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
10.1 Amendment to credit agreement
10.2 Amended and Restated Private Label
Revolving Credit Plan Agreement
27.1 Financial data schedule
Page 17
<PAGE> 1
EXHIBIT 10.1
SECOND PROMISSORY NOTE MODIFICATION AGREEMENT
This Agreement is made and entered into on July 20, 1998 ("Agreement Date"), to
be effective as of June 30, 1998 ("Effective Date"), by and between Roberds,
Inc. ("Maker") and Bank One, NA, successor by merger of Bank One, Dayton, NA
("Bank One")
WHEREAS, Maker heretofore executed an Amended and Restated Business Purpose
Revolving Promissory Note in the amount of $45,000,000.00 dated December 31,
1996 in favor of Bank One, as amended as of June 30, 1997 to reduce the amount
to $35,000,00.00 ("Promissory Note");
WHEREAS, the Promissory Note has at all times been, and is now, continuously and
without interruption outstanding in favor of Bank One;
WHEREAS, Maker has requested that the Promissory Note be modified to the limited
extent as hereinafter set forth; and,
WHEREAS, Bank One has agreed to such modification;
NOW THEREFORE, by mutual agreement of the parties and in mutual consideration of
the agreements contained herein and for good and valuable considerations, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree that the Promissory Note is modified as hereinafter indicated.
1. ACCURACY OF RECITALS.
Maker acknowledged the accuracy of the Recitals, stated above.
2. MODIFICATION OF PROMISSORY NOTE.
2.1 The Promissory Note is hereby amended and restated to read as
follows:
2.1.1 The principal amount of the Promissory Note shall be
reduced by FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00), thereby affording
Maker with a credit availability of THIRTY MILLION AND NO/100 DOLLARS
($30,000,000.00).
2.1.2 Except to the $20,000,000.00 of Principal outstanding as
of the effective date which shall continue to bear interest at
the LIBOR Rate until the scheduled maturity date of that draw,
for any advances or readvances on or after June 30, 1998, such
advances or readvances shall bear interest as set forth
herein, and with respect to such advances or readvances, the
paragraphs entitled "Rate of Interest and Interest Payments,"
"Interest Rate Options," "Prime Rate Option," and "LIBOR Rate
Option" and all reference to "Interest Rate Options," "LIBOR
Rate," "LIBOR Rate Option," and "LIBOR" are deleted in their
entirety and in substitution therefor the following paragraph
is added:
"Rate of Interest and Interest Payments. The
outstanding principal sum shall bear interest at the
rate of the Prime Rate plus one percent (1%) per
annum, which shall be adjusted from time to time to
reflect the change in the Prime Rate on the same day
as the Prime Rate changes. "Prime Rate" means the
amount announced from time to time by Bank One as its
Prime Rate. Interest shall be calculated on a 360-day
year basis and shall be calculated by dividing the
actual number of days which elapse during the period
interest accrued by a year of 360
Page 18
<PAGE> 2
days times the interest rate in effect.
The outstanding principal sum and all accrued and
unpaid interest shall be due and payable on January
31, 2000 (the "Maturity Date"). Interest shall be due
and payable on January 1, 1997 and on the first day
of each and every month thereafter until the Maturity
Date, at which time all accrued and unpaid interest,
however calculated, shall be immediately due and
payable. If any interest rate period would otherwise
expire, or any payment would be due, on any date
other than a Business Day (defined as any day other
than a Saturday, Sunday or any other day on which
banks in Dayton, Ohio are authorized by law or
governmental actions to close), then such payment
shall be due on the next Business Day."
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Maker shall fail to comply with
any of the covenants of Maker herein or if any representation or warranty by
Maker or by any guarantor herein is materially incomplete, incorrect, or
misleading as of the date hereof. As used in this Agreement, "Loan Documents"
shall include the Promissory Note and all documents executed by Maker(s) or
others in connection with the Loan which is represented by the Promissory Note.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENT AND COLLATERAL.
The Loan Documents are ratified and affirmed by Maker and shall remain in full
force and effect as modified herein. Any property or rights to or interest in
property granted as security in the Loan Documents shall remain as security for
the loan and the obligations of Maker in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Maker represents and warrants to Bank One:
4.1 No default or event of default under any of the Loan Documents as
modified hereby, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
conditions of Maker or any other person whose financial statement has been
delivered to Bank in connection with the Promissory Note from the most recent
financial statement received by Bank.
4.3 Each and all representations and warranties of Maker in the Loan
Documents are accurate on the date hereof.
4.4 Maker has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Promissory Note and Loan Documents as modified herein are the
legal, valid, and binding obligation of Borrower, enforceable against Maker in
accordance with their terms.
4.6 Maker is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Maker. This Agreement has been duly executed and delivered on
behalf of Maker.
Page 19
<PAGE> 3
5. BORROWER COVENANTS.
Maker covenants with Bank One:
5.1 Maker shall execute, deliver, and provide to Bank One such
additional agreements, documents, and instruments as reasonably required by Bank
One to effectuate the intent of this Agreement.
5.2 Maker fully, finally, and forever releases and discharges Bank One
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations and suits, of whatever kind or nature, in law
or equity of Maker, whether now known or unknown to Maker, (i) in respect of the
Loan, the Loan Documents, or the actions of omissions of Bank One in respect of
the Loan or the Loan Documents and (ii) arising from events occurring prior to
the date of this Agreement. As used in this Agreement, "Loan Documents" shall
include the Promissory Note and all documents executed by Maker(s) in connection
with the Loan which is represented by the Promissory Note.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Maker has paid to Bank:
5.3.1 All accrued and unpaid interest under the Promissory
Note and all amounts, other than interest and principal, due and payable by
Maker under the Loan Documents as of the date hereof.
5.3.2 A modification fee of $75,000.00.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank One shall not be bound by this Agreement until (i) Bank One has executed
and delivered this Agreement, and (ii) Maker has executed this Agreement and has
performed all of the obligations of Maker under this Agreement to be performed
contemporaneously with the execution and delivery of this Agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION OR
WAIVER.
The Loan Documents as modified herein contain the complete understanding and
agreement of Maker and Bank One in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Maker and Bank One and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Maker, provided, however, Maker may not assign any of its
rights or delegate any of its obligations under the Loan Documents and any
purported assignment or delegation shall be void.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Ohio without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
Page 20
<PAGE> 4
11. NOT A NOVATION.
This Agreement is a modification only and not a novation. Except for the
above-quoted modification(s), the Promissory Note, any agreement or security
document, and all the terms and conditions thereof, shall be and remain in full
force and effect with the changes herein deemed to be incorporated therein. This
Agreement is to be considered attached to the Promissory Note and made a part
thereof. This Agreement shall not release or affect the liability of any
guaranty, surety or endorser of the Promissory Note or release any owner of
collateral securing the Promissory Note. The validity, priority and
enforceability of the Promissory Note shall not be impaired hereby.
12. REAFFIRMATION OF COGNOVIT PROVISION.
Maker continues to authorize any attorney at law to appear in an action on the
Promissory Note, as modified, at any time after the same becomes due, whether by
acceleration or otherwise, in any court of record in or of the State of Ohio, or
of elsewhere, and to waive the issuing and service of process against Maker,
enter an appearance and to confess judgment in favor of Bank One against Maker
for the amount that may be due under the Promissory Note, as modified, together
with costs of suit, and to release all errors and waive all rights of appeal and
stay of execution from the judgment rendered.
WARNING: BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
ROBERDS, INC.
By: /s/ Robert M. Wilson
Its: Executive Vice President
BANK ONE'S ACCEPTANCE
The foregoing Promissory Note Modification Agreement is hereby agreed to and
acknowledged this 30th day of June, 1998.
BANK ONE, NA successor by merger of
Bank One, Dayton, NA
By: /s/ Terry Warncke
Its: Vice President
Page 21
<PAGE> 5
THIRD AMENDMENT TO SECOND AMENDED
AND RESTATED BUSINESS LOAN AGREEMENT
This Amendment ("Amendment") is made as of the 30th day of June, 1998,
by and between Roberds, Inc. (the "Borrower") and Bank One, NA successor by
merger of Bank One, Dayton, NA (the "Bank").
WHEREAS, the Borrower and the Bank entered into a Second Amended and
Restated Business Loan Agreement dated December 31, 1996, as amended on February
27, 1997 and June 30, 1997 (the "Credit Agreement"); and
WHEREAS, the parties hereto desire to amend the Credit Agreement as set
forth below:
NOW, THEREFORE, the parties hereto agree as follows:
1. Capitalized terms not defined herein shall have the meaning ascribed
in the Credit Agreement.
2. Section 6.3 of the Credit Agreement bearing the heading Funded Debt
to EBITDA, Current Ratio is hereby amended and restated to read as follows:
6.3 FUNDED DEBT TO EBITDA. Borrower agrees to maintain a ratio of
Funded Debt to EBITDA of not more than the ratio set forth for the
following periods measured at each quarter's end on a rolling four
quarter basis.
Periods Ratios
------- ------
04/01/98 through 06/30/98 8.50:1.00
07/01/98 through 9/30/98 7.25:1.00
10/01/98 through 12/31/98 7.25:1.00
"Funded Debt" shall be determined in accordance with GAAP and shall be
deemed to include all interest bearing borrowings plus capitalized
leases.
"EBITDA" shall be defined as earnings before interest expense, taxes
and depreciation/amortization.
3. Section 6.5 of the Credit Agreement bearing the heading Fixed Charge
Coverage is hereby amended by deleting the words and figures "and June 30, 1998
and beginning fiscal quarter ending September 30, 1998 and at each fiscal
quarter-end thereafter of not less than 1.20 to 1.00 measured on a rolling four
quarter basis" and by inserting in substitution therefore the words and figures
"of not less than 1.10 to 1.00 at fiscal quarter end June 30, 1998, September
30, 1998 and December 31, 1998 and beginning fiscal quarter ending March 31,
1999 and at each fiscal quarter-end thereafter of not less than 1.20 to 1.00
measured on a rolling four quarter basis."
4. The Business Loan Agreement "Borrowing Base" Addendum attached to
the Credit Agreement is hereby amended and restated as follows:
(a) This "Borrowing Base" Addendum to the Business Loan Agreement
governs the $30,000,000.00 Promissory Note, as amended (the
"Note"), set forth in the Agreement as an Obligation.
Borrower agrees so long as the Note or the indebtedness
represented thereby is outstanding or so long as the Agreement
is in effect, the following shall apply:
1. Note Advance Formula. The proceeds of the
Note may be advanced, repaid and readvanced an
unlimited number of times with Borrower's right to
borrowing
Page 22
<PAGE> 6
under the Note limited in that the total principal
balance at any time outstanding on the Note shall not
exceed, prior to request for a draw or advance or
after a draw of advance, the borrowing base formula
as hereinafter set forth. The "Borrowing Base"
formula as of any date shall mean the lesser of:
(a) the Note amount, or
(b) the total amount of one or more of the
following:
(a) 80% of Borrower's Eligible Accounts
Receivable, plus
(b) 60% of Borrower's Eligible
Inventory, except for appliances and
electronics which shall be 55% of
Eligible Inventory of appliances and
electronics,
(c) minus the Excess Customer Deposits.
(b) Paragraph 4 is deleted in its entirety, and in substitution
the following is added:
"Excess Customer Deposits" means an amount equal to
the aggregate amount of liability to the customers of
Borrower as reflected as a current liability on its
financial statements and books and records (x) for
the period from June 30, 1998 through September 29,
1998 in excess of $11,000,000.00; (y) for the period
from September 30, 1998 through December 30, 1998 in
excess of $9,500,000.00; and (z) beginning on
December 31, 1998 and thereafter in excess of
$8,000,000.00.
(c) The words "Eligible Leasehold Improvements" are deleted from
Paragraph 5.
(d) Paragraph 6 is deleted in its entirety and in substitution
therefor the following is inserted:
6. Reporting. Not later than thirty (30) calendar days from
the end of each month and more frequently, if requested by
Bank One, Borrower will supply a compliance certificate in a
form and format acceptable to Bank One, certifying Borrower's
compliance with the Loan Documents and such other reports as
Bank One may reasonably request.
(e) Paragraph 8 is deleted in its entirety.
5. The Borrower represents and warrants that (a) the
representations and warranties contained in the Credit Agreement are true and
correct in all material respects as of the date of this Amendment, (b) no
condition, act or event which could constitute an Event of Default under the
Credit Agreement exists, and (c) no condition, event, act or omission has
occurred, which, with the giving of notice or passage of time, would constitute
an Event of Default under the Credit Agreement.
6. This Amendment shall become effective only after it is fully
executed by the Borrower and the Bank. Except as amended by this Amendment, the
Credit Agreement shall remain in full force and effect in accordance with its
terms.
7. This Amendment is a modification only and not a novation.
Except for the above- quoted modification(s), the Credit Agreement, any
agreement or security document, and all the terms and conditions thereof, shall
be and remain in full force and effect with the changes herein deemed to be
incorporated herein. This Amendment is to be considered attached to the Credit
Agreement and made a part hereof. This Amendment shall not release or affect the
liability of any guarantor, surety or endorser of the Credit Agreement or
release any owner of collateral securing the Credit Agreement. The validity,
priority and enforceability of the Credit Agreement shall not be impaired
hereby. To the extent that any provision of this Amendment conflicts with any
term or condition set forth in the Credit Agreement, or any agreement or
security document executed in conjunction therewith, the provision of this
Amendment shall supersede and control. Borrower acknowledges
Page 23
<PAGE> 7
that as of the date of this Amendment it has no offsets with respect to all
amounts owned by Borrower to Bank and Borrower waives and releases all claims
which it may have against Bank arising under the Credit Agreement on or prior to
the date of this Amendment.
8. The Borrower acknowledges and agrees that this Amendment is limited
to the terms outlined above, and shall not be construed as an amendment of any
other terms or provisions of the Credit Agreement; the Borrower hereby
specifically ratifies and affirms the terms and provisions of the Credit
Agreement. Borrower releases Bank from any and all claims which may have arisen,
known or unknown, in connection with the Credit Agreement on or prior to the
date hereof. This Amendment shall not establish a course of dealing or be
construed as evidence of any willingness on the Bank's part to grant other or
future amendments, should any be requested.
9. In substitution for the Borrowing Base Compliance Certificate dated
as of May 31, 1998 previously delivered to the Bank and contemporaneous with the
execution of this Amendment, Borrower has delivered to the Bank a Borrowing Base
Compliance Certificate dated as of May 31, 1998, restating the Borrowing Base
consistent with the amended Borrowing Base as set forth in this Amendment.
IN WITNESS WHEREOF, the parties have entered into the Agreement as of
the day and year first above written.
BANK ONE, NA BORROWER
ROBERDS, INC.
By: /s/ Terry Warncke By: /s/ Robert M. Wilson
Title: Vice President Title: Executive Vice President
Page 24
<PAGE> 8
SECOND AMENDED AND RESTATED
BUSINESS LOAN AGREEMENT
BORROWING BASE COMPLIANCE CERTIFICATE
<TABLE>
<CAPTION>
<S> <C> <C>
1. Total Eligible Accounts Receivable (AR) $_________________________
2. Total Eligible Inventory (INV) $_________________________
(excluding appliances and electronics)
3. Total Eligible Inventory - Appliances and Electronics (Excluding INV
as set forth in line 2)
(INV - A+E)
4. Available borrowing advance
A. AR 80% of line 1 $_________________________
B. INV 60% of line 2 $_________________________
C. INV - A+E 55% of line 3 $_________________________
5. Total Eligible Collateral (lines 4A thru 4C) $_________________________
6. Less: Amount of Revolver O/S $_________________________
7. Less: Standby Letters of Credit $_________________________
8. Less: Excess Customer Deposits $_________________________
9. Line 6 plus line 7 plus line 8 $_________________________
10. Lesser of line 5 or line 9 $_________________________
11. Principal Balance available for borrowing $_________________________
(line 5 minus line 10)
(If line 11 is a negative number, then a "pay down"
in accordance with the Borrowing Base Addendum is required)
</TABLE>
===============================================================================
Withholding Taxes and FICA Taxes due have been paid in full as of the date
hereof.
______ Yes ______ No
===============================================================================
Page 25
<PAGE> 9
For the purpose of inducing Bank One, NA to advance money to Borrower against
the balance of funds available under Borrower's $30,000,000.00, Promissory Note
dated December 31, 1996, as amended, and pursuant to the terms and provisions of
Borrower's Second Amended and Restated Business Loan Agreement ("Agreement")
dated December 31, 1996, as amended, Borrower hereby certifies and affirms that
this Borrowing Base Compliance Certificate is true, complete and correct
according to the books and records of Borrower and is available as acceptable
Collateral for advances in accordance with the representations and warranties
set forth in the Agreement. As of today's date, Borrower was in full compliance
with all terms, conditions, covenants and provisions of the Agreement. To the
best of Borrower's knowledge, Borrower is not aware of any Event of Default
under the Agreement or any facts or circumstances which by itself, with the
passage of time, or the giving of notice, might give rise to any Event of
Default.
ROBERDS, INC.
Date: _____________________ By: __________________
Its: _________________
Page 26
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED
PRIVATE LABEL REVOLVING CREDIT
PLAN AGREEMENT
BY AND BETWEEN
BANK ONE, NA
AND
ROBERDS, INC.
JUNE 17, 1998
Page 27
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions ............................................................1
2. Bank One Covenants......................................................3
3. Roberds Covenants.......................................................4
4. Plan Credit and Marketing Decisions, Terms and Conditions...............5
5. Plan Interest Proceeds..................................................8
6. Income..................................................................9
7. Value-Added Programs...................................................10
8. Reserve Accounts.......................................................10
9. Reports and Inspection; Annual Performance Analysis....................12
10. Processing Agreement; Remote Application Processing Agreement..........12
11. Warranties; Services...................................................13
12. Credit and Transaction Application Processing Hours....................13
13. Advertising............................................................14
14. Use of Roberds' Trademarks and Trade Names.............................15
15. Artwork................................................................15
16. Telecommunication Requirements.........................................16
17. Plan Administrator.....................................................16
18. Term/Termination.......................................................16
19. Rights Upon Termination................................................17
20. Additional Termination Rights of Bank One..............................17
21. Default................................................................18
22. Charge Back and Set off................................................18
23. Indemnification........................................................19
24. Escrow Account.........................................................22
25. Exclusive Property.....................................................22
</TABLE>
Page 28
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
26. Inspection Rights......................................................23
27. Waiver.................................................................23
28. Financial Statements...................................................23
29. Modification...........................................................23
30. Assignment; Securitization.............................................24
31. Delivery of Cardholder List; Option to Purchase Portfolio..............24
32. Confidentiality........................................................25
33. Severability...........................................................26
34. Notices................................................................26
35. Miscellaneous..........................................................26
ADDENDUM A AUTHORIZATION TO TRANSACT TELEPHONE OR
MAIL ORDERS....................................28
ADDENDUM B PRIVATE LABEL ADVERTISING REQUIREMENTS...............................29
ADDENDUM C PLAN CARD PROCESSING AGREEMENT.......................................31
ADDENDUM D REMOTE APPLICATION PROCESSING AGREEMENT..............................42
</TABLE>
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BANK ONE, NA AND ROBERDS, INC. AMENDED AND RESTATED
PRIVATE LABEL REVOLVING CREDIT PLAN AGREEMENT
This Agreement is made this 17th day of June, 1998, to be effective
June 17, 1998, by and between ROBERDS, INC., an Ohio corporation ("Roberds(R)"),
and BANK ONE, NA, a national banking association ("Bank One") and amends and
replaces the existing contract between Roberds and Bank One dated March 16,
1993.
WITNESSETH:
WHEREAS, Roberds and Bank One have had in effect a private label
revolving credit card plan since 1984;
WHEREAS, Roberds desires to have Bank One continue the private label
revolving credit card Plan (as hereinafter defined) to enable Roberds' customers
purchasing merchandise or services from Roberds (collectively "Products") to
finance such Products under the Plan; and
WHEREAS, Bank One is willing to continue such a Plan for Roberds
subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1 DEFINITIONS.
The following definitions shall apply to this Agreement:
"Account" shall mean a revolving line of credit established under the
Plan for a Cardholder, including, but not limited to, all documents
pertaining thereto, for the purpose of financing credit purchases of
Products purchased by a Cardholder from Roberds.
"Addendum" shall mean documentation attached to this Agreement which
specifies certain particulars of this Agreement.
"Agreement" shall collectively mean this Revolving Credit Plan
Agreement and all Addenda hereto.
"Annualized Monthly Cardholder Loss Percentage" shall mean the ratio of
a) the product of the sum of the principal Plan Balances which Bank One
reasonably deems uncollectible for a given month, including bankruptcy,
death and insolvency, minus the recoveries times the number twelve
(12), to b) the aggregate outstanding Plan balance at the end of the
same month.
"Applicant" shall mean a Roberds customer who completes a Bank One
application for a Plan Account.
"Application" shall mean a Plan credit application completed by an
Applicant.
"Bank One Loan Loss Reserve" shall mean those accounts of Bank One to
which monies are reserved to absorb anticipated losses from loans and
other extensions of credit which accounts shall be funded in accordance
with federal regulations.
"Bankruptcy Code" shall mean any chapter of the Bankruptcy Reform Act
of 1978, as amended.
"Business Day" shall be defined as any day which the Federal Reserve
Bank of Cleveland, Ohio, is open for the transaction of general banking
business.
"Cardholder" shall mean an Applicant approved by Bank One and for whom
an Account is opened pursuant to the Plan.
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<PAGE> 5
"Cardholder Agreement" shall mean the Revolving Credit Plan Agreement
between Bank One and a Cardholder and the Truth-In-Lending Disclosure
issued by Bank One to such Cardholder setting forth the terms and
conditions of its extension of open-end credit to such Cardholder.
"Cardholder List" shall mean the listing of names, addresses and
Account numbers of Cardholders.
"Charge Back" shall mean the reversal of a previously credited sales
Transaction, which involves the return of the sales Transaction from
Bank One to Roberds and a debit to Roberds' Settlement Account, a
deduction by Bank One from any payment due Roberds, or reimbursement to
Bank One by Roberds for violation of the terms and conditions set forth
herein.
"Charge" shall mean an Account charged off as a loss for, reasons
including but not limited to, bankruptcy, fraud, death of a Cardholder
and/or delinquency.
"Consumer Interest Rate" shall mean the annual percentage rate of
finance charge charged to Cardholders, calculated and disclosed
pursuant to the federal Truth-In-Lending Act and Regulation Z.
"Cost of Funds" shall mean the interest expense actually born or
incurred by Bank One in obtaining liabilities to fund or finance the
Plan.
"Loans" shall mean all credit extended to Cardholders under the Plan on
or after the date of this Agreement.
"Opening Date" shall mean the date on which the first Cardholder
Account is opened under the Plan.
"Plan" shall mean individually each private label credit card plan, and
collectively all private label credit card plans, established pursuant
to this Agreement, each of which makes Accounts available to qualified
customers of Roberds to permit them to finance credit purchases of
Products sold by Roberds. The term "Plan" includes the extension of
credit to Cardholders, billing of Accounts, collection of Accounts,
customer services rendered to Cardholders, accounting between the
parties hereto, and all other aspects of the customized private label
revolving credit plan contemplated thereby.
"Plan Card" shall mean the plastic credit card issued to a Cardholder
and identified as the card used by the Cardholder to finance Products
purchased from Roberds pursuant to the Plan.
"Plan Interest Proceeds" shall mean finance charges billed by Bank One
to Cardholders plus the amount of posted interest credited to Accounts
from purchases made under either a ninety (90) day or a one hundred
twenty (120) day same as cash promotion and interest posted to said
Accounts in the first billing cycle following the expiration of any
said promotion.
"Requirements" shall mean the advertising guidelines set forth in
Section Thirteen (13) herein as defined and referred to in Section Four
E (4E).
"Sales Agreement" shall mean receipt(s), sales slip(s) and/or other
document(s) evidencing the purchase, return or exchange of Products by
a Cardholder from Roberds at the time of the Transaction.
"Transaction" shall mean those mutual acts and exchanges between the
Cardholder and Roberds occurring at the time of a purchase, return or
exchange of Products.
"Transaction Draft" shall mean the document(s) required by Bank One
which Roberds is to complete to evidence a purchase, return or exchange
at the time of a Transaction.
"Verbiage" shall have the meaning as set forth in Section Thirteen
(13).
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<PAGE> 6
2. BANK ONE COVENANTS.
Bank One agrees:
A. To comply with all applicable consumer credit and other laws and
regulations in connection with its administration and operation of
the Plan including, but not limited to, Applicant credit evaluation,
credit approval and denial procedures and all forms and documents
related to the Plan, including, but not limited to, Applications,
Cardholder Agreements, and Transaction Drafts. Examples of these laws
and regulations include Regulation B, Regulation Z, applicable federal
and state interest rate and fee limitation statutes and collection
practice laws.
B. To perform all functions necessary and appropriate to continue,
operate, administer and service the Plan, including, but not limited
to, all Applicant credit investigations, credit decisions and
notifications of approval or adverse action relating to an Application
or an Account.
C. To design, supply and mail (where appropriate) all Plan forms and
documents including the Application, the Plan Card(s), Cardholder
Agreements, any separate Plan Card carrier(s), and the periodic billing
statement(s) used in connection with the Plan.
D. To perform all Plan administrative duties and Cardholder services,
including, but not limited to, billing, collecting balances, processing
payments and/or adjustments and handling inquiries.
E. To allow Roberds, if an Application is not approved by Bank One or
its secondary source of financing, to provide that said Application to
another creditor for the purpose of securing credit, in compliance with
all applicable laws.
3. ROBERDS COVENANTS.
Roberds agrees:
A. To own and perfect all legal rights to any trade name(s), logos or
service marks it selects to use in connection with the Plan or the Plan
Card.
B. From time to time assist customers who wish to apply for an Account
in completing the Application. Roberds shall not be the agent of Bank
One for purposes of taking the Application and shall not hold itself
out as an agent of Bank One for such. In connection with the
Application by a customer for an Account, Roberds pledges its best
efforts to ensure that the information communicated to Bank One shall
be as true and as complete as Roberds may know. Roberds also pledges
its best effort to ensure that the Application shall not contain any
information which, in Roberds' knowledge, or in the knowledge of its
employees, or agents, is false or constitutes a misrepresentation of
facts.
C. Except as otherwise provided in this Agreement, Roberds will use its
best efforts to ensure that at all Roberds stores, Bank One is offered
the first option on substantially all potential consumer financing,
meaning that on any Transaction in which the customer seeks or desires
financing (except for Visa/MasterCard, Discover, Diners Club or other
similar national card branded programs which Roberds accepts), Roberds
shall encourage the use of or opening of an Account; however, Roberds
shall not coerce customers or pursue any deceptive practices in
soliciting Accounts.
D. If an in-store Application is being made, to provide each Applicant
with the first copy of the Cardholder Agreement at, or before, the time
the Application is completed.
E. To retain original Applications in trust for Bank One for a minimum
of twenty-five (25) months and to deliver any Application to Bank One
within five (5) Business Days upon request of Bank One unless said
Application has been previously forwarded.
F. To process in a timely manner Transaction Drafts for Cardholders.
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<PAGE> 7
G. To cooperate with Bank One at any time in providing to Bank One
information in Roberds' possession regarding a particular Transaction,
including providing to Bank One a written statement of circumstances
involving said Transaction.
H. To act promptly and reasonably to resolve disputes with Cardholders
regarding Products.
I. To offer no deviation to Cardholders from the Cardholder Agreement
without the prior written approval of Bank One. For example, oral
misrepresentations to customers relative to special terms, interest
rates, payment schedules or payment due dates shall be prohibited.
4. PLAN CREDIT AND MARKETING DECISIONS, TERMS AND CONDITIONS.
A. Bank One has the absolute and unilateral right to determine the
credit worthiness of Applicants and the terms and conditions of
Cardholder Agreements. Bank One makes no representation either
expressed or implied as to Applicant approval rate. Credit criteria and
standards to be applied to Applicants will be at Bank One's sole
discretion and uniformly applied. Bank One may change its credit
criteria and standards or the Cardholder Agreement terms and conditions
at any time it deems appropriate, provided, however, that Bank One
shall provide reasonable notice to Roberds of material charges in its
credit criteria and standards. In consideration of this, Bank One
waives any and all claims against Roberds for credit or other losses
resulting from the Plan, except as elsewhere stipulated in this
Agreement.
B. Bank One shall determine and be responsible for the compliance of
the terms and conditions of the Plan and all documents required by it
to be used in connection with the Plan, with all applicable federal and
state laws and regulations, including, but not limited to, the
compliance and enforceability of the Cardholder Agreement, except that
the Consumer Interest Rate charged to Cardholders shall be mutually
agreed upon by Bank One and Roberds, subject to applicable law.
However, if the parties cannot agree to a mutually acceptable Consumer
Interest Rate within thirty (30) days after notification by either
party to the other of a proposed change in the Consumer Interest Rate,
then either party may, within ten (10) days thereafter, terminate the
Plan upon One Hundred Eighty (180) days prior written notice to the
other party.
C. The Plan is currently offered to new Applicants as follows:
(i) Consumer Interest Rate shall be a variable rate equal
to 14.73% plus the "Prime Rate" as published in the "Money
Rates" section of The Wall Street Journal on the 15th day of
each calendar month or the next Business Day if the 15th day
falls on a weekend or holiday.
(ii) No annual membership fee;
(iii) Ninety (90) days same as cash on initial service or
purchase of Products made under the Plan. A minimum monthly
payment is required to be made with the balance to be paid in
full by the due date shown on Cardholder's third periodic
billing statement. If the Cardholder does not pay the full
balance, accrued interest from the date of the first periodic
billing statement after the Transaction will be added to
Cardholder's Account. Late payment fees will be charged to
Cardholders who ail to meet the minimum payment requirements
during the ninety (90) day period;
(iv) Ninety (90) days same as cash on subsequent services
or purchases or Products made under the Plan. A minimum
monthly payment is required to be made with the balance to be
paid in full by the due date shown on Cardholder's third
periodic billing statement. Interest is calculated on and
posted to the Account from the date the charge was incurred
until paid in full. However, if the subsequent service or
purchase principal amount is paid in full by the payment due
date set forth in the third monthly billing cycle from the
from the charge date (regardless if there is an existing
principal balance) then Bank One will credit
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<PAGE> 8
existing principal balance), then Bank One will credit the
Account for the amount of the posted interest only on that
service or purchase. Late payment fees will be charged to
Cardholders who fail to meet the minimum payment requirements
during the ninety (90) day period;
(v) Late payment fee of Twenty Five Dollars and No
Cents ($25.00).
(vi) Return check fee of Twenty Five Dollars and No
Cents ($25.00).
(vii) A minimum monthly payment of three percent (3%) of
the unpaid balance or Ten and No/100 Dollars ($10.00),
whichever is greater, is required each month.
(viii) Overlimit Fee will be assessed at 30% over credit
limit and will be the amount of Twenty Two Dollars and No
Cents ($22.00).
Roberds and Bank One may, by mutual agreement, develop other
special financing programs and by mutual agreement may change the fees
and charges set forth in Section 4C (v), (viii).
D. No minimum Transaction amount for purchases to be charged to an
Account will be required by either Roberds or Bank One. Transactions
may be for any amount up to the Cardholder's available credit limit.
All "add on" purchase Transactions up to the Cardholder's available
credit limit will be authorized and processed electronically using the
Bank One/Roberds electronic interface as set forth herein.
E. Bank One has the right to approve or disapprove all aspects of the
Plan not specifically referred to in this Agreement including, but not
limited to, advertising and promotional material as same relates to the
Plan beyond the advertising requirements set forth in Section Thirteen
(13) herein and those guidelines provided to Roberds by Bank One, a
copy of which is attached hereto as Addendum "B". The purpose of said
approval is to allow Bank One to insure that advertising does not
jeopardize or impede Bank One's position that Bank One is the creditor
and owner of all Accounts, all of which are located in Dayton, Ohio,
and as such are subject only to State of Ohio laws and any Federal
statute applicable to national banks. Bank One must be contacted, for
written approval, at least thirty (30) days prior to (i) any change by
Roberds in previously approved advertising related to the Plan and
constituting a variance from the existing Requirements or (ii) new
advertising or promotional material relating to the Plan being
implemented by Roberds.
F. Bank One will provide to and/or develop programs for Roberds use for
Cardholder solicitation and existing but inactive Account activation.
Bank One will work closely with Roberds to develop a marketing plan to
be implemented at the beginning of each calendar year to promote and
enhance the Plan. The marketing plan will include direct mail programs,
holiday promotions and other mutually agreed upon promotional items to
support the growth of the Plan. Costs associated with list selection,
credit bureau scoring, printing, production and implementation would be
borne by Roberds; however, any such expenses shall be mutually agreed
to by the parties prior to expenses being incurred, and can be shared,
as agreed.
G. Bank One will provide the ability to put promotional messages on
periodic statements and to include inserts for advertising or other
purposes in monthly periodic statements envelopes. Bank One's
responsibility shall be limited to providing format and structure for
such promotional messages, envelope space for such inserts and for the
mailing thereof. The insert(s) will be produced by Roberds at its
expense and in accordance with specifications as supplied by Bank One;
insertion will be done by Bank One at Bank One's expense. Bank One
shall pay the costs for all statement mailings including postage at
first class rates up to a weight of one (1) ounce per envelope, on
accounts with credit balances or balances greater than zero; provided,
however, Bank One will make mailings on Accounts with zero balances at
the request of Roberds, in which case the cost of such mailing shall be
paid for by Roberds, or shared as agreed.
H. Bank One shall have the right both before and after termination of
this Agreement to mail to the Cardholder base, materials for the
marketing of bank services or other products or services offered by or
though an Affiliate of BANC ONE CORPORATION ("Bank Services:), provided
that
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<PAGE> 9
(i) Bank One informs Roberds of said mailings prior to
mailing;
(ii) No reference is made to Roberds in said mailings; and
(iii) Bank One provides Roberds a copy of said mailing.
I. Bank One may from time to time purchase customer lists from credit
bureaus or other sources for use by it or by other retailers in
promotional matters. Roberds recognizes that some Cardholder names may
appear on such independently obtained lists and agrees to the
appearance of such names, so long as Bank One does not specifically or
separately identify More Value TM Cardholders as such without the
express written consent of Roberds.
5. PLAN INTEREST PROCEEDS.
Plan Interest Proceeds shall be distributed as follows:
A. Bank One will deduct from the Plan Interest Proceeds an amount
sufficient to cover Bank One's Cost of Funds, plus Bank One's operating
fee of seven percent (7.0%) per annum on the average outstanding Plan
portfolio balance, plus, to fund a loan loss reserve, an amount equal
to two percent (2.0%) per annum of the average outstanding Plan
portfolio balance. The average outstanding portfolio balance will
include balances arising from Transactions made under either 90 day
same-as-cash and 120 day same-as-cash promotions, but will exclude
balances arising from Transactions made under any other type of
promotional purchase program, until the promotional period for any
promotional purchase expires. Any balance outstanding from a
promotional purchase at the end of the promotional period will be added
to the regular revolving balance on the Account and included as part of
the average outstanding portfolio balance.
B. Annualized Cost of Funds shall be calculated monthly by a mutually
agreed upon methodology.
C. It is understood and agreed that the functional relationship between
the Consumer Interest Rate and the required return to Bank One may
result in a situation where the portion of the Plan Interest Proceeds
due Roberds could be negative, thereby causing Roberds to pay Bank One
for operation of the Plan.
D. Any income or expense calculation or computation referred to in this
Section Five (5) shall be determined as of the last Business Day of
each calendar month and payment in accordance with said calculation or
computation shall be made no later than the tenth (10th) Business Day
of the following month.
6. INCOME.
A. Any Plan income derived from late payment fees, returned check fees
and overlimit fees charged by and paid to Bank One will be retained by
Bank One. Income or commissions earned from third party products or
services, sometimes called value-added programs, sold to Cardholders
and received by Bank One will be shared equally, by the parties hereto,
less any administrative costs incurred. Net income derived from
collected insurance premiums offered at any time under the Plan will be
paid to Roberds, after deducting any Cardholder refunds, and a Bank One
programming and administrative fee of five percent (5%).
B. Any expense(s) that may be incurred by Bank One under the Plan which
are caused by Roberds, which may be billed to Roberds, and which are
deemed by Bank One to be extraordinary in nature, shall be mutually
agreed upon by the parties prior to occurrence. Said agreed upon
expense(s) will be billed directly to Roberds if the reason for such
expense is to fulfill a request by Roberds or on Roberds' behalf.
7. VALUE-ADDED PROGRAMS.
A. Roberds agrees to provide the following services in connection with
any value-added programs provided, offered, or sold to Cardholders
from time to time in connection with the Plan;
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(i) To give Applicants and/or Cardholders materials and
documents provided to Roberds by Bank One or the third party
servicer of the value-added program which describes the
value-added program and/or contains the application or
authorization to be signed by the Applicant or Cardholder;
(ii) To assist the Applicant and/or Cardholder in
completing said application or authorization;
(iii) To respond to inquiries by an Applicant and/or
Cardholder relative to said value-added program;
(iv) To direct any Cardholder inquiring about the proper
manner in which to make a claim to contact either Bank One or
the third-party servicer, giving the name, address and phone
number of both; and
(v) To provide Bank One or the third-party servicer with
such assistance as may reasonably be requested by either.
B. For said value-added programs described above, Bank One shall
pay to Roberds, and Roberds agrees to accept as payment in full for
services rendered by Roberds, a predetermined level of compensation
based upon a predetermined schedule.
8. RESERVE ACCOUNTS.
Bank One shall establish from the Plan Interest Proceeds a special
reserve account (the "Reserve") described as follows:
A. At the end of each calendar month, Roberds will deposit with
Bank One 1/12 of two percent (2%) of the average outstanding balance
for that month to the Reserve. The Reserve shall be the exclusive
property of Bank One and funds from the Reserve shall be utilized to
offset Bank One's losses from the Plan at the sole and absolute
discretion of Bank One. Roberds retains the right to audit the funding
of the Reserve.
B. The Reserve shall be in the form of a Bank One Money Market
Account for business or shall be invested in any other manner as Bank
One and Roberds shall agree from time to time. The interest earned as a
result of such investments shall be credited to the Reserve. Bank One
shall not be liable to Roberds in respect to any loss or damage
sustained by Roberds as a result of any such investment.
C. If any Account shall become one hundred eighty (180) days past
due or, if for any other reason the Account is deemed uncollectible by
Bank One, in its sole discretion, (such Accounts collectively to be
known as "Chargeoffs"), the outstanding balance of any such Accounts,
together with any accrued and unpaid interest thereon, may be charged
off by Bank One against the Reserve as follows:
(i) At the end of each calendar month, the balance of all
Chargeoffs will be charged to the Reserve until the funds in
the Reserve have been reduced to Zero Dollars ($0.00);
(ii) Any Chargeoffs remaining unpaid after the application
of the Reserve pursuant to subsection (I) above will be
charged in their entirety to the Bank One Loan Loss Reserve;
(iii) Chargeoffs may not be carried forward or backward from
month to month.
D. Bank One may charge back directly to Roberds or against any
account of Roberds at Bank One, independently of the Reserve, that
amount of any Account that is not paid when due where the reason for
nonpayment is an alleged
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<PAGE> 11
breach of warranty during the term of any warranty provided a
Cardholder by or through Roberds if such amount remains unpaid thirty
(30) days after Bank One gives Roberds notice of the amount in dispute
and a description of the alleged breach of warranty.
E. Notwithstanding any other provision in this Agreement, Bank
One and Roberds agree to review annually the amounts contributed by
Roberds to the reserve account and the Chargeoffs charged to the
reserve account by Bank One. Roberds and Bank One agree that they will
share equally in the total Chargeoffs, up to a maximum Chargeoff rate
of four percent and based upon the average outstanding balance. To the
extent Chargeoffs exceed four percent, Bank One shall absorb the
excess, as set forth in C above. To the extent the Chargeoffs are less
than four percent, Bank One shall refund to Roberds one-half of the
difference between the actual Chargeoff rate and four percent.
Roberds and Bank One agree to review the Chargeoff experience
at least annually and, if a payment is due to Roberds under the terms
of this section, Bank One agrees to make such payment promptly.
9. REPORTS AND INSPECTION; ANNUAL PERFORMANCE ANALYSIS.
A. Upon reasonable request of Roberds, Bank One shall share with
Roberds the following material specific to the Plan, all of which shall
remain confidential and shall not be divulged by Roberds to any third
party except as may be required by law or by order of a court of
competent jurisdiction (provided that Roberds shall notify Bank One of
any such action in which any such order is sought in sufficient time
for Bank One to intervene if it so desires);
(i) Operating procedures including, its general credit policy,
its general collection and chargeoff policies, and its overall
operating costs;
(ii) Aggregate Plan portfolio information including
application activity reports with acceptance rates and related
performance data, delinquency reports, and general demographic
data;
(iii) Applications, payment histories and other file data as
may be agreed upon from time to time; and
(iv) Other Plan portfolio statistics as may be agreed from
time to time. It is understood that because of applicable
state and federal laws, Bank One may be required to eliminate
names and other identifying information on Cardholder specific
items. From time to time other items of information may be
deemed necessary by Roberds and Bank One will not unreasonably
refuse such requests. Provided, however, that no report or
information shall be given to Roberds which would render Bank
One a credit reporting agency under the Fair Credit Reporting
Act or other applicable law.
B. No later than the end of February each year, Bank One and
Roberds shall jointly conduct an annual performance analysis of the
Plan which shall include, but shall not be limited to, a review of the
program pricing relative to servicing costs, credit quality, and
Cardholder chargeoffs; and any other significant issues deemed
appropriate for review by either party hereto.
10. PROCESSING AGREEMENT: REMOTE APPLICATION PROCESSING AGREEMENT.
A. The Processing Agreement, which sets forth certain duties,
rights and obligations of each of the parties relative to the operation
of the services to be provided herein, is attached hereto as Addendum
"C". Each of Roberds' store locations are obligated to fully comply
with Addendum "C".
B. The Remote Application Processing Agreement, which sets forth
certain duties, rights and obligations of each of the parties relative
to the operation of the services to be provided herein, is attached
hereto as Addendum "D". Roberds is obligated to fully comply with
Addendum "D".
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<PAGE> 12
11. WARRANTIES; SERVICES.
A. If Roberds sells, arranges or gives away (with or without
cost) to any Cardholder, any warranty or servicing agreement or
contract including extended manufacturer's warranty, "free" check-ups,
free servicing, trade-in or credit for non-use of any warranty
(excepting manufacturer's warranty), then Roberds agrees to indemnify
Bank One for any loss relating to a Cardholder's claims for failure of
Roberds or a third-party which Roberds has contracted with or through,
if any, to provide the warranty or service offered or sold by or
through Roberds.
B. Roberds grants to Bank One the right to audit and review all
terms and conditions of all said warranties or servicing agreements or
contracts (including copies of all applicable documents, internal
audits and reviews of warranty providers and/or insurance underwriters
of policies regarding said warranties, services or contracts) annually,
or more often as reasonably determined by Bank One. Bank One may
require Roberds to establish an escrow account as provided for herein
to insure coverage of said warranties, services or contracts whether or
not same is insured by a third party insurance carrier if Bank One
reasonably believes that Roberds or the insurance carrier does not have
sufficient financial capacity to honor the warranties, services or
contracts.
12. CREDIT AND TRANSACTION APPLICATION PROCESSING HOURS.
A. Bank One's credit application processing and credit approval
department's hours of operation are set forth below; however, same is
subject to the availability of information necessary to make credit
decision from the credit bureaus serving the market area(s) in which
Applicants resides. Such Bank One hours shall apply Three Hundred
Sixty-One (361) days (excluding New Year's Day, Easter Sunday,
Thanksgiving Day and Christmas Day) per year as follows:
Monday - Saturday 8 a.m. - 12:00 midnight
(Eastern Time)
Sunday 11:00 a.m. - 9:00 p.m.
(Eastern Time)
Bank One and Roberds may, however, establish additional credit
application processing hours as they shall mutually agree.
B. Transaction processing by Bank One will be offered twenty-four
(24) hours a day, Three Hundred Sixty-Five (365) days a year except
when a disaster beyond the reasonable control of Bank One occurs.
13. ADVERTISING.
A. Roberds will:
(i) Display upon its premises in a manner approved by Bank
One, and agreed to by Roberds, decals, signs or other
advertising materials supplied by Bank One which are intended
to notify the public that Roberds offers and accepts the Plan
Card;
(ii) Display the appropriate Bank One service marks, logo
types and Verbiage on all promotional materials and
advertising, including but not limited to forms of print
medium, in which the front of the Plan Card is depicted;
(iii) State on all advertising referencing the Plan that the
Plan is a "credit service of Bank One, NA, Dayton, OH 45401,
offered through Roberds" (the "Verbiage");
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(iv) Not represent, either in writing at any time or orally
(as best as Roberds can control), that the Plan or the Plan
Card is owned or controlled by Roberds or refer to the Plan or
Plan Card as "Our Plan" or "Our Plan Card"; and,
(v) Follow any commercially reasonably advertising guidelines
relative to the Plan issued by Bank One from time to time.
B. Bank One and Roberds agree that the following guidelines shall
control use of the Plan name mark and logo and the Bank One mark and
logo:
(i) "More Value" shall be used as the name of the Plan;
(ii) Applications shall include the Plan mark and logo
and the Bank One name, logo and Verbiage;
(iii) Plan disclosures, Cardholder Agreements and the
Cardholder periodic billing statements will contain Roberds'
name and logo, the Plan name and logo and the Bank One name,
logo and Verbiage; and
(iv) The letterhead for general correspondence to Cardholders
and others relating to the Plan shall include only the Bank
One name and logo. The correspondence shall reference that it
is concerning the Plan;
C. Bank One and Roberds agree to mutually cooperate in good faith
in determining the manner their respective names, logos and Verbiage
are used on documentation relating to the Plan. Mutual consent of the
parties shall be required for specific layouts for such documents.
14. USE OF ROBERDS' TRADEMARKS AND TRADENAMES.
A. Bank One acknowledges that the term "Roberds" is a registered
trademark owned by Roberds and that during the term of this Agreement
and any renewal thereof, Bank One is hereby granted a limited,
nonexclusive license, to use depictions of the Plan Card, and Plan Name
or other names, trademarks, tradenames or service marks (collectively
the "Marks"), owned by Roberds in a fashion approved by Roberds in
writing from time to time, in its advertising, signs, brochures, forms
and the like, provided that Bank One uses such Marks only in a fashion
approved by Roberds and only in connection with the selling or
servicing of the Plan. Bank One recognizes that upon termination of
this Agreement by either party for any reason whatsoever, Bank One
shall immediately cease and discontinue to use any of Roberds' Marks
and shall have no interest or right to use any Roberds Mark for any
purpose thereafter except as to collection of Accounts existing at date
of termination.
B. Roberds acknowledges that the term "Bank One" is a registered
trademark of Bank One and that during the term of this Agreement, and
any renewal thereof, Roberds is hereby granted a limited, nonexclusive
license to use depictions of the Plan Card, Plan Name and other Marks
owned by Bank One in a fashion approved by Bank One in writing, from
time to time, in its advertising, signs, brochures, forms and the like,
provided that Roberds uses such Marks only in a fashion approved by
Bank One and only in connection with the selling or servicing of the
Plan. Roberds recognizes that upon termination of this Agreement by
either party for any reason whatsoever, Roberds shall immediately cease
and discontinue to use any of the Bank One Marks and shall have no
interest or right to use any Bank One Mark for any purpose thereafter
except as to collection of Accounts existing at the date of
termination.
15. ARTWORK.
Roberds agrees to provide "camera ready" artwork for the design, but
not substantive content, of the Plan Card, periodic billing statements and
Applications, at Roberds' expense. Said artwork will be in accordance with and
shall meet Bank One specifications.
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16. TELECOMMUNICATION REQUIREMENTS.
A. Facsimile machines of reasonable quality and quantity as
determined by Bank One and supporting telecommunication lines necessary
for the transmission of credit applications are required for each of
Roberds' store locations. Said facsimile machines and supporting
telecommunication lines shall be in accordance with Bank One
specifications. A Bank One Authorization/Data Capture Terminal is also
required for each store location; such Terminal shall be provided by
Bank One.
B. Transaction Drafts must be transmitted electronically through
the medium of the Bank One Authorization/Data Capture Terminal
utilizing the Bank One Data Capture Network.
C. All Transactions must be authorized and transmitted
electronically through the medium of the Bank One/Roberds electronic
interface network.
17. PLAN ADMINISTRATOR.
Each party shall name a Plan administrator/manager as the key contact
for the other party for any and all questions, comments, problems or suggestions
concerning the Plan.
18. TERM/TERMINATION.
A. This Agreement shall have a term of five (5) years (the
"Initial Term") from the Effective Date and shall be automatically
renewed for successive five (5) year terms ("Renewal Terms")
thereafter, subject to the rights of termination stated herein.
B. Either Bank One or Roberds may give written notice to the
other party of its intent to terminate the Plan at least One Hundred
Eighty (180) days prior to the then scheduled termination date of the
Initial Term or any Renewal Term hereof, and the obligation of Bank One
to continue to extend credit to Cardholders hereunder shall terminate
on the scheduled termination date.
C. In the event of termination of the Plan, the Reserve Account
shall continue to be funded until all Accounts are paid in full or
charged off under the Plan, unless an alternative arrangement is agreed
upon by both parties in writing. In the event of termination of the
Plan, the provisions of this Section will continue in full force and
effect as to all Account outstanding balances on the date of such
termination until all such Accounts are paid in full or charged off.
D. During the period after notice of termination is given and
before the scheduled termination date, the parties shall cooperate to
provide for an orderly transition. Bank One shall maintain existing
application response times, credit policies, and Cardholder Agreement
terms and conditions, defined as those in effect prior to any proposed
change. Roberds shall continue to offer Plan financing and encourage
use of the Plan by Cardholders.
E. In the case of termination of the Plan, the provisions of this
Agreement will continue in full force and effect as to all Accounts
outstanding on the date of such termination until all such Accounts are
paid in full or charged off. Any balance in the Reserve then remaining
shall be refunded to Roberds.
19. RIGHTS UPON TERMINATION.
Except as otherwise provided in this Agreement, and except in the case
of any willful default, neither Roberds nor Bank One shall have any obligations
to the other hereunder following termination nor, by reason of the termination
of this Agreement, be liable to the other for compensation, reimbursement or
damages, either on account of present or prospective profits, on sales or
anticipated sales, or on account of expected investments or commitments made in
connection therewith, or in connection with
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the establishment, development or maintenance of the public good will of Roberds
or Bank One or on account of any condition or thing whatsoever.
20. ADDITIONAL TERMINATION RIGHTS OF BANK ONE.
Notwithstanding anything to the contrary herein, Bank One may terminate
this Agreement upon written notice to Roberds if Federal or State of Ohio
legislation is enacted which limits the interest rate, fees, or other charges
which national or State of Ohio banks may assess on credit cards to such an
extent that, in Bank One's sole and exclusive determination, its yield on the
Plan will be materially adversely impacted; or Bank One may terminate service in
a particular state if that state passes and enacts new legislation, or if claims
by a state governmental authority or law established by court decision indicates
that Bank One is subject to existing legislation, which adversely affects Bank
One's ability to do business in that state or makes it unfeasible, in Bank One's
sole determination, to continue to do business in that state at the interest
rate and/or fees normally charged by Bank One for credit extended under the
Plan, unless Roberds agrees, with the consent of Bank One, which such consent
shall not be unreasonably withheld, to pay a discount, impose additional charges
upon Cardholders or take such other action or combination of actions as are
necessary to correct the materially adverse impact to Bank One. Bank One's
notice of termination pursuant to this Section shall specify the effective date
of such termination which shall be not earlier than the effective date of any
new legislation or one hundred eighty (180) days, whichever is earlier, and
shall further specify the reasons for termination.
21. DEFAULT.
Either party shall have the right to terminate this Agreement in the
event of a default by the other party of the terms and conditions of the
Agreement which is not cured within thirty (30) days following receipt of
written notice of such default or specify to the other party the particular
manner and time frame for curing the default (if not curable with such 30 day
period). The party giving the notice of default may permit the allegedly
defaulting party to cure a default which cannot be cured within the 30 day
period without waiving its rights to terminate the Agreement based on the
alleged default or any other default under the Agreement. If at the end of such
30 day period (or other period agreed upon by the parties), the default has not
been cured, the party giving notice of default may give notice of termination.
Such notice shall be effective one hundred eighty (180) days from the date of
such notice. During the 180 day period, the parties shall continue to adhere to
their respective obligations under this Agreement. The right to terminate the
Agreement pursuant to this paragraph shall also be available to either party in
the event either party files a petition pursuant to any chapter of the
Bankruptcy Code or if a petition is filed against either party pursuant to any
chapter of the Bankruptcy Code and not dismissed within forty (40) days after
such filing, or if either party becomes insolvent, makes an assignment for the
benefit of its creditors, files a petition or otherwise seeks relief under or
pursuant to any other bankruptcy, insolvency or reorganization statute or
proceeding, or if either party dissolves, discontinues or substantially
discontinues its business, or if a conservator, receiver, trustee, or similar
officer is appointed for either party or for a substantial portion of either
party's business or assets, or if any judgment, writ of attachment, execution,
levy or similar process against either party is issued with respect to any
substantial part (valued at ten percent (10%) or more of the total tangible
assets) of the property of either party, the other party may, at its sole
election, terminate this Agreement by written notice to the other, which notice
is waived by and need not be given if the termination is due to the filing of a
petition pursuant to any chapter of the Bankruptcy Code, or in the event of
fraud or misrepresentation by the other party. Notwithstanding, any isolated
acts of fraud or misrepresentation by an employee of Roberds, such shall not be
considered grounds for default provided Roberds reimburses Bank One for any
reasonable expenses incurred as a result of such acts.
22. CHARGE BACK AND SET OFF.
In order to assure, implement and maximize Bank One's rights of Charge
Back and Set off, and their availability to Bank One for any and all
indebtedness and obligations of Roberds to Bank One hereunder, whether now
existing and hereafter incurred:
A. Roberds understands and recognizes that each Transaction
creates a contingent and unmatured claim for Charge Back in favor of
Bank One against Roberds.
B. Roberds irrevocably grants to Bank One a right of Set off in
and to any of Roberds' funds, whether in an Escrow Account or not, now
or hereafter
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due or to become due to Roberds from Bank One, together with the
proceeds thereof. Roberds also irrevocably grants to Bank One a lien
and security interest solely in and to any of Roberds' funds in
any said funds whether in an Escrow Account or not. Any such funds,
money or amounts may be commingled with other funds of Bank One and
need not be maintained in any separate account.
C. The right of Roberds to receive any amounts due or to become
due from Bank One is expressly subject and subordinate to the Charge
Back, Set off and lien rights of Bank One with respect to claims that
are liquidated, fixed or matured. No failure of Bank One to exercise
its rights of Charge Back, Set off or lien and no course of conduct by
Bank One in not exercising its rights of Charge Back, Set off or lien
shall in any respect constitute a waiver of or impair the rights and
remedies of Bank One to exercise at any subsequent time the rights of
Charge Back, Set off and lien provided for in this Agreement and under
applicable law.
D. Roberds agrees to duly exercise and deliver to Bank One such
instruments and documents as Bank One may reasonably request to perfect
and confirm the lien, security interest, right of Set off and
subordination set forth in this Agreement.
E. In recognition that each Transaction creates a contingent and
unmatured claim for Charge Back in favor of Bank One against Roberds
for the amount that Bank One is required, or has the right, to pay to
or repurchase with respect to any fee, discount, customer credit and
adjustment, charge, fine, assessment, penalty or other item which may
be charged back to Roberds by Bank One, Roberds and Bank One hereby
agree that this Agreement constitutes a contract to extend debt
financing or financial accommodations by Bank One to Roberds.
23. INDEMNIFICATION.
A. Roberds agrees to indemnify Bank One and to hold Bank One
harmless from and against any and all actions, lawsuits, complaints,
liabilities, losses, claims, damages and expenses (including, without
limitation, reasonable fees and disbursements of counsel) suffered,
sustained, incurred, paid or required to be paid by Bank One, whether
filed or claimed by consumers or instrumentalities of the Federal or
state governments:
(i) Arising out of or resulting from the breach,
incorrectness, or incompleteness of any representation,
warranty or covenant made by Roberds in this Agreement or in
any other instrument delivered pursuant hereto;
(ii) Its actions under the Plan and in conducting its
business;
(iii) Any failure on Roberds' part to comply with any
local, state or federal statute, law or regulation with regard
to the validity and legality of Roberds' business;
(iv) Any and all aspects of Roberds' business including,
but not limited to the selection, use, and operation of sales
agreements used in conjunction with a Transaction with
Cardholders;
(v) Any and all local, state or federal filings,
reports, disclosures, taxes and the like required of Roberds;
(vi) Any and all product liability claims or condition,
quality, or failure claims arising from or in anyway related
to Products including any warranty, service or contract as set
forth in Section Eleven (11) purchased from Roberds with a
Plan Card; or
(vii) Acts or omissions of Bank One performed in response
to requests or instructions given by Roberds to Bank One.
Roberds hereby guarantees that Bank One shall suffer no loss
on a Cardholder Account as a result of a claim with respect to
which it is entitled to be
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<PAGE> 17
indemnified. Provided, however, that nothing herein shall
operate to protect or indemnify Bank One from any claim or
action arising out of or based on a request or conduct of
Bank One, its agents or employees.
B. Bank One agrees to indemnify Roberds and to hold Roberds
harmless from and against any and all actions, lawsuits, complaints,
liabilities, losses, claims, damages and expenses (including, without
limitation, reasonable fees and disbursements of counsel) suffered,
sustained, incurred, paid or required to be paid by Roberds, whether
filed or claimed by consumers or instrumentalities of the Federal or
state governments:
(i) Arising out of or resulting from the breach,
incorrectness, or incompleteness of any representation,
warranty or covenant made by Bank One in this Agreement or in
any other instrument delivered pursuant hereto;
(ii) Its actions under the Plan and in conducting its
business;
(iii) Any failure on Bank One's part to comply with any
local, state or federal statute, law or regulation with regard
to the validity and legality of Bank One's business;
(iv) Any and all local, state or federal filings, reports,
disclosures, taxes and the like required of Bank One; or
(v) Acts or omissions of Roberds performed in response to
requests or instructions given by Bank One to Roberds. Bank
One hereby guarantees that Roberds shall suffer no loss on a
Cardholder Account as a result of a claim with respect to
which it is entitled to be indemnified. Provided, however,
that nothing herein shall operate to protect or indemnify
Roberds from any claim or action arising out of or based on a
request or conduct of Roberds, its agents or employees.
C. Each party agrees to give prompt written notice to the
indemnifying party of any third-party claim, action or proceeding as to
which it may request indemnification hereunder. Each party will
cooperate with the other party in determining the validity of any such
third-party claim, action or proceeding. The indemnifying party
hereunder shall have the right to defend with counsel reasonably
satisfactory to the indemnified party any such third-party claim,
action or proceeding, subject to the right of the indemnified party, at
its own expense, to participate in the defense of the same. The
indemnified party shall have the right to be represented by counsel and
accountants, at its own expense, and shall be kept fully informed as to
such claim at all stages thereof whether or not it is represented by
its own counsel. Until the indemnifying party shall have so assumed the
defense of any such claim, or if the indemnified party shall have
reasonably concluded that there are likely to be defenses available to
the indemnified party that are different from or in addition to those
available to the indemnifying party (in which case the indemnifying
party shall not be entitled to assume the defense but shall have the
right to be represented by counsel and accountants, at its own expense,
and shall be kept fully informed as to such claim at all states thereof
whether or not represented by its own counsel), all legal or other
expense reasonably incurred by the indemnified party shall be borne by
the indemnifying party. The indemnifying party shall make available to
the indemnified party and its attorneys and accountants all books and
records or the indemnifying party relating to such action and the
parties hereto agree to render to each other such assistance as they
may reasonably require of each other in order to facilitate the proper
and adequate defense of any such action. Neither the indemnifying party
nor the indemnified party shall settle or compromise any such
third-party claim, action or proceeding without the prior written
consent of the other which consent shall not be unreasonably withheld.
Without limiting the generality of the foregoing, it shall not be
deemed unreasonable to withhold consent to a settlement involving
injunctive or other equitable relief against the indemnified party or
its assets, employees or business.
D. Each party shall indemnify the other on demand for said
damages, claims, etc., suffered by said party and such reimbursement
shall be secured by this Agreement.
E. Neither party shall be liable for any consequential damages
arising from the other's actions under this Agree-
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ment. Both parties waive any claim for punitive damages arising from
the other party's actions under this Agreement. Both parties also waive
their right to request a trial by jury in any litigation involving
Roberds and Bank One.
24. ESCROW ACCOUNT.
Bank One, at the termination of this Agreement, or prior thereto if
deemed necessary by Bank One, in its sole and exclusive reasonable
determination, which determination shall be based upon:
(i) The material financial deterioration of Roberds, as in
comparison to Roberds' previous financial statements for the
last six (6) to twelve (12) month period;
(ii) A significant breach of this Agreement and/or of the
Operating Procedures by Roberds which creates a significant
financial risk to Bank One;
(iii) Excessive disputes or Charge Backs against Roberds by
Cardholders and or Bank One; and/or
(iv) Possible excessive warranty, services or contract
claims, may require Roberds to open and maintain with bank
One, a non-interest bearing Escrow Account in an amount equal
to one (1) months' Plan Card sales or projected Plan Card
sales. Roberds agrees to pay said sum to Bank One promptly on
demand by Bank One. If Roberds fails or refuses to pay said
sum as required, Bank One may debit Roberds' checking account,
or withhold payment(s) owed to Roberds. Bank One will not pay
Roberds any interest on the funds in the Escrow Account. Bank
One will release the money held in the Escrow Account to
Roberds, if any remains, not later than one hundred eighty
(180) calendar days after the opening date of the Escrow
Account and Roberds will be provided with an accounting of any
money taken out of the Escrow Account.
25. EXCLUSIVE PROPERTY.
All Accounts, Applicant and Cardholder names and information, files,
specifications, data, programs, forms and procedures utilized or developed by
Bank One in connection with services under this Agreement shall be and will
remain the property of Bank One and may only be used by Roberds in accordance
with the terms of this Agreement.
26. INSPECTION RIGHTS.
Each party shall have the right, at reasonable times and at reasonable
intervals, at its own expense, to send a reasonable number of its employees,
consultants or agents to observe the operations of the other and shall cooperate
with the other in making arrangements for the same. Each party shall also have
the right to audit the financial records of the other relating to this
Agreement, either by its employees, consultants, agents or independent certified
public accountants, provided, that the party requesting same bears all costs and
expenses of the audit and provided that the audit is conducted with reasonable
prior notice and during normal business hours.
27. WAIVER.
No delay or failure of Bank One or Roberds to exercise any right, power
or privilege set forth in, or resulting from, this Agreement, shall affect such
right, power or privilege; nor shall any single or partial exercise thereof or
any abandonment or discontinuance of steps to enforce such a right, power or
privilege affect such right. The rights and remedies of Bank One and Roberds
hereunder are cumulative and not exclusive. Any waiver, permit, consent or
approval of any kind by Bank One or Roberds of any breach or default hereunder,
or any such waiver of any provision or conditions hereof, must be in writing and
shall be effective only to the extent set forth in such writing. No waiver shall
be deemed to be a continuing waiver in respect to any subsequent breach or
default either of similar or different nature unless expressly so stated in
writing.
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28. FINANCIAL STATEMENTS.
The financial statements and other information heretofore furnished by
Roberds to Bank One fairly represents the financial condition of Roberds and,
since such time, there have been no material adverse change in the condition
(financial or otherwise) or operations of Roberds. Roberds shall furnish to Bank
One annually, audited financial statements of Roberds prepared and certified by
certified public accountants, which will include a statement of income and
expense in the operation of Roberds' business. In addition, Roberds agrees to
furnish to Bank One from time to time such other financial information as Bank
One may reasonably request. Bank One shall hold all such financial information
in strict confidence.
29. MODIFICATION.
This Agreement may be modified from time to time by mutual written
agreement signed by both parties, except for terms and/or conditions which Bank
One has unilateral control which Bank One may modify by sending written notice
of such modification, together with the effective date thereof, to Roberds.
30. ASSIGNMENT; SECURITIZATION.
A. All terms and provisions of this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
transferees, successors and assigns; provided, however, that this
Agreement and all rights, privileges, duties and obligations of the
parties hereto may not be assigned or delegated by either party without
the written consent of the other party. Notwithstanding the foregoing,
Bank One may without such consent assign any or all of its rights and
obligations hereunder to BANC ONE CORPORATION or to any subsidiary or
affiliate wholly owned (directly or indirectly) by BANC ONE
CORPORATION, but only if BANC ONE CORPORATION or such subsidiary or
affiliate, as the case may be, shall, prior to such assignment, have
obtained all necessary governmental or regulatory approvals and
authorizations and have obtained, filed and satisfied all other
consents, authorizations, notifications, requirements and conditions
necessary for it to receive such assignment and engage fully in the
activities contemplated by it without satisfying any further such
requirements whatsoever or (b) sell Plan Accounts as accounts
receivable for securitization; however, retaining servicing thereon.
BANC ONE CORPORATION or such subsidiary or affiliate, as the case may
be, shall thereafter be subject to, bound by and entitled to the
benefits of the provisions of this Agreement with the same effect as
though it were an original party hereto; provided, however, that no
such assignment shall relieve Bank One of any of its obligations or
liabilities hereunder which are not performed or discharged fully by
BANC ONE CORPORATION or such subsidiary or affiliate.
B. Additionally, no assignee for the benefit of creditors, successor in
interest, custodian, receiver, trustee in bankruptcy, debtor in
possession, sheriff or any other officer of a court, or other person
charged with taking custody of a party's assets or business, shall have
any right to continue or to assume or to assign this Agreement.
31. DELIVERY OF CARDHOLDER LIST; OPTION TO PURCHASE PORTFOLIO.
A. Upon receiving or giving notice of termination of this Agreement,
Bank One will provide Roberds the Cardholder List in a mutually
acceptable format, and such other pertinent information as can be
mutually and reasonably agreed upon, and both parties will use their
best efforts to ensure a smooth transition. Bank One will also update
this list, at reasonable intervals to be agreed upon by the parties
hereto, between notice and actual termination. At termination a final
list will be given.
B. In the event a notice of termination of this Agreement is given by
either party, Roberds shall have sixty (60) calendar days from the
notification date in which to advise Bank One that Roberds desires to
buy from Bank One all the Accounts not previously charged off. If
Roberds elects to buy said Accounts, then the parties shall use their
best efforts and good faith efforts to negotiate and sign a purchase
agreement within sixty (60) days from receipt of the notice of
termination. If a purchase agreement is not signed between the parties
within said sixty (60) day period, then Bank One may at its option,
negotiate, and enter into, a purchase agreement with any other entity.
32. CONFIDENTIALITY.
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<PAGE> 20
The terms of this Agreement are, and shall continue to be, confidential
and shall not be disclosed to any third parties without the prior written
authorization of the other party, except as otherwise provided herein or as
required by law. Each party will hold, and will cause its officers, directors,
employees, representatives, agents, consultants and advisors to hold, in strict
confidence, all documents and information obtained by them with respect to the
other party hereto in connection with the transactions contemplated by this
Agreement except to the extent that such information can be shown to have been
or to have become:
(i) Generally available to the public other than as a
result of a disclosure by the officers, directors, employees,
representatives, agents, consultants or advisors of such
party;
(ii) Made available on a non confidential basis from a
source other than the officers, directors, employees,
representatives, agents, consultants or advisors of such
party;
(iii) Known to such party prior to the date of disclosure
of such information by the other party, and will not release
or disclose such information to any other person, except their
auditors, attorneys, and other consultants in connection with
the transactions contemplated by this Agreement.
Notwithstanding, permission from the other party shall not be
necessary for disclosures pursuant to any federal, state or
local governmental body, laws or regulations, in which case
notice shall be promptly given to the other party. Prior
authorization shall be required for disclosure of information
to a potential successor to the other party or to a party
which may purchase the Cardholder Accounts. In either case,
the potential successor shall sign a written nondisclosure
agreement containing terms similar to those contained herein;
(iv) As a result of a final non-appealable order from a
court of competent jurisdiction.
33. SEVERABILITY.
If any of the provisions or parts of this Agreement are determined to
be illegal or invalid under any applicable statute or rule of law, such
provision(s) or part(s) shall be deemed omitted without affecting any other
provision(s) or part(s) of this Agreement, which shall remain in full force and
effect.
34. NOTICES.
All notices required under this Agreement shall be in writing and shall
be effective upon sending written notice of termination via certified or
registered mail, postage prepaid, return receipt requested, or by delivery to an
overnight mail service such as Western Union Mailgram or Federal Express. The
notice may be sent to the appropriate address listed below unless the sending
party has received written notice of a different address.
Bank One: Banc One Private Label Credit Services
Attn: President
Kettering Business Park
950 Forrer Blvd.
Kettering, Ohio 45420
Fax No. (937) 534-2157
cc: Banc One Corporation
Attn: General Counsel
100 East Broad Street - 18th Floor
Columbus, Ohio 43215
Fax No. (614) 248-6060
Roberds: Roberds, Inc.
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<PAGE> 21
1100 E. Central Avenue
Dayton, Ohio 45449-1888
Attn: President
cc: Robert M. Wilson
Roberds, Inc.
1100 E. Central Avenue
Dayton, Ohio 45449-1888
35. MISCELLANEOUS.
A. Except to the extent superseded by Federal law applicable to
national banks, this Agreement shall be subject to and construed under
the laws of the State of Ohio.
B. This Agreement and the Addenda hereto contain the entire Agreement
between the parties regarding the subject matter hereof. All prior
agreements and letters, and any amendments or modifications thereto,
between Bank One and Roberds are terminated and merged into this
Agreement and are no longer in force or effect upon execution hereof by
Bank One and Roberds. If there is any conflict or ambiguity between
terms of this Agreement and such prior terms, the terms of this
Agreement shall govern. All oral representatives are fully merged in
this Agreement.
C. With the exception of the "Definitions" listed in the preamble, the
provision headings contained in this Agreement are for convenience only
and shall at no time be deemed to define, describe, limit, or enlarge
the meaning, intent, or scope of any provision of this Agreement, or to
in any way affect the interpretation of this Agreement. All words used
herein shall be of such gender or number as the circumstances require.
D. All obligations incurred or existing under this Agreement as of the
date of termination or default, whether then known by either party to
exist, and whether specifically referred to elsewhere herein or not,
shall survive such termination or default.
E. Upon failure of Roberds to meet any of its obligations set forth in
this Agreement, Bank One has the right to collect any amount due, or
which may become due, to Bank One from any accounts belonging to
Roberds held by Bank One or by any other financial institution with
contemporaneous notice to Roberds, and Roberds gives Bank One a
security interest in all such accounts for that purpose.
F. Roberds shall notify Bank One of any judgments, writs, warrants of
attachment, executions or levies against any substantial part of
Roberds' assets (valued at ten percent (10%) or more of Roberds' total
assets) not later than thirty (30) days after Roberds obtains knowledge
of any such judgments, writs, warrants of attachment, executions or
levies.
G. In all cases under this Agreement wherein consent is required of one
or both of the parties, the decision by the parties shall be made in
good faith and not be unreasonably withheld. Furthermore, the parties
agree that each shall in good faith perform their obligations under
this Agreement.
H. This Agreement may be executed in any number of counterparts, all of
which together shall constitute one and the same instrument, but in
making proof of this Agreement, it shall not be necessary to produce or
account for more than one such counterpart.
I. The parties agree that the Plan Card Processing Agreement attached
hereto as Addendum "C" and any operating procedures, guidelines and/or
manuals developed by the parties regarding the administration of the
Plan will be, and hereby are, incorporated herein as part of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have set their hands upon the
day and year first above written
WITNESS: ROBERDS, INC.
/s/ Barbara L. Fogle By: /s/ Robert M. Wilson
/s/ Alberta Carmack Title: Executive Vice President
BANK ONE, NA
/s/ Dennis K. Houchins By: /s/ Ben W. Manley
/s/ Wendy Shannon Title: Senior Vice President
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<PAGE> 23
ADDENDUM "A"
TO PLAN CARD PROCESSING AGREEMENT
AUTHORIZATION TO TRANSACT TELEPHONE OR MAIL ORDERS
A. Bank One specifically authorizes Roberds to sell its own Products,
services or warranties by telephone or mail order and to submit said Plan
Transactions to Bank One. When a Transaction is based on a telephone order or
mail order the Transaction Draft may be completed without a Cardholder signature
or a Plan Card imprint; however, Roberds shall type or print legibly on the
Transaction Draft the following information as it appears on the Plan Card: the
account number and the embossed name. Roberds shall also type or print legibly
"telephone order" or "mail order", as applicable, on the Cardholder signature
panel of the Transaction Draft.
B. Roberds specifically agrees that a Transaction representing a sale
made by telephone or mail order may be charged back to Roberds in accordance
with the charge back provisions contained in the Agreement if at any time any
defense or problem is made or presented to Bank One or found by Bank One,
questioning the validity or authorization of the Transaction.
C. Any conflict between this Addendum and any other Agreement provision
will be controlled by this Addendum.
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<PAGE> 24
ADDENDUM "B"
PRIVATE LABEL ADVERTISING REQUIREMENTS
Bank One encourages you to promote your "MORE VALUE" program. You can
do so by advertising in your local newspaper and directory service. You can also
develop your own advertising to suit your specific needs. Due to the complexity
of advertising credit programs, always have your legal counsel review such
advertising. Bank One reserves the right to approve or disapprove all aspects of
the advertising and promotional material, and credit features used in your
advertisements. To comply with Federal Regulations (Truth in Lending Regulation
A-Section 226.16) among others, use the following guidelines when developing
your own advertising:
1. The full name of the service can be any of these:
* "MORE VALUE"
* Bank One's "MORE VALUE" card or credit card
* "MORE VALUE", a credit service of Bank One, Dayton, NA offered
through Roberds.
2. Do not insert your company name in front of the "MORE VALUE"
program name.
3. Do display on your premises all decals, signs, or other advertising
materials supplied by Bank One, which are intended to notify the public
that you offer and accept the "MORE VALUE" credit card.
4. Do not imply that you own or operate the "MORE VALUE" program.
Don't use terms such as "exclusive" and "only from".
5. You must display the Bank One logo on all advertising in which the
front of the "MORE VALUE" credit card is used.
6. Do not imply that "MORE VALUE" is extending credit. Use one of the
following disclaimers (in small print).
* "MORE VALUE" is a credit service of Bank One, NA, Dayton,
Ohio.
* "MORE VALUE" is a credit card program of Bank One, NA,
Dayton, Ohio offered through "Roberds".
7. You should use phrases such as:
* Low monthly payment
* No annual membership fee
8. Do not use terms such as "free" and "interest free".
9. Do not alter the "MORE VALUE" credit card or the Bank One logo.
10. Any Monthly payment quoted in your advertisement must specify the
program name to which the payment refers. If promoting a "MORE VALUE"
minimum payment, specify the program name, "MORE VALUE", in conjunction
with the minimum payment.
11. If featuring a minimum payment, use a disclaimer that includes all
of the following:
* Annual percentage rate
* Percent/minimum payment due each month
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Example:
The minimum monthly payment is 3% of the unpaid
balance, or $10.00, whichever is greater, and is
based on a variable ANNUAL PERCENTAGE RATE ("APR") of
14.73% plus the "Prime Rate" as published in the
"Money Rates" section of The Wall Street Journal on
the 15th calendar day of each month or the next
business day if the 15th day falls on a weekend or
holiday.
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ADDENDUM "C"
PLAN CARD PROCESSING AGREEMENT
This Agreement governs the mechanics of the Plan and the Plan Card in
connection with connection with Roberds' sale of Products.
1. PROCEDURES.
The procedures set forth by Bank One in any Operations Guide, Credit
Card Sales Guide, Operating Procedure Manual or other guides/manuals supplied by
Bank One to Roberds at any time ("Procedures"), are hereby incorporated into and
made a part of this Agreement, and the rules and regulations issued by Visa and
MasterCard or any successor thereto, as amended from time to time, shall be
followed by Roberds and shall govern the processing of Transactions initiated
through the medium of the Plan Cards issued to Cardholders. If there exists a
conflict between the Procedures and the rules and regulations issued by Visa or
MasterCard, the Procedures shall control.
2. HONORING THE PLAN CARD.
Roberds will honor all valid Plan Cards when properly presented as
payment from a Cardholder for a Transaction. Roberds will not refuse a sale
because it falls below a certain dollar amount. Roberds will have a zero floor
limit ("Floor Limit") for all Plan Card Transactions.
3. COMPLETION OF SALES TRANSACTION DRAFTS AND CREDIT VOUCHERS.
All Transaction Drafts will be on forms supplied or approved by Bank
One and each will be completed in conformity with all applicable laws and
regulations and the terms of this Agreement, and will include, among other
things, the name of the Cardholder, Cardholder's Plan Card number, the imprint
of the Plan Card if the electronic interface is not available, the signature of
the Cardholder, the Transaction date, referencing number (SKU) of the Products
sold that Roberds will be able to identify upon request by Bank One, the total
cash price of the sale, and the city and state wherein the Transaction occurred.
As authorized by separate Addendum "A" to this Agreement, Roberds does not need
to secure the Cardholder's signature or the Plan Card imprint for telephone or
mail order sales. Roberds will compare the signature on the Transaction Draft to
the signature on the Plan Card and if they appear to be different, will contact
Bank One's authorization facility. A copy of the Transaction Draft will be given
to the Cardholder, and one copy, or more, will be retained by Roberds.
4. ROBERDS' REPRESENTATIONS OF TRANSACTIONS TENDERED.
A. All Transaction Drafts tendered represent obligations originated
with a Cardholder as a result of a Transaction with Roberds in the
amount set forth on such Transaction Draft for Roberds' Products only
and do not involve credit for any other purpose. Roberds will not
knowingly complete any Transaction Draft which is fraudulent, nor
present a Transaction Draft for processing, directly or indirectly,
which did not originate as a result of any act between the Cardholder
and Roberds. Roberds will not tender for acceptance by Bank One any
Transaction Draft as to which it has knowledge of any invalidity or
defense to the collectability of such Transaction Draft; will exercise
due care in filling out forms and processing its work; and will require
no special agreement, condition or security from a Cardholder in
connection with any Transaction Draft. If Bank One determines that
Roberds has breached the foregoing provisions of this paragraph, Bank
One, in addition to any other rights it may have, may offset funds in
Roberds' account or any other account maintained by Bank One.
B. Roberds additionally warrants and represents that no Transaction
Draft submitted by Roberds represents a sale by Roberds which was made
by telephone or mail order except as permitted in Addendum "A" hereto.
Bank One reserves the right to unilaterally withdraw said authorization
without notice to Roberds.
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5. SETTLEMENT ACCOUNT.
A. Bank One will pay Roberds the total face amount of each Transaction
Draft accepted hereunder. Roberds must maintain a commercial checking
account with any Automated Clearing House (hereinafter "ACH") member
financial institution (which may include Bank One) and will authorize
"pre-notifications" through any authorized transfer system (such as the
Central Regional Automated Funds Transfer System, Inc.). Roberds
authorizes ongoing credits and debits to such account pursuant to the
terms of this Agreement. Bank One will transfer funds to or from said
account for the purpose of settling Transaction Drafts, charging
applicable fees, providing refunds, debiting for charge backs, and any
other necessary transactions. ACH transfers will be credited within one
(1) Business Day; Bank One transfers will be credited within one (1)
Business Day.
B. In reference to the above-mentioned account(s), all figures are
subject to final auditing and checking by Bank One, and Roberds agrees
that Bank One may make any corrections necessary without prior notice
to Roberds, or may elect to return Transaction Drafts for Roberds'
correction.
6. IMPRINTERS AND FORMS.
A. Bank One will provide Roberds with an appropriate number of
Transaction Draft imprinters, which unless otherwise agreed, will
remain the exclusive property of Bank One. Roberds will use such
imprinters whenever possible and will return such imprinters, and any
validation plates, if the same are utilized, upon termination of this
Agreement.
B. Bank One will provide Roberds with an appropriate number of sales
drafts, credit vouchers, and deposit slips upon request from Roberds
without charge.
C. Bank One and Roberds will develop mutually acceptable procedures for
the utilization of appropriate forms, imprinters, and other
requirements for processing Transaction Drafts.
7. AUTHORIZATIONS.
In the event of suspicious or unusual circumstances, Roberds will
request a "Code 10" authorization. With the exception of a "Code 10"
authorization, Roberds must advise Bank One of the specific reason(s)
authorization is requested. If authorization is given, Roberds will type or
print legibly on the Transaction Draft the authorization approval code received.
8. UNACCEPTABLE PLAN CARDS.
Roberds will not, without authorization, complete a Transaction
involving use of a Plan Card if Roberds' authorization request is rejected.
9. RETRIEVAL OF THE PLAN CARD.
If, in response to an authorization request, Roberds is advised to
obtain or hold onto a Plan Card, or if given other instructions, Roberds shall
use its best efforts, by reasonable and peaceful means, to comply with such
advice or such instructions.
10. CASH PAYMENT/DISCOUNTS/DEPOSITS.
Roberds will not receive any payments from a Cardholder with respect to
charges for Products which are included on a Transaction Draft resulting from
the use of a Plan Card. Roberds will be entitled under the Fair Credit Billing
Act to grant, or offer to grant, discounts for use of cash to make a purchase.
Roberds will not receive moneys from a Cardholder and subsequently prepare and
deposit a credit voucher for the purpose of effecting a deposit thereof to the
account of the Cardholder.
11. ADDITIONAL CHARGE TO CARDHOLDERS.
Roberds will not require the Cardholder to pay any part of any fee or
charge assessed by Bank One to Roberds, whether
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<PAGE> 28
through any increase in price or otherwise, or to pay any contemporaneous
finance charge in connection with the Transaction in which a Plan Card is used.
12. DISCLOSURE AND STORAGE OF CARDHOLDER INFORMATION.
Roberds will not, without the Cardholder's and Bank One's written
consent, sell, purchase, provide, or exchange Plan Card account number
information to any third party other than Roberds' agents for the purpose of
assisting Roberds in its business, to Bank One or pursuant to any government
request. Roberds will store all Cardholder account number information in an area
limited to selected personnel and, prior to discarding, will destroy such
information in a manner rendering data unreadable.
13. MULTIPLE TRANSACTION SEGMENTS.
When a purchase is completed by Roberds and two or more Transaction
Drafts are prepared for the purpose of creating individual Cardholder receipts,
a separate authorization shall be obtained for the amount of each Transaction
Draft. For purchases involving multiple cards or other combination of payment
methods accepted for a purchase, each payment segment completed with a Plan Card
shall require authorization for such corresponding amount.
14. IMPRINTER REPAIR/REPLACEMENT/DAMAGE.
Bank One reserves the right to debit Roberds' account on a
non-refundable basis, for repair, replacement, handling, shipping, out of pocket
costs and expenses for any imprinter owned by Bank One in the event of one of
the following: the imprinter is not returned to Bank One or its agent at any
time for repair or replacement within ten (10) calendar days when requested to
do so or the imprinter must be replaced as a result of loss, destruction, misuse
or abuse by the Roberds. Replacement cost (if necessary) will be the cost of a
new imprinter. All repairs and replacement charges for any imprinter owned by
the Roberds will be borne by Roberds. Roberds will be responsible for the loss
of any imprinter and for any damage resulting from improper handling or
operation once the imprinter has been delivered to the Roberds.
15. IMPRINTER TAXES.
With respect to any imprinter, Roberds will pay when due: (a) all use,
excise, personal property, ad valorem or other taxes; (b) all assessments, fees
and charges payable with respect to the ownership, possession or rental of the
imprinter, and (c) all expenses resulting from registration, inspection or other
governmental requirements, now or hereafter existing, all of which are imposed
by governmental entities because of the location or use of any imprinter at
Roberds' place(s) of business.
16. RETURNED MERCHANDISE AND ADJUSTMENTS
Roberds will establish a fair policy for the exchange and return of
Products and adjustment of contracts involving services. If Roberds limits
acceptance of returned Products, proper disclosure must be provided to
Cardholder and purchased goods or services must be delivered to the Cardholder
at the time the Transaction takes place. Proper disclosure shall be given if the
words "NO REFUND", "EXCHANGE ONLY" or "IN-STORE CREDIT ONLY" are legibly printed
on the Transaction Draft, receipt or invoice in letters approximately 1/4 inch
high and in close proximity to the space provided for the Cardholder's
signature. Roberds will issue credit vouchers for any reason for Products,
refund, adjustment or cancellation of a sale where the original sale involved a
Plan Card, and such credits must be to the same Account used in the original
sale. Credit vouchers may not exceed the original Transaction amount. Roberds
will not make any cash refunds when the Transaction involved the use of a Plan
Card.
17. CHARGE BACKS.
A. Bank One may charge back to Roberds a Transaction when one of
the following occurs:
(i) Billing Error. Where a Cardholder asserts a "billing
error" as defined by Regulation
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<PAGE> 29
Z (12 CFR Part 226), Section 226.13, in the manner and within
the time limits required by said Section, and after giving
Roberds an opportunity to respond in accordance with the
Procedures, which shall include a time period of at least ten
(10) Business Days, Bank One determines that a billing error
has occurred;
(ii) Merchandise or Service Dispute. Where a Cardholder
refuses to pay based on an assertion of a dispute about the
quality of the merchandise or services purchased (which is not
a billing error under Regulation Z Section 226.13), including
any alleged breach of warranty provided Cardholder by or
through Roberds, Bank One shall request from Roberds for a
written response. If Roberds provides a good faith response as
determined by Bank One which indicated that (a) it is
reasonably addressing the Cardholder's concern, (b) the
Cardholder has not made a good faith attempt to resolve the
dispute, or (c) Roberds is not responsible for the dispute, no
charge back will be made. If no written response is received
within twenty (20) calendar days from Bank One's request, then
a charge back for the amount of the Transaction will be made;
(iii) Operating Regulations Violation. The occurrence of
any one (1) or more of the charge back reasons set forth in
the Operating Regulations of VISA and/or MasterCard;
(iv) Agreement Violations. With respect to any individual
Transaction, failure to comply with authorization procedures,
Transaction production requirements, breach of any
representation or a breach of the processing requirements set
forth in this Agreement or the Procedures;
B. When a charge back may be made pursuant to this paragraph,
Roberds agrees that it will reimburse Bank One and that without prior
notice Bank One may charge Roberds' account for the full amount of the
Transaction. In the event of any such charge back, Bank One hereby
assigns to Roberds the charged back Transaction, along with all
appropriate documentation, and the right to collect the amount charged
back to Roberds.
18. TRANSACTION DRAFT OR VOUCHER RETENTION.
One (1) copy or more of each Transaction Draft and accompanying invoice
or bill will be retained by Roberds (held in trust for Bank One) for a period of
seven (7) years from date of the Transaction, filed by date, and such copy shall
be provided to Bank One upon request within five (5) Business Days of such
request. Failure to provide requested Transaction Draft copies on a timely basis
may result in Roberds' assumption of liability in settlement of Cardholder
disputes and Bank One shall have the right to charge back the full amount of the
Transaction in question to Roberds' account. Upon termination or default of the
Plan, Roberds will secure and store all invoices and Transaction Drafts for Bank
One at Roberds' expense or will assemble and send same to Bank One at Roberds'
option but Bank One's cost.
19. TRANSACTION DRAFT VERIFICATION
At any reasonable time Bank One may examine and verify all records of
Roberds pertaining to Transaction Drafts submitted hereunder. Bank One shall
have no liability or assume any cost with regard to such records other than
reasonable costs of reproducing such records from duplicates provided by
Roberds.
20. PAYMENT ON TRANSACTION DRAFTS.
Bank One will have the sole right to receive payment on Transaction
Drafts it purchases. Roberds agrees not to sue or to make any collections
thereon, except as it may be specifically authorized by Bank One or in the event
that the Transaction is charged back to Roberds. If specifically authorized,
Roberds will hold all collections, if any, in trust for Bank One and will
deliver same immediately to Bank One.
21. IMMEDIATE CREDIT FOR INITIAL PURCHASE.
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<PAGE> 30
Bank One will permit Roberds to allow an approved Applicant, for the
initial purchase only, a Plan credit charge in an amount not to exceed the
credit limit established by Bank One ("Immediate Credit"), provided that the
following procedures are adhered to by Roberds:
(i) Applicant completes and signs a credit application
applying for issuance of a Plan Card;
(ii) Roberds submits Applicant's completed credit application
to Bank One via a facsimile machine or remote computer
terminal on a timely basis, but in no event more than ten (10)
days from date of application; and
(iii) Roberds processes the initial purchase after obtaining
appropriate authorization from Bank One.
22. CREDIT APPLICATIONS.
A. Roberds agrees to provide each Applicant at or before the time
that Applicant's credit application is made a copy of the Plan
Agreement.
B. Any credit application which is:
(i) Knowingly falsified by Roberds;
(ii) Accepted by Roberds knowing that the application
contains false information; or
(iii) Accepted by Roberds knowing that the Applicant(s)
signature is missing, the date of application is missing, the
identification required to be verified by Roberds has not been
completed (two types of identification are required for all
Applicants, one of which must be a photo identification),
Applicant(s) social security number is missing, Applicant(s)
date of birth is missing, or Applicant(s) printed name is
missing or other requirements as set forth in the Procedures
has not been met, may not be honored, at the discretion of
Bank One, for the purpose of crediting settlement proceeds to
Roberds' account. If proceeds have been credited to Roberds,
then Bank One may charge back to Roberds' account said
Transaction (hereinafter a credit application meeting the
criteria of either (i), (ii) or (iii) above, will be known as
a "Problem Application").
C. Any subsequent charge(s) to an Account which was/were honored
by Bank One but later determined to be improper because the Account was
established with a Problem Application, may be charged back to Roberds
within a reasonable time after such Problem Application is made aware
to and recognized by Bank One.
23. DATA CAPTURE PROCEDURES.
Bank One will supply Roberds with an approved electronic point of sale
terminal ("POS Terminal") to be used for the electronic authorization and
monetary settlement of Transactions. In accordance, the following is agreed to:
A. Installation
(i) Roberds will install a POS Terminal(s) interconnected to
the Bank One designated authorization system and Roberds will
use a Bank One Transaction Draft imprinter(s), including
validation plate(s) or an approval electronic printer(s). Such
equipment will remain the absolute property of Bank One,
unless otherwise agreed, and Roberds will surrender such
equipment at the request of Bank One.
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<PAGE> 31
(ii) Roberds may have a direct outside business telephone line
for POS Terminal(s). If Roberds chooses to not install a
direct outside business telephone line, Roberds is responsible
for contacting its telephone company and ensuring
compatibility of the POS Terminal(s) with Roberds' telephone
system before installation of the POS Terminal(s). Bank One
assumes no liability for damage to Roberds' telephone system
resulting from the use of the POS Terminal(s).
B. Use of POS Terminal
(i) Roberds will receive and process all authorizations and
periodically balance all Transactions in accordance with the
terms of this Agreement and the Procedures.
(ii) Roberds in accepting the Plan Cards and using the POS
Terminal, will exercise due care in inputting and processing
Roberds' work. Roberds ensures the accuracy and adequacy of
information entered through the POS Terminal(s) as evidenced
by the system log maintained by Bank One, and will affect
corrections and adjustments in the manner prescribed in the
Procedures. Bank One is not responsible for Roberds omissions.
(iii) Roberds will record the Bank One provided authorization
number and sequence number on all Transaction Drafts. The
sequence number is to be recorded on all credit vouchers.
(iv) Roberds will obtain an authorization prior to completing
a Transaction and will process said authorization in
accordance with the Procedures. If no prior authorization is
received on a Transaction, these Transactions(s) become
Roberds' liability.
(v) Roberds will electronically deposit Transaction Drafts to
Bank One within one (1) Business Day from the date of
Transaction.
(vi) The electronic submission to Bank One of Transaction
Drafts shall constitute an endorsement to Bank One by Roberds.
C. POS Terminal and/or Electronic Printer Repair and Replacement
In the event of a POS Terminal and/or electronic printer malfunction,
Roberds is responsible for calling Bank One's Merchant Services
Department within one (1) Business Day. Bank One will arrange for the
repair or the replacement of any POS Terminal and/or electronic printer
which fails to function properly during the normal course of operation
due to a defect in materials or workmanship. Roberds will be
responsible for the loss of any POS Terminal and/or electronic printer
and for any damage resulting from improper handling operation. Roberds
will also provide adequate insurance covering loss of, or damage, to
all POS Terminal(s) and/or electronic printers, with Bank One named as
loss payee.
D. Fees and Service Charges Bank One reserves the right to debit
Roberds' Account, on a non-refundable basis, for the replacement cost
of the POS Terminal and/or electronic printer, if:
(i) The POS Terminal and/or electronic printer is not
returned in time for repair or replacement; or
(ii) The POS Terminal and/or electronic printer is not
returned within ten (10) days of Bank One's written request;
or
(iii) The POS Terminal and/or electronic printer must be
replaced as a result of loss, destruction, misuse or abuse
by Roberds.
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Bank One may, at its discretion, levy its standard service charges for
any additional assistance in Terminal operation and resolution of
problems which are not caused by POS Terminal(s) malfunction or system
malfunction, but are due to Roberds' failure to adhere to the
Procedures.
E. Terminal Taxes As to any POS Terminal and/or electronic
printer, Roberds will pay when due:
(i) All use, excise, personal property, ad valorem or other
taxes;
(ii) All assessments, fees and charges payable with respect to
the ownership, possession or rental of the POS Terminal and/or
electronic printer; and
(iii) All expenses resulting from registration, inspection or
other governmental requirements, now or hereafter existing,
all of which are imposed by governmental entities because of
the location or use of any POS Terminal and/or electronic
printer at Roberds' place(s) of business.
F. Conflict With Other Agreement Provisions. Any conflict
between this paragraph and any other Agreement provision will be
controlled by this paragraph.
36. MISCELLANEOUS.
A. This Agreement shall become effective when signed by both
parties and shall remain in full force and effect until termination or
default.
B. This Agreement shall be governed by the laws of the State of
Ohio and shall be binding upon the parties, their heirs, successors or
assigns.
C. This Agreement supersedes any prior Qualified Card Merchant
agreement between the parties and will govern all prior Qualified Card
Transactions previously submitted to Bank One, regardless of date of
submission.
D. All obligations of Roberds incurred or existing under this
Agreement existing as the date of termination or default, regardless
of whether then known by either party to exist, shall survive such
termination or default.
E. Roberds agrees to provide Bank One sixty (60) calendar days
prior written notice of its intent to:
(i) Transfer or sell any substantial part (50% or more) of
its total stock or assets;
(ii) Liquidate, or change the basic nature of its business;
(iii) Change its name, address, phone number or other
pertinent information relating to its business; or
(iv) Make any changes to the Settlement Account set forth in
Section Five (5) herein. Bank One, within sixty (60) days
after receipt of the above notice, may terminate this
Agreement effective one hundred eighty (180) calendar days
after written notice of said termination is sent to Roberds.
F. All specifications, data, programs, forms and procedures
utilized or developed by Bank One in connection with services under
this Agreement shall be and remain the property of Bank One and may
only be used by Roberds in accordance with the terms of this Agreement.
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<PAGE> 33
G. This Agreement may be amended from time to time by mutual
consent. Bank One may also modify this Agreement by sending written
notice of any amendment or modification to Roberds. Said modification
will be effective upon receipt by Roberds.
H. If any of the provisions or parts of this Agreement are
determined to be illegal or invalid under any applicable statute or
rule of law, such provisions or parts shall be deemed omitted without
affecting any other provisions or parts of this Agreement, which shall
remain in full force and effect.
I. Upon failure by Roberds to meet any of its obligations under
this Agreement, Bank One has the right to collect any amount due, or
which may become due, to Bank One from any accounts belonging to
Roberds held by Bank One or by any other financial institution without
notice to Roberds and Roberds gives Bank One a security interest in all
such accounts for that purpose.
J. In all cases under the Agreement wherein consent is required of
one of the parties, the decision by the parties shall be made in good
faith and not be unreasonably withheld. Furthermore, the parties agree
that each shall in good faith perform-their obligations under this
Agreement.
IN WITNESS WHEREOF, the parties have hereto set their hands this 17th
day of June, 1998.
WITNESS: ROBERDS, INC.
/s/ Barbara L. Fogle By: /s/ Robert M. Wilson
/s/ Alberta Carmack Title: Executive Vice President
BANK ONE, NA
/s/ Dennis K. Houchins By: /s/ Ben W. Manley
/s/ Wendy Shannon Title: Senior Vice President
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<PAGE> 34
ADDENDUM "D"
REMOTE APPLICATION PROCESSING AGREEMENT
WHEREAS, Roberds and Bank One have mutually determined that the
following additional terms and conditions are both necessary and desirable to
the ongoing relationship contemplated by the Revolving Credit Plan Agreement
entered into by the parties:
1. Computer links have been developed between Roberds and Bank One which
allow Roberds to:
A. Process Plan credit applications for new Plan applicants and
requests and/or applications for Plan credit line increases on existing
Plan accounts at a remote location and receive credit decisions by
directly accessing Bank One's application processing system
("Processing").
B. View Bank One's appropriate credit decision for submitted Plan
credit applications or increases for Plan credit lines.
C. Receive an approved Plan Applicant account number, authorization
number and other information as is mutually determined to be required
by Roberds and Bank One to complete the remote application transaction.
2. Roberds agrees to fully comply with Bank One's Remote Application
Processing Instructions for Input Operators ("Instruction") as amended from time
to time for Processing and to use reasonable care and to adhere to a high
standard of accuracy and truthfulness as established by Bank One from time to
time. Roberds also warrants and represents that the original completed Plan
credit application or credit increase being processed is in its possession, has
the Applicant's signature and required identification verification prior to
being inputted and that all other information inputted into the computer system
for a Plan credit application or credit line increase is in agreement with the
information on the application submitted by the Applicant.
3. Both parties agree to work in good faith to correct known problems
involving the remote processing of Plan credit applications or credit increases
as quickly as is reasonably possible.
4. New stores operated and/or opened by Roberds will be automatically
covered by the Agreement and this Addendum.
5. Roberds shall be solely responsible for: (a) maintaining, and
operating, at its expense, the equipment/software provided by Bank One which is
required to interface with Bank One's equipment, (b) the accuracy and integrity
of the data it transmits for processing or storage, (c) maintaining a procedure
external to the interface service for reconstruction of lost data and programs
to the extent Bank One deems necessary and for purposes of re-entry in the event
of system malfunction, and (d) establishing a procedure for Processing Plan
credit applications or credit increases which can be implemented should the
Processing system malfunction and not be available. Bank One reserves the right
to approve/reject Roberds' standby procedure at Bank One's discretion and to
request that Roberds submit alternative procedures.
6. Roberds agrees to indemnify Bank One for any loss Bank One may suffer
as a result of fraud perpetuated by Roberds' employees whether or not said
employee was acting in the scope of his/her employment in committing said fraud.
Such indemnification is not limited to actual damages, but includes
consequential, incidental or any other loss Bank One may suffer as a result of
such fraud.
7. Any conflict between this Addendum and any other Agreement provision
will be controlled by this Addendum.
8. That Bank One may, with or without prior notice to Roberds, audit Plan
credit applications or credit increases at such of Roberds' locations as Bank
One may deem. Said audit(s) will involve examining and verifying information
contained in Plan credit applications or credit increases to the information
input and processed by Roberds.
9. Roberds will submit, as per the Agreement, selected Plan credit
applications or credit increases upon Bank One's request.
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<PAGE> 35
10. That Plan credit applicants, whether approved or rejected for Plan
credit, may be contacted by Bank One to verify information and authenticity of
his/her Plan credit application.
IN WITNESS WHEREOF, the parties have hereto set their hands this 17th
day of June, 1998.
WITNESS: ROBERDS, INC.
/s/ Barbara L. Fogle By: /s/ Robert M. Wilson
/s/ Alberta Carmack Title: Executive Vice President
BANK ONE, NA
/s/ Dennis K. Houchins By: /s/ Ben W. Manley
/s/ Wendy Shannon Title: Senior Vice President
Page 61
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFOMRATION EXTRACTED FROM THE
CONDENDSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 3,741
<SECURITIES> 0
<RECEIVABLES> 2,963
<ALLOWANCES> 0
<INVENTORY> 43,089
<CURRENT-ASSETS> 59,603
<PP&E> 129,363
<DEPRECIATION> 33,615
<TOTAL-ASSETS> 164,016
<CURRENT-LIABILITIES> 36,622
<BONDS> 76,065
0
0
<COMMON> 604
<OTHER-SE> 42,064
<TOTAL-LIABILITY-AND-EQUITY> 164,016
<SALES> 152,406
<TOTAL-REVENUES> 152,406
<CGS> 104,629
<TOTAL-COSTS> 104,629
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 3,484
<INCOME-PRETAX> (4,880)
<INCOME-TAX> (1,690)
<INCOME-CONTINUING> (3,190)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,190)
<EPS-PRIMARY> (.53)
<EPS-DILUTED> (.53)
</TABLE>
