Exhibit 10.2
HEILIG-MEYERS COMPANY
SEVERANCE PLAN
1999 Amendment and Restatement
Introduction
The Board of Directors of Heilig-Meyers Company (the "Board") believes
that, in the event of a threat or occurrence of a bid to acquire or change
control of Heilig-Meyers Company or to effect a business combination, it is in
the best interest of the Heilig-Meyers Company and its present and future
shareholders that the business of the Company (as defined below) be continued
with a minimum of disruption, and that such objective will be achieved if
employees who materially contribute to the successful operations of the Company
are given assurances of employment security so they will not be distracted by
personal uncertainties and risks created during such period; and
The Board further believes that the giving of such assurances by the
Company will (a) secure the continued services of key operational and management
employees in the performance of both their regular duties and such extra duties
as may be required of them during such period of uncertainty, (b) permit the
Company to rely on such employees to manage the affairs of the Company during
any such period with less concern for their personal risks, and (c) provide the
Company with the ability to attract new key employees as needed; and
In order to accomplish these objectives, Heilig-Meyers Company has
adopted this amended and restated Severance Plan:
1. Definitions:
(a) Cause. Addiction to alcohol or a controlled substance,
willful criminal conduct involving moral turpitude (including, but not limited
to, theft, embezzlement or sexual harassment) regardless of whether proven or
admitted, conduct which brings (or, if known, would bring) discredit to the
Company or an employee of the Company, and the willful violation of published
Company policies governing employee conduct in the workplace.
(b) Change of Control. "Change of Control" means:
(i) The acquisition, other than from Heilig, by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either the
then outstanding shares of common stock of Heilig or the combined
voting power of the then outstanding voting securities of Heilig
entitled to vote generally in the election of directors, but excluding
for this purpose, any such acquisition by Heilig or any of its
subsidiaries, or any employee benefit plan (or related trust) of Heilig
or its subsidiaries, or any corporation with respect to which,
following such acquisition, more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by the individuals and
entities who were the beneficial owners, respectively, of the common
stock and voting securities of Heilig immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the then outstanding shares
of common stock of Heilig or the combined voting power of the then
outstanding voting securities of Heilig entitled to vote generally in
the election of directors, as the case may be; or
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(ii) Individuals who, as of the date hereof,
constitute the Board (as of the date hereof the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board,
provided that any individual becoming a director subsequent to the date
hereof whose election or nomination for election by Heilig's
shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of Heilig
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act); or
(iii) Approval by the stockholders of Heilig of a
reorganization, merger or consolidation, in each case, with respect to
which the individuals and entities who were the respective beneficial
owners of the common stock and voting securities of Heilig immediately
prior to such reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such reorganization, merger or consolidation, or a complete
liquidation or dissolution of Heilig or of its sale or other
disposition of all or substantially all of the assets of Heilig.
(c) Company: Heilig and each subsidiary of Heilig.
(d) Effective Date: September 15, 1989.
(e) Heilig: Heilig-Meyers Company.
(f) Participant: All employees of the Company holding the
title of Assistant Vice President or above (other than the Chairman, the
President, and the three most senior executive vice-presidents, all of whom are
entitled to severance payments under their respective executive employment
agreements), all officers of the Company (whether elected or appointed), area
supervisors, store managers, distribution center managers, service center
managers, directors of management information systems, director of internal
audit, director of taxes, assistant controllers, assistant to the treasurer,
clearance center managers, fixture center managers, maintenance center managers
and all full-time employees of the Company (employees who regularly work forty
hours or more per week) who have completed ten years or more of service
(provided such service requirement is met on a date a benefit becomes payable
under Section 4); and provided, further, that no employee who becomes entitled
to a severance payment under an executive employment agreement with the Company
shall be considered a Participant under this Plan.
2. Employment. If Participant is in the employ of the Company on the
date on which a Change of Control occurs (the "Change of Control Date") the
Company will continue to employ Participant and Participant will remain in the
employ of the Company, for the period commencing on the Change of Control Date
and ending on the second anniversary of such date (the "Employment Period"), to
exercise such authority and perform such duties as are commensurate with the
authority being exercised and duties being performed by the Participant
immediately prior to the Change of Control Date, which services shall be
performed at the location where the Participant was employed immediately prior
to the Change of Control Date.
3. Compensation and Benefits. During the Employment Period, the Company
will (i) continue to pay the Participant a salary at not less than the level
applicable to Participant on the Change of Control Date, (ii) pay the
Participant bonuses in amounts not less in amount than those paid during the
12-month period preceding the Change of Control Date, and (iii) continue
employee benefit programs as to Participant at levels in effect on the Change of
Control Date (but subject to such reductions as may be required to maintain such
plans in compliance with applicable federal law regulating employee benefit
programs).
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4. Termination of Employment.
(a) If during the Employment Period (i) Participant's
employment is terminated by the Company for any reason (other than for cause) or
(ii) there is a material reduction in Participant's compensation or benefits, or
a material adverse change in Participant's status, working conditions or
management responsibilities, or if Participant is required to change the
locality of his employment (other than a change in management responsibilities
or place of employment based on sound business practices followed by companies
in the retail industry and not inconsistent with Company policies in effect on
the Change of Control Date), and Participant voluntarily terminates his or her
employment within 60 days of any event or the last in a series of events
described in (ii), then Participant shall be entitled to receive, subject to the
provisions of (c) and (d) below, a lump sum payment equal to 200% of
Participant's "base amount," as determined under (b) below. The lump sum payment
shall be subject to and reduced by all applicable federal and state withholding
taxes and shall be paid to the Participant within 30 business days after his
termination of employment. If Participant terminates his employment prior to the
Change of Control Date or during the Employment Period, and the events described
in (i) or (ii) have not occurred, his rights under this Plan shall terminate.
(b) The Participant's "base amount" for purposes of this
paragraph shall be his base salary and bonuses paid to him during the 12-month
period preceding his termination of employment pursuant to paragraph (a). If
Participant has not been employed for a 12-month period, his "base amount" shall
be his annualized base salary at the highest rate in effect prior to his
termination of employment plus bonuses paid to Participant prior to the date of
his termination of employment.
(c) The amount payable to Participant under (a) shall be
reduced to the extent necessary so that the amounts payable to Participant under
this Plan, when added to (i) any amounts he becomes entitled to receive under
any other compensation arrangement maintained by the Company which become
payable upon or as a result of the exercise by Participant of rights which are
contingent on a Change of Control, and (ii) the value of rights that arise or
are accelerated as a result of a Change of Control event described in paragraph
(a) (such as, for example, the accelerated right to exercise stock options), but
only to the extent the value of such payments or rights described in (i) and
(ii) would be considered a "parachute payment," do not equal or exceed 300% or
the then permissible percentage of the Participant's "base amount," whichever is
less, for determining whether the Participant has received an "excess parachute
payment." For purposes of this subsection (c), the terms "parachute payment,"
"base amount" and "excess parachute payment" shall have the meaning given to
those terms under Internal Revenue Code section 280G and applicable regulations
thereunder.
(d) If at the time the events occur described in (a)(i) or
(ii) entitling Participant to the payment provided for in paragraph (a) there
also exists an employment agreement or other compensatory arrangement between
Participant and the Company pursuant to which Participant becomes entitled to
receive, as a result of a Change of Control, a payment (or series of payments),
the payment provided for in (a) shall be reduced (but not below zero) by the
payment (or present discounted value of a series of payments) under such
employment agreement or other compensatory arrangement.
(e) In determining the present discounted value of a series of
payments to be taken into account under this Section 4, a rate equal to 120% of
the applicable federal rate (determined under Internal Revenue Code section
1274(d)) compounded semi-annually, shall be used.
(f) If Participant becomes entitled to a payment under this
Plan, the Company shall compute the proper amount. In applying the limitations
of Internal Revenue Code section 280G, and applicable regulations and rulings
thereunder, the Company shall apply a good faith interpretation that is most
likely to avoid the imposition of the excise tax on Participant and ensure the
deductibility of payments by the Company.
5. Enforcement by Participant. If litigation shall be brought by the
Company or by a Participant in good faith to enforce or interpret any provision
of this Plan, or if Participant shall have to institute litigation brought in
good faith to enforce any of his rights under the Plan, the Company shall
indemnify Participant for his reasonable attorney's fees and disbursements
incurred in any such litigation.
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6. Confidentiality. Participant recognizes that he has or will have
access to and may participate in the origination of non-public confidential
information and will owe a fiduciary duty with respect to such information to
the Company. Confidential information includes, but is not limited to, trade
secrets, supplier information, pricing information, internal corporate planning,
Company secrets, methods of marketing, methods of showroom selection and
operation, ideas and plans for development, historical financial data and
forecasts, long range plans and strategies, and any other data or information of
or concerning the Company that is not generally known to the public or in the
industry in which the Company is engaged. Participant agrees that from the date
of this Plan and throughout the Employment Period he will, except as
specifically authorized by the Company in writing, maintain in strict confidence
and will not use or disclose, other than disclosure made in the ordinary course
of business or to other employees of the Company, any confidential information
belonging to the Company. If Participant shall breach the terms of Section 6,
all of his rights under this Plan shall terminate.
7. Governing Law. This Plan shall be construed according to the laws
of the Commonwealth of Virginia, to the extent not preempted by applicable
federal law.
8. Amendment. This Plan may be amended by Heilig at any time, except
that no amendment shall be made after a Change of Control has occurred without
the written consent of the Participants.
9. Binding Effect. This Plan shall be binding on Heilig, its
successors, and assigns. Should there be a consolidation or merger of Heilig
with or into another corporation, or a purchase of all or substantially all of
the assets of Heilig by another entity, the surviving or acquiring corporation
will succeed to the rights and obligations of Heilig under this Plan.
10. Term. This Plan shall be effective from the Effective Date and for
twenty-four (24) months thereafter, and shall continue in effect from year to
year thereafter unless Heilig notifies Participants 30 days in advance of an
anniversary of the Effective Date that the Plan shall terminate. If a Change of
Control occurs, this Plan shall terminate twenty-four (24) months after the
Change of Control Date.
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